Ed Norton works in the sewers. Or at least he did up until a week ago. Ed got laid off and the prospects of being called back to work are dismal. Ed used to make $1,000 a week for working down in the sewers. He’ll miss that income, but he knows thanks to the government he’ll be entitled to unemployment benefits for a full year.
Ed starts to do the math. He knows he’ll only get $500 a week in unemployment but then realizes there is no social security tax on these benefits. When he had his job about 8% of his gross pay went for social security/medicare taxes.
He also now realizes his unemployment is no longer subject to any income taxes thanks to recent legislation. Back when Ed had his job roughly 25% of his pay went to combined state and federal income taxes. When he was making $1,000 a week, he was only bringing home about $670 after the above taxes.
Lastly, Ed realizes he will eliminate the costs of getting to and from work and buying lunch out (since it’s not practical to take your lunch if you work in the sewers). He figures these costs amount to about another 7% of his previous gross pay.
The bottom line is Ed’s take home pay after all taxes and expenses was only about $600 when he had his job. When he compares that to his unemployment benefits of $500 that are absolutely tax free, he realizes he is only actually pocketing about 15% less than when he was working full time.
In exchange for this relatively modest “pay cut” of 15%, Ed knows he has an extra 45 hours of free time each and every week for an entire year. He also knows the government may well extend unemployment benefits even longer than a year by the time he nears exhausting his benefits.
Ed is absolutely ecstatic about his situation now that he sees he is control of all his time and all he gives up is a small fraction of his previous $1,000 per week. He rushes downstairs to tell his good friend Ralph and to suggest to Ralph he should find a way to get laid off too so they can shoot pool all day and go bowling in the evenings.
Ed Norton works in the sewers. Or at least he did up until a week ago. Ed got laid off and the prospects of being called back to work are dismal. Ed used to make $1,000 a week for working down in the sewers. He’ll miss that income, but he knows thanks to the government he’ll be entitled to unemployment benefits for a full year.
Ed starts to do the math. He knows he’ll only get $500 a week in unemployment but then realizes there is no social security tax on these benefits. When he had his job about 8% of his gross pay went for social security/medicare taxes.
He also now realizes his unemployment is no longer subject to any income taxes thanks to recent legislation. Back when Ed had his job roughly 25% of his pay went to combined state and federal income taxes. When he was making $1,000 a week, he was only bringing home about $670 after the above taxes.
Lastly, Ed realizes he will eliminate the costs of getting to and from work and buying lunch out (since it’s not practical to take your lunch if you work in the sewers). He figures these costs amount to about another 7% of his previous gross pay.
The bottom line is Ed’s take home pay after all taxes and expenses was only about $600 when he had his job. When he compares that to his unemployment benefits of $500 that are absolutely tax free, he realizes he is only actually pocketing about 15% less than when he was working full time.
In exchange for this relatively modest “pay cut” of 15%, Ed knows he has an extra 45 hours of free time each and every week for an entire year. He also knows the government may well extend unemployment benefits even longer than a year by the time he nears exhausting his benefits.
Ed is absolutely ecstatic about his situation now that he sees he is control of all his time and all he gives up is a small fraction of his previous $1,000 per week. He rushes downstairs to tell his good friend Ralph and to suggest to Ralph he should find a way to get laid off too so they can shoot pool all day and go bowling in the evenings.
