Recently I got a phone call from an engineering manager I’ve known for over ten years. He informed me that he’d been laid off last spring, but before I could offer condolences he added that he’d been hired by another company in the same industry for a consulting assignment.
That temporary work had lasted over six months but was winding down. He hadn’t been a contract “consultant” before and after some additional small talk told me, “… and I’ve discovered something I never knew.” Anticipating a revelation about a new found inner strength, I listened carefully.
“You know,” he began, “when you work as a consultant, you have to pay twice the withholding for Social Security and Medicare that you do when you work for a company.” I told him that wasn’t exactly true and we discussed briefly the labor burden — those costs the employer pays in the U.S. when they hire someone.
The big story these days is employer provided health benefits, but unfortunately that subject overshadows the longer term liability an employer or company faces when they hire employees; and is certainly one of the reasons why many firms increasingly like “contract” agreements. My friend’s take on having to pay a greater amount to Social Security and Medicare was not “exactly true” because the money “contributed” by the employer was always part of his gross wages, but was obscured by the mechanism of the deceit explicit in the government’s term “employer’s contribution.” I have some experience here. I’ve been a business owner and self employed most of my adult life.
You see, the employer by law must add to and pay the government an amount equal to what he withholds for Social Security and Medicare on a full-time employee’s behalf. If you regularly earn $400 a week, you are responsible for sending $30.60 of that amount to the federal government. (And that’s separate from what you may owe for income tax.)
The employee’s Social Security portion is 6.2% of gross wages up to $106,800 a year; and Medicare another 1.45% of gross wages but without a cut off point. For most of us, the combined 7.65% is our “contribution” to the federal retirement and healthcare systems already in place. But it’s not the total “contribution.”
As stated above, an employer or company that hires you is responsible for an equal “contribution” in your name of an additional 7.65% of your gross wage. Many who work for company’s lose sight of the fact that employers must add that cost of having them on the payroll to their cost of hiring us. Put bluntly, our employee has to account for a profit of at least $430.60 a week in order to justify being on a payroll. And because of the federal government’s demand that his and the employer’s “contributions” must be paid weekly, or monthly according to the government’s demands; the system has a tendency to put its own demands on a company’s cash flow. A company has to have enough profitable receipts to be able to “contribute” their one-half of what is demanded for their employee’s government retirement and healthcare system. And believe me, the government wants “their” money first and doesn’t care what other bills an employer has to pay.
My engineer friend was facing the reality of having to be his own employer so to speak and ante up the total 15.3% all on his own. Like most consultants he’d arranged a fee that paid him an amount from which no deductions were taken. At times like these, we’re all small business owners. It’s sobering. Imagine if there was no withholding and all taxpayers had to write a check at the end of the year. How might they choose to act? These government systems managed by Caesar are soon to be bankrupt. I heard someone report recently that Medicare is in arrears by $38 Trillion.
Fall is typically the season during which the sermons delivered by pastors from church pulpits concern stewardship. In making the case for Christian Stewardship many pastors will visit Genesis and the story of Abel and Cain. Compare and contrast are my favorite means of offering clarity on many subjects so I like the Genesis story of obedience versus selfishness. Many use the Bible to promote the concept of the tithe and if you Google Tithe you’ll come up with a plethora of explanations, indictments and opinions. Generally the percentage of income or produce that we are persuaded God asks of us is ten — 10%.
I can tell you that the tithe is a request that staggers most Christians. Those with work earning $400 a week are not likely to volunteer $40 when the plate is passed on Sunday — yet seemingly ignore the fact that $61.20 was sent to the IRS on their behalf that week.
It’s instructive to remember that the concept of the religious tithe contains a lesson which is not of taxation. It’s argued that all is God’s and all we have comes to us through His Grace. I believe that’s true.
Yet as I sat in the pew recently listening to one of those sermons about “giving” I took a break to recall and pray for my engineer friend’s employment perdicament, I also compared my own hesitation at pledging myself toward a 10% tithe in light of the reality that I was already on the hook to give Caesar 15.3% off the top. Glancing around the sanctuary, the question arose as to whether the bureaucrats at a government office could match our congregation in our common devotion to each other, our Lord; and the missions we support in service to Him.
And it got me realizing that when you compare the two: Caesar and God — 10% is one heck of a deal.
[This article originally appeared on Acton.org and is used by permission of the author.]