As American businesses attempt to get the economy back on its feet, a payroll tax cut would be WIN-WIN for an employer and employee. This tax cut would give employers a reduction in their payroll costs and the potential to hire new employees, increase employee salaries, or gain profitability. Further, the tax cut would enable employees more take-home pay.
President Trump has proposed to eliminate payroll taxes that fund Social Security and Medicare through the end of the year. The current payroll tax rate for social security is 6.2% for the employer and 6.2% for the employee (up to $137,000), or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.
Therefore, cutting the payroll tax could assist companies who want to rehire employees by reducing the cost by 7.65% and enable an employee to get 7.65% additional in their paycheck.
In other words, for example, an employee who makes $50,000 a year would see their take home pay increase by $3,375 a year and same reduction for the employer.
The Payroll tax cut would not be ideal for the Social Security and Medicare programs and would increase corporate income tax and personal income tax at the end of the year, but could be a temporary perk for struggling businesses and employees, with the result of a better economy.