David Thomas: “I hope you all enjoyed that ride through very dark woods. Now let me explain what is really going on. Return with me to…”

“I hope you all enjoyed that ride through very dark woods. Now let me explain what is really going on. Return with me to 1945. We were in the middle of a war and a decision was made which affects us profoundly today. There was a choice of increasing wages or there was an idea that we can snooker workers not to ask for more wages if we create a procedure in which employers offer fringe benefits for which they will get a tax break. Today, a dollar in wages competes against a dollar in fringe benefits. A dollar in wages is taxed 100 percent. A dollar in fringe benefits does not affect the worker or the employer. We created a system that puts a premium on going for fringe benefits over wages. The argument the gentleman from California just made is based on that concept. He has a letter from Joint Tax that says if you create this fringe benefit, flexible spending accounts, in which up to $500 of the employee's tax deferred structure is allowed to roll over in the employee-controlled structure as an incentive to keep down the fringe benefit costs, there is a possibility that these will be successful. What happens if they are successful? The dollar in wages is not paid, the dollar in fringe benefits is paid, and the payroll tax, which otherwise would have gone into the Social Security Trust Fund from the wages foregone, is what he is talking about; not enough to modify the trust fund one iota over the year in terms of true impact on the Social Security Trust Fund.”