White House Denies Dems’ Claim Payroll Tax Suspension Will Damage Social Security

President Donald Trump at the Trump National Golf Club in Bedminster, New Jersey, on Aug. 8, 2017. Nicholas Kamm/AFP via Getty Images

President Donald Trump’s recent executive order suspending payroll tax collection will put extra money in millions of Americans’ pockets without hurting the Social Security program, according to a White House spokesman.

“Providing a payroll tax deferral poses no risk to the Social Security Trust Fund and puts more money in the pockets of hardworking Americans as we fight to end this pandemic from China and rebuild our economy safely,” White House spokesman Judd Deere told The Epoch Times on Aug. 15.

“This has been a priority for President Trump and, while congressional Democrats played politics, the president acted for the forgotten men and women of this country, as he has done so many times before,” Deere said.

Trump’s directive followed the failure of negotiations between Senate Republicans and House Democrats on a third major economic recovery bill meant to address the difficulties caused by COVID-19, the disease caused by the CCP virus.

Most Senate Republicans and Trump support a $1 trillion package consisting solely of CCP virus relief aid, while Democrats want the relief aid, plus an additional $2 trillion for non-relief measures such as $1 trillion to bail out high-tax blue states that the president argues have been mismanaged for years.

Trump’s order suspends deduction from paychecks of taxes used to help fund Social Security benefits. The suspension applies to annual incomes of $104,000 or less. Trump has said he will propose permanent reductions in the assessments if he’s reelected in November.

Opposition

But Democrats and their allies in the special interest advocacy communities immediately branded the Trump proposal a dire threat to Social Security, prompting fears among millions of elderly Americans who depend on the program.

Presumptive Democratic presidential nominee Joe Biden called Trump’s order part of a “series of half-baked measures” that put Social Security “at grave risk.”

Similarly, Senate Minority Leader Chuck Schumer (D-N.Y.) claimed that “the president said if elected, I will forgive all this. That depletes money out of the Social Security and Medicare trust funds. If you’re a Social Security recipient or Medicare recipient, you better watch out if President Trump is reelected.”

The American Association of Retired Persons (AARP), one of the nation’s most powerful special-interest groups, said in a statement that “this approach exacerbates people’s already-heightened fears and concerns about their financial and retirement security. Social Security’s guaranteed benefits are indispensable. Families impacted by coronavirus urgently need help, and we believe bipartisan congressional action on another coronavirus aid bill is the right solution.”

Strong Economy Needed

The crux of the issue is whether the uncollected payroll tax revenues that would normally go into the Social Security Trust Fund in 2020 would be collected by Congress in 2021.

A top Trump administration official, speaking on background, told The Epoch Times that “the president has called on Congress to make this deferral permanent. If they do not, this action still effectively allows working Americans to get a sizable advance on their pay starting in a month, which is just when working Americans need it most, as we are fighting to end the COVID-19 pandemic.”

The administration official argued that “the Social Security Trust Fund is not at risk (especially since, at present, the payroll tax relief is just a temporary deferral that must be paid back in early 2021) and the best way to keep the Social Security Trust Fund safe is to keep our economy strong.”

Strong Support

Robert Carlstrom, president of AMAC Action, the advocacy wing of the Association of Mature American Citizens (AMAC), told The Epoch Times on Aug. 17 that a recent poll of the group’s membership found strong support for Trump’s actions.

More than 26,000 of the responding AMAC members either said they strongly support Trump’s directive or agree with it as long as Social Security benefits weren’t subsequently made subject to the annual congressional budget process. More than 7,000 of the respondents were opposed or strongly opposed.

“The overwhelming majority agree with Trump, but there is a concern and that was reflected in the primary yes category,” Carlstrom said. The “primary yes category” consists of 16,000 of the 26,000 supporting Trump who said Social Security shouldn’t be part of the congressional budget process.

Rachel Grezler, a research fellow in economics, budget, and entitlements at the conservative Heritage Foundation think tank, told The Epoch Times in an Aug. 14 interview that “everything President Trump has indicated and that [Treasury] Secretary Steven Mnuchin has said is they will make the Social Security Trust fund ‘whole.’”

Even so, Grezler added, “it costs what it costs and whether it comes from the Social Security Trust Fund or general revenues, it still shifts a burden to future taxpayers and moves us closer to a financial crisis.”

“But I definitely think that all these fear-mongering statements that a payroll tax cut is going to kill Social Security or defund the system are simply not true.”

Public Misunderstanding

The debate about Trump’s suspension and its potential impact on Social Security reflects a widespread public misunderstanding about how the program’s benefits are funded.

The average retiree in 2020 will have paid into the system $135,000 in payroll deductions and receive $193,000 in benefits, according to the Urban Institute, a liberal think tank. The difference between what the retiree paid into and the benefits taken out of the system must be made up by other government revenues.

The payroll tax is currently 12.4 percent on income taxable for Social Security, but the figure required to make the system solvent is 15.5 percent, Grezler said, citing the Social Security Trustees Report for 2020. The report estimates that the system will be unable to cover promised benefits by 2035 if no reforms are enacted.

A package of reforms proposed by the Heritage Foundation would allow the payroll tax to be reduced to 10.1 percent, while putting the system on a path to recovered solvency.

Contact Mark Tapscott at [email protected]