Travis County elects not to pursue federal tax deferment for employees

The idea for a federal payroll tax holiday for employees was rolled out in early August, but it was only last Friday that the federal government issued guidance on how employers were expected to execute this economic relief measure.

On Aug. 28, the U.S. Department of the Treasury specified that payroll tax relief efforts were set to begin Sept. 1 – the same day that the Commissioners Court met to discuss whether the county ought to entertain a payroll tax deferment for its employees. After weighing the short-term financial benefit of deferred taxes against the liability of paying the money back next year, the Commissioners Court voted not to offer the option of payroll tax deferment to its employees.

County Auditor Patti Smith told the commissioners that only the Social Security portion of employees’ tax obligation is eligible for deferment, which amounts to 6.2 percent of each paycheck. Eligible workers must earn $4,000 or less per biweekly pay period. Deferrals are only available until the end of 2020, and employees are expected to pay back what Smith called “an interest-free loan” between January and April 2021.

For the average county employee, the sum of the deferred taxes amounts to $1,075 over the next four months.

“It doesn’t provide a lasting relief because the person has to pay this all back,” Commissioner Brigid Shea said. “I just think this is not fiscally responsible for the county to entertain.”

Smith explained that in 2021, the county planned to double the amount of Social Security tax taken out of an employee’s paycheck if an employee deferred their taxes for the remainder of the calendar year. For those who leave the county’s employ before that period, the county is still responsible for paying back the deferred Social Security contributions to the federal government.

The county is potentially liable for $6.6 million if all of its employees took the payroll tax deferment option and did not pay back the loan.

Due to the quick implementation window, Smith said that this liability does not include implementation costs for such a program, which the department did not have time to calculate over the weekend. However, she did say it will be an entirely manual process to contact employees wishing to participate and enact those requests into the county payroll system. “This will require a lot of overtime from our payroll employees,” she said.

“I don’t think it is a good deal,” Commissioner Gerald Daugherty said. However, he said he believed it was each employee’s choice whether to take advantage of such an offer. “It’s their money. I don’t think it’s a good idea for them to do that, but I think there are some circumstances with some people where they would probably exercise this.”

The commissioners voted 4-1 not to provide the option of payroll tax deferment for county employees. Daugherty voted against the motion.

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