Last week’s 2013 Social Security Board of Trustees report press release stated, “Income including interest to the combined OASDI Trust Funds amounted to $840 billion in 2012. ($590 billion in net contributions, $27 billion from taxation of benefits, $109 billion in interest, and $114 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2012 payroll tax legislation).”
Usually there are three main income streams into Social Security: payroll taxes, income from the Federal income taxes that some people pay on their Social Security benefits, and interest earned on government bonds held by the Social Security trust funds.
Why were General Funds a large part of 2012 income to Social Security?
Economic stimulus legislation (H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) provided for a temporary reduction in the Social Security payroll tax rate in 2011 and 2012 and reduced payroll tax revenues to the Social Security funds by an estimated $222 billion in total.
That same legislation provided for transfers from the General Fund to the trust funds in order to “replicate to the extent possible” payments that would have occurred if the payroll tax reduction had not been enacted. Those General Fund reimbursements amounted to about 15 percent of the program’s non-interest income in 2011 and 2012. The temporary payroll tax reduction expired at the end of 2012.