What a payroll tax cut would actually mean for your wallet – CNBC
Trump has not elaborated on how large a payroll tax cut would be.
If he were to make such a move, he would not be the first to implement such changes. Former President Barack Obama previously reduced the taxes paid by employees to 4.2%, down from 6.2%, in 2011 and 2012.
Yet experts say that the boost consumers get to their pay checks might not be that noticeable.
If $10,000 was made exempt from payroll taxes, that would be just $700 for many workers, said Jeffrey Levine, CEO and director of financial planning at BluePrint Wealth Alliance. That might not be enough to stimulate the economy, he said.
Still, with lunemployment down and historically low interest rates, it is probably not the most appropriate time to make such a move, Levine said.
“You don’t use your best play in the second quarter. You wait until you really need it at the end of the game,” Levine said. “When you need the play, you want to make sure you have something you can count on.”
Experts also worry that the trust funds for Social Security and Medicare, which are already facing funding shortfalls, would be further damaged by such a policy.
“If a payroll tax cut is enacted, those two funds would be directly impacted, unless provisions are made to replace the lost tax collections from general revenues,” said Tim Steffen, director of advanced planning at Baird Private Wealth Management.
Payroll tax cuts could not only jeopardize the benefits for individuals who are retired or who are approaching retirement, but could also point to bigger payroll tax hikes for younger generations, according to Laurence Kotlikoff, economics professor at Boston University and president of Economic Security Planning, a provider of financial planning tools.