Trump Proposes '0% Payroll Tax Rate' Amid Stock Market Turmoil... Bold 950 Trillion Won Offer

Republicans Discuss Stimulus Plan... Propose $800 Billion in Tax Cuts
Bloomberg: "53% Chance of US Economic Recession Next Year"

[Image source=Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] It has been reported that President Donald Trump conveyed to Congress his plan to drastically reduce the payroll tax rate to 0% in response to the economic downturn caused by the novel coronavirus infection (COVID-19). This move is seen as an attempt to resolve the red flags raised not only for the U.S. economy but also for his own administration amid the spread of COVID-19 and the sharp drops in oil prices and stock markets. However, the market's reaction to the stimulus package's effectiveness remains lukewarm.

On the 10th (local time), President Trump personally visited Congress to discuss the stimulus package with Republican senators and requested their cooperation. CNBC cited an anonymous official saying that President Trump proposed lowering the payroll tax rate to 0% until the end of the year. The day before, President Trump had announced a stimulus package including payroll tax cuts, support for part-time workers, and aid for the airline, lodging, and cruise industries. The tax cut amount due to the payroll tax reduction was reported to reach $300 billion, and if the rate is lowered to 0%, the scale of the tax cut is expected to increase further.

After meeting with Republican lawmakers, President Trump told reporters, "We discussed the stimulus package," and added, "The Republican Party is very united."

However, the response from Republican lawmakers, the ruling party, to this White House proposal was reportedly skeptical. There was immediate controversy over how to make up for the revenue shortfall caused by the payroll tax cut. According to the Congressional Budget Office, payroll taxes accounted for $1.17 trillion of U.S. government revenue in the 2018 fiscal year.

The media also expressed negativity. The New York Times (NYT) analyzed that President Trump proposed a complete exemption of payroll taxes to Republican lawmakers, estimating the relief amount to reach $800 billion (approximately 950 trillion won). It also reported that it would be difficult to gain support from either the Republican or Democratic parties. The Wall Street Journal (WSJ) reported that bipartisan lawmakers want "targeted" measures for part-time workers and the travel industry affected by COVID-19, and that President Trump's payroll tax exemption plan was effectively rejected. In response, Larry Kudlow, Chairman of the National Economic Council (NEC), argued that the revenue shortfall caused by the payroll tax cut could be offset by economic growth.

Vice President Mike Pence, Treasury Secretary Steven Mnuchin, NEC Chairman Larry Kudlow, and Peter Navarro, Director of the White House Office of Trade and Manufacturing Policy, all made appearances during the congressional visit.

Treasury Secretary Mnuchin took on the role of opposition party liaison. After meeting with Speaker Pelosi that day to directly explain the administration's measures, he emphasized to reporters the urgent need to pass the support measures on a bipartisan basis.

Even if the U.S. government’s stimulus package is introduced, forecasts that the U.S. economy will fall into a recession continue. On the same day, Bloomberg News reported that a survey of economic experts showed a 53% chance that the U.S. economy would enter a recession within a year. Although the New York stock market succeeded in a significant rebound that day, the fluctuations between declines and rises following the government’s announcements suggest a bleak outlook.

Meanwhile, the New York stock market rebounded sharply on the day amid expectations for the U.S. government’s measures. At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average surged 4.89% (1,167.14 points) to close at 25,018.16, the S&P 500 index rose 4.94% (135.67 points) to 2,882.23, and the Nasdaq index also jumped 4.95% (393.58 points) to finish at 8,344.25.

This content was produced with the assistance of AI translation services.