[FoRK] Megan McArdle advocates 376,537.65% marginal tax rate

Jeff Bone jbone at place.org
Thu Jan 21 10:05:20 PST 2010


This is what happens when you let people that, um, weren't exactly in  
the AP math classes play tax-policy wonk.  Via:

   http://econlog.econlib.org/archives/2010/01/mcardle_advocat.html#

   http://meganmcardle.theatlantic.com/archives/2010/01/killing_off_the_insurers_the_c.php


David Henderson's commentary:

Here's what Megan McArdle advocated today:

"eliminate the tax-deductibiity of health insurance benefits for  
people making more than $150K a year in household income, $100K for  
singles."
So now imagine that you're a married person with a family and you're  
making exactly $150K a year. Your employer pays $10K toward your  
health insurance. Of course, it's not subject to federal income tax,  
state income tax, or Social Security or HI tax. You and your spouse  
make a total of $150K, split roughly evenly, so both of you pay the  
marginal payroll tax rate of 7.65%. You also pay a marginal income tax  
rate of 25% and a state income tax rate of 5%. So your total marginal  
tax rate is 25 + 5 + 7.65 = 37.65%.

Now you earn one more dollar. What happens? That whole $10K employer  
contribution becomes taxable and so you pay tax on it at 37.65% or  
$3,765. You made an extra buck and you paid $3,765 extra in taxes. Oh,  
yes, plus $0.3765. So you paid $3,765.3765 in taxes. Your marginal tax  
rate on that dollar: 376,537.65%.

HT to Tyler Cowen.


--

I think the election of Scott Brown has driven some folks completely  
insane.


;-)


jb



More information about the FoRK mailing list