Let's Add Salt!

Let’s Add Salt!
by Richard S. Russell

Both salary and benefits are part of a worker's total compensation package. But there's a significant difference between them: Salary is taxable, benefits are not.

As an example, suppose a state worker currently makes $60,000 in salary, and the state pays an additional $6,000 (10%) on the worker's behalf in the form of pension deposits and insurance premiums. So the worker gets $66,000 in total compensation, right?

Well, yes, if you stop analyzing there. But let's go the next step and understand that, between payroll tax (FICA), state income tax, and federal income tax, about 1/3 of the worker's SALARY goes to taxes. That would be $20,000, leaving the worker with $46,000 in USABLE compensation.

Suppose the state decides to take away $6,000 from the worker. The sensible thing to do would be to deduct it directly from salary (which is taxable), leaving the worker with $54,000 in salary (of which he or she keeps 2/3, or $36,000 after taxes) and $6,000 in benefits, for a total USABLE compensation of $42,000 — a $4,000 hit from where he or she started.

But no, not content with merely applying the blade, Gov. Walker also wants to rub in some salt. Instead of taking the $6,000 out of the worker's TAXABLE salary, he proposes to take it away from UNTAXED benefits. So the worker ends up with $60,000 in salary ($40,000 after taxes) and NO benefits, for a total USABLE compensation of $40,000 — a $6,000 hit from where he or she started.

It's one thing to be a jerk, but this verges on malicious cruelty for the sheer sake of being cruel.

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Unions: the people who brought you the weekend