As the country navigates the economic fallout from the pandemic, one of the biggest issues is how the federal government is going to continue the solvency of key support programs, like Social Security, while easing the cost of everyday life for Americans.
In recent days, the White House has discussed a potentially permanent cut of the payroll tax, which besides being unprecedented, would lead to significant funding challenges for programs government-wide.
How the Payroll Tax Funds Social Security
According to the Social Security Administration (SSA), employers and employees each pay 6/2% up to the taxable maximum of $137,700 (for tax year 2020) and the self-employed pay 12.4%. 89% of funding for Survivors Insurance and Disability Insurance came from payroll taxes – a staggering amount that makes this issue all the more pertinent.
What SSA’s Chief Actuary Has to Say
In the NBC News story, SSA Chief Actuary Stephen Goss is quoted as estimating that in the event of a payroll tax termination by Jan. 1, 2021 (which Congress would ultimately have to approve), the benefits fund would run out by the middle of the calendar year in 2023.
A solution led by President Trump suggests diverting money from the Treasury’s General Fund to pay for that tax revenue elimination. The SSA was not asked to consider this alternative in their analysis, but it’s almost certain that the amount of money required to keep Social Security afloat would divert much-needed funding from other critical federal resources.
What This All Means
Social Security was already under intense financial pressure before the pandemic, and now, the situation is hitting a tipping point. Almost surely, it’s going to get harder for those who may have had initial claims rejected or disputed to get their hard-earned benefits, or the government could raise taxes on certain employees or companies to help make up the difference. There’s much to be determined in the months ahead.
This is why it’s important to have a knowledgeable Social Security claims attorney on your side. The team at Schott Law works hard to stay up to date on the latest developments to advise our clients in Eastern Washington and Idaho. Call us today at (509) 328-5789 to learn more and schedule a free consultation.
