Posted on 09 September 2011
By Mark Miller
The Congressional Super Committee hasn’t even started cutting Social Security, but advocates are already expressing concern on a different front: the payroll tax cut extension proposed last night by President Obama as part of his jobs plan. Those payroll taxes fund the Social Security program.
The President asked for a $175 billion one-year extension and expansion of the employee payroll tax holiday now in place, halving the tax rate to 3.1 percent in 2012. He also proposed halving employer payroll taxes to 3.1 percent for the first $5 million of payrolls in 2012. The president also wants a complete payroll tax holiday that would apply when companies grew their payrolls by up to $50 million in a year by hiring new workers or raising the salaries of existing workers.
These cuts in the Federal Insurance Contributions Act tax (FICA) may be one of the best available stimulus options in the current political climate, and they will have a positive economic impact. But they raise questions about the long-term viability of Social Security’s revenue source.