In: Economics
Casey is in the 12% marginal tax bracket, and Jean is in the 35% marginal tax bracket. Their employer is experiencing financial difficulties and cannot continue to pay for the company's health insurance plan. The annual premiums are approximately $8,000 per employee. The employer has proposed to either (1) require the employee to pay the premiums or (2) reduce each employee's pay by $10,000 per year with the employer paying the premium.
Which option is less objectionable to Casey, and which is less objectionable to Jean?
Casey would find the first option less objectionable since she would be "better off" by _______?
Jean would find the second option less objectionable since she would be"better off" _________?
Incorrect
.
Casey would find the first option less objectionable since she would be "better off" by $800.
1st option she has to pay = $8000
2nd option she has to pay [$10000- ( $10000*12%)] = $8800
Better off by = $800
Jean would find the second option less objectionable since she would be"better off" by $1500
1st option she has to pay = $8000
2nd option she has to pay [$10000- ( $10000*35%)] = $6500
Better off by = $1500