Top Trump trade official calls for payroll tax cut

A top trade adviser to President Trump, Peter Navarro, is calling on Congress to stay in Washington to “solve problems” associated with coronavirus fears. It’s not yet known what President Trump will say about economic measures the administration will propose to ease the economic damage wrought by COVID-19. 

The president has talked with Republicans on Capitol Hill about a payroll tax holiday, but that idea has not been enthusiastically received by either Republicans or Democrats. Navarro, however, blamed Democrats, and attributed their refusal to entertain a payroll tax cut to playing politics. Navarro confirmed that the president wants to see a temporary 0% payroll tax rate. Those familiar with the proposal say that the payroll tax cut would be anywhere from three months to the end of the year. It would not be permanent. 

“Temporarily eliminating the payroll tax for both workers and employers through the end of the year offers one of the clearest paths to a highly effective fiscal stimulus, as we head toward that inevitable light at the end of the coronavirus tunnel,” Navarro said in a statement. “A payroll tax cut provides a hefty 7.65% raise for blue-collar and middle-income workers, while allowing particularly small and medium-sized businesses to effectively manage any short term cash flow problems that may arise in a time of heightened uncertainty.” 

He pointed out that it would be “equivalent to an extra week’s pay every three-month period” for these workers. Navarro claimed that if “enacted in full and promptly, the positive GDP growth impacts of the payroll tax cut has the potential to completely offset any of the negative growth effects of COVID-19.”  

But such a move would be extremely costly and will add to rising deficits. Asked how the administration would make up for the lost revenue from a payroll tax holiday, Navarro called it a “rounding error” when considered in the context of the cost to the economy of slower growth or disruption. When pressed further, he responded, “If you don’t do anything, and you lose all that growth, you lose a ton of revenue.” 

Navarro added, “It’s odd that the Democrats are pushing back on one of the most pro-worker tax cuts that you can design. If they’re pushing back, it’s just politics. They don’t care about the people, it’s just politics.” 

He responded dismissively to the House proposal that is expected to be voted on Thursday. He said there wasn’t much new in it beyond increases to the Supplemental Nutrition Assistance Program (SNAP). The administration, he added, has already supported free coronavirus testing, paid sick leave for hourly workers, and are expanding unemployment insurance.  The Trump administration is also proposing small-business loan initiatives.  

“They’re doing all this important small stuff, but are pushing back on the single most important thing that could help American workers and ensure that we don’t lose any growth,” Navarro said of the Democrats. “If you put this in you complete offset any negative growth effects from the virus.”

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