Most Americans fear President Trump’s tax break will destroy Social Security
Social Security serves as a vital source of income for millions of older Americans, but the program is in the throes of a financial crisis that could worsen as the coronavirus pandemic continues. The main source of Social Security revenue is payroll taxes – the taxes that workers pay on income up to $ 137,700 (that’s the threshold for 2020, but it changes from year to year).
In the years to come, Social Security is expected to collect far less payroll taxes as baby boomers leave the workforce in droves. And as a double whammy, once baby boomers retire, they are likely to start collecting their own benefits, creating an additional financial burden on Social Security.
Fortunately, the program has trust funds that it can leverage to offset declining payroll tax receipts and keep up with its planned benefits, but once those funds are depleted, benefit cuts will be considered. And it could happen sooner rather than later. Millions of Americans have lost their jobs during the coronavirus pandemic, and as such, Social Security is already considering a glaring shortfall for this year alone.
But that’s not the only thing current and future social security recipients need to worry about. In August, President Trump signed an executive order calling for a four-month delay payroll tax deferral for workers earning up to $ 104,000 per year. From September to December 2020, eligible employees will not have social security charges deducted from their salary.
It is this tax break that worries most Americans. Specifically, 86% of Americans are now worried that this new payroll tax relief will end up hurting Social Security in the long run, according to the September 2020 SimplyWise. Confidence in retirement index. But are they right?
Is social security really doomed?
Social Security is in big trouble, but not necessarily more because of the president’s tax break. The reason? As it stands, this tax break is just a tax deferral to temporarily increase paychecks, and the plan is to have workers refunded those taxes from January 2021. As long as that happens, social security will not be the real loser. over four months of payroll tax revenue – it will only collect that money early next year instead of receiving it now.
That said, President Trump at said that if re-elected in November, he will seek permanent exemption from those four months of payroll taxes, and this could deal a devastating blow to social security. But we don’t know how the next election will play out, and it’s unclear whether Trump will be successful in his efforts to eliminate this payroll requirement altogether. So, for now, the public doesn’t have to assume the worst.
While Social Security is in trouble and cuts in benefits may occur, lawmakers are also invested in preventing this scenario – preventing the millions of older people who currently depend on these benefits from plunging below the threshold. of poverty. At the present time, it is best for American workers to maintain a positive attitude towards Social Security, while doing all they can to saving for retirement regardless so that if the benefits are actually reduced, they are not totally unlucky.