2018 Tax Rates Rate Individuals 12% $9,526 to $38,700 22% 38,701 to $82,500 24% $82,501 to $157,500 32% $157,501 to $200,000 Married Filing Jointly $19,051 to $77,400 $77,401 to $165,000 $165,001 to $315,000 $315,001 to $400,000 Let's imagine you work at a management-consulting company. To simplify the following problem, assume everyone in the firm you are consulting for is currently making $100,000. And assume everyone files taxes as an individual. 1a) First, to check your understanding: If someone in this firm receives a $1,000 raise, by how much will their take home (after tax) income go up? 1b) The firm is going to increase its spending on compensation by $5,000 per employee. Knowing that employees will not have to pay tax on a health benefit, the VP for HR asks you to lead a task force to determine if the company should increase the generosity of its health benefits package or give the $5,000 in cash. You do some research and learn that employees would only value the health benefit at $4,500. What is your recommendation? Should the firm adopt the benefits? Why or why not? 1c) Assume the firm adopts health insurance benefits for the employees, what is the potential social welfare problem associated with this choice? In other words, why might this be Kaldor-Hicks inefficient? Assume that the Marginal and Average Costs are both $5000 per employee. 1d) How does your answer in 1c connect to the economists' position on the ACA's Cadillac tax? 2018 Tax Rates Rate Individuals 12% $9,526 to $38,700 22% 38,701 to $82,500 24% $82,501 to $157,500 32% $157,501 to $200,000 Married Filing Jointly $19,051 to $77,400 $77,401 to $165,000 $165,001 to $315,000 $315,001 to $400,000 Let's imagine you work at a management-consulting company. To simplify the following problem, assume everyone in the firm you are consulting for is currently making $100,000. And assume everyone files taxes as an individual. 1a) First, to check your understanding: If someone in this firm receives a $1,000 raise, by how much will their take home (after tax) income go up? 1b) The firm is going to increase its spending on compensation by $5,000 per employee. Knowing that employees will not have to pay tax on a health benefit, the VP for HR asks you to lead a task force to determine if the company should increase the generosity of its health benefits package or give the $5,000 in cash. You do some research and learn that employees would only value the health benefit at $4,500. What is your recommendation? Should the firm adopt the benefits? Why or why not? 1c) Assume the firm adopts health insurance benefits for the employees, what is the potential social welfare problem associated with this choice? In other words, why might this be Kaldor-Hicks inefficient? Assume that the Marginal and Average Costs are both $5000 per employee. 1d) How does your answer in 1c connect to the economists' position on the ACA's Cadillac tax