Cutting the payroll taxes that fund Social Security and Medicare would cost the government $807 billion from April through the end of the year, the Penn Wharton Budget Model said in its report. Moreover, the tax cuts would have a marginal impact on the economy, reducing gross domestic product by 0.1% in 2030 and 0.2% in 2050 due to decreases in capital stock, the report said.
The bottom 20% of the income ladder, the group most likely to spend tax savings and stimulate the economy, would only receive about 2% of the payroll tax cut's benefits, according to the report. Many lower-income households wouldn't benefit because the savings would be distributed throughout the year, according to the report.
A cut to payroll taxes also wouldn't benefit households that don't earn wages and don't pay Social Security or Medicare taxes, the report said.
Trump urged Congress in an Oval Office address Wednesday to provide payroll tax relief in light of COVID-19 outbreak, an idea Democrats have criticized as narrowly effective.
--Editing by Neil Cohen.
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