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Trump’s Payroll Tax Scam

March 13, 2020

Payroll tax tweet

Trump is doubling down on eliminating the payroll tax (which funds Social Security) this year. Or maybe longer, as he has hinted.

This is a stupid idea for several reasons and is actually a stealth attack on Social Security, the crippling of which has been a conservative Republican goal for decades.

First, the payroll tax is collected only if you are earning wages. If you can’t work and aren’t getting paid, then you won’t be paying the tax anyway. Therefore it is of NO help to people who lose their pay because of the virus.

It would also eliminate employer’s share of the payroll tax, which is roughly equal to the employee’s share. Trump’s proposal would eliminate the tax on all workers, not just those who have lost their income (who, as previously noted, wouldn’t be paying it anyway.) Therefore, it would be a huge windfall for corporations, but would do little or nothing for workers directly affected by the virus. But it might–temporarily–stem the fall of the stock market, which until now has been Trump’s biggest boast.

The only rational argument for this measure is that it would be a stimulus to the economy, but it is an extremely blunt and untargeted instrument for that. There are many other ways to do this, if it becomes necessary, without the collateral damage to Social Security.

This isn’t the first time that Trump has floated this idea. He proposed it in 2017 as part of his tax “reform”–the one that has already swelled the deficit by more than $1 trillion. It was a bad idea then, and thankfully went nowhere.

Trumpsters are trying their usual “Obama-did-it” argument, and as usual it’s not exactly true. In 2010, in the midst of the Great Recession and still very high unemployment, Obama made a deal with Congress to cut the employee portion of the tax from 6.2% to 4.2% temporarily. The employer contribution was unchanged. The amount of the reduction was reimbursed to Social Security from general revenue, and the full tax was restored two years later. The deal was heavily criticized at the time as it set a precedent for fooling with Social Security funding to deal with a general economic crisis, but the Obama administration accepted this as a Faustian bargain in order to get a larger stimulus for the ailing economy.  That is not what we are facing now, and what Trump proposes is to eliminate the tax–and thereby its revenue stream for Social Security–entirely.

Conservatives have been trying to kill Social Security for decades. They know it’s an extremely popular program, so they can’t attack it directly. Their strategy has been to hack away at it piecemeal, most importantly by undermining its financial basis and thereby creating doubts in the minds of younger Americans who are still working that they will ever get benefits when they retire. One way to do this is to eliminate the dedicated revenue stream provided by the payroll tax to Social Security, which then would have to be funded from general tax revenue, which is much easier to manipulate politically. 

That’s exactly what this is–a sneak attack to eliminate up to $1 trillion in Social Security funding, which will then be used as an argument for cutting benefits.

Call your congressman and senator and tell them that you don’t like this!

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