The COVID-19 pandemic and the resulting economic recession has sparked fresh concerns about the long-term solvency of Social...Read more
Disability Advocates Warn Trump’s Payroll Cut Will Play Havoc with Social Security’s Finances
- By Andy Jones
- August 26th, 2020
A new executive order from President Trump that would cut half of Social Security’s funding threatens the program’s financial foundation, disability advocates are warning.
The Social Security program, including Social Security Disability Insurance benefits, is funded by two “payroll” taxes: a 6.2 percent tax paid by employees and a 6.2 percent tax paid by employers.
On August 8, President Trump issued four executive orders in an effort to jumpstart the economy after Congress failed to agree on a new stimulus package. One of these executive orders – which could still be challenged in the courts or blocked by Congress -- would suspend the collection of employees’ payroll taxes from September through December 2020. The suspension would apply to all employees who earn less than $4,000 every two weeks, meaning that it would cover the vast majority of employees nationwide.
Disability advocates, however, argue that the small boost that employees would see in their paychecks by not having to pay the 6.2 percent tax would do little to stimulate the economy but would also damage the long-term stability of the Social Security program.
As previously discussed, he COVID-19 pandemic and the resulting economic recession have sparked fresh concerns about the long-term solvency of Social Security’s trust funds. A report from the Bipartisan Policy Center warned in April 2020 that the Old-Age and Survivors Insurance (OASI) Trust Fund, which funds Social Security retirement benefits, could run out as early as 2029, compared to previous projections of 2034. This means that benefits could be reduced starting in 2019 unless Congress steps in to fill in the revenue gap. Meanwhile, the Social Security Disability Insurance Trust Fund (DI) could be depleted as early as 2024, or even 2022.
“Payroll taxes revenues fund Social Security benefits and without them, the program will face devastating cuts,” the Consortium for Citizens with Disabilities wrote in an August 11 statement. “After promising during his first campaign that he would make ‘no cuts’ to Social Security, he has reversed his position and proposed a plan that would put an earned benefit on the fast track to insolvency. The 22 million Americans who Social Security keeps out of poverty cannot afford to lose their benefits.”
President Trump has promised that if re-elected he will permanently eliminate the 6.2 percent payroll tax for employees.
“If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said at a news conference when he issued the executive order. “I’m going to make them all permanent.”
If this happens, the OASI trust fund could deplete as early as mid-2023, the Social Security Chief Actuary Stephen Gross estimated in an August 24 letter to Congressional leadership. The DI trust fund, meanwhile, would be depleted at some point next year.
Created date: 08/26/2020