Early last week, Donald Trump issued four new executive orders that could change the way we all look at our finances for quite some time.
While at his golf club in Bedminster, New Jersey, Trump announced that he plans to postpone payroll taxes through the end of the year, extend the unemployment bonus at $400 a week in the hope of “helping people stay in their homes”, and that he is waiving student debt payments through the end of 2020.
Here’s why you should continue saving up money and making monthly payments: Trump is ordering a payroll tax deferral and not a permanent cut.
This means, even though taxes won’t be collected for a while, they’ll still be due at a later date. Nothing has actually passed. These are all ideas which may create severe ramifications if not handled correctly.
Furthermore, tax changes have to come from Congress, its not something our President has direct control over.
When we lay out the four executive orders, things don’t necessarily seem as black and white. Which is why we feel it’s important to break them down.
- Trump Delays Payroll Tax Collection For Those Making Under $104,000: When Trump instructed the U.S. Treasury to stop the collection of payroll taxes, he had to backtrack a little and call on Congress (and presumptive Democratic presidential nominee Joe Biden) to make sure the payroll tax deferral was a permanent tax cut. Here’s the problem with that, payroll taxes help pay for social security and medicare. With this executive order, Trump is trying to delay the 6.2% tax that employees pay every paycheck for social security. On top of that, employers are also required to pay 7.65% out of the company’s pocket for each employee. Earlier this year, Congress deferred employer payroll taxes for the rest of 2020. The grim reality is, if these deferred taxes are not paid back, it will lower the funds in the Social Security Trust Fund.
- Unemployment Is Extended to $400 A Week: Over 30 million unemployed individuals received an extra $600 a week from the government, in addition to their unemployment checks. That funding to expired at the end of July. With each political party at odds, and various funding amounts proposed, this is far from a done deal. Especially since Trump wants the Department of Homeland Security to use $44 million in funds typically allocated towards disaster relief such as hurricanes, tornadoes, and flooding.
- Top Officials Can Consider “Halting” Evictions: Within the next few months, out of the 110 million renters in the United States, somewhere between 30-40 million of them will be facing evictions. Trump’s executive order does not specify whether or not evictions will have to seize, nor does it provide funding or additional aid for renters. Rather, Trump is now relying on Alex Azar (Health and Human Services Secretary) and Robert Redfield (Centers for Disease Control and Prevention Director) to decide on whether an eviction ban is needed. In order for aid to be provided to renters, Ben Carson (Housing and Urban Development Secretary) and Steven Mnuchin (Treasury Secretary) have to come up with an adequate way to disperse funds once again. Again, nothing is guaranteed.
- Student Loan Payments are Differed Until December 31, 2020: This executive order only extends the difference that has already been in place on Federal Student Loans. However, the Department of Education does have the authority to defer or possibly even cancel student loan payments to the federal government. While Trump has been able to temporarily cancel interest payments, the debt is not canceled forever.
So what happens next?
Eliminating debt, preventing evictions, providing more for the unemployed and postponing payroll taxes all seem great in theory.
The issue is that none of these executive orders have any permanence.
More than anything, they’ve seemed to make things seem more confusing and uncertain in a time that already seems grim.
The important thing to remember is the necessity to continue saving whatever money you can while (re)building a financial safety net one day at a time.