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Taxes, pay and benefits, 2 hypothetical scenarios and a question

March 14, 2012 - Mike Maneval
A movement has spent the past several years gathering steam, both in Lycoming, Tioga, and surrounding counties and in the nation as a whole. It is a movement pressing for - often demanding - significant cuts to the compensation of public school teachers and other workers in the public sector. Most often, the cuts are targeted toward health insurance and retirement benefits, and often, the justification presented is that for about three decades, workers in the non-unionized portions of the private sector have experienced erosion of benefits and are paying greater and greater shares of their health coverage and retirement planning out of pocket.

While certainly there is truth to claims about what many private sector workers have experienced in recent history, the argument puts in my mind two hypothetical scenarios.

In both scenarios, imagine yourself as a homeowner, with a home assessed at $100,000 in value, living in a school district of 10,001 properties, with an annual district budget of about $25 million.

In the first scenario, presume the prevailing labor conditions the advocates of lower pay rates for the public sector observe remain a fact of life. The households where one or two income-earners work for the non-unionized private sector have struggled with stagnant pay, few or no benefits and steep increases in health care and retirement planning costs. Each year, a smaller percentage of their pay can go to home ownership, and the average value of your neighbors' properties now is $70,000.

In the second scenario, presume the labor conditions that have prevailed for the public sector also have prevailed for all or most segments of the private sector. Either by inclusion of benefits or pay rates that increase as the cost of living rises, your working neighbors spend a more consistant and lower percentage of their personal income out of pocket for retirement and health care, leaving more earned income for consumer purchases - and also for the purchase and upkeep of homes. The average value of your neighbors' properties is $130,000.

Under which scenario is your tax bill lower?


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