Neutralizing the Adverse Effect of State and Federal Income Taxes on Lump Sum Awards in Employment Cases

$25.00
In stock
SKU
v25i1-2nieswiadomy_loudat
Michael Nieswiadomy and Thomas Loudat. 2019. Neutralizing the Adverse Effect of State and Federal Income Taxes on Lump Sum Awards in Employment Cases. Journal of Legal Economics 25(1-2): pp. 53–73.
Downloadable
This paper provides a methodology to ‘‘gross-up’’ an award when estimated losses are taxable such as in employment (e.g., wrongful termination or discrimination/retaliation) and non-physical injury cases. This solves a simultaneity problem wherein the award amount is a function of the income taxes paid, and these taxes are a function of the award plus other income in the year the award is received. This paper makes two contributions. First, it provides ‘‘gross-up’’ calculations in the context of several factors impacting income tax: investment income, Social Security and Medicare taxes, and Net Investment Income Taxes (NIIT) in the context of the Tax Cuts & Jobs Act of 2017. Second, it uses spreadsheet functions to iterate a user-friendly solution using an example calculating state and federal income taxes, Social Security/ Medicare taxes, and NIIT to determine the award. We also compare the accuracy of an approximation ‘‘gross-up’’ formula to the correct solution.
More Information
Authors Michael Nieswiadomy, Thomas Loudat
Write Your Own Review
You're reviewing:Neutralizing the Adverse Effect of State and Federal Income Taxes on Lump Sum Awards in Employment Cases
Your Rating
Copyright © 2014 - 2022 American Academy of Economic and Financial Experts. All Rights Reserved. Designed and Developed by Larry Havard, Havard Econometrics. All Rights Reserved