Friday, November 13, 2009
If people on the dole give up more when they go to work than they can possibly earn on the job -- an implicit marginal tax rate of more than 100% -- they will become permanent constituents for the welfare state.
Increasingly, that seems like the plan.
According to the chart at the link, every dollar earned between $25k and under $45k results in net reduced economic position, except for a really tiny range in the upper 30k. The total loss in this range for someone earning $45k is the area under the curve and above the 100% line. Eyeballing it looks like averaging around 115%, so that nominal increase of $20k (from 25 to 45) results in a net decline of $3k, and a person making $45k now finds himself worse off than when he previously made half as much money.
The funny thing is, I personally went through this change in income, and instead of feeling poorer, I felt much richer.