Many Employers Skipping Payroll Tax ‘Holiday’

Sep. 28--A temporary tax break designed to give Americans a reprieve as they deal with the economic upheaval the coronavirus pandemic caused appears likely to fall short of its goal as many private-sector businesses opt not to participate, business officials say.

President Donald Trump issued an executive order in August suspending collection of the 6.2% Social Security tax from Sept. 1 through Dec. 31 for employees who earn less than $4,000 in a biweekly pay period.

Federal government offices are instituting the tax holiday. The initiative has encountered resistance from both employers and employees in the private sector, however, because the taxes are being deferred, not eliminated. That means any savings now must be paid back starting in January.

"From the point of view of workers ... they have to understand, whatever they save now, they will have to make it up," said Iordanis Petsas, Ph.D., a professor and chairman of the Department of Economics and Finance at the University of Scranton.

Trump has vowed to forgive the taxes if he's reelected. There is no guarantee that will happen, however, because Congress would have to approve such a measure, said Garrett Watson, an analyst with the Tax Foundation in Washington, D.C., a nonprofit group that researches tax policies.

That uncertainty, coupled with the expense and burdensome process of altering payroll deductions, made the initiative less attractive, Watson said.

"Folks are saying it's not worth it and passing on the opportunity," Watson said.

Locally, Geisinger Health System is among the employers that opted out.

Matt Mattei, spokesman for Geisinger, said they chose not to participate because employees expressed concern it would cause a financial strain next year.

Pennsylvania government offices also are not participating because there is no net benefit to employees, said Lyndsay Kensinger, press secretary for Gov. Tom Wolf.

Rachelle Bernstein, vice president of the National Retail Federation, said most of its members also opted out.

Besides the expense of instituting the changes, businesses worry about what happens if an employee leaves at the end of the year. Companies would still be required to pay back the deferred taxes, leaving them to eat the cost if they cannot recoup it from the employee, she said.

Bernstein said members also worry about the impact on employees who might not understand the future ramifications.

"Come January you would basically have to double up on the withholding," Bernstein said. "They are concerned some people might not be prepared for that."

Workers whose employers are participating need to carefully consider whether to save or spend the extra cash they'll see in their checks, Petsas said. For those who opt to spend it, he cautions about making a major purchase with payments that would extend beyond the relief.

"I would use it for something existing, like a credit card or to buy something you really need, as opposed to going out and buying a car," Petsas said.

Contact the writer: tbesecker@timesshamrock.com; 570-348-9137; @tmbeseckerTT on Twitter.

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