August 2020 memorandum directing the Secretary of the Treasury to defer the withholding
legal authority is grounded in 26 U.S.C. § 7508A
In August 2020, President Trump issued a memorandum directing the Secretary of the Treasury to defer the withholding, deposit, and payment of certain payroll taxes for employees earning less than $4,000 bi-weekly, covering wages paid from September 1, 2020, through December 31, 2020. (see, e.g. Trump White House Archives).
The legal authority is grounded in 26 U.S.C. § 7508A, which permits the Secretary of the Treasury to postpone certain tax deadlines due to federally declared disasters. This statute allows for the deferral of tax obligations during periods of disaster, such as Covid-19 or any of the current natu. The memorandum specifically targeted the employee portion of Social Security taxes, as imposed by 26 U.S.C. § 3101(a), and the equivalent portion for railroad employees under 26 U.S.C. § 3201. The Secretary of the Treasury was instructed to issue guidance ensuring that the deferred taxes would not accrue penalties, interest, or additional amounts.
Furthermore, the memorandum directed the Secretary to explore avenues, including legislation, to potentially eliminate the obligation to repay the deferred taxes. This action was framed as a temporary relief measure aimed at supporting workers during the economic disruptions caused by the COVID-19 pandemic.
Obviously, while the President can direct the Treasury to defer tax obligations under existing statutory authority, permanently eliminating tax liabilities would require legislative action by Congress. The use of 26 U.S.C. § 7508A in this context demonstrates the flexibility granted to the Treasury Department to provide tax relief in response to federally declared emergencies.
This memorandum stands as a notable example of executive action taken to mitigate economic hardship during a national crisis by leveraging existing tax code provisions and should be used again today in order to expose the true size of the Federal government. The Southern Border National Emergency and National Energy Emergency can be expanded to a natural disaster as much as Covid was.