I run a business, from my perspective the meaningful number is the total payroll cost for the employee. Taxes are taken before it even leaves my pocket and goes to the employee, and then more and more taxes by the time the employee finally sees it. You can't waive away the taxes just because the law says you can't show the true tax burden on the pay stub.
> Opportunity Cost
There are real, direct, added costs to choosing to work. It's reasonable to subtract those from salary when trying to calculate the net benefit of working. Just like there's an opportunity cost for waiting in line for bread. It's a real thing.
> $115300 -> $78,900 vs. $0 -> $44,011 (for a gap of $35k)
First, you can't take home quite $78,900 on $115,300 -- you've shifted up income but haven't adjusted taxes accordingly. From my perspective that employee is earning more like $140,000 (you can't just waive away the cost of paying for all those benefits that otherwise would be provided free by the government, just because they are taken out of your earnings before you see them).
Second, you can't just count $100 / pay period as the cost of insurance. It's the full cost of the plan (up to almost $24k / year for Platinum insurance for a family of 4) that has to be paid every two weeks at payday. Benefits are tax advantaged income, income paid out before you see it, but income all the same. If you are self-employed all this becomes obvious, but if you've never worked outside a W-2 the true cost is very much hidden out-of-sight.
Employer group insurance plans are more expensive than individual plans, which are obviously way more expensive than free means-tested plans. Going from $0 -> $30k you lose about $8k of value from losing Medi-Cal and going to the Cost-Shared Silver Plan. Going from $30k -> $60k you lose another $12k of subsidies. "Total actuary value" of having Medi-Cal is around $20k / yr for a family of 4. So if you are at $0 income, it's not just +$12k for ACA subsidies, it's more like +$20k for Medi-Cal since it's comparable coverage to a Platinum plan.
Third, yes the EITC phases-in and phases-out, it doesn't mean it's not a cost you pay for earning more. It's a curve and it's not a straight line, but it's still a real refundable tax credit that is clawed back as earnings increase over $24k. I agree it's impossible to maximize all benefits concurrently, it's a very complex equation with local and global minima/maxima. One day I really hope to be able to program it and put in on GitHub.
> Making financial progress on $100k income is challenging
So very true! Even per all your numbers, which are way more conservative than mine... the 'net benefit' to the family of earning "$115,300" of income (~$140k payroll) is only $35,000 !! (the gap)
And if you dig deep into all the assistance available, start counting things like income-based rent control, income-based property tax limits, income-based car registration fees, income-based electricity bills, etc.... you can easily erode that $35k down to more like $15k.
Isn't that just astounding?! Starting at $140k of employee payroll expense, by the end of the year you've only added $15k of net cash benefit to the family?!
> First, you can't take home quite $78,900 on $115,300 -- you've shifted up income but haven't adjusted taxes accordingly.
While grandparent made an error of including both halves of the payroll tax, when only the employer share should have been added, the point is that employer share (while it can be considered "income" of a sort that goes directly into paying payroll taxes), isn't taxable income subject to any other taxes, so properly counting it as part of the "income" number if you are counting the whole payroll tax (including employer share) as part of the tax expense doesn't shift up the taxes, it just correctly accounts for the income that goes with the taxes originally presented.
My statement was totally fair. I'd rather you reply to the core point then 6 replies about how FICA is paid.
I don't want to argue the mechanics of taxation on W-2 vs 1099! I was totally happy to accept 'danans' much more conservative numbers because we still end up with a maximum of $35,000 net benefit from $115,300 of compensation!
This is, with danans math, which is adjusted from mine by not even counting;
Employer portion of health care cost
Employer share of FICA
Excluding direct employment costs
Excluding indirect opportunity cost
Use average disability payment, instead of max
Exclude SSI payments
Exclude rent control
Exclude property tax circuit breakers (21 states, not CA)
Exclude EITC
If my point still stands after all those are ignored, I think we can stop arguing the mechanics of FICA and realize there's a huge fucking social service+taxation problem in this country, so big that at many points of the curve from $0 - $150k, almost across that entire curve, earning more, earns you less.
Like I said, the only way to properly calculate all this is to code it all up and chart it. But the laws are insanely complex (we've proven that just now, right?) I don't think anyone has ever tried.
Your core point is entirely dependent on the relation of additional income to additional costs; if that relation is calculated incorrectly, then the core point is not supported.
I run a business, from my perspective the meaningful number is the total payroll cost for the employee. Taxes are taken before it even leaves my pocket and goes to the employee, and then more and more taxes by the time the employee finally sees it. You can't waive away the taxes just because the law says you can't show the true tax burden on the pay stub.
> Opportunity Cost
There are real, direct, added costs to choosing to work. It's reasonable to subtract those from salary when trying to calculate the net benefit of working. Just like there's an opportunity cost for waiting in line for bread. It's a real thing.
> $115300 -> $78,900 vs. $0 -> $44,011 (for a gap of $35k)
First, you can't take home quite $78,900 on $115,300 -- you've shifted up income but haven't adjusted taxes accordingly. From my perspective that employee is earning more like $140,000 (you can't just waive away the cost of paying for all those benefits that otherwise would be provided free by the government, just because they are taken out of your earnings before you see them).
Second, you can't just count $100 / pay period as the cost of insurance. It's the full cost of the plan (up to almost $24k / year for Platinum insurance for a family of 4) that has to be paid every two weeks at payday. Benefits are tax advantaged income, income paid out before you see it, but income all the same. If you are self-employed all this becomes obvious, but if you've never worked outside a W-2 the true cost is very much hidden out-of-sight.
Employer group insurance plans are more expensive than individual plans, which are obviously way more expensive than free means-tested plans. Going from $0 -> $30k you lose about $8k of value from losing Medi-Cal and going to the Cost-Shared Silver Plan. Going from $30k -> $60k you lose another $12k of subsidies. "Total actuary value" of having Medi-Cal is around $20k / yr for a family of 4. So if you are at $0 income, it's not just +$12k for ACA subsidies, it's more like +$20k for Medi-Cal since it's comparable coverage to a Platinum plan.
Third, yes the EITC phases-in and phases-out, it doesn't mean it's not a cost you pay for earning more. It's a curve and it's not a straight line, but it's still a real refundable tax credit that is clawed back as earnings increase over $24k. I agree it's impossible to maximize all benefits concurrently, it's a very complex equation with local and global minima/maxima. One day I really hope to be able to program it and put in on GitHub.
> Making financial progress on $100k income is challenging
So very true! Even per all your numbers, which are way more conservative than mine... the 'net benefit' to the family of earning "$115,300" of income (~$140k payroll) is only $35,000 !! (the gap)
And if you dig deep into all the assistance available, start counting things like income-based rent control, income-based property tax limits, income-based car registration fees, income-based electricity bills, etc.... you can easily erode that $35k down to more like $15k.
Isn't that just astounding?! Starting at $140k of employee payroll expense, by the end of the year you've only added $15k of net cash benefit to the family?!
As they say, "What the actual fuck!"