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Would New Plan to Fund Social Security Undermine It Instead?

Over 1 million Hoosiers could be affected by proposed changes to Social Security. (Virginia Carter)
Over 1 million Hoosiers could be affected by proposed changes to Social Security. (Virginia Carter)
April 24, 2017

INDIANAPOLIS – More than 1.3 million Hoosiers receive Social Security benefits, and a proposal to change the way the program is funded is being attacked as a sneaky way of undermining it.

The Trump administration is floating what's been described as a trial balloon to end the separate payroll taxes dedicated to Social Security and replace them with general revenue or a consumption tax, similar to a sales tax.

But Nancy Altman, president of Social Security Works, says those payroll deductions function like insurance premiums – you have to pay in to get benefits.

She says stopping those would be the first step to cutting benefits.

"Undermining the premiums, which are the dedicated revenue, which can only be used for Social Security – the dominant source of funding that's been there since 1935 – it fundamentally alters the program," she states.

Critics charge Social Security is going bankrupt and has to be changed.

The latest federal estimates say the program's trust fund will run out in 2034, but Altman says the program would still pay out nearly 80 percent of current benefits, even with an empty trust fund.

Since Social Security has its own dedicated source of funding, it adds nothing to the deficit. But Altman points out that ending the payroll taxes would make cutting Social Security benefits a way to reduce the deficit at some point in the future.

"So I've actually called it a 'Trojan Horse,' because it looks like a gift, it looks like middle-class tax relief, but really it's undermining middle-class economic security," she states.

During the campaign, President Donald Trump said he wouldn't cut Social Security benefits. But Altman points out that Trump has criticized the program in the past. And she says the payroll tax structure has been a cornerstone of Social Security since it was founded.

"Before he started running, he called Social Security an 'illegal, criminal Ponzi scheme,'” Altman points out. “I think it's like Trumpcare – if there's enough noise, they will see the writing on the wall and drop it."

About two-thirds of American seniors rely on Social Security for most or all of their income. Without it, economists estimate the poverty rate for older Americans could multiply by three or four times.

Veronica Carter, Public News Service - IN