President Donald Trump prepares to sign four executive orders during a news conference at the Trump National Golf Club in Bedminster, N.J., on Aug. 8, 2020. Credit: Susan Walsh | AP

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Reducing payroll taxes to put more money into the pockets of working Americans may sound like a good idea, in theory.

In reality, however, it is a horrible proposal because these taxes, split between employers and employees, fund Social Security and Medicare. And, economists have found, reducing or eliminating payroll taxes doesn’t offer much economic stimulus.

Eliminating the taxes, which President Donald Trump has proposed, would deplete the fund that supports Social Security payments by 2023, the Social Security Administration’s chief actuary warned this week.

If there is no more payroll collected and no alternative source of revenue beginning on Jan. 1, 2021, the Office of the Chief Actuary estimates that the Disability Insurance Trust Fund asset reserves “would become permanently depleted in about the middle of calendar year 2021, with no ability to pay DI benefits thereafter,” Chief Actuary Stephen Gross wrote in an Aug. 24 letter responded to a query from four senators. The office estimates that the Old Age and Survivors Insurance Trust Fund reserves “would become permanently depleted by the middle of calendar year 2023, with no ability to pay OASI benefits thereafter.”

Employers withhold 6.2 percent of earnings of American workers and contribute another 6.2 percent of an employee’s wages to fund Social Security.

“Trump’s payroll tax cut plan not only fails to help Americans struggling to get by right now, it would also completely decimate Social Security for the millions of Americans who rely on it,” said Sen. Chris Van Hollen, a Democrat from Maryland and one of the senators who sent the questions to Gross.

Such a proposal has little chance of making it through Congress, but it belies Trump’s promises to protect Social Security.

Trump made such a pledge earlier this year. “We will always protect your Medicare and we will always protect your Social Security. Always,” he said during the State of the Union speech on Feb. 4.

Less than a week later, he unveiled a budget proposal that included cuts to Medicare. The previous year’s budget plan, which was rejected by Congress, included cuts to both Medicare and Social Security and other safety net programs.

After Congress failed to agree on another coronavirus relief bill, Trump unilaterally took action, signing a memo on Aug. 8 directing the federal government to defer payroll tax collections from Sept. 1 through the end of the year. The goal is to stimulate the economy.

There are many unresolved questions about how the deferral will work, especially whether employees will have to repay the money beginning in January. Given this uncertainty, many employers are expected to continue to withhold the taxes.

Trump’s memo does not apply to the 2.9 percent payroll tax that funds Medicare.

Trump has pledged to make permanent cuts to payroll taxes if he is re-elected president.

Beyond the conflicting presidential promises and the confusion his Aug. 8 memo has caused, cutting payroll taxes isn’t a big benefit in terms of jump starting the economy.

Mark Zandi, the chief economist at Moody’s Analytics, ranked payroll taxes in the mid range of economic stimulus options. Every dollar of payroll tax cuts would increase the nation’s gross domestic product by $1.24 a year later, Zandi said in testimony to Senate Finance Committee in April. Continuing enhanced unemployment benefits would generate $1.61, increasing food stamps would generate $1.74.

It is also worth noting that the millions of Americans who are currently unemployed are not paying payroll taxes, so deferring these taxes does nothing to help them.

The long-term financial stability of Social Security and Medicare certainly need to be addressed by Congress. But gutting Social Security by ending the payroll tax is a horrible idea, especially from a president who falsely pledges to protect the social safety net for seniors.

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The BDN Editorial Board

The Bangor Daily News editorial board members are Publisher Richard J. Warren, Editorial Page Editor Susan Young, Assistant Editorial Page Editor Matt Junker and BDN President Todd Benoit. Young has worked...