Business_news Trump pledged to permanently scrap the payroll taxes used to fund Social Security and Medicare if he wins re-election

Business_news

  • President Donald Trump vowed on Saturday to scrap the payroll tax, a funding mechanism for Social Security and Medicare, if he wins re-election.
  • “If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said at a press conference announcing executive actions on coronavirus relief.
  • Experts say the move to cut payroll taxes would further erode the shaky finances of both programs.
  • Visit business Insider’s homepage for more stories.

President Donald Trump pledged on Saturday to scrap the payroll tax, a key mechanism that’s used to fund Social Security and Medicare.

“If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said at a press conference. “I’m going to make them all permanent.”

He later said: “In other words, I’ll extend it beyond the end of the year and terminate the tax. So we’ll see what happens.”

Business_news The payroll tax funds Medicare and Social Security

The federal government imposesa 15.3% levy on wagesknown as the payroll tax. It’s evenly divided between employers and workers, and most of it goes to fund Social Security. It also helps to finance Medicare, the federal health insurance program for people over the age of 65 and for younger Americans with disabilities.

In anApril 2020 Gallup poll, 58% of retirees said they relied on Social Security for a “major source” of their income.

Trump’s unexpected comments on Saturday came as he signed anarray of executive actions aimed at providing reliefto Americans during the pandemic. Among them was adeferral in the collection of payroll taxes, which he is waiving from September through the end of the year for workers earning below $104,000 a year.

But it doesn’t forgive workers’ payments outright since the power to eliminate taxes or change the tax code rests with Congress. As workers and employers are still legally on the hook to make those payments next year,experts say it’s unlikelythat workers will see a bump in their wages anytime soon. Companies are more likely to continue withholding the money from paychecks.

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Plus, lawmakers from both parties roundly rejected including a payroll tax cut in their stimulus proposals. Many economists sayit would not benefitthe 31 million unemployed Americans, either.

Congressional action to eliminate the tax entirely is also improbable, and may instead set off a fraught debate over the federal programs’ fiscal futures.

Business_news Medicare and Social Security’s finances are already shaky

Economists from the left-leaning Center for American Progresswarned on Thursdaythat Trump’s push to enact a payroll tax cut could further erode their shaky finances.

“Trump’s scheme would weaken the Social Security and Medicare trust funds by diverting the revenue from the employee portion of Social Security and Medicare taxes, and potentially the employer’s share of Medicare taxes, from the programs’ trust funds,”a memofrom the organization said.

Around $500 billion in payroll taxes went into the trust funds of both programs from August to December of last year, the Center for American Progress said.

The trust funds for both programs are scheduled to be depleted in this decade.The Bipartisan Policy Center projectsthat if economic damage was similar to the Great Recession a decade ago, the Social Security trust funds could be depleted in 2029. That could prompt a 31% cut in retirement benefits, the organization said.

The Medicare trust fund is in worse shape.Its trustees said the programwould run out of money in 2026 — also without accounting for the pandemic.

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