Advocacy / Opinion / Politics / Social Security

White House Denies Dems’ Claim Payroll Tax Suspension Will Damage Social Security

payrollPresident Donald Trump’s recent Executive Order suspending payroll tax collection will put extra money in millions of Americans’ pockets without hurting the Social Security program, according to a White House spokesman.

“Providing a payroll tax deferral poses no risk to the Social Security Trust Fund and puts more money in the pockets of hardworking Americans as we fight to end this pandemic from China and rebuild our economy safely,” White House spokesman Judd Deere told The Epoch Times Aug. 15.

“This has been a priority for President Trump and, while Congressional Democrats played politics, the President acted for the forgotten men and women of this country, as he has done so many times before,” Deere said.

Trump’s directive followed the failure of negotiations between Senate Republicans and House Democrats on a third major economic recovery bill, meant to address the difficulties caused by COVID-19, the disease caused by the CCP virus.

Most Senate Republicans and Trump support a $1 trillion package consisting solely of CCP Virus relief aid, while Democrats want the relief aid, plus an additional $2 trillion for non-relief measures like $1 trillion to bailout high-tax blue states that the President argues have been mismanaged for years.

Trump’s order suspends deduction from paychecks of taxes used to help fund Social Security benefits. The suspension applies to annual incomes of $104,000 or less. Trump has said he will propose permanent reductions in the assessments if he is re-elected in November.

Opposition

But Democrats and their allies in the special interest advocacy communities immediately branded the Trump proposal a dire threat to Social Security, prompting fears among millions of elderly Americans who depend on the program.

Democratic presidential nominee Joe Biden called Trump’s order part of a “series of half-baked measures” that put Social Security “at grave risk.”

Similarly, Senate Minority Leader Chuck Schumer (D-NY) claimed

“the president said if elected, I will forgive all this. That depletes money out of the Social Security and Medicare trust funds. If you’re a Social Security recipient or Medicare recipient, you better watch out if President Trump is re-elected.”

The American Association of Retired Persons (AARP), one of the nation’s most powerful special interest groups, said in a statement that this approach exacerbates people’s already-heightened fears and concerns about their financial and retirement security. Social Security’s guaranteed benefits are indispensable. Families impacted by coronavirus urgently need help, and we believe bipartisan congressional action on another coronavirus aid bill is the right solution.”

Strong Economy Needed

The crux of the issue is whether the uncollected payroll tax revenues that would normally go into the Social Security Trust Fund in 2020 would be “made up” by Congress in 2021.

A top Trump administration official speaking on background told The Epoch Times that “the President has called on Congress to make this deferral permanent. If they do not, this action still effectively allows working Americans to get a sizable advance on their pay starting in a month, which is just when working Americans need it most as we are fighting to end the COVID-19 pandemic.”

The administration official argued that “the Social Security Trust Fund is not at risk (especially since, at present, the payroll tax relief is just a temporary deferral that must be paid back in early 2021) and the best way to keep the Social Security Trust Fund safe is to keep our economy strong.”

Strong Support

Robert Carlstrom, president of AMAC Action, the advocacy wing of the Association of Mature American Citizens (AMAC), told The Epoch Times Monday that a recent poll of the group’s membership found strong support for Trump’s actions.

More than 26,000 of the responding AMAC members either said they strongly support Trump’s directive or agree with it as long as Social Security benefits were not subsequently made subject to the annual congressional budget process. More than 7,000 of the respondents were opposed or strongly opposed.

“The overwhelming majority agree with Trump but there is a concern and that was reflected in the primary yes category,” Carlstrom said. The “primary yes category” consists of 16,000 of the 26,000 supporting Trump who said Social Security should not be part of the congressional budget process.

Rachel Grezler, a Research Fellow in Economics, Budget and Entitlements at the conservative Heritage Foundation think tank, told The Epoch Times in an August 14 interview that “everything President Trump has indicated and that Secretary [of the Treasury] Steven Mnuchin has said is they will make the Social Security Trust fund ‘whole.’”

Even so, Grezler added, “it costs what it costs and whether it comes from the Social Security Trust Fund or general revenues, it still shifts a burden to future taxpayers and moves us closer to a financial crisis.

“But I definitely think that all these fear-mongering statements that a payroll tax cut is going to kill Social Security or defund the system are simply not true.”

Public Misunderstanding

The debate on Trump’s suspension and its potential impact on Social Security reflects a widespread public misunderstanding about how the program’s benefits are funded.

The average retiree in 2020 will have paid into the system $135,000 in payroll deductions and receive $193,000 in benefits, according to the Urban Institute, a liberal think tank. The difference between what the retiree paid into and the benefits taken out of the system must be made up by other government revenues.

The payroll tax is currently 12.4 percent on income taxable for Social Security, but the figure required to make the system solvent is 15.5 percent, Grezler said, citing the Social Security Trustees Report for 2020. The report estimates that the system will be unable to cover promised benefits by 2035 if no reforms are enacted.

A package of reforms proposed by the Heritage Foundation would allow the payroll tax to be reduced to 10.1 percent while putting the system on a path to recovered solvency.

Reprinted with Permission from - Epoch Times by - Mark Tapscott

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JohnH
11 months ago

It is my understanding thaat FICA at end of 2019 had built up surplus of $2.9 Trillion & is estimated to keep current benefits okay until 2034-2035. By law this money is invested in US Treasuries & then SS borrows from to pay benefits. The Federal govt. borrowing from this fun pays back + interest which which something like $80 Billion in 2019 ?? So why is Trump doing anything with FICA payroll taxes now ??? It it goes into General Fund , then Fed. debt to fund disappears?? I say, leave it alone.

AlfromFl
1 year ago

————————–`
Politicians raided the social security fund a long time ago. Social Security benefits are, essentially, paid out of the general fund. Withoout the payroll tax, that means that the dems will have less money available to spend without raising taxes which they, if elected, intend to do. I’d rather Trump end the social security program for all under 50 (pick an age ) guarantee it for those grandfathered in and change how a savings/safety net program is funded for future generations so that it is an independent program that gov’t pays into and so does the taxpayer who controls his fund (but with provisions to prevent someone from reckless withdrawals)

Bill Gray
1 year ago

This statement, “The average retiree in 2020 will have paid into the system $135,000 in payroll deductions and receive $193,000 in benefits,” illustrates the flaw in the Social Security program since its inception. If that $135,000 were invested even very conservatively, it would have grown to far more than $193,000. As a retiree, I am relying partly on Social Security for my monthly income, but if I’d been allowed to invest the money that had gone into Social Security, I’d be sitting pretty indeed. Furthermore, the statement ignores the matching employer contributions. Lastly, Congress has borrowed from the Social Security fund over the years, leading to the predicament in which we now find ourselves.

PaulE
1 year ago
Reply to  Bill Gray

Assuming a very conservative rate of return of say 5 percent annually (that’s way on the low side of how the markets have actually behaved over the last 40 years) over a 35 to 40 year period in the stock and bond markets, your regular contributions totally $135,000 over that time frame would be worth approximately $540,000. That’s a difference of $347,000 dollars for your retirement. With SS only investing in U.S. Treasuries, which are one of the worst financial assets you could tie up ALL that money in, that’s the kind of under-performance you can expect. There is such as thing as “too safe”, when the net present value of your money over that time frame doesn’t even offset the real rate of inflation. Anyway, your basic premise is correct and I just wanted to give you some reasonable ballpark numbers to back it all up.

Rik
1 year ago

Just watch what is going to happen in my state of CaliMexico. After Proposition 13 is overwhelmingly passed in November’s election our Progressively Communist Governor will then have to greatly increase property taxes! Because after all, how is he going to keep funding helping our 10 million illegals! These people are NOT ASSIMILATING INTO BEING AMERICANS, they’re COLONIZING US!

PaulE
1 year ago
Reply to  Rik

I see your illustrious Governor is pushing to hike tax rates on businesses and those that already pay the lion share of taxes in California yet again. He must have not noticed the mass exodus that has been going on for the last year or two of people and companies. Gee, I guess the moron must be counting on Senile Joe getting elected and then bailing out the state via hundreds of billions from Washington. Same with Cuomo in NY, Murphy in NJ and the rest of the Democrat Governors, who all are keeping their state economies shutdown for purely political reasons while they refuse to cut wasteful government spending in any meaningful way.

Yes, not only property taxes will shoot up, but virtually every form of state, county and local taxes will as well. Socialism is a very, very expensive system to maintain. It requires ever-increasing amounts of fresh, new money to support the endless increases in “free stuff”.

Rik
1 year ago
Reply to  PaulE

Hi PaulE, glad to see you’re still contributing your extremely insightful comments. I haven’t seen anything from Ivan Berry in a while. I hope he’s okay. As Margaret Thatcher always said: “Socialism is great, until you run out of everybody else’s money!”

PaulE
1 year ago
Reply to  Rik

I think Ivan’s family have told him to focus on other things than AMAC. Last I heard from him, he is doing well.

Yes, Thatcher was trying to educate the people of her own country about the dangers of moving back over to the socialist side of the tracks. Sadly even after enduring the economic and societal stagnation bought about by England’s first go round with socialism in the mid 50’s through most of the 1970
‘s and the nationalization of several key sectors of their economy before electing her to clean up that horrible mess, it seems the lesson didn’t stick as well as she and others hoped it would. Only recently have the British people decided to oust their version of RINO’s (the globalist crowd pretending to be “conservatives while selling out the nation left and right) and outright socialists of the alternative Labor Party for a leader who would adhere to more fiscally conservative values again.

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