Comments (24)

• yeager12

  How can the poor work when there are no jobs?

  Published: November 9, 2009 6:49 AM

• geoih

  And you're not including sales taxes, property taxes, fees for "services", etc., or most importantly, inflation.

  Published: November 9, 2009 7:14 AM

• geoih

  Quote from yeager12: "How can the poor work when there are no jobs?"

  I think the point is, why would they bother to work, jobs or no jobs. Of course, you could claim that is the goal.

  Published: November 9, 2009 7:16 AM

• Marek

  Great post,

  I would imagine it would be even worse when including other indirect taxes on revenue, such as those 'paid' by the employers (which are in reality paid by the employees, as was arguing even Milton Friedman).

  Published: November 9, 2009 7:45 AM

• aisxray

  I always figured there was a super super secret formula that was keeping me from getting ahead....Now I know...

  Published: November 9, 2009 7:58 AM

• K Ackermann

  @aisxray - hahahaha. Yes, I came so close to making it big, except I had to cough up an extra $200 bucks for taxes.

  What about the benefit derived from the poor? If it wasn't for them, then I might be poor.

  Every day I read the Help Wanted to a lucky blind kid that I see. I read it to him just to make him feel guilty for being alive. He has a choice.
  

  Published: November 9, 2009 9:45 AM

• K Ackermann

  66% of corporations operating in the US did not pay taxes between 1998 and 2005.

  I bet many of them sold products to the poor, and I bet many of them used the court system etc.

  We can look at it as supporting the corporations.

  Published: November 9, 2009 10:23 AM

• Mike

  "What about the benefit derived from the poor? If it wasn't for them, then I might be poor."

  Please support.

  Published: November 9, 2009 11:00 AM

• billwald

  Three observations. First, the working person is mostly concerned with marginal net income vs. increased working hours and increased responsibility. How much extra does he take home if he works an hour of overtime? If he takes a promotion is the extra pay worth the stress?

  Second, anyone whose annual green fees plus bar bill is less than his taxable income is not rich. Rich people have capital gains and dividend payments, taxed at a maximum 15%. They collect medicare and social security but pragmatically don't pay a payroll tax because they don't work for wages.

  It is expensive to pull down a high wage. A family that grosses $150K probably spends $120K and is a good manager if they save 10% of gross a year.

  The person with $10 million invested assets can cash in $400K, pay $60K tax, and his pot will still grow faster than the inflation rate. The guy with $100 million invested assets doesn't know how to spend his safe annual draw of $4 million on which he would pay $600K tax.

  Third, our owners stir up class warfare between the low end middle class and the high end middle class. The guy making $20/hour thinks the guy with $250K gross income is rich. This poor slob has no numerical conception of RICH!

  Published: November 9, 2009 12:19 PM

• PirateRothbard

  K Ackermann,

  The fact that some corporations have managed to escape taxes does not mean our government is supporting them. It means they are lucky and didn't have to pay the extortionist. No corporation or individual should have to pay taxes.

  Published: November 9, 2009 12:52 PM

• JL Bryan

  "66% of corporations operating in the US did not pay taxes between 1998 and 2005.

  I bet many of them sold products to the poor"

  If such corporations were taxed more heavily, they would have to charge the poor more money for products and services. Since the poor have limited money, this would reduce their standard of living.

  Also, if the corporations had to pay more taxes, they would have less money with which to hire employees. So more people would be unemployed, and therefore poor.

  If you're worried about improving the lot of the poor, you certainly wouldn't want to decrease their job opportunities while increasing the price of things they need to buy.
  

  Published: November 9, 2009 1:23 PM

• Ohhh Henry

  Creating a large underclass of government dependents is a boon to the people who are paid to assist those people. Up to a point, the bigger the underclass the more money they make.

  But where is that point, where the tax base is so ravaged that it is no longer a benefit to the government class to create more hardship and put more people on the welfare rolls? I don't know exactly where that point is or if the USA has passed it yet, but I think that at around the time that this point is reached there will be a meltdown marked by a rapid deterioration of the tax base and a sharp increase in nanny spending programs. The sawtooth at the left of Mr. Thies' chart will move to the right and rapidly eat up the incomes of more and more Americans causing them to slip off the economic ladder into the abyss of food stamps, public housing, etc. However the currency will inevitably be devalued and the overall level of wealth and average standard of living will be drastically eroded. Many people will be surprised to learn that TANSTAAFL after all, not even for the people who gave themselves the job of giving everyone else a free lunch.

  And then what? In a relatively small country with a relatively strong central government and weak or non-existent provincial and municipal governments like in Iceland or Argentina it is possible to keep the impoverished majority at bay and politically neutralized with the combination of a strong and centralized army and police force plus IMF money and other subsidies from abroad. But I don't think the USA is sufficiently politically centralized and there isn't enough money anywhere to fund the USA as the world's largest IMF basket case.

  Published: November 9, 2009 1:43 PM

• Cramchakle

  I would like to see this concept turned into a simple online App where I can put in information about my own family, and it presents a curve customized to me. It might help me to better get mine back out of the system.

  Published: November 9, 2009 1:49 PM

• overtheedge

  "66% of corporations operating in the US did not pay taxes between 1998 and 2005.

  I bet many of them sold products to the poor"

  Never forget the paraphrased "Laws of Thermodynamics".

  Everything is connected to everything.
  Everthing has to go somewhere.
  There ain't no such thing as a free lunch. (TANSTAAFL)

  These corporations that sold stuff to the (non-working) poor got paid out of public coffers. It is wealth redistribution, plain and simple. Advertising is a tax on the public and the consumers. Corporations are just a financial instrument that protects the owners from direct responsibility; nothing else.

  I'm not condemning anyone other than the public. We permit it, vote for it and then whine about it.

  So what is the answer?

  Education. But this is fundamentally impossible without a grievious reset of the economy. Thrift can only be learned by the masses through the loss of safety nets. This isn't permissible. The belief systems must be preserved.

  So what to do? CYA

  Published: November 9, 2009 2:07 PM

• Wealth

  Billwald,

  I earn $30,000 a year and I manage to save $18,000 and I am a POOR manager (in all the meaning of that word), I could save even more money.

  So if I would earn $250,000 a year, you would bet I would save at least $175,000. In just 8 years I would be rich.

  They guy who earns $250,000 a year and complaints about being broke is a wreckless waste spender.

  Published: November 9, 2009 3:10 PM

• Wealth

  Overtheedge,

  Corporations can be large and owned by hundreads, thousands and even hundreads of thousands of people.

  Therefore it's reasonable to find ways to limit direct responsibility when nobody is really responsible anyways.

  Corporations don't pay taxes, the consumers and the workers do.

  Any taxes forced upon corporations will be passed on to the consumers in the form of higher prices and passed on to the workers in the form of lower wages.

  66% of corporations not paying their taxes is outrageous, I demand that 100% of corporations and 100% of individuals DON'T pay taxes.

  Published: November 9, 2009 3:14 PM

• earthshelterguy

  No one to blame but the electorate? How about the Federal Reserve, whose fiat money makes these programs possible? Also, we are a Republic, not a Democracy. Our leaders are supposed to protect the rights of all citizens, not have some benefit by taking property by force from others. Read John Locke to see the difference between a right and a privilege.

  Published: November 9, 2009 9:23 PM

• aisxray

  Billwald,
  Being taxed on $250,000 a year and being broke is a real possibility for many small business owners.
  Having a Sub-chapter S Corporation, where the company taxes are passed through to be paid by the individual is a real possibility. He's not a wreckless waste spender, just a struggling small family business.

  Published: November 9, 2009 10:39 PM

• Bennet Cecil

  The purpose of these government programs is to buy votes for statists. Their children and grandchildren will also vote for more government. The only solution is the natural consequences of faulty fiscal and monetary policies. High unemployment, high taxes and high inflation push voters to consider smaller government, lower taxes and stable money. This happened in 1980 and it will happen again.

  Published: November 9, 2009 10:53 PM

• Srikar Bongu

  Even though implicit marginal rates may be very high. How likely is it that the working poor are aware of their incentives? In which case their actions would just assume that working an hour would make them wealthier when in actuality it does not.

  Published: November 10, 2009 12:11 AM

• ryan

  In addition to Srikar's point, I also think there's an implicit cost to a lot of the programs available to the poor. Usually they consist of waiting in lines, tons of paperwork, and face-to-face meetings with social workers, etc. if i can make 200 bucks without that hassle by working, it might be better than going through the hassle to receive 200 or even 220 bucks.

  Published: November 10, 2009 4:46 PM

• Bob Roddis

  Anyone familiar with the "writings" of Matt Yglesias knows that he is an unreconstructed Keynesian/Krugmaniac who knows absolutely nothing about Austrian School theory (or economics, for that matter).

  Yglesias has a link to this instant article here but "would like to see it replicated by someone who’s from someplace more credible than the Mises Institute."
  

  Published: November 13, 2009 6:13 PM

• Chad

  I recreated the chart in Georgia (as I live in Atlanta). I'm assuming it is similar rules. What's the interval used to calculate the marginal rates? The only thing I can figure is that it must be pretty high. Calculating changes at $1,000 intervals create marginal rates in excess of 900% at two different points.

  Maybe I am modeling this incorrectly. I have read the rules that Medicaid and PeachCare phase out at specific income amounts. In my model, you gain a $1,000 of benefits, you lose $9,000 and $12,000 of benefits at two points. For a single mother of two(the assumed household in the model), that is indeed a hell of marginal tax hike.

  Whatever your conclusions, this seems to be a policy question about health insurance. From my analysis, the high rates are caused by losing Medicaid and PeachCare. There are tremendous disincentives to earn more for a single mother at those income limits.

  If a mother of 2 is getting $30,000 of subsidies that are phased out by the time she is making $50,000 of income she will have to have higher marginal rates over that income range than a single man with no children.

  I hope this post qualifies as intelligent and civil.

  Thanks.

  Published: November 15, 2009 7:51 PM

• Chad

  I'm a dummy. I reread the article after posting and it says clear as day $10,000 changes.

  Well, my post was at least civil, IMO.

  Published: November 15, 2009 7:56 PM