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Beyer Testifies On Payroll Tax Deferral’s Damaging Effects On Military, Federal Workforce

Washington, September 24, 2020

Rep. Don Beyer (D-VA) today testified before the House Committee on Ways and Means Subcommittee on Social Security in its hearing, “Save Our Social Security Now.” Beyer, whose district includes the largest number of civilian federal employees of any member the House as well as the Pentagon and a number of other military installations, spoke to the damaging effects that the policy will have on military service members and federal workers.

Beyer’s testimony, as prepared:

Chair Larson and Ranking Member Reed, thank you so much for having this hearing and allowing me to offer witness testimony today.

I have the privilege of representing Northern Virginia, which is home to the highest concentration of federal workers in the country as well as the Pentagon and other major military installations. President Trump’s tax deferral, which is mandatory for federal employees and military service members, has put many of my constituents in a difficult position.

In the short term they will see more money in their paychecks, at a time when need is keenly felt, and many will be tempted to spend it. But under current law they will have to repay that money through double taxation, beginning in January. Soldiers and federal workers have written to me to say the guidance they have been provided by their branches or agencies has been confusing or misleading.

One, an Army Captain, expressed concerns that many of those who serve under him may not realize or prepare for the significant cuts to their paychecks which President Trump has set them up to receive in January.

He wrote:

“Dear Representative Beyer,

…I am currently serving as an officer in the U.S. Army, interacting daily with Soldiers as part of my job.

Nothing in my life means more to me than the wellbeing of these young men and women …

 

The current administration has implemented a payroll tax deferral for all federal employees as part of its COVID-19 economic stimulus. This tax deferral will provide additional money on federal employee monthly paychecks. However, this money is also required to be paid back in its entirety from January to April of 2021, otherwise employees will incur additional fees. Recently, it was also announced that members of the military will *not* have the option to opt out of this program, and the payroll tax deferral will automatically be added to paychecks for the month of September 2020 and will be expected to be paid back starting in January, resulting in approximately a 10% reduction of pay from January to April 2021. This is where my urgent concern lies.

Awareness of this cash windfall and later requirements has not been effectively broadcast to any level of the military. These include the young Soldiers, Sailors, Airmen, Marines, and Coast Guardsmen who are still learning financial responsibility. Many of these men and women are fresh out of high school and earning the first paychecks of their lives. The sudden influx of money, unexplained, will likely be spent very quickly by many of them, with little regard for later consequences. Many of the Soldiers within the ranks live paycheck to paycheck, and if they are not aware that all of this money must be paid back next year, it could be ruinous to their financial health.

If no action is taken to address this problem, numerous members of the military will be stricken with deductions from their paychecks next year that will cause unnecessary suffering and hardship. As service members have their incomes reduced as a result of the IRS recouping the tax deferred pay, many will struggle to make payments on vehicles, families will struggle to pay rent and buy food, and the men and women who volunteered to serve their nation will find themselves unable to provide for themselves and their loved ones.

If service members do not immediately set aside the entirety of their tax deferral this month, they place themselves at risk of not being able to make ends meet next year. No official information about this policy has been broadcast to service members, meaning many in the military will spend this money without thinking and be affected later with financial hardship. The decision to not allow members of the military to opt out of this deferral was also reckless, and shows significant shortsightedness on the part of the country’s leadership.

The deferral can still be delayed with rapid action and there could be added an option to opt out. Additional training and education can be created and broadcast to all levels of the military. Most importantly, and realistically, the period in which to pay back this money can be extended, and fees waived or cancelled to allow vulnerable service members a chance to avoid being hurt. What is coming is a situation in which a population that has volunteered to risk their lives in the service of the nation are themselves being put at unnecessary risk by the nation they serve.

 

The wellbeing of the men and women defending our nation has always been an issue that members of congress agree on. I’ve seen time and again that members from both parties can come together to do right by our Soldiers. All I wish is that the same will happen now.”

Listen to that. And he’s not alone in reaching out to me. Dozens of federal employees have expressed similar fears. And the simple fact is that President Trump does not have the legal authority to deliver the “permanent” deferral of these taxes.

Also, as my colleagues note, some of the ways President Trump has proposed making this policy permanent would have the added effect of depleting Social Security trust funds and leading to benefit cuts. This is not the real relief my constituents need and deserve, this is smoke and mirrors that could easily do more harm than good.

It isn’t just that the President is using the civil service and the United States military as political pawns – by explicitly tying forgiveness of these deferred taxes to his re-election, President Trump is making it clear that the intent of the policy is fundamentally corrupt. Congress should void this policy entirely, before President Trump can use it to do further harm to government workers and Social Security.

As it explores the means of doing so, federal workers and military servicemembers should be allowed to opt out.

I would note, in closing, the business community and private sector objected strenuously to the payroll tax deferral as “unfair” and “unworkable,” and were allowed the option of not participating (which nearly all have chosen). Federal workers and members of the military deserve the same courtesy and respect from the federal government.

Thank you for allowing me the opportunity to testify today and represent the voices of our military service members and federal employees on how Trump’s executive order impacts them.