Examining the “Payroll Tax Cut” Issue - Kiplinger, Forbes
As talks continue in Washington on the possibility of additional economic stimulus funding, one of the sticking points that keeps emerging is the issue of either eliminating or suspending the 7.65% payroll tax as a means to get more cash into the hands of workers. The debate focuses on opposing viewpoiunts: those that do not favor the move because of its relative insignificance in the face of immediate financial need and its inability to help the unemployed, and those who favor it because of its positive impact on the country’s workforce. Another confusing part of the debate is the lack of clarity on the duration of a payroll tax cut: six months, a year, or longer?
In any event, one key talking point that seems to often get lost in the rhetoric is the impact on Social Security. The payroll tax–6.2% for Social Security; 1.45% for Medicare–is the primary revenue contributor for these two senior safety net programs, and any diversion of funds without a plan to make up the difference would have the effect of making a bad situation worse. The “bad situation,” of course, is the impending depletion of the Trust Fund reserves supporting these programs, and the projected reduction of benefits that would result from this depletion. In Social Security’s case, the most recent forecast calls for benefits to be cut by as much as 21% by 2035, absent legislative action to resolve the long-term funding problem.
Here are links to two current articles discussing the payroll tax issue, one from Kiplinger Tax Editor Rocky Mengle, the other from Forbes contributor Shahar Ziv. Mengle focuses on the impact workers would realize via the tax cut, while Ziv addresses the relationship between the tax cut issue and the potential for further stimulus funding. Both provide interesting perspectives on the overall debate.
On the issue of Social Security’s financial future, it’s important to note that the Association of Mature American Citizens (AMAC) has for years been actively promoting awareness of the program’s solvency issue, and has been working toward a solution. AMAC’s work has taken the form of a proposed legislative framework that would preserve and modify Social Security for generations to come, without necessitating a tax increase. Learn more about AMAC’s Social Security Guarantee here…
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