Eliminating payroll tax could deplete Social Security by 2023, chief actuary estimates
WASHINGTON - Social Security funds would run out as early as 2023 if President Donald Trump opts to permanently cut payroll taxes and there is no alternative source of revenue, according to an estimate from the chief actuary of the Social Security Administration.
The estimate was done in response to a request by four Democratic senators who asked the agency to conduct an analysis on the numbers after Trump said he would permanently cut payroll taxes if he’s reelected.
Trump previously announced the federal government would defer employee payroll tax collections for the rest of 2020, aimed at boosting an economy rattled by the pandemic and an attempt to bypass Congress after talks on a broader coronavirus relief bill have stalled.
During a news conference earlier this month, Trump said he could eliminate the tax if he is reelected without undercutting the retirement program or greatly adding to the deficit, arguing that economic growth would offset the revenue losses. He added that the reduction would be a “number that’s bigger than any of the numbers we talked about,” and a typical family would get back $5,000 or more.
A 12.4 percent payroll tax split between employers and workers currently funds Social Security, while a 2.9 percent payroll tax finances Medicare. These taxes raised $1.24 trillion last year, according to the Congressional Budget Office.
An analysis by the Associated Press found it “highly unlikely” that economic growth would be enough to offset the loss of the payroll tax.
In a letter sent Monday, Chief Actuary Stephen Goss says the analysis was based on hypothetical legislation that would not take money from the general fund.
Assuming the legislation was passed as of Jan. 1, 2021, the DI Trust Fund that provides monthly benefits to Americans living with disabilities would be “would become permanently depleted in about the middle of calendar year 2021, with no ability to pay DI benefits thereafter,” Goss writes.
The OASI Trust Fund, the fund that supports Social Security, “would become permanently depleted by the middle of calendar year 2023, with no ability to pay OASI benefits thereafter,” Goss added.
The senators who requested the analysis, Sen. Chuck Schumer, D-N.Y., Sen. Bernie Sanders, I-Vt., Sen. Ron Wyden, D-Ore., and Sen. Chris Van Hollen, D-Md., said they would “not be supportive of this hypothetical legislation,” but would like to “be aware of its potential implications.”
RELATED: Coronavirus pandemic puts Social Security at risk of insolvency by 2030
This story was reported from Cincinnati. The Associated Press contributed.