Trump pledged to permanently scrap the payroll taxes used to fund Social Security and Medicare if he wins re-election
Donald Trumpvowed on Saturday to scrap the payroll tax, a funding mechanism for Social Securityand Medicare, if he wins re-election.
- "If I'm victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax," Trump said at a press conference announcing executive actions on coronavirus relief.
- Experts say the move to cut payroll taxes would further erode the shaky finances of both programs.
President Donald Trump pledged on Saturday to scrap the payroll tax, a key mechanism that's used to fund Social Security and Medicare.
"If I'm victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax," Trump said at a press conference. "I'm going to make them all permanent."
He later said: "In other words, I'll extend it beyond the end of the year and terminate the tax. So we'll see what happens."
The payroll tax funds Medicare and Social Security
The federal government imposes a 15.3% levy on wages known as the payroll tax. It's evenly divided between employers and workers, and most of it goes to fund Social Security. It also helps to finance Medicare, the federal health insurance program for people over the age of 65 and for younger Americans with disabilities.
In an April 2020 Gallup poll, 58% of retirees said they relied on Social Security for a "major source" of their income.
Trump's unexpected comments on Saturday came as he signed an array of executive actions aimed at providing relief to Americans during the pandemic. Among them was a deferral in the collection of payroll taxes, which he is waiving from September through the end of the year for workers earning below $104,000 a year.
But it doesn't forgive workers' payments outright since the power to eliminate taxes or change the tax code rests with Congress. As workers and employers are still legally on the hook to make those payments next year, experts say it's unlikely that workers will see a bump in their wages anytime soon. Companies are more likely to continue withholding the money from paychecks.
Plus, lawmakers from both parties roundly rejected including a
Congressional action to eliminate the tax entirely is also improbable, and may instead set off a fraught debate over the federal programs' fiscal futures.
Medicare and Social Security's finances are already shaky
Economists from the left-leaning Center for American Progress warned on Thursday that Trump's push to enact a payroll tax cut could further erode their shaky finances.
"Trump's scheme would weaken the Social Security and Medicare trust funds by diverting the revenue from the employee portion of Social Security and Medicare taxes, and potentially the employer's share of Medicare taxes, from the programs' trust funds," a memo from the organization said.
Around $500 billion in payroll taxes went into the trust funds of both programs from August to December of last year, the Center for American Progress said.
The trust funds for both programs are scheduled to be depleted in this decade. The Bipartisan Policy Center projects that if economic damage was similar to the Great Recession a decade ago, the Social Security trust funds could be depleted in 2029. That could prompt a 31% cut in retirement benefits, the organization said.
The Medicare trust fund is in worse shape. Its trustees said the program would run out of money in 2026 — also without accounting for the pandemic.
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