President Donald Trump again teased a potential payroll tax cut and other economic stimuli to help combat the coronavirus’ impact on the economy and stock markets, but White House officials warned that any sort of solution may not be revealed for some time.
“We are to be meeting with House Republicans, Mitch McConnell, and discussing a possible payroll tax cut or relief, substantial relief, very substantial relief,” Trump said during a Monday press conference.
“They will be major,” Trump added.
Some members of Trump’s administration were blindsided by the president’s announcement Monday.
“That was news to everyone on the inside,” an anonymous official told CNBC. Officials did not want to be named because plans were still being hashed out.
Another person inside Trump’s administration said “(the plan’s) not there right now. … A lot of details need to be worked out.”
The president and the coronavirus task force is scheduled for a media briefing at 5:30 p.m. EDT.
White House economic adviser Larry Kudlow and Treasury Secretary Steven Mnuchin are also set to meet with Senate Republicans on Tuesday to try to sway them on some of the team’s ideas, including a payroll tax cut that is facing some criticism, largely because such a tax cut also would hurt Social Security funding and the program is already looking at being insolvent by 2035.
American workers pay 6.2%, which is matched by their employers, and Social Security and Medicare are funded through this tax, known as FICA (Federal Insurance Contributions Act), which is capped at $137,000.
Mnuchin said such a payroll tax cut would be temporary but once lawmakers go down the road of cutting so-called “entitlements,” who knows what could happen.
Also of note is the Democrats control the House so it seems unlikely a tax cut would pass muster in that chamber.
“The president has a strong point of view, and he’s looking forward to Senate reaction to that perspective,” another anonymous senior official told CNBC.
Another hangup surrounding a payroll tax cut during an outbreak like the coronavirus is the fact that while people may be getting more money in their pockets, they may be wary to leave their house and spend it.
“A payroll tax cut could help stimulate the economy if done correctly and over a long enough time period,” Certified Public Accountant Nate VandenBerg said.
“For example, a 2% payroll tax cut for a family making $75,000 per year would mean an additional $125 in that family’s pocket every month. Of course, this is only effective if people are working, so the administration has to be cognizant of the impact the coronavirus is having on the average American’s ability to work.”
Other ideas that Trump floated during his Monday press conference included aid for hourly wage earners “so they can be in a position where they’re not going to miss a paycheck,” Trump said. One official warned that this idea would require huge federal spending, though.
The president also mentioned the administration will be working with the airline and cruise ship industries that have been rocked by the coronavirus threat. Royal Caribbean Cruises (NYSE: RCL) withdrew its 2020 guidance and increased its credit capacity by $550 million Tuesday.
“We are going to take care of and have been taking care of the American public and the American economy,” Trump said Monday.
“This was something that we were thrown into, and we’re going to handle it and we have been handling it very well.”
The president’s announcement came after markets were rocked Monday with the Dow Jones Industrial Average losing 2,013 points, while the S&P 500 and Nasdaq also fell more than 7%.
Stocks rebounded a bit Tuesday upon the tax cut news, with all three major indexes up more than 1% by 11 a.m. EDT. However,