Letter to the Senate Opposing Extension of Payroll Tax Holiday

* a copy of this letter was also sent to the House of Representatives

July 19, 2011

United States Senate
Washington, DC 20510

Dear Senator:

In his news conference of July 15, 2011, President Obama called on the Congress to extend into 2012 the Social Security payroll tax cut that was enacted last year. On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I want to state our strong and continuing opposition to perpetuating this so-called "tax holiday", which will reduce revenue to the Social Security Trust Funds by nearly $230 billion if it is extended through 2012. A year ago we believed, and continue to believe that this proposal would have devastating effects on Social Security for a number of reasons.

As we said then, there is no such thing as a temporary tax cut, and the President's proposal only too vividly corroborates our point. Advocates for the payroll tax cut said it would last only for one year, and then funding for Social Security would revert to the
current payroll tax rate. A one-year interruption in the program’s funding is in itself highly undesirable; extending it for another year is just another step down a path that will end up permanently devastating the historic manner in which the Social Security program has been funded.

A year ago we said that the 2 percent payroll tax cut would be the beginning of the end of Social Security as we know it. We argued that the payroll tax cut, coupled with legislation that would substitute lost revenue with general fund transfers, would leave Social Security dependent on general revenue and the actions of Congress for its funding rather than workers' contributions, which have so successfully funded the program since its inception in 1935. Making matters worse, a permanent extension of the payroll tax cut, which appears even more likely to us today than a year ago, would nearly double Social Security’s 75-year projected shortfall.

Supporters of Social Security have always been able to accurately maintain that the program has not contributed one dime to the huge deficits that plague our country. That will change if Social Security becomes even partially dependent on general revenues. The needs of America's seniors would suddenly have to compete with other benefit programs, funding for the Defense Department, and hundreds of other government programs that are funded out of general revenues. Social Security would become a target for deficit reductions since the program would no longer be funded in its entirety by its own dedicated sources of revenue.

Finally, using general revenues to pay benefits, even if done only in part, would weaken the earned-right nature of Social Security. This is a fundamental aspect of the program, and accounts very substantially for its enduring popularity. Workers pay into the program in the belief that, when the time comes, they will receive benefits in return that reflect the contributions they have made during their working lives. Using general revenues to fund Social Security weakens this essential feature of the program. In proposing to extend the payroll tax cut for another year, the President argues that doing so will stimulate the economy. Clearly, something needs to be done to encourage job growth and reduce unemployment, but we do not believe that cutting Social Security’s revenue funding is the best way of addressing this important problem. The Tax Policy Center has reported that the wealthiest 40 percent of households benefit most from a payroll tax cut. Both the Center on Budget and Policy Priorities and the Center on Economic and Policy Research agree that extending the Making Work Pay Tax Credits, rather than a payroll tax holiday, would do more to boost the economy and help all workers.

While continuing the payroll tax cut for another year may sound like a good deal for workers, it is a bad deal for Social Security - the program that most of these same workers will rely on in the future. We urge you to oppose any extension of cuts to Social Security’s revenue funding.

Sincerely,

Max Richtman
President & CEO