Payroll tax cut undermines the security of the Social Security Program
If lawmakers see Social Security as just one of the line items in the federal budget, there is not much to stop it from being caught up in an orgy of spending reductions.
When an economic agreement was reached in Congress recently which extended unemployment insurance, the Social Security payroll tax cut and retained present levels of reimbursement for doctors who accept Medicare, the response by many was a resounding “Hurrah.”
The perception was that Congress finally did something important with less posturing and brinkmanship and not quite as close to the deadline as usual. Although the infant recovery of the national economy was saved from a threat, what they actually did was avoid the issues until they are safely beyond the presidential election–at the end of the year.
It may not be a good thing because every time Congress extends the payroll tax cut since 2010, restoring it to 6.2% is pushed further away, which is not good for Social Security.
So far it has not hurt the program because 100% of the cut must be covered by the general fund which has so far amounted to $130 billion. The newest cut will require a transfer of about $94 billion more.
But tampering with funding for Social Security is playing with fire. Sen. Tom Harkin (D-Iowa) stated he never thought he would see a Democratic president putting Social Security in jeopardy.
Because of continued cuts, restoring the old payroll tax cut would mean a nearly 50% increase and may be seen as a tax hike on working people, although it is restoration of a temporary cut.
- House Republicans Agree On Short-Term Renewal Of Payroll Tax Cuts And Other Benefits (fastswings.com)
- Extension On Payroll Tax Cuts Made Because Of Rare GOP Offer (2012taxes.org)