Would Trump's 0% Payroll Tax Crush Social Security?
Social Security provides key financial support for tens of millions of retirees, and the growing wave of Baby Boomers receiving benefits has put a long-anticipated strain on the program. The vast majority of money that funds current Social Security benefit payments comes from the payroll taxes that workers currently pay, but even with that source of revenue, money set aside in Social Security's trust funds will likely run out by the mid-2030s.
Meanwhile, the COVID-19 outbreak has put new stress on the global economy, and President Trump has sought ways to provide fiscal stimulus to keep the economy growing. One proposal Trump has reportedly made involves cutting payroll taxes to 0% for the remainder of the year. Although putting more money in people's paychecks could provide some help, Social Security advocates are worried about the ramifications of diverting money from Social Security.
Social Security relies largely on the revenue it gets from collecting payroll taxes. Currently, workers pay 6.2% of their pay toward Social Security payroll taxes, and their employers pay a matching 6.2% amount. Those who are self-employed end up paying the combined total of 12.4%. The tax gets imposed on a maximum amount of pay each year, with the 2020 limit coming in at $137,700. A typical worker making $40,000 a year would pay $2,480 in Social Security payroll taxes, while high-income employees would top out at the $8,537.40 maximum tax for 2020.
Source Fool.com
