If you take Sara’s position, your salary doesn’t change. You’ll just make what you’re making now. You’ve already weighed all the other factors and decided it would be a $12,000 improvement over your current position. You can have a promotion or a raise, but not both.
Here’s the actual data:
http://www.taxfoundation.org/news/show/250.html#Data
Interpret as you see fit.
23-to-37 still seems like alot to come from 1. JMHO.
I already have two cars, so the corporate car isn’t worth anything to me. I take the raise, irrespective of the tax rate.
Got another one?
OK. You take the $15,000 raise. You figure “I’ll take the $577 in my paycheck rather than have $461.53 worth of benefits every check.” You get your first pay stub and open it up to find that you only got to keep $400 after FICA, state, and local taxes that total a mere 30%.
Now you’re going “:smack: Should have taken the promotion! Why, oh why, didn’t I consider the taxes?!”
No, I’m going, “Yay, I have an extra $400 a month, instead of a car that I’m not using (be it the corporate car or one of the pair I already have).” It’s even worse if I drive the corporate car instead of one of mine, because I still have to pay insurance on my now unused vehicle, which is especially galling as it’s not being driven. Plus, I have to drain the fluids during the winter, put it in storage since my HOA won’t let it sit there for more than 90 days (or at least drive it once in a while, which is gas money). Taxes or no, I’m up $400 compared to the nothing useful Sara’s position offers me.
Plus, you never said if that promotion requires extra effort. Even if you want to jerry-rig it so the effort is exactly the same, the daily tasks are different, there’s bound to be a learning curve, the job might not be as enjoyable as my current one… you don’t have to fill in the gaps in your hypothetical. But my point is that these are the variables I consider and weight far more heavily than taxes.
Benefits simply don’t translate that directly. I’d gladly take a $60 ‘hit’ if it meant I got cash.
Benefits may or may not be useful; cash always is.
What part of “You consider all the benefits to be worth $12,000” do you two not understand? I declared, as a given, that you think all the intangibles are worth a certain amount. Coming back with “Well I prefer cash” or “you didn’t say how hard it would be” or “I don’t want another car” is just fighting the hypothetical.
You don’t get to tell me how much you like cash or cars. I told you how much you like them. You don’t get to decide how much harder the job is. I told you how much harder it is.
Are you really trying to get me to resort to changing “you” to “Bob”? I mean really, if you want to argue, at least argue in good faith.
Congratuations, you both took $10,500 in cash instead of a collection of pros and cons that you’d be willing to pay $12,000 for. And all because you fundamentally failed to understand how taxes work. You lose.
This isn’t a game show, and asking the questions that quixotic78 is isn’t fighting the hypothetical. YOU may have calculated out the costs of the benefits to be $12,000 but I’m not.
Look, even if we don’t fight the strange hypothetical where apparently moving into a promotional position involves no increase in salary and no change job description, I’m still not going to be looking at the liquid value of a car and telecommuting options.
Instead, I’m going to ask 1) Do I need that car?
2) Do I want to telecommute?
Notice that tax implecations didn’t enter into that. I could put the value of this car at $80,000 but since the car isn’t mine to sell it really makes no difference to me, does it?
Maybe I hate my family and want to spend as much time away from them as possible. Well then telecommuting sucks doesn’t it?
I could give up $100,000 in completely useless benefits and still be happy with my $400 raise that my boss gave to me just because I’m an awesome dude. Tax implecations be damned.
And you know, even if I needed that car or the telecommuting option and still took the cash, I’m not going to be kicking myself over a difference of $100. Because at the end of the day, cash is flexible. Cash is king. Cash can buy that damn car they’d have loaned to me.
So if you really wanted me to regret my decision, you’d give me a choice where the benefits were so awesome I’d be a fool to take the raise…and STILL taxes wouldn’t play a role in that decision.
They’re valued at $12,000. They’re worth nothing to me. Here’s my hypothetical for you: you can take Sara’s position, as you described, and in exchange the company will name 500 stars for you. At $50 a pop, that’s a benefit worth $25,000. Alternatively, you can stay in your own position, and your boss will give you an extra $15,000 in salary. Which do you take? What’s that? The cash, because the stars are worth bupkus to you? Congratulations, you’re picked $10,500 instead of $25,000.
No you didn’t.
No, you didn’t.
Go ahead, but then you’re just telling a (really boring) story instead of having a discussion. I can do that, too – Chessic Sense’s boss offers him Sara’s position, with a black corporate car valued at $2,000 – not per year, just $2,000 (it’s a 1994 Ford Taurus). Alternatively, Chessic can take a raise in salary of $15,000/yr. However, Chessic has always wanted to own a black car – it’s psychological – so he can do naught but take the car. The end.
It’s not our fault you created a shitty hypothetical. Feel free to try again.
No, if we lose it’s because it’s an absurdly contrived hypothetical. But hey, whatever gets you off.
No. He specifically said “You consider”. How about changing the hypothetical to “undisclosed benefits that you personally value at $12,000”.
btw, if the benefits include a car, that’s probably taxable, which somewhat changes the hypothetical. They may be worth $12k less taxes. Or you may have taken taxes into account in deciding their worth - but that would prove the point Chessic Sense is making - you need to understand the effect of taxes.
But the original point that Chessic created the hypothetical to refute wasn’t that taxes don’t need to be considered, it’s that they’re almost never the sole factor on which a decision turns.
About the only situation I can think of is one where a single mother working Mon-Fri is offered a half shift on Saturday. It may be that taxes reduce the pay from those four hours enough that it actually costs more to pay for the babysitter, gas, and whatever other necessities must be taken care of while she’s at work for a sixth shift. It seems unlikely to me, but possible.
That’s not Chessic’s point. He’s specifically addressing something enderw24 said (my emphasis): “Give me a scenario where taxes enter not into your calculations, but as a significant factor in your decision?” That’s a far cry from understanding the effect of taxes, which (as I already noted) is routine. But he’s had to go through this horribly, artificially constrained hypothetical to reach a point where taxes are a significant factor… and even then, some (e.g., Bosstone, maybe myself, depending on what the “unspecified benefits” you propose are) prefer cash in hand.
Listen to this guy who knew there was a problem before he found whoring for the rich was so lucrative.
Ok, I stated it badly, but the point still applies when changed to “as a significant factor” (and you have to understand the taxes when they are a significant factor).
Ok, but I think we’re still lacking that situation where taxes are a significant factor. Chessic Sense would like to wave away concerns about the added responsibilities of a new position, increased stress, less enjoyable work, longer hours, the fact that benefits – irrespective of their dollar value – might not be “worth” much (e.g., naming stars), etc. simply by saying, “No, it’s my hypothetical, you don’t need to know all that.” But all those strictures simply make it a poor, and therefore not very useful, hypothetical. Those considerations he wants to wave away are all significant factors; to me, taxes aren’t even in that same league.
I do agree that the hypothetical scenario is complicated and unnecessarily introduces factors that lessen its applicability.
Really, I have a hard time viewing taxes as the “culprit” in any situation. Yes, when you’re choosing between two career paths, you might conclude that one pays more than the other after factoring in all benefits and expenses. But taxes are no more the problem here than having to pay for gas, or insurance, or a babysitter, or being offered $30/hr instead of $35/hr. It’s just one more part of the equation to take into account.
In Chessic’s hypothetical, the appropriate comparison is not between $12,000 in benefits or $15,000 in cash (HAHA it’s only $10,500 gotcha!). It’s between $12,000 in benefits and $10,500 in cash. Of course you have to understand taxes, but there is no special insidiousness or evil to them than anything else, unless you begin from the belief that anything the government does is bad and anything private companies do is wholly justified. I’d be more annoyed about the insurance on driving a new car than the taxes required, myself.
I didn’t wave them away. I evaluated them. I weighed the pros and cons and gave you the conclusion. I don’t know why you think that me saying “You sum up all the pros and cons and conclude that it’s worth $12,000” is complicated but me breaking it all down into dollars and cents, writing essays about how stressed you’ll be, etc is uncomplicated.
I don’t know what you don’t understand about “YOU VALUE THE BENEFITS AT $12,000”! I told you exactly how much you’d be willing to pay for all the benefits. I told you explicitly how bad you want those things. I told you clearly and unambiguously how much you’d be willing to trade/give up/forgo in order to have the benefits.
And I further don’t understand how you fail to grasp that before taxes, the raise is better. After taxes, the benefits are better. It’s really a simple concept. Taxes are an important consideration when deciding whether to go for the extra money! It’s so obvious, it’s painful.
Yes, exactly. It’s one more part to consider. A part that reduces your salary by 15-35%, so it’s a really fucking big part to consider.
No, it’s between $12k and $10.5k, or maybe it’s actually $11.5k, wait no, it’s really $13k, or perhaps it’s really only $8.5k- You’ve got to figure in the taxes to find out what it really is. Thus, it proves that the tax rate is important.
It’s simple: If you don’t do your homework, you’ll pick the money and be worse off. If you do your homework, you’ll take the benes and be better off.