If Obama wins, this company will fire some employees

One of my former students sent this message to his managers:

------ Forwarded Message------
From: CEO
Date: Tue, 19 Feb 2008
To: managers
Subject: Food for thought

Some Presidential candidates have suggested removing the limit upon which social security taxes are imposed on wages. Right now, the first $102,000 of an employee’s W-2 income is subject to the withholding tax of 6.2%. And the employer matches that amount.

Currently employees who earn more than $102,000 in a calendar year are not taxed 6.2% for social security on amounts above that and the company does not make any matching social security contributions for wages over $102,000. (which is one reason January’s payroll costs are always higher than December’s).

In 2007 more than 45 of our employees earned in excess of $102,000. Under the plans being floated, each of these employees would pay 6.2% more in taxes on the difference between $102,000 and their total pay. (e.g., if you made $202,000, your tax bill would have been $6,200 higher than it was.)

Our treasurer estimates that had the change been in effect for 2007, our employees would have paid an additional $500,000 in social security taxes. The employees paid and the company matched $410,000 in social security taxes in 2007.

Increasing the tax may be fair and just, depending upon your political ideology and your view of taxes and government spending and how much you pay now.

But consider this: What none of the press accounts bothers to mention is that employers must match this amount. Had the tax change been in effect for 2007, our company would have owed another $500,000 in matching social security taxes, (over and above what would be withheld from employee’s pay) almost certainly creating a situation where major cuts would have been necessary.

Just something to consider.