The Senior Citizens League warns that President Trump’s proposal for a payroll tax cut in the second economic stimulus package would worsen existing financing problems for Social Security and Medicare beneficiaries.
The Alexandria, Va.-based seniors advocacy group today issued a press release where it voiced its opposition to the temporary payroll tax cut that Trump is insisting on including in the next coronavirus stimulus package. The group said not only will it harm Social Security and other beneficiary
programs, but it also likely wouldn't provide financial help for unemployed workers who need the money most.
“It would take the payroll taxes right out of the system, and right now our system is currently paying out more than it is bringing in in cash revenues," said Mary Johnson, a Social Security and Medicare policy analyst with the Senior Citizens League. "So that would seriously weaken the Social Security financing.”
Social Security's payroll tax is a 12.4% tax on earned income of up to $137,700, as of 2020. Employees’ wages are subject to a 6.2% tax up to $137,700 in 2020; the other half is paid by employers. The self-employed pay the entire 12.4%. Workers also pay a Medicare tax of 1.45%, which is matched by employers.
Citing the most recent Social Security Trustee Report, Johnson said in 2019, Social Security paid $1,047.9 billion in benefits versus receiving $944.5 billion in payroll tax revenues. She said taxation of the benefits of retirees provides another $36.5 billion in revenues, and $80.8 billion is money from “interest” earned by the assets of the Social Security Trust funds, which are special non-marketable bonds. She added that the trustees forecast that the program will be depleted by 2035.
The No. 1 concern for the more than 61.2 million people who depend on Social Security and Medicare payroll tax revenues for their benefits is that benefits could eventually be permanently cut to pay for these "temporary" tax cuts, Johnson said.
In addition, Social Security payroll taxes also have been severely affected because millions of people lost their jobs during the pandemic, Johnson said. She said claims for Social Security will grow faster in 2020 than anticipated, as older adults lose their jobs.
And while many older workers may have delayed claiming Social Security prior to the pandemic to take advantage of a bigger payout, those who have lost their jobs may be forced to collect Social Security benefits now, especially if their retirement accounts have gone down significantly in value, Johnson said.
Furthermore, she said the high level of hospitalizations for Medicare patients during the pandemic may shorten the life expectancy of the Medicare Trust Fund, adding that the 2020 Medicare Trustee Report estimated that the Hospital Insurance Trust Fund will become depleted by 2026.