Shifty Analysis

by Don Boudreaux on August 22, 2010

in Other People's Money, Reality Is Not Optional, Social Security, Taxes

Here’s a letter to the New York Times:

Monique Morrissey wants to fix Social Security by forcing employers to “pay their share of the [Social Security] tax on their employees’ full salaries” rather than on only the first $106,800 of each employee’s annual earnings (“Employers Should Pay Up,” August 22).  She illustrates by pointing out that, under her proposal, LeBron James’s employer, the Miami Heat, would pay an additional $900,000 annually in Social Security taxes.

Ms. Morrissey’s scheme might or might not “fix” Social Security.  Either way, though, these additional taxes would be paid in large part, not by employers, but by employees.  Knowing that they must pay more to Uncle Sam for each employed worker, employers would offer wages and salaries lower than they offer with the current cap in place.

LeBron James might possess unique-enough talent to arm-twist an NBA franchise into paying higher annual taxes on his behalf without reducing his take-home pay.  It’s doubtful, however, that ordinary accountants, high-rise construction workers, supermarket managers, and other employees whose annual earnings exceed the current Social-Security-tax cap will be as fortunate.

Donald J. Boudreaux


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