A lifetime ago (in March), President Trump signed the $2 trillion CARES Act into law. Fast forward to August: some parts have expired, unemployment is still scary-high, and Americans want an update.
On Saturday, Trump signed a few executive orders he thinks can help. Including one that says Americans earning less than about $100K can stop paying payroll taxes – the 7.65% of their paycheck the gov collects to fund public programs – till the end of 2020. Here’s what a payroll tax holiday could mean for your wallet.
It might feel like you just got a raise. At least that’s the idea. Bigger paychecks = more money you could use to cover bills and spend at American businesses. Which can help boost the economy. But there’s a catch: your employer has to say okay.
Since the payroll tax holiday is temporary – and Congress would have to agree to permanently forgive any tax bills – some experts think a lot of companies will continue collecting payroll taxes. And hang onto that money for safekeeping. So that if Uncle Sam asks for it later, they won’t be on the hook for their employees’ portions.
You might get less from gov programs later. Payroll taxes pay for Medicare. And Social Security…which is already on the struggle bus. If funding gets slashed, your checks in retirement could be even smaller than you hoped. Meaning you’ll probably want to invest more to make sure Future You is covered.
theSkimm: A bigger paycheck could be nice for your bank account and the economy. If you get one (and can afford to not spend it all in one place), set aside a little extra for retirement. Think of it as damage control in case public benefits take a hit.
Skimm’d by: Ivana Pino, Elizabeth Smith, and Elyse Steinhaus