A secure Social Security system down the line or hundreds of dollars in savings per family right now – that is the dilemma that lawmakers and President Obama faced as they debated whether to extend the payroll tax cut that had temporarily been in place for 2011. The 2011 cut was meant to be a form of economic stimulus, as it trimmed two percent from the taxes that workers pay into Social Security. The problem is that this takes money away from Social Security, which, for most of its history, has remained self-funded. Only in 2010 did Social Security begin paying out more than it is taking in, and fears are mounting amidst estimates that both retirement and disability benefits may run out of money in the next two to three decades.
After temporarily extending the payroll tax cut through the end of February, Congress recently decided to make the cut effective for all of 2012. Naturally, the amount of the tax cut varies with how much you make – for example, $20,000 in annual earnings merits $400 in tax savings, and $50,000 in earnings merits $1,000. How have these savings benefited you and your family for 2011 and 2012?
The opposing concern is that the savings come at the expense of Social Security’s viability in the future. The Social Security Administration promised that the payroll tax cuts would have no effect on workers’ benefits in the future. This is true in theory, as the law requires that all of the cut be made up for from somewhere else, but that somewhere else is the Treasury Department’s general funds. Those funds are for programs that Congress often cuts when tax revenue is lean. So, for the first time in its history, Social Security during 2011 and this year gets its money from elsewhere besides itself.
How have you used the extra money from the payroll tax cuts? Would you prefer to have that money go towards Social Security’s funding?
Troutman & Troutman, P.C. – Tulsa Social Security disability attorneys