Skip to comments.For some, income drops as wage rises [Commentary]
Posted on 02/11/2014 12:37:12 PM PST by howardl
As minimum wage goes up poor people lose government benefits. If the minimum wage goes from $7.25 to $11.50, the woman in the story gains $735 in wage income, but loses $827 in government benefits, so she's actually worse off. The obvious solution: work fewer hours at the higher wage, so that you don't lose your benefits.
(Excerpt) Read more at baltimoresun.com ...
***...the woman in the story gains $735 in wage income, but loses $827 in government benefits, so she’s actually worse off.***
Wrong. She’s better off because she regained at least part of her dignity and the freedom that comes with independence.
Dignity? What’s that?
I see your chart.
In this day and age of computation, there is NO reason to not have a smoothly graduated phaseout of benefits. If that were done, work would always pay more than not work, although at times the marginal rate of pay wouldn’t be very high.
The way it is done now, people who have welfare and begin to work soon find themselves hitting thresholds where their marginal tax rate is more than 100%.
Similar things happen to higher income people, but it’s more subtle, and the government does a better job of hiding it. A big example comes with phaseouts and floors. For example, if you have medical costs, they are deductible against income, but only to the extent they exceed a floor of 10% of your AGI (adjusted GROSS income, not net). Similarly, a lot of miscellaneous deductions, such as tax preparation, unreimbursed business expenses, etc., have a floor before deductibility. And then, after you’ve carefully jumped through all of those hoops and calculated everything, they phase them out entirely if you have a really good year. Or, you get subject to the AMT and all of your calculations are thrown away. Or tuition deduction credits get phased out.
At the high end of income, where the majority thinks you deserve to get screwed, the net effect of these tricks is to raise your marginal tax rate, but without explicitly raising the front page rates.
At the low end, especially with Obamacare, it’s much worse. I’ve seen many stories about people whose health care costs shift by $10,000 due to subsidies disappearing if they earn just a bit more. This is STUPID, and it’s unnecessary. What are these legislators—or their staff, who are supposed to be better on details, thinking?
Shes better off because she regained at least part of her dignity and the freedom that comes with independence.
= = = = = = = = = = = = = = = = =
I have contended for a while that since ‘they’ are going to do it anyway, set a goal for what a family should make.
If ‘they’ decide to make the goal 1200 per week for a family of 4 and the breadwinner (Husband or wife) makes 800 a week, let them earn the 800 and make the ‘benefit’ 400. The other ‘adult’ in the family unit would be allowed to work and if they can bring in say 600 a week, the state would be relieved of their obligation.
No tax to be paid on the first 1200.
State, Federal, FICA etc all after the first 1200.
This would ‘encourage’ people to seek employment AND stem that ridiculous payout every April.
This would benefit employees, employers, and help build self esteem.
I know the dissenters will say ‘they’ will work to 1200 then slack off - WE are still better off because we are getting SOMETHING out of all, not just handing 1200 a month out with nothing in return.
When you figure today that people are getting upwards of 30 grand a year for DOING ABSOLUTELY NOTHING at least let them ‘earn’ a portion of their own up keep.
This is similar in logic to the French four day work week. The difference is that the French don’t bring a lot of immigrants to fill the low wage jobs, they herd their immigrants (mostly from North Africa) into ghettos, where they riot and set cars on fire.
I don’t know who dreamed up those figures (in the example at the link), but paying $1000/month for rent on MINIMUM WAGE is NOT reasonable. Her monthy income before taxes is only $1,274.00 and she has 3 kids to feed. After taxes, she’s got how much left for utilities, groceries, child care, auto/transportation expenses, clothing, lunch at work, toiletries, laundry, diapers, kids clothing, OTC medicines, christmas, easter, halloween, school supplies? And whatever else I forgot...
Where I live, a grand a month is MORE than a house payment! You can get a luxury apartment or a really NICE house to rent for a grand.
And while you may not pay federal tax on min wage, you DO pay fica, medicare, state tax (if your state has it) and taxes on goods and services. If you’re on medicaid, then you have co-pays. If you have foodstamps, it’s not enough to feed 4 people on for the month unless the kids get free school breakfast AND lunch.
In my state, and many others, only $333.00 per month is allowed to claim rent and utilities. If you’re over that, too bad so sad. And if you have medical conditions requiring a specialized diet, too bad, so sad. No extra for that either.
That’s IF you play it strait and honest. You can’t make ends meet. The numbers absolutely do not stretch that far. It amazes me the level of ignorance which exists regarding low income and welfare.
In Balt-Wash (where this was published) average two bedroom rental is over $1500, so $1000/month is pretty far down-market.
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