TRUMP’S ‘PERMANENT’ PAYROLL TAX CUT TO BANKRUPT SOCIAL SECURITY
Trump recently signed a memorandum that would temporarily stop the collection of payroll taxes, which is a 12.4% tax split evenly between employees and employers that funds the Social Security and Medicare trust funds. Only Congress can cut taxes, however, so the payroll tax savings would still have to be repaid by next year’s tax deadline — though Trump said he would push to forgive the deferred taxes if he is reelected, Igor Derysh wrote for Salon on August 29, 2020 (Sunday, August 30, 2020 in Manila.)
Trump went a step further earlier this month, vowing not just to forgive this year’s payroll tax but eliminate it entirely. “If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax. I’m going to make them all permanent,” he said during a news conference at his Bedminster, N.J. golf course. “…In other words, I’ll extend beyond the end of the year and terminate the tax. And so we’ll see what happens.”
The claim prompted alarm on Capitol Hill. Senate Minority Leader Chuck Schumer, D-N.Y., Sen. Bernie Sanders, I-Vt., and Sen. Ron Wyden, D-Ore., sent a letter to the Social Security Administration questioning how permanently eliminating the tax and making no other changes would impact the viability of the Social Security Trust Fund. “While we would not be supportive of this hypothetical legislation, we would like to be aware of its potential implications,” they wrote.
Stephen Goss, the chief actuary at the Social Security Administration, told the senators in his response that the hypothetical cut would cause the Social Security Disability Insurance Trust Fund to be depleted by mid-2021 and the Social Security Trust Fund reserves “would become permanently depleted by the middle of calendar year 2023, with no ability to pay… benefits thereafter.” Goss noted that past temporary payroll tax reductions did not affect the trust fund reserves because the Treasury Department authorized automatic transfers from its General Fund, which Treasury Secretary Steven Mnuchin vowed to do for the deferred taxes, but it is unlikely to extend beyond that. If the payroll tax is eliminated, Congress would have to replace the funds with about $1 trillion in tax increases. Social Security benefits for retired workers average about $1,500 per month, and “these amounts could be completely eliminated” without alternative sources of funding, Forbes reported. “While benefits scheduled in the law… are obligations, such obligations can only be met to the extent that asset reserves are available,” Goss wrote. Democrats cited the analysis to warn that Trump’s promise would “completely decimate Social Security.”