Trump says he wants to end the payroll tax

That could affect your retirement plans as soon as 2023, feds say

Eliminating the payroll tax — as President Donald Trump has said he wants to do — would have detrimental effects on Social Security, the agency’s chief actuary said last week.

The president said during a news conference earlier this month that if he wins re-election he will “terminate” the payroll tax. But doing so would require Congress to pass legislation, and NBC News reports that its current composition makes that unlikely because there’s not enough support.

Following Trump’s comments, four senators sent a letter to the Social Security Administration’s Chief Actuary Stephen Goss asking hypothetically what the impacts would be of such legislation.

An analysis found Social Security would be permanently depleted as soon as 2023 if the payroll tax were eliminated “with no alternative source of revenue,” Goss said in a letter released last week.

“We estimate that DI Trust Fund asset reserves would become permanently depleted in about the middle of calendar year 2021, with no ability to pay DI benefits thereafter. We estimate that OASI Trust Fund reserves would become permanently depleted by the middle of calendar year 2023, with no ability to pay OASI benefits thereafter,” Goss wrote in the letter.

“DI” refers to Social Security’s Disability Insurance and “OASI” is Social Security’s Old Age and Survivors Insurance.

The analysis also found that under such legislation “benefit obligations” couldn’t be met after the payroll tax was eliminated and assets were depleted.

“While benefits scheduled in the law for OASI and DI are obligations, such obligations can only be met to the extent that asset reserves are available in the OASI and DI Trust

Funds,” it says. “The law does not provide authority for the trust funds to borrow in order to pay benefits beyond the limited authority for ‘advance tax transfers.’ This limited authority allows all payroll tax income expected for a month to be advanced to the beginning of that month if needed to meet benefit obligations on a timely basis.”

Payroll taxes are withheld from salaries by employers and paid to the government to be used for specific programs. At the federal level, they cover Social Security and Medicare.

The president said during a news conference that he would use the general fund to pay for Social Security if he eliminated the payroll tax. But that would require action from Congress, which NBC reports is also unlikely.

The analysis from Goss does not include that scenario.

Trump previously issued an executive order directing the Treasury Department to defer the collection of payroll taxes between Sept. 1 and Dec. 31. The CARES Act also allowed businesses to defer payment of payroll taxes. But it wasn’t a cut — the taxes would still be paid back over two years.