What's Being Done By Trump Isn't Totally Clear, But It's Not Good For Social Security For Our Kids and Grandkids
Contributor: Buddy Robinson
President Trump just signed an Executive Order to pause collection of the Social Security and Medicare payroll tax, deferring the payment of those taxes until after the election. Worse still, he promised that if elected, he may terminate the Social Security payroll tax. That, dear reader, would kill off Social Security.
The idea of temporarily pausing the Social Security and Medicare payroll tax (6.2 per cent and 1.45 per cent of wages, respectively) had been floated by the White House in recent weeks, and many Congressional Republicans—including Senate Majority leader Mitch McConnell - are on board with it.
Trump's Executive Order specifically defers the payment of the Social Security and Medicare taxes for workers with wages under $100,000/year, which is the vast majority of workers. The deferral is for September through December, and totals about $800 for the average wage worker.
After December, however, those deferred taxes will be payable by workers. How many will be in good enough financial shape come January to be able to pay back that money? This supposed tax “holiday” is not really a holiday at all.
On top of this, Trump declared: "If I win, I may extend and terminate, extend it beyond the year end terminate the tax. So, we'll see what happens."
That statement, like many of Trump's, is very muddy. It might mean that if elected, Trump will turn the temporary tax cut into a true holiday and not require repayment. If he extends the pausing of the tax for a time into 2021, that raises the same question as to whether the additional amount will need to be repaid. The worst case scenario is that Trump means to end the payroll tax permanently.
Any true holiday of the payroll tax, without payback, hurts Social Security's funding—unless Congress were to pitch in general tax revenue to fill the hole.
And since the payroll tax is the key funder of Social Security benefits (75 per cent now, and 100 per cent come 2035), terminating the tax effectively kills off the Social Security program, period.
Terminating the Medicare portion of the payroll tax deals a much smaller per cent cut to Medicare funding, but it would still be a major blow, and would put pressure on Congress to put more federal dollars into Medicare.
However, can Trump really change the payroll taxes by himself? That is clearly the job of Congress. Trump is relying on the idea of extraordinary measures for disaster relief.
It's obvious that his pausing or terminating of the payroll tax will end up in the Courts.
By the way, one reason many people voted for Trump in 2016 is that he promised on the campaign trail to leave Social Security and Medicare alone. In 2015 he said: “I’m not a cutter. I’ll probably be the only Republican that doesn’t want to cut Social Security.”
Let your Representative and Senator know that Trump must leave the payroll tax alone!
*Threats to the safety net
*We're outraged at this
*What we need to do about it