4 ms·

That last statement -- that it takes a household income of ~$100k/year before you "pull out the other side" and end up genuinely better off than you would be ea

by gjm11 11y ago

That last statement -- that it takes a household income of ~$100k/year before you "pull out the other side" and end up genuinely better off than you would be earning nothing -- seems extremely surprising. The great majority of households in the US have household income less than $100k. Are you saying that they are all worse off, or only insignificantly better off, than they would be with an income of zero? If so, I'd love to see some data.

zaroth 11y ago
The typical chart looks something like this; http://www.economonitor.com/dolanecon/files/2014/01/P140103-5p.png http://www.economonitor.com/dolanecon/files/2014/01/P140103-... But even that does not include a substantial number of assistance programs, like TANF (up to $10k per year in cash), Section 8, and forget about a proper analysis of progressive income-based-pricing for things like college tuition. Most of all, these analysis always assume the cost of working is $0 when in fact it costs a lot to get to work and be at work all day, as well as the marginal value of not being employed and spending that time doing work you would otherwise pay someone else to do (childcare, housework, home schooling, etc.) is very significant. It also depends heavily on how healthy the family is, and therefore the market value of $0 deductible Medicaid / ACA. GSA pegs the average value of Medicaid around $8,000 but consider the max family out-of-pocket for Bronze ACA without any subsidies is $13,200, and that's not even counting the premiums, so that $8,000 value is assuming a a relatively health family of 4. If the family has chronic health needs, then getting eligible for Medicaid can save upwards of $25,000 per year between premiums and out-of-pocket expenses. Also note, SSDI is ~$48,000/yr for a fully vested disabled individual with 2 children. So I definitely agree if you just look at the tax return the average healthy family of 4 will see net income rising certainly before you hit $100k gross. How much their cost-of-living is increasing in lock-step with that rise, versus how much is eaten by increasing work-related and income-related expenses is a more contentious topic which I have yet to find, even from GSA, a truly comprehensive analysis which includes the effects of the ACA.
- gjm11 11y ago
  That chart suggests that at pretty much every income level you're better off (in financial terms) earning more. Over most of its range it looks like d(benefits)/d(income) is no worse than about -0.1. The other factors you mention will of course make a difference, but I'm not seeing anything that comes close to justifying the statement that you don't get into positive returns until $100k/family/year.
  - zaroth 11y ago
    If you consider only Medicaid, SNAP, and EITC, the lost benefits equate to at least a $10,000 tax on the first $70,000 gross (an effect 14% tax). Since the chart is only showing a subset of lost benefits, it can't show if you're "better off" because it doesn't show all the lost benefits and it doesn't show the effect of taxes. First, there are all the programs the chart simply ignores. Some are asset-tested like TANF and SSI, so you can't just stop working and start claiming them. Yet they pay out about $70 billion so they are not insignificant. Others are income-based and can be very significant, like Section 8 which could pay $10,000/yr in rental assistance. Another question, is it fair to value Medicaid as the average cost / enrolled person, when the government is getting a special low rate? If valued on a replacement cost basis (what it costs for worse insurance paid for by the employee+employer) then it would be valued closer to $20,000 in premiums plus the deductible. So yes, you can easily lose $40,000 in benefits, and pay $20,000 in taxes earning that first $100k gross, besides the fact that it will cost you 4160 hours of work to get there.
    - gjm11 11y ago
      Assuming for the sake of argument that all your figures are correct, that still puts you $40k/year better off with the $100k salary than without it. I am still not seeing how it can possibly be correct to describe this by saying that it's at about $100k/year gross that you start to "pull out the other side". Programmes for which "you can't just stop working and start claiming them" are surely irrelevant to this particular discussion, which is entirely about the effect of earning more or less (at, presumably, a fixed level of assets). Also: 4160 hours of work is over 11 hours/day, 365 days/year. I'm sure there are people working such hours, unfortunately, but if you're implying that that's in any way typical then I must gently suggest that you might be wrong. (For the avoidance of doubt: I think "poverty traps" are a very bad thing, and I would love to see taxation and benefits everywhere reformed so that effective income rises smoothly as a function of gross earnings, and I agree that the US tax and benefit system is a mess and makes it unprofitable for some lowish earners to earn more. All I'm disagreeing with is the suggestion that the point at which this stops happening is anywhere near as high as $100k/year gross.)

by gjm11 11y ago

zaroth 11y ago

The typical chart looks something like this; http://www.economonitor.com/dolanecon/files/2014/01/P140103-5p.png http://www.economonitor.com/dolanecon/files/2014/01/P140103-... But even that does not include a substantial number of assistance programs, like TANF (up to $10k per year in cash), Section 8, and forget about a proper analysis of progressive income-based-pricing for things like college tuition. Most of all, these analysis always assume the cost of working is $0 when in fact it costs a lot to get to work and be at work all day, as well as the marginal value of not being employed and spending that time doing work you would otherwise pay someone else to do (childcare, housework, home schooling, etc.) is very significant. It also depends heavily on how healthy the family is, and therefore the market value of $0 deductible Medicaid / ACA. GSA pegs the average value of Medicaid around $8,000 but consider the max family out-of-pocket for Bronze ACA without any subsidies is $13,200, and that's not even counting the premiums, so that $8,000 value is assuming a a relatively health family of 4. If the family has chronic health needs, then getting eligible for Medicaid can save upwards of $25,000 per year between premiums and out-of-pocket expenses. Also note, SSDI is ~$48,000/yr for a fully vested disabled individual with 2 children. So I definitely agree if you just look at the tax return the average healthy family of 4 will see net income rising certainly before you hit $100k gross. How much their cost-of-living is increasing in lock-step with that rise, versus how much is eaten by increasing work-related and income-related expenses is a more contentious topic which I have yet to find, even from GSA, a truly comprehensive analysis which includes the effects of the ACA.

gjm11 11y ago
That chart suggests that at pretty much every income level you're better off (in financial terms) earning more. Over most of its range it looks like d(benefits)/d(income) is no worse than about -0.1. The other factors you mention will of course make a difference, but I'm not seeing anything that comes close to justifying the statement that you don't get into positive returns until $100k/family/year.
- zaroth 11y ago
  If you consider only Medicaid, SNAP, and EITC, the lost benefits equate to at least a $10,000 tax on the first $70,000 gross (an effect 14% tax). Since the chart is only showing a subset of lost benefits, it can't show if you're "better off" because it doesn't show all the lost benefits and it doesn't show the effect of taxes. First, there are all the programs the chart simply ignores. Some are asset-tested like TANF and SSI, so you can't just stop working and start claiming them. Yet they pay out about $70 billion so they are not insignificant. Others are income-based and can be very significant, like Section 8 which could pay $10,000/yr in rental assistance. Another question, is it fair to value Medicaid as the average cost / enrolled person, when the government is getting a special low rate? If valued on a replacement cost basis (what it costs for worse insurance paid for by the employee+employer) then it would be valued closer to $20,000 in premiums plus the deductible. So yes, you can easily lose $40,000 in benefits, and pay $20,000 in taxes earning that first $100k gross, besides the fact that it will cost you 4160 hours of work to get there.
  - gjm11 11y ago
    Assuming for the sake of argument that all your figures are correct, that still puts you $40k/year better off with the $100k salary than without it. I am still not seeing how it can possibly be correct to describe this by saying that it's at about $100k/year gross that you start to "pull out the other side". Programmes for which "you can't just stop working and start claiming them" are surely irrelevant to this particular discussion, which is entirely about the effect of earning more or less (at, presumably, a fixed level of assets). Also: 4160 hours of work is over 11 hours/day, 365 days/year. I'm sure there are people working such hours, unfortunately, but if you're implying that that's in any way typical then I must gently suggest that you might be wrong. (For the avoidance of doubt: I think "poverty traps" are a very bad thing, and I would love to see taxation and benefits everywhere reformed so that effective income rises smoothly as a function of gross earnings, and I agree that the US tax and benefit system is a mess and makes it unprofitable for some lowish earners to earn more. All I'm disagreeing with is the suggestion that the point at which this stops happening is anywhere near as high as $100k/year gross.)