Big Brother Tries to Look Out for Madison Teachers
The Capital Times
PO Box 8060
Madison WI 53708-8060
The Madison school board just barely approved the new teacher contract. The Cap Times reported that a rationale given by at least 1 of the 3 “no” voters was that they wanted to devote more money to teachers’ salaries (and, by implication, less to benefits like health care).
Let me explain things in round-number terms that even a 5th grader could understand. Suppose a teacher earns $50,000 a year, and the school board is willing to provide that teacher with a 4% increase. In other words, the board is willing to spend 2000 additional dollars on that teacher.
Now, does this mean that the teacher gets $2000 worth of benefits? No. Why not? Taxes. (Stop me if I’m going too fast here.) The feds take 25%, the state gets 6.5%, and Social Security gets 6.2% of that $2000, leaving the teacher with the remaining 62.3%, or $1246.
So the teachers, not being dumb, figure that they’d rather split that $2000 a different way -- say, $1500 in wage increases and $500 in health insurance. So their take-home pay is 62.3% of $1500 (or $935) BUT they also get the benefit of $500 worth of health coverage which, since it’s paid to the insurance company, doesn’t count as wages and so doesn’t get taxed -- a total of $935 + $500 = $1435, or $189 more value than getting everything paid in wages.
So why don’t they take EVERYTHING in the form of fringe benefits? Because (a) there’s a limit to how much of such benefits any one person can use and (b) you can’t buy groceries with them.
Nonetheless, who’s in a better position to determine the proper mix of taxable wages and non-taxable benefits, the teachers themselves or their “benign” (IE, paternalistic) school-board employers? It’s judgment calls like this that led to the formation of teacher unions in the first place, so they didn’t HAVE to depend on the often misguided “good will” of the bosses.