The Meaningless Social Security Tax Rate Cut

The American Thinker ^ | December 24, 2010 | Joe Gimenez

[Scanian]

A lot of people in government don't know much about business operations because they have never run a business. Examples: the current president, vice president, probably most members of Congress, economics professors at publicly funded state colleges, and most of the other people in government or government-funded organizations for whom I slave away as an independent businessman on a daily basis to pay their salary and benefits.

In the interest of giving these people a sliver of insight into real-world working conditions, I thought I'd present a glimpse into my thought processes on Social Security tax reduction of 2 percent for employees.

Now, let's make no mistake: this exercise in education is a chump-change example, as it involves only me and my sole-proprietorship (individually-owned) company, which provides marketing communications and public relations for various clients. But so many people I talk to have no conception about how the relationship of government to taxpayer manifests itself through the tax code, up and down the employment chain. Maybe this example is perfect, though -- it's simple enough for those government workers and elected officials who otherwise wouldn't understand the more complex calculations being performed by larger corporations.

And while mine may be a chump-change example, I am not alone. A Bureau of Labor Statistics report says that in 2009, there were 15.3 million self-employed people, or 10.9 percent of total employees in the workforce. So right now, there are 15,299,999 other people looking at this tax code change and thinking about what it means to them and the people they may employ. Just because someone is self-employed doesn't mean they don't have employees or use contractors.

[Malsua]

It may be meaningless but anything that deprives the gaping maw of the Federal government is a-ok with me.

[CitizenUSA]

The president lied yet again.

President Obama: “Putting more money in the pockets of families most likely to spend it, helping businesses invest and grow, that’s how we’re going to spark demand, spur hiring and strengthen our economy in the new year.”

I know the fact that the president lies will surprise many FReepers, but a minor tax cut (freeze?) that has to be fought all over again in two years is not going to help stabilize the economy, much less spur it.

[CitizenM]

bump

[P.O.E.]

Third, to the potential full-time employees in 2011. I'd probably pay them less than I otherwise would have. I don't need to do otherwise. After all, they are going to be able to retain 2 percent more of whatever salary figure we agree on

This would not apply to workers with long-term pay contracts, such as, say, um, union employees? What an amazing coincidence!

[dixie sass]

How do you think it’s going to deprive them of anything? If a two percent increase is less than a $100 dollars a year, how is a decrease of the same amount going to help. You should realize that for every decrease something else is going to increase by two percent - like insurance. That’s the way the government works - the take from one hand and give to the other so that everything remains the same.

[CitizenUSA]

Malsua: “It may be meaningless but anything that deprives the gaping maw of the Federal government is a-ok with me.”

Sounds good, except for the fact the tax bill added another $57 billion in spending to extend jobless benefits. They keep right on spending money they don’t have. What does that mean? It means you THINK you’re depriving the federal government of money, but they’ll just take it by inflating your wealth away.

[Principled]

This would not apply to workers with long-term pay contracts, such as, say, um, union employees?

I dunno.. if my contract is for $100k, then I am contracted for $100k. If I still receive 100k, what's my beef?

but i'm no labour lawyer...

[t-dude]

Many long term contracts have automatic salary increases built in.

Union wages would probably continue to rise, whereas non-union employers might be hesitant to give out raises in such an uncertain environment. I think that was the point.

[ridesthemiles]

Third, to the potential full-time employees in 2011. I’d probably pay them less than I otherwise would have. I don’t need to do otherwise. After all, they are going to be able to retain 2 percent more of whatever salary figure we agree on
This would not apply to workers with long-term pay contracts, such as, say, um, union employees? What an amazing coincidence!”

This reduction is only for the year 1022.

Having union employees with a contract paying a different amount of SS & matching costs makes a more complicated 941 quarterly tax return for the employer.

So-—in the end, the employer has bigger bookkeeping costs.

[ridesthemiles]

This reduction is only for the year 1022.”

2011-——sorry

[BfloGuy]

anything that deprives the gaping maw of the Federal government is a-ok with me.

Generally, I'd agree with you, but with Social Security fixing to go under, this is a very, very odd choice for a tax cut, indeed.

And to those conservatives who cheered this 2% point cut as an economic stimulus, well, shame on you. The only tax cuts that promote economic growth are those that encourage capital formation (remember: economic growth = capital growth).

Those are across-the-board marginal income tax rates, capital gains taxes, inheritance taxes and corporate income taxes. All other tax cuts are, of course welcome (when accompanied by spending cuts), but their ability to influence economic growth is minimal.

[yort]

All tax cuts encourage capital formation — capital formation is the only way you, rather than somebody else, will get a cut of the resulting increased effective demand.