Sen. Chris Van Hollen with feds and union reps

Feds, unions continue push to make deferred payroll tax optional

Feds and their unions are pushing back against one COVID-era policy billed as “help”—but that seems, to some, sure to end up hurting.

That policy? Payroll tax deferral for feds, a four-month-long program announced by the White House back in August, across federal agencies—and subsequently implemented as a mandatory process.

The administration bills this as COVID “relief”—as putting money into feds’ pockets in a time of crisis and cash into the American economy at a time of reduced consumer demand. For now, the vast majority of feds—just about all executive branch feds earning less than $4,000 per pay period—no longer have their payroll taxes deducted on paydays.

But, hey, there’s a big catch: Come next year, they will have to pay it all back—thousands of dollars! So, amid a rising chorus of federal employees’ complaints that the program is bound to cause trouble later, some in Congress have been moved to act.

The Surprise Taxes Act, a bill sponsored by Sen. Chris Van Hollen (D.-Md.), would compel the administration to gain the consent of each fed—with an “opt-in”—before deferring any more payroll tax, and forcing them to take yet another loan in effect from the government.

Federal unions have slammed the White House policy, and are urging passage of the bill.

“This payroll tax deferral plan is nothing but a temporary loan program and federal employees deserve to choose whether they want to participate,” National Treasury Employees Union President Tony Reardon said on Oct. 9. “We appreciate Sen. Van Hollen and his growing list of cosponsors for looking out for workers who want to protect themselves from the burdens of higher taxes and smaller paychecks come January.” 

Reardon noted that both the legislative and judicial arms of government were able to opt out—and they did. “[Employees] in the executive branch were forced into it without sufficient explanation of when the deferrals would start, how employees could calculate whether they were subject to it, and how the deferred taxes will be collected by the government next year,” the union’s statement said.

Another major fed union—the American Federation of Government Employees—likewise blasted the tax deferral policy from its early days—and, in its initial press release on the issue, called it  “Trump’s Social Security tax scam”.

The National Federation of Federal Employees also trashed the policy, similarly calling it a “payroll tax scam,” and pressed for it to be abandoned.

“President Trump and the treasury secretary made fools of themselves by issuing this order and guidance,” NFFE President Randy Erwin said in a statement on the issue. “Even the business community and the U.S. Chamber of Commerce believe this is a dumb idea.”

NTEU’s Reardon added that those feds who might want to continue to defer their payroll taxes will be allowed to do so. “Under Sen. Van Hollen’s bill, federal employees who want to participate in the deferral would be able to continue doing so, which is how the federal government should have structured the program in the first place,” Reardon stated.  

2021 Digital Almanac

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