US Economy 2019: Trump Administration Denies Reports Of Possible Payroll Tax Cut To Prevent Recession

The Trump administration has denied media reports that they are looking at a payroll tax cut to prevent a recession, after the Dow had a one-day selloff of 800 points last week due to a warning signal in the bond markets.

The Washington Post and New York Times both reported Monday that the Trump administration was looking at tax cuts to buoy the U.S. economy and sustain strong consumer spending. In addition to a payroll tax decrease, the administration was also looking at a cut for the capital gains tax, which would likely only help wealthy investors.

"More tax cuts for the American people are certainly on the table, but cutting payroll tax is not something under consideration at this time," a White House official said late Monday evening in response to the reports.

Payroll taxes are imposed on employers and employees and are taken out of an employee's salary. The most prominent payroll tax in the U.S. is the Federal Insurance Contributions Act (FICA) which is taken out of an employee's salary to pay Social Security and Medicare.

By reducing the FICA tax, less money would go into Social Security and Medicare, but workers would take more money home, which could translate to more spending on consumer goods.

The Trump administration has used tax cuts as economic stimulus before, as Trump signed the Tax Cuts And Jobs Act, which cut individual taxes across the board and made significant changes to the tax code.

Last week, a signal in the bond market called an inverted yield curve panicked investors, making Wednesday the worst-performing stock market day in 2019. Trump said Sunday that he does not "see a recession" when asked about a possible economic downturn and even blamed the news media of manufacturing a crisis to throw off his reelection chances.

GDP grew only 2.1% for the second quarter of 2019, the lowest since the beginning of Trump's term as president. The Federal Reserve also lowered interest rates on July 31 due to a possible slowdown in the global economy and multiple international trade wars.