I saw an article in the Wall Street Journal yesterday comparing Mitt Romney and Obama in terms of their corporate tax reform policy. I thought to myself, "Could we make those corporate tax reforms apply to moms please?" Here is the reason I wondered such a thing:
I will need to hire a part-time nanny if I am going to go back to teaching in the fall. My husband feels much more comfortable with this option than any kind of group daycare or home daycare. However, it also is more expensive, if done according to the law. Most people actually break the law on this one and there is a good reason why (although I do not agree with breaking the law). A nanny is considered a domestic employee in your home and, therefore, regardless of whether the person is part-time or full-time, they are considered a W2 employee. It is illegal to 1099 your nanny. Apparently the IRS has a specific section of the code related to this regulation. Therefore, if you hire a nanny and for some reason the arrangement doesn't work out, you are responsible for unemployment, medical and social security. My sister had this experience when she hired a nanny for her infant daughter about five years ago. The nanny was a great caregiver but insisted on creating her own schedule and dictating policy in the home. For this reason, my sister had to fire her. And- because she is a W2 employee my sister was obligated to pay her unemployment insurance. On top of that, if my sister wanted to rehire a different person to fill her shoes, her unemployment tax would increase about four times the previous rate. My sister was treated as a business and every business has a hire/fire ratio. Since she only employed one person, her hire/fire ratio was 100% and, therefore, she was obligated to pay more into unemployment insurance.
Now- how many people can afford to hire a nanny under these conditions? It doesn't make sense. Especially if you only need someone ten to fifteen hours a week as I will need in the fall. The majority of people simply break the law and either pay cash under the table or create a 1099 situation where they are not responsible for the extra government fees. I would like to be a good citizen and follow the law and so I intend to find a company that will create the W2 for me so the nanny is their employee instead of mine. Apparently, there is only one such company in the entire city of San Diego. (There is only one such company in Bellingham, Washington where my sister lives but that is a much, much smaller city.)
Only one such company? This is an immigration issue. The reason that only one company like this exists is because of illegal immigrants who come from Mexico. Today I spoke with the owner of a nanny company in San Diego and she explained the situation to me. Nobody can afford to W2 their employees for temporary work because there is not enough demand for them. It is too expensive and not enough people use the service. Everybody employs undereducated, illegal immigrants from Mexico and pays them under the table.
How is that for a law that doesn't make sense? (Read my previous entries about regulations and the importance of relevance and enforecability) In this case, people who follow the law (like me) pay huge fees that cut into their profits while those who break the law and employ illegals pay less money and are not responsible for social security and unemployment insurance. Why can't we modify the law to benefit American nannies and create a more level playing field in this industry?
What a nonsensical system. And, once again, we are back to the concept that you can't get away from regulatory.