President Trump’s proposal to cut Social Security payroll taxes is a misguided attempt to stimulate the economy that will hurt the workers it is intended to help. The National Committee opposes interfering with the revenue stream that funds Americans’ retirement benefits. Social Security funds should not be used for an unrelated, short-term purpose — especially when common sense alternatives to boost the economy are available.
“First, President Trump promised never to cut Social Security. This proposal jeopardizes the strength of the program. Cutting the payroll tax is not an economic gift no matter how you wrap it. A payroll tax reduction would provide scant relief to working people while destabilizing the finances of Social Security. There are better ways to cushion the economic impact of the coronavirus than robbing Social Security of much-needed revenue.” – Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
Contrary to the president’s claims, reducing the payroll tax would not put a significant amount of money in working people’s pockets. As Jason Furman pointed out in the Wall Street Journal, the payroll tax reduction would be “too slow and dispersed to substantially stimulate the economy” — and would favor higher earners. Furman calculates that a high-income couple might receive as much a $5,000 in relief from a one-year payroll tax reduction of 2%, while a single parent earning $25,000 per year only would reap an additional $500.
Skeptics in Congress are rightly wary of the president’s proposed payroll tax cut. They correctly observe that it would not help workers who lose their jobs during the epidemic, or who do not pay into Social Security, or retired seniors from whom the President proposes to take the funds. Many Congressional leaders speak of the need to target stimulus policy so that money gets into working people’s hands, instead of showering tax breaks on higher-wage earners and employers.
Meanwhile, Social Security provides more than $1.6 trillion in stimulus every year, as retirees spend their benefit checks in local and state economies. If the president wants to stimulate the economy, he should support legislation in Congress to boost Social Security benefits, especially Rep. John Larson’s Social Security 2100 Act. This bill would permanently increase the ongoing stimulus that Social Security provides by putting more money in the wallets of 63 million retirees, disabled and survivors.
“Payroll taxes are fundamental to the financial soundness of Social Security, and should not be leveraged for unrelated purposes. The Social Security trust fund will become exhausted by 2035 if Congress does not take pro-active steps to fortify the system. The system needs more – not less – revenue to meet the financial needs of future retirees, who will depend on their Social Security benefits even more than today’s seniors do.” – Max Richtman
There are other remedies for the current economic crisis, including federally guaranteed paid sick leave, infrastructure spending, and even granting adult citizens and taxpaying residents a $1,000 federal payout, an idea proposed by Jason Furman. While considering these measures, Congress must reject the president’s proposed payroll tax cut. Americans deserve better solutions that don’t put their Social Security program at risk.
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