On Reducing the Burden of Employers

As a former employer, I saw the obligations on the other side of the paycheck. Your FICA (Federal Income Tax withholding) comes straight out of your salary, but for every Social Security and Medicare deduction, which you think is high (and they are) would actually be worse if you paid it all, but you don't - you're only paying 50% of it. The employer pays the other half. So, if you have a $1000 source paycheck and a $100 Medicare deduction and a $100 Social Security deduction (these are not proper ratio, BTW), you have a net printed paycheck of $800. However, to process payroll, the employer has to pay the $1000 plus an additional $200, so it's $1200 to generate your paycheck of $800.

That's big bucks.

Social Security, which everyone decries as being on the door to insolvency, could be buttressed by changing or removing the donation cap. I don't know what it currently is, but I think it's about $125,000. Up to the cap, you get Social Security deducted from your paycheck. Up to the cap, employers have to match the Social Security deduction. But if you earn more than the cap, once you've earned it for the year (say, in October), the remainder of your paychecks for the year don't have Social Security deductions. More money in your pocket! However, you're no longer adding to the Social Security fund. For the really high earners, they might blow past the cap by March, leaving the bulk of their income free of Social Security taxes. When we are contemplating an underfunded Social Security, rather than raise the qualifying age, we should consider pulling in more funds, particularly as the 1% don't pay Social Security on the majority of their income.

The drawback, and the pushback, here, is that the employer would have to pony up their half of the Social Security for everyone making over $125k or whatever the cap is.

But the big elephant in the room is health benefits. Employers decry the rising cost of health insurance - it's keeping salaries down because employers pour so much into maintaining benefits. But what if, as was raised on Saturday's Rumble, health insurance was decoupled from employment? Employers would not have the cost of health benefits, which would create the ability to have more business profits or raise wages. One would think they would jump at that, if it was couched in those terms.

As an employer, matching Social Security and Medicare was expensive, but at least it was predictable. What drove me nuts was trying to offer decent health insurance benefits when those costs could raise arbitrarily and I had no control over those costs other than opting to reduce benefits offered.

We need to really couch the argument about universal health care in terms of the benefits to companies. There's a lot to be said for the value to small businesses of a system that doesn't obligate them to spring for everyone's health care.