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The Payroll Tax "Holiday" directly links Social Security to the deficit.

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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:44 AM
Original message
The Payroll Tax "Holiday" directly links Social Security to the deficit.
The claims that Social Security does NOT contribute to the deficit are no longer true,
thanks to the Payroll Tax Holiday instituted and lauded by the Democratic Party leadership.
The two are NOW directly linked.

The Payroll Tax Holiday
"The Internal Revenue Service has directed employers to implement the lower 4.2% Social Security tax rate paid by employees no later than January 31, 2011. Additionally, employers are supposed to refund to their employees any excess tax withholding if they were using the old 6.2% rate during January; the IRS has instructed employers to refund the difference no later than March 31, 2011."

http://taxes.about.com/od/payroll/a/Reduced-Social-Secu...


But what happens to the shortfall in collecting funds for Social Security?
"To prevent Social Security from losing tax revenue, Congress mandated that revenues be transferred from the general fund to the Social Security trust funds to make up for the tax reduction."

http://taxes.about.com/od/payroll/a/Reduced-Social-Secu...


BINGO.
The Deficit and Social Security are NOW directly linked!


It would have been much easier and simpler to send everybody a check from the general fund.
There is already a precedent for this. Bush the Lesser did it.
Why go to all the trouble and complexity to cut the Payroll taxes, and then repay Social Security from the General Fund?

What is gained from all that extra complexity?
Social Security is NOW directly linked to The Deficit.

But "The Holiday" is only temporary,
so there is no need to worry.
"President Barack Obama wants to consider extending a payroll tax holiday for employees and initiating a payroll tax cut for employers to accelerate the economic recovery, the White House said Tuesday."

http://blogs.wsj.com/economics/2011/06/14/obama-to-cons... /


Draw your own conclusions,
but THIS scares me.
If somebody can talk me down with Facts & Figures,
I'm willing to listen.


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CleanGreenFuture Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:47 AM
Response to Original message
1. For whatever reason, this country is being rammed into the dirt.
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jtown1123 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:48 AM
Response to Original message
2. That's why I was so pissed in December. They are destroying this program
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myrna minx Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:49 AM
Response to Original message
3. This is exactly why this whole 3 card monty is so worrying - this whole
manufactured "crisis" seems to be the shock doctrine blow to our safety nets. :-(
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CleanGreenFuture Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:51 AM
Response to Reply #3
5. That's exactly what it is and the American people will sleep right through it. As usual.
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HereSince1628 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:50 AM
Response to Original message
4. Weasling around looking for stimulus money
that looks like a tax break...this is akin to eating the seed corn.
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ProSense Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:53 AM
Response to Original message
6. The revenue is being made up, and besides
there is no deficit crisis, right? Also, what if the cap is raised? From 2010:

ROBERT REICH: It looks more and more like we're heading toward a double dip. That's because consumers can't and won't spend enough to get the economy moving. They're still deep in debt, can't use their homes as ATMs and have to save.

Yet Washington is stymied on what to do. Keynesians want more government spending. Supply-siders want more business tax cuts. Deficit hawks say no to both.

But here's an idea that might command everyone's support: Eliminate payroll taxes on the first $20,000 of income. Payroll taxes, you recall, include Social Security, Medicare and unemployment insurance. Make up the revenue loss by applying the payroll tax to incomes above $250,000.

This would immediately stimulate spending by adding to the paychecks of just about every working American. Right now, 80 percent of Americans pay more in payroll taxes than they do in income taxes. And lower-income workers, who would receive the largest proportion of the benefits, are more likely to spend the extra cash than are people with high incomes.

In addition, this idea would make it cheaper for employers to hire, because they wouldn't have to pay their share of the tax. It wouldn't add to the deficit. Revenues would be made up by applying payroll taxes to income exceeding $250,000 -- which is fair. As of now, the Social Security payroll tax doesn't apply to any income over $106,000. Having the tax kick in again at $250,000 draws on the top 3 percent of earners, who now rake in a larger portion of total income than at any time since 1928.

So how to get the economy moving again? Eliminate the payroll tax on the first $20,000 of income and apply it to income over $250,000 for two years.

How to keep the economy moving? Do this permanently.

link

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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:58 AM
Response to Reply #6
9. "The Revenue is being made up"
Do you have anything besides Smoke and Mirrors and spurious Blue Links?

Lets keep it very simple.
Clearly explain HOW the Payroll Tax Holiday does NOT link Social security to the General Fund.
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jtown1123 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:00 AM
Response to Reply #9
10. It is simple. They profoundly changed the funding structure. Now SS has to compete for limited $$
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RaleighNCDUer Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:53 AM
Response to Original message
7. I made that connection, and posted about it, weeks ago.
I was ignored.

Hope you fare better.

K & R
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PoliticAverse Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 10:58 AM
Response to Original message
8. It was already 'directly linked'...
Edited on Thu Jul-21-11 11:00 AM by PoliticAverse
It has always been the case that interest paid to the Social Security trust fund
on securities held by the trust fund comes from the general fund.

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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:06 AM
Response to Reply #8
11. Its ALWAYS been that way....
Thanks, but I'm not really convinced.

Paying interest on a loan is FAR different from taking cash from the General Fund to make up a shortfall in funding for Social Security.
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PoliticAverse Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:12 AM
Response to Reply #11
12. Well it is different, how different is a good question...
Edited on Thu Jul-21-11 11:27 AM by PoliticAverse
Two additional comments on the payroll tax holiday:

1 - Regardless of the source, the Social Security trust fund is still getting paid.

2 - This makes Social Security less of a regressive tax.
General revenue comes primarily from income tax which is progressive compared to
the Social Security payroll tax which is regressive.
Is it better for Social Security to be financed progressively or regressively?
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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:22 AM
Response to Reply #12
15. It is BETTER...
..to have it completely separate from the General Fund.
NOW, when the republicans claim that Social Security is a part of the deficit,
they are telling the truth.
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ljm2002 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:19 AM
Response to Original message
13. Why yes, it does...
...and that is why many of us were against it. It was proposed by Republicans (surprise, surprise), for whom it is a twofer: it lowers taxes and it undermines one of the strongest claims for Social Security, namely, that it has never contributed one thin dime to the deficit.

Thanks Obama, great job there.
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TheKentuckian Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:19 AM
Response to Original message
14. This was obvious and pointed out many times.
The spin patrol defended the indefensible over and over with dreams of extra-dimensional chess and Fantasy Island talk of "fixing it later" via unobtainable solutions that have never been sought and cannot be passed out of running scared from the usual "largest tax increase in history" charges.

The lawmakers and their spinning defenders should be run out on rails for this.
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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:31 AM
Response to Reply #14
16. Yes, it was.
and it is worth repeating,
in the simplest terms possible.

I have seen several posts recently claiming that Social Security and The Deficit are not connected.
Sadly, NOW they are,
and it is the Democratic Party leadership that connected them,
and framed it as a "stimulus" to help Working People,
while they slide the knife into the back of the New deal.

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Ganja Ninja Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 11:37 AM
Response to Original message
17. This is bullshit.
Edited on Thu Jul-21-11 11:40 AM by Ganja Ninja
Social Security has never contributed one dime to the national debt. Just because the government has had to pay out more than they're taking in in payroll taxes for the last 2 years does not mean Social Security is responsible for increasing the debt. Social Security has a trust fund that has been accumulated from past years to fall back on. That's money the government already owed. One third of the national debt is the Social Security trust fund. The government does not have to cover the shortfall out of the general fund. They can pay it out of the trust fund. If the government has to sell some bonds in order to payoff the bonds in the trust fund it's not increasing the debt.
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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 12:50 PM
Response to Reply #17
18. While I appreciate your reply,
you will have to explain it to me in simpler terms.

"To prevent Social Security from losing tax revenue, Congress mandated that revenues be transferred from the general fund to the Social Security trust funds to make up for the tax reduction."

http://taxes.about.com/od/payroll/a/Reduced-Social-Secu...


How does the Payroll Tax Holiday NOT directly connect Social Security to the Deficit,
if, as stated above, "Congress mandated that revenues be transferred from the general fund to the Social Security trust funds to make up for the tax reduction" is a TRUE statement?

I really would like to believe you.
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Ganja Ninja Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-21-11 01:56 PM
Response to Reply #18
19. They're covering the lost revenue or in other words paying back the trust fund.
Social Security would have been short regardless of whether they had the payroll tax reduction or not. Payments out of the trust fund are covered by the bonds in the trust fund. The bonds in the trust fund are covered by the general fund.

The bottom line is the government owes the social security trust fund about one third of the total of the national debt. That's how much they have borrowed from it over the years. In order to pay it back it has to come from the general fund. The Social Security trust fund is linked to the national debt in the same way the bank is linked to my credit card debt.
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Enthusiast Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-22-11 07:17 AM
Response to Original message
20. That is why it was enacted.
That was the motive behind the holiday and extending the Bush tax cuts.
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