Many federal workers will soon see a few hundred dollars more in their paychecks, thanks to a coronavirus relief measure signed last month by President Donald Trump.
Union leaders, however, are furious that their members are being forced to participate in the President’s payroll tax deferral program, which many private business leaders have said they’ll forgo.
That’s because workers will have to pay back hundreds or even thousands of dollars in payroll taxes in early 2021, because Trump’s move simply pushes back the date the levy is due.
“People are going to have to be prepared that sometime from January 1 to April 30, they are going to have to pay back this money,” Tony Reardon, national president of the National Treasury Employees Union, told CNN.
Though he has said he supports forgiving the taxes, only Congress has the power to do that, and lawmakers have shown no interest in doing so.
Starting with this pay period or the next one, federal workers who earn less than $104,000 annually will have the employee portion of their Social Security taxes – 6.2% – deferred through the end of the year.
That can amount to nearly $1,100 in payroll taxes for workers making $50,000 a year or more than $2,200 for those earning $104,000, according to the US Chamber of Commerce.
The business lobbying group, along with more than 30 trade associations, wrote a letter to the Treasury Department and Congress last month calling the move “unworkable” and asserting that many of their members will likely not defer the tax.
The US government, however, is requiring eligible federal employees to participate with no option to opt out. They will have to repay the deferred amount early next year, as well as resume making payroll tax payments – resulting in smaller paychecks for part of 2021. Those who retire or leave government service will still owe the deferred levy.
The move could affect around 1.2 million federal workers, according to the American Federation of Government Employees. Also, more than a million military members must participate, according to the Military Times.
“Soldiers: Be prepared to repay your payroll tax deferral. … Check your LES this month and set the ‘extra’ money aside!” tweeted Michael Grinston, sergeant major of the US Army, referring to their leave and earnings statements.
Reardon, along with Everett Kelley, the federation’s president, wrote letters to Office of Management and Budget Director Russell Vought asking for an opt-out provision and expressing concerns that their members are not aware of the repayment requirement.
“They don’t understand why they are being saddled with a huge tax bill next year, they are worried about penalties and fees, they are concerned about how falling behind could impact their security clearance and their livelihood, and they want an opportunity to opt out,” said Kelley, whose union represents 700,000 workers.
A group of Democratic senators, along with Sen. Susan Collins, a Maine Republican, have also called on Vought and Treasury Secretary Steven Mnuchin to allow workers to decide whether to participate.
“People will be misled into thinking they’ve received a windfall or bonus when in fact they haven’t,” Democratic Sen. Chris Van Hollen of Maryland told CNN.
The Office of Management and Budget has not responded to the union leaders or the senators, and Mnuchin has not answered the lawmakers. The agency also did not return CNN’s request for comment.
But it did issue guidance on Friday saying that executive branch agencies should implement the deferral for the next pay period and to continue to inform and educate employees about the measure.
Trump has long been enamored of a payroll tax cut, though it has little support in Congress. The OMB guidance said the administration continues to advocate that lawmakers make the deferral permanent.
The President signed several measures in early August to provide Americans with some fiscal relief during the coronavirus pandemic after lawmakers left town following their failure to agree on a package.
Deferring payroll taxes, however, does little to help the unemployed, since they are not working and paying the levy. Many jobless Americans will receive up to $1,800 in federal benefits after Trump took action to distribute $44 billion in disaster aid to them.