When Working Hurts

We know that people appreciate the things they work for.  That people tend to care for and maintain those things that have taken effort to acquire.  So for no other reason (though there are many others) the balance would seem to stand in favor of making sure that people have the incentive to continue working, or to start working.  Oh, and working adults, if they are employed through mutual voluntary exchange, create this thing for society called wealth.

But...a couple of years ago a study was conducted about the implicit marginal tax rate faced by people on the low skill / low income side of the equation.  What is "implicit marginal tax?"  Simply the percentage amount by which the paycheck of a worker is reduced as they earn more money.  This takes into account not only the increasing types and rates of taxes they must pay, but also their advancing ineligibility for federal and state hardship aid of various kinds.  For example, if I make an additional $10,000 and am taxed 10%, it looks like my marginal tax rate for that $10K is 10%.  However, if by making that $10K I am now too "rich" for $5K of housing assistance, my implicit marginal tax rate is now 60%!  So by working hard and earning $10K, I have only made myself $4K better off!

And it gets worse.  These charts are from this column.




And...



Essentially, if you earn between $25,000 and $50,000/year, each additional dollar of income you earn results in the LOSS of MORE than a dollar of buying power.

Remind me, what is the message we want to send to the younger generation, those getting in on the ground floor of their working lives?