Sweet: Public employees’ fat benefits mean skinny taxes

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Sweet: Public employees’ fat benefits mean skinny taxes

(’76 Contributor) Much attention has been given to the generally acknowledged fact that public union members enjoy higher wages and more generous benefits compared to their private sector counterparts. But this disparity is even greater when viewed from the perspective of net, after–tax income.

Compare the percent of total compensation including benefits that is taxable for the average Wisconsin school teacher compared to private sector employees. Based on average Wisconsin teacher average compensation figures cited on the Dennis Miller Show last week:

  • Taxable wage average is about $58k (annualized to 12 months that’s about $77K, before a health holidays, sick days, personal day allowance)
  • Total Comp Package is about $105k (that’s $47k in compensation that is not taxed)
  • Therefore, the Taxable portion of total comp package is only 55%

As a small business owner who provides health insurance and matches tax deferred savings, I observe that my PRIVATE sector employees pay tax on about 75–80% of their total comp package. While my comparison maybe anecdotal, it points to an unfairness. Most of our “public servants” pay dramatically less tax (as a percentage of total comp) than private sector employees. We dumb private sector employees and employers have limits on 401(k)s and SEPs. Most of us cannot hit the maximum contribution limits; yet, our “public servants” get nearly half of their comp on a tax–free basis!

So when you hear stories of low salaries for public union members, a closer look at net, after tax value of total comp, especially when divided by the number of work days, tells a dramatically different story.

One Comment

  1. Brandon March 30, 2011 at 5:49 am - Reply

    Great point! Looking at net, after tax value of total compensation helps paint a more realistic picture of public union vs. private sector employee compensation. We should all be more well informed when debating such issues.

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