a) Suppose that your employer offered you $5,000 in cash instead of health insurance coverage. Health insurance is excluded from state and federal income taxes. (To keep the problem simple we will ignore Social Security and Medicare wage taxes.) The cash would be subject to state income taxes (8%) and federal income taxes (28%). How much would the value of the insurance ($5000) compared to the post-tax cash. b) How different would this calculation look for a worker who lived would face a state with zero income tax rate percent and a federal income tax rate of 15 percent. What would a worker consider if they believe themselves to be healthy and unlikely to need healthcare this year.

a) Suppose that your employer offered you $5,000 in cash instead of health insurance coverage. Health insurance is excluded from state and federal income taxes. (To keep the problem simple we will ignore Social Security and Medicare wage taxes.) The cash would be subject to state income taxes (8%) and federal income taxes (28%). How much would the value of the insurance ($5000) compared to the post-tax cash. b) How different would this calculation look for a worker who lived would face a state with zero income tax rate percent and a federal income tax rate of 15 percent. What would a worker consider if they believe themselves to be healthy and unlikely to need healthcare this year.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter16: Information, Risk, And Insurance

Section: Chapter Questions

Problem 10RQ: In an insurance system, would you expect each person to receive in benefits pretty much what they...

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