[Congressional Record Volume 146, Number 93 (Tuesday, July 18, 2000)]
[House]
[Pages H6380-H6382]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RIGHT-TO-KNOW NATIONAL PAYROLL ACT
Mr. SAM JOHNSON of Texas. Mr. Speaker, I move to suspend the rules
and pass the bill (H.R. 1264) to amend the Internal Revenue Code of
1986 to require that each employer show on the W-2 form of each
employee the employer's share of taxes for old age, survivors, and
disability insurance and for hospital insurance for the employee as
well as the total amount of such taxes for such employee.
The Clerk read as follows:
H.R. 1264
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Right-To-Know National
Payroll Act''.
SEC. 2. DISCLOSURE OF FICA AND MEDICARE TAX ON W-2 FORM.
(a) In General.--Subsection (a) of section 6051 of the
Internal Revenue Code of 1986 (relating to requirement of
receipts for employees) is amended by striking ``and'' at the
end of paragraph (10), by striking the period at the end of
paragraph (11) and inserting a comma, and by inserting after
paragraph (11) the following new paragraphs:
``(12) the total amount of tax with respect to the employee
imposed on such person under--
``(A) section 3111(a),
``(B) section 3111(b),
``(C) so much of the tax imposed under section 3221(a) as
relates to section 3111(a), and
``(D) so much of the tax imposed under section 3221(a) as
relates to section 3111(b), and
``(13) the total amount of tax with respect to the employee
for old-age, survivors, and disability insurance and for
hospital insurance, which is the sum of--
``(A) each of the amounts shown under subparagraphs (A)
through (D) of paragraph (12), plus
``(B) the amount shown under paragraph (6).''
(b) Effective Date.--The amendment made by subsection (a)
shall apply with respect to remuneration paid after December
31, 2000.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Texas (Mr. Sam Johnson) and the gentleman from California (Mr. Matsui)
each will control 20 minutes.
The Chair recognizes the gentleman from Texas (Mr. Sam Johnson).
General Leave
Mr. SAM JOHNSON of Texas. Mr. Speaker, I ask unanimous consent that
all Members may have 5 legislative days within which to revise and
extend their remarks and include extraneous material on H.R. 1264.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I think every Member would agree that our American
workers pay too much in taxes, and with a $2.2 trillion surplus it is
time for Washington to give our workers relief from a crushing tax
burden. Unlike most Democrats, I believe our workers have earned a tax
refund. I also think they are entitled to know the whole truth about
how Washington secretly takes more of their hard-earned money than they
might realize.
Many workers simply do not realize the actual tax burden that
Washington imposes on them. For instance, as every working American
probably knows, each January we get a W-2 form. This W-2 form shows how
much money we made and how much we paid in taxes during the previous
year. But the W-2 simply does not show the whole picture. It fails to
show how much tax your employer pays to Washington on your behalf.
{time} 1115
Many people are not aware that half of all of their payroll taxes,
which are separate from their income taxes, are paid by the employers.
In fact, yesterday I met with communications workers in my district who
complained that their payroll taxes were too high and yet they did not
realize that Washington takes the same amount from their employer, too.
That is because current W-2s do not show the employer's share of the
payroll tax burden.
This is a typical Washington sleight of hand. The money they take
from an employer is money that could have gone to the employee, either
by increasing their take-home pay or providing better retirement or
health benefits.
Why does one think they hide it? Because they know that once the
truth is out, bureaucrats cannot keep spending everyone's money to
increase the size of government. This bill will change that by showing
America the whole truth.
In this legislation, the Right-to-Know National Payroll Act,
employers will disclose their share of Social Security and Medicare
taxes on each of our annual W-2s. This common sense legislation should
have been law last year but the President vetoed it, along with much-
needed other tax relief.
So I am pleased that we are able to address this issue once again.
Working Americans have a right to know the total amount of their
paycheck that goes to Washington and they have a right to know the true
extent of their payroll tax burden. It is clear that Washington takes
too much money from our workers and it is time to let the sunshine
shine on Washington's book of tricks.
Mr. Speaker, I yield such time as he may consume to my friend, the
gentleman from Michigan (Mr. Hoekstra), the sponsor of this bill.
Mr. HOEKSTRA. Mr. Speaker, I thank my colleague, the gentleman from
Texas (Mr. Sam Johnson), for yielding me this time.
Mr. Speaker, for 7 out of 10 households, the FICA tax, also known as
the payroll tax, is the greatest of all taxes that they pay. Yet half
of the payroll tax is hidden from the employee's view.
Current law requires employers to annually issue all of their
employees a W-2 form, a written statement that shows their total wages
and the amount withheld in taxes for the previous year. However, the
information
[[Page H6381]]
on American workers' W-2s does not tell the whole story. The 12.4
percent Social Security tax and the 2.9 percent Medicare tax are split
equally between employers and employees. Current W-2s disclose only the
employee's half of the cost of these programs.
Many workers are probably unaware of this employer contribution to
Social Security and Medicare, which my colleague from Texas just
pointed out, which also makes them unaware of how much their employment
actually costs. It is possible that if the employer were not required
to pay payroll taxes, or if the payroll tax was reduced, a portion of
this money might go to the employee. Not only does this lack of
information hide from employees the true cost of their employment but
it also makes them uninformed about how much of their paycheck funds
two government programs which are vital for their retirement security,
Social Security and Medicare.
The Right-to-Know National Payroll Act would require employers to
simply disclose their share of both Social Security and Medicare taxes
on each employee's annual W-2. Implementing the right-to-know payroll
form is as simple as changing the format of a current W-2 form because
employers actually calculate these costs annually. For employers, the
right-to-know payroll form helps workers understand the constraints
employers face when seeking to create jobs, increase pay and compete
effectively in a global economy, and shatters the myth that taxes and
mandates can be placed on employers without affecting the workers
themselves.
For workers, the right-to-know payroll form allows them to compare
the benefits and costs of various government programs and helps to
raise the awareness of employment-related public policy and how it
affects their jobs.
Language from the Right-to-Know National Payroll Act was included in
the Financial Freedom Act of 1999. The concept has been endorsed by the
Cato Institute and The Heritage Foundation. I thank the Committee on
Ways and Means for bringing it back up today.
The Right-to-Know National Payroll Act came out of discussions I had
several years ago with the Mackinac Center of Public Policy in
Michigan. The Mackinac Center thought it was important for workers to
know the total cost of taxes and government programs and developed the
right-to-know payroll form for use by employers. The right-to-know
payroll form is now being used by hundreds of businesses across the
country and by the State of Michigan.
The purpose of this legislation is simple. For too long, the
government has taken taxes from employers and hidden this information
from employees. It is time to give employees information about the full
cost of their Federal benefits. I urge my colleagues to support H.R.
1264.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield such time as he may
consume to the gentleman from Colorado (Mr. Tancredo).
Mr. TANCREDO. Mr. Speaker, I rise in support of H.R. 1264, the Right-
to-Know National Payroll Act, offered by my friend, the gentleman from
Michigan (Mr. Hoekstra).
In Colorado, there was an employer who at one point in time opened
two windows giving his employees payments in cash at one window for all
the time. They went to the next window and he took from them the taxes
they had to pay back. The fact is that IRS made him stop that practice
because it was too truthful. They had to know exactly what was being
paid. The employer wanted the employees to know how much they were
making, how much it was costing him to employ them so he gave them
their total payment in cash. They moved to the next window, as I say,
and they had to pay back their income taxes, their State taxes and
their Social Security taxes so that they would have a sense of exactly
what it was that taxes were costing them.
Now, this only went on for a relatively short time until, as I say,
the IRS stepped in and said this cannot be done. They disallowed it.
But from my point of view, this proposal, the proposal of the gentleman
from Michigan (Mr. Hoekstra), H.R. 1264, is in the vein of full
disclosure.
As the previous speakers have alluded to, this will help workers
understand the constraints employers face when seeking to create jobs,
increase pay and compete effectively in a global economy, and it
shatters the myth that taxes and mandates can be placed on employers
without affecting workers themselves.
More importantly, it allows workers to compare the benefits and costs
of various government programs and helps raise awareness of employment-
related public policy and how it affects their jobs.
I want to stop there, for the previous speakers have talked about the
merits of the legislation. The support and the news articles that it
has received from those around the country speak for itself, but I want
to turn to the problem of hidden taxes.
Today, the average Federal tax burden is around 20 percent but, of
course, it is not the true cost of taxation. We still have State and
local taxes, as well as thousands of dollars in so-called hidden taxes;
taxes the Americans pay but never see, primarily because they have been
added to the cost of goods and services or resulted in a reduction in
pay.
These include hotel taxes added to the cost of the hotel room;
stadium taxes included in the price of a baseball or football ticket;
highway and airport taxes added to the cost of gas and airline tickets.
It also includes the employee's burden of financing Social Security
and the Medicare system, for workers are being deceived when taxes are
imposed on business. A careful employee can look at the pay stub and
figure out that Social Security and Medicare payroll taxes consume 7.65
percent of his income, but will he or she know that another 7.65
percent is being paid on his behalf by his employer?
This is money that otherwise would go to the employee's paycheck.
Sadly, the worker never knows it exists in the first place. It is
because of this and some estimate that the average taxpayer, in
reality, pays over 40 percent of his or her income in taxes. This is an
abomination. As many of my colleagues here in the House know, and I
know, I was elected to Congress in an effort to reduce the tax burden
on the American families and to reduce the size of government. We are
all making strides in this regard.
A great deal of work certainly remains to be done in the area of
hidden taxes. The bill we are considering today starts the process of
informing the public about hidden taxes and lets them know that both
themselves and their employers contribute to the solvency of the Social
Security and Medicare funds. I urge my colleagues to support this good
government legislation, and I thank my good friend, the gentleman from
Michigan (Mr. Hoekstra) for bringing the bill to the floor.
Mr. MATSUI. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I was asked about 15 minutes ago to manage this bill. We
apparently on this committee could not find anyone to manage this piece
of legislation. No one thought it was significant enough to take the
time to manage so I kind of am stuck with this responsibility. My
understanding of this legislation is that right now on the W-2 forms
there is an aggregate number of the FICA tax and the HI tax, and what
this basically will do will break it up into employer/employee taxes.
Now, bear in mind that the information is already provided by the
Social Security Administration. Beginning this year, the Social
Security Administration will be sending out, on an annual basis, to
everybody that pays the payroll tax the aggregate amount over the
lifetime of the individual of both the HI tax and the payroll tax, the
FICA tax, and broken down from management, or the employer and employee
side.
So that information is provided. There is no secrecy involved in it.
It will be provided to every taxpayer, every employee, on a lifetime
basis every year. So there is no secret to it.
In fact, what this will do is probably put an additional small burden
on the employer, because now the employer perhaps will have to go back
to the computers and make some adjustments, but I guess that is not an
unfunded mandate although I am not quite sure. It could be an unfunded
mandate, but I do not think anybody will object to it because it is not
that big of a deal. Most employers will probably be able to do it.
[[Page H6382]]
I might also say, just to have no misunderstandings about this, that
we are not going to oppose this legislation. The more information to
the public, the better off we are, and if breaking it down from
employer, employee side gives more information to the average citizen,
more to it.
The only problem is that I did hear on the other side, as I was
coming in, that the whole issue of true costs, then people will be able
to figure out the real true costs, and obviously rate of return they
are going to get but this really will not have any relevance to that
because I have done a lot of studies on Social Security. And the fact
of the matter is that right now the overhead costs on one's Social
Security benefits, the money coming in and going out, is about 1
percent. We have done some studies, had some hearings in the Committee
on Ways and Means, the Subcommittee on Social Security, and we find
that actually the costs of maintenance, if one privatizes and actually
invests in the private market, is about 20 percent, because there are
fund managers and all of that, and we are not going to put that on that
W-2 form because that would be too much trouble. Then once there are
the aggregate benefits in the trust fund and one is ready to retire
then they have to amortize the account. That will cost another 20
percent. So we are talking anywhere from 35, 40, maybe even 45 percent,
in terms of the overall cost if the Social Security system is
privatized; whereas the overall cost is 1 percent in terms of the
current Social Security system.
So this does not give anybody any comparison. Again, as I said, the
more information the better off we are and so we are not going to
oppose this.
Just in conclusion, it would be my hope that we begin to focus on the
real issue of Social Security, is that how do we deal over the next 35
years with the fact that we are going to have a 25 to 30 percent
shortfall in the Social Security system? That is a big issue, and we
need, on a bipartisan basis, to come up with a solution to that,
because that is going to hit us much sooner than we expected. The
reality is that we cannot leave the uncertainty in the system that we
currently have.
{time} 1130
Mr. Speaker, I urge a yea vote on this resolution, and I yield back
the balance of my time.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume to just remind my colleagues that we are trying to put
sunshine on the issue, and it was a Republican Congress that started
this by making the Social Security Administration report at all.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Michigan (Mr. Hoekstra) for closing.
Mr. HOEKSTRA. Mr. Speaker, just to make sure there is no
misunderstanding between us and our colleague from California,
currently a W-2 form does not require the employer's share to be
reported, so the W-2 form only lists the employee's share.
What this legislation will require is that on the W-2 form, both the
employer and the employee's share of the FICA tax will be listed. This
will allow employees to fully understand the true cost of their
employment. This is a process that a number of people have already
taken steps toward; that this is good government. Hundreds of companies
are doing this. The State of Michigan has added this in.
Mr. Speaker, I thank my colleague from the other side of the aisle
for encouraging a ``yes'' vote in support of this.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield back the balance of my
time.
The SPEAKER pro tempore (Mr. Isakson). The question is on the motion
offered by the gentleman from Texas (Mr. Sam Johnson) that the House
suspend the rules and pass the bill, H.R. 1264.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
____________________