Penalties on Employment
OCTOBER 01, 1980 by RALPH BRADFORD
Mr. Bradford, of Ocala, Florida, is well known as a writer, poet, speaker, and business organization consultant.
Among those who deplore the ravages of Big Government, there is a tendency to dwell upon aggregate figures, rather than on individual experiences. Emphasis is apt to be placed upon the billions that are being exacted from the taxpayers collectively and squandered by the bureaucrats upon seemingly useless activities.
Such concern, of course, is as it should be. More power to any writer or speaker who can find new ways to drive the message home convincingly! For the hour is late—very late. Slowly but surely our country is being reduced to bankruptcy in the name of alleged social and economic progress. And the people collectively are paying the bill and will ultimately suffer the consequences in a further stifling of initiative and curtailment of freedom.
But of late I have been thinking about what all this supergovernmentalism is doing to Jim Smith, Henry Jones, Mary Brown and millions of their social and economic counterparts as individuals—how much time and work and money they are forced to expend in ridiculously complicated, Federally-generated bookkeeping, reporting and fee paying.
My interest was further quickened by a letter that came to me not long ago from a mid- western friend of long standing. Before his retirement he was for years the General Manager of a large national Trade Association. He is also a Certified Public Accountant and a Financial Analyst; and he is therefore better qualified than most taxpayers to keep records and fill out complicated forms. With his letter to me he enclosed a copy of one he had written to a high government official, in which he had set forth some of his experiences as an enforced paper shuffler.
And because his ordeal, with slight variations as to detail, has probably been duplicated by several million other Americans I am, with his permission, giving the gist of his experience in the following paragraphs.
First, as to his status, he is a retired businessman, a widower, who employs a part-time housekeeper. For twelve years after his wife died he employed a live-in housekeeper; but he reports that after her retirement (and after interviewing twenty other women) he has been unable to secure another. In his search he found that many women who formerly did domestic work now dwell in government-subsidized apartments at low rentals, and subsist on Federal Social Security payments, bank interest, and other types of income. But he has also found, he adds, that such women seem pleased with their situations. While their incomes are low and their living standards are not high, they are generally happy, since “they do not have to work.” Their desire and will to work, he believes, have been destroyed.
His present part-time domestic employee, he reports, is paid the Federal minimum hourly wage, together with her meals and several other benefits; but in order to employ her legally he is required to execute and file thirteen different forms, and pay a total of $442.35 a year in Federal Social Security taxes, and state and Federal unemployment insurance taxes. This he must do in order to be allowed to furnish employment to a person who seriously needs it!
The employee has both a heart and an eye condition that would make it very difficult for her to secure other employment. So his use of her services fills a real social need; and he says she is very happy with her work. But . . . . he must do all that paper work, and dig up nearly $450 over and above her wages, for the privilege of giving her employment that is beneficial to her and to society at large, as well as to him.
When she was first hired, he was required to prepare and file a paper called Form UC01—“a report to determine status of domestic employment.” Then he had to file Form 327, to show that he is not a retailer, a wholesaler, or a manufacturer. Then every three months he is required to prepare and file Form 942 Federal Aid Security, pay 6.13 per cent of her wages in taxes and deduct that amount from her wages—a total tax of 12.26 per cent of her wages. At year’s end he must prepare and file with Internal Revenue Service Form W 2, showing her total wages and taxes—and a copy of this report must also be given to the employee.
Then every three months he must also prepare and file Form UC-D, namely, Employer’s Contribution Report for Unemployment Insurance, together with Form UC 3-T; and must pay 3 per cent of her wages in such taxes. Incidentally, another form, which shows the employee’s name, Social Security number and the amount of such taxes in her case, must be sent to a Michigan Avenue address in Chicago, whereas the other form (UC 3-T) must be sent to a different Chicago address.
Endless Filing and Duplicate Reporting
Maybe there is some matter of bureaucratic efficiency or convenience involved in such a requirement, but one wonders why these two reports couldn’t be combined and sent to the same address, thus saving printing costs, extra envelopes, and extra postage cost to the taxpayers. A small matter of maybe only fifty cents or less to each individual? Yes—but not small when you multiply it by many thousands, and possibly by several million.
But my employer friend is not yet finished with his paper work. At the end of each year he has to prepare and file Form 940, the Employer’s Annual Federal Unemployment re turn, showing the total wages paid to his part-time housekeeper. At the same time, he must pay 7 per cent in taxes to the Internal Revenue Service.
He tells me that he could also face the possibility of completing and filing twelve more forms each year. This could happen if his four-days-a-week housekeeper, who pays a total of about $150 a year in Federal and Illinois income taxes, should ask him to withhold such Illinois taxes from her pay, so she would not have to make the single payment on April 15th. This would involve his completing Form IL 501 (Illinois Employers Income Tax) on the first and second months of each calendar quarter, paying such withheld taxes, and then completing and filing another form (IL 941) showing total wages for the quarter, on the third month of each quarter. These three forms and three remittances would be mailed quarterly to the Illinois Department of Revenue at Springfield. So far my employer-friend has been spared this particular load of paper work; but it would be required of him if his employee should decide she wants him to withhold these taxes from her pay. If this should happen, he estimates that a minimum of two and a half days of time each year would be required to complete, file, record, issue checks, and mail, in order to comply with the law.
Rules and Regulations
For many years defenders of the so-called liberal program of our government (high employment at good wages with attendant social benefits) have sung the praises of its al leged advantages. Seldom do they mention the wasteful, time-consuming, sometimes ridiculous rules and regulations that have become a part of that program.
To some extent this results from the long-established “liberal” notion of labor as an abused commodity—a mass of underprivileged, downtrodden wage slaves; and of employ ers as big-bellied cartoon types, or as huge and soulless aggregations of capital. Partly it inheres in any bureaucratic management of the minutiae of our lives.
Apologists for the system of so-called benefits for thousands of marginally-employed workers are either unaware of or indifferent to the problems faced by the employers of such labor, who are almost as numerous as the workers themselves. An example is the case of my friend, who, because he employs a part-time housekeeper, must prepare and mail 13 different forms, and possibly 12 more forms for a yearly total of 25; must enter in his personal financial records the figures upon which to base the issuance of nine checks for a total yearly payment of $442.35 in Federal Social Security taxes, plus both Federal and Illinois State unemployment insurance taxes on the cash wages of $4500.
On top of all this, he says that domestic employment in 1980 will come under the Illinois Workmen’s Compensation Act, and he will have to secure an appropriate insurance policy at an annual premium of about $75. This coverage, he notes, would be included at very low cost to him (only $4.75 per year) under the liability section of his regular Homeowner’s Insurance policy! Thus an employer is again to be penalized for furnishing some much-needed employment and income.
What is the alternative to such nonsense? One sensible way would be to allow the free- market economy to take its beneficial course. The problem is simple. A man needs a part- time housekeeper. A woman with some health problems is nevertheless able and anxious to perform the household tasks involved. She is willing and eager to work. He is anxious to employ her services. So . . . .
Why not simply let them strike their bargain without invoking and involving the ponderous, costly and time-consuming machinery of the U. S. Government and the State of Illinois? Such a program would, of course, be looked upon by the disciples of Statism as wrong, reprehensible and reactionary, and to propose it seriously is to invite their scornful condemnation.
There is, of course, another alternative. To mention it here is not to propose it, and certainly not to endorse it. I refer to the so-called underground system. Under it, neither employer nor employee makes any reports to government at any level. The wages are paid from hand to hand in cash on an agreed basis; nobody makes any reports; nobody pays any fees or taxes. Naturally such arrangements are not publicized, and nobody knows how widespread the practice may be.
The evil in the “underground system” is that it encourages people to break the law, and causes disrespect for government. And the evil is not removed, even though it is perhaps slightly modified, by the gloomy fact that people who practice it do so to evade the senseless exactions of their own government!
Significant bits of light are cast on this problem in two letters received by my troubled friend. One was from the Nobel prize-winning economist and social philosopher, Dr. Milton Friedman. In his usual forthright way, Dr. Friedman said: “You wrote an excellent and clear letter to (the “high government official” above referred to) about the incredible paper work and taxes, just to employ a part-time housekeeper legally. What a mess we are in.”
By contrast, the other letter was from an assistant to the said high government official—written after some two month’s delay in response to an urgent follow-up by my friend. It said:
“The amount of mail received . . . . . in recent months makes it impossible for us to respond . . . . with as much detail as we would like. However, you may be sure that we have noted your remarks.”
Some day an inspired composer may set that line to soul-stirring music and give us a new National Anthem: “Brother, we have noted your remarks!”
Well . . . . there it is: One troubled and troubling echo from our statist society; one bit of honest pretest; one small, exasperating incident which, multiplied by millions, ends in national frustration, and points to bankruptcy. And a nagging question keeps intruding:
Is it possible—just possible—that somewhere in the crowded corridors of Washington and other capital cities there is room for the exercise of a little ordinary horse sense?