$240 A MONTH Second Stimulus | Employer Tax Credit Proposal Explained

Stimulus Package Update
Will there be another stimulus check?

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Will There Be a Second Stimulus Check?

Employer Tax Credit:



President Trump is a big fan of cutting employer and employee taxes as a form of stimulus leaving additional money to spend elsewhere. During a town hall on Fox News on May 3rd Trump said “I told Steve just today, we’re not doing anything unless we get a payroll tax cut,”

What is the Employer Tax Credit?
When employers pay their employees both parties pay taxes. This stimulus would eliminate payroll related taxes through December 31st 2020. The total cost is estimated to be around $90 billion a month.
Payroll For Employees Taxes include:
6.2% of your income up to $132,000 for social security
1.45% of your income for Medicare (and married couples who make over $250,000/yr and single filers who make over $200,000 pay an additional 0.9%)

Employer Payroll Taxes Also Separately Include:
6.2 % of employee’s wages to social security
1.45% of employee’s wages to Medicare

With this proposed idea: (now you won’t see these calculations anywhere else, I don’t just read off articles blindly. I take in the information attempt to simplify it and make my own examples)
Employers and employees would each retain around $75 for every $1000 paid out or earned.

This means the average worker would get a “stimulus” of around $280 a month and employers would save on average that same $280 a month per employee.

For the average worker that would mean: $2240 extra in their pocket by the end of the year it would just be broken up as a little bit over each payday.

Employers would see the same net benefit per average employee.

Self employed individuals would also be included in this and these would be the biggest beneficiaries of the proposed idea.

self-employed individuals do not have an employer to pick up half of their FICA tab. Therefore, their self-employment tax rate is 15.3%, for Social Security and Medicare taxes.
This means that with average wages the average self employed individual would be looking at a $560 per month “stimulus” totalling $4480 by the end of the year.

That’s really a good deal for those folk.

Now on to what I see as the pros and cons of this program:

Pros:

It is extremely simple and no additional systems would be needed. One of the biggest issues with the current $1200 stimulus and all of the proposed next packages is the logistics and system building needed to make them happen. This would be pretty much plug and play and efficient for the taxpayer meaning we’re not also paying tons of administrative costs to get these payments out.

It lowers expenses for businesses and individuals. It’s kind of a double whammy economic benefit. I believe this package will influence employers to get full time hours back to employees and bring laid off employees back quicker because the gross payroll cost is less.

Cons:

I don’t believe this is quite enough funds quickly enough to individuals. Splitting this “stimulus” over 8 months doesn’t help individuals present problems. I’d personally rather see another one time payment over this. Maybe the U.S. government could use this tax credit system but pay it in a lump sum based off of the worker’s average pay over the past 12 months. Essentially getting that $2240 now.

And the last major issue is that anyone not currently working would receive no benefit whatsoever. This would leave out millions of employees who lost their jobs or cannot work.

Maybe the best stimulus is a combination of this and a one time payment.





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Disclaimer
This presentation does not constitute legal or tax advice. It is provided solely for informational and educational purposes and does not fully address the complexity of the issues or all the steps businesses must take under
applicable laws. You should consult your professional advisers regarding your individual situation. Max Maher undertakes no obligation to update the information in this presentation, and no representations are made that
the content is error-free.

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