Sign at the Social Security building in Baltimore. (Photo: Bloomberg)
If the payroll tax were eliminated with no alternative source of revenue enacted, the Social Security Disability Insurance (DI) Trust Fund would become "permanently depleted in about the middle of calendar year 2021, with no ability to pay DI benefits thereafter," according to Social Security Actuary Stephen Goss.
In a Tuesday letter to Sens. Chris Van Hollen, D-Md.; Chuck Schumer, D-N.Y.; Ron Wyden, D-Ore.; and Bernie Sanders, I-Vt.; Goss added that the Old Age and Survivors Insurance (OASI) Trust Fund "and Trust Fund reserves would become permanently depleted by the middle of calendar year 2023, with no ability to pay OASI benefits thereafter."
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President Donald Trump issued an executive order, the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster on Aug. 8. The order allows employers to temporarily defer the employee portion of payroll taxes. Trump has said the deferred taxes could later be forgiven, or the cut made permanent. When he signed the order, he vowed to "terminate the tax" if reelected.
The Senators asked Goss in an Aug. 19 letter "to assess the impact of a proposal to zero out" Social Security's payroll and self-employment taxes — paid by employers and employees — on the OASI and DI trust funds.
"Trump's payroll tax cut plan not only fails to help Americans struggling to get by right now, it would also completely decimate Social Security for the millions of Americans who rely on it," said Van Hollen in a statement. "This analysis makes clear — this is another thinly veiled attempt to gut Social Security and go after the American people's hard-earned benefits. We can't let Trump get away with this and will do everything in our power to prevent this disastrous policy from ever going into effect."
Treasury Secretary Steven Mnuchin has said that money would be transferred from the federal government's general fund to cover the trust fund shortfall.
Trump didn't mention Social Security during his remarks at the Republican National Convention, which started Monday.
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Melanie Waddell
Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2024. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.
