Benefit Bulletin: June 2012

Benefit Bulletin: June 2012

“Tough Choices” — Payroll Tax Cut For Illegals Or Notch Reform?

“Tough choices.” When referring to reducing the Social Security deficit, those tough choices boil down to just two choices — raising taxes or cutting benefits. The Social Security Notch is one of our nation’s most ignominious examples of how tough Social Security choices went awry during a Social Security funding crisis in the past which still continues. The current 2% reduction in Social Security payroll taxes, that was extended through 2012, is another.

The decision to extend the temporary 2% payroll tax cut through December 31st of this year was tough because the Social Security Trust Fund is in deficit and paying out more in benefits than cash revenues coming in.The tax cut makes that deficit worse and the federal government must make up the difference by borrowing the money that’s needed to pay the benefits. The Congressional Budget Office and other economists say, however, that the temporary 2% tax cut is helping to provide needed stimulation to the economy by putting more money into workers’ pockets.

But the payroll tax cut is also benefiting illegal immigrant workers at the expense of Social Security, according to a new analysis for TSCL.The analysis estimates that illegal immigrants who are working under stolen, false and invalid Social Security numbers are pocketing an estimated $2.5 billion in higher paychecks received during 2011 and 2012. TSCL believes that money should be going to Social Security and used instead to help pay for Notch Reform benefits. The Social Security Notch affects about 4 million of our oldest, poorest and sickest seniors.

Notch Babies receive lower Social Security benefits than other retirees having similar work and earnings histories. The Notch occurred when Social Security was facing a major funding crisis in the late 1970s. Congress enacted legislation that changed the benefit formula and reduced benefits of retirees, the first of whom turned 62 in 1979, only two years after the 1977 legislation was enacted. A transitional formula provided to phase in the changes failed and deeper-than-expected benefit cuts affected retirees born from 1917 through 1926.

TSCL continues to lobby for “The Notch Fairness Act” (H.R. 1001) introduced by Representative Mike McIntyre (NC-7), and S.118 introduced by Senator David Vitter (LA). The legislation would provide Notch Babies born 1917 through 1926 a choice of $5,000 payable in four annual installments, or an improved monthly benefit. We thank Notch Babies and their families who continue to contact Members of Congress to ask for their support of these bills, and we continue to go door to door in Congress working for passage of this overdue legislation. This is one choice that shouldn’t be “tough.”