The Sound Guy
Pursuit Driver
The article below shows how taxes and the governmental programs work *against* a person getting off of assistance because of non graduated reduction in benefits if income is raised. I've read stories of people refusing to go full time or refusing a raise because they would end up going over a benefit limit and they would actually lose money in the deal.
I've thought for years that congress and the states need to integrate the support structure and modify it so that people always gain some real income as their salary goes up. But as long as the politicians create these programs in isolation, we'll lock the poor and minorities in that condition for years.
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(Bloomberg) -- Millions of low-income Americans are locked into poverty thanks to U.S. tax policy, Federal Reserve Bank of Atlanta researchers say. About a quarter of lower-income workers effectively face marginal tax rates of more than 70% when adjusted for the loss of government benefits, a study led by Atlanta Fed Research Director David Altig found. That means for every $1,000 gained in income, $700 goes to the government in taxes or reduced spending. In some cases, there are no gains at all.
Poorer families may rely on Medicaid insurance, welfare payments, food stamps, housing vouchers and tax credits that are based on family incomes. Small increases in wages can bring big losses of benefits, reinforcing a negative cycle in which workers aren’t rewarded if they improve their skills or pay. “This is a perverse incentive that says you shouldn’t try to make yourself better,” said Atlanta Fed President Raphael Bostic, who is leading a virtual conference Thursday intending to focus attention on the problem. “They are not dumb. It’s on us to actually change those incentives so that people understand what the potential is and move forward towards opportunity.”
<Snip>
While the median low-income American family may have a marginal tax rate of about 45%, there’s a large dispersion of experiences, depending on age, family size, location and benefits. Some families face an exaggerated problem -- 70% tax rates or occasionally much more. Just $1,000 in higher pay for a single mother in Oregon, in one example cited in Altig’s research, would result in a devastating loss of $15,000 in housing subsidies.
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Bloomberg
The article also shows that the worst states for punishing the poor attempting to move up are the liberal states:
Another example of vote buying plans actually locking the poor into government dependence
I've thought for years that congress and the states need to integrate the support structure and modify it so that people always gain some real income as their salary goes up. But as long as the politicians create these programs in isolation, we'll lock the poor and minorities in that condition for years.
********************************************************
(Bloomberg) -- Millions of low-income Americans are locked into poverty thanks to U.S. tax policy, Federal Reserve Bank of Atlanta researchers say. About a quarter of lower-income workers effectively face marginal tax rates of more than 70% when adjusted for the loss of government benefits, a study led by Atlanta Fed Research Director David Altig found. That means for every $1,000 gained in income, $700 goes to the government in taxes or reduced spending. In some cases, there are no gains at all.
Poorer families may rely on Medicaid insurance, welfare payments, food stamps, housing vouchers and tax credits that are based on family incomes. Small increases in wages can bring big losses of benefits, reinforcing a negative cycle in which workers aren’t rewarded if they improve their skills or pay. “This is a perverse incentive that says you shouldn’t try to make yourself better,” said Atlanta Fed President Raphael Bostic, who is leading a virtual conference Thursday intending to focus attention on the problem. “They are not dumb. It’s on us to actually change those incentives so that people understand what the potential is and move forward towards opportunity.”
<Snip>
While the median low-income American family may have a marginal tax rate of about 45%, there’s a large dispersion of experiences, depending on age, family size, location and benefits. Some families face an exaggerated problem -- 70% tax rates or occasionally much more. Just $1,000 in higher pay for a single mother in Oregon, in one example cited in Altig’s research, would result in a devastating loss of $15,000 in housing subsidies.
***************************************************************
Bloomberg
The article also shows that the worst states for punishing the poor attempting to move up are the liberal states:
Another example of vote buying plans actually locking the poor into government dependence
