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

[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.