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Johnson and Buchanan Opening Statements at a Joint Subcommittee Hearing on the Complexities and Challenges of Social Security Coverage and Payroll Tax Compliance for State and Local Governments

June 29, 2017

WASHINGTON, D.C. – House Ways and Means Social Security Subcommittee Chairman Sam Johnson (R-TX) and Oversight Subcommittee Chairman Vern Buchanan (R-FL) today delivered the following opening statements at a joint hearing of the Social Security and Oversight Subcommittees on the Complexities and Challenges of Social Security Coverage and Payroll Tax Compliance for State and Local Governments.

CLICK HERE to watch today’s hearing.

Rep. Sam Johnson remarks as prepared for delivery:

“Good morning and welcome to today’s hearing on the complexities and challenges of ensuring Social Security coverage and payroll tax compliance for state and local government employees.  

“But before we begin, I’d like to take this moment to say a few words about my friend, and former Social Security Subcommittee Chairman, Jim Bunning. Sadly, Jim passed away just a few weeks ago. Chairman Bunning was a Member of the Ways and Means Committee for four Congresses. While many will remember Chairman Bunning as a baseball hall of famer who pitched two no-hitters, I’ll always remember him as the guy who showed me the ropes on serving as Chairman of Social Security. Among many other bills, he introduced the Rehabilitation and Return to Work Opportunity Act of 1996 that ultimately became the basis of the Ticket to Work Act of 1999. More than 20 years later, this Subcommittee continues to look for ways to help those beneficiaries who can return to work, and I look forward to having another hearing on that topic later this year. Jim Bunning was a patriot, a strong supporter of Social Security, and a friend. We are thankful for his service and keep his wife Mary and all of his family in our prayers. 

“Turning back to today’s hearing, usually when we talk about state and local workers and Social Security, we talk about how many of them aren’t covered by Social Security. But today, we are going to focus on the close to three-quarters of state and local workers who are covered, and why figuring out their Social Security coverage and payroll tax compliance is so complicated.

“When Social Security was created, state and local government employees were excluded due to Constitutional concerns. Overtime, the law was changed to allow state and local governments to extend Social Security coverage to their employees.

“Today, all states have at least some employees who are covered by Social Security and pay Social Security taxes on their earnings. But who is covered can vary by state and even locality.  

“With all this complexity, it’s up to Social Security, the IRS, and states to work together to get it right. But, as we’ll hear, that doesn’t always happen. 

“Back in 2010, the Government Accountability Office found that both Social Security and the IRS have trouble identifying problems with Social Security coverage for state and local government employees, and instead must rely on public employers to ensure compliance.

“It seems that not much has changed.  

“Social Security still does not have the ability to verify that state and local governments are properly reporting wages for covered workers. And the IRS still doesn’t know whether the employer reported and paid the correct amount of payroll taxes without doing an audit. Even though payroll taxes are the biggest tax most people pay, efforts to improve compliance generally focus on other taxes.  

“These problems – like the one in Missouri that we will hear about today – can go undetected for years, and have real consequences for Americans’ retirement security and for Social Security’s Trust Funds.

“If someone thinks they’re covered, but aren’t according to Social Security, they may not qualify for the Social Security benefits that they’ve been counting on. And if an individual receives benefits without having paid the correct amount of Social Security taxes, the Social Security Trust Funds and taxpayers are left to make up the difference.  

“Let me be clear. The answer here isn’t mandatory coverage.

“But Social Security and IRS need to get their act together. At the end of the day, we need to be sure that state and local employees pay the right amount of taxes and receive the Social Security benefits they are counting on. And that the Social Security Trust Funds get the taxes they’re owed. The American people deserve nothing less.” 

Rep. Vern Buchanan remarks as prepared for delivery:

“Good morning, I want to thank the panel for coming and welcome you all to today’s hearing and I also want to thank Chairman Johnson for his important oversight work.  

“Today we are looking to better understand the challenges that state and local governments face when applying Social Security coverage to their workers. While many state and local government workers rely on their own retirement plans, others rely on Social Security through voluntary arrangements between the states and the Social Security Administration.  

“Giving states flexibility on coverage decisions is important, however it often leads to complicated individual coverage situations for state and local employees. This creates unique challenges for state and local employers as well as the SSA and the IRS, who oversee the program.  

“Nearly 70 percent of the $3.3 trillion collected by the IRS comes from employment related taxes – like those for Social Security and Medicare. These contributions must be accurate. However, the complexity of coverage issues for state and local governments requires the combined efforts of the SSA, IRS, and State Social Security Administrators to provide state and local employers with appropriate guidance and oversight. I look forward to hearing from the witnesses about ways that we can assist them to ensure the process works better.

“We look forward to hearing from our witnesses about how to help make sure that the information they need to verify the payroll taxes and protect the Social Security and Medicare trust funds.”