A few days ago President Trump held a rambling press conference in which he promised to do something about Social Security taxes. He’s already signed an executive action that (if it passes muster in the courts) would defer all payroll taxes through December but then require them to be paid back in a lump sum in January. So one thing he wants to do is forgive the repayment. But then there was more. Trump started to blather about “extending” the payroll tax deferral. Finally, apparently unable to stop himself, he went further and promised to permanently reduce or even terminate the payroll tax. Later in the day, his campaign made that promise explicit:
— Team Trump (Text TRUMP to 88022) (@TeamTrump) August 8, 2020
As with most things, your best bet in this case is to ignore everything Trump says. It’s just meaningless chatter that even Trump himself probably doesn’t understand. But guess what? In this case, he’s accidentally stumbled onto a great idea.
You see, we should terminate the payroll tax. It’s regressive, it’s pointless, and it long ago stopped serving its original purpose. We should get rid of it and simply fund Social Security out of general tax revenues, just like everything else. Why should it have a less reliable funding source than the Pentagon, after all?
So that’s that. Get rid of the payroll tax and increase the personal and corporate income taxes to make up the revenue. At the same time, we can make a bonfire out of the bonds in the Social Security trust fund, televised on national TV for everyone to see. There would be no more ridiculous talk about Social Security “going bankrupt” or endless arguments about whether the trust fund is “real” or “fully funded over the 75-year window.” When it’s all over, we’d pay for Social Security (and Medicare) the same way everything else is paid for: through general purpose taxes. This would save Social Security and Medicare and ensure their full funding forever.
It’s too bad this was just Trump blather. If he were serious about it, it would have been a great idea.