Pandemic Relief: Long-Term Care and Payroll Taxes

Blog Post
Wednesday, August 12, 2020

On the latest Facing the Future, I was joined by Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center at the Urban Institute, Andrew Biggs, a resident scholar at the American Enterprise Institute, Concord Coalition Executive Director, Bob Bixby, and Concord's Policy Director, Tori Gorman. We discussed COVID-19 relief legislation, President Trump’s executive action concerning payroll taxes, their potential implications and Social Security. 

[Note: Portions of this week's Facing the Future can be seen in the video clips posted below.]

Gleckman said the discussion around the Congressional response to the COVID-19 pandemic should be divided into two categories, fiscal policy and public health. 

“In fiscal policy, Congress has done an extraordinarily large amount,” Gleckman said. “What the government hasn’t done, is deal with the real problem - the public health problem.” 

“We’re not going to fix the economic problem until we fix the public health problem, and frankly we’ve done a terrible job on public health,” he added. 

Gleckman works on long-term care policy as well, which concerns one of the most vulnerable populations for this novel coronavirus - the elderly. 

“This is a scandal - over 50,000 residents of nursing homes and assisted living facilities have died from COVID-19,” he said. “It was completely unnecessary, it was absolutely a scandal and it was absolutely not surprising; those of us who work in this field have known something like this was going to happen.” 

He rattled off a number of viruses and illnesses that often run rampant through assisted living facilities and nursing homes that go unnoticed by the general public.

“These facilities do a bad job at infection control,” Gleckman said. “And what we now have is an extremely dangerous infection that’s killing tens of thousands of people, and we’re still not dealing with it.” 

Regular testing with rapid results, quality PPE, better infection control practices and better pay for aids that end up having to work in multiple facilities to make ends meet are methods Gleckman identified to help address the issue. 

On Congress’ handling of the health crisis, Gleckman identified two major problems: insufficient funding for long-term care facilities to get what they need and the lack of a coordinated government response. 

The conversation shifted to the next piece of legislation that Congress is considering in response to the pandemic. 

“They can’t really even agree on what the overall purpose of the money is,” he said. “Are we doing just economic relief for people or are we doing stimulus? Those are two very different things that require very different solutions.” 

“The problem is, when businesses have to continue to stay shut because the pandemic is out of control, all the stimulus in the world isn’t going to get you out of this,” Gleckman added. 

 

Biggs joined the program to discuss recent executive action by President Trump that impacts payroll taxes dedicated to Social Security and Medicare. 

“For quite some time now, the President has been stating his preference that any sort of stimulus or COVID package should include a cut in the Social Security payroll tax,” said Biggs. “He hasn’t really gotten the cooperation in Congress that he wanted, so what he has done instead is an executive action that would instruct the government to stop collecting Social Security payroll taxes.” 

It does not mean that people do not still owe those taxes. It is not a tax cut. It is a tax deferral. 

“Unless Congress agrees to forgive those taxes, then come 2021, I assume on people’s tax returns, they’re going to have to pay that money back,” he said. In some circumstances, it could also result in individuals not only owing the deferred taxes but also having to pay higher income taxes. 

“What is going on here, because there isn’t that agreement with Congress, it’s sort of daring Congress to come back and force people to pay this money later,” Biggs said.

He argued that this may even be a new angle by Republicans to achieve policy goals, almost as retribution for executive action taken by President Obama while he was in office.

“You could see it in the future as sort of a Republican strategy, ‘we’re not going to cut taxes, we’re simply going to stop collecting them, and then we’re going to dare the Democrats to raise them’ ” he said. “It’s a positioning thing … it’s not how you want your government to function.” 

Even if a payroll tax deferral goes into effect, Biggs believes Congress would act to make the Social Security trust funds whole and that this executive action would not “destroy” the method of funding the system. 

“The current way of funding Social Security has a lot of the defects of a self-funded system - it is hard to change things - but it doesn't have the virtues of actually being self-funding,” he said. “We should just acknowledge the reality here; either make it self-funding or admit it’s not and then figure out how things should go.” 

“Most other countries, to be frank, don’t have this sort of trust fund, self-financing Social Security structure, and I think they’ve been better at fixing their Social Security programs than we have,” Biggs added.  

He said that for 30 years, we’ve known what the problems and solutions are, and we’ve simply chosen not to do anything. 

“The problem here is that these are very long-term programs … very long time horizons,” Biggs said, “managed by elected officials whose time horizon is from now until the next election.” 

 

Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Play Music or with an RSS feed. Follow Facing the Future on Facebook and watch videos from past episodes on The Concord Coalition YouTube channel.