Republicans are tossing out the payroll-tax cut in favor of a 2nd round of stimulus checks

A $600-a-week boost to unemployment benefits will expire at the end of July. Republican leaders and the White House are in talks about what to do next.Ting Shen/Xinhua via Getty Images
  • Senate Republicans are scrapping the payroll tax cut from their initial coronavirus relief bill in favor of stimulus checks, Treasury Secretary Steven Mnuchin said on Thursday.
  • "We think the payroll tax cut is a very good, pro-growth policy. But the president's focus is he wants to get money into people's pockets now because we need to reopen the economy," Mnuchin said on CNBC's "SquawkBox."
  • Trump had insisted on including the payroll tax cut, and the development marks a dramatic reversal for the White House.

Senate Republicans are scrapping the payroll tax cut from their initial coronavirus relief proposal in favor of a second round of stimulus checks, Treasury Secretary Steven Mnuchin said on Thursday.

Mnuchin said the measure "won't be in the base bill."

"We think the payroll tax cut is a very good, pro-growth policy. But the president's focus is he wants to get money into people's pockets now because we need to reopen the economy," Mnuchin said in an interview on CNBC's "SquawkBox."Advertisement

He added that President Donald Trump prefers to "send out direct payments quickly so that in August people get more money," and didn't rule out pursuing it in another piece of legislation down the road.

The development is a remarkable U-turn for the Trump administration. The president previously said on a Fox News Sunday interview that he would consider not signing a stimulus package if it didn't contain the payroll tax cut.

Trump had repeatedly insisted the measure would be good for the economy, which posed an obstacle for Republicans that were largely cool to the idea as they designed their initial coronavirus relief bill over the past week.
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They labored to keep the amount of spending under $1 trillion, and the payroll tax cut would have significantly driven up the cost of the legislation depending on its design.GOP Sen. Chuck Grassley, the Senate finance chair, said on Monday a stimulus check would generate a bigger economic boost than a payroll tax cut, since direct payments give people a sum of money up front instead of a wage bump that's distributed across paychecks over time. Democrats were against the tax break.Advertisement

Republicans are expected to release their coronavirus relief plan on Thursday.

Economists and many lawmakers in both parties that reducing the amount of taxes taken out of employed people's paychecks to finance Social Security and Medicare wouldn't benefit the estimated 20 million jobless Americans.

Seth Hanlon, a tax policy expert at the left-leaning Center for American Progress, previously told Business Insider: "It's a policy that's designed to benefit people who are working. It benefits people who are earning more, and it doesn't do anything for people out of work."Advertisement

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