Payroll Tax Holiday

[NorthCarolina]

Of all the provisions being forced through the tax cut extension legislation, the Payroll Tax Holiday that drains funds directly from Social Security is by far the most dubious provision to me. I have seen some here on DU who insist there is no need to worry since the losses will be replaced by the general fund, but again this strikes me as the most dubious component of this most dubious provision. Tying, for the first time, Social Security funds directly to the general fund. I have seen several breakdowns on this tax holiday which indicate that for an income earner at the $50,000/yr level can expect to see roughly $12 more per week ($624/yr) in their paycheck. Couldn't this same thing have been accomplished by slightly modifying the personal deductions for the year? Seems as though is it a small amount to risk for such a grand compromise to Social Security. Is there any question that this Payroll Tax Holiday provision is expressly intended as a means to weaken the program? Seems quite obvious to me since the deduction could have been handled in other ways, without the need to tie Social Security surpluses to the general fund. If you do not feel that this provision is a purposeful action undertaken as a means of delivering a poison pill to Social Security, then I would sure like to hear your alternative explanation.

[sinkingfeeling]

1. I agree. This is the first step to destroying SS. It was a give away to the right who have been

trying to get this done for decades.

[walldude]

2. Hey, it can't be bad.. it's a HOLIDAY!!!

Break out the ornaments and lights we're going to celebrate!

[stillwaiting]

6. Frank Luntz must have been involved in crafting the language to "sell" this monstrosity - nt

[kentuck]

3. Two Big Macs per week..

Sure to spur the economy.

[Dawgs]

4. No way I can be convinced that this will not eventually be made permanent.

Every single one of these "tax cuts" will be extended or made permanent in 2 years. The modern Democratic party has shown us that they will cave EVERY TIME.

[tk2kewl]

5. I would use the word "sinister" rather than "dubious"

[NorthCarolina]

8. I can agree with that. nt

[Still a Democrat]

7. The notion funds don't transfer between the two is nonsense

The general has raided social security for trillions over the years. Now there will be a relatively small transfer from the general to the social security to make up the holiday, and everyone is panicking over that.

The real problem is and always has been the raiding of ss by the general fund for years.

[Enthusiast]

10. It is the start down a slippery slope.

Social security has remained above the deficit fray because it had a dedicated funding mechanism. Eroding that dedicated funding will allow privatization zealots to attack social security for being a source of deficit spending. This move will eventually bolster their argument. And this, in fact, is the main inspiration for the Payday Tax Cut Holiday.

I remember arguments, similar to your's, in favor of the Gramm-Leach-Bliley Act in 1999. "Times have changed. These objections are nonsense."

[Still a Democrat]

21. "Social security has remained above the deficit fray" ???

Social security is squarely on the table. I can hardly believe you said that.

Ay any rate, a relatively small sum being funded in this way is a tiny, academic argument as compared to the forces at work against SS on the whole - i.e. a huge debt that some see SS cuts as a solution.

[Enthusiast]

22. An academic argument? (lol) Hardly.

Right wing zealots, and right wing zealots posing as Democrats, have pulled social security into the deficit discussion. But this is completely unjustified as social security has never added one cent to the deficit. As a matter of fact social security contributions are helping to mask the true size and scope of the deficit. REAL Democrats know this. Anti-New Deal right wing zealots do not.

[DrDan]

9. the advantage of doing this is that those making less than

$106,800 will get the 2% reduction for all their income.

Those making more, will have the 2% capped at $106,800.

So a bit of a minor win for the middle-class.

But - once in-place it become much harder to remove. Anyone who does so will be certainly labeled a "tax increaser".

[mmonk]

11. Yes. That alone is enough to make me oppose the legislation.

It's pretending to give the people something while it actually is taking something away.

[NorthCarolina]

12. Unfortunately, both the GOP and the DLC New Dems want this,

so there is really nothing that the people can do to keep it from happening. Folks under 55 like myself (54) can probably look froward to a greatly reduced SS benefit, or be forced to accept some alternative to SS that is tied to privatized accounts.

[mmonk]

13. I'm 54 as well.

I'm not looking forward to the future.

[NorthCarolina]

14. Amazing what America has become in just our lifetime.

American citizens no longer able to look forward to the future. I think I despise the DLC New Dems as much, if not more, than the GOP. At least with the GOP you know what motivates them.

[mmonk]

17. I know how you feel. It's best to have your opponents in front of you.

You can handle them. Those behind you hit you when you are least expecting it.

[hfojvt]

15. to me the disgusting thing is also that it is regressive

a person making $20,000 a year gets . A person making $20,000,000 a year gets $2,100 (assuming at least $106,000 of their income is in the form of wages). http://journals.democraticunderground.com/hfojvt/135$400

[mmonk]

20. Good work.

[jtown1123]

16. Great thread. Here is some bulleted info, which you may find helpful:

A Payroll Tax “Holiday” A Bad Deal for Workers and for America

--------------------------------------------------------------------------------

•There has been a lot of talk recently about giving America’s workers a payroll tax “holiday”. Both the President’s deficit reduction commission and the Domenici-Rivlin debt reduction task force have recommended payroll tax “holidays” and now the President is also calling for one.


•A common element of all the payroll tax “holidays” is to cut funding for Social Security. Currently, each worker pays 6.2 percent of their salary into the Social Security trust fund (up to a maximum that is currently $106,800) and their employer makes a matching contribution. Under the President’s proposal, in 2011, workers would contribute 4.2 percent of their wages to Social Security rather than the usual 6.2 percent.
•For someone who earns $50,000, that would result in an additional $19.24 per week in take-home pay. But it would cost the Social Security Trust Fund $120 billion in lost contributions.


•Diverting $120 billion from the Social Security Trust Fund for a “tax holiday” may sound like a good deal for workers, but it is bad business for the program and the millions of middle-class seniors depend on it—today and in the future.


•Coupled with the payroll tax cut, the President has included in his tax compromise a provision that would reimburse the Social Security Trust Funds for the $120 billion in lost revenue stemming from the tax cut. These reimbursements would come from the general fund of the Treasury, and while that may seem to be superficially reassuring, changing Social Security’s funding in this manner hasn’t been fully thought through and in fact poses a serious threat to the program’s continued existence.


•The advocates for a tax “holiday” say to America’s seniors, “trust us, this tax holiday will last only for one year, and then funding for the program will revert to the old tried and true method.”


•But if we’ve learned anything in the last few weeks, it’s that there is no such thing as a “temporary” tax cut. If Congress is unwilling to allow tax cuts for wealthy Americans to expire, then why would it allow this so-called “holiday” end in one year?


•The short answer is that it wouldn’t. We can expect that any attempt to allow the payroll tax cut to end would be portrayed as a massive tax hike rather than the legislated end of the “holiday.”


•In fact, restoring the 2% payroll tax will be portrayed as a 50% “tax increase” on every American worker, making it politically difficult for Congress or the President to restore the funding at the end of 2011. This is especially true in the face of a more conservative Congress, composed of Members who have already made clear their opposition to any revenue change that can be portrayed as a “tax increase.”


•The problems with this proposal are compounded by the fact that workers will not be receiving any additional benefits for those reinstated contributions, making the increase difficult to justify.


•Extending the “holiday”, or making it permanent, would leave Social Security dependent on general fund revenues rather than workers’ contributions, which have so successfully funded the program since its inception in 1935. Making matters worse, a permanent extension of this payroll tax cut would more than double Social Security’s 75-year projected shortfall.


The rest: http://www.ncpssm.org/news/archive/payroll_tax_holiday/

[NorthCarolina]

19. The impetus behind this move is clear then. The fact that it is a Dem President backing this

is doubly disturbing. Even knowing full well that he is a DLC New Dem doesn't soften the hurt.

[subterranean]

18. I have no doubt that this is intended as a poison pill.

Up until now, Social Security has not contributed a dime to the deficit. Never again will we able to say that. The stimulus effect of the PTH could just as easily be achieved by mailing out a check or giving a tax credit to every taxpayer. The fact that Obama and the Republicans chose the PTH instead indicates to me that there are other motives behind it. Obama's public statements about Social Security ("All options are on the table") offer no encouragement either.