(solution) Suppose your employer offered you $4,000 in cash instead of

(solution) Suppose your employer offered you $4,000 in cash instead of

Suppose your employer offered you $4,000 in cash instead of health insurance coverage. Health insurance is excluded from state and federal income taxes (let’s ignore Social Security and Medicare wage taxes for now). The cash would be subject to state income taxes (8%) and federal income taxes (28%). How much would your after-tax income go up if you took the cash rather than the insurance? Should you take the cash over the health insurance?