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Lawmakers are working to reach an agreement on a stimulus bill to provide economic relief because the coronavirus pandemic that has shut down large swaths of the U.S. economy, and some tax measures, like a payroll tax suspension, have emerged as controversial.
GOP senators are considering different measures to allow some employers to temporarily defer the payment of payroll taxes in an effort to reduce costs.
An amendment, proposed by Sens. David Perdue, R-Ga., and Thom Tillis, R-N.C., on Monday would allow both employers and employees to defer payments for one year.
The payroll tax is paid separately from federal income taxes and funds Social Security and Medicare. Employers and employees each pay 6.2 percent for Social Security, and 1.45 percent for Medicare and an addition 0.9 percent is levied on the highest earners.
Those programs themselves, however, are in danger of being unable to pay full benefits to workers within the coming decades as reserves run dry by 2035.
But, if Congress were to suspend payroll taxes, language in the bill circulating through the Senate indicates the money would eventually be paid — just not when it was scheduled to be.
The deferred employment tax would be paid throughout the next two years if the bill becomes law. Half would be due by Dec. 31, 2021, and the other half would be due by Dec. 31, 2022. It is not clear how employers would be required to eventually make those payments, whether they would do it themselves or potentially pass it on to workers.
It’s unclear whether the proposal will be included in the final bill. Senators have, so far, kept the provision in their legislation, but it is not part of the House bill.
The Senate has been negotiating since Friday.
FOX Business’ Edward Lawrence contributed to this article.