TOPLINE
Payments for Social Security benefits will end by the middle of 2023 if President Donald Trump were able to deliver on his promise of permanently cutting payroll taxes, and if another funding source was not provided to replace it, according to an estimate from the chief actuary of the Social Security Administration.
Social Security trust fund problem with roll of USA dollar bills with storm clouds behind 100 dollar … [+]
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KEY FACTS
Assuming legislation were passed eliminating payroll taxes as of Jan.1, 2021, the trust fund providing monthly stipends for Americans with disabilities would be emptied first around the middle of 2021, Chief Actuary Stephen Goss said in a letter sent Monday, and the fund that supports Social Security payments would run dry after the middle of 2023.
Trump recently announced the federal government would defer payroll tax collections from Sept. 1 through the end of the year as an economic stimulus measure; employers withhold 6.2% of earnings of American workers to fund Social Security and employers pay an equal amount.
Goss’ letter was sent to Sen. Chuck Schumer (D-NY), Sen. Bernie Sanders (I-VT), Sen. Ron Wyden (D-OR) and Sen. Chris Van Hollen (D-MD), in response to an inquiry of what would happen if payroll taxes are cut permanently.
WHAT WE DON’T KNOW
Since Trump’s action only deferred collecting those taxes till next year, some companies and tax advisors are leaning toward continuing to make the tax payments. If he’s reelected, Trump has promised to forgive the taxes retroactively, but he doesn’t have the power to do so — Congress would have to pass legislation.
CRITICAL QUOTE
“With no alternative source of revenue to replace the elimination of payroll taxes on earned income paid on January 1, 2021 and thereafter, we estimate that DI Trust Fund asset reserves would become permanently depleted in about the middle of calendar year 2021, with no ability to pay DI benefits thereafter,” Goss said. “We estimate that OASI Trust Fund reserves would become permanently depleted by the middle of calendar year 2023, with no ability to pay OASI benefits thereafter.”
KEY BACKGROUND
Trump’s move to unilaterally suspend payroll tax collections came with talks stalled between Republicans and Democrats on another stimulus package in response to the coronavirus pandemic. A payroll tax cut was not even on the table for negotiations between Republicans and Democrats, and many Republicans have expressed concern about the tax cut.
FURTHER READING
Trump Calls for Making Permanent Cuts to Both the Medicare and Social Security Payroll Taxes (Forbes)
How Trump’s Payroll Tax Holiday Might Work (Forbes)
6 Reasons Not To Celebrate The Payroll Tax Holiday (Forbes)
Next Stimulus Bill Package Will Not Have Payroll Tax Cut, Makes Way For Larger Stimulus Check (Forbes)
