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

Stephen Williams sdw at lig.net
Thu Jan 21 12:24:27 PST 2010

David Kammeyer wrote:
> This is borderline pedantry.  Of course, like every other tax deduction that has an income cap, there would be a phaseout so that earning more gross income doesn't cause your net income to go down.  
> ----- Original Message ----
>> From: Jeff Bone <jbone at place.org>
>> 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%.
Many people think there are taxation cliffs for everyone now.  I have 
had to explain how progressive income tax works to too many people.  I 
remember people thinking the wrong thing even when I was very young.

Adam Beberg writes:
> The poor are no strangers to benefit "cliffs" if they make more money. 
> It's well known that unless you can make something like 40K as a 
> family of four, you're much better off making zero. We're always happy 
> to pay poor people to do nothing so long as they keep quit and away 
> from the rich.

Those have been somewhat softened I think, but a lot of work is still 
needed.  And healthcare reform is actually a big part of that.  In many 
areas, healthcare is free or nearly so if you are "poor" and has a huge 
step function if you don't qualify.  If you do hike up to enough income 
that you are no longer "poor", you usually cannot afford insurance so 
you are at high risk of unnegotiated healthcare costs which will slam 
you back down to poor in a decisive way.  And even if you get insurance, 
you need quite an income to pay all of the copays, etc.  I've pointed 
out before that this alone is probably keeping a large percentage of 
people poor.


> So putting a tax cliff up in rich-people land seems like fun :)
> -- 
> Adam L. Beberg 

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