Townhall - Extending the payroll tax cut -- as the GOP leadership has now agreed with Democrats to do -- may be good politics, but it is lousy policy.
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| Linda Chavez |
For the average household with earnings of $49,445 a year (about the median), keeping individual payroll taxes at 4.2 percent as opposed to 6.2 percent will mean about a thousand dollars more in their wallets this year. And generally speaking, letting people keep more of their own money to spend and invest as they choose is a good thing, both for individuals and the economy as a whole.
But there is a difference when it comes to payroll taxes, whose specific purpose is to fund Social Security. Many people mistakenly believe that the payroll taxes they pay when they're working actually provide the funds for their own future Social Security benefits. But that is not the case.Payroll taxes of currently employed workers end up paying for the benefits of current Social Security recipients, with any excess retained by the Social Security Trust Fund. But because, on average, Social Security recipients receive more in benefits over their lifetimes than they and their employers contributed in taxes during their working years, the system functions only because there are enough current workers making additional payments into the fund. This is why some people describe Social Security as a giant pyramid scheme. Read full column here: News New Mexico
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