Keep in mind that this deferral would affect people who are working, not those who are out of work. Kudlow said it would mean about $1,200 per worker by the end of the year, on average. That means 7.65% is not a universal rate because some people who earn a lot more than average pay a lower overall percentage.)Īn earlier relief measure allowed employers to defer their FICA payments until next year.Īs an example, a person making $50,000 a year earns $961 a week. For Medicare, you pay 1.45% of your earnings but there is no wage limit. If you hit that wage, any further income is not taxed for Social Security.
(For Social Security, you pay 6.2% of your earnings up to $137,7. Your employer matches your withholding, meaning the total withholding is 15.3%. You pay 7.65% of your salary to FICA, which funds both Social Security and Medicare. The tax that President Trump’s order suspended is what you see on your paystub listed as “FICA” (which stands for the Federal Insurance Contributions Act). It is not a tax cut, it is a deferral - meaning whatever you do not pay now you will pay later. The president, in this case, issued a “memorandum” directing the secretary of the treasury to stop collecting some federal taxes on wages from Sept. But it is important that the public understand there is no immediate relief on the way.Ī temporary delay in payroll tax liability means you might see more money in your paycheck but, at some point, you will have to pay it back.
It is the one stimulus action that touches the most people and, while there probably will be some agreement on sending a second round of checks to Americans, it is still in the air. There is not yet a stimulus check on the way. House Speaker Nancy Pelosi said Sunday that states don’t have the matching money. Despite that, Kudlow said he thinks the first checks could “be in a matter of weeks.” He admitted that the states had not agreed to the match prior to President Trump signing the memorandum. White House economic adviser Larry Kudlow told CNN Sunday that the administration will be talking with states Monday to find out how many can find a way to come up with the 25% match. Mike DeWine said Sunday that “we are looking at it” to determine if his state can find the money to supply the 25% match. Even if it does not face legal challenges, which are expected, and even if states can come up with the matching money, it may take weeks or even months to get it rolling. This whole proposal is significantly more complicated than the relief package that expired. By some estimates, if the states do use the Coronavirus Relief Fund to pay their 25%, they might have enough money to pay five weeks of benefits. The president’s order directs states to tap into the unspent Coronavirus Relief Fund, which is still largely unspent, but states said they have plans for that money. States generally have to match federal disaster funds 25%. The states could request money from the Federal Emergency Management Agency, which is not an unfamiliar requirement for states to use FEMA funds.
The president’s order creates a new program that would pay $400 a week in federal unemployment benefits but would require states to pay $100 per week to the individual at the same time. The president’s memorandum creates a new unemployment benefit, but states will have to come up with money to make it real.
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