White House

Payroll tax cuts off the table? Not so fast, says Trump in another whiplash reversal

No immediate move likely on taxes, as president also distances himself from gun background checks

President Donald Trump concludes a campaign rally at the Williamsport Regional Airport in Montoursville, Pa., May 20. (Tom Williams/CQ Roll Call file photo)

Updated 4:15 p.m. | In yet another whiplash policy reversal, President Donald Trump directly contradicted his staff Tuesday by saying payroll tax cuts are on the table as he looks to stave off an election-year recession.

A White House official on Monday afternoon, responding to a Washington Post report that the White House was eyeing a payroll tax cut amid recession fears, dismissed the idea this way: “More tax cuts for the American people are certainly on the table, but cutting payroll taxes is not something under consideration at this time.”

Trump, less than 24 hours later, said in the Oval Office: “I’ve been thinking about payroll taxes for a long time.” He added that lots of people want him to do just that, but he did not define who those people were.

A senior White House official contended there is no contradiction between the staff's Monday statement and Trump's Tuesday statement because aides were being asked if a specific policy proposal soon would be released. The president was merely saying a payroll tax cut has been discussed behind the scenes, the official said. 

[Trump reprises his pitch as the only savior for a Rust Belt battleground]

The president also said he is considering some sort of tax indexing, which he said he has been “talking about ... for a long time.” Trump added of that idea: “I can do it directly.”

“We’re looking at various tax reductions,” Trump said after markets last week were down amid worries about his tariff tussle with China

The administration has been considering indexing the tax on capital gains to inflation, a change that critics say would disproportionately reduce the tax liability of wealthier households, since stock ownership is more prevalent at upper income levels.

It’s not clear whether Trump would in fact have the authority to “do it directly,” as he said Tuesday. A 1992 Treasury Department legal opinion says otherwise, although backers of the move, such as the Grover Norquist-led Americans for Tax Reform, have commissioned their own studies that concluded the executive branch could act without Congress.

Trump’s comments are the most extensive yet about what administration officials are considering, he noted he’s not poised to act “any time soon.”

His embrace of a payroll reduction marks just the latest time he has undermined his staff’s plans and official policy announcements. The practice often causes aides to scramble and lawmakers to scratch their heads as they try to understand just where the president and his administration are headed.

Governs by instinct

It often shows how the president governs via instinct, often discarding the advice of his economic and policy advisers if he thinks an issue could benefit him politically.

A senior White House official contended there is no contradiction between the staff's Monday statement and Trump's Tuesday statement because aides were being asked if a specific policy proposal soon would be released. The president was merely saying a payroll tax cut has been discussed behind the scenes, the official said. 

But even as he searches for a way to avert an economic slowdown — no modern president has won a second term in the midst of one — Trump again said Tuesday that the American economy is tops in the world “by far.”

He called the word recession “inappropriate” and again said he thinks the U.S. economy is not nearing a major economic tumble.

[Gonzalez: GOP will need more than promoting their preferred opponent to affect Democratic]

He also again pressed the Federal Reserve to slash interest rates, saying a “substantial” reduction would provide new juice for the economy.

“I think we are actually set for … tremendous growth if the Fed would do its job,” he said. “I think they should say 100 base points … over a period of time.”

On a payroll rate cut, Washington has been here before. Following the Great Recession last decade, Congress passed and then-President Barack Obama signed a pair of payroll tax holiday provisions estimated to cost federal coffers more than $200 billion.

‘Shut up’ about recession

There was no immediate comment from House Ways and Means Chairman Richard E. Neal, D-Mass.

On Tuesday, the Senate’s top voice on tax matters, Senate Finance Chairman Charles E. Grassley, R-Iowa, said any talk of tax cuts, or interest rate cuts, “lends credence” to recession talk.

“So the best thing is just to shut up,” said Grassley, adding that due to the condition of trust funds, he would not suggest cuts to payroll taxes, which fund Social Security and Medicare.

Cuts to payroll taxes, however, go straight into workers’ pocketbooks, including those of workers who earn too little to owe income tax. According to a Congressional Research Service report, someone making an average $44,687 wage in 2011 saw an $894 reduction in payroll taxes, while someone earning the maximum taxable wage of $106,800, saved $2,136.

Because higher-income earners didn’t pay taxes on wages above $106,800 in 2011, they didn’t get any tax relief on earnings above that amount. According to another CRS analysis, those in the bottom 80 percent of income earners saw a .2 percent overall cut in their federal tax rate, while those in the top 20 percent saw a .1 percent overall cut.

‘Slippery slope’ on Second Amendment

Meantime, Trump, for the second time in three days, appeared to distance himself from previous comments supporting gun background checks legislation.

“We have very, very strong background checks right now,” adding his administration is “looking at mental institutions.” He again did not explain how his team might propose paying for those kinds of expensive facilities.

He declined comment on whether he supported House-passed legislation that aims to beef up federal firearms background checks. “I’m not going to get into that,” he said, not explaining why.

But he did note that some measures would amount to a “slippery slope” that might erode Second Amendment rights — his latest indication he is thinking about his conservative base, which includes many gun proponents, as he mulls whether he will use the power of his office to push a bill through Congress following the August recess.

Doug Sword contributed to this article. Get breaking news alerts and more from Roll Call on your iPhone.