Why the Payroll Tax Holiday will Cripple Social Security

[jtown1123]

From NCPSSM Blog: Entitled to Know
http://www.ncpssm.org/entitledtoknow/?p=1415

1. There’s no such thing as a “temporary” tax Cut. If Congress is unwilling to allow tax cuts for wealthy Americans to expire in the midst of economic crisis now, then why would it allow this so-called “holiday” to end in one year? The short answer–it wouldn’t. Americans should expect that when this tax “holiday” ends, restoring Social Security’s funding will be portrayed by those opposed to the program as a massive tax hike, rather than the legislated end of the “holiday”. That leaves Social Security permanently dependent on general fund revenues rather than worker contributions which have successfully funded the program for 75 years. If extended, this payroll tax cut would then double Social Security’s 75 year projected shortfall.


2. This 2% payroll tax cut is the beginning of the end of Social Security as we know it. Worker contributions have successfully funded the program for 75 years and that critical linkage between contributions and benefits is what keeps Social Security a self-funded program. Proposals like this threaten the program’s independence, forcing Social Security to compete for limited federal dollars.

3. Cutting contributions to Social Security isn’t the best way to stimulate the economy. The Tax Policy Center reports the wealthiest 40% of households benefit most from a payroll tax cut. According to The Center for Budget and Policy Priorities (http://www.cbpp.org/cms/index.cfm?fa=view&id=2264), extending the “Making Work Pay Tax Credit” is a much better and targeted stimulus.

Hullabaloo's Digby: http://digbysblog.blogspot.com/2010/12/one-more-nail-in-social-security-coffin.html

Social Security Expert Nancy Altman: http://my.firedoglake.com/nancyaltman/2010/12/07/the-end-of-social-security/

[Donnachaidh]

1. wanna guess how fast the catfood commission's finding become relevant again?

Playing a Jenga game with the retirement fund everyone has paid into is obscene.

[jtown1123]

2. It's appalling. Very sad to see our greatest program potentially crumble in my lifetime.

[gratuitous]

10. That's it

They blew their deadline, never issued a final report, and yet the conclusions listed in the never-ratified final report will be taken up regardless of their commission's by-laws, and social security will find itself on the chopping block. The stated reasons will be that the "bipartisan" Deficit "Reduction" Commission recommended cutting social security benefits and raising the retirement age (it didn't), and it would have been part of the final report if it hadn't been for some liberal malcontents on the Commission.

We will be further assured by all kinds of people that dismantling social security will never, ever happen, that we're being alarmist, and that the plain handwriting on the wall doesn't mean anything. Until, of course, it's too late, and then we'll be treated to a stirring round of shrugs followed by heartfelt sentiments like "Well, what can you do?" and "This battle should have been fought back in 2010" mostly voiced by the same people who are calling us alarmists.

It's so depressingly predictable.

[ArcticFox]

3. It's a Republican wet dream

Obama kills social security and touts it as a benefit to the working man.

[jtown1123]

4. And then they get to say they are the "defenders" of Social Security, Disgusting.

[OrwellwasRight]

22. Took the words out of my mouth.

I was over on the GD: P earlier and accused of not "arguing in good faith" when I said that the President's plan was going to harm the Social Security Trust Fund. It is nice to be in a saner thread.

Edited to fix typo.

[leftstreet]

5. K&R

[laughingliberal]

6. K & R nt

[notadmblnd]

7. I think you are panicing

FICA taxes are separate from federal income tax. They are part of your total payroll taxes but are separate from federal, state and local taxes. So, a 2% Federal income tax cut should not affect SS withholding's.

Payroll taxes for Social Security benefits are collected under the authority of the Federal Insurance Contributions Act or FICA. Most people simply refer to these taxes as FICA tax. This tax had its origins back in 1935, when the tax was part of the Social Security program.

more: http://www.money-zine.com/Financial-Planning/Tax-Shelter/FICA-Tax/

[RainDog]

9. That's what I was thinking - a payroll tax cut is progressive.

a payroll tax cut helps people who earn wages for a living, not those living on bonds or stocks. Payroll tax isn't the same thing as Social Security.

[notadmblnd]

11. Unless the tax cut is a FICA tax cut. I don't see what people are up in arms about

:shrug:

[Statistical]

13. It is a FICA tax cut. Your FICA taxes will be reduced by 2% in 2011.

[Statistical]

15. "Payroll tax" has no official meaning but it means the taxes collected for SS and Medicare.

The 2% reduction is a reduction in SS contribution rate from 6.4% to 4.4%.

If you look at your paycheck (payroll) in January you will notice SS line will be 4.4% of your gross pay while currently it is 6.4% of gross pay.

[glitch]

19. And your increased income will be taxed at your current income tax rate.

Which is a higher rate than if it were taxed as Social Security income received when you retire.

Those dollars on add up, so it's a twofer for the people wanting to tax the middle class while simultaneously attacking social security.

[Statistical]

21. no income tax will be exactly the same.

Both income tax and payroll tax are based on gross income.

Reducing payroll taxes increases net income however your gross income is still exactly the same.

[OrwellwasRight]

24. It is in this case.

http://www.whitehouse.gov/the-press-office/2010/12/07/fact-sheet-framework-agreement-middle-class-tax-cuts-and-unemployment-in

The President claims that the Republicans have promised to make up the lost Soc Sec monies by putting general fund revenues into the SS Trust Fund to make up for what we are not paying. I don't believe it ever will happen. There is not enough money in the budget to cover it.

[Mimosa]

12. How would this affect the self-employed? n/t

[OrwellwasRight]

25. The self employed, if they pay all their taxes,

instead of taking income "off the books," should be paying both halves of their Social Security tax (employee and employer halves). They, like everyone else, should get to pay 2% less.

[Statistical]

16. The cut has nothing to do with income taxes (federal, state or local).

SS contribution rate on employeee side is being cut from 6.4% to 4.4%. Employer will still match 6.4%.

This takes effect on all paychecks begining on January 1.

[OrwellwasRight]

23. That is the point.

FICA is social security, so every American will pay 2% less into the Social Security Trust Fund next year. That is a huge hole to make up. It is not the same as just lowering your income tax, which just goes to general revenues.

[sasha031]

8. it's even being sold as a pay raise by Randi Rhodes

[suston96]

14. It seems this is a FICA tax cut......

http://www.bloomberg.com/news/2010-12-06/payroll-tax-holiday-on-the-table-as-negotiators-debate-bush-rate-extension.html

Payroll Tax

In addition, the plan outlined by Obama would extend aid for the long-term unemployed for an additional 13 months. To help spur hiring, the payroll tax -- which funds Social Security and Medicare -- would be cut by 2 percentage points during 2011.

The payroll tax cut would apply to all wage-earners, an administration official told reporters on a conference call. That would be an $800 savings for individuals with an income of $40,000. Those who earn salaries of more than $106,800 would save a maximum of $2,136. The proposal would cost the government $120 billion, another administration official said.

The 2 percent cut represents a savings of about a third on the 6.2 percent share of the tax workers normally pay. Their employers get no benefit.

Edited for how outrageously easy it is to really screw with Social Security. Nice work, Mr. President.

[gratuitous]

18. I figured it for me

It will bring me just a little less than $40 per pay period, and probably fuck my social security benefits forever whenever I'm thinking about retiring, which seems farther away than ever.

And what do you suppose will happen as January 1, 2012 approaches, and this "holiday" is scheduled to end? Will everyone say, "Well, that was a good idea, certainly lent a little stimulation to the economy, and now it's over"? If you think that, seriously, see a physician about getting your medications adjusted.

If you think we will be subjected to the worst caterwauling, comparable to the horrid prospect of Paris Hilton paying another three cents on the dollar for her "earnings" above $250,000, go to the head of the class. There will be no end to the pearl clutching and groping for the fainting couch as the Republicans gleefully decry this "tax increase on the middle class" all the while calculating the final termination date for social security and the delightful (to them) prospect of millions of retirees left to the tender mercies of grinding poverty.

[OrwellwasRight]

27. Ding ding ding! We have a winner.

"Caterwauling" = exactly!

[bvar22]

17. Anyone who believe these cuts are "temporary"...

...needs to back away from the Kool-Aid.
Even Obama KNEW he was telling the Big Lie today every time he stressed "temporary".
You could see it in his eyes.

I dare anyone to show me HOW the political situation will change for the better in two years so that these ruinous tax cuts for MILLIONAIRES can be axed.

Today WAS/IS the last chance to fix this.
Like Health Insurance Deform, the Patriot Act, NAFTA and so much else,
there will be NO 'Fixing it Later".

[suston96]

20. Republicans wanted to get into that Trust Fund and Obama gave them the key to the door....

The huge surpluses in the Social Security and Disability Trust Funds are what are being used to fund this FICA cut.

Just what the Republicans have been looking to do for years.

[BzaDem]

26. False. The Treasury is writing a check to the trust fund for the full cost of the tax cut. n/t