'A guinea pig for a bad policy': 1.3 million federal workers will have payroll taxes deferred under a controversial new directive from Trump
- The Trump administration is implementing a payroll-tax deferral for 1.3 million federal workers that's set to take effect in mid-September.
- The move will cause them to bring home smaller paychecks as the government doubles its payroll-tax withholding from January until April to recoup the money owed.
- The White House defended the move as one that would provide relief for employees.
- Critics, such as Democratic Rep. Don Beyer of Virginia, ripped into the initiative and said it "treats the federal workforce like a guinea pig."
The federal government is moving to implement a payroll-tax deferral for 1.3 million federal workers beginning in mid-September, which will lead to smaller paychecks for those employees earlier next year.
In early August, President Donald Trump signed an executive order to institute a payroll-tax holiday. People earning under $4,000 every two weeks — or below $104,000 yearly — won't have to pay the 6.2% tax out of their paychecks, which the government uses to fund Social Security. It's set to begin Tuesday and end on December 31.
The government is the nation's largest employer. The step will cause the federal government to double its withholding amount from January until April 30 so it can recoup the money owed from its workers.
Rachel Semmel, a spokeswoman for the Office of Management and Budget, said Trump acted when Congress failed to strike a stimulus deal.
"The President put forward this action to give relief to all Americans during this pandemic," Semmel said in a statement to Business Insider. She added the executive branch was acting as an employer to "implement the deferral to give our employees relief as quickly as possible, in line with the presidential memo."
Trump's directive and the ensuing guidance released Friday from the Treasury Department and IRS triggered significant criticism from lawmakers, tax experts, and business leaders. The guidance was released only four days before the payroll-tax holiday took effect, reducing the odds employers would be prepared to take part.
Democratic Rep. Don Beyer of Virginia — who represents a district where many federal workers reside — blasted the administration's move, saying the measure "treats the federal workforce as a guinea pig for a bad policy that businesses already rejected as 'unworkable.'"
About 60% of the federal workforce earns below $100,000 annually, which is under the threshold that the Trump order sets, The Washington Post reported.
A senior administration official said they were working to start the deferral for workers with their second paycheck this month, a date that falls around September 18.
However, scores of business groups in the private sector say they are unlikely to implement the deferral given the difficulties of designing a system that employees can opt out of if they choose.