Biden Attacks Trump's Attempt To Defer F.I.C.A.

      From the Tampa Bay Times:

Democratic presidential candidate Joe Biden has a new message for Florida seniors: President Donald Trump’s latest attempt to fix the economic crisis could put their retirement at risk.

In a new ad that will air exclusively in the Sunshine State, Biden’s campaign accuses Trump of stealing from Social Security to pay for a new round of coronavirus relief. ...

The Biden ad equated Trump’s proposal [to defer F.I.C.A. for three months] to “slashing hundreds of billions of dollars from the Social Security trust fund every year.” ...

What Would You Prefer?

      The President announced that he would defer collection of the F.I.C.A. tax that supports Social Security between September and December of this year.  Note that the President only announced that the tax would be deferred. It would all still be due in January. It is not within a President’s power to cancel it. In fact, it’s not really within his power to defer it. 

     The employee’s part of that tax is 7.65% of gross payroll. If the President’s plan goes forward, employees will find themselves owing 30.6% of their gross paycheck in payroll taxes in January in addition to income tax withholding.

     So, let me ask you. Would you rather pay your F.I.C.A. month by month or would you rather have no F.I.C.A. tax for three months followed by a large balloon payment that eats up a huge portion of your salary, after the election, in January?

     And it's not just employees who may find this tax deferral of questionable utility. The vice president for government affairs of ADP says that deferring the F.I.C.A. tax requires "a little bit of a leap of faith on an employer’s part." You may well ask who is ADP? It's a corporation. They process payroll for 40 million workers and 800,000 businesses. If ADP doesn't defer F.I.C.A., there probably will be little deferring of F.I.C.A.

Trump’s Most Dramatic Attempt To Undermine Social Security

      From the Washington Post:

Another document signed by Trump on Saturday attempts to defer payroll tax payments from September through December for people who earn less than $100,000. The impact of this measure could depend on whether companies decide to comply, as they could be responsible for withdrawing large amounts of money from their employees’ paychecks in a few months when the taxes are due.

     Are we in a situation now where Republicans, no longer content with trying to undermine Social Security in subtle ways, decide to really own the libs by completely destroying the program’s finances? If Trump gains re-election does he dispense with ordinary American governance and rule by fiat?

White House F.I.C.A. Insanity

     The President has been proposing that one aspect of a pandemic response be for the government to stop collecting the F.I.C.A. tax that supports Social Security. This proposal has received almost no support even from Republican legislators. Despite the requirement of the Constitution that the President "take care that the Laws be faithfully executed "the President's Chief of Staff is proposing that the President issue an executive order waiving the F.I.C.A. tax! Predictably, the Chairman of the House Ways and Means Committee and the Ranking Member of the Senate Finance Committee have slammed the idea. However, the biggest reason that the idea of the President issuing an executive order waiving collection of the F.I.C.A. tax won't fly is that regardless of an executive order it would be crazy for any employer to not pay the F.I.C.A. tax. Any such action will be vigorously contested and would not stand. Employers would be reminded of the consequences of failing to pay the F.I.C.A. tax. There's a 100% tax penalty and that penalty is levied not just against a corporation but personally against the corporate officers. If you're an employer, you never, ever fail to pay the F.I.C.A. tax. Even if your finances are so bad that you're having trouble making payroll, you still pay the F.I.C.A. tax. Shut down the business and stiff the employees their last paycheck if you have to but never fail to pay F.I.C.A.!

     And, no, my Republican friends, this isn't just like D.A.C.A. Everyone concedes that the President has discretion in criminal prosecutions. No one in their right mind thinks the President has discretion to stop collecting a tax.

Effect Of Eliminating The F.I.C.A. Wage Base Cap

     If you've been looking for an actuarial study of the effect of eliminating the cap on wages covered by the F.I.C.A. tax and allowing those extra wages to be considered in determining Social Security benefit payments, Social Security's Chief Actuary has you what you need. See the table below but note that the proposal would also change Social Security's COLA to the CPI-E index. The "E" is for elderly. That change would increase the COLA. Eliminate consideration of the additional wage base in benefit computations and stick with the current COLA and the Trust Fund reserves stay in balance almost as far as can be computed.

White House Proposes Extending Payroll Tax Cut

     From TPM (emphasis added):

In a Capitol meeting with House Speaker John Boehner Thursday, Treasury Secretary Timothy Geithner submitted the Obama administration’s proposal for addressing medium term deficits, and avoiding across the board tax increases and spending cuts at the end of the year.

Republicans called the proposal outlandish and brushed it aside as unserious. But it’s almost entirely comprised of policies Obama campaigned on and included in his budget for the current fiscal year....

The administration asked Republicans to boost the economy, too, by either extending the payroll tax cut, or replace the holiday with a similar stimulus, such as the Making Work Pay tax credit in the Recovery Act. 

Doing Away With F.I.C.A. Isn't Liberal

      Froma Harrop isn't buying Russ Douthat's argument that we should do away with the F.I.C.A. tax and means test Social Security:

Conservatives never much liked Social Security. It's a wildly popular government program that's totally solvent until 2033. It will be easily fixable and by then may not need fixing at all. Doesn't quite fit with the government-can't-do-anything-right talking point. ...

They already tried Plan A during the George W. Bush years. Recall efforts to privatize the program -- that is, let workers put their Social Security payroll tax money into private investment plans. Recall how the boosters tried to sell stocks as a no-lose investment.

The beauty of Plan A was that Wall Street would get its cut, and eventually, the federal government would no longer be obligated to cut Social Security checks. But the public was so protective of traditional Social Security that Plan A crashed even before the stock market did.

Plan B starts with means-testing. It is a clever approach because it expropriates liberal rhetoric about the rich helping the poor. Means-testing would reduce the benefits of the well-to-do while keeping (or raising) them for others. This is an excellent way to destroy the loyalty to the program among our more powerful citizens. The deal could include making permanent the Social Security payroll tax holiday scheduled to expire on Jan. 1 -- in the interests of progressive taxation, of course.

Another counter-idea: The payroll tax holiday was always a bad concept from a true liberal perspective. (President Obama backed it as a stimulus measure.) It's bad because Social Security is an earned benefit. You can't easily take away something people know they've paid for.

So here's the work-around: It makes no sense, writes conservative Ross Douthat, "to finance our retirement system with a tax that ... imposes particular burdens on small business and the working class."

How liberal sounding. How sneaky. Start paying for Social Security out of general revenues and reduce benefits for the wealthy, and what do you have? You have welfare. You know what happens to welfare. ...

By the way, we already have a system for means-testing. It's called the progressive income tax. If conservatives think rich people should pay more, they can simply let marginal tax rates (and the capital gains tax rate) rise. Complicating Social Security with more means-testing and ending the tax dedicated to keeping it afloat would kill the program -- with a smile.

On to Plan C.