President Trump has signed an Executive Order deferring the collection of the 6.2 percent social security employee payroll tax through the end of the year. While this will provide much needed liquidity for American families, Democrats like House Speaker Nancy Pelosi (D-Calif.) and Joe Biden have criticized this proposal as doing little to help Americans and undermining social security.

This is a sharp reversal from a decade ago when Pelosi and Biden vocally supported payroll tax cuts pushed by the Obama administration.

Throughout this period, President Barack Obama, Vice President Joe Biden, and House Speaker Nancy Pelosi repeatedly highlighted payroll tax cuts as way to give middle class families more money and help grow the economy.

For instance, in a blog post, the Obama administration highlighted that payroll tax cuts would give the typical family $40 per two-week pay cycle. As the document noted: 

 “$40 is real money for working families, as people all over the country told us. That money buys things like school lunches, the gas needed to get to work or visit ailing relatives, and co-pays for doctor visits and essential prescription medicines.”

It is important to note that Trump’s payroll tax deferral applies to the entire 6.2 percent tax while Obama’s payroll tax cut reduced the tax from 6.2 percent to 4.2 percent for two years. As a result, the same working family highlighted by Obama would be seeing three times the benefit under Trump, or roughly $130 per pay cycle.

Democrats also repeatedly highlighted how a payroll tax cut will help workers. For instance, in a speech given on December 17, 2010, President Obama noted that the payroll tax cut would reduce taxes for 155 million workers:

“Over the course of 2011, 155 million workers will receive tax relief from the new payroll tax cut included in this bill -– about $1,000 for the average family. This is real money that’s going to make a real difference in people’s lives.”

Similarly, in a speech given on May 22, 2012, Biden highlighted the administration’s efforts to cut the payroll tax, noting that it would reduce taxes for 98 percent of Americans:

“In December of 2010 we passed the payroll tax that gave each and every American an average of $1,000 tax cut. One thousand dollars less was taken out of their pay in payroll taxes. We repassed that not long ago, allowing another $1,500 to go into people's pockets instead of going into taxes. Ninety-eight percent of the American people -- they get a pay stub. They pay payroll taxes. So when you cut taxes for people with a -- with a payroll tax, 98 percent of the American people are getting a tax cut.”

Joe Biden’s biography on the Obama White House website even specifically highlighted his effort to cut payroll taxes for American workers:

“Fought for payroll tax cuts during the economic recovery -- ensuring a tax cut for every single worker in America.”

Speaker Pelosi also vocally supported payroll tax cuts. For instance, On December 13, 2011, Speaker Pelosi said that a payroll tax cut will give more money to Americans and help create more jobs:

“This is about a thriving middle class.  It's about a payroll tax cut that does what it sets out to do, puts $1,500 in the pockets of Americas families who need it, who spend it and in doing so inject, inject demand--demand, demand--into our economy which further creates jobs.”

Pelosi even supported extending the payroll tax cut without offsetting lost revenue, as her February 13, 2012 press release noted: 

“Democrats have always demanded that we extend the payroll tax cut for 160 million Americans without paying for it.”

In addition, following a jobs report released on December 2, 2011, Pelosi called for expanding the payroll tax cut:

“Today's jobs report sends a clear message: we've made some progress but we have work to do. The American people's top priority remains job creation. Democrats want to put more money in the pockets of all Americans and strengthen small businesses by expanding the payroll tax cut.”

President Trump has called on Congress to make the tax deferral a permanent tax cut. Given their past support for payroll tax cuts, Biden and Pelosi should join Trump in calling for permanent payroll tax relief.

Taxpayers in The Badger State will be happy to learn that Scott Fitzgerald and Cliff DeTemple have signed the Taxpayer Protection Pledge in the WI-05 Republican primary. They are running to replace retiring U.S. Congressman and Pledge signer Jim Sensenbrenner. By signing the Pledge, these candidates make a written commitment to oppose and vote against any efforts to increase taxes on Wisconsin taxpayers.  

Scott Fitzgerald is the Majority Leader of the Wisconsin State Senate and has been endorsed by outgoing Rep. Sensenbrenner. Fitzgerald’s primary opponent, Cliff DeTemple, has also signed the Taxpayer Protection Pledge. DeTemple is a small business owner specializing in measuring systems for Land Surveying.  

With a Solid Republican rating from Cook Political Report, the winner of tomorrow’s primary is a strong favorite to become the next Congressman from Wisconsin’s 5th district.  

In Wisconsin, every Republican in the state congressional delegation has signed the Taxpayer Protection Pledge. Candidates running for public office like to say they will not raise taxes, but often turn their backs on the taxpayer once elected. The idea of the Taxpayer Protection Pledge is simple enough: Make them put their no-new-taxes rhetoric in writing, so the promise is harder to break.  

ATR strongly urges all candidates running for elected office to sign the Taxpayer Protection Pledges. Candidates can still make this important commitment to voters ahead of the primary by visiting ATR.org. 

In a big win for Arizona taxpayers, Maricopa County Superior Court Judge Christopher Coury ruled that a nearly $1 billion income tax hike cannot appear on the November ballot due to its misleading language.

Backers of the Invest in Education initiative said it would have imposed “a 3.5% surcharge on taxable income above (a) $250,000 annually for single persons or married persons filing separately, and (b) $500,000 annually for married persons filing jointly or head of household filers.” Three and a half percent sounds like almost nothing, but as the Judge pointed out, that is shockingly and deliberately dishonest.

“Invest in Education circulated an opaque ‘Trojan horse’ of a 100-word description, concealing principal provisions of the initiative,” said Coury in his 20-page ruling. One of his main concerns with the initiative is its use of the word “surcharge” in the description.

“Although the use of the term ‘3.5% surcharge on taxable income’ may be perfectly understood by some Arizona voters to be permanently adding 3.5 percentage points to the taxation rate – an increase 77.7% in the tax rate on taxable income above the threshhold – others reasonable Arizona voters may understand a “surcharge” to mean a temporary tax, or to mean a modest 3.5% increase of the existing tax rate,” explained Coury. “The use of the term ‘surcharge’ creates a substantial likelihood of confusion for a reasonable Arizona voter.”

Coury also noted that the description fails to inform voters that the proposed tax increase would apply to more than just the “wealthy.” It would also apply to a number of small businesses, which are already struggling from the pandemic. Coury explained:

“Under applicable tax law, income generated by businesses – sole proprietorships, limited liability companies, S-corporations, and partnerships – that is not paid at the business level ‘passes-through’ to individuals and is captured as taxable income of the business owners. This ‘pass-through’ business income is taxed at the individual level. The 100-word description does not alert signers that this ‘pass-through’ ‘business’ income would be subject to the ‘surcharge’ if it was part of an individual or married couple’s taxable income…”

Adding insult to injury, a similar Invest in Education initiative was bumped off the ballot in 2018 for similar reasons. The Arizona Supreme Court suggested acceptable initiative language to the backers of Invest in Education, but they deliberately chose not to use it.

“Arizona is not a low tax state. Its top income tax rate is already too high – just a tad below Massachusetts’. And certainly above the nine states that do not tax wage income, such as Texas, Florida, Tennessee, and Wyoming,” said Grover Norquist, president of Americans for Tax Reform. “Arizonans know this. An effort to phase down the state income tax to zero over time was narrowly defeated in the Arizona Senate just last year.”

Tragically, unclear tax initiatives are not uncommon. For example, in Arkansas, a roughly 9% permanent sales tax hike will be on ballot this November under the title “Continuing a One-Half Percent (0.5%) Sales and Use Tax for State Highways and Bridges; County Roads, Bridges and Other Surface Transportation; and City Streets, Bridges, and Other Surface Transportation After the Retirement of the Bonds Authorized in Arkansas Constitution, Amendment 91.”

Coury’s ruling shines a spotlight on a major problem that happens throughout the country. Too many tax hike measures are intentionally vague or unclear in hopes of confusing or tricking voters into supporting them.

Backers of the Invest in Education initiative have filed a notice of appeal, but given the Arizona Supreme Court’s opinion in 2018, Coury’s ruling is unlikely to be overturned.  

A new survey finds that the freedom to be an independent contractor is vital to rideshare and food delivery drivers, as nine out of ten drivers on app-based platforms "began driving because they needed a job where they could control their work hours." 72 percent of drivers support California Proposition 22, affirming their right to be an independent contractor.

Edelman Intelligence, with author Brad Williams, completed the California App-Based Driver survey in July. The survey interviewed 718 Californian app-based rideshare and food delivery drivers “who have driven with any rideshare or food delivery app within the past year." Data was collected between May 19 and June 1, 2020.

Here are its key findings, including AB5 impact analyses in the white paper report:

• 88% of drivers said they started driving because they needed a job where they could choose when or where to work.
   
• 68% of app-based drivers say they wouldn’t continue driving if they didn’t have the flexibility they have now and were required to work a fixed shift.
   
• 72% of rideshare and food delivery app drivers support Proposition 22, a ballot initiative which would affirm app-based driver freedom to continue as independent contractors and not employees or agents. 
   
• About 84% of drivers say that they have another job, and agree with the statement, “This is part-time work, not a full-time job.” 
   
• Drivers report that, without the extra income, they wouldn’t be able to put money away for a rainy day (76%), provide for themselves and their family (73%), pay their bills (73%), put food on the table (65%), and pay rent/mortgage (67%).
   
• 71% of app-based drivers say their driving schedule changes from week to week.
   
• Rideshare prices (after AB5) would need to increase 25 percent to 111 percent to cover the additional employee costs, “depending on current market conditions, minimum wages, and other regulations in local regions throughout the state.” 
   
• This increase in prices would result in a reduction in trips of between 23 percent and 59 percent, with less dense cities and rural areas experiencing the largest percentage losses.
   
• “Assuming that the company would hire full-time workers, the number of active drivers in a three-month period would decline from 209,000 to 51,000, a 76 percent decrease.”
   
• “Despite the [AB5] proponents’ claims to the contrary, economic realities would require app-based platform companies to curtail or eliminate the flexibility currently afforded to drivers to choose when, where, and number of daily hours they work. Instead, drivers would be subject to fixed work hours and driving locations set by the companies.”
   
• One in four drivers (25%) say that they lost a part of full time job due to COVID-19. About 67% of drivers agree that app-based driving gave them an opportunity to earn money after losing a job or hours.
   
• “The resulting decline in the industry means fewer jobs, less income, and lower tax receipts to state and local governments in California - at a time when the state has the highest unemployment since the Great Depression.”
   
• “The losses will be magnified by the fact that five of the six largest app-based platform companies in the U.S. are located in California.”
   

See Also:

Biden Threatens Independent Contractors and Freelancers Nationwide

Pew Research Center Survey: By a 3-1 Ratio, Americans Consider Rideshare Drivers to be Independent Contractors

Pew Research Center Survey: By a 5 - 1 Radio, Residents of Majority Minority Neighborhoods Say Uber and Lyft Bring Them Where Taxis Will Not Go