Originally Posted by
thenomad
Oh yeah, because employers are alwys looking for ways to pay their employees more instead of getting them to work more for less, yeah.
Last time I had an offer of employment they never once gave me a number they would pay me and then tell me they were actually paying 25% more so I wont have to pay that amount in taxes.
Employers don't give a **** about how much tax employees have to pay, they only care about how much they have to pay out, and how to keep that to the absolute minimum.
Let me try a again.
Scenario #1
Let's say you agree to do a job for $320, and your tax rate is 25%. Your employer will pay you $320. You will have to give $80 to the IRS and your take home pay will be $240.
Scenario #2
Now, what if there was an identical job that paid only $240 but your tax rate was 0%? Your employer will pay you $240. You will have to give $0 to the IRS and your take home pay will be $240.
Theoretically you should be indifferent between the two jobs because your after tax take home pay is the same in both scenarios. However, it is obvious that first job scenario is more expensive for the employer ($320 out their pocket vs $240).
So, anytime an employer can compensate their employees with tax free benefits vs taxable benefits, it saves them money.
Do employer's actually "care" about the tax situation of their employees? Certainly not in an altruistic sense (I am assuming both employers and employees will act in their own best interest). But, it does have an indirect effect on the labor market. Ultimately I will accept a job if I think that the take home (after-tax) pay makes it worth while. Let's say I can live comfortably off of $20 per hour as my take home (after tax) pay. If my take rate is 0%, I will take a job for $20 per hour from an employer. What if my tax rate is 80%? I won't take the job unless they pay me $100 per hour. So, in this sense my employer will "care" about my tax situation because it impacts who they can hire and at what cost. I realize this is an extreme example but it illustrates the impact of the taxable vs tax-free designation of various employee benefits.