CLEVELAND, December 21 — Among the items included in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which was signed into law by President Obama on December 17, is a temporary employee payroll tax cut.
This provision, found in Section 601 of the legislation, reduces the employee Social Security tax rate from 6.2% to 4.2% for 2011 earnings subject to the tax, which will be levied on the first $106,800 of earnings next year.
Because Railroad Retirement Tier 1 taxes and annuities are based on Social Security, the Tier 1 tax rate for railroad workers will be cut by the same amount, meaning that take-home pay for railroad workers will be increased by 2% of gross earnings next year, up to the cap.
The shortfall in funding for Tier 1 benefits created by this tax cut will be made up from general federal revenues, pursuant to Section 601(e)(2) of the legislation, which states as follows:
- “There are hereby appropriated to the Social Security Equivalent Benefit Account established under section 15A(a) of the Railroad Retirement Act of 1974 (45 U.S.C. 231n–1(a)) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a)(2). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Account had such amendments not been enacted.”
BLET National President Dennis R. Pierce expressed concern about how the Congress decided to make up the shortfall. “Since its inception Railroad Retirement has been successfully defended from Congressional attack, in part, because all Railroad Retirement funds have historically been contributed by railroad workers and railroad employers only, with no non-railroad taxpayer money being used to fund our retirement system” Pierce said. “That complete funding independence has been broken by enactment of this law.”
“While every BLET member benefits from a two percent increase in take-home pay, what is happening here is that this money is not coming from the carriers’ record profits. Instead, 2% of our own money that is designated for our retirement is being given to us now, and essentially is being paid for by American taxpayers,” Pierce added. “There are powerful forces who would like nothing better than to destroy Railroad Retirement and Social Security, and I am concerned that this ‘tax cut’ may make their goal easier to achieve.”