National Committee president and CEO Max Richtman has sent the following letter to President Trump and Treasury Secretary Mnuchin, insisting that a payroll tax cut would undermine the Social Security program:
Dear Mr. President and Treasury Secretary Mnuchin:
On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am writing to state our strong opposition to your proposal that would divert Social Security Trust Funds for purposes for which they were not intended, such as a means to stimulate the economy.
While we agree that providing tax relief to middle class Americans is an important consideration as we respond to the many possible economic and social dislocations that may arise as a result of the coronavirus pandemic, we do not believe that cutting, eliminating or deferring the Social Security payroll tax is an appropriate way to accomplish this goal. Any reductions to this vitally important revenue stream would threaten Social Security’s ability to continue paying benefits to the 64 million Americans who depend on those benefits for their economic survival by reducing the trust funds from which benefits are paid.
Moreover, the proposal would undermine the earned benefit nature of the program. Social Security is an earned benefit fully funded by the contributions of workers throughout their working lives. A payroll tax cut or deferral chips away at that fundamental idea, making it easier each time it is enacted to turn to it again to meet some future crisis, until the payroll tax is not just cut or deferred but is eliminated. Undermining the program in this manner would help achieve the goals of opponents of Social Security including those who would privatize the program. This is equally true even if the funds are replaced by general revenues from the Treasury.
Another problem with a payroll tax cut as an economic stimulus is the fact that it leaves out large segments of the population. Large numbers of federal, state and local government workers do not pay into Social Security, and therefore would not benefit from the payroll tax cut. Ironically, the senior population, those who are directly affected by taking their money from the trust fund, will not see a single dime of relief since most of them are not working.
There are alternatives to the payroll tax cut which would be more targeted and effective to stimulate an economy slowed by the spread of the coronavirus. For example, another one-time payment by the federal government can put money in the hands of taxpayers quickly, and the Making Work Pay Tax Credit can be passed by Congress rapidly as can an expansion of the Earned Income Tax Credit. Spending in other programs that directly help those who lose employment as a result of the virus can be the most targeted relief of all.
Again, the National Committee to Preserve Social Security and Medicare on behalf of its members and supporters are opposed to any alteration to the payroll tax that reduces revenue flowing into the trust funds or undermines the “earned right” nature of the program. We appreciate your consideration.
President and CEO
The 2020 Trustees Report reveals, once again, that Social Security is not going ‘bankrupt’ or becoming ‘insolvent’ — as opponents often claim. If Congress takes no preventative action, the program’s trust fund will be depleted by 2035, after which it still would be able to pay 79% of benefits. However, this year’s report does not reflect any impact that the COVID-19 pandemic may have on Social Security.
“Social Security is strong. But its long-term fiscal health cannot be guaranteed if the White House and Congress continue to use the program’s financing structure for economic stimulus during the COVID-19 crisis. Those who would like to dismantle Social Security are using the pandemic to launch a stealth attack. A broad-based payroll tax cut, as the President has proposed, would interfere with Social Security’s traditional revenue stream while failing to deliver effective or equitable stimulus. Meanwhile, Social Security already provides more than $1.6 trillion in annual economic stimulus as seniors spend their benefits for essential goods and services in their communities. Now is not the time – in fact, it is never the time – to tamper with a program that more than 40% of retirees rely upon for all of their income.” – Max Richtman, President and CEO, National Committee to Preserve Social Security and Medicare
The Trustees estimate that the Social Security cost-of-living adjustment (COLA) for 2021 will be 2.3%. However, that projection does not reflect the impact of the pandemic on inflation, and the actual COLA for next year could be lower.
“We do not know the extent of the pandemic’s impact on Social Security, but we do know that seniors need a boost in their benefits. Let’s strengthen the program now by eliminating the payroll tax wage cap and demanding the wealthy pay their fair share. That way, we can expand benefits and adopt a more accurate cost-of-living inflation formula for seniors.” – Max Richtman
As for Medicare, the Trustees say the program’s financial future is relatively unchanged from last year’s report, but the impact of the pandemic is not reflected. The Medicare Part A Trust Fund will become exhausted by 2026, after which the program still could pay 90% of benefits – if Congress does nothing to strengthen Medicare’s finances.
The Trustees estimate that the Medicare Part B premium will rise to $153.30 per month in 2021, an $8.70 increase over last year’s.
Lawmakers can take action to cut beneficiaries’ out of pocket costs and boost Medicare’s fiscal health by passing H.R. 3, The Lower Drug Costs Now Act — which would save the program some $400 billion in projected prescription drug costs by allowing the government to negotiate prices directly with Big Pharma.
“During this time of crisis, Americans are turning to Social Security and Medicare now more than ever. Let’s work to strengthen these programs that have been the bedrock of America’s middle and working classes, and resist proposals by those determined to tear them down.” – Max Richtman
Under pressure from advocates including the National Committee, the Treasury Department has reversed course and will allow SSI beneficiaries to receive stimulus payments without filing tax returns. On Wednesday, Treasury announced:
“SSI recipients with no qualifying children do not need to take any action in order to receive their $1,200 economic impact payment. The payments will be automatic.” – Treasury Secretary Steven Mnuchin, 4/15/20
As CNBC reported, “The announcement clears up confusion for individuals who rely on these benefits, who are generally elderly, disabled or blind, and have little to no taxable income.”
However, SSI recipients with qualifying children under age 17 still must visit IRS.gov and click on the “Non-Filers: Enter Payment Info Here” button. “The tool will request basic information to confirm eligibility, calculate and send the Economic Impact Payments” in the amount of $500 per qualified dependent child.
Treasury’s reversal of course is a victory for seniors’ advocates, including the National Committee, who had pressured the administration to clear the way for automatic payments for SSI recipients.
“The Trump administration did the right thing by allowing recipients of Supplemental Security Income (SSI) to receive relief payments without filing a tax return. The administration’s decision removes an unnecessary barrier that would have made it difficult for millions of our most vulnerable citizens to obtain the same cash payments available to other Americans under the CARES Act.” – Max Richtman, National Committee president, 4/15/20
On April 2nd, the National Committee sent a letter to Treasury Secretary Steve Mnuchin, Social Security Commissioner Andrew Saul, and Secretary of Veterans Affairs Robert Wilkie, urging the administration not to require tax returns from SSI or Veterans benefits recipients. The National Committee is gratified that SSI beneficiaries will receive stimulus payments without filing tax returns, but still strongly urges that VA beneficiaries be afforded the same treatment – something that has not yet been forthcoming.
“Seniors and people with disabilities are among the hardest-hit by the COVID-19 pandemic. They struggle to make ends meet on fixed incomes, many living with debilitating conditions and many without families who can provide support. These federal relief payments improve their chances of surviving the next few months both physically and financially. Now we know that these poor, disabled, and elderly will receive their relief payments automatically just like everyone else – without undue burdens or delays.” – Max Richtman, 4/15/20
The Treasury Department says that SSI beneficiaries should receive their automatic relief payments no later than early May. But those with qualifying children who do not provide information via the online portal soon will have to wait until later to receive their $500 per qualifying child.
The administration’s policy reversal regarding SSI beneficiaries follows an earlier decision to allow Social Security and SSDI recipients to receive stimulus payments automatically — which also was the result of a successful pressure campaign by seniors advocates and members of Congress.
President Trump is at it again — pushing a payroll tax cut that would damage Social Security and Medicare. During a press briefing Tuesday, the president revived the idea of cutting payroll taxes, ostensibly for economic stimulus. But this time, he said that he would like to make a payroll tax cut permanent.
“I would love to see a payroll tax cut… There are many people who would like to see it as a permanent tax cut…. both for business and the people… You’d get a lot of people a lot money immediately.” – President Trump, 4/7/20
For a president who promises “not to touch” Social Security and Medicare, repeatedly advocating payroll tax cuts is a bizarre way of showing it. Social Security and Medicare depend on workers’ and employers’ payroll tax contributions for funding. (Social Security and Medicare Part A are completely funded by payroll taxes). It is no secret that both programs face financial challenges. The Social Security trust fund will be exhausted in 2035, and Medicare’s trust fund in 2026 — if Congress takes no action to increase revenues. (See the National Committee’s analysis of the most recent Trustees reports here.)
“This would be a fantastic time to have a payroll tax cut.” – President Trump, 4/7/20
No, this is the worst possible time to stanch the flow of revenue into either Social Security or Medicare, yet the President continues to pitch this deeply flawed proposal. The Washington Post reported that the White House will push a payroll tax cut and a capital gains tax cut in the next stimulus package.
The President complained yesterday that “the Democrats right now are stopping it.” When a reporter asked why, he replied, “I don’t know.” In that case, let’s once again explain to President Trump and his allies in Congress why a payroll tax is such a terrible idea:
1. It is an ineffective way of delivering economic stimulus. A payroll tax cut does nothing for the laid off, furloughed, and otherwise unemployed – and less for freelance/contract workers in the ‘gig economy.’
2. As previously proposed, the payroll tax would grant significantly more relief to people in higher income brackets; lower-income earners would only see a few hundred dollars more per year in savings, while upper-income people would receive thousands.
3. It would take several months for any stimulus effect (which economists project would be negligible) to be felt in the economy at large.
4. A payroll tax cut is a trojan horse to undermine Social Security and Medicare’s funding streams. Backfilling lost revenues using general federal funds simply strengthens the hand of the programs’ opponents in Washington, who will claim that Social Security and Medicare are contributing to the debt and must necessarily be cut.
5. Once a payroll tax cut is enacted, it will be harder for Congress to restore the former level of worker/employer contributions, because opponents will cry that it’s a “tax increase.”
6. Making any payroll tax cuts permanent, as the President suggested on Tuesday, would make all of the above problems infinitely worse.
Congress has already allowed “the camel’s nose under the tent” by enacting employer payroll tax credits in the CARES coronavirus stimulus act. Thanks to pushback from Social Security and Medicare’s most ardent defenders (including the National Committee), the legislation did not include broader, more damaging payroll tax cuts. President Trump has now set off new alarm bells with his reckless remarks. Seniors and their advocates must answer them anew.
The Trump administration has relented to pressure from seniors’ advocates and members of Congress, reversing course on what would have been an unjust policy toward older Americans struggling through the Coronavirus crisis. The Treasury Department announced last night that Social Security recipients do not have to file tax returns in order to receive COVID-19 stimulus payments. Instead, Treasury will use beneficiaries’ annual 1099 statements to generate stimulus checks.
Earlier this week, in direct contravention of the CARES relief act, the I.R.S. published guidelines that seemed to require seniors and the disabled receiving Social Security to file tax returns if they wanted stimulus checks. Advocacy groups and several members of Congress pushed back hard, demanding that Treasury reverse course and respect the letter of the law.
The administration succumbed to that pressure in less than one day, with Treasury Secretary Mnuchin announcing:
“Social Security recipients who are not typically required to file a tax return need to take no action, and will receive their payment directly to their bank account.” – Treasury Secretary Steven Mnuchin
The new IRS guidelines would have imposed an undue hardship on seniors and the disabled, who do not always have the internet access or technical acumen to file taxes online — and are limited in other means of filing during the COVID-19 pandemic.
As we insisted in yesterday’s edition of Entitled to Know:
“The Trump Treasury Department and the I.R.S. must immediately clear up any doubt — and relieve America’s most vulnerable citizens of the obligation to file tax returns to get the cash payments they so badly need during this pandemic.” – National Committee to Preserve Social Security and Medicare, 4/1/20
More than forty members of Congress sent a letter to Treasury Secretary Steven Mnuchin demanding a reversal of the new guidelines. Republican Senator Josh Hawley, not known as a moderate by any means, tweeted Wednesday that the administration’s announced policy was “ridiculous.”
One of Social Security’s leading champions in the U.S. House, Rep. John Larson (D-CT), released a statement today hailing the administration’s about-face:
“The Treasury Department made the right decision to reverse its misguided proposal and ensure that Social Security beneficiaries will automatically receive their economic impact payments as Congress had intended.”
The reversal capped an intense 24 hours of resistance from advocates who demanded that the administration adhere to the just-enacted CARES Act:
“The drafters of the CARES Act were clearly trying to correct the mistakes of the 2008 stimulus payments. Lawmakers that year required roughly 15 million Social Security beneficiaries and veterans to file tax returns to get their stimulus payments, even though they had no other need to file a return and the federal government already had the necessary information to send them payments directly.” – Center for Budget and Policy Priorities, 3/31/20
The administration’s original position – that Social Security beneficiaries would have to file taxes to get stimulus payments – no matter how ill-considered, was not out of character. Trump’s Social Security Administration (SSA) and Centers for Medicare and Medicaid Services (CMS) have been actively trying to undermine Americans’ earned benefits through a variety of measures over the past three years. The President’s budgets have sought to cut Social Security, Medicare, and Medicaid by trillions of dollars. His advisors and his allies in Congress have called for “entitlement reform” in order to pay for the Trump/GOP tax cuts of 2017. Although the administration reversed course this week amid intense pressure, seniors and their advocates will continue to insist that this administration stop asking seniors – who have done so much for this country – to make disproportionate sacrifices during times of crisis.