Reference no: EM131006132
A mandatory health insurance plan costs $4,000. One worker earns $24,500 in employment income and $500 in investment income. Another worker earns $48,000 in employment income and $2,000 in investment income. A third worker earns $68,000 in employment income and $7,000 in investment income. A premium based system would cost each worker $4,000. A wage tax based system would cost each worker 8.5 % of wages. An income tax based system would cost each worker 8% of income. For each worker, calculate the cost of the insurance as a share of total income.
Worker 1 Worker 2 Worker 3
E=employment income $24,500 $48,000 $68,000
I= investment income $500 $2,000 $7,000
P=premium cost of insurance $4,000 $4,000 $4,000
Premium % of income= P/(E+I)
W= Wage tax cost of insurance = 0.085xE
wage tax cost % income= W/(E+I)
T= income tax cost = 0.080x(E+I)
Income tax cost as % of income= T/(e+I)
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