No, the Payroll Tax Cut Doesn't Hurt the Trust Fund

[jefferson_dem]

No, the Payroll Tax Cut Doesn't Hurt the Trust Fund
—By Kevin Drum

| Tue Dec. 6, 2011 6:43 PM PST

Senator Mark Kirk explains his opposition to extending the payroll tax cut that was originally passed last year:

The White House has redefined this as the payroll tax deduction. It's not the payroll tax deduction — it's contributions to Social Security. And when the American people hear that we have legislation moving forward to cut contributions to Social Security and drive the trust fund into the red, I think opposition would be fairly overwhelming.

Everybody gets to put their own spin on things, and this has become a common Republican meme over the past week or two. Unfortunately, it's just factually false. Normally, a reduction in the payroll tax would indeed reduce contributions to the Social Security trust fund, but last year's bill specifically made up for this loss from the general fund. The trust fund got every penny it normally would have, and all the proposals on the table this year do the same.

What changes here isn't the solvency of the trust fund. What changes is where the money comes from. Payroll taxes mainly come from the middle and working classes. The general fund is supported by income taxes, which mainly come from the well-off and the rich. So, generally speaking, a payroll tax cut that's compensated for by transfers from the general fund reduces the taxes of the middle and working classes and raises the taxes of the well-off and the rich.

If Republicans object to this — and they do — they should say so. But it's long past time to stop pretending that this has anything to do with the trust fund, and long past time for the media to pass along this claim unchallenged.

http://motherjones.com/kevin-drum/2011/12/no-payroll-tax-cut-doesnt-hurt-trust-fund

[TheWraith]

1. Kicked and recommended. It's appalling how many people don't know this.

And many of the people who do still think it hurts Social Security in some nebulous way that maybe might take shape in the future.

The reality is, it's a tax cut which disproportionately favors people who work for a living, and the poorer you are the more it benefits you.

[Name removed]

4. Deleted message

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[sad sally]

6. Just like the "temporary" tax cuts that were supposed to expire at the

end of 2010, but were extended another two years, this "holiday" will never end. If it's expanded to employers and extended, it will never die. Some will say good riddance - a social safety net for doddering old fools, survivors, kids who've lost parents, and disabled people who weren't smart enough to play the market and get rich deserve to live out their life poor.

As for adding the cost to the general fund budget, congress and the President will have to borrow money to fill the hole, which will further damage social security's credibility. Once again, those who detest the idea of a social safety net for old people, widows, orphans and disabled people will be glad to see it go.

This "holiday" isn't the solution to the lack of money working people are experiencing.

[jefferson_dem]

8. "Temporary little bandaids"?

Mittens would be proud: http://www.youtube.com/watch?v=4BjDdeDsyYo

Please...

The SS is just as strong now as it was when the payroll tax holiday was extended before.

[RC]

10. Yeah, and a couple of years down the road when there isn't any money

in the general fund for anything except our wars? Then what?

[Hoyt]

16. If we get to that point, it won't matter anyway.

Few programs are safe if this economy doesn't improve or change in some fundamental way.

[jefferson_dem]

17. Teabagger-esque.

[Lord Magus]

25. You know who else will be happy if this "holiday" never ends?

Those who like the idea of Social Security being funded by the income tax instead of the extremely regressive payroll tax. Those who have absolutely no problem with the idea of redistributing wealth from the highest income earners to the rest of us. Would this fundamentally change the nature of Social Security? Yes, but in a good way.

[TheKentuckian]

14. How could that be so when the percentage is flat?

It by definition must be a larger benefit to higher earners up to the cap and those that earn in excess of the cap still get the maximum return.

I also fail to see what is nebulous about changing the program to self funding and indeed a lender to the US Government to being dependent on the general fund and a direct deficit driver. It is like some people haven't been paying attention for several decades, the entire impetus behind this Republican initiative has always been to de-fund Social Security or failing that to make it a welfare program and we have fallen right for it.

People are acting like this is some new and fresh idea that ever clever Obama devised, when in reality it is more bad and rejected rehash from earlier years.

[jefferson_dem]

19. Point is: Nothing is getting "defunded", regardless of the lies spewed by GOP/Teabaggers...

That argument, which has been adopted by members of both parties and perpetuated by news outlets like NPR, has one problem: it’s not true. Each of the plans under consideration is fully paid for, replacing revenue the Social Security Trust Fund would have lost from lower payroll tax receipts with money made up from either alternative revenue sources or spending cuts. The earlier payroll tax holiday, set to expire this month, was also fully-funded, and the program has thus far “been held harmless” from the holiday, as Reuters noted today.

And while the opposition from Republicans may seem like an impassioned defense of a vital and popular program, a look at their history with the program shows it is not. DeMint has supported privatizing the program while Paul is a proponent of means testing — “solutions” that are both bad policy and unnecessary. Despite Paul’s $6 trillion assertion, Social Security actually has a $2.6 trillion surplus and is solvent through at least 2037.

And if Republicans truly want to use the payroll tax to shore up its long-term viability, there is an easy way to do that. The payroll tax is currently collected only on the first $106,800 in income; raising or eliminating that cap would make the program fully solvent for the next 75 years.

If Republicans have a cogent reason for opposing a tax cut for the middle class that is meant to stimulate the economy, they should provide it, because their current line — that such a tax cut will weaken a program many of them have sought to undermine for years — simply isn’t true.

Stephen C. Goss, the Chief Actuary of Social Security, said today that the Social Security Trust Fund “would be unaffected by enactment” of a payroll tax cut extension, according to a statement circulated by Sen. Bob Casey (D-PA). The Congressional Budget Office agreed, saying all lost revenue would be offset.

http://thinkprogress.org/economy/2011/12/07/383989/republicans-payroll-tax-undermine-social-security/

[TheKentuckian]

20. No, we are going with the welfare program option instead.

It is silly, if you are going to transfer from the general fund then cut taxes and if the TeaPubliKlans won't allow that but this can "get by them" then they are forcing us to take the blame for what they want as an outcome again.
This isn't a sneaking under their nose deal, this is their concept and they know exactly what the endgame is while they can make political hey of opposing the cut while using it as an excuse to attack what they have been after for many decades.

"Held harmless" is impotent and unenforceable on the legislative and propaganda levels. You can point all you want to a throw away line of a bill but it will not impact media coverage, political machinations, or public perception in the least.

[TheWraith]

21. No, because the payroll tax cuts off at a little over $100k.

So in other words, someone making $500,000 a year gets the same "payroll tax cut" as someone making $100,000, but someone making $50,000 gets a much higher percentage of their income back than does the person making $500,000.

Not to mention, "flat taxes" are inherently regressive in nature, because the people with the least amount of money have the least discretionary funds. Once you subtract basic living expenses, you're taking a much larger chunk of someone's available income if they make a little money than if they make a lot of money.

[DCKit]

2. Negative input doesn't hurt?

Tell that to my retirement fund - kinda like SS.

[jefferson_dem]

7. There is no "negative input" impact on the trust fund.

That's the point, eh?

[Name removed]

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[Donnachaidh]

3. hmmmm...

forgot my hipwaders.....

[jefferson_dem]

5. Best find them before you encounter even more "payroll tax cuts are bad for SS" spew...

[girl gone mad]

9. It's one of the few Obama economic policies I've agreed with.

It's a progressive move, but progressives are rightly skeptical. The administration lost a lot of trust by adopting such a foolish, incompetent stance on the deficit over the past few years.

[Duct Tape]

28. +1 Perfectly stated. n/t

[Tarheel_Dem]

11. K & R

:kick:

[stockholmer]

12. it's delusional to separate the 'so-called trust fund' from the rest of the debts of the US

When the US is forced into liquidation down the road, the creditors will not segregate some monies out as 'sacrosanct'. Insolvent is insolvent. Also, intra-government debt is still debt, and all those special T-bills in the SS 'trust fund' have long ago been borrowed against and spent. All the rosy talk is based on economic projections, spending discipline, and a concurrent lack of inflation that will never, ever come to pass.

As bad as Social Security is, Medicare dwarfs it, and the US populace is getting sicker by the year. By 2020, HALF of the US will either be fully diabetic or nearly so. http://www.reuters.com/article/2010/11/23/us-unitedhealth-diabetes-idUSTRE6AM0NH20101123

The only way out is to end the empire and shove a 1% or so financial turnover tax down the collective throats of the global bankster cartel.

Good luck with that.

[Lord Magus]

26. What's delusional is thinking the US will ever be (or CAN ever be) forced into liquidation.

And if you hate Social Security and Medicare so much, go somewhere that'll appreciate your nonsense, like Free Republic.

[great white snark]

13. K&R

[GeorgeGist]

18. The taxes of the well-off and rich have not been raised one iota ...

but nice try at spinning it.

[newblewtoo]

22. You mean FICA isn't taken out out dividends and interest?

Oh darn, I guess it isn't. Apparently people need to learn why Roosevelt set up Social Security the way he did.

Know what, if this is what a majority of short sighted fools think will be helpful to the longevity of Social Security, I am done arguing about it.

Bring on means testing.

[Lord Magus]

27. Roosevelt set it up that way because that's how he could gtet it passed.

Social Security had a great many severe shortcomings when it was created. Many have since been fixed, but not all of them have.

[jefferson_dem]

24. Separate issue.

Don't move the goalposts.

Seems we agree that the SS surplus is unaffected by the payroll tax cut extension. That's progress toward truth.

[Vattel]

23. No, the payroll tax cut doesn't "raise the taxes of the well-off and the rich"

(speaking of memes that are "factually false")

[Duct Tape]

29. Good to know. I was originally against this, but with this

information I will happily support the extension of the holiday. Of course, that doesn't mean that we shouldn't be careful with what goes on with SS. With the general fund now contributing to SS, the right could blame part of the deficit on SS, as they've already been doing. I'm not a happy supporter of the president at all, but this was a good move all things considered.