The Open Mind With Richard Heffner: Milton Friedman: 'Your Boss Doesn't Pay Your Social Security Tax (1975)'

Source:PBS- Professor Milton Friedman, talking to Richard Heffner, on The Open Mind in 1975.

"Nobel Laureate economist Milton Friedman explains how both halves of the Social Security tax are borne by the employee. From PBS's The Open Mind (December 7, 1975)"

From  Wide World of Wisdom

Milton Friedman is correct in this sense about Social Security, that employees pay the whole thing. Because employers calculate the costs of employees, to when they decide how much to charge their customers, they take it in account. They know they are going to have to pay for half of the payroll tax, as well as half of the Unemployment Insurance tax.

So what employers do is have their customers make up the difference for what they have to compensate their employees as far as Social Security and Unemployment. So in theory, when business is doing well and companies can afford it with their prices, they don't have to pay the payroll tax at all. At least not long-term, because they get back based on how much they sell and charge customers extra to cover their share of SS and UI to make up the difference. While employees get stuck paying for their share of SS and UI, as well as Medicare. But also have to pay for other employees as well, when they buy products.

It's one example of why the payroll and UI taxes are regressive. But the problem with Professor Friedman's argument is that you could say that about anything that business's pay for. Everything they spend money on as a cost of doing business gets passed down to their customers. Including their employees compensation and benefits.