The Washington Post reported this week that senior White House officials are considering a temporary payroll tax cut as a way to prevent an economic slowdown, revealing growing concerns about the economy according to top economic aides.
However, the White House released a statement on Monday indicating that the idea for the payroll tax cuts are not currently under active consideration despite the deliberations that took place.
“As [National Economic Council Director Larry Kudlow] said yesterday, more tax cuts for the American people are certainly on the table, but cutting payroll taxes is not something under consideration at this time,” the statement said.
According to the Post, “President Trump and top aides have spent the past few days trying to convince the public that the economy is strong and that fears about a recession are misguided. But White House officials have begun scrambling for new ideas to reverse public concerns and boost business confidence.”
Millions of Americans currently pay a 6.2% payroll tax on their earnings to finance Social Security programs. The payroll tax was last cut to 4.2% percent in 2012 during the Obama administration but the cut was allowed to increase back up to 6.2% percent the following year.
Cutting the tax is a popular idea for many lawmakers seeking to deliver savings for middle-income earners but payroll tax cuts can also add dramatically to the deficit and potentially pull billions of dollars away from Social Security.
Payroll tax cuts have remained popular with Democratic lawmakers because they are seen as targeting working Americans and the money is often immediately spent by consumers instead of saved which gives consumers more spending power while also helping businesses that rely on the income.
White House officials have recently become focused on protecting strong levels of consumer spending, which is one reason they are exploring new tax cuts. That is because one of the biggest causes of economic downturns is a pullback in consumer spending which hurts businesses, which then lay off workers, who then cut back on spending which causes a troublesome economic loop.
Despite a tumultuous week in the markets which suggested that the economy is unstable, the Trump administration has touted what they say are the economy’s strengths, particularly consumer spending, and predicted that a recession will not occur.
