Retirees could be permanently harmed by President Donald Trump’s temporary Social Security payroll tax deferral, Congressional Democrats and consumer advocates told the House Ways and Means Committee Social Security Subcommittee today.
Trump’s deferral of employee contributions to the payroll taxes which helps pay for Social Security benefits is mandatory for federal employees and military service members, but voluntary for private employers.
While the deferral made by a presidential executive order will put more money in the paychecks of workers subject to it now, paying it back will mean smaller checks for the first few months of 2021.
He has said more than 14 times he wants to terminate the tax permanently, claimed Subcommittee Chair John Larson (D-CT).
Larson called Trump’s deferral unwise, short-sighted and the first step to eliminating the number one anti-poverty program in America.
The panel’s ranking Representative Tom Reed (R-NY) charged Larson of fear mongering and putting on a political circus in the hearing branded as “Save Our Social Security Now.”
“We are not here as a party to defund Social Security. The president is not defunding Social Security. Social Security will be around for generations to come,” said Reed.
The Congressman defended the deferral as additional relief needed for Americans during the Covid-19 pandemic.
Representative Jodey Arrington (R-TX) accused the hearing was an attempt to make the cheapest of political points.
Donald Trump is the biggest danger there is to people’s Social Security benefits, Oregon Democratic Senator Ron Wyden charged in the hearing.
“I’ve seen a lot of tone deaf moments in the Trump administration, but nothing quite compares to the billionaire president announcing from the ballroom of his private golf club to a nation enduring mass death and economic collapse that his big rescue plan is to steal from Social Security,” Wyden said.
He noted each Trump budget has called for billions in Social Security cuts.
Trump’s payroll tax deferral was attacked for giving workers subject to it a false sense they are getting a tax break when in fact it is merely a loan that they will need to repay next year, Alliance of Retired Americans President Robert Roach Jr. said.
Echoing Roach, Social Security Works President Nancy Altman called it a Trojan horse: “It appears to be a gift, in the form of middle-class tax relief, but would, in the long run, lead to the destruction of working Americans’ fundamental economic security,” said Altman, who has written extensively on the history of the program.
She said ending Social Security contributions, even temporarily, poses a serious threat to the benefits.
“Eliminating Social Security contributions is a radical, destructive and pernicious change,” said the advocacy group chief.
Terminating payroll taxes altogether – as the President has repeatedly called for — would be a disaster for current and future generations of beneficiaries, warned National Committee to Preserve Social Security and Medicare President and CEO Max Richtman.
“Under the worst-case scenario, ending payroll taxes with ‘no reimbursement’ to the trust funds would permanently defund and undermine Social Security and Medicare,” Richtman said.
He pointed out Social Security’s chief actuary estimates Disability Trust Fund reserves would be permanently depleted in about the middle of 2021 while reserves in the Old Age and Survivors Insurance Trust Fund would be permanently depleted by the middle of 2023.
After that, he stressed Social Security would have no ability to pay earned benefits to eligible retirees, workers with disabilities and survivors.
When the trust funds are depleted, benefits are projected to be cut by about 25 percent.
Richtman pointed out most employers are not participating in the deferral and it does nothing to put money into the pockets of the 30 million Americans who have become unemployed.
There are countless more effective ways the federal government can help families right now than with the tax deferral that can be done without undermining Social Security’s dedicated revenue stream, said Representative Linda Sanchez (D-CA).
“A good place to start would be extending the full $600 federal unemployment benefit and we should give families additional economic impact payments so they can keep their heads above water,” recommended Sanchez.
In stressing the importance of Social Security for her heavily Latino district, she noted 75 percent of Latinx retirees depend on Social Security for the majority of their retirement income.
Two out of every five retirees rely on Social Security as their sole income.
Roughly 48 million people were receiving Social Security retirement and survivor benefits, with 10 million disabled workers and their family members getting disability benefits at the end of last year.
House Democrats have introduced legislation to invalidate the deferral. But if it is passed, it is certain to die in the Mitch McConnell-led Senate without a vote.