That would be people like my wife who continue to work. Here is how her income is taxed:
These are wholly aside from the taxes she pays on almost anything she buys. Now in what follows I am playing fast and loose with the numbers else I bore you with fancy pictures and imagined income, but to consider a typical $50,000 salary:
Now, from a practical perspective, the reason why her employer does not pay her for the value of unpaid health benefits is that the employer does not actually see lower health premium costs if she does not accept the policy, or so I suspect. My understanding (not articulated by her employer to her of course) is that when you are part of a group health insurance policy, the global premium from the employer to the insurer is fixed and is a function of expected number of employees covered and their relative risks. So, though her dropping out of the insurance pool should reduce the costs to the insurer, it does not, for now, reduce costs to the employer. That said, if every employee opted out of health coverage it would be hard to take seriously any justification for not paying out the value of the benefits (or some fraction thereof) in cash.
Taking the very simplified information from above, on a salary of $50,000, she ends up walking home with $28,950. But that salary of $50,000 actually captures the net payment to her from the employer, which should be $65,500 (the employer share of payroll taxes and contributions to health premiums included now but which do not have state and federal income taxes deducted from). Putting this all together, each year my wife’s “supposed” compensation should be $65,500. And each year she walks home with $28,950. This is an effective marginal tax rate on her annual work effort of 56%.
Say what you will about the 1% and how privileged both myself and my wife are to have been born to the United States (both to rather poor families in poor circumstances, but ignore that for now), that’s a pretty hefty marginal tax rate on her work effort, especially given the type of work she does (maybe more on that in a future post), which includes wiping the asses of complete strangers. A lot.
And then of this $28,950 that she is so blessed to keep, she pays 50.6 cents per gallon of gas in NYS excise taxes and 18.4 cents in federal – so just driving each year (600 gallons of gas burned) costs her another $414. And I’d estimate that 2/3 of her spending ends up being taxed at the 8.25% sales tax rate, meaning she dishes out another $2,354 in sales taxes to the state/county each year. And then of course is the embedded higher prices she must pay for almost anything else she consumes because of the various regulations that businesses must adhere to (not all bad of course and things we’d happily pay for if priced a la carte) such as FCC taxes on the phone plan she has, taxes and fees and licensing on the car she drives, and so on, which I’d estimate easily at 10% of her gross salary, but to be generous we’ll call it less than 5% of her take-home salary – meaning about another $1,000 in costs she pays.
Putting this all together, for a pretty tough job that required $50,000 in debt to obtain schooling to train for (and several years of lost wages), my wife ends up taking home and obtaining about $25,000 worth of goods and services, or an implied annual tax burden of 62%. Now, $2,000 per month of extra take home free income is, ipso facto, nice. But not given the effort one must make to obtain it. No reason to comment much more here, aside from the following:
Much more to say of course, but as I look at it, we are complete suckers.
Any how generous you were with your assumptions. They will say “but WC, what about the roads! Who will pay for the roads!”
*And. It’s early folks, sorry.
right. but then I read this: http://www.democratandchronicle.com/story/news/2014/04/02/winter-leaves-sea-potholes/7230321/
and I wonder why we have to scratch through the dirt to find the funding to made our roads safe…one of the most basic functions of government is a struggle to take care of, despite taking over 50% of our income.
I have been seeing ads on TV about how hospitable New York State is for business, and now WC comes along as the skunk at the party.
By the way, you forgot about municipal income taxes,state and federal unemployment taxes, and real estate taxes. It could be worse: you both could be working in Manhattan, which does not have a nearby Wegeman’s.
As a corollary, you could open a business in New York and deduct the losses from Adjusted Gross Income. For big losses, go into chickens and you can depreciate your tractor and manure spreader, and maybe the chickens.
Also, for not only WC and others pushed into higher marginal tax rates, triple tax-free New York municipal bonds become attractive, raising those bond prices for those who hold them already, and encouraging New York municipalities to borrow more money to spend on public works designed by politicians, who are much better at allocating capital resources than, well, anybody. Higher marginal rates, especially for married female nurses, is a win-win, and WC gets a tax shelter carved out for him, maybe enough to buy a canoe.