Protect Social Security
To the Journal editor:
Eighty-five years after President Franklin Roosevelt signed the Social Security Act, Social Security remains one of our nation’s most successful, effective and popular programs.
Over 64 million people, one out of every six U.S. residents, collected Social Security benefits this year. Some 97% of the elderly receive Social Security or will receive it.
Employee Social Security taxes are paid in two parts: the Old Age, Survivors and Disability Insurance (“OASDI”) tax and Medicare. OASDI tax funds the Social Security payments you may receive when you retire. In other words, workers earn their Social Security benefits by contributing through deductions from their paychecks.
The OASDI payroll tax is 6.2% of an employee’s annual wages (12.4 percent for the self employed). Employers and employees each pay 6.2 of wages up to the taxable amount of $137,700. Recent reports indicate that Social Security is fully funded through these payments until 2034.
However, on Aug. 8, the OASDI payroll tax was deferred until the end of 2020 for employees making less than about $104,000.
The stated rationale was to allow citizens to have more money available to them during the pandemic, with repayment of the deferred payroll taxes beginning in January. While this may sound nice, this could lead to terminating the payroll tax after the beginning of the new year as some have suggested.
Terminating the OASDI payroll tax would pose a serious threat to both retirees and the budget. Social Security’s payroll tax payments — which total about 4.3 percent of the gross domestic product, or about a quarter of all federal revenues — provide the federal revenue that funds our retirement payments.
Without the payroll tax, funding OASDI payments using federal budget dollars would almost double long-run budget deficits.
This hardly seems sustainable. And moreover, without a dedicated source of funding based earnings, Social Security would no longer be viewed as an earned benefit and would become even more vulnerable to cuts.
Do you care about the Social Security retirement benefit and the people who depend on it? Something to think about!