There is a debate going on right now regarding whether or not to raise Social Security payroll taxes.
While many have heard that Republicans want to raise Social Security taxes in order to address the budget deficits, President Obama has other plans. In fact, Obama wants to keep taxes lower, leaving more money with American households where people are struggling due to the current economic crisis.
The stimulus plan that originally reduced Social Security taxes from 6.2 percent to 4.2 percent is almost at its end, but Obama feels that the taxes need to remain as they are and that the government should not increase the tax to 6.2 percent for another year. Republicans, however, don’t like the idea and want the Social Security tax rate to return to its prior 6.2 percent status.
While many Americans are struggling due to the current state of the US economy and high unemployment rates, the 2 percent tax cut provides only a small measure of relief. The fact is, many of the families who are in the most desperate need of help are unemployed, retired, or getting disability and generally don’t currently pay taxes at all, so the 2 percent increase wouldn't affect them.
Another thing to consider is that the Social Security programs themselves are currently struggling to remain fiscally solvent, and adding 2 percent to the program from worker's payroll taxes may very well help to alleviate some of the financial burden that the Social Security Administration is experiencing. For working Americans who pay these taxes, the 2 percent increase might not have that much of an impact. On the other hand, it may provide significant revenue for our much-needed Social Security programs.
Over the past few months, there have been a number of stories from various media outlets about how the Social Security program is going broke. We hear rumors that Social Security Disability and Retirement benefits won't be there for people when the time comes to cash in on the programs they've paid into. In light of such alarming news, a 2 percent increase might go a long way toward keeping these vital government programs in place.
If we were to extrapolate the math to the situation of an individual earning $52,000 per year, or $1,000 per week, the 2 percent payroll tax increase would mean a tax increase from $42 to $62 per week towards Social Security taxes. In other words, that person would pay only about $20 per week more than what they are currently paying.
If that $20 a week could do something to offset the current insolvency of the Social Security, it is most definitely worth it. The extra income coming in from payroll taxes across the nation could make the program more solvent, thereby thwarting the decline of the Social Security Administration and the disability and retirement programs that it administers.
Restoring the pre-stimulus payroll tax rate is unlikely to be enough to “fix” Social Security, and the programs will certainly still need to see some serious reforms in the near future. With that said, however, this September’s budget debate isn’t going to bring about any major changes in the way disability benefits are awarded, calculated, or delivered to claimants around the country.