Withholding Taxes Made Easy : Reform needed in absurd law that encourages people to ignore it
Paying Social Security taxes for baby-sitters, cleaning women and other household helpers who are paid more than $50 over a three-month period is a mind-boggling hassle. So now that more people know exactly what is required--in the aftermath of the Zoe Baird melodrama--Congress ought to make the chore much less burdensome. It needs to change the law, and change it fast. Laws that are absurd on their face undermine public confidence and inspire lawbreaking.
Rep. Dan Rostenkowski (D-Ill.) has introduced a bill that would raise the income threshold to $300 a year, eliminate quarterly filings and allow employers to file the Social Security taxes with their annual income tax returns. That’s a start toward reducing paperwork and making payment more convenient. But the amount of income that triggers the requirement should be raised much higher. The current level of $50 a quarter, set nearly four decades ago, is wildly unrealistic. That 50 bucks currently represents the weekly rate for many housekeepers or baby-sitters.
Despite all the headaches of obeying even a reform law, payment of these taxes should be required to protect the cleaning women, baby-sitters and other household workers in their old age. These hard-working employees deserve Social Security benefits, the only retirement income for which many may qualify, when they can no longer scrub toilets, iron clothes, wash windows or chase after kids.
The Federal Insurance Contributions Act has required the quarterly payments since 1954. Yet a generation of cleaning women, largely poor, has been denied even the lowest level of benefits because employers failed to pay the required Social Security taxes. In part that’s because the 1954 law has been an absurdity more honored in the breach than the observance.
Noncompliance continues to be widespread even when the legality of a worker is not a complication. Barely 500,000 households paid the requisite taxes last year, according to IRS estimates; Commerce Secretary Ronald H. Brown and many other Americans did not. At least four times that number were required by law to do the paperwork and pay up, at a rate of 7.65% of wages. (An additional 7.65% is paid either by the employee or the employer.)
To encourage compliance with this and other employment taxes, Washington ought to proclaim a temporary amnesty for past violators. The IRS ought to help people muddle through the hours of paperwork and figure out what they owe. Everyone ought to have a chance to pay without penalty.
If there is to be better compliance in future years, Congress needs to ease the requirements and toughen the penalties. Fairness, to household employees and employers, demands nothing less.
