Recent revisions to Social Security are significant in that the connection between Social Security taxes and benefits received has essentially disappeared. Instead, Social Security has recently been framed as a jobs program, and it’s difficult to know how impactful this will be upon Michigan recipients.
In 2010 we had the Hiring Incentives to Restore Unemployment Act (HIRE), which has allowed employers hiring new workers during a certain period of 2010 to qualify up to a 6.2 percent payroll-tax deduction. However, the deduction does not in any way affect the employee’s retirement benefits. And in 2011, Congress passed legislation allowing for workers to pay 4.2 percent instead of 6.2 percent employee taxes for the entire year. Now Congress is even thinking of extending the reduced rates into 2012.
Without question, such breaks have been implemented as an incentive for employers to hire on new workers. The reduction in tax rates was implemented in part to place more money into the hands of workers that otherwise will not be affecting market demand through the money they spend.
It may be surprising that there is bi-partisan support for such measures, but that’s not because the two party’s agendas have now meshed. Instead, Democrats wanted the extension of the cuts out of fairness to workers, and Republicans wanted the cuts out of opposition to any tax hikes to begin with.
It may take an attorney familiar with Social Security to figure it all out in the end and hopefully the politicians are not playing a dangerous game with benefits that many of us will rely upon when we retire or are disabled. Though the reduction in tax rates may be appealing, it could lead in the future to reduction in benefits.
Source: The Washington Times, “Shipman: Reshaping Social Security and our society,” by William G. Shipman, Jan. 25, 2012