To the Editor:
Whenever Congress mentions lowering Social Security benefits, we are urged to call Congress and tell them to leave Social Security alone. For decades we have heard Social Security was “going broke.”
The Social Security system, from its beginning, was based on equal contributions by employers and employees, most recently at 6.2 percent of wages. If these contributions were smaller, wouldn’t Social Security be bankrupt sooner?
The December 2010 tax changes and this year’s “American Jobs Act” do just that. To offset the small 2011 increase in workers’ income tax withholding, Social Security withholding was adjusted all year and “for only one year” from 6.2 percent to 4.2 percent.
The American Jobs Act would extend that decrease and make deeper cuts in contributions by both employers and employees. Using the phrase “payroll tax” instead of FICA or “Social Security withholding” is misleading.
In his weekly column for Twin City TIMES dated October 20, Lewiston Mayor Larry Gilbert complained that Senate Republicans had killed President Obama’s “American Jobs Act.” Mayor Gilbert quoted some major provisions of the American Jobs Act as highlighted by the United States Conference of Mayors, certainly a reliable source.
One paragraph states: “$70 billion would be available in tax cuts for small businesses that hire new workers and expand operations. The proposal calls for a 50 percent reduction on the small business employer’s share of the payroll tax, which is 6.2 percent of payroll on the first $5 million in wages. And it would temporarily eliminate the payroll tax for wages for new hires or for growth in payroll for existing workers up to $50 million.”
A later paragraph notes: “$175 billion would be available in tax cuts for 160 million workers. The employee’s share of the payroll tax, 6.2 percent, would be reduced by 50 percent. Last year the payroll tax for workers was reduced from 6.2 percent to 4.2 percent. This proposal would further reduce the payroll tax for workers to 3.1 percent, which will provide a tax cut of $1,500 to the typical family earning $50,000. This will increase the buying power of 160 million workers next year and serve as a significant stimulus to local economies.”
Why isn’t anyone saying that the “payroll tax” which would be reduced as an immediate stimulus to the economy is actually the Social Security tax? Decreasing those contributions means less money for paying benefits. Do we really want to bankrupt Social Security so quickly?