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thuridas

Aren't we creating incentives for workers abuse:

- No tax on overtime: so now making them work 60 hours a week is cheaper for the employer

- No tax on tips: so the tip based payment model is cheaper

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Yes, and my understanding is that this is precisely the point.

Income tax is paid from employee salaries/wages, not by employers.

Doesn’t matter, money is fungible.

My money is not fungible with my employer's money. Money being fungible does not mean I get to use your money.

It means that you paying taxes on your pay is equivalent to your employer paying taxes on your pay. If you shift taxes to the employer, then they will reduce your pay accordingly.

Never ever once has an employer given me a pay raise when they got a tax cut or a pay cut when they got a tax hike.

Taxes do not feature into salary negotiation. Employers pay as little as they can get away with, while employees want to get as much money as they can.

If you need theoretical worlds with no correspondence to anything ever in actual history to justify your claim, then maybe there is not that much to it.

Where do you live that employer-paid taxes on employee pay have been cut during your career?

I have never lived anywhere where there are employer-paid taxes on employee pay. Have you? Do you even know of a country like that?

The United States has federal payroll taxes of which half are paid by the employer.

Social Security and Medicare (FICA) is not exactly a tax, if that is what you are talking about. There is FUTA (Federal Unemployment Tax) paid by employers, but this is quite low, certainly not a significant portion of tax revenue.

The IRS calls it a tax. In what sense is it not exactly a tax? It’s a mandatory payment to the government. It functions like a tax and it’s called a tax.

> Taxes do not feature into salary negotiation

The point is valid based on the context here, but taxes certainly feature in compensation.

Notably if you’re considering moving from a no/low tax locale to a higher one.

Two spectacular examples are the MLB contracts of Shohei Ohtani and Vladimir Guerrero.

Ohtani is getting paid very little ($2M/year) for his 10 years with the Dodgers, the vast majority is deferred to when after he leaves the team (and, notably, probably) California (likely back to Japan).

Vlad’s large contract is padded with a very large (like $175M I think) “signing bonus” to be paid over 10 years. The key point is that money will be earned “where he lives “, which is Florida, not where he plays (Toronto).

Both of these are structured to avoid local (high) tax jurisdictions.

But not just superstar athletes need to consider this. Anyone moving for work to a higher tax locale needs to consider that during salary negotiations.

Not sure how is it now, but when I worked in a plant overtime work was paid at 150% rate of regular pay. Work during national holidays was paid at 200% rate. Isn’t this still the case?

(The workforce at the plant was unionized and the higher rate may have been part of the labor contract. This was in Montreal Canada about 25 years ago. )

How is it cheaper for the employer?

For the same amount of money employee gets it requires employer to pay out less.

That’s not how income tax works, particularly for minimum wage workers.

It's just supply and demand. It makes working in these industries relatively more attractive, increasing supply of labour and therefore reducing price of labour. So restaurant owners capture some of the benefits

So employees earn more, and restaurants spend less. And this is bad because?

Because you're artificially favouring one specific industry, at a cost to all other industries.

And because the implication of your argument is we should never tax anything because that's a benefit to both the consumer and the business

Well, the money doesn't appear with magic, so someone is paying: the government (forfeiting taxes) or the consumer (more pressure to tip).

To me, the bad part is the tax reductions only appear in behavior I don't agree with: high overtime and tipping (when it's semi mandatory).

I'm not American, but this is also showing up in my country.

Aren't we already in a manufacturing hole and we're incentivizing more service industries over them?

They can pay lower wages because the employee is losing less of their income to tax. Supply and demand.

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