According to rumors, here is what a salary tax reduction might look like

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Businesswoman giving a check to her colleague — Getty

President Donald Trump insists that the economy remains healthy as worries circulate about a possible recession. Despite these claims, White House officials are considering the possibility of a temporary reduction in the payroll to give more money to consumers. & Nbsp;

according to reports, White House economists have drafted a white paper on the possibility of reducing payroll taxes. Earlier, a White House official published a statement claiming that "more tax cuts for the American people are certainly on the table, but the reduction in payroll taxes is not in the study yet." However, President Trump confirmed to reporters that cuts in payroll taxes were on the table, with these rumors potential changes in capital gainssaying, "I have been thinking for a long time about payroll taxes. Many people would like to see that.

If the comings and goings seem familiar, it echoes the themes of an earlier era. The Obama administration has passed the latest cuts in payroll taxes for American workers, also controversial. in 2011despite fears that the reduction would increase the federal deficit. The theory was that the advantage would make up for all the costs: the reduction was aimed at boosting the economy after the recession of 2008. After the first round, the congress renewed temporary reductions in social security contributions in 2012.

Here's how payroll cuts worked. Wages and income from self-employment are subject to social security taxes and health insurance. Together, social security and health insurance taxes are known as FICA (Federal Insurance Contributions) taxes and are deducted from your salary. Self-employment income taxes are designated separately as SECA (Self-Employment Contribution Tax) taxes, as the self-employed pay both employee and employer contributions. 39; employer.

(You can read more about withholding right here.)

If you are an employee, you pay the social security tax (6.2%) as an employee and your employer also pays the same tax rate (6.2%); Again, if you are self-employed, you pay both parties.

Unlike Medicare, social security contributions are subject to a salary cap. In other words, you pay social security taxes on your income until you reach a magic number. After that, your wages are no longer subject to social security taxes. For 2019, this magic number is $ 132,900. This means that, whether you earn $ 1,000 or $ 100,000, you will have to pay Social Security taxes on that income. But what if you win $ 132,901? You will pay social security taxes on $ 132,900, but not on the extra dollar. And if you earn $ 1,132,900? You will pay social security taxes on $ 132,900, but not on the extra $ 1 million.

In contrast, all salaries are subject to Medicare taxes. If you are an employee, you pay the Medicare tax (1.45%) as an employee and your employer levies the tax at the same rate (1.45%). As before, if you are independent, you will pay both. And, & nbsp; through a change in the law that came into effect in 2014, high-income taxpayers are also subject to a Medicare surtax (0.9%) corresponding to salaries over $ 200,000 or $ 250,000 for married taxpayers.

Your employer collects these social security and health insurance payments and remits them to the government on your behalf (or you pay them directly if you are self-employed). These taxes are sometimes called "trust fund" taxes and are credited for your retirement benefits.

(You can find out more about trust fund taxes right here.)

This is how the 2011 payroll tax reduction works. On the employer side, payroll contributions for federal purposes have remained the same. On the employee side, social contributions for federal purposes were reduced by 2%: instead of paying 6.2% of social security taxes (up to $ 106,800), contributions were 4, 2% for social security. Security taxes (always up to the ceiling). Self-employed also a reduction of 2%. Contributions for Medicare remained the same.

A similar reduction in payroll taxes in 2019 could save up to $ 2,658 for key employees. Most full-time employees would earn about $ 908, or about a week's salary (based on the Office of Labor and Statistics data for the quarter ending July 2019, downloadable in PDF format).

It remains to be seen whether a reduction in social charges will become a reality. However, discussions about other tax cuts are likely to occur. Said Larry Kudlow, Director of the National Economic Council Fox News Sunday viewers: "Tax cuts 2.0, we are looking at all this."

President Donald Trump insists that the economy remains healthy as worries circulate about a possible recession. Despite these claims, there have been rumors that White House officials are investigating the possibility of a temporary reduction in the payroll to give more money to consumers.

According to reports, White House economists have written a white paper on the possibility of reducing payroll taxes. Earlier, a White House official had issued a statement in which he declared that "other tax cuts for the American people are certainly possible, but the reduction in payroll taxes is not considered for the moment ". However, President Trump has confirmed to reporters that payroll tax cuts are on the table, with these potential rumors about capital gains, saying, "I've been thinking about payroll taxes for a long time. Many people would like to see that.

If the comings and goings seem familiar, it echoes the themes of an earlier era. The Obama administration enacted the latest payroll cuts for American workers – also controversial – in 2011, despite fears that the cuts would increase the federal deficit. The theory was that the advantage would outweigh all the costs: the reduction aimed to revive the economy after the 2008 recession. After the first round, Congress renewed the temporary tax cuts on wages in 2012.

Here's how payroll cuts worked. Wages and income from self-employment are subject to social security taxes and health insurance. Together, Social Security and Medicare taxes are known as Federal Insurance Contributions Act (FICA) taxes and are deducted directly from your salary. Self-employment income taxes are designated separately as SECA (Self-Employment Contribution Tax) taxes, as the self-employed pay both employee and employer contributions. 39; employer.

(You can read more about withholding here.)

If you are an employee, you pay the social security tax (6.2%) as an employee and your employer also pays the same tax rate (6.2%); Again, if you are self-employed, you pay both parties.

In contrast, all salaries are subject to Medicare taxes. If you are an employee, you pay the Medicare tax (1.45%) as an employee and your employer levies the tax at the same rate (1.45%). As before, if you are independent, you will pay both. And, thanks to a change in the law that came into effect in 2014, high-income taxpayers are also subject to a Medicare surtax (0.9%) on salaries over $ 200,000, or $ 250,000 for taxpayers married.

Your employer collects these payments from Social Security and Medicare and remits them to the government on your behalf (or you pay them directly if you are self-employed). These taxes are sometimes called "trust fund" taxes and are credited for your retirement benefits.

(To learn more about trust fund taxes, click here.)

This is how the 2011 payroll tax reduction works. On the employer side, payroll contributions for federal purposes have remained the same. On the employee side, social contributions for federal purposes were reduced by 2%: instead of paying 6.2% of social security taxes (up to $ 106,800), contributions were 4, 2% for social security. Security taxes (always up to the ceiling). Self-employed people also benefited from a 2% discount. Contributions for Medicare remained the same.

A similar reduction in payroll taxes in 2019 could save up to $ 2,658 for key employees. Most full-time employees would earn about $ 908, or about a week's salary (according to data from the Bureau of Labor and Statistics for the quarter ending July 2019, downloadable in PDF format).

It remains to be seen whether a reduction in social charges will become a reality. However, discussions about other tax cuts are likely to occur. National Economic Council Director Larry Kudlow said Fox News Sunday viewers: "Tax cuts 2.0, we are looking at all this."