Payroll tax suspension is going to be effective starting from September 1. Not everyone is going to see this suspension on their paychecks though. If your earnings are more than $104,000, you will still pay payroll taxes.
What are payroll taxes though? The payroll tax suspension only applies to the Social Security tax which the employee and the employer pay a combined 12.4% (6.2% each). With the payroll tax suspension, your next paycheck after September 1st will be increased by 6.2% which is about $100 to $300 for most Americans.
This is a measure taken to help Americans amidst coronavirus. While the payroll tax suspension sounds nice, it raises many questions. What if Social Security won’t be able to fund itself to pay the benefits millions of Americans receive?
If Trump’s payroll tax suspension were to be permanent, the Social Security funds would be dried out as early as 2023. This is obviously not something that will be permanent. However, Trump stated:
If I am victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to payroll tax.The statement was announced on the August 8 statement by the President.
On the other hand, there is Medicare taxes which is 1.45% for employees. Whether or not the payroll tax suspension will cover Medicare taxes, it is yet to be known.
Considering millions of Americans rely on Social Security and Medicare, it is very unlikely if not impossible for the payroll tax to be suspended for good. It is expected that the payroll tax suspension will continue until the beginning of 2021 and from there, there might be only cuts to the payroll tax.
The continuation of the payroll tax suspension would be shifted starting from November 3rd depending on the election results. Until then, the payroll tax suspension will be effective starting from September 1 and the suspension is likely to be lifted off in early 2021.