Implications of the Payroll Tax Holiday for Social Security: Social Security Now Has Four Dedicated Income Sources The Tax Holiday Needs an Exit Strategy

Abstract

The contributions that workers pay for Social Security have been temporarily reduced under legislation designed to get money quickly into the hands of workers so they could spend it to help the nation out of the Great Recession. This “payroll tax holiday�? is scheduled to end on December 31. This fact sheet describes an ‘exit strategy’ that could attract broad public support and help strengthen Social Security for the long term. The fact sheet notes that Social Security now has four dedicated sources of income, including reimbursement funds from general revenues that replace dollar-for-dollar the revenue not collected during the temporary tax reduction. Therefore, Social Security’s trust funds are unaffected by the payroll tax holiday.