030930 H1B visa holders may not have to pay social security tax soon

The Economic Times ^ | 030930 | JAMES MATHEW & KRISHNA KANT

[XBob]

030930 H1B visa holders may not have to pay social security tax soon
2003-09-30
13:01:53




The Economic Times
Tuesday, September 30, 2003| Updated at 21:36 hrs IST

http://economictimes.indiatimes.com/cms.dll/html/uncomp/articleshow?xml=0&artid=25500046&sType=1

H1-B visa holders may not have to pay social security tax soon
JAMES MATHEW & KRISHNA KANT

TIMES NEWS NETWORK[ FRIDAY, OCTOBER 18, 2002 12:55:44 AM ]
NEW DELHI: There is good news for all those who are there in the US on a H1-B visa. India is close to signing the administrative protocol with the US on abolishing social security tax charged by the US administration on those H-1B visa holders.


The administrative protocol is the first step towards India being able to sign the final agreement with the US government on the withdrawal of the tax on large number of Indians, estimated to be about 60,000 to 70,000 at any point of time, on short-term employment visas in the United States.


The waiver on the tax-charged currently at the rate of 17% to 21.5% of their total salaries-could result in savings of billions of dollars annually. A person has to work for at least 10 years in the US to take full benefits from his social security taxes. H1-B visa on the other hand is for a maximum period of six years.


According to sources, the ministries of external affairs, finance, labour and commerce have already agreed on the draft agreement on the protocol to be signed with the US.


After the signing of the protocol it has to be ratified by the two countries before the two governments start negotiations on the final agreement. From the Indian side, the ministry of labour is the nodal agency for the negotiations on the final treaty to be signed between the two countries. US has a similar agreement with 20 other countries, including Germany, the UK and Japan.


For the US to waive social security taxes, the domestic country should have a social security system. Indian officials in their negotiations with their US counterparts have pointed towards the existence of social security benefits like employee provident fund, Employee State Insurance medical facility and limited unemployment benefits in India.


Besides directly benefiting engineers, who form the largest chunk of H1-B visa holders, the agreement would benefit students, academicians and other professionals on short-term deputation.


The matter has seen hectic parleys between the various industry chambers and the government. The Indo-American Chamber of Commerce, a bilateral chamber, is particularly lobbying hard with both the governments for an early signing of the final agreement between the two countries.

[Viva Le Dissention]

You joke about "wanting fries with that," but service-based industries, in this case, food service, is exactly the types of industries that will dominate the US economy. Service industries are always in demand, which is why people like doctors, lawyers, plumbers, etc., aren't damaged nearly as badly in economic downturns as manufacturing based industries. I don't NEED a new pair of shoes this month, but the essential services I can't do without. Innovative capitalists will continue to develop new services and new products--which may be manufactured overseas, but the profits remain at home with the investors and the owners, making everyone happy.

Moreover, certain manufacturing jobs will always be in the US, such as construction and the like.

I agree that we're not eliminating an obsolete technology, but we are evolving into a different, better system of economics. For instance, farming wasn't obsolete when the industrial revolution rolled around, but the economics of the time called for people to abandon farming and pursue industrial jobs. Here, a rational participator in the market will abandon industrial work to pursue a career in service or technology related fields.

[Viva Le Dissention]

If we don't adapt, we'll fail. Such is the harsh reality of the free market.

If government didn't interfere in the free market in the first place by establishing things like min. wage laws, number of workable hour laws, child labor laws, we wouldn't be in such a bad position. But we are.

As an aside, I don't think many service-based jobs are very readily exported.

[mardler]

I agree with you. If I understand right, this is nothing more or less than an agreement to exempt Indians in the US from FICA and Americans in India from Indian social security taxes. The US has many such agreements with foreign countries. Right now, I myself am working in the Netherlands, taking advantage of the same legislation in reverse to stay in FICA.

Originally, it was the US that pressed for such agreements when it had many more expatriates overseas than foreign countries had in the US. We can hardly complain too much if India now tries to apply the same principle.

[glock rocks]

The answer for US workers is not to demand that the free market be regulated by the government, but to adapt to market conditions and learn skills which cannot be readily exported.

right. like becoming a software engineer?

bs business overregulation, osha, workers comp, fica, medicade... no wonder companies want to get the hell out of the US... just like the local companies are getting out of California. Nope, this tax cut for foreign nationals won't destroy our economy, but it is another in a long trend to grind our lifestyle and economy down to that of the turd world. enjoy the ride.

[Lazamataz]

You joke about "wanting fries with that," but service-based industries, in this case, food service, is exactly the types of industries that will dominate the US economy.

This statement, to my mind, directly contradicts this statement:

I agree that we're not eliminating an obsolete technology, but we are evolving into a different, better system of economics.

So what we have here is someone who ACTUALLY BELIEVES that America can prosper by fixing burgers for one another.

Madness.

Utter madness.

[XBob]

I propose we start with you, and give you only enough money at your job to have one bowl of rice a day to live on.

That way we can get our wages down to the level of the 3rd world and compete.

Horay for cheap wages.

[Jack Wilson]

That's because he's on board.

My guess is that he's never heard of this. Its too low in the stack. By the way, I agree on the H1B. I would make them pay what I call an infrastructure tax - to pay for the use of the roads, schools, etc. that we paid for. I also think their pay level needs to be raised to match the average American pay rate.

[Lazamataz]

My guess is that he's never heard of this. Its too low in the stack. By the way, I agree on the H1B. I would make them pay what I call an infrastructure tax - to pay for the use of the roads, schools, etc. that we paid for. I also think their pay level needs to be raised to match the average American pay rate.

Absolutely. I'm with you all the way.

[Wolfie]

The difference is, Libertarians would repeal the SS tax for Americans as well.

[XBob]

21- "Innovative capitalists will continue to develop new services and new products--which may be manufactured overseas, but the profits remain at home with the investors and the owners, making everyone happy. "

EXCEPT FOR THE AMERICAN WORKERS WHO NOW HAVE NO JOBS.

GO WORK IN INDIA, YOURSELF !!!

[ThinkDifferent]

why should people pay into Social Security if they are never going to reap the benefits of the system?

Social Security is not a retirement or investment program. It's just another tax.

I think most libertarians would take it a step further and say that the SS tax should be outright eliminated, but that this is a reasonable start.

Absolutely FICA taxes should be eliminated, but this plan is worse than doing nothing. By reducing the cost of foreign workers relative to Americans, it actively encourages businesses to use H1Bs. That's not a free market.

[XBob]

21 - "Service industries are always in demand"

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[fr_freak]

Just great. I think I'll stay home and not vote next election.

I always freak out when I hear (conservative) people say this. Remember, there are always other issues on the ballot besides presidents or governors. Go vote on those. You can skip the presidential section if you want, but make sure you vote down the "Teddy Bears for the Homeless" bond initiative and keep Josef Stalin III out of the state senate.

[nothingnew]

By the way, I agree on the H1B. I would make them pay what I call an infrastructure tax - to pay for the use of the roads, schools, etc. that we paid for. I also think their pay level needs to be raised to match the average American pay rate.

Absolutely. I'm with you all the way.

I'm with you'se guys.

FMCDH

[Joe Hadenuf]

Thank you President Bush!

[RogueIsland]

GO WORK IN INDIA, YOURSELF !!!

He can't. India does not extend the same courtesy to foreign "guest workers" that we do.

[1rudeboy]

I would make them pay what I call an infrastructure tax - to pay for the use of the roads, schools, etc. that we paid for.

Seeing the H1-B's pay income tax, isn't that enough?

[Mr Crontab]

>but service-based industries, in this case, food service, is exactly the types of industries that will dominate the US economy

Too bad they don't pay as well. I'm a middle aged guy who has a successful 20+ year career in technology. Sole source of income for my family. If my career in technology dries up, I'm supposed to work at Denny's?

>but the profits remain at home with the investors and the owners, making everyone happy.

Except the workers who actually *worked* in these industries.

>Here, a rational participator in the market will abandon industrial work to pursue a career in service or technology related fields.

Except for technology, which would be moved to India. This seems to excite you for some reason.

Can you rationally expect the US to remain the leading power in the world if we allow our technology and industrial base to move overseas?

[Swanks]

I always freak out when I hear (conservative) people say this. Remember, there are always other issues on the ballot besides presidents or governors

Its this kind of thinking that lets politicians like Bush pull the stunts they do as in this thread. While they screw you, they can count on you to vote for them again because you will always find something to grab on to that's better than the Dem's platform.

Now you really pi**ed me off. Not only will I NOT stay home, I'll go vote against Bush. Just to negate your vote.

[Jack Wilson]

Seeing the H1-B's pay income tax, isn't that enough?

The way I see it, the H1-B's are able to undercut Americans because there are many components to our relatively higher cost. I have an expensive house in an expensive neighborhood. What made it expensive? The tons of money I put into the infrastructure the last couple of decades: the schools, roads, police department, etc. These guys come in with a lower price but haven't had to pay for any of this stuff.

This is separate from income tax.