The SEP deduction lowers yours Adjusted Gross Income. However, the SEP deduction does not lower your net income from self-employment on Schedule C. As a result, it does not reduce your self-employment tax of c 15%.
If the contribution is not reducing your tax liability at all, that means your "regular" tax rate is already 0%. You owe self-employment tax on your net income even if your "regular tax" is $0.
You might want to look at your 1040- pay close attention to the amounts on lines 56 (regular net tax) and 57 (SE tax).
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