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Trump has deferred about $100 billion in payroll tax payments through the end of the year. The payroll tax currently funds 90% of Social Security. It’s not clear that it will become a permanent cut.
Trump has not offered a clear plan for managing the impact on Social Security’s finances beyond taking money from the general fund.
Trump has told reporters that he wants to terminate the payroll tax if he wins re-election. Administration officials say Trump is referring to forgiving the payroll tax deferral for this year, not getting rid of it entirely in future years.
Joe Biden has a new message in Florida, where one in five residents receives Social Security: President Donald Trump is jeopardizing the retirement benefit with his new move on payroll taxes.
Trump on Aug. 8 directed the Treasury secretary to withhold the payroll tax that funds Social Security for a few months. The measure was one of four meant to help the economy through the pandemic, but it’s close link with Social Security has made this measure a focal point in the presidential race.
What’s more, Trump has gone beyond the temporary deferral of payments outlined in the memo to talk about ending the payroll tax altogether — raising legitimate questions about Social Security’s solvency.
A Biden TV ad running in Florida portrays Trump as a golfer on a mission to hurt Florida’s seniors:
"Donald Trump stepped off the golf course and signed an executive action directing funding cuts for Social Security. He also proposed slashing hundreds of billions of dollars from the Social Security Trust Fund every year, putting your hard-earned benefits in jeopardy. Nearly 4 million Florida seniors rely on Social Security, and once again Donald Trump’s failed leadership is hitting seniors the hardest."
Biden also warned about Trump’s plan in a Tampa Bay Times opinion-editorial, saying Trump "promised to defund Social Security."
But like a claim from running mate Kamala Harris, Biden’s warning goes too far and stretches what Trump said he would do. Trump never said he intended to cut Social Security benefits or "defund" the program.
Trump has said he not only wants to forgive the deferred payroll tax payments, but he has said multiple times that he will try to eliminate the payroll tax altogether in a second term. Even ending just the workers' side of the payroll tax would drop Social Security trust fund revenues by about $450 billion a year.
"Long-term, of course, all of this talk about weakening the role of the payroll tax in funding Social Security does raise questions about whether its financial foundation would be shakier and, thus, benefit cuts more likely," said Alicia Munnell, director of the Center for Retirement Research at Boston College.
Here’s what you need to know to understand the Social Security attacks in Biden’s ad.
This is oversimplified. Trump has not proposed cutting Social Security benefits.
Trump’s memo directed the Treasury secretary to defer the withholding of the payroll tax on wages paid between Sept. 1 and Dec. 31. Each paycheck, employees see 6.2% of their wages go to Washington to help fund Social Security while employers pay the same amount.
That means someone making the median weekly wage of about $1,000 would see an extra $62 in their paycheck. Trump’s memo applies to people making up to $2,000 per week, so people who earn $104,000 a year or higher wouldn’t get the tax break.
It is not clear how many employers will choose to defer withholding of taxes, but the nonpartisan Committee for a Responsible Federal Budget estimated that up to $100 billion in payroll taxes will be deferred during the last four months of the year.
Biden’s ad calls this delay a "cut," but the group’s analysis doesn’t use that word.
"The $100 billion is a deferral," said Marc Goldwein, a senior vice president of the group. "If it is all paid back by the end of the year as intended, there is no deficit impact."
Left uncertain is how the federal government handles that deferral in the future.
Trump said he doesn’t want workers to pay it back. His memo tells the Treasury secretary to "explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred."
If the money isn’t paid back, the money either comes out of Social Security’s trust funds, or general revenues.
Treasury Secretary Steve Mnuchin told Fox News Sunday that the money would be made up with dollars from the general fund. The administration can’t promise that on its own; Congress would have to pass a bill.
This part of Biden’s ad deals with Trump musing about ending the payroll tax entirely if he wins another term in office — a stance routinely contradicted by White House officials.
At an Aug. 8 press briefing, Trump said: "If I’m victorious on Nov. 3, I plan to forgive these taxes and make permanent cuts to the payroll tax. So I’m going to make them all permanent. …. But if I win, I may extend and terminate. In other words, I’ll extend it beyond the end of the year and terminate the tax."
Asked if he really meant he wanted to end the tax, White House economic adviser Larry Kudlow said on CNN’s State of the Union, "I believe he was referring to doing away with the payback of the deferral."
But Trump brought up ending it again at an Aug. 10 briefing: "I signed directives to give a payroll tax holiday, with the understanding that after the election — on the assumption that it would be victorious for an administration that’s done a great job — we will be ending that tax. We’ll be terminating that tax."
At that point, the Biden campaign started running this ad in Florida. Biden’s ad extrapolates the potential $100 billion cost of deferring payroll taxes for the rest of 2020 and assumes that if Trump delivers on his statements to reporters, that will add up to "hundreds of billions of dollars."
But Trump says his actions on the payroll tax — which remain malleable — won’t hurt the retirement program.
"When I win the election, I’m going to completely and totally forgive all deferred payroll taxes without in any way, shape, or form hurting Social Security," Trump said Aug. 12. "That money is going to come from the General Fund."
But Trump went on and said, "We’ll be terminating the payroll tax after I, hopefully, get elected. We’ll be terminating the payroll tax, so that will mean anywhere from $5,000 to even more per family."
The only way to get to $5,000 is by eliminating the tax completely.
The next day, White House spokeswoman Kayleigh McEnany said, "What he was meaning yesterday is that he wants permanent forgiveness of the deferral."
Trump can say that using general revenues to pay Social Security benefits is his goal, but funding is up to Congress. Last year, the full payroll tax put $944 billion into the program. If not funded through borrowing, replacing those dollars would eliminate all non-defense discretionary spending, including money for veterans, highways and more.
Joe Biden, Campaign ad in Florida about Social Security, Aug. 11, 2020
Social Security, Beneficiaries by state and county, 2019
Social Security, What are trust funds? Accessed Aug. 11, 2020
White House, Remarks by President Trump in Press Briefing, Aug. 8, 2020
White House, Remarks by President Trump in Press Briefing, Aug. 10, 2020
Congressional Research Service, Social Security: What Would Happen If the Trust Funds Ran Out? July 29, 2020
Washington Post, Trump promises permanent cut to payroll tax funding Social Security and Medicare if he’s reelected, Aug. 8, 2020
CNN State of the Union, Transcript, Aug. 9, 2020
Congressional Research Service, Payroll Tax Cuts as Economic Stimulus: Past Experience and Economic Considerations, Aug. 23, 2019
Committee for a Responsible Federal Budget, How Much Would President Trump's Executive Orders Cost? Aug. 8, 2020
Social Security Administration, 2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, April 22, 2020
Tampa Bay Times, Trump’s ‘deal’ hurts Floridians and Social Security | Joe Biden, Aug. 11, 2020
PolitiFact, Donald Trump’s payroll tax holiday: What you need to know, Aug. 10, 2020
PolitiFact, Kamala Harris’ flawed Social Security, Medicare attack on Donald Trump, Aug. 13, 2020
Email interview, Mike Gwin, Biden campaign spokesman, Aug. 11, 2020
Email interview, Eugene Steuerle, economist and cofounder, Urban-Brookings Tax Policy Center., Aug. 12, 2020
Email interview, Alicia Munnell, professor of management Sciences at Boston College’s Carroll School of Management and director of the Center for Retirement Research at Boston College, Aug 12, 2020
Email interview, Marc Goldwein, Senior Vice President and Senior Policy Director for the Committee for a Responsible Federal Budget, Aug. 14, 2020
Email interview, Zach Parkinson, President Donald Trump campaign spokesperson, Aug. 14, 2020
Email interview, Kayleigh McEnany, President Donald Trump spokesperson, Aug. 14, 2020