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Politics : Formerly About Advanced Micro Devices
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From: TimF11/13/2009 4:20:44 PM
1 Recommendation  Read Replies (1) of 1577284
 
Ugly curves, ugly outcomes

EconLog | Arnold Kling | Marginal Tax Rates:

Clifford F. Thies writes,

When you take into account the loss of means-tested benefits (e.g., cash assistance, food stamps, housing subsidies, and health insurance), and the taxes that people pay on earned income, the return to working is essentially zero for those in the lower two quintiles of the income distribution.

Read the whole thing. And note that Greg Mankiw shows that health care reform will make this worse. For that matter, so might health care vouchers.

There are two potential solutions. One solution is to base eligibility for means-tested benefits on total income, including other government benefits programs. Another approach would be to abolish a lot of specific programs and replace them with generic cash assistance.

This is really scary to me. Those are the kinds of perverse effects that can bring a society to a halt.

Here are the two graphs Thies presents in his post:





The tax code is such an ugly hackjob. I think if you stripped the labels off of those graphs any engineer worth his salt could tell you that they described a cobbled together system lacking even the suggestion of logic or elegance. It doesn't even matter what the domain is, those curves scream suboptimal. Hell, they scream random.* Which is exactly what they are after a century-plus of congressional sausage-making...

southbend7.blogspot.com
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