Note: Not an official Forward Party Page
Policy Proposal: Change Employer FICA
Proposal: End the current Employer’s contribution to Social Security and Medicare, payable by companies that employ US workers, and instead implement a revenue-based tax payable by all companies that do business in the US. The change would make our tax system fairer, reduce the cost of employing US workers and address numerous challenges: offshoring of jobs, increasing automation, pressure to shift employees to contractor status and the growth of the gig economy.
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“Human-Centered” is an approach to governance that places the needs of human beings at the center of any policy decisions. We have slipped away from this approach, with proposed new laws and regulations often based more on ideology, on an arbitrary set of beliefs, than their impact on human beings. Getting back to Human-Centered doesn’t require a transformation or re-imagining of government. Instead it requires a different examination of proposed laws and a re-examination of our existing laws, to ensure they are still improving the lives of Americans.
The vast majority of the laws that have been passed by Congress were designed to address specific challenges or opportunities, and most, when passed, did improve the lives of Americans. But we live in a fast paced, constantly evolving world, and often as the world changes our laws don’t keep up. Over time the laws and how they are implemented can slip out of alignment with our economy and society. Sometimes they stop fulfilling their intended purpose. Sometimes how they are implemented contributes to new challenges for society.
The Employers Contribution to Social Security and Medicare are examples. They are two of the most consequential and successful government programs in our history, and a great tradeoff for workers and for companies. Both Social Security and Medicare are income transfer programs. US workers pay 7.65% of their income into Social Security and Medicare, to cover the monthly payments to seniors and their medical costs. In return they have the comfort of knowing when they retire, their Social Security and Medicare costs will be paid by the current generation of workers.
Employers also pay a tax equal to 7.65% of their payroll into Social Security and Medicare. In return, they get the benefits of Seniors with the money to buy their products and a more stable economy with less severe recessions. Again, Social Security and Medicare have been two of the most successful government programs in our history; we greatly reduced senior poverty, stabilized consumer demand and have lessened the severity of recessions that could have turned into depressions.
When Social Security and Medicare were passed in the 1930s, who paid matched up with who benefitted. Foreign trade limited and pretty much every part of our economy required lots of people to get the job done, whether that was producing a car, maintaining records at a bank or routing a telephone call from one home to another. Basing the employer’s portion on its payroll was a simple way of making sure that all businesses paid their share for the benefit they received.
The world has changed. A significant percentage of what is sold to American consumers is no longer produced by American workers. Computers route phone calls and keep track of bank balances. Increasingly cars are produced by robots. Human labor is a much smaller part of creating economic value in our economy.
This change in our economy has caused a disconnect in the tax burden; many of the companies that benefit from the government’s economic stabilization and Seniors being able to buy their products pay very little for that benefit. Essentially the companies that employ US workers are subsidizing those that don’t.
The structure of the taxation also increases the cost of hiring a US worker by 7.65%, an average of about $4,000 per worker annually. This makes US labor less competitive with foreign labor, increasing pressure to move jobs offshore and to replace jobs with robots. It also gives employers a reason to turn employees into contractors or gig workers. The structure of the taxation is undermining US employment – it is harming the humans in our country.
Revenue-Based Social Security and Medicare Contributions
Basing a company’s Social Security and Medicare contributions on its US revenue instead of its US payroll would be a much fairer approach to taxation. It would again ensure all companies that benefit from the programs pay their share of the cost of the programs. It would also make US labor more competitive with foreign labor and robots, and remove some of the cost advantages of hiring contractors or gig workers instead of employees.
The change could be revenue neutral, not a tax cut or tax hike. Businesses already record and report revenue, minimizing the additional paperwork burden. As with any change in tax policies, there will be winners and losers. The losers will be the companies that have minimized their US employment by shifting jobs offshore or to contractor status, that currently get the benefit of the government’s efforts to stabilize consumer spending and our economy but don’t pay for it. The winners will be the companies that employ US workers, working Americans themselves and our country as a whole. We all benefit when there are more jobs available for American workers.
Returning to Human-Centered Capitalism
Social Security and Medicare are still two of the most important, impactful programs in the United States. But how we collect those taxes from businesses is a legacy of a different time and a radically different economy. It is unfair to US producers, makes US workers more expensive to hire and hurts our ability to compete internationally. Ending the employer portion of Social Security unemployment insurance and moving to a revenue-based tax would be a fairer approach that would benefit our country.
This isn’t a grand transformation of our economy; it’s a re-examination and refinement of government to ensure it benefits our country and doesn’t cause unintended harm. It’s an example of how the Forward Party will move our country back to Human-Centered Capitalism. The change won’t be overnight. But this, along with many other incremental changes, will eventually again ensure our capitalist economy benefits all Americans.
_______________________________________
“Human-Centered” is an approach to governance that places the needs of human beings at the center of any policy decisions. We have slipped away from this approach, with proposed new laws and regulations often based more on ideology, on an arbitrary set of beliefs, than their impact on human beings. Getting back to Human-Centered doesn’t require a transformation or re-imagining of government. Instead it requires a different examination of proposed laws and a re-examination of our existing laws, to ensure they are still improving the lives of Americans.
The vast majority of the laws that have been passed by Congress were designed to address specific challenges or opportunities, and most, when passed, did improve the lives of Americans. But we live in a fast paced, constantly evolving world, and often as the world changes our laws don’t keep up. Over time the laws and how they are implemented can slip out of alignment with our economy and society. Sometimes they stop fulfilling their intended purpose. Sometimes how they are implemented contributes to new challenges for society.
The Employers Contribution to Social Security and Medicare are examples. They are two of the most consequential and successful government programs in our history, and a great tradeoff for workers and for companies. Both Social Security and Medicare are income transfer programs. US workers pay 7.65% of their income into Social Security and Medicare, to cover the monthly payments to seniors and their medical costs. In return they have the comfort of knowing when they retire, their Social Security and Medicare costs will be paid by the current generation of workers.
Employers also pay a tax equal to 7.65% of their payroll into Social Security and Medicare. In return, they get the benefits of Seniors with the money to buy their products and a more stable economy with less severe recessions. Again, Social Security and Medicare have been two of the most successful government programs in our history; we greatly reduced senior poverty, stabilized consumer demand and have lessened the severity of recessions that could have turned into depressions.
When Social Security and Medicare were passed in the 1930s, who paid matched up with who benefitted. Foreign trade limited and pretty much every part of our economy required lots of people to get the job done, whether that was producing a car, maintaining records at a bank or routing a telephone call from one home to another. Basing the employer’s portion on its payroll was a simple way of making sure that all businesses paid their share for the benefit they received.
The world has changed. A significant percentage of what is sold to American consumers is no longer produced by American workers. Computers route phone calls and keep track of bank balances. Increasingly cars are produced by robots. Human labor is a much smaller part of creating economic value in our economy.
This change in our economy has caused a disconnect in the tax burden; many of the companies that benefit from the government’s economic stabilization and Seniors being able to buy their products pay very little for that benefit. Essentially the companies that employ US workers are subsidizing those that don’t.
The structure of the taxation also increases the cost of hiring a US worker by 7.65%, an average of about $4,000 per worker annually. This makes US labor less competitive with foreign labor, increasing pressure to move jobs offshore and to replace jobs with robots. It also gives employers a reason to turn employees into contractors or gig workers. The structure of the taxation is undermining US employment – it is harming the humans in our country.
Revenue-Based Social Security and Medicare Contributions
Basing a company’s Social Security and Medicare contributions on its US revenue instead of its US payroll would be a much fairer approach to taxation. It would again ensure all companies that benefit from the programs pay their share of the cost of the programs. It would also make US labor more competitive with foreign labor and robots, and remove some of the cost advantages of hiring contractors or gig workers instead of employees.
The change could be revenue neutral, not a tax cut or tax hike. Businesses already record and report revenue, minimizing the additional paperwork burden. As with any change in tax policies, there will be winners and losers. The losers will be the companies that have minimized their US employment by shifting jobs offshore or to contractor status, that currently get the benefit of the government’s efforts to stabilize consumer spending and our economy but don’t pay for it. The winners will be the companies that employ US workers, working Americans themselves and our country as a whole. We all benefit when there are more jobs available for American workers.
Returning to Human-Centered Capitalism
Social Security and Medicare are still two of the most important, impactful programs in the United States. But how we collect those taxes from businesses is a legacy of a different time and a radically different economy. It is unfair to US producers, makes US workers more expensive to hire and hurts our ability to compete internationally. Ending the employer portion of Social Security unemployment insurance and moving to a revenue-based tax would be a fairer approach that would benefit our country.
This isn’t a grand transformation of our economy; it’s a re-examination and refinement of government to ensure it benefits our country and doesn’t cause unintended harm. It’s an example of how the Forward Party will move our country back to Human-Centered Capitalism. The change won’t be overnight. But this, along with many other incremental changes, will eventually again ensure our capitalist economy benefits all Americans.