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Trump’s coronavirus tax cut hits rough patch as lawmakers talk stimulus

House Democrats look set to pursue separate track with aid package that doesn't include tax cuts

President Donald Trump’s push for some form of payroll tax holiday is stumbling out of the gate as lawmakers and the White House try to cobble together a quick stimulus package to help those adversely affected by the COVID-19 virus.

The president wants to cut the Social Security payroll tax, currently 6.2 percent paid by workers and employers on the first $137,700 in wages, to as low as zero through Dec. 31, according to a senior administration official. The White House is also looking at an option to cut only the employee share of the Social Security tax to 2 percent, so clearly the parameters are still the topic of debate. 

But under the Constitution, the House must originate any revenue bill, and Democratic leaders there quickly ended the payroll tax cut conversation Tuesday. “That’s not on the table for us,” said Ways and Means Chairman Richard E. Neal, D-Mass. 

Majority Leader Steny H. Hoyer said a payroll tax holiday “advantages the richer people, it disadvantages the poorer people, and if you don’t have a job it disadvantages you altogether.”

Eliminating the payroll tax on someone making $137,700 or more in 2020 would save them more than $8,500 if extended for one year; by contrast, an individual earning $50,000 would save only $3,100. And as Senate Finance ranking member Ron Wyden, D-Ore., pointed out, it wouldn’t help restaurant servers or others who earn mostly tips.

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Trump, Vice President Mike Pence and top administration officials met with Senate Republicans at their weekly policy luncheon Tuesday to discuss tax cuts and other measures he pitched at a briefing Monday night, such as paid leave for hourly workers forced to stay home. Senate Republicans have taken a wait-and-see approach, deferring to the White House.

Senators emerging from the meeting voiced only tepid backing for cutting payroll taxes or other large-scale stimulus measures, however. “The payroll tax as a general stimulus, I’ll have to think about that,” said Lindsey Graham, R-S.C., a top Trump ally. “I don’t know if that’s the best way to do it.”

Added Graham: “The president is pushing it. I’ll have to sit down and think.”

Others said they wanted more information first, including how much a payroll tax cut would cost and how long it would be in effect.

In 2011 and 2012, Congress and the Obama administration enacted a 2-percentage-point cut in workers’ share of the Social Security tax, which is borne by employers as well, at a roughly $120 billion cost per year. That cost would likely rise now that earnings subject to the tax have risen over the past eight years.

The top House Republican also didn’t appear ready to embrace a broad new tax cut yet.

“Well, we’re looking at a number of measures,” Minority Leader Kevin McCarthy said Tuesday. “Remember, we have a very strong economy, very low unemployment, but we want to look at is there a surgical way that those who are hurt — hourly wages and others — is there an ability to help to keep the economy moving as strong as it is today.”

[Lawmakers criticize cruise lines over coronavirus refunds]

Speaking to reporters after the luncheon, Trump claimed “tremendous unity in the Republican Party” for his stimulus initiative. But he didn’t mention specific proposals other than to say airlines and cruise lines that have taken a hit because of lost travel bookings should receive some help. “There’s a great feeling about doing a lot of things, and that’s one of the things we talked about,” Trump said when asked specifically about a payroll tax cut.

One Senate Republican who has embraced a payroll tax holiday is Steve Daines of Montana, who this week drew a potentially tough Democratic rival in his November reelection campaign. Montana Gov. Steve Bullock, an erstwhile presidential contender, said he would challenge Daines.

Separate track

For now, House Democrats look set to pursue their own separate track with an aid package that doesn’t include tax cuts but instead focuses on items like paid leave, extended unemployment insurance, nutrition assistance and funding to cover medical tests for those who can’t afford them, among other items.

Party leaders want to finish the package — which will include components from Ways and Means, Appropriations, Energy and Commerce, Education and Labor and possibly Agriculture — by Wednesday, with the full caucus meeting late in the afternoon, according to a Democratic aide not authorized to speak publicly on the matter. The goal is for a vote on the package Thursday if possible, but that could be delayed until after recess, said a senior Democratic aide also not authorized to speak publicly on the plan.

“We hope to have a plan in the next day or so,” Neal said earlier, adding he’s “been encouraged by some of the conversations I’ve had with the administration” on a stimulus plan. 

If a package isn’t ready this week, Hoyer said it was possible the Congressional Budget Office could spend next week analyzing a package that would be ready for action when lawmakers reconvene after recess.

Treasury Secretary Steven Mnuchin, who has been the administration’s point man on recent budget deals, is negotiating directly with Speaker Nancy Pelosi, D-Calif. “They work well together,” Senate Majority Leader Mitch McConnell, R-Ky., said. “We’re hoping he and the speaker can pull this together so we’re not playing partisan games.” 

[Congress ‘struggling’ with questions of office logistics, travel and hygiene]

Mnuchin met with Pelosi for about 30 minutes in her office Tuesday after the Senate GOP luncheon.

Republicans and Democrats alike have expressed an interest in helping workers who lose out on pay from being stuck in quarantine or other measures imposed on them through no fault of their own. There’s also bipartisan interest in providing meals to children who would otherwise receive free and reduced-price lunches at school if they’re forced to stay home.

Pence also told Senate Republicans that Medicare, Medicaid and private insurers have agreed to cover medical testing for those without health coverage, according to attendees. 

Don’t panic?

Senate Appropriations Chairman Richard C. Shelby, R-Ala., said many Republicans don’t have much appetite for an Obama-style stimulus package, which Shelby said “wasted a trillion dollars.” He said he could back a major infrastructure package, but that generally, “I don’t think we should panic right now.” 

Senate Majority Whip John Thune, R-S.D., told reporters Tuesday morning that he won’t rule out supporting a stimulus plan that includes paid sick leave. “At this point, I’m not ruling anything out,” Thune said. “Obviously, whatever we do, there has to be a really good rationale for it. And I’m going to make sure that we’re doing the types of things that’ll help ease the economic impact of the virus and hopefully get us through to a better time.”

Thune declined to predict a timeline for when a stimulus package might move forward but said he should know more after a midday briefing from White House economic officials. “We’ll hear from them and take it from there,” he said.

On the Democratic side, lawmakers haven’t embraced the concept of either a payroll tax cut or tax rebate checks such as those enacted under President George W. Bush in 2008. Some prominent Obama-era economic officials have endorsed the latter, but sending out checks worth $500 or $1,000 or some other figure doesn’t seem to be in the mix for the aid package Democrats want to introduce this week.

“The administration seems to believe that the answer to any problem is another tax cut,” Senate Minority Leader Charles E. Schumer said on the floor. “But this is a health care crisis. It demands a health care solution.”

Rep. Stephanie Murphy, D-Fla., a Ways and Means member and leader of the moderate Blue Dog Coalition, said she questions the effectiveness of a broad-based tax cut at this time. “The demand isn’t there,” she said after a meeting of Ways and Means Democrats. “This virus is creating a demand-side issue by suppressing people’s desire to go out and spend money, travel or even make investments in the face of uncertainty.”

Ways and Means members discussed options including paid leave, aid to overstretched local governments, extended unemployment insurance and other policy levers like a moratorium on water service cutoffs by local utilities. Lawmakers say constituents told to repeatedly wash their hands are using more water than they typically do, leading to higher bills.

Paul M. Krawzak, Niels Lesniewski, Jennifer Shutt, Katherine Tully-McManus, Chris Marquette, Jessica Wehrman and Michael Macagnone contributed to this report.

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