Senate committee simplifies 'nanny tax' that bedeviled Clinton nominees

March 23, 1994|By Los Angeles Times

WASHINGTON -- The Senate Finance Committee addressed the "nanny tax" that has bedeviled the Clinton administration by approving yesterday the first revisions in 44 years to laws governing the payment of Social Security taxes for household workers.

The bill, quickly approved on a voice vote, simplifies the payment proceduresand raises the wage level at which the taxes must be paid from $50 per quarter to $630 a year. In addition, young people under 18 hired to do household chores or baby-sitting would be exempt from the Social Security tax.

The legislation also provides that the payroll tax could be paid once a year, as part of the federal income tax return, rather than in quarterly payments. Employers also would be required to provide an annual statement of earnings in a W-2 form.

Sen. Daniel Patrick Moynihan, D-N.Y., the committee's chairman, called the Social Security Administration "brain-dead" for not having proposed such a bill before.

The bill now goes to the full Senate, where its chances for passage are excellent, aides said. A similar bill will be introduced in the House shortly, and passage there is also considered a virtual certainty, said Rep. Andrew Jacobs Jr., D-Ind.

Failure to pay timely Social Security taxes on household employees was a factor in the withdrawal of the nomination of Zoe Baird, President Clinton's first choice for attorney general.

Other potential nominees were not appointed, partly because they had not paid Social Security taxes on domestic workers; some high administration officials paid the taxes retroactively to comply with the law.

The aim of the bill, according to Senator Moynihan, is to provide greater Social Security coverage for domestic workers.

Now, only about one in every four employers of household servants pays taxes designed to provide government pensions for workers who provide child care in the home or do other domestic chores.

"This issue has been a rather large problem for the administration, starting last year with Zoe Baird and ending with Bobby Ray Inman," said Mr. Moynihan, criticizing the administration for not having proposed legislation to resolve the problem.

Mr. Inman, who withdrew after being selected as defense secretary, acknowledged that he had not paid Social Security taxes for a household servant.

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