“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions …. With those taxes in there, no damn politician can ever scrap my Social Security program.” President Franklin D. Roosevelt
“You know, the payroll tax holiday is a bold move. It’s a very bold move. And this has always been a bold president. And, we have been cutting taxes and rolling back regulations…and doing things that nobody thought we could do before.” President Trump’s National Economic Council Director Larry Kudlow
As Congress considers coronavirus pandemic relief legislation, President Trump has repeatedly proposed that Social Security and Medicare payroll taxes be cut or eliminated.
While lawmakers have decided against including a general payroll tax proposal in the packages considered to date, they made the following changes to the payroll tax – opposed by the National Committee – in the Coronavirus Aid, Relief and Economic Security (CARES) Act (P.L. 116-136):
- Employee retention payroll tax credit: In order to incentivize employers to keep their employees on payroll rather than laying off those employees, this provision would offer a fully refundable tax credit, tied to the payment of employee wages, against the employer’s share of Social Security payroll taxes. Payroll tax revenue forgone by this proposal would be replaced by general revenue and transferred to the trust fund.
- Payroll tax deferral: Employers allowed to defer payment of their share of Social Security payroll tax – half until next year and the other half until 2022. Payment of payroll tax revenue deferred by this proposal would be replaced by general revenue and transferred to the trust fund.
Since this tax is used exclusively to fund Social Security and Medicare, its elimination would be tantamount either to ending these two vitally important programs or converting them into welfare programs where retirees’ benefits would be subject to the whims of Congress and the vagaries of the legislative process.
The National Committee to Preserve Social Security and Medicare opposes this terrible idea and urges Congress to reject the President’s proposal and oppose further expansion of the payroll tax credit and deferral in the CARES Act.
Social Security is broadly supported by Americans because they see it as an earned right. Retirement benefits are determined by the contributions made during a person’s working career. The relationship between earnings and benefits is a fundamental feature of the program, one that would be completely undermined if Social Security is no longer funded by a payroll tax.
Some have questioned the wisdom of funding Social Security in this manner. When President Franklin D. Roosevelt was asked about this by a young economist, he responded by saying, “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions …. With those taxes in there, no damn politician can ever scrap my Social Security program.”
We urge the Administration to disavow elimination of the payroll tax so that America’s seniors can rest assured that their Social Security benefits will continue to be paid, on time, just as they have been paid since the beginning of the program over 80 years ago. Social Security is too important to replace its dedicated and self-financed revenue source with another funding mechanism that would make the program incredibly vulnerable to benefit cuts or privatization.
How important is Social Security? The numbers tell the story. Approximately 64 million seniors and their family members receive Social Security benefits. In 2019, their benefits totaled more than $1 trillion, and payment of these benefits was funded nearly entirely from payroll taxes paid by the 178 million workers (and their employers) who contributed to Social Security and Medicare that same year.
Given the nearly universal participation in the programs, it should not be surprising that regardless of party affiliation or age, Social Security and Medicare are overwhelmingly popular. Conversely, proposals to use these programs for purposes they were not intended, including payroll tax cuts to provide economic stimulus, are overwhelmingly unpopular. In a 2015 poll commissioned by the National Committee, 90 percent of respondents said they “think funds from the Social Security and Medicare programs should always be dedicated for earned benefits only, and never be applied to another program.”
For these reasons, the National Committee strongly urges lawmakers to oppose any plan to change Social Security and Medicare’s funding by eliminating, cutting or deferring the payroll tax.