22 August 2019


A few days ago the New York Times reported here that President Trump is considering tax cuts to spur the economy. It seems unlike that further reductions in the marginal income rates or even cuts to taxes on capital gains would make much difference to an economy that's chugging along rather well. Cuts to the so-called "payroll tax" were reported to be on the table  Another report here says they're not being considered. Only time (and Twitter) will tell.

"Payroll taxes" are a euphemism (or better, Orwellian doublespeak) for worker contributions to Social Security. The most recent occasion for cutting what is needed to keep Social Security afloat was by President Obama in the early years of this decade. I wonder what our current president had to say about that move?

In any event, you can read what I said about it here. I fully stand by what I wrote then:
The Internet and the chattering political class are all in an uproar about yesterday's agreement by the House Republican caucus to a two-month extension of reduction in what the media persists in euphemistically calling the "payroll tax." Here's today's New York Times report. Perhaps only once have I heard any news report on television or radio tell the audience what this tax funds: Social Security (and Medicare).
Republicans have been spewing venom since the election of President Obama about the $14 trillion U.S. deficit. That's chump change. The unfunded benefits of Social Security are projected to exceed $50 trillion. The federal government is already borrowing money to pay benefits (read a good account here). And we're cutting the tax that is already not high enough to cover the costs? I understand why politicians don't want the sheep-like American electorate to understand the "payroll tax" shell game but what explains the media's silence?
The so-called Social Security trust fund (my previous comments about the "no-trust fund" here and here) will expend its surplus (currently invested in US Treasury obligations) around 2036. There's a good chance I'll still be collecting and I would prefer that my benefits not be cut by, say, 25%.

One way to help insure that I'll take the hit, however, is to reduce contributions. One more thing: any assertion that cutting contributions will be offset by greater income on which the taxes are assessed is a pipe dream. There's not much room for income growth in an economy where only 4.1% are unemployed and wages have been stagnant for years.

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