Tuesday, February 21, 2012
U.S.: Extension of payroll tax holiday may threaten Social Security Funding
In the LATimes Michael Hiltzick writes that extension of the payroll tax cut will undermine Social Security. Most commentators are quite happy with the extension of the Social Security Tax payroll holiday as well as unemployment insurance plus maintenance of reimbursement levels for Medicare doctors.
Hiltzick worries that each extension makes it less likely that politicians will have the courage to reinstate the statutory 6.2 per cent. This will threaten funding for Social Security.
Hitzick admits that so far the tax holiday has not hurt Social Security's financial resources. One hundred per cent of the cut must be covered by transfers from general revenue. Since 2010 that comes to 130 billion dollars. This new extension will cost about 94 billion.
Hiltzick believes that Social Security is now on the table for cuts and the revenue stream from the payroll tax is in jeopardy. Andrew Biggs a former Social Security official but now at the conservative American Enterprise Institute told the author:"Who is ever going to say, 'Now the economy's so strong that it's the right time to raise taxes'?" Other analysts think that it will be possible for the old rates to return. Given the opposition that Republicans might make against such a tax hike this seems unlikely. For much more see the full article.