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Pepperdine University School of Law

Friday, January 29, 2010

Should Law Schools 'Gross Up' Pay for Taxes on Benefits to Gay & Lesbian Faculty?

Inside Higher Ed, 'Grossing Up': Equity or Bias?:

Syracuse University may be on the cutting edge of promoting equity for its gay and lesbian employees. Some of the university's straight employees, however, say Syracuse needs to focus its limited funds on benefits for everyone -- and recognize that it can't be held responsible for the inequity of marriage laws in the United States.

The battle is over "grossing up" -- a human resources term for paying someone on top of salary levels so that the employee takes home the full salary amount. So if someone would owe $10,000 on a $50,000 salary, grossing up would mean paying that person $60,000 (plus whatever tax is needed on the extra $10,000 and so forth) so that $50,000 becomes take-home pay.

Syracuse plans to pay $1,000 each to its gay and lesbian employees who use the university's domestic partner program to provide health insurance for their partners. While health insurance benefits for employees and their spouses and children are not taxable under federal law, health insurance that an employee receives for a partner who is not a spouse recognized under state law is taxable. So even though Syracuse has tried to be equitable by offering partner benefits, the university's gay employees have pointed out that they were not really being treated the same way as married opposite-sex couples. ...

If Syracuse goes ahead with its plans, it may be the first college to offer such a benefit. The College and University Professional Association for Human Resources could not identify any colleges with this benefit. The Human Rights Campaign, a gay rights organization that encourages grossing up policies for partner benefits, has identified only three businesses and one family foundation with such policies.

Pat Cihon, an associate professor of law and public policy and president of the Syracuse chapter of the American Association of University Professors, has spoken out against the new benefit. Cihon said that he applauds the chancellor's commitment to inclusiveness and agrees that current marriage and tax law discriminate against gay people. He also said that he supports offering domestic partner benefits and believes that most of his colleagues share that belief. But he said that the problem that needs addressing is the law, not the university's benefits. "We really ought to be lobbying to change the tax laws," he said.

What troubles him, he said, is that the planned $1,000 payments are effectively only available to one class of people -- gay employees with partners on benefits -- and could never be available to employees married to or in domestic partnerships with people of the opposite sex.

"I appreciate and understand the rationale and intent, but now the employer is treating different people differently, and they are giving additional compensation to some groups because of sexual orientation," said Cihon.

Update: Tony Infanti (Pittsburgh), “Grossing Up” Domestic Partner Benefits

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It isn't equality unless the GL couples are required to sign a contract giving each other "divorce" rights to pensions, alimony, etc.

What Syracuse (and many many others) have isn't equality; it is the benefits of marriage with none of the disadvantages.

Posted by: EvilDave | Jan 29, 2010 5:12:57 PM

We might as well send 100% of our money to the government and let them divvy it up and send back to each what it thinks is fair. And, since women have to spend more for cosmetics, panty hose, and lots of shoes; send them a little extra. Oh, I need a little extra for sporting events, too.

Posted by: Woody | Jan 29, 2010 7:22:48 PM

Inequality in benefits is nothing new; Cihon's objection is ignorant or disingenuous. Bracketing the proposed gross-ups, what about the inequity toward single people, or young healthy people with "just" a spouse (and no children), as compared to older and/or unhealthy people possibly with a bunch of kids?

Posted by: anon | Jan 30, 2010 10:15:26 PM

I look forward to the day that one of Woody's comments actually adds something to a discussion.

Posted by: Woody's a Douche | Jan 31, 2010 1:59:21 PM

It applies to all employees, not just the law school. An economist would say that in a market economy, people get compensation, including the value of benefits, equal to what they produce. So even if the tax treatment of gay couples is unfair (which I think it is), it's not up to employers to rectify that. Indeed, an employer in a competitive market who tried to do so would go bankrupt. Nonprofits are not subject to the same market discipline.

Economists' models assume that the only thing that matters to people is their own compensation, but it's likely that perceptions of fairness also enter their utility functions. In this case, it's not clear how that plays out. On the one hand, employees might feel good about working at a place that makes a tangible effort to mitigate a societal inequity, and be willing to pay something for that. On the other hand, GLBT employees are getting paid more than straights, which some will obviously see as unfair.

There are other interesting questions. Employees' perceptions might be colored by the fact that the policy is part of a benefits' overhaul that significantly cuts overall benefits. My guess is that straight employees might be more open to this change if the cost to them were less apparent, but the university clearly viewed this as an offsetting enhancement that might make employees more willing to accept the package.

Another interesting question will be whether other academic institutions (and other employers) follow suit.

It will be fascinating to see how this plays out.

Posted by: Len | Jan 31, 2010 4:43:02 PM