>Wouldn't a lot of people start demanding "perks" like free cars, food and housing in exchange for lover monetary pay? Wouldn't this possibly undermine the fund as the ones with the higher salaries are in a better position of negotiating these deals?

This is already happening to avoid the income tax.

> This is already happening to avoid the income tax.

That's tax fraud. Call the IRS and turn in whoever is doing this; you will get a portion of the misreported funds as a bounty.

It used to be that stuff like company cars didn't count as income. That was back when we had income tax rates of 70% and 90%. It was trivial to avoid those taxes for a dozen reasons, once being that compensation that wasn't cash was not taxed.

Now, any kind of compensation [1] is taxed as income.

[1] except health care, for no good economic reason.

This article[1] states that food, for example, is a tax free perk. Additionally, I didn't specifically talk about the American tax code. It's a global phenomenon.

1. http://www.mercurynews.com/business/ci_22982220/irs-is-looki...

The IRS is already thinking about including those perks as part of your taxable salary anyway...

The company has to pay taxes on them already as most perks as considered compensation (except for a narrow class of business expenses, and health care). If the 3% was applied there it could avoid this issue.

Sounds similar to https://en.wikipedia.org/wiki/Fringe_benefits_tax_(Australia...

In Aus (and UK, I believe) you can "salary sacrifice" something like a car, phone, or computer. Essentially the employer buys it for you and just deducts payments from your paycheck towards it. It isn't income to you, but there is a fringe benefits tax. Some items, like computers and phones, are exempt from this tax though.

As far as I know the only thing that works this way in the UK - there is as scheme where you can get a bicycle tax free and paid by deductions from your salary:

http://www.cyclescheme.co.uk/

Which is already the case in most Western European countries.

That has happened here in Norway. One normally get so heavily taxed when receiving a perk that it is normally give more economic sense to pay out of your own pocket instead.

As a result very few have any real perks, except free cell phone. At list it makes it easier to compare job offers :)

I'd imagine they'd use AGI. The IRS already goes to great lengths to precisely define income to avoid trickery like that. E.g. employer provided housing is generally considered taxable income. Food is taxable income except for certain subsidized cafeteria plans.

They are basing this on very conservative starting salary of less than 30K. It would be very hard to ask for any perks such as free housing or company car at this level of pay.