You hit the nail on the head. I knew something was wrong and I just didn't see it. This needs lots more thought.
Does that really make sense to you ?
If the salary is $100K, then the business is paying the employee $80K, withholding $20K, and sending the IRS an additional $7K in SS/M taxes. Then the business also sends the IRS the taxes on its profits. And the business spends money on tax compliance, loses money by making decisions based on taxes instead of good business, etc. All its raw materials or payments to vendors also had these costs built into them. The Money Magazine author could not possibly have asked the question the way he did and gotten that answer from Jorgenson. He is lying, or wants us to think Jorgenson is an idiot that can't do simple math.
This is where the price reduction comes from, not from lower wages to employees. Don't take anybody else's word for the whole "reduced wages" argument. Go to yahoo or some other financials page. Look at the financial statements for major companies. See what they paid in profit taxes as a percentage of their revenue. Look at their company profile and look at how many employees they have and their average wages. Calculate the employer-side SS/M taxes. Take that total percentage savings and apply it to all the company's overhead costs and raw materials costs. It's all right there for you on the financial pages. If you do this for Bank of America or IBM you'll see where over 15% of revenue could obviously be saved if there were no business taxes. Without reducing wages or profits by a penny. And there is extra to be saved on compliance costs -- generally another 2% of revenue.