Marginal Tax Rates for Working Poor

[chemgator]

http://epionline.org/studies/shaviro_02-1999.pdf

An interesting study on "marginal tax rates" for the working poor (from 1999). A person making minimum wage ($5.15/hr at the time, or about $10,000/year for 2,000 hours) in a typical city will have to pay a marginal tax rate of about 90% on additional income. If you increased minimum wage by $1.00/hour, they would only receive $0.10 of that. In one case, a single parent making $10k/yr would pay a tax rate of about 120% if their income was raised to $25k/yr. How is that possible? They lose a huge amount of state and federal benefits as their income goes up--more than what they make.

What does this tell us?

a) there are a lot of benefits available for poor people.
b) there isn't much incentive to work harder or work an additional job.
c) we have a really screwed up system, if it keeps people poor this way.
d) democrats should probably think before they pass legislation that enslaves people.

[QGator2414]

e) all the above

[neisgator]

It is sad
The crutch is there... And it is getting stronger

[mocgator]

The Democrat plantation is large and deep. Just like they want it. Nobody is allowed off the plantation once they get off. Marxism 101.

[GatorFanCF]

Wow...when this changes; and, it must because sooner or later you run out of other people's money, there are going to be A LOT of pissed off people looking to feed, clothe and shelter themselves - without many of the skills developed by struggling (for a time) and working through challenges. I won't blame them - I would be angry too if I was promised I would get "X" if I just did "Y" and one day the promise doesn't deliver, leaving me with very weak options.

[g8orbill]

everyone needs to pay income taxes

[bluelang]

Originally Posted by chemgator

http://epionline.org/studies/shaviro_02-1999.pdf

An interesting study on "marginal tax rates" for the working poor (from 1999). A person making minimum wage ($5.15/hr at the time, or about $10,000/year for 2,000 hours) in a typical city will have to pay a marginal tax rate of about 90% on additional income. If you increased minimum wage by $1.00/hour, they would only receive $0.10 of that. In one case, a single parent making $10k/yr would pay a tax rate of about 120% if their income was raised to $25k/yr. How is that possible? They lose a huge amount of state and federal benefits as their income goes up--more than what they make.

Maybe you should read the article for comprehension. The loss effect is mostly from services, not taxes. Changing minimum wage will raise the defined boundaries of "poverty" (since it's a relative measure) and the service thresholds themselves will move with it.

The bad assumption is that things like child care credits - which exist to support a fixed % of people - would "disappear" for people who suddenly made over the limit. It's not true. The limit will move. Companies that make money off of poor people will charge more for poor people things.

So the opposition to drastically changing minimum wage is generally correct, but for the wrong reason. All it ends up doing is costing taxpayers slightly more and feeding inflation. Net change over a couple of legislative cycles (long enough to reset the boundaries for services) is zero.

[bluelang]

The opposite is also true, by the way. We could eliminate the min wage, but we'd just have to expand services. There's some % of people who are going to either be "subsistence workers" or not work at all. Whether you give them cash dollars or just pay for everything directly is essentially a shell game.

[dangolegators]

The Employment Policies Institute is a front for a lobbyist for the restaurant, hotel, alcoholic beverage and tobacco industries. All of their 'studies' show that anything that might adversely affect profits in those industries, things like increasing the minimum wage, is bad, really bad.

[JerseyGator01]

Until the left hand of government knows what the right hand is doing, raising the minimum wage is essentially a joke.

[chemgator]

Originally Posted by bluelang

Maybe you should read the article for comprehension. The loss effect is mostly from services, not taxes. Changing minimum wage will raise the defined boundaries of "poverty" (since it's a relative measure) and the service thresholds themselves will move with it.

The bad assumption is that things like child care credits - which exist to support a fixed % of people - would "disappear" for people who suddenly made over the limit. It's not true. The limit will move. Companies that make money off of poor people will charge more for poor people things.

So the opposition to drastically changing minimum wage is generally correct, but for the wrong reason. All it ends up doing is costing taxpayers slightly more and feeding inflation. Net change over a couple of legislative cycles (long enough to reset the boundaries for services) is zero.

Maybe you should read what you quote for comprehension. (Hint: the last sentence you quoted has a clue. Maybe you should get a clue.)