Donald Trump’s payroll tax holiday: What you need to know

President Donald Trump’s weekend order to give millions of workers a break on payroll taxes caught many people by surprise, and created a range of reactions, criticism and questions. 

Each paycheck, employees see 6.2% of their wages go to Washington to help fund Social Security. Trump ordered Treasury Secretary Steve Mnuchin to defer those payments for at least four months, from September through the end of the year.

That means someone making the median weekly wage of about $1,000 could see an extra $62 in their paycheck. (We say "could" because the memo says employers don’t need to send the money to Washington. It doesn’t say they must give it to their workers, and there’s a debate in the business community over what to do.)

Trump’s order applies to people making up to $2,000 per week, so people who earn $104,000 a year or higher wouldn’t get the tax break. 

After those basics, things get more complicated.

As written, Trump’s order provides temporary relief. At some point, the missed payments would need to be made up, but the memo says the administration will look for a way to let people keep the money.

Mnuchin told Fox News Sunday that the money would be made up for with dollars from the general fund. The administration can’t promise that on its own. Congress, which controls federal spending, would need to pass a bill to make it happen.

Employers already are getting a tax holiday. They match the employee contribution, and under the last COVID-19 relief package, the CARES Act, their payments are on hold until the end of the year. They have two years to pay it back. They need to send Washington half by the end of 2021 and the other half by the end of 2022.

Social Security and Medicare amount to over a third of all federal spending, and the payroll tax delivers nearly 90% of the money to keep them running. As more people retire, there’s less money to keep them solvent. Less money coming into the system only exacerbates the problem.

The executive order has already fueled chatter on social media about what it means for the future of Social Security. We looked at four different Facebook posts.