BURLINGTON, Vt. (WCAX) President Trump says he's no longer considering a payroll tax cut that would give American workers more money but would take from Social Security.
Payroll taxes are taken out of each one of your paychecks and given to Social Security, Medicare and unemployment insurance. Your Social Security tax is 12.4 percent with half of that coming out of your paycheck and the other being funded by your employer.
Local economist Art Woolf explained that if implemented, a payroll tax cut would give each American employee about $50 extra each paycheck. That means the retirement system isn’t getting as many funds and it will run out sooner than 2034, which is when it’s expected to be depleted.
“So instead of running out in 2034, if this thing passed, depending on how long it was put in place, it would run out of money in 2033 or 2032 or something sooner,” Woolf told WCAX News. “Vermonters pay a lot in Social Security taxes. If you include the amount that employers pay, it's about $2.8 billion a year. So it's a large chunk of money if you reduce the payroll tax rate by 1 percent. It's not 1 percent of $2.8 billion, it's one percent of the 6 or 7 percent that you pay right now. So it would be a significant addition to people’s paychecks. They’d notice it.”
Although the thought of shoppers having more money to spend, to some people who work on Church Street, it's not worth it.
“It just doesn't seem really helpful,” said Justice Wheaton. “It definitely would concern me knowing that part of the population is almost being taken advantage of to a point just so people can bring home 20 bucks.”
WCAX also asked Rep. Peter Welch, D-Vermont, for his opinion on the payroll tax.
“It really jeopardizes the solvency of our Social Security and Medicare programs, so a payroll tax cut is a serious, serious question with real implications,” he said.
President Trump said he changed his mind on the payroll tax cut because the economy is strong and the U.S. doesn’t need it. Woolf backed up what President Trump said. According to Woolf, the U.S. economy is slowing down a bit but labor numbers are good, unemployment is low, and we are still generating jobs. He says the economy has been expanding since 2009, and that’s the longest expansion the country has ever had. Woolf says payroll tax cuts are typically enacted when the economy is not doing well. He says he was confused when President Trump said he was considering it.
“It’s a very interesting time to be talking about it. As I said, people that talked about it talked about it when the economy was in its worst recession in the last 60 years or 70 years,” Woolf said. “Now the economy is growing. There are some fears that a recession might be coming in a couple of years but that’s pretty skimpy evidence.”
The last payroll tax cut was in 2011 under the Obama Administration. The tax was cut by 2 percent.
If President Trump were to change his mind again and decide to implement the tax cut, Woolf says the proposal would have to go through Congress.