“I’m Also Unemployed” – How The Way We Work Has
Changed
During, the 2012 US election, Republican presidential
candidate, Willard M. Romney, quipped, “I’m Also Unemployed.”
http://thecaucus.blogs.nytimes.com/2011/06/16/romney-im-also-unemployed/ Some interpreted this as a joke, an attempt at humor. I did
not. What Mr. Romney was saying is that under the current Social Security law
definition of work, despite his vast earnings, he was not “working.” This is
why The BEST Social Security Modernization Plan proposes updating the
definition of work to bring it into the 21
st century.
The way many of us work has changed. Some of us still
perform physical labor like manufacturing, construction, others in desk-type
job including teaching, but many now earn their living by capital investment in
areas like rentals, the stock market, and other forms of financial speculation.
Make no mistake: those who earn money via financial investment are working.
They are merely using their capital, or the capital of others, rather than
physical or mental skills to do so.
As I noted in my November 26, 2013 post, Social Security has
a history of change and progressively rolling out additions and improvements.
Section 211 of Title II of the Social Security Act was written
to specifically exclude rentals from real estate, stock market gains, and
capital gains from the definition of covered self-employment income at the time
around 1950 when self-employment income became covered under the Social
Security program. The fact that it had to be specifically excluded indicates
that there had been some consideration then of including this type of income as
a self-employment income. Here is a reprinted section of the law:
*****
Sec.
211.
[42
U.S.C. 411
] For the purposes of this title—
Net Earnings From Self-Employment[163]
(a) The term “net earnings from
self-employment” means the gross income, as computed under subtitle A of the
Internal Revenue Code of 1986, derived by an individual from any trade or
business carried on by such individual, less the deductions allowed under such
subtitle which are attributable to such trade or business, plus his
distributive share (whether or not distributed) of the ordinary net income or
loss, as computed under section 702(a)(8) of such Code, from any trade or
business carried on by a partnership of which he is a member; except that in
computing such gross income and deductions and such distributive share of
partnership ordinary net income or loss—
(1) There shall be excluded rentals
from real estate and from personal property leased with the real estate
(including such rentals paid in crop shares, and including payments under
section 1233(2) of the Food Security Act of 1985 (16 U.S.C. 3833(2)) to
individuals receiving benefits under section 202 or 223), together with the
deductions attributable thereto, unless such rentals are received in the course
of a trade or business as a real estate dealer; except that the preceding
provisions of this paragraph shall not apply to any income derived by the owner
or tenant of land if (A) such income is derived under an arrangement, between
the owner or tenant and another individual, which provides that such other
individual shall produce agricultural or horticultural commodities (including
livestock, bees, poultry, and fur-bearing animals and wildlife) on such land,
and that there shall be material participation by the owner or tenant (as
determined without regard to any activities of an agent of such owner or
tenant) in the production or the management of the production of such
agricultural or horticultural commodities, and (B) there is material participation
by the owner or tenant (as determined without regard to any activities of an
agent of such owner or tenant) with respect to any such agricultural or
horticultural commodity;
(2) There shall be excluded
dividends on any share of stock, and interest on any bond, debenture, note, or
certificate, or other evidence of indebtedness, issued with interest benefits
or in registered form by any corporation (including one issued by a government
or political subdivision thereof), unless such dividends and interest are
received in the course of a trade or business as a dealer in stocks or
securities;
(3) There shall be excluded any gain
or loss (A) which is considered under subtitle A of the Internal Revenue Code
of 1986 as gain or loss from the sale or exchange of a capital asset, (B) from
the cutting of timber, or the disposal of timber, coal, or iron ore, if section
631 of the Internal Revenue Code of 1954
[164] applies to such
gain or loss, or (C) from the sale, exchange, involuntary conversion, or other
disposition of property if such property is neither (i) stock in trade or other
property of a kind which would properly be includible in inventory if on hand
at the close of the taxable year, nor (ii) property held primarily for sale to
customers in the ordinary course of the trade or business;
*****
It is now time to acknowledge that those who earn their
livelihood from any of these three sources of income are working and should be
subject to paying Social Security taxes, which for the self-employed are
sometimes referred to as SECA taxes: Self Employment Contribution Act taxes,
which is a comparable term to FICA or Federal Insurance Contributions Act, the
comparable term for the tax for employees.
While, requiring the self employed to contribute Social
Security taxes to the Social Security Trust Fund for rental income, stock
market investment gains and other capital gains is an important component of
THE BEST Social Security Modernization Plan, more must be done.
I will be proposing in future posts that these three types
of profits which are earned by corporations should also require corporation
businesses to make comparable contributions to the Social Security trust fund.
