- Days left

Point: It's the Wrong Time to Raise Social Security Taxes, Mr. President

President Barack ObamaDear President Obama:

Congratulations on winning a second term as President. Now that the election's over, some of the hardest work you've faced so far lies directly in front of you, and it simply can't wait any longer. The crisis I'm talking about is the fiscal cliff of tax increases and spending cuts slated to take effect at the beginning of next year.

With Congress having chosen to wait until after its members' campaigns to tackle these tough issues, your leadership will be more crucial than ever in driving the future direction of the country. Finding the right balance between fiscal responsibility and smart economic planning will be a challenge, but it's one you must overcome in order to complete the job you took on four years ago.

Millions of workers are urging you to extend the temporary reduction in Social Security payroll taxes that you first enacted two years ago. I know that extending the payroll tax holiday would draw criticism from those who argue that it endangers the nation's long-term financial future for the sake of more government spending. But it has to be done: It's been a successful way to get money into the hands of working families, many of whom badly need it to make ends meet.

It's a Tough Trade-off

Mr. President, no one envies you for the position you were thrown into when you first took office. Starting from a point where the economy was in a tailspin and confidence about America's future was at a multigenerational low, you've overseen a slow recovery that has left many people impatient for a faster pace of change.

With millions of people still seeing little or no benefit from the economic growth of the past few years, you've sought new ways to accelerate growth. Many of those steps, including the extension of the tax cuts enacted by your predecessor, weren't easy choices.

Yet with the payroll tax holiday, you tied the benefits of government stimulus payments to earning income -- a concept frequently associated with your political opposition. You took what many call the most regressive tax in the nation and reduced its impact. And in giving the typical family earning $50,000 a $1,000 break, you boosted take-home pay in a direct and meaningful way without making anyone wait until the end of the year to claim the benefits on their tax returns.

It Was the Right Move Then and It's the Right One Now

Some, like my colleague Chuck Saletta, argue that the health of the Social Security system is too fragile to endure another year of the payroll tax cut. (Here, he lays out his argument for letting the payroll tax holiday expire.) However, when you transferred money from the General Fund into the Social Security fund, it became clear that you were concerned about the fragility of the system hundreds of millions of current and future retirees will rely on for a vital portion of their retirement income. That transfer of funds kept Social Security funding at the same level it would have been without the tax holiday. And on the flip side, using the payroll tax system to get money to workers as quickly and efficiently as possible helped avoid bureaucratic delays and other challenges that plagued past stimulus efforts.

Moreover, keeping the payroll tax holiday in place gives all working Americans the chance to decide for themselves what to do with the money they save. For some, making investments of the sort that Saletta recommends will help them reach a more secure financial future. But many others don't have the luxury of thinking that far ahead with their finances.

Giving everyone a choice will help make sure that the economy gets a current shot in the arm while giving Americans the flexibility to save for retirement in whatever way they see fit.

In the long run, restoring payroll taxes to their former level may well be the best way to ensure the long-term financial viability of the nation, and setting the stage for that eventual tax increase further down the road makes sense. For now, though, the better choice is to work with Congress to make sure the benefits of the payroll tax holiday aren't yanked away at the worst possible moment.

For the latest Motley Fool research on Social Security, Medicare and your retirement, click here for access to a free video special report.

Increase your money and finance knowledge from home

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

TurboTax Articles

A Brief History of Income Taxes

Did you know President Abraham Lincoln, one of America's most beloved leaders, also instituted one of its least liked obligations - the income tax? In this brief history of taxes, see the historical events which shaped income taxes in the United States today.

What Is a Schedule M IRS form?

Note: The content of this article applies only to taxes prepared for 2009 and 2010. It is included here for reference only. In order to take the making work pay tax credit, the IRS requires you to prepare a Schedule M with your federal tax return.

Video: Tax Filing Requirements for Children

Depending on how much money they made during the year, your children may very well have to file for taxes. Learn about tax filing requirements for children with help from TurboTax in this video on tax tips.

Add a Comment

*0 / 3000 Character Maximum


Filter by:

When might we expect to have OUR MONEY - returned to the Social Security Fund, that BOTH PARTIES - Have STOLEN - FROM - THOSE - ON - SOCIAL SECURITY? They took our money & replaced our money with IOU'S, now it is time for THEM - to PAY - US - BACK - !!!!

November 18 2012 at 9:53 AM Report abuse +2 rate up rate down Reply

December 11 is Financial Amnesty Day. If you have earned money and have any left over you may turn it back into the treasury department without ridicule from the democratic party.

November 15 2012 at 4:47 PM Report abuse rate up rate down Reply

Surprise, Surprise, the market is down again today. I guess the country was split down the middle this last election between the haves and the have-nots. Someday we'll all have nothing!

November 15 2012 at 1:39 PM Report abuse +2 rate up rate down Reply
1 reply to billcac's comment

You are right!

November 17 2012 at 12:49 PM Report abuse rate up rate down Reply

People say the rich should pay more into SS. That may be but won't they be able to collect more when they retire? What's the point?

November 14 2012 at 7:40 PM Report abuse rate up rate down Reply

It is strange how the liberals gloat over destroying America. Hope you enjoy Communism.

November 14 2012 at 7:32 PM Report abuse rate up rate down Reply

It's been proven that republicans don't have a brain or a heart...any evidence that they have a soul?

November 14 2012 at 7:02 PM Report abuse -3 rate up rate down Reply
3 replies to PeopleSmoks's comment


November 14 2012 at 3:20 PM Report abuse +6 rate up rate down Reply

Just because Americans were foolish enough to re-elect Obama, doesn't negate Obama's incompetence and failed leadership!

November 14 2012 at 2:48 PM Report abuse +6 rate up rate down Reply
3 replies to Randy's comment

I just wanted to let all you darlings know that I have decided to stay on as democrat minority leader of the house. I will continue to fulfill the job of babbling, speaking incoherently, fear mongering and to further my mission of destoying the country. I am honored to still be reigning queen of the loons. Thank you so much dears.

November 14 2012 at 2:43 PM Report abuse +4 rate up rate down Reply
2 replies to mrspelosi's comment



November 14 2012 at 3:38 PM Report abuse +1 rate up rate down Reply

I think you look hot in your g-string Depends.

November 14 2012 at 7:01 PM Report abuse -1 rate up rate down Reply
2 replies to PeopleSmoks's comment

I love mrspelosi but that was funny.

November 14 2012 at 7:38 PM Report abuse -1 rate up rate down

Peoplsmoky darling, your cell mate said the samething about you dear.

November 17 2012 at 12:33 AM Report abuse rate up rate down

Can anyone tell me how many days the market has been up since Mr. Wonderfull was elected? And don't tell me that Wall Street doesn't reflect on Main Street. When the market crashed people were either jumping out of windows or waiting on soup lines!

November 14 2012 at 1:40 PM Report abuse +6 rate up rate down Reply