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Home Publications Blogs Beat the Press The Payroll Tax Cut Did Not Cost Security Revenue

The Payroll Tax Cut Did Not Cost Security Revenue

Thursday, 08 September 2011 17:26
The NYT wrongly told readers that the payroll tax cut cost Social Security, "resulted in $67.2 billion of lost revenue for Social Security in 2011." This is not true. The tax cut was fully offset by money from general revenue so that the trust fund was unaffected by the tax cut.
Comments (6)Add Comment
written by urban legend, September 09, 2011 1:07
But the character of Social Security -- as a self-contained program with dedicated funding -- may have been changed. We will have to see whether that has negative consequences or not, but it is going to be hard to go back to full payroll taxes. Part of the funding will now be subject to politicization over deficits and choices for government general fund spending.
written by Ron Alley, September 09, 2011 7:51
Well, now we have the leading Republican presidential candidate calling Social Security a Ponzi scheme and the President we elected calling upon Congress to cut payroll taxes, appropriate money to that Ponzi scheme and cut "entitlements".

Do you think we failed to elect a Democrat?
Does Payroll Tax Cut Diminish Soc. Sec. Trust Fund?
written by Stuart Levine, September 09, 2011 11:31
Dean--You are correct as to the previous payroll tax cut. Last night, on Olbermann's show, I heard Sen. Sanders complain that the new payroll tax would diminish the trust fund. I simply assumed that Sanders was incorrect. When checking out the White House explanation of the proposed bill, it stated that the tax cut with respect to the employee portion of FICA would not "negatively impact[] the Social Security Trust Fund." I take that to mean that revenues lost would be replaced by revenues from the general fund, as has been the case heretofore.

However, no similar statement was made with respect to proposed cuts to the employer share of FICA. Was this merely an oversight or will the cuts to the employer share reduce revenue to the trust fund? See here: http://1.usa.gov/pEOwsU
written by ellis, September 09, 2011 12:23
What about this year's payroll tax cut. Was it completely offset by money from general revenue? Where is this explained?
Offset Issue
written by Stuart Levine, September 09, 2011 2:59
To "ellis," see here at footnote 14: http://bit.ly/pvwtp7
Americans with incomes under $40K should be exempted from FICA.
written by Tyler Healey, September 09, 2011 3:34
"Social Security and Medicare are government programs; they cannot go bankrupt, and they cannot fail to meet their obligations unless Congress decides--say on the recommendation of the Simpson-Bowles Commission--to cut the benefits they provide. The exercise of linking future benefits and projected payroll tax revenues is an accounting farce, done for political reasons. That farce was started by FDR as a way of protecting Social Security from cuts."

- James Galbraith

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.