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Retirement Planning > Social Security

Ending Payroll Tax Would Drain Social Security by Mid-2023

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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.”

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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