Indeed, the government's ability to pay these benefits is not dependent on tax revenue at all. Hence, there is no reason to try to preserve budget surpluses in the Social Security program. Indeed, there are very good reasons to cut payroll taxes. Further, the payroll tax is specifically levied on working, providing a powerful disincentive to employment. Not only does it raise the costs to every employer of creating new jobs, it also discourages people from working.
Payroll taxes are inflationary because they increase the costs of production.
They distort the market mechanism, by raising the costs of labor relative to the costs of capital. There is an additional, important consideration. It is generally accepted by economists that the household propensity to consume varies inversely with income, thus, a tax cut that favors lower income households should have a larger impact on consumption than would a tax cut that favors high income households. Under current tax law, low-income workers often pay the highest marginal rates. A payroll tax cut accomplishes all these results.