June 16, 2011

What if?

by Chris Feeney

What if everybody was self employed? I suspect there would be far fewer Democrats or Republicans in the United States of America.

Sure that is a simplistic look at America's partisan struggles, and unarguably biased by this author's personal politics, but please allow me a moment to try to explain the opinion.

The mindset is rooted in my personal transition from the left to the right, which coincidentally enough coincided with my move from the ranks of employees to employer. If everyone was self employed, we would eliminate much of this great divide.

But instead of donkeys and elephants, let's focus on the employment part of the opening statement.

When President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, it was championed as legislation that would provide vital tax relief and investments in our nation's workers that would create jobs and accelerate economic growth.

Sounds great. But so do all the wonder drugs whose commercials bombard us daily. They are free to make outrageous claims about all of their benefits as long as they hide somewhere in the fine print the disclaimer that the statements have not been evaluated by the Food and Drug Administration and the fact the "drug" is not intended to diagnose, treat, cure, or prevent any disease.

I'd at least feel better about political marketing if they were forced to follow drug commercial rules, and list all the possible side effects at the end of the sales pitch.

But I digress... back to jobs, or lack of, being created by the Job Creation Act of 2010.

In my eyes, one of the key components of the bill was the extension of unemployment benefits for an estimated 7 million out-of-work Americans through the end of 2011. I'm not heartless, so I agree with aiding those who have lost their jobs due to the tough economic times.

However, would it not make more sense to find them a job instead of paying them for not working? At what point in time does it become logical to stop paying unemployment, and instead start paying businesses to create more jobs?

This isn't a new idea, but I still am shocked why it doesn't get more support. Turn unemployment benefits into a rewards program for businesses that create new jobs.

Right now, unemployment benefits only benefit the unemployed. The job rewards program would benefit the unemployed, by giving them a job; the employer, by returning some of their tax dollars while investing in true economic development; and the economy overall by boosting production, and ultimately adding to the tax base.

Another part of the 2010 legislation was the payroll tax reduction of 2%. Of course that was on the employee side of the tax calculation, allowing over 155 million workers tax relief of about $112 billion in 2011.

Again, I'm all for tax relief for the worker. But where is the aid for the employer?

If you have never signed a paycheck, you might be unaware that United States businesses pay for the right to employ.

According to the March 2011 report by the U.S. Bureau of Labor Statistics, approximately 8% of the average compensation package for employees consists of legally mandated fees such as worker's compensation as well as Social Security and Medicare taxes not to mention unemployment taxes.

While the Job Creation/Tax Relief effort did lower the Social Security contribution rate for employees from 6.2% to 4.2%, it did nothing to help employers. We still must contribute 6.2% of each employee's salary, not to mention 1.45% for Medicare. That's right, employers pay a 7.65% tax for the right to offer you a job.

Wouldn't it make more sense, to give the tax break to the employer? If there are no jobs, then there is no Social Security or Medicare tax being generated. The employee receives the Social Security and Medicare benefits (hopefully) in the future. The employer just gets 1/2 the bill, along with picking up the tab for the unemployment benefits extension. No wonder no one is in a hurry to create more jobs, it costs too much.

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