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« The Law of Unintended Consequences strikes again | Main | It's not enough to *find* an anomaly . . . »

December 03, 2012

Ladies and gentlemen . . . the American tax system!

Very few things reveal as consistently and as strongly the grave problems at the heart of our current political system. John Cochrane:

It all sounds great if you don't understand margins.  Why should the government help rich people? But every time we do cap something or means-test it, we introduce another marginal tax. And some of the biggest marginal taxes hit the poor. 

This is a deeply important point so let me reiterate it. If you means-test any benefit, you introduce a steep marginal tax rate at means-testing point. If you don't means-test a benefit, you blow out the budget. It's a hard nut, that you can't get around.

This is not a little problem. We worry about the distribution of income in the US, and how low-income people seem stuck. Well, faced with these barriers of course they're stuck. And the barriers are going to get worse.   

More, including "Welfare's Failure and the Solution," here.

Comments

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Ken

I have a revolutionary idea: limit the government to its approved powers, ending wealth transfers. Repeal the sixteenth amendment and return federal collection to fee for services.

Geo

Wow, six posts before 6am! If you need a new year's resolution there it is!

Kidding aside, I really do like your blog -- it's one I check daily. You've always got some fascinating stuff here.

P.S., Sorry if this sounds like comment spam. Keep up the good work.

jorod

Get rid of the income tax. Get a VAT like the rest of the world.

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