To bring back jobs, don’t cut the the corporate tax rate … here’s another idea.

Last week, we asked: if increasing the number of well-paying manufacturing jobs is important —  then rather than the usual proposed bromide of just cutting corporate taxes across-the-board, why not offer employers a double tax deduction for workers’ wages earned in the U.S.?

Here’s a complementary idea (to doubling the wages deduction) that might be worth worth considering …

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Under the Federal Insurance Contributions Act (FICA), employers have to:

(1) withhold Social Security and Medicare taxes from their employees’ wages  and

(2) match the amounts withheld.

In other words, employers must remit (to the Feds) two times the required withholdings for Social Security and Medicare taxes.

Currently,  an employer’s Social Security match is 6.2% of employees’ wages (up to to $127,200) ; the Medicare match is 1.45% for all employees’ wages with no cap.

So, employers have to pay 7.65% of employees wages to the Feds.

Think about that for a minute …

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An employer can “hire” a machine and neither withhold nor, more important, pay FICA taxes.

Advantage to the machine, right?

Or, a manufacturer can offshore labor to some foreign-based factory.

Advantage to the offshore location, right?

Why should an employer be penalized for employing?

That doesn’t make sense.

I say: in lieu of an across-the-board corporate tax cut, eliminate the employer match for FICA – both Social Security and Medicare.

Why not?

Lowers taxes paid by corporations that employee workers in the U.S. …  so, should stimulate hiring and the macro economy.

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But, you say, Social Security is heading towards insolvency …

Yeah, but that’s a separate issue.

As Al Gore pointed out long ago, there isn’t a Social Security lockbox.

All the money flowing into the Feds is fungible … for years, the Social Security Trust Fund has gotten raided for other purposes.

So, handle Social Security as part of the bigger budget challenge … i.e. getting government spending under control and starting to reduce the debt.

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I like this idea because it’s simple … and it’s common sense.

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#HomaFiles

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