Dems:Check Tax Break Hurts S. Security 08/11 06:07
President Donald Trump's move to defer Social Security payroll taxes could
be taking him into treacherous political territory.
WASHINGTON (AP) -- President Donald Trump's move to defer Social Security
payroll taxes could be taking him into treacherous political territory.
His directive --- aimed at boosting an economy shaken by the coronavirus
pandemic --- doesn't affect retirement benefits but impacts how they're paid
for. Democrats seized on it Monday as a signal that Trump would cut the social
safety net and break a promise he made as a candidate in 2016 not to touch
Social Security and Medicare. Some nonpartisan experts also expressed concerns.
Deferral of the 6.2% payroll tax on employees for the last three months of
this year could mean that up to $100 billion in payments to the Social Security
Trust Fund would be delayed, according to an updated estimate by the
nonpartisan Committee For A Responsible Federal Budget, which advocates for
reducing government deficits.
"What it does is undercut Social Security," Rep. John Larson, D-Conn., said
Monday, addressing Trump's move. The president "is defunding Social Security
and breaking his promise. ... He will say, 'I'm not doing anything to touch
Social Security, I'm just deferring this,' but it's as clear as my hand in
front me." Larson chairs the House Ways and Means subcommittee overseeing the
The Democratic National Committee was out with a video accusing Trump of
breaking his promise to older Americans.
The White House pushed back.
"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," spokesman Judd
Deere said in a statement. "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."
With more than 60 million beneficiaries, Social Security is funded by a
12.4% payroll tax evenly divided between employees and employers. But there's a
cloud over the program's long-term finances, and even before the pandemic,
government experts estimated it would be unable to pay full benefits starting
in 2035. Medicare's hospital fund is also financed by a payroll tax, but that's
not affected by Trump's directive.
Social Security and Medicare are seen as politically untouchable. It's not
just that seniors have clout in elections, but the two programs have
longstanding inter-generational support.
Trump acted on his own after negotiations with Congress on another COVID-19
relief package broke down. The president has authority to take such limited
steps during the national emergency due to the coronavirus.
Trump has also directed Treasury Secretary Steven Mnuchin to work with
Congress to forgive the entire amount of the payroll taxes deferred. Otherwise,
the tax holiday would become a tax liability for workers when the government
comes back to collect the money owed to Social Security.
The whole exercise troubles some nonpartisan experts, who say the bedrock
principle of Social Security is that earmarked payroll taxes from employees and
their employers pay for earned benefits for retirees.
"This undermines the dedicated funding, which is the foundation of Social
Security," said William Arnone, CEO of the National Academy of Social
Insurance, a nonpartisan public policy organization.
Although the White House says the Treasury Department will guarantee that
the Social Security Trust Fund is made whole, Arnone said he's worried because
payroll tax collections have already taken a hit this year in the coronavirus
"The question of the reimbursement of the trust fund is not clearly spelled
out ," said Arnone. "It is a big boost in take-home pay for workers, but what
is the long-term cost to them if it makes Social Security less stable?"
Under Trump's plan, workers making below $104,000 a year would get the tax
But the president's directive is incomplete because many key details are
still not known.
For example, the benefit is limited to workers who "generally" make less
than $4,000 every two weeks. However, Trump didn't define "generally" in his
directive to the Treasury. What happens to people who make $4,001?
Economist Eugene Steuerle of the Urban Institute think tank said other
practical issues seem to have been ignored.
"It raises all sorts of questions with respect to people who can't come up
with the money down the road to pay back the tax cut," said Steuerle. That
would have to be dealt with if Mnuchin can't persuade lawmakers to permanently
forgive the taxes owed.
Yet there are lots of reasons to think Congress won't bend to Trump's will.
It isn't just Democrats, as the White House suggests. Many congressional
Republicans have been cool to Trump's payroll tax cut.
Lawmakers are loathe to reward the Republican president for trying to change
tax policy without their consent and for trying to break the longstanding tie
between Social Security payroll taxes and the earned benefit that they are
Businesses also have misgivings, because the plan would require them to
change their payroll systems and could leave them responsible for collecting
deferred taxes later on.
How much of a boost to the economy Trump's plan would provide is a matter of
In a previous coronavirus relief bill, Congress and Trump together gave
employers the option of deferring their share of Social Security payroll taxes
this year, but it's unclear how many businesses have taken that up.
A payroll tax break is not a new idea. Congress approved a a temporary cut
in the Social Security tax during the Obama years, in the aftermath of the
2007-09 recession. That cut was 2 percentage points.
Get your local Cash Bids emailed to you each morning from DTN – click here
to sign up for DTN Snapshot.