Monday, January 24, 2011

It Gets Worse: Queer People "Volunteer" To Help To Ease The Tax Burden For Straight Families

Remember in my last post when I said it doesn't always get better?  A little bird down the street at Yale --erp, I mean, Oligarch University twigged me last week to a payroll error, because of which 61 employees will see a paycheck reduction of 33% or more for January and the subsequent two months.  Right before winter break, LGBT employees who had taken advantage of Connecticut's new freedom to gay marry received a letter telling them of a payroll error:  the university had ceased withholding taxes on the benefits received for domestic partners who had become spouses under state law -- but not federal law.  The upshot, for those of you who suffer temporary black out when taxes are mentioned, gay married people get to pay two years of taxes in one.

Homos are just more patriotic, that's all.  Photo Credit.
In many ways, this falls under the category of discriminatory behavior that allows universities to perform budget trimming immoral acts because they are perfectly legal, while insisting that it is not they who discriminate.  For those of you not familiar with what those of us who pay it call "the gay tax," homofolk whose marriages are not recognized under federal law pay federal taxes on benefits that are untaxable for  heterofolk, resulting in thousands of dollars of penalties that gay people pay.  According to Tara Bernard at the New York Times (January 11 2011):

A programming error failed to withhold income for taxes owed on the value of domestic partner health coverage....the value of those benefits are taxable (for nondependent partners) by the federal government. But in states like Connecticut, same-sex married couples are treated the same as opposite-sex married couples, and those benefits are not taxable on their state income tax returns.

“Unfortunately, the payroll system inadvertently treated those benefits as nontaxable for Connecticut and federal purposes for the entire calendar year of 2010,” said a letter, dated Dec. 22, from Yale’s payroll department to employees with same-sex partners who were affected by the error. To correct the error, the university went on to say, it would pay the tax and deduct the amount it paid from employees’ paychecks — in equal amounts over the first three months of 2011.

The university, which has extended health insurance to its same-sex employees’ domestic partners since 1994, typically withholds those taxes from employees’ paychecks over the course of the year. But due to the programming error, employees will be responsible for paying the taxes for both years in 2011.

Oligarch has offered "a more flexible repayment schedule" in the event that losing a third or more of a person's salary causes them any hardship. Gosh, do ya think? But honestly, you know what causes a hardship?  Being paid less for doing the same job than straight people are.  As Bernard pointed out last December, a provision of the federal health care bill that would have eliminated this tax on health benefits was dropped from the final legislation.  A very small number of employers (Google, Cisco and the Gates Foundation) reimburse employees for the cost of this discriminatory tax, a practice called "grossing up." Very few institutions of higher ed follow this practice (Syracuse is one -- commenters are invited to name names), and it is particularly shameful that one as well-endowed as Oligarch does not.

The university has received public criticism from the Human Rights Campaign; you can go here to sign a petition to tell Yale how stupid they are on this issue.  But while you are at it, if you are an academic, tell your own university about the anti-gay discrimination that helps them pay for essentials like football, keeping the cost of Alumni/ae weekends low, Presidential salaries in the millions and giving iPods to every entering freshman.  Check out the schools you graduated from, and let them know how you feel about a practice that writes discrimination into the law and violates the equal protection clause of the Constitution. Hey, I've got an idea, Yale Law profs:  how about filing a big, fat civil rights suit on behalf of your colleagues?


Katrina said...

This is outrageous. What is up with the assumption that when an error is made on the part of payroll, the burden is on the employee to face the inconvenience of the reimbursement?

(I've seen analogous cases at universities, "oops, we reimbursed you too much/taxed you in the wrong category/etc" in which the faculty member then has an enormous amount docked from their salary in one go. And yet, when the error is in the other direction, getting repayment is slower than molasses. Funny that...)

Aside from the inequity in the tax situation you describe, why only three months to pay the whole lot? How about "spaced over the next year?". And yes, in the interests of employee fairness, Yale should pony up the difference.

Math Teacher's Daughter said...

Dear Tenured Radical,

Re: "Oligarch has offered 'a more flexible repayment schedule' in the event that losing a third or more of a person's salary causes them any hardship."

I am completely in agreement with the overall gist of your post re: the discriminatory effects of the federal government's non-recognition of non-hetero-marriage. That said, the arithmetic in the post doesn't quite add up here. If Oligarch is collecting the unpaid federal tax on partner's health benefits alone--even for a whole year--surely this does not add up to one-third of the employed partner's salary, does it?

The injustice and discrimination you describe are obviously outrageous and unacceptable. No question. But the advocacy and activism around the issue can only be strengthened by having our numbers add up.

I am happy to be corrected if I've misunderstood.

With respect and admiration,
The Math Teacher's Daughter

Anonymous said...

Math teacher's kid -- The numbers come from the NYT article, and the percentages are based on monthly earnings. So when you take into account tax brackets and the dollar-value of various benefits packages, it can easily add up to a 33% hit on a person's monthly take-home salary; this is also why "generously" spreading out the tax penalties over several more months reduces it in terms of percentage of net salary (albeit not total dollar amount of the penalty).

WRS said...

@Math Teacher's Daughter. Here's a realistic scenario: Prof makes 60,000/year with $10,000 in benefits affected by the tax error. 25% tax bracket, so uncollected tax is $2500. Monthly salary after federal taxes withheld =$3750. If you factor in other taxes and with-holdings (retirement, social security, state tax, union dues, copayments for benefits) the amount can exceed 1/3 of a person's take-home salary.

We just fought at mid-Atlantic flagship state uni and got same-sex partner health benefits for the first time this year. SS spouses cannot be added to our policies because of homophobic legislators, so the university is providing people whose spouses need insurance with a subsidy towards buying that insurance on the open market. It doesn't cover the full amount of such insurance, but they are covering the taxes incurred by queer married people on this amount. No university should be able to claim to not discriminate without covering these taxes IMHO. Thanks for your attention to this issue.

Janice said...

Ouch! Another reason that I love Canada: gay spouses' and partners' rights or benefits are the same as hetero -- plus, our health care is provided as legal resident benefit. My university has no endowment, but manages to treat its employees with consideration that Oligarch seems to dismiss.

GlassPen said...

Things you are right about: federal tax policy needs adjustment and Oligarch's accounting department should have caught the error sooner.

However, the individual is *always* responsible for their own tax burden (whether the tax is "fair" or not). If Oligarch had not done what it did, the people affected still would have owed the tax...and since it wasn't taken out of paychecks in a timely fashion, would have had to pay it to the IRS in a lump sum (or worked out a payment schedule with them). Some of them might not have paid close-enough attention to the if the IRS caught on, they might also be in for the nasty surprise of penalties and interest. All in all, Oligarch did the right thing here. And they don't owe their gay married employees the extra benefit of paying a tax burden that the IRS has imposed.

Sorry, there is NO tax case here. Tho if you want to talk the Tiger Mother and her husband (both Oligarch law profs) into taking on this project, go ahead. Better use of resources: lobby Congress for changes to federal tax law...tho that's not likely either until some state manages to get the Supreme Court to agree with a state that has allowed gay marriage.

Tenured Radical said...

Nothing like a little mansplainin'!

No one said there is a tax case here, except as it leads us to the obvious: because gay marriage is illegal at the federal level, gay people are discriminated against under the tax code.

Yale also would have been culpable had they failed to collect the taxes, and technically, all 61 queers are in violation of the tax code and liable to penalties already for under-withholding.

But the case is for Yale's moral culpability, and the culpability of all employers, who do not alleviate this discrimination. Here's an extreme example: if the Federal government mandated that we all start identifying ourselves with pink triangles, ought universities to assist in the enforcement and claim they simply had no choice in the matter?

BPJ said...

Speaking as one of the 61 employees, I can tell you that no one caught this error (including people with professional accountants) because our paychecks are a riddle of codes, additions, and deductions. Even payroll employees can't explain it.

The problem is two-fold. One, some of us simply cannot afford the $500/month in a additional taxes over the next year (could you?).

Two, Yale has failed to recognize, formally or through informal channels, that this situation has anything to do with discrimination. That in itself is deeply disappointing.

Would we get the same by-the-numbers response if a random error affected a different minority group (say, all female faculty)? What does that say about the judgment inherent in this situation?

LouMac said...

I really appreciate your covering this issue. I thought I was a fairly well-informed queer academic, but wasn't aware of this form of discrimination until I started reading your blog. My partner and I are soon going to tie whatever knots our state will legally let us tie, and it's really good to be forewarned about what we can expect. I certainly plan to make a public stink about it. And I absolutely expect, since we're a Large State U, that the response will be some mealy-mouthed language about how they are beholden to the electorate (i.e. lowest-common-denominator voter prejudice that would scream if it thought queers - and useless commie academics at that - were being treated the same as Real Americans.)

Tenured Radical said...

To add to BPJ's point: part of the burden of this kind of discrimination is that Yale goofed because nobody actually thought about it, so invisible are their LGBT employees to them.

Gay marriage was a huge change in the state legal code, but I guess not for Yale!

And BTW, GlassPen,you snarkipants: Amy Chua is neither a specialist in tax code or civil rights. She teaches contracts, ethnicity and international law.

Snarkpants said...

Thanks for the new handle, TR. I'm emboldened by the possibilities. Best regards.
--Snarkpants, formerly GlassPen

Tenured Radical said...

Its snarkipants, with an "i".

Snark-i-pants said...


Snark-i-pants said...

BTW, did you see Heather Wilson's column on the over- and undereducation of Rhodes Scholar candidates (last Sunday's WaPo)?

Anonymous said...

Oligarch has offered "a more flexible repayment schedule" in the event that losing a third or more of a person's salary causes them any hardship. Gosh, do ya think? But honestly, you know what causes a hardship?

Why would this be a problem, given that they were already overpaid?

This is why employers make a point of stressing that they are not your tax preparers. When you go through a major life event, check your damn withholding. If you're too lazy to bother and you get overpaid as a result, you aren't a victim because you're asked to the unearned money back.

Now if Yale made them pay interest on the money? Sure, that'd be nasty.

Tenured Radical said...

Anonymous, get a grip. I mean seriously.

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