I don’t have enough good ideas to flesh out what I think should be done about small business and contractors. Just complaints.
I do think if you hire on any day labor or independent workers that there should be Medicare payments made based on the total wages claimed.They don’t have to be attached to an individual but should be paid directly into the IRS. Then the contracted individual will not be liable for that 1.45% . I would like to do the same for social security tax but don’t know how to figure benefits when someone has paid only .062 instead of .124 as a W-2 employee. Somehow that is being ignored by the husband/wife 150% benefit payout . (I’m not bitter just: concerned like Susan Collins.
This is confused.
If a person is a contractor or proprietor of a small business, they pay .124 on their Schedule C. And the entity hiring them as a contractor pays zero.
So from SS’s point of view, whether that worker is a contractor or a W-2 employee is immaterial. Likewise there’s no difference between a sole proprietor whose gig makes a profit versus a sole prop who pays themselves a salary equal to what would otherwise be their profits. SS gets the same cut either way. By design.
This is handled by the general design of the system as a redistribution system, not a personal savings account system. The redistribution occurs both across space, where you’re getting other people’s money and they’re getting yours, and also across time, where money coming in today is paying for benefits earned years ago. And through the trust fund, money coming in today will be used to pay benefits in the years ahead too.
Blockquote This is confused.
If a person is a contractor or proprietor of a small business, they pay .124 on their Schedule C. And the entity hiring them as a contractor pays zero.
Blockquote
This is what I want to change. Right now a business can use independent workers Ha Ha and nothing goes to Medicare . The worker claims expenses and leaves the value of his labor as zero with zero FICA . The system suffers and the worker suffers.
You mansplained the system to me with irrelevant information about redistribution. We are trying to find solutions to a system that is not self sustaining as it is today.
Actually that’s not correct. Contractors pay .124 to SS. And they also pay .029 to Medicare. Via Schedule C. The tax take going to Medicare is identical with a 1099 contractor and with a W-2 employee. That is a total non-issue.
I agree completely with you that the current system is unsustainable without at least some changes. But the 150% husband/wife thing you mention is hardly the problem. It’s been built into the system since the IIRC 1970s.
The system needs tweaking. But it’s helpful to have a clear understanding of both the problems and the things that are working well.