AARP urges Congress not to extend payroll tax break another year

The nation’s largest seniors lobby on Thursday urged Congress and the White House not to extend a temporary payroll tax holiday beyond January.

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Social Security is funded by the payroll tax, and AARP worries that continuing the break to stimulate the economy will do long-term damage to the retirement program.

The 2-percentage-point cut in the employee portion of the payroll tax was instituted for 2011 and extended in a deal with Congress earlier this year.

Even though general treasury funds are used to make the Social Security trust fund whole, AARP worries that by making Social Security dependent on the regular federal budget, it will weaken support for it. 

“Further extension of the payroll tax holiday would undermine confidence in Social Security and put at risk the program’s dedicated funding stream and the hard-earned benefits of millions of Americans and their families,” AARP head A. Barry Rand wrote in a letter to Congress and the White House. 

He noted recent signs of an economic recovery, including a drop in the unemployment rate to 7.8 percent this month. 

“Should a consensus emerge that — despite these indicators — the economy would benefit from continued assistance to workers, we strongly urge that goal be achieved through means other than a reduction in Social Security’s dedicated funding stream, the payroll rate,” he said.

This month, former White House economic adviser Larry Summers urged a continuation of the payroll tax stimulus due to the weak recovery. So far, neither Republicans nor Democrats have come out in favor of an extension; however, President Obama bragged about the payroll tax cuts during the second presidential debate on Tuesday. 

AARP is worried that as Congress convenes to deal with the fiscal cliff in November, cuts to Social Security could be on the table in a long-term deficit deal. It has argued that the program is separate from the budget based on its trust fund source of support — and that argument is undermined by the new reliance on the general treasury caused by the payroll tax holiday. 

Obama raised eyebrows when he said in the first debate, on Oct. 3, that his views on Social Security are similar to those held by GOP competitor Mitt Romney, who has advocated a partially privatized system in the past. Liberals argue that the funding shortfall for Social Security after 2033 can be fully addressed by raising the cap on payroll subject to tax. 

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