An hourly wage is NOT the same as an hour of cost.

[Cerridwen]

Repeat - an hourly wage is NOT the same as an hour of cost.

I'm just going to re-post what I wrote in another thread. There seems to be a whole shit-load of confusion around this.


They are two different animals. One is what shows up on the employee's paycheck; the other shows up in bits and pieces on a corporation's balance sheet. On one, the employee pays taxes. On the other the corporation "massages" the numbers to get tax breaks and credits.

At 14 an hour you're looking at about 29,000 a year - pre tax (I rounded). Double that at 28 an hour. Take out taxes, federal, state, and local, subtract any employee-paid contribution plans, then you'll have take home. 60000 to 70000 a year? If only.

For the corporation, they take those costs and sprinkle them around their books and take tax breaks and tax credits, that you, I, and the auto-workers can't dream of, write-off what expenses they can, then expect us to bail them out because they're piss poor business managers. The sad thing is, we want to save the workers and we'll wind up helping the piss poor business managers.

The corporation will probably never actually pay taxes on the difference between wage and cost and in many cases will receive credit for paying said cost.

In addition, they also write off any bad debts. Those car loans they can't collect on (GMAC), or vendors who don't pay - yes, they get to write-off those bad debts. Try to write off your bad debts. Nope. Ain't gonna happen.

Thank you for reading. Please return to your regularly scheduled kung-poo fight.

:hi:

edit for usual typo

[nadinbrzezinski]

1. kick

[Cerridwen]

2. Thank you, ma'am.

[nadinbrzezinski]

3. You welcome... I fear though that people

no longer comprehend those points

Though that hour of cost also includes materials and all that. Which are included in the actuarial exercise of calculating that hour of cost

[gogoplata]

4. What kind of materials?

[Cerridwen]

6. Depending on the person doing the calculations, they could factor

in the costs of equipment (lease/purchase), equipment maintenance, power to run equipment and/or lights, A/C, heat, etc.

Costs also include the cost of materials used to make the products. It all depends on who is doing what calculations for what purpose.

[nadinbrzezinski]

7. And that is where the futzing for tax purposes comes in...

ah the magic of actuarial accounting

:-)

[Cerridwen]

9. Yep. Or preparing investor or shareholder reports.

Move a number here; move another there.

:)

[nadinbrzezinski]

11. And I fear this is going to go into inside baseball fast

[Cerridwen]

16. ? I didn't understand your post.

It's almost my bed time so you may have been clear and I'm being fuzzy. :)

[nadinbrzezinski]

17. Near mine too

night

[Cerridwen]

20. G'night.

:hi:

[gogoplata]

12. Oh, I thought you were referring to hourly labor cost.

[Cerridwen]

14. Nadine was. I was replying in a more generalized way. Though,

I haven't seen the break-down so it's possible the current line does include some of those other costs.

[Cerridwen]

5. I think they might...if they want to. It's the "want" part that I wonder about.

:D

[nadinbrzezinski]

10. True, I was technically never trained in economics

Oh wait, as a historian I had to read plenty of Keynes... and stuart and Ricardo... I loved Ricardo... oh and Marx of course, little Lenin, (damn politician more than economist)...

[Cerridwen]

18. :D Funny what you can pick up from reading stuff - even history.

LOL

I have some small training in economics and taxes. Enough to know the basics. That's what's so scary. I have only the basics but it appears to be more than many people have. *sigh*

[bluecollarcharlie]

8. KICK,KICK,KICK!!!!

It is amazing how so many allegedly progressive people are willing to swallow the Kool-Aid that first appeared during the last contract negotiations. I mean, i knew that the republicans were sheep like obedient and therefore easily fooled, but here?

[Cerridwen]

13. I think financial ignorance is American more than party related.

But, yeah, it bugs me people don't question their assumptions a bit more; especially on a board in which we're always having to debunk the other side's assumptions about us.

Thanks for the enthusiastic kick. :D

[Greyhound]

15. Banking on the general ignorance. K&R

:kick: & R

[Cerridwen]

19. :D

[deadmessengers]

21. You can write off a bad debt.

they get to write-off those bad debts. Try to write off your bad debts. Nope. Ain't gonna happen.

This is not true, and I'm speaking from personal experience here. I've had to do this when I loaned money to a (now former) friend who filed chapter 7 bankruptcy and discharged the debt. I was able to deduct the full discharged amount from that year's return - it's considered a business loss for tax purposes, and is deductable - it's on the 1040C form.

[Cerridwen]

27. Only if you file schedule C - the individual 1040 is another matter.

If an individual files bankruptcy; all the discharged debt becomes income to be reported on the return.

[deadmessengers]

34. I think we're talking about two different things.

I'm talking about bad debt from the perspective of the lender. Anyone can write that off - and anyone can file sched C, even if your only self-employment activity was that bad loan.

You're talking about bad debt from the perspective of the debtor. You're right - that's treated as imputed income to the person or corporation who defaulted on the debt.

[Cerridwen]

37. Thanks.

So if I loan aunt Martha 10K and she doesn't pay me back, I can file schedule C? I wonder how aunt Martha would feel about that? hee hee If I loan my son 20K toward the down payment on a house and he can't pay me back, same thing? Thanks.

Thanks. I learn something everyday. What about the core of my OP, though? That last about debt was more a throw-away thought. The rest was an effort to point out how the "news" is reporting oranges and calling them apples.

:)

[ColbertWatcher]

22. Bravo! Thank you for posting! k+r, n/t

[Cerridwen]

28. Thanks, ColbertWatcher. n/t

[ColbertWatcher]

40. You're welcome. n/t

[hfojvt]

23. you make it sound like a bad thing for them to write off those costs

Why shouldn't they, since they are actual costs? My employer, for example, pays $3,092.52 a year for my health insurance, which works out to over $3 an hour tax free income for me. And if I was married with children, they would pay $5,184.84. If a worker makes $28 an hour, the company pays $4284 in FICA taxes.

Writing off bad debts is not such a huge benefit either. Since the tax rate is not 100%, the company is still taking a loss on the bad debt.

[Cerridwen]

29. Nope. I make it sound a bad thing that some people are using a

specious line of reasoning as to how much workers are paid and are catapulting some r/w propaganda in the process; whether they know it or not.

The FICA a company pays may also be deducted from taxes owed by the company. They pay it then get the tax break. There are also tax incentives, either through breaks or credits, for paying benefits. You don't think businesses all pay benefits out of the kindness of their hearts? Please don't misunderstand that last question. I know some small business owners who do, in fact, do their damndest to offer benefits because they think or believe it's the right thing to do; also because they want to stay competitive and/or because they want a good environment for their employees. When it comes to some of the behemoths, they've only done so throughout history because they've been offered a carrot in the form of tax incentives. Or have been "forced" to by unions organizing and fighting for those benefits. Up until the most recent anti-union craze, those benefits, and pay, and hours, and wages, etc. have benefited us all as those businesses tried to stay competitive with what union workers had.

Rather than fighting to deny union workers what they have earned, we'd all be better off if we fought to have what they have.

[MazeRat7]

24. Wages are OPEX (operational expenses) and should be deductable from cost.

And yes, individuals can claim opex as well - including bad debts. Of course that implies they are claiming there is some type of "business" associated with the debt.

MZr7

[Cerridwen]

30. Precisely; and thank you. I'm talking specifically about W2 here.

Sole props, independent contractors, and small businesses weren't included in the mix specifically because the latest numbers floating around about auto workers' pay are being used to muddy the waters about wage only earners. I presume most of those auto workers' are not filing a schedule C or 1120(any version).

[pipoman]

25. I'm not getting you

Are you advocating that employers should have to pay taxes on their expenses? Talk about regressive tax policy. Anyone can write off bad debt...unless you are filing the 1040EZ. Not to say there aren't some abuses of the system, but many, many, many businesses would be gone and jobs along with them if it were not for ability to write off expenses. Once again with the big bad corporations who happen to employ most Americans. Let's just run them all out of business...fuck'em..take your job and shove it, just leave mine alone.

[Cerridwen]

31. *sigh* No. That's not at all what I'm saying. I'm trying to break

down the numbers that some people have stuck in their head that auto workers are being paid $73 per hour.

If you know of a way for an individual who is a wage only earner; that is, files a 1040(whatever version); who does not file a schedule C, please let me know. If I've missed something I'd like to know and I'd hate to give out incomplete information. However, that last little bit I posted what hardly the crux of my post.

My post was simply to point out that what an employee is paid in wages is not the same as what and how a company records those same wages on their books. Nor are the numbers a business enters in their books all taxed and accounted for the same way.

[OnionPatch]

26. My husband is in management

at the company I work for and he explained this to me a long time ago. According to him (and management) I cost about 50 bucks an hour. My actual take home salary is a little less than 20 bucks an hour. All the rest are costs of insurance, 401k contributions, other perks and if I understand correctly, they actually count overhead as well, so the cost of my office space, computer and even the electric I use is calculated into the cost of my labor. (I offered to work from home, use my own computer and electric and keep the whole bundle. :)) I'm not sure how the auto industry does it, but this is how my company does it. So they could lie on the news and say I made 50 bucks an hour, but it wouldn't actually be true.

[Cerridwen]

32. Precisely, OnionPatch. Thank you.

That's the only point I was trying to make.

What's being reported in the news about auto workers' pay is purposely deceptive. I was trying to remove some of the deception.

Thanks, again.

:hi:

[Nederland]

33. An hourly wage is not the same as an hour of compensation

A UAW person who makes $24 an hour and receives healthcare benefits and a pension makes a hell of a lot more than a Walmart person who makes $24 an hour and gets shit. Not that any Walmart employees make $24 an hour...

[Cerridwen]

36. True. So would you take away what the unions have fought for

or would you rather others have the same benefits as the unions?

I say we work to get the same for all of us and "the same" should be the highest standard rather than the lowest.

Gee, ya think that's why Walmart has fought so hard against unions and unionizing?

Now, maybe we should compare CEO compensation packages between the Big Three and Walmart. Why do we keep going after the worker rather than the big whigs?

[Nederland]

38. Not on your life

I would love to see everyone get the same benefits that unions get, but quite honestly I don't see how it wouldn't bankrupt the country.

[brentspeak]

41. So how is the country bankrupt today when very few Americans are union members?

[suston96]

35. I have no disagreement with the OP but please refresh my memory......

I agree with your hourly wage posting and it was very clearly presented.

Aren't there still such things as GAAP (Generally Accepted Accounting Principles) and FASB (Federal Accounting Standards Board) that instruct how accounting must be done? I know they apply to public companies but don't all companies have to abide by those accounting instructions?

In other words, companies are not really so easily allowed to "cook" their books and financials.

[Cerridwen]

39. Yes, those are in place. If only the media talking-heads were required

to follow them. I also don't think those regs apply to what and how they report to the press so they can say pretty much what they want.

The main thrust of my OP was to point out that what the media is reporting as wage is not the same as what is reported on corporate books or even what the worker sees on their paycheck. The "reporters" and the spokespeople for the corporations are trying to muddy the waters. I was trying to clear them a bit.

I'm not sure of the mechanisms in place to insure businesses, especially ones the size of the Big Three, are held to the standards proscribed in GAAP and FASB. My experience of it has been that the IRS questions the numbers and the business justifies them; some firms do request financial audits. I would hope corporations of that size have more oversight than just on their tax returns or at their request.

Perhaps a corporate CPA will check in with answers for you (and me).

I'm about to head out so if you reply and I don't, t'ain't nuthin' personal. :D

:hi: