Eliminating payroll taxes could drain the Social Security trust funds within a few years if no alternative source of funding is provided, the Social Security Administration’s chief actuary said in a letter released Monday.
Sens. Bernie Sanders (I-VT), Chuck Schumer (D-NY), Ron Wyden (D-OR), and Chris Van Hollen (D-MD) requested the analysis after Trump earlier this month signed a memorandum allowing payroll taxes to be deferred from September through the end of the year. The president also said he would “terminate” payroll taxes if he wins reelection.
"We will be, on the assumption I win, we are going to be terminating the payroll tax after the beginning of the new year," Trump told reporters earlier this month, adding that he would pay into Social Security through the Treasury Department’s general fund.
White House Press Secretary Kayleigh McEnany said the following day that Trump was just referring to having deferred payroll taxes forgiven. “The president is very clear on this matter that he wants a permanent forgiveness of the deferral. That’s as far as he’s gone, and he’s gone even further to say he’s going to make sure that Social Security is fully funded.”
Trump would not be able to eliminate payroll taxes or transfer money from the general fund without legislative action by Congress, and lawmakers in both parties have pushed back against the idea.
Stephen C. Goss, the Social Security Administration’s chief actuary, noted in his letter to the senators that he was not aware of anyone proposing the hypothetical legislation they requested be analyzed. But he wrote that if no alternative revenue source was provided, Social Security’s disability insurance trust fund would be depleted by the middle of next year and its retirement trust fund would be exhausted by the middle of 2023. The programs would stop paying out benefits once those reserves are depleted.
If general fund transfers were used to make the Social Security trust funds whole, the programs’ benefits and financial condition “would be essentially unaffected,” Goss wrote — though, again, absent some other source of revenue, such transfers would raise the federal budget deficit and Trump’s proposal would represent a massive change to the structure of a popular safety net program. A plan to draw money from the general fund is unlikely to pass a divided Congress.
Why it matters: As the senators surely expected, the analysis will give Joe Biden and Democrats another cudgel to use against Trump.
“President Trump continues to play fast and loose with the health and well-being of America’s seniors,” House Speaker Nancy Pelosi said in a statement. “The new analysis today shows the swift potential devastation of President Trump’s reckless call to ‘terminate’ the payroll tax: shattering the sacred promise of Social Security.”
And Schumer warned: “President Trump’s plan to eliminate Social Security’s dedicated funding would endanger seniors' Social Security and could mean the end of Social Security as we know it by 2023.”
The Trump campaign insists that the president will protect Social Security benefits (though his budget proposals have included cuts to disability insurance). “Joe Biden’s allies are dusting off the old Social Security scare tactic playbook and talking about hypothetical legislation that does not exist," said Trump campaign communications director Tim Murtaugh, according to The Hill.
The bottom line: The chances that payroll taxes are permanently eliminated appear slim at best, at least right now. And Trump’s payroll tax deferral is not expected to have much effect either, as employers are still awaiting guidance from the Treasury Department as to how the deferred taxes would be handled once they come due next year. Given the questions surrounding the deferral, most businesses are not expected to stop withholding payroll taxes.