http://www.truth-out.org/subsidizing-profits-weakening-social-security-employer-payroll-tax-cut/1309872784Subsidizing Profits, Weakening Social Security: The Employer Payroll Tax Cut
Dean Baker
Tuesday 5 July 2011
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One aspect of this tax cut that is not in dispute is that it raises important issues about the future of Social Security. And this is true whether the tax cut is on the employer side or employee side.
While the plans at present call for crediting the Social Security trust fund with the full amount that it would have received had there been no cut in the payroll tax, this is a departure from past practice in which the trust fund's revenue came entirely from the designated payroll tax or interest earned on bonds bought by the trust fund. The 2 percentage point employee-side payroll tax cut that is currently in place and any future cuts, imply that general revenue is now being used to finance Social Security.
There is nothing wrong with using general revenue for Social Security in principle, however, several Republicans have already indicated that they intend to use the revenue shortfall as an argument for cutting benefits. They may not get far in this effort, however, giving the Obama administration's openness to cuts in Social Security, it is dangerous to go down this path.
It is possible to give whatever cut is intended through a reduction in the payroll tax through an income tax cut or credit. There is no obvious reason to prefer that the cut be designated as a "payroll tax" cut, unless the point is to raise issues about Social Security. Presumably, this is why the Republicans insist that tax cuts take this form.
In short, the employer-side payroll tax cut is not only bad policy for boosting the economy; it also unnecessarily puts Social Security in jeopardy. This is one form of stimulus that we can certainly do without.
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http://www.huffingtonpost.com/2010/12/08/tax-cut-deal-a-hidden-thr_n_793983.htmlTax Cut Deal A Hidden Threat To Social Security
Ryan Grim
First Posted: 12- 8-10 03:42 PM | Updated: 12- 8-10 04:33 PM
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A White House official dismissed the concerns. "It is explicitly temporary and there's a general revenue transfer in the bill so it will not negatively impact the social security trust fund at all," he said.
Sen. Barbara Mikulski (D-Md.), who chairs the Senate Subcommittee On Retirement and Aging, said she's concerned that the payroll cut will weaken Social Security and leave it vulnerable. "I'm concerned this could be the beginning of the slippery slope to getting rid of the payroll tax and cause a way of getting rid of Social Security as a public issue in the way of heading to privatization," she said. "I know it's been recommended by several economists, but this is really big. My question is, shouldn't this be viewed in a more shock wave kind of way?"
Rep. Keith Ellison (D-Minn.), co-chair of the Congressional Progressive Caucus, echoed Mikulski's concern. "On the surface, the payroll tax reduction of two percent is attractive, but when you get past the surface, it's deeply disturbing. Because what it means is we'll replace the loss of money from Social Security with general fund money, but in the past Social Security has been raided to help fund general fund programs. So how long will it be before somebody says Social Security is not sustainable and we need to cut the program?" he said. "I'm afraid we are feeding into a larger narrative that goes toward eliminating Social Security."
Stripping Social Security of payroll tax revenue will make the program appear less viable in projections, which currently gauge that it can pay full benefits until 2037 and roughly four-fifth of benefits over the next 50 years. That vulnerability can then be exploited.
"The difficulty you have here is you have a very large federal deficit and you've got a Social Security fund that really needs some work," said Johanns. "Social Security has got to be part of the mix
. So stay tuned. There's a lot of stories to be written about that between now and a year from now."
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