Wimberly & Lawson Alert: President Plays "Trump" Card in Virus Relief
President Plays "Trump" Card in Virus Relief
Two virus relief packages have passed Congress and been implemented, each running slightly in excess of $1 trillion. They provided a $600.00 per week federal supplement to state unemployment benefits, so generous that a majority of workers on unemployment received more monies than if they were working. That federal supplement expired at the end of July, and extensive negotiations occurred between the Administration and the Democrats over an extension and other pandemic relief.
The Administration was unable to reach agreement with the Democrats, and much of the disagreement coming over the monetary size of the third package, the Democrats wanting some $3.4 trillion, and extension of the federal unemployment supplement to at least the end of the year, and additional aid to state and local governments, and others. The Republicans were pushing for employer protection from lawsuits resulting from workplace Coronavirus, as long as they make reasonable efforts to follow public health guidelines and did not commit acts of gross negligence or intentional misconduct. The Republican legislation includes an expanded version of the employer retention tax credit for businesses that keep workers on their payrolls.
With no end in sight in the negotiations between Administration and the Democrats, President Trump on August 8, 2020 issued a set of executive actions providing economic relief for the pandemic. The executive actions would reduce the $600.00 supplement in unemployment compensation that expired in July to $400.00, or $300.00 in the case of states that are unwilling to add the remaining $100.00 from their own budgets. The new plan would cover weeks of unemployment insurance from August 1 through December 27, 2020, or when the government's Disaster Relief Fund balance drops to $25 billion, whichever occurs first. This means that under the UC laws of many states, those states will be paying approximately $700.00 per person per week.
Another order would give federal housing officials broad discretion to prevent evictions. The third order would defer payroll tax payments from September through December 2020 for people making less than $100,000.00 a year. The fourth part of the President's executive actions related to student loan relief.
Treasury Secretary Mnuchin said there will be no cuts to Social Security or Medicare from the deferred payroll tax collection, and that they would be paid out from the general federal budget. Congress temporarily cut the payroll tax by two percentage points under President Obama in 2011. Apparently, employers would have to decide whether to pass on the temporary savings of payroll taxes to staff as to the employer portions of the contributions. It is still an unknown whether employees will have to pay back the taxes that are deferred, and if so, how the IRS will get the money back if an employee leaves the company before January.
Two forms of uncertainty exist regarding these developments. One is that the Administration will have to clarify and potentially revise some of the specifics. The other is that there may be litigation over the President's authority to take such sweeping executive actions. There is much irony in the important aspects of the President's Executive Orders, in that Democrats support many of the measures the President took, although they might have taken even more aggressive steps. Further, the Democrats may not want to be on record in opposing matters crucial to those adversely affected by the pandemic. There are even legal questions such as standing, as to what entity has a right to sue to stop the executive actions.
Thus, employers may have to stop withholding the employee portion of payroll taxes effective September 1, 2020. It may be helpful to prepare a communication to employees that explains the program and its temporary nature. It is suggested that such a memo only be issued as late as possible since additional guidance from the government may be received.
Questions? Need more information?
Call Jim Wimberly (email@example.com) at 404-365-0900.