House Panel Votes to Modify ‘Nannygate’ Tax Regulations

A House subcommittee, reacting to the “nannygate” scandal that sank President Clinton’s first choice for attorney general, voted Wednesday to raise the amount that domestic workers need to earn before their employers must pay Social Security taxes for them.

Under an existing but rarely enforced law, employers are required to report and pay Social Security taxes for any domestic worker who earns more than $50 in a calendar quarter.

Under a revised rule approved by the House Ways and Means Committee’s subcommittee on Social Security, the $50-per-quarter threshold would be raised to $1,750 per year. Proponents argued that a higher threshold would encourage more employers to comply with the law.

Even the IRS has admitted that practically no one obeys the current law, enacted in 1950 when the $50 threshold seemed reasonable. But a previous attempt to raise the threshold to account for more than two decades of inflation failed when a tax bill to which the changes were attached was vetoed by then President George Bush.

The law received new attention, however, after attorney Zoe Baird was forced to withdraw her nomination as attorney general in January when it was disclosed that she had hired two illegal aliens as domestic workers and had failed to pay their Social Security taxes.

The new rule must now be approved by the full Ways and Means Committee and is expected to be sent to the House floor as part of the Clinton Administration’s budget package later this year.