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?