70 percent tax on work

[caddyman]

I personally don't know anyone who wants to be poor. If given the chance at a better wage, anyone would jump at it.

Would they actually work harder or do we just need to pass more laws to give them better wages?

[WaterMan]

Would they actually work harder or do we just need to pass more laws to give them better wages?

 

We were just talking about the poor. I don't think the poor would be working harder going from a fast food job to a cushy CEO chair.

[Azazello1313]

take a look at this chart, based on existing law (i.e., not even factoring the large implicit marginal tax rate hikes of 20-30% in the various health care bills).

 

here's another, with some explanation as to what's going on:

 

At B, the marginal tax rate is relatively low (!) because of the Earned Income Tax Credit (EITC). From B to D, we (or, rather, the working poor) are in the Dead Zone, with implicit marginal tax rates mostly exceeding 100 percent.

 

At C, the implicit marginal tax rate is momentarily "only" 75 percent. This is because, in the face of losing other means-tested benefits while the federal income tax kicks in, the children of the household still qualify for the State Children's Health Insurance Program (SCHIP). The lull in the onslaught is momentary, however, ending as soon as that prop is removed from the household.

 

At D, the family is finally done with jumping through the hoops to qualify and remain qualified for the give-away programs. Now all it has to concern itself with is paying taxes. But there is no rest for the weary because, at E, the child tax credit phases out.

 

now read this story:

the poverty trap is still very much a reality in the U.S. A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn’t make ends meet any more. I told her I didn’t know what I could do for her, but agreed to meet with her. She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges. She asked me if she should go back to earning $25,000.

 

who wrote that? must be some right-wing liiiieeear, right? umm, no it was jeff liebman, a guy who currently has a job in the obama administration. check out what he said about health reform in february, 2008:

Second, in designing universal health insurance, we need to be very careful not to phase out income-related premium subsidies over the same income range where all of these other benefits are being phased out.

well, they weren't careful at all, the health insurance subsidies phase out steeply over the exact same income range.

 

this is a real problem. it seems like they could kinda-sorta fix it though by doing the means-testing based on total income INCLUDING any other government benefits.

 

big picture though.....a lot of people talk a lot and very concernedly about the vanishing middle class, and of course all the blame is always somehow put on the rich getting richer. well how can you NOT look at a giant wall between poverty and the middle class gobbling up huge percentages (sometimes over 100%!) of the income earned from one point to the other as the primary culprit?

[evil_gop_liars]

the poverty trap is still very much a reality in the U.S. A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn’t make ends meet any more. I told her I didn’t know what I could do for her, but agreed to meet with her. She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges. She asked me if she should go back to earning $25,000.

 

I'm confused, isn't this what you guys want. She is no longer using perches tax money, she is paying for health care and she is paying income tax. If she is dumb enough to have a crappy job and kids it's her fault, she made her bed...

[Ursa Majoris]

I'm confused, isn't this what you guys want. She is no longer using perches tax money, she is paying for health care and she is paying income tax. If she is dumb enough to have a crappy job and kids it's her fault, she made her bed...

Worth bumping for an answer to this.

[Caveman_Nick]

I'm confused, isn't this what you guys want. She is no longer using perches tax money, she is paying for health care and she is paying income tax. If she is dumb enough to have a crappy job and kids it's her fault, she made her bed...

 

For my part....

 

There should not be financial incentive provided by the government to make less money in the private sector. That's what I want, and that's what this woman is running up against.

 

I am not sure why that's complicated to see.

[Azazello1313]

I'm confused, isn't this what you guys want. She is no longer using perches tax money, she is paying for health care and she is paying income tax. If she is dumb enough to have a crappy job and kids it's her fault, she made her bed...

Well my hope for any person dependent on govt assistance is that they would work hard to get themselves out. I'm sure we all feel that way, regardless of politcal orientation. The problem is the government itself making that more difficult and less likely by subsidizing poverty and penalizing the climb out of it. It's done out of noble, altruistic goals, but the resulting incentives are perverse.

[wiegie]

Well my hope for any person dependent on govt assistance is that they would work hard to get themselves out. I'm sure we all feel that way, regardless of politcal orientation. The problem is the government itself making that more difficult and less likely by subsidizing poverty and penalizing the climb out of it. It's done out of noble, altruistic goals, but the resulting incentives are perverse.

again, if you are worried about these incentives, the best way to fix the perverse results would be to give people subsidies that increased as their incomes increased. That way people would have double the incentive to not be poor.

[Azazello1313]

again, if you are worried about these incentives, the best way to fix the perverse results would be to give people subsidies that increased as their incomes increased. That way people would have double the incentive to not be poor.

Right , because the only options are implicit marginal tax rates near or above 100% on the one hand, or negative on the other. There certainly can be no reasonable alternative somewhere in between.

 

This is a really weak argument on your part wiegie. Seems like a topic where you might have something constructive to offer, oh well.