I was somewhat surprised to see my second-to-last employer on the list, as it’s an essential business in our state. But then I thought about it, and even if I know that they have all been working full-time remotely, a) collections have likely been impacted to a large extent because their business and individual clients’ incomes have been impacted; and b) it’s a law firm, and many courts and government agencies that they deal with have been impacted by closures, so cases are likely not moving forward as they would normally. And at least on the litigation side, much of the work they do is contingent on winning or settling the case. So if the case isn’t completed, they don’t get paid. Result: giant cash flow problems.
I was thinking that would be a smart move because it’s my understanding that its not a tax cut, it’s some sort of deferment. If you get an extra $200 a week for 16 weeks because of this cut, at some point in January you’ll need to pony up $3200. I’m not sure how the payment would be restructured.
This feels to me like the sleaziest election stunt ever. People will see HUGE increases in their paychecks and Trump will take credit for the biggliest tax cut ever. He’ll downplay or even lie about the repayment - I’m thinking he would answer all questions as to whether it needs to be repaid with “Maybe not - we’ll see what happens” and all his followers will be suckered.
Then if he loses, then Biden takes the fall* for requiring repayment and if this stunt sweeps him to victory — he won’t care, his “base” will cease to become useful to him on Nov 4th of this year and he’ll gleefully screw them like a porn star,
*Not to detail the thread too much, but Trump will see that he takes the fall. If Trump loses, he’s not going to fade away. I’m thinking he’ll have his own cable TV channel and he’ll kick off his Trump 2024 campaign in January 2021.
Payroll tax deferment:
Yes, businesses may have to pony up the funds in January, but that months away. If it keeps them in business now, it’s a benefit to the economy. It’s a bit of a shell game for those who aren’t having problems making payroll, but if they are it helps at least a little with cash flow and is within the President’s powers of deciding how to enforce the law. Only Congress can write off the debt, but there might be enough political capital for them to do so. I don’t support much of what the President does, but this move is at least somewhat defensible even if it’s highly politically motivated.
RMDs:
The idea that people shouldn’t have to make RMDs because it would require them to take the money out when the market was down is not at all remotely tenable. There is no requirement to take RMDs in cash. Now, most people do take them in cash since it’s far more flexible and they can always just buy back the investments they sold for cash, but even if you’re in a volatile environment where you don’t want to be out of the market for a day, you can just transfer the securities between accounts, and the fair market value will be taken as a distribution as well as the cost basis of the securities for tax purposes when you do sell them. Waiving RMDs because of a down market is just a complete non-sequitur. It does however represent a huge tax savings for those with large retirement accounts subject to RMDs as noted. I know of plenty of clients who are forced to take way more out of their retirement accounts than they really need, and have a growing pile of taxable investments because of it; they will be the primary beneficiaries of this. Those that need their retirement money to live on won’t benefit at all.
Trump wants to take away the payroll tax and then never put it back, he already said so.
Complaining on July 24th about waiving RMDs in a bill passed when the indexes were down 30% is ridiculous. For all anybody knew, the indexes could be down 50% now.
Inherited retirement accounts got whacked in the SECURE Act that was passed last year. Non-spousal beneficiaries now have to take distributions of an entire account within 10 years instead of over their lifetimes. Not only does it accelerate the tax collection, it will push a lot of beneficiaries into higher tax brackets.
That provision was added as a 1:1 tax revenue offset to pay for expanding access to retirement accounts to people who don’t have it now. So that was a Robin Hood move that should make you very happy.
If it’s not an act of congress, then if I do have my payroll taxes discounted, I plan on opening an escrow account to hold them.
I will advise my employees to do the same.
Whole lot of businesses going to go under if they have to pay a years of payroll tax all at once.
From the WSJ: Evidence of PPP Fraud Mounts, Officials Say
Many other PPP loans are falling into a gray area in which businesses received one despite seeing revenue increase during the pandemic. Prosecutors are probing some of those cases but finding it difficult to bring charges, in part because Congress set a low bar for obtaining the funds, according to law-enforcement officials familiar with the matter.
Prosecutors face hurdles in proving business owners lied when they said they needed money in the pandemic’s chaotic early days—even if profits kept coming in later, officials said.
The CARES Act, the March law that established the PPP, effectively used the honor system. If a company had fewer than 500 employees and certified “current economic uncertainty makes this loan request necessary to support the ongoing operations,” it was generally approved.
At the PPP’s peak, the SBA approved about 514,000 loans on a single day, May 3.
“They don’t charge mistakes. They charge intentional lies,” said Tarek Helou, a former Justice Department prosecutor who is now a partner at Wilson Sonsini Goodrich & Rosati. Given the limited criteria Congress set for the program, he said, “The scandal is what’s legal, not what’s illegal.”
Yes, the government added tens of thousands of dollars to the debt with the money going to rich people who didn’t need it, even if they were eligible to receive it, in exchange for a few thousand dollars in cash for the middle class. Exactly the way the Republicans wanted it.