The Office of the Chief Actuary of the Social Security system looked at Trump’s promise to end the dedicated payroll taxes that pay for Social Security on January 1. The conclusion: this would bankrupt the Social Security system by 2023. The fund for disability payments would be empty by mid-2021. The fund for Social Security benefits would be gone by mid-2023. To make it personal: my social security check would be gone as of June 2023. My 94-year-old mother’s social security check would be gone. If you are over 65, your social security check would be gone.
That is Trump’s proposal.
He touts this as a continuation of his August 11 proclamation allowing employers to suspend payroll tax withholding from September 31 to December 31. Four things to know about this proclamation:
- It does not stop these taxes, but only delays collection.
- In January, the accumulated payroll taxes will be due—so there will be double withholding.
- The proclamation does not help anyone who is unemployed.
- The proclamation may not even be legal.
Because of this craziness, most employers will not stop withholding.
Trump said his action will offer relief in the COVID-19 recession. It will not. Even if employers suspended payroll taxes, that would offer zero help to millions of unemployed workers. Even if employers suspended payroll taxes, that would only increase the amount employees have to pay in January.
Franklin Delano Roosevelt signed the Social Security Act in 1935 to set up a retirement insurance program for workers. A 1939 amendment expanded coverage to retirees’ spouses and children. In 1956, disability benefits were added.
Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA).
For the past 80 years, Social Security has provided a safety net at retirement for hundreds of millions of U.S. workers who are not covered by other pension or retirement plans.
Neither Trump’s proclamation, nor his promise to end all payroll taxes if he is re-elected, makes any sense.
For more information:
*correction 8/31–my mother is 94, not 93! H/T Kenny!