Blog author: ken.larson
Friday, October 30, 2009
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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.

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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.


  • http://commentarius-ioannis.blogspot.com/ Paul W. Primavera

    The problem isn’t the 10% tithe as a stand-alone thing. The problem is adding up the 10% tithe to all the other deductions (health care insurance, state and federal taxes, social security, etc.) that come one’s way. Then one is often left with 50% or less of what one might have worked for. Yes, everything belongs to God, but when an extra $40.00 can determine whether you put the money in the basket plate at work or buy groceries for your kids, people usually opt for the later. And yes, I have heard some say, “Just trust in God and He will provide.” It’s fine to trust, but God gave us brains to use. I avoid taking risks in providing for my children.

    I realize that these concerns don’t bother large business owners and executives, but us working men and women have real life issues.

  • Michael

    Paul Primavera,

    I have done a straight 10% tithe on two separate occasions and am now in the middle of a third. During a down market, I might add. Every time I have done this, I have reaped the reward as promised in scripture. Although I agree that it is scary to add up all the figures like you suggest, I think you miss the point which is, FIRST FRUITS. Our biblical mandate is 10% of first fruits. It’s an exercise in priorities. It’s not about the money or “risking” your family’s security. It is certainly NOT a mindless or brainless thing to exercise, through tithing, one’s faith in God. Your final statement is naive. Successful large business owners were all struggling small business owners at one time. And you can bet that their best learned lessons have to do with priorities, stewardship and Faith. Not business. These decisions do in fact “bother” business people. Even more than people who work for other people. Because they have everything on the line. That’s where it really pays to exercise faithful behavior.

  • Patrick

    I own a small retail “mom & pop” business. My decisions are often between giving more hours to our “employee” or titheing and working without the relief of employee help. Yet, there are ways to give that don’t go directly against wages, for example, we collect $1 for Toys for Tots or Knights of Columbus whenever we need to provide “courtesy” services. My philosophy is “We give to those that give, those that don’t can find their own solutions.” I also give reduced prices for religious and educational customers. Sometimes foregoing profit avoids taxes yet provides needed services.

    Do we get people that walk out rather than donate? Yes, but we usually haven’t seen them before and wouldn’t see them in the future. I run a for-profit business, if they want things for free, they can call their Congressman or Clergyman.

    I find it is better to use a Temporary Help agency rather than employ our labor directly. The agency covers the workman’s comp. insurance, does the payroll accounting and interfaces with EDD and other gov’t agencies. This easily saves me 4 to 6 hours per week, plus the cost of workman’s comp. insurance. They do the recruiting, interviewing and background investigations for new help. My cost for these services, 50% above the employee’s per hour wage.

    Just as the cost of Workman’s Comp. Insurance influences the Burden, a employer mandated health insurance will too. Subsequently, higher burden, fewer hours for employees and more “contract” consultants who will provide their own legislated burden.

    The question that comes to mind for me, Ken, is would you call your friend’s revelation an epiphany, an education or a mugging of the type that converts a Liberal or a Conservative? If the Public Option becomes law, how many more people will realize they’re being mugged as employers drop private medical plans?

  • http://www.reenchantment.net Ken Larson

    Patrick: I’m not sure I’d call the teachable moment an epiphany. There are lots of things that we simply haven’t thought through. Your remarks about healthcare mandates being a case in point. I like your use of mugging: to attack and rob in a public place. Sounds about right.

    Paul: Actually, these demands do not “come one’s way” as you suggest, but they are a problem. They are put upon us by [Caesar] because we do not pay attention; or become complacent with losing our freedoms and property through the demands presumptuously made on us with impunity by government.

    Paul also writes that he “avoid[s] taking risks in providing for [his] children.” Here I would suggest that my illustration of the senior manager who hadn’t realized the extent of the reach into his wages by the government was meant as a wake up call to others. A risk for parents equally great as not having grocery money is the one they take by their sending their kids off to public schools that are nothing more than the house organs for the state.

    “Render Unto Caesar” is a phrase most recognize; but it’s important to remember that render also means to process the carcass of an animal. With all that government is reaching for these days, that definition needs to be recalled. All readers: do please remember that businesses large and small and the owners and managers of those businesses have real life issues too. They are after all a lot like the rest of us in more ways than some care to imagine.

  • Neal Lang

    With regards to the tithe the earliest Biblical reference to a tithe is found in Genesis 14 which describes Arbam (Abraham) giving 1/10th of his “spoils of war” on the tribes that kidnapped his cousin, Lott, to Melchizedek, king of Salem (Jerusalem), and priest of the Most High God.

    One aspect of Old Testament tithing that advocates neglect is the fact that tithing did not apply to a workman’s earnings, but only applied to the agricultural crops grown on a farmer’s land – this means that tithing was done from the profit a land-owner received from his assets. There are no recorded instances in the Bible of a workman tithing from wages that he received for his labor. Of note is the fact that our Constitution originally specifically forbade any tax on income. Since the vast majority of modern workers make a living by selling their labor to an employer rather than by earning profits off of a material asset like a farm, it’s debatable whether the practice of tithing would apply to a modern worker even if tithing is still part of the New Covenant.

    After the Reformation the tithe was increasingly taken over from the church by the state. In countries such as Germany and Switzerland, this remained the case until the 19th century, when the tithe was abolished. In England, church tithes remained until the 19th century and in some cases to this day voluntary tithes are paid by the devout. In some cases the abolishment of the tithe was accompanied by a one-time tax upon the farmers. This led many farmers into debt.

    Due to the fact that the New Testament explicitly directs Christians to give voluntarily as each person has determined in their hearts (2 Corinthians 9:7) and condemns those who make a show of their donations to organized religion (Mark 12:41-44, Matt. 6:3), the arguments for tithing as a Biblical practice seem to violate the basic principles of Biblical interpretation used by most conservative Protestants, who usually stress the plain meaning of the text, and regard the New Testament above the Old Testament as the authoritative word of God. One reason why the practice is so vigorously promoted by conservative Protestant leaders, aside from the financial benefits of tithing for their institutions, may be that people who tithe or make other large sacrifices for the Church gain a positive reputation for their devotion. Some Christians may also feel that they’ve earned God’s favor through their sacrifice. Opponents of tithing note that the Bible explicitly condemns making public sacrifices as a means of enhancing one’s reputation (Matt. 6:3), so the public testimonies of tithing advocates actually run the risk of being sin.

  • Dale Milne

    People in 2010 AD ought not be bound by antiquated laws designed for peoples of 2010BC and 33+ AD. To be strictly in accordance with tithing, from a Judaeo-Christian perspective, shouldn’t one pay not only the annual tithing to pastors and preachers (Deut. 2:6; 16:16; Num. 18:21); but also for use at festivals (Deut. 12:17-18; Deut. 14:22-26; Lev. 27:30); as well as the triennial tithe specifically for widows and orphans (Deut. 14:28; 26:12-13; Josephus, Antiquities IV, viii.22). I believe “new occasions teach new duties.”