FORT WAYNE, Ind. (Indiana’s Newscenter) The tax cut deal is expected to pass tonight once it hits the house floor. One question that remains with some: How will Social Security be affected?
Social Security is funded in large part by the revenues gained from the Payroll Tax. The Payroll Tax, the center of the tax cut deal, will be 4.2% as opposed to 6.2%, a difference of two percent.
Opponents of the tax cut deal argue that more than $100 billion could be added to the Social Security fund if the Payroll Tax is kept at 6.2%. They believe that Social Security, which is expected to be paying out more than it is taking in within five or 10 years, could actually run out of money sooner.
Proponents say employers will be enticed to provide more jobs. If more people find jobs, then more people can pay taxes. If more people can pay taxes proponents argue, then the two percent won’t make much of a difference.
If you ask Dr. Doug Meador, Professor of Economics at University of Saint Francis, Social Security is destined to be in the red within the next 10-15 years regardless of what kind of revenues the Payroll Tax creates.
Meador says the government is hopeful that the extra pocket money will be spent, therefore stimulating the economy. Meador doesn’t believe this will ultimately be the case. He believes the uncertainty surrounding the job market, huge amounts of debt people have and the desire to save money will trump spending it.
Uncertainty of the future is dominating the mind of the consumer. With so much uncertainty, saving the extra pocket money or paying off credit cards could the best option for an individual.
The tax cut deal is part of a compromise to extend unemployment benefits.
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