Employment Taxes in Crisis: In Practice, Enforcement, and Insolvency

When President Trump permitted the Service to defer employees’ Social Security taxes in 2020 as a result of COVID-19, he claimed it was a “modest, targeted action.” The call was not unprecedented. Congress had already deferred the employer portion of Social Security taxes through the end of 2020. Nevertheless, tax holidays for U.S. employment taxes are rare, despite relatively frequent legislative change to payroll taxes. More than 75 statutory changes have been made to payroll taxes since they were first enacted in 1935, with almost all changes increasing rates, the taxes’ reach, or the government’s enforcement power. By examining legislative developments and their portrayal in the New York Times and Wall Street Journal, this Article documents the changes themselves, how they were presented by the government, and how the public reacted to the change. Exploring the historical development of payroll taxes focuses on the impact of changes to payroll taxes and, through its exploration, also forecasts the likelihood of future changes to the payrolltax system and Social Security funding.