Social Security Tax Holiday is a Trap

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December 10, 2010

Social Security Experts Detail Why Payroll Tax “Holiday” is No Gift to Americans

Briefing reporters today, National Committee President Barbara Kennelly, Social Security Works Co-Director Nancy Altman and CEPR Co-Director Dean Baker warned that passage of a payroll tax holiday could have devastating effects on Social Security’s long-term financing.
“As we’ve seen in Washington these days, it’s easy to enact tax cuts but virtually impossible to allow them to expire.  This payroll tax holiday proposal will be no different.  Election year politics in 2012 will doom the repeal of this $120 billion dollar cut and Social Security beneficiaries will then pay the price. The American people understand we’re in an economic crisis yet they don’t want to trade their future security for a short-term benefit. They didn’t ask Congress to cut their Social Security contributions, in fact, poll after poll shows they’d pay more to preserve Social Security. I salute the House for saying we need to give this deal another look because this payroll tax provision is no deal at all.”…Barbara B. Kennelly, President/CEO National Committee to Preserve Social Security and Medicare

Conservatives have long dreamed of a payroll tax holiday because it fulfills two ideological goals, lower taxes and weakening Social Security’s finances.  Worker contributions have successfully funded the program for 75 years and that critical linkage between contributions and benefits is what keeps Social Security a self-funded program.  Proposals like this threaten the program’s independence, forcing Social Security to compete for limited federal dollars.   If made permanent, this payroll tax cut would then double Social Security’s 75 year projected shortfall.

“While the payroll tax cut is sure to be a welcome increase of income for workers, it is also likely to deepen the public’s distrust of Congress and the President, and reinforce the belief held by much of the public that Congress is raiding Social Security.   Past Congresses have worked hard to maintain a wall between Social Security’s funds, which, by law, must be used only for Social Security, and the government’s general fund, which can be used for any purpose, limited only by the Constitution.  The proposal, if enacted, will reinforce the public perception that Congress is cavalier with their contributions, intermingling them at will and substituting general revenue for dedicated workers’ contributions — because that is just what the proposal does. ” Nancy Altman, Social Security Works Co-Director
We agree there is a need for more stimulus; however, this payroll tax holiday isn’t the most effective way to provide that economic boost. According to The Center for Budget and Policy Priorities, extending the “Making Work Pay Tax Credit” is a much better and targeted stimulus.
“If the point is to provide a boost to the economy the quickest, fairest, and most effective way would be to simply extend and expand the Make Work Pay tax credit. This has about 10 percent more bang per buck than the payroll tax holiday and would go to all workers, including the state and local government employees not covered by Social Security.”…Dean Baker, Co-Director Center for Economic and Policy Research
 The National Committee’s Policy Review of the Payroll Tax “Holiday” has been post on our website at: .
###The National Committee, a nonprofit, nonpartisan organization acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the Board of Directors and professional staff. The work of the National Committee is directed toward developing better-informed citizens and voters.
Media Inquiries to:Pamela Causey 202-216-8378/202-236-2123Kim Wright 
Cutting $120 billion in Social Security contributions as a so-called “holiday” and keeping billions in tax cuts for the wealthy has got to be the most ridiculous example of “let’s make a deal” politics Washington has ever considered. 
Social Security has contributed nothing to the current economic crisis and should not be used as a bargaining chip in an economic scheme that rewards the rich while undermining the most important federal program serving the middle class. 
When this tax “holiday” ends, restoring Social Security’s funding will be portrayed by those opposed to the program as a massive tax hike, rather than the legislated end of the “holiday”.  That leaves Social Security dependent on general fund revenues rather than worker contributions which have successfully funded the program for 75 years.  Make no mistake about it, members of Congress who support this fundamentally flawed approach will be remembered as the ones who opened the door to Social Security’s demise endangering the economic security of millions of Americans like me.
Please don’t be among that group, this so-called payroll tax holiday is no holiday at all and should be removed from this tax “deal”.
Cynthia S. ParksGrassroots Associate
National Committee to Preserve Social Security and Medicare
10 G Street, NE Suite 600
Washington, DC  20002-4215
(202) 216-8368

One thought on “Social Security Tax Holiday is a Trap”

  1. As I continue to download the text of Bernie Sanders’ long speech I see his repeated warning that Social Security not be funded from general revenues as it is scheduled to be under the compromise plan.

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