Dear Rusty: I will be retiring early next year but my question to you is: During the Obama administration, payroll taxes that employees pay were cut in half from 6.2% to 3.1%, while the employer’s part stayed the same at 6.2%. This continued for around a year I think. This was an attempt at giving people a tax cut, which I think was a bad idea or maybe the wrong way to have done it. How much damage do you think this may have caused to Social Security? Signed: Soon to RetireÂ
Dear Soon to Retire: FYI, the Obama-era cut in the employee portion of FICA payroll taxes and SECA (self-employment tax) was a temporary measure, which has long since expired. However, the legislation which enabled that cut in employee FICA/SECA taxes also included a provision to replenish the Social Security Trust Funds from the General US Treasury in an amount equal to the estimated loss of tax revenue to the Trust Funds. So, in effect, there was little or no impact on the Social Security Trust Funds.
FYI, the Trustees of Social Security have been projecting for many years that the Social Security reserves would be fully depleted in the mid-2030s, unless Congress takes action to reform the SS program. Unfortunately, Congress has not yet taken any meaningful action to accomplish that reform, and the current projection from the Trustees is that all Social Security reserves will be depleted in about 2033, necessitating an across the board cut of about 21% in everyone’s benefit. Time is running short, and we see signs that Congress is finally starting to seriously discuss Social Security reform.
At AMAC, we have developed and submitted to various Congressional Representatives a reform plan which would restore Social Security to full solvency. You can see AMAC’s suggested plan at www.amac.us/social-security-guarantee. And AMAC is working every day in Washington, D.C. to promote Social Security reform to avoid future cuts in benefits. We believe and hope that Congress will eventually reform the Social Security program to avoid future benefit cuts but, unfortunately, not until they can muster sufficient bipartisanship to make the hard choices needed. To this end, contacting your Congressional Representative to demand Social Security reform now would be a good thing to do. The longer Congress delays reform, the harder the choices will be.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-dvisory) or email us at [email protected].
Have a Social Security question for Rusty?
A much more damaging event to the Social Security trust fund happened in the waning days of the Biden administration when full benefits were granted to government employees who had managed to shelter much of their income from social security taxes. This largess by the Congress came at the expense of those whose income was fully taxed.