Payroll Tax Cut Imperils Social Security Long-term - The Motley Fool & AMAC
It’s all the talk in DC these days– cutting the payroll tax. But is it a good idea? Arguments against cutting the 12.4% payroll tax (6.2% each for employers and employees) go beyond just the potential damage to the Social Security program, one which already faces insolvency in just over a decade. As Christy Bieber reports, “Cutting payroll taxes simply isn’t a great way to get extra cash into the hands of people who no longer pay them since they no longer have jobs.” It’s a fact. The unemployed do not pay this 6.2% tax, thus the benefits go to workers and employers. For employees, the more one makes, the more one receives in any tax cut. President Trump is touting a payroll tax cut as something that needs to be included in any next round of a Covid-19 stimulus plan. Skepticism about the concept cuts across both party lines, making a payroll tax cut’s future uncertain. And of course, depending how the cut is structured, Medicare could be imperiled too, as employees and employers each pay 1.45% of that part of the payroll tax. Medicare is scheduled for insolvency in 2026, though some experts say predict 2023 due to the pandemic. Read full article by Bieber here.
For even more info on “winners and losers” of a payroll tax cut, see this Forbes piece from May 4th here, which notes losers outnumber winners in any payroll tax cut scheme, with the main winner being mainly the self-employed who pay BOTH sides of the payroll tax.
The Association of Mature American Citizens (AMAC) is leery of proposals that deplete the sooner than is currently predicted (2034, though likely sooner with the pandemic). AMAC believes Social Security must be preserved and modernized by making modest changes in cost of living adjustments and the retirement age, with no tax increases on workers. AMAC supports a bipartisan compromise, “The Social Security Guarantee Act,” taking portions of bills introduced by former Rep. Johnson (R-TX) and current Rep. Larson (D-CT) and merging them with the Association’s own research. One component is Social Security PLUS, a new, voluntary plan that would allow all earners to have more income available at retirement. This component is intended to appeal especially to younger workers. AMAC is resolute in its mission that Social Security be preserved and modernized and has gotten the attention of lawmakers in DC, meeting with many congressional offices and staff over the past several years. Read AMAC’s plan here.