No upside to tax holiday

In my opinion, Congress should not extend the FICA contribution holiday.

FICA (Federal Insurance Contributions Act) is paid by all wage earners, and is the sole funding source for Social Security and Medicare. Payroll contribution holidays reduce or eliminate the deduction of FICA for wage earners, depending on income level.

Social Security and Medicare are what is called non-discretionary spending, and therefore must be funded before discretionary items like defense are funded; therefore, it is not possible to defund them, even though Democrats often scare seniors with claims that Republicans are trying to do just that.

However, suspending FICA contributions will reduce the revenue stream that is dedicated to paying Social Security and Medicare benefits. The FICA contribution holiday will blow a $260 billion hole in their funding.

The battle between Republicans and Democrats is about how to pay for this contribution holiday.

Republicans are demanding cuts in non-defense discretionary budget items to pay for the shortfall in revenues for Social Security and Medicare that this tax-cut extension will create.

Democrats want to tax and borrow more to pay for the shortfall. They have also included a mortgage tax in their bill which will increase the cost of home loans to help pay for this shortfall.

If you listen to Democrats like John Douglass, Democratic candidate for U.S. House of Representatives in Virginia’s 10th District, they would simply tax those making more than $1 million per year to pay for the shortfall.

As good as it sounds to some, taxing the rich will not begin to pay for this new bill. The balance of the funding for the shortfall will have to come from the general fund, which is where all of our income tax dollars go, meaning every taxpayer will eventually pay a portion.

Because the general fund can no longer cover all of our bills due to the outrageous spending of Democrats over the last three years, much of the money to pay for this holiday will have to be borrowed. This will increase our national debt.

According to the policy-neutral National Payroll Reporting Consortium, the two-month payroll tax holiday “could create substantial problems, confusion and costs affecting a significant percentage of U.S. employers and employees.”

If it costs employers money to implement, it will provide yet another disincentive to hiring.

Another unintended consequence of suspending contributions is that it reduces the benefit a contributor will receive. All wage earners periodically receive a statement from which outlines the benefit they will receive when they retire, based on contributions made during their wage-earning years.

If you contribute less over your working lifetime, you can expect your benefit to be less, as well.

In the end, this FICA contribution holiday will end up taking more money from the pockets of taxpayers, increasing our national debt, decreasing Social Security and Medicare benefits that contributors will receive, and will do nothing to alleviate the depressed economy.

Cameron Jones

Catlett