What do Volunteer Companies Cost the Government?

Day 797, 16:23 • Published in USA USA • by Aaron S

I’ve been thinking lately about the eUS economy and how there is an increase in government owned companies and other companies that run off of volunteer labor for one reason or another.

I am going to do a study on what a volunteer or government run company really costs using myself as an example since I’m currently being encouraged to work for one.

I have manufacturing skill of 6.7. Working for a Q1 weapon company, I can produce 30.15 units which is equivalent to 6.03 weapons. At $.2733 per iron unit, each weapon costs $1.36 in raw material costs. The current market price of weapons in the US is $3.28. Of this $1.91 is to pay labor, taxes, and profit (or loss) to owner. Typical pay for a volunteer company is usually minimum wage, or $1 in the US. The income tax rate for weapons is 20%. The highest offer on the market at my skill in the US is $10.50 right now. At market competitive wages, my pay would be $1.74 per weapon. Add this to the $1.36 in raw material costs and the total is $3.10 breakeven price for the weapons I can produce. Of the$3.28 selling price of the weapon, $3.04 is going to the company owner and $.24 is going to the government. So the government makes $1.45 on the weapons I produce when they are sold at retail. Of my $10.50 salary, I get $8.40 and the government gets $2.10. In total, between my production and my retail price of the products I produce, the government would get $3.55 each day. If I were to volunteer at a company to produce weapons to sell to me, the cost of my labor would be $.17 per weapon. I would get paid $.80 and the government would get $.20 as income tax. For the weapon, the cost of the iron will still be $1.36 so the total cost per weapon is about $1.52 in this scenario. This is why this method looks so appealing.

Let’s look at if this were to be a government company though. The guns given to me for my work would cost $1.52 each in outright expenses or $9.16 for my total production and instead of making $3.55 in taxes, the government would get $.20 in taxes.

The cost to the government to buy 6.03 guns at market rate is $19.78 minus the $3.55 in taxes they’d receive for a total cost of $16.23 and I’d receive $8.40 to spend. So it cost the government $16.23, I gained $8.40 so the net would be $7.93 with me having $8.40 to buy products with. Spending this salary on goods at 8% VAT on most things would be an additional $.67 cents to the government which would effectively lower the cost for the weapons as well.

The cost for me to produce the guns for the government by volunteering would be $9.16 for the 6.03 guns with the government getting back $.20 in taxes from my income tax so it’d bring their cost to $8.96 with me having $.80 to spend. I’m gaining $.80 and the government has a cost of $8.96 which is a net of $8.16. I will spend my $.80 on goods at 8% on most goods which would effectively lower the cost to the government by $.06.

The final numbers between a government owned company and working for myself look to be $7.93 and with money to buy other goods working for the open market or $8.16 and enough to purchase food working for the government option.

I am not going to run any additional numbers on it, but consider for a second if these government companies were not in the US. What if the income taxes on the volunteer labor are going to other governments and the players are purchasing goods on other markets with their wages? How could these seemingly harmless volunteer projects cause the government huge tax consequences when implemented on a large scale?

Best wishes,
Aaron S