The 97,440% implicit marginal rate on that $218,001 threshold is wild. Most people probaly don't realize they're getting hit with these cliff effects becasue the mechanics are so hidden. It's one thing to phase out a benefit gradually, but jumping from zero premium to $974/year for a single dollar of income creates these perverse incentives where high earners are basically penalized for not gaming the system.
The US Tax Code is an disgusting. A simple, transparent fixed rate national sales tax offers huge net benefits. But H.R. 25 The Fair Tax Act has not been able to clear the Ways and Means Committee for more than 25 years, year after year. Kinks and notches, indeed.
I got nailed by this last year, didn’t see it coming. This year I will increase donations to avoid the notch. But the many annoyances and injustices of the tax code shouldn’t lead us to take our eye off the ball. Repeal the income tax!
Correct Warren. The easiest way to avoid all of this complexity and unfairness is to just abolish the income tax. I have written in favor of abolishing all taxes on production, with the tax code shifting to economic rents and, to a lesser extent, consumption.
"But the principal is the same"
OTHER principle.
This post would have benefitted ENORMOUSLY from two ACTUAL graphs.
The 97,440% implicit marginal rate on that $218,001 threshold is wild. Most people probaly don't realize they're getting hit with these cliff effects becasue the mechanics are so hidden. It's one thing to phase out a benefit gradually, but jumping from zero premium to $974/year for a single dollar of income creates these perverse incentives where high earners are basically penalized for not gaming the system.
Bill Poole, not Bob.
Thanks. Don't know how I blew that one. Change made.
The US Tax Code is an disgusting. A simple, transparent fixed rate national sales tax offers huge net benefits. But H.R. 25 The Fair Tax Act has not been able to clear the Ways and Means Committee for more than 25 years, year after year. Kinks and notches, indeed.
This is a post where a couple of charts might be handy!
True.
I got nailed by this last year, didn’t see it coming. This year I will increase donations to avoid the notch. But the many annoyances and injustices of the tax code shouldn’t lead us to take our eye off the ball. Repeal the income tax!
Correct Warren. The easiest way to avoid all of this complexity and unfairness is to just abolish the income tax. I have written in favor of abolishing all taxes on production, with the tax code shifting to economic rents and, to a lesser extent, consumption.
A consumption tax IS a tax on production.