Millions of Americans rely on Social Security and Medicare in retirement. Current retirees depend on workers and their employers paying the 15.3% payroll tax to find the program. But President Donald Trump recently announced that he plans to eliminate the tax if he is reelected.
"We will be, on the assumption I win, we are going to be terminating the payroll tax after the beginning of the new year," President Donald Trump said earlier this month. The claim came after President Trump postponed the collection of payroll taxes from Sept. 1 through Dec. 31 for individuals earning less than $104,000.
"If I’m victorious on Nov. 3, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said while signing the order. “In other words, I’ll extend beyond the end of the year and terminate the tax."
Trump has suggested that the money could be replaced with funds from the U.S. Treasury’s general fund, promising "tremendous growth” despite record-high unemployment.
But according to a new report from Stephen Goss, the chief actuary, Social Security could run out of money in 2023 if payroll taxes are eliminated and the money is not replaced.
“If this hypothetical legislation were enacted, with no alternative source of revenue to replace the elimination of payroll taxes on earned income paid on January 1, 2021 and thereafter, we estimate that [Disability Insurance] DI Trust Fund asset reserves would become permanently depleted in about the middle of calendar year 2021, with no ability to pay DI benefits thereafter," Goss wrote in a letter to four Democratic senators who requested the review.
"Donald Trump's proposal to eliminate the payroll tax would bankrupt Social Security in just three years," Sen. Wyden said in a statement. "While Democrats would protect Social Security for generations to come, Donald Trump would throw seniors to the wolves to give big corporations billions per year in tax breaks."
"Instead of dismantling Social Security, we must expand it so that every senior can retire with the dignity they deserve," Sen. Sanders said.
While the payroll tax holiday defers taxes owed until next year, President Donald Trump has pushed for them to be forgiven. But it's unlikely that lawmakers will actually forgive the payments.
As such, many employers aren't implementing the order and are paying their payroll taxes as normal, calling the order "unworkable." They warned businesses that they could face a bigger tax bill next year if President Donald Trump is not able to forgive the tax.
"Therefore, many of our members will likely decline to implement deferral, choosing instead to continue to withhold and remit to the government the payroll taxes required by law," they said.