All Employees of United Company Are Covered by a Group

question 90

Multiple Choice

All employees of United Company are covered by a group hospitalization insurance plan, but the employees must pay the premiums ($8,000 for each employee) . None of the employees has sufficient medical expenses to deduct the premiums. Instead of giving raises next year, United is considering paying the employee's hospitalization insurance premiums. If the change is made, the employee's after-tax and insurance pay will:

• A)Decrease by the same amount for all employees.
• B)Increase more for the lower paid employees (10% and 15% marginal tax bracket).
• C)Increase more for the higher income (35% marginal tax bracket) employees.
• D)Increase by the same amount for all employees.
• E)None of these.