206
Opinion of the Court
wage ceiling, thereby subjecting all wages to the Medicare tax.6 In 1986 and 1987, the FUTA tax was 6.0 percent on wages up to $7,000; 7 in 1994, it was 6.2 percent on wages up to $7,000.8
In this case, allocating the 1994 payments back to 1986 and 1987 works to the advantage of the Company and its former employees. The reason is that all but one of the employees who received back wages in 1994 had already collected wages from the Company exceeding the taxable maximum in 1986 and 1987. Because those employees as well as the Company paid the maximum amount of employment taxes chargeable in 1986 and 1987, allocating the 1994 payments back to those years would generate no additional FICA or FUTA tax liability. By contrast, treating the back wages as taxable in 1994 would subject both the Company and its former employees to significant tax liability. The Company paid none of the employees any other wages in 1994,9 and FICA and FUTA taxes attributable to that year
6 26 U. S. C. § 3121(a)(1).
7 26 U. S. C. §§ 3301, 3306(b)(1) (1982 ed. and Supp. III).
8 26 U. S. C. §§ 3301, 3306(b)(1).
9 If a player received wages in 1994 from another employer in addition to receiving back wages from the Company, the player—but not the Company—would be entitled to a credit or refund of any Social Security tax paid in excess of the amount of tax due on a single taxable wage base ($60,600). 26 U. S. C. § 6413(c)(1). To illustrate, suppose a player received $50,000 in back wages from the Cleveland Indians and an additional $50,000 in wages from the New York Mets in 1994. Assuming all $100,000 in wages are taxed in 1994, the player would be entitled to a credit or refund of Social Security tax paid in excess of the amount of tax due on $60,600. By contrast, the Indians and the Mets would each be liable for Social Security taxes on $50,000 in wages paid to that player. 26 U. S. C. § 3111 (Social Security tax is "an excise tax, with respect to having individuals in his employ"). Thus, under the Government's proposed rule, the Cleveland Indians would owe Social Security taxes on all amounts up to $60,600 that it paid to each player in 1994, regardless of whether the players themselves had reached or exceeded the $60,600 ceiling through multiple wage sources.
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