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If you want to abolish the marginal tax, then I would start by looking at tax reform. If you think the marginal tax imposed by a given welfare system is too hig
by gizmo686 8y ago
If you want to abolish the marginal tax, then I would start by looking at tax reform. If you think the marginal tax imposed by a given welfare system is too high, you can just tweak the numbers.
- SilasX 8y agoI meant that it's effectively a high marginal tax, when you decrease the housing subsidy as the recipient earns more income. That is, if every $100/month gain in wages comes with a $30/month decrease in subsidy, that's effectively a 30% marginal tax (on top of all their other taxes). (And I don't know what you mean by "just tweak the numbers"; the more generous benefits you want, the more you have to disincentivize work; no amount of "tweaking" avoids the core tradeoff.)
- gizmo686 8y agoWhat do you want the marginal rate to be? 1%? Just have a $1/month decrease in the subsidy for every $100/month increase in wages. Personally, I would prefer if all welfare was unconditional and we did all of this tweaking through the explicit tax code, but that is an implementation detail. >The more generous benefits you want, the more you have to disincentivize work; What disincentives work is the marginal decrease in benefits. Assuming you have adequate funding, there is no need to increase the rate of marginal decrease. If you don't have adequate funding, then you will need to fund the increased benefits to the not-as-poor by decreasing benefits to the poorer. There is, admitadly, a decreasing marginal value of money that does behave like you are describing, but its effect is dwarfed at the level of income we are talking about.