MINOT, N.D. — President Donald Trump wants to “terminate the payroll tax” permanently.
This is not a sane proposal.
Our federal tax code is byzantine, and I don't blame you if you're not exactly certain what the term "payroll tax" means for you.
If you get a paycheck, you and your employer are each paying 6.2% of your income to fund Social Security.
Another 1.45% gets paid to Medicare.
People with higher incomes pay an additional 0.9%.
In the last fiscal year, these taxes represented $1.2 trillion in revenues for the feds, or about 36% of all federal revenues.
How could we make that large a tax cut work?
This year the federal budget deficit is on track to be an astounding $3.7 trillion. That's money the federal government is spending in excess of what it takes in revenues. The sum of it is larger than the entirety of the last budget President George W. Bush submitted to Congress in 2009.
When I was helping to organize "tea party" rallies in North Dakota back in 2009, we were upset about an Obama-era budget deficit that ran over $1 trillion. That sort of red ink has now become common place.
Last year the budget deficit was nearly $1 trillion, it will be multiple trillions this year (thanks in no small part to the coronavirus), and we are projected to have another trillion-plus deficit next year.
Our total national debt is currently sitting at $26.5 trillion, a more than 26% increase since 2017 when President Trump took office, a 150% increase since 2009 when President Obama took office, and a 356% increase since George W. Bush was inaugurated.
If Trump wants to cut taxes equalling more than 1/3rd of federal revenues, where are we going to make up the difference?
Again, payroll tax revenues fund Social Security and Medicare Part A.
Both of those calculations were based on pre-pandemic projections. Given the number of Americans who have lost their jobs, and the overall economic blow we've suffered, a more topical estimate would have those insolvency dates closer to today.
This is the situation we're going to take roughly $1.2 trillion in revenues from?
That is not a serious proposal. Not unless it's coupled with some massive reforms to the way Social Security and Medicare work, which seem unlikely to happen in even the most cooperative of political environments. In today's environment, you may as well be trying to turn lead into gold.
Unfortunately, what Democrats are offering as an alternative is no less crazy.
Trump challenger Joe Biden wants to lower the eligibility age for Medicare from 65 to 60, and the argument for doing so is hopelessly conflicted for anyone paying attention. Democrats are simultaneously arguing that Americans age 60 to 64 are the oldest and most expensive people on private insurance, so moving them to a government program would save premium payers money, but they'd also be the youngest people on Medicare and so they wouldn't cost that much.
This is magical thinking, and it has no place in coherent policy discussions.
There is no way to add millions of Americans to the Medicare rolls without expanding the financial burden that program is already under, and hastening its insolvency date. Also, it's not at all clear that moving those Americans to Medicare would save all that much money in the private insurance markets. “[C]ontrary to expectations, the authors find that when 50-to-64-year-olds move out of the individual market, premiums for individual market plans increase," a RAND study from last year states.
America desperately needs grown-up leadership. Our nation is hopelessly divided. Our federal government doesn't function anymore. Our national finances are the spreadsheet equivalent of a superfund site.
Yet looking at who is on offer for leadership from both the Democrats and Republicans, there seem to be no adults in sight.
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Rob Port, founder of SayAnythingBlog.com, is a Forum Communications commentator. Reach him on Twitter at @robport or via email at firstname.lastname@example.org.