Tonight is President Obama’s Job Speech(tm).
I have a counter-proposal that is so “out of the box” thinking it might work.
It’s simple. Today, the Employer and Employee each pay 7.65% half of the payments into Social Security (self-employed pay both parts – 15.3%)
My idea: End the the employee contribution to Social Security, and shift that to the employer AND make 100% of the employer Social Security taxes paid as a NON-REFUNDABLE CORPORATE INCOME TAX CREDIT.
Things this would do:
- Change the employee expectation – the first step to ending the Social Security Ponzi scheme is to end the “big lie” at its root – that Social Security is an “Insurance Program” that you make “voluntary” “Contributions” into “your account” – that you deserve a check because you paid money into a fake ponzi scheme
- End the Double Taxation – I don’t know if you’ve noticed, but you’re paying income taxes on money you never receive and you’re paying social security taxes on your income taxes
- Ends federal withholding for many people – the working poor already don’t have income tax withholding – without FICA, that only leaves their State Income tax (if their state has one)
- Reward profitable company that employ a lot of people – Since 100% of the social security tax is a tax credit, essentially the government is paying 100% of the costs of social security – but with some important changes
- For profitable companies that employ Americans in America, this effectively ends the Corporate Income Tax for them, something Conservatives want
- For companies (foreign and domestic) that employ Americans in America that evade income taxes by shifting corporate income to other countries, since the tax credit is non-refundable, they don’t get it, and their payroll taxes double.
- For companies that make a lot of “profit”, but employ very few people (Hedge Funds, investment banks), they get hit with the full force of the corporate income tax – if this is not revenue neutral, then increase the rate until it is.
- For American companies that derive profit by employing people outside of America (who don’t pay Social Security), they get no tax credit for their payroll tax, only a tax deduction.
So an example:
Company “W” (a retailer) employs 2.1 million people and has sales of $421 billion. They have a payroll of $60 billion (guestimate), which means today they pay about $4.5 billion in Social Security and Medicare. Under my play they now pay $9 billion – but that entire $9 billion is a direct write off against their corporate income tax. Today, they make about $23 million a year and pay $7 billion in corporate income tax.
So they pay $9 billion in Social Security ($4.5 billion more than they are now). The entire $7 billion they pay today in corporate income taxes would go away, increasing their after tax profits by $2.5 billion. Not only that, they have a $2 billion buffer during which they can hire more people and not pay any social security tax on them.
Company “G” is a domestic car maker. They employ lots of union members, but have little of no chance of making a profit. Their Social Security taxes double with no tax benefit
Company “T of America” is a car maker from Japan that makes cars in America – They get a tax credit for their employee wages inside the United States, but derive no benefit from it because they tax shift the corporate income back to Japan, so their tax benefits Double
Company “GS” is a global investment banking company. Their employees are mostly “partners” who evade paying FICA because they are above the income cap or they don’t work in the United States. They employ relative few Americans and are aggressively working to move those jobs to other countries. They would see a doubling of their Social Security taxes with minimal effect on their overall taxes. This would encourage GS to completely leave the country and detach itself from the Obama White House Nipple
I’m sure this idea has lots of unintended consequences, but the underlying principle is sound – to quote Ronald Reagan (which I rarely do)
“When you tax something, you get less of it – when you subsidize something you get more of it”.
So the underlying principle is that we want more companies with employees in America making a healthy profit. The marketplace will work out the details of the winners and the losers.
There is no doubt that this will be wildly supported by most Americans – they’ll see their take home go up 7.65% (at least at first), “good” corporations will see their taxes drop, social security tax revenue will increase without raising rates (as part of the 20% functionally unemployed go back to work), Democrats will support it because they think they’re sticking it to corporations and discouraging outsourcing.