No, the Payroll Tax Cut Doesn’t Hurt the Trust Fund

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Senator Mark Kirk explains his opposition to extending the payroll tax cut that was originally passed last year:

The White House has redefined this as the payroll tax deduction. It’s not the payroll tax deduction — it’s contributions to Social Security. And when the American people hear that we have legislation moving forward to cut contributions to Social Security and drive the trust fund into the red, I think opposition would be fairly overwhelming.

Everybody gets to put their own spin on things, and this has become a common Republican meme over the past week or two. Unfortunately, it’s just factually false. Normally, a reduction in the payroll tax would indeed reduce contributions to the Social Security trust fund, but last year’s bill specifically made up for this loss from the general fund. The trust fund got every penny it normally would have, and all the proposals on the table this year do the same.

What changes here isn’t the solvency of the trust fund. What changes is where the money comes from. Payroll taxes mainly come from the middle and working classes. The general fund is supported by income taxes, which mainly come from the well-off and the rich. So, generally speaking, a payroll tax cut that’s compensated for by transfers from the general fund reduces the taxes of the middle and working classes and raises the taxes of the well-off and the rich.

If Republicans object to this — and they do — they should say so. But it’s long past time to stop pretending that this has anything to do with the trust fund, and long past time for the media to stop passing along this claim unchallenged.

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