Workers Compensation Premiums As A Business Tax
Should Workers Compensation Premiums be considered a tax? Premiums and taxes are similar in some respects. Workers Compensation premiums and taxes are also very different when compared to each other.
One of the ways that premiums and business taxes differ greatly is that premiums are regressive. As more payroll is covered in an employer’s account, the unit cost of providing those benefits reduces more than proportionally.
The business tax system is progressive. As business or personal income increases the per-unit rate of taxes increases up to a prescribed amount.
The more a corporation or individual earns results in a progressively higher tax rate. WC premium rates are not structured in that manner. The larger employers tend to pay less per unit for WC premiums.The WC system is structured as regressive due to larger employers tend to hire safety personnel. A large amount of payroll can absorb a large or many claims much easier than smaller employers.
For instance, a $200,000 claim with an employer that has five employees cannot absorb the risk like a major corporation with 450 employees. Such is the nature of risk. The bottom line is Workers Compensation should be looked at as more of an investment in the company and its workers. Even though an employer may not see a return on investment, the possibility of a catastrophic loss can be avoided. I have often referred to Workers comp premiums as a zero-based investment.
A zero-based investment does not carry any part of the investment forward. All balances at the beginning and the end of the policy year begin at zero.
The following tax table shows how tax is progressive as a taxpayer attains each level of earnings.
For example, the Tax Tables for Corporations is as follows:
Taxable income over Not over Tax rate
$ 0 $ 50,000 15%
50,000 75,000 25%
75,000 100,000 34%
100,000 335,000 39%
335,000 10,000,000 34%
10,000,000 15,000,000 35%
15,000,000 18,333,333 38%
18,333,333 .......... 35%This is the Table Table for Married Individuals
Filing Separately – 2014:
Taxable income: Tax: Over But not over Tax +% On amount over $ 0 $ 9,075 $ 0.00 10 $ 0 9,075 36,900 907.50 15 9,075 36,900 74,425 5,081.25 25 36,900 74,425 113,425 14,462.50 28 74,425 113,425 202,550 25,382.50 33 113,425 202,550 228,800 54,793.75 35 202,550 228,800 ....... 63,981.25 39.6 228,800
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