House Panel Votes to Simplify Taxes on Domestic Workers

The House Ways and Means Committee on Tuesday voted to simplify the way Social Security taxes and unemployment insurance are paid for domestic workers.

The panel voted to raise the wage threshold from $50 in each calendar quarter to $1,750 a year in 1993 and to index it for inflation thereafter. In addition, employers of domestic workers would be permitted to pay the tax when they file their personal income tax returns and they could authorize deductions from their paychecks throughout the year to pay for it.

The measure--part of the Clinton Administration’s $242-billion deficit reduction legislation--was adopted by voice vote. The issue came to public attention earlier this year when Zoe Baird’s nomination to be attorney general failed after she admitted that she had not paid the Social Security tax for her domestic workers.

The current threshold of $50 a quarter was adopted in 1950. The law now requires quarterly payments to the Internal Revenue Service. Only about one-fourth of those who owe the taxes actually pay them, officials said.

Rep. Barbara B. Kennelly (D-Conn.) argued that some low-paid workers would lose benefits under the $1,750 threshold and offered an amendment to lower that figure to $1,000 a year. It lost on a 19-19 vote, however.

A committee staff aide said there are about 733,000 domestic workers with only one employer, and 16% of them would lose some benefits under the higher threshold.

The federal threshold for paying unemployment insurance taxes is now $4,000 a year and that would not be changed by the committee action. The measure also would authorize the Treasury secretary to enter into agreements with states to collect state unemployment insurance taxes when federal tax returns are filed.