May 27, 2005
One More Scam for Wealthy to Escape Social Security Taxes
Its ridiculous how many ways the rich escape paying social security taxes and dump the costs on regular working people.
Yesterday, J. Russell George, the Treasury's inspector general for tax administration, testified that many high-income small business owners were using what is known as an "S Corporation" to officially pay themselves low or no salaries, thereby escaping social security tax, and pass that income on directly as individual profit. The amount of money involved is impressive:
In the 2000 tax year, nearly 80% of all "S" corporations were fully- or more than half-owned by a single shareholder. In such cases, the business owner determines his own salary, George said. A lower salary means lower employment taxes and higher profits, he said..."The different tax treatment has caused the 'S' corporation form of ownership to become a multibillion dollar employment tax loophole for single-shareholder businesses," George said.I know the party line is that Democrats are not supposed to suggest reforms to the social security system, but it is pathetic that progressives have been putting up with a system for decades that imposes burdensome taxes on working people, while leaving so many loopholes for the wealthy to escape fair contribution to the system.
In the 2000 tax year, the owners of 36,000 single-shareholder 'S' corporations received no salaries at all despite each having operating profits of more than $100,000, he said. As a result, there were no employment taxes paid on $13.2 billion in profits, George said.
Posted by Nathan at May 27, 2005 08:22 AM