September 24, 2020

Mnuchin to Van Hollen: Making Payroll Tax Deferral Optional for Federal Employees and Service Members is “Reasonable”

Today, in response to a question posed by U.S. Senator Chris Van Hollen (D-Md.), U.S. Treasury Secretary Steve Mnuchin stated that it would be “reasonable” to allow federal employees and members of the military to choose whether or not to participate in President Trump’s payroll tax deferral. The Trump Administration is currently imposing the deferral, which must be repaid next year, on all qualifying federal employees and service members. The exchange, which took place during a hearing in front of the Senate Committee on Banking, Housing, and Urban Affairs, follows Senator Van Hollen’s repeated calls to make the payroll tax deferral optional for federal employees and service members, including in a bipartisan letter he led to Mnuchin and Office of Management and Budget Director Russell Vought earlier this month. 

During the hearing, Senator Van Hollen said, “Let me ask you now about President Trump's payroll tax deferral proposal – where workers don't have their Social Security taxes taken out of their paychecks through the end of the year, but then they owe the money and have to pay it back. As you know, the private sector really wants nothing to do with this. It really is a shell game. But I wrote to you about this along with a number of my colleagues. We sent a bipartisan letter simply asking you this, that with respect to folks in our military and our federal civil servants, that you at least give them the choice as to whether or not to participate. That you don't force folks in the military or federal employees to participate if they don't want to do it… When are we going to get an answer to the letter and [can you tell us] what your answer is?” 

To which, Secretary Mnuchin responded, “I would be happy to follow up with OMB, who is responsible to have the agencies – I think that's a reasonable issue, if people don't want to participate. But let me follow up with them.”  

A video of the Senator’s questioning of Secretary Mnuchin can be found here and a full transcript can be found below. In addition to pressing Mnuchin on the payroll tax deferral, Senator Van Hollen also used his questions to underscore the economic need for state and local funding in the next COVID-19 relief package and expose this Administration’s exaggerations on economic growth. 

SENATOR CHRIS VAN HOLLEN: Thank you, Mr. Chairman, and Ranking Member, and I want to thank Chairman Powell and the Secretary for being here. I’ve been listening to the testimony, and Mr. Secretary, I understand that both you and the Chairman agree that additional fiscal help is needed to help working families and the economy. I also hope we would all agree that we should provide that relief in the most effective way possible for working families – to boost the economy. And the Congressional Budget Office just issued a report on September 18th about the impact of the CARES Act on economic impact. Have you had a chance to review that report – the CBO report? 

TREASURY SECRETARY STEVE MNUCHIN : I have not yet had a chance, but will do so this afternoon. 

VAN HOLLEN: Thank you. I encourage you to do that. We had a Budget Committee hearing yesterday, and I asked the Republican-appointed Director of the CBO about the provision in the report that indicated that aid to state and local governments was among the most effective tools for helping working families and boosting the economy. So, I really encourage you to do that.  You're aware of the fact that during the negotiations over the CARES Act, the original proposal put forward by Senator McConnell on the floor of the Senate did not include a penny of appropriations for state and local governments, right? 

MNUCHIN: Well, it provided money to education, which would have saved state and local governments significant amounts of money. So, in essence that was. 

VAN HOLLEN: Mr. Secretary, that goes directly to education departments – which is good – and of course, we increased that at the time. But there was not a penny and then subsequently, when this issue came up, Senator McConnell talked about letting states and local governments go bankrupt. And of course, the most recent proposal he put on the floor of the Senate, does not include a penny of money for state and local governments, even though the CBO report indicates that's one of the most effective ways. But as I understand your testimony, you agree that additional state and local support would be helpful, right? 

MNUCHIN: Yes, we do support some additional aid. 

VAN HOLLEN: Got it. So, I would like to ask you about a statement you made on national television a few weeks ago, on September 6th, and I'm quoting what you said. You said, “I think before we got into COVID-19, I thought the debt was very manageable. We were having extraordinary growth. We were creating growth that would pay down the debt over time.” That was the statement you made on FOX. I asked the Republican-appointed CBO director about that statement yesterday in a Budget Committee hearing, and with respect to the claim that we were creating growth that would pay down the debt, he simply said that was untrue. Just the budget did not show that. It was flat out wrong. But I want to focus on the part of your statement where you said that prior to the pandemic we were experiencing “extraordinary growth.” Because in 2019, before COVID-19 hit, economic growth was 2.3 percent. Is that the, “extraordinary growth” that you were referring to in that TV interview? 

MNUCHIN: We were on track for significant growth, beyond that. And that is correct. 

VAN HOLLEN: Alright. Mr. Secretary, you were not on track for significant growth. You’ve overestimated the growth repeatedly. You know, President Trump has talked about 4 percent growth. And the reason I ask is that during the second term of the Obama-Biden Administration, the economy grew at 2.4 per year per year. In fact, slightly higher than the economic growth you were talking about just before the pandemic. So, by your definition, those four years of the Obama-Biden Administration experienced extraordinary growth, is that right? 

MNUCHIN: Again, I would be happy to go through my projections with you offline. But we were beyond all of our projections. And again, we had projected 3 percent over time, which is something that has not been done in years. And we believe the economic policy – were on track for that. 

VAN HOLLEN: Mr. Secretary, it's simply the difference between projections and reality. And reality is that economic growth over – you know – the four years of the Obama-Biden Administration was actually slightly higher than economic growth in 2019, which you called “extraordinary growth.” Let me ask you now about President Trump's payroll tax deferral proposal. Where workers don't have their Social Security taxes taken out of their paychecks through the end of the year, but then they owe the money and have to pay it back. As you know, the private sector really wants nothing to do with this. It really is a shell game. But I wrote to you about this along with a number of my colleagues. We sent a bipartisan letter simply asking you this – that with respect to folks in our military and our federal civil servants – that you at least give them the choice as to whether or not to participate. That you don't force folks in the military or federal employees to participate if they don't want to do it. 

SENATOR JOHN KENNEDY (presiding): Could you give us a brief answer, Mr. Secretary? 

VAN HOLLEN: Yes, could you? And – when we're going to get an answer to the letter, and also what your answer is? 

MNUCHIN: I would be happy to follow up with OMB, who is responsible to have the agencies –  I think that's a reasonable issue, if people don't want to participate. But let me follow up with them.