Senate Finance Chairman Chuck Grassley, a Republican from Iowa, pushed back on the idea of including a payroll tax cut in the emerging GOP recovery plan, saying on Monday that it’s a “public relations problem” and would have little economic impact.
Republican Sen. John Cornyn of Texas warned that a payroll tax cut “divides our conference,” while Senate Majority Leader Mitch McConnell would not say whether Republicans will accept a payroll tax cut as he walked off the Senate floor Monday afternoon.
Lawmakers have a major feat to pull off as they attempt to put together a new stimulus proposal that can make it across the finish line in a deeply divided Congress and in the midst of an election year.
Democrats and Republicans are already at odds over competing priorities they want to see the bill focus on with no clear way to reconcile major differences.
The pushback from top Republicans to the idea of including a payroll tax cut in the legislation, which Trump has been championing, underscores the extent of divisions that will have to be overcome to pass any legislation, not just between Democrats and Republicans, but within the Republican Party as well. The President has recently said that he would consider not signing the stimulus package if the payroll tax is not included in the package.
Asked about the possibility of a payroll tax cut, Cornyn told CNN on Monday, “I think it divides our conference because the Social Security and Medicare trust funds are not exactly on solid ground.”
“We need to do something in that space anyway, but cutting the revenues by payroll tax is problematic because eventually you’re going to have to raise it anyway and you’re just exacerbating the already difficult status that both of those trust funds are in,” he said.
Grassley also warned about how the public may perceive such a cut, since enacting such a tax break would have an impact on the Social Security trust fund. Grassley said that even though Congress would replenish the fund, people would think Washington is “raiding it.”
“People would think that we’re hurting Social Security funds when we’re really not,” Grassley said, explaining why he thinks it could be a “public relations problem.”
At the White House on Monday, Trump reiterated his support for a payroll tax cut during a meeting with Republican leaders.
“It’s been proven to be successful,” Trump said. “It’s a big savings to the people. It’s a tremendous saving.”
McConnell said he plans to follow the White House meeting with a discussion among members at Tuesday’s GOP lunch to “see if we can develop kind of a common approach to this on our side,” after which he’ll begin to reach out to the Democrats, he said.
Some Senate Republicans have already balked at the enormous price tags associated with the already-enacted stimulus measures, which total in the trillions of dollars, and are reluctant to spend significant amounts of additional money. A payroll tax cut could end up increasing the deficit, a feature of the policy proposal that could make it less likely to win GOP support.
Grassley argued on Monday that a better way to stimulate the economy is through another round of stimulus checks — rather than passing a law to impose a small cut in American workers’ payroll taxes.
“If the purpose of (a payroll tax cut) or a check is to stimulate the economy and help people in need, I think when a person has a check in his hand … I think that’s going to do more economic good than if we dribble out $30 every paycheck,” Grassley said in the Capitol. “Because people are going to notice it and maybe take some action as a result.”
Asked if he’s open to both stimulus checks and a payroll tax break, Grassley said: “I don’t think you can fit them in the approximate (price tag) … Let’s say approximately $1 trillion: I don’t think you can fit them both in.”
CNN’s Ali Zaslav and Jason Hoffman contributed to this report.