Social Security Report

The Debate on Payroll Tax Elimination

President Trump, in a Coronavirus Task Force briefing yesterday, discussed his thoughts on cutting and/or eliminating the payroll tax withheld by employers, thereby generating immediate financial relief for workers. The 7.65% payroll tax (6.2% for Social Security and 1.45% for Medicare) represents the primary funding stream for Social Security and Medicare, and its elimination would add to the paychecks of workers struggling during this time of reduced working hours. With respect to the Social Security portion alone, the tax provided close to $900 billion to the program in 2018.

While the immediate income relief would help the economy during the anticipated rebound following the pandemic, the elimination of a major source of program funding for Social Security presents longer-term issues that would need to be resolved. In fact, Social Security’s Trust Fund reserves would be depleted much more rapidly than the 14-year horizon presently predicted.

The Association of Mature American Citizens (AMAC) recognizes the need for reform and has been sounding the alarm for several years. AMAC’s position is reflected in its Social Security Guarantee (SSG) proposed legislative framework, an approach calling for adjustments in several areas of Social Security that would ensure the program’s solvency without requiring tax increases. As a solution for future retirees, the SSG also includes a Social Security Plus feature designed to help eventual beneficiaries prepare for financial needs during retirement.

The AMAC approach assumes continuation of employee/employer contributions as the primary funding mechanism, so reform discussions will need to address a source of funding to meet promised benefits. Stay tuned for further developments on this issue!

This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.