Suppose I am a welfare recipient and I decide to earn some more money. What will be the bottom line? How much extra money will I take home if I earn more money? What is the marginal tax rate I will experience?
Posted on 09/25/2012 5:13:15 AM PDT by SeekAndFind
Everyone's getting their knickers in a twist about the 47 percent that Mitt Romney figures are going to vote for Barack Obama, no matter what. But do you know why they will vote for Barack?
Wyatt Emmerich did the math back in 2010 for The Clevelend Current in Mississippi. It's been written up at ZeroHedge and by Kathy Shaidle.
The message is simple. Earn $3,600 per year as head of a family of three, and your net earnings (after taxes and government benefits) will amount to $31,630. But if you earn $60,000 a year, your net earnings will be $34,366. In other words, if you work your tail off and increase your earnings by $56,400, you will be only $2,736 ahead in take-home pay. The reason is that your government benefits will be cranked down from $30,762 a year to zero, and your taxes (including child care) will crank up from $2,787 a year to $25,634. Talk about chump change.
But I am not interested in the raw numbers; I am interested in the science behind the numbers. It is true that I never read "Science Tuesday" in The New York Times or listen to "Science Friday" on NPR, but I am still interested in science. In this case, of course, the science in question is economic science. It is the branch of economic science called "marginal economics" that came in ten years after Karl Marx nailed his colors to the labor theory of value in Capital.
Marginal economics solved the problem that had hag-ridden the classical economists. How could a jewel, that has high exchange value but low use value, be more valuable than a tractor that has low exchange value but high use value? The answer was that use value and exchange value are meaningless concepts.
(Excerpt) Read more at americanthinker.com ...
Excellent read. Thanks for the post.
And we wonder why illicit businesses (drugs, prostitution, gambling) thrive in that economy.
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Something REALLY needs to happen. This “system” needs to be smashed, demolished, destroyed ....and then we need to just start over and build from the bottom up.
I for one, am tired of working so hard, giving up all MY free time in life to work hard and study, to be serious, to not fritter my time away ....while others just get it handed to them. Or to have limosuine liberals lecture me about how selfish and greedy I am. I feel like MY needs are continuously pushed aside, overlooked, and inconsequential.
I didn’t enslave ANYONE. I was just born here, in the 1960’s and have played by the rules and BELIEVED in this country — that if I worked hard and took the opportunities presented to me, that I might have half a chande to make it.
I never believed there were any guarantees. I realized LUCK had something to do with it also — but mostly just trying my best and tryind hard NOT to be a total douche bag would help. And it did.
Why is this concept SO hard for so many people?
LibsRJerks,
Most excellent. I’ve been saying the same thing for years.
We producers are so screwed.
Wow - thats a lot of incremental labor for no net income advantage. This message certainly needs getting out. The disincentive to labor up to $60k in earnings - that’s over the national median income for heavens sake.
BTTT
Not everyone has the benefit of a Christian upbringing.
Most cheeruns nowadaze are razed by Ludicris IceCube, and Snoop Dog.
That answers the douchebag question also.
We need to teach the 10 commandments, and the beatitudes in schools, and kick the gangsta cRap to the curb!
Amen.
Yes. Yes. Yes.
And then when one of us says something like this, we are pilloried by the leftists for being “mean” and failing to have “compassion.” They trot out the example of someone who is obviously in need and unable to work and ignore the millions of examples of people who are simply unwilling to work.
It’s not just at lower income levels.
I’m fortunate to make a pretty decent salary.
My wife is a homemaker.
She had a part-time job briefly, but every dollar she makes is essentially taxed at the same rate as if it were tacked onto the upper end of my salary.
We get more value from her staying home and managing the household than we get from her working, unless she were to get a fulltime job with a good salary - and that has it’s own set of costs/benefits - another car, less time for meal prep, laundry, etc., plus the stress. We save more by her making all the meals, packing my lunches, and growing veggies than we would gain from her working instead.
We’re both healthier and happier and she works just as hard at home as I do at work, if not harder.
Before I was married, I did pretty well with a decent salary and investment income. After we was married, I noted the same problem: her income was taxed at my highest marginal rate.
We maxed out everything that gives us any tax benefits: 401(k)/403(b) contributions, FSA/HSA contributions, etc. If we are under the income limit, we also make Roth IRA contributions for each of us.
This substantially reduced the tax bite. Our take-home income is about the same, but we will get a lot of additional benefits in the long run.
I realize that a part-time job typically won't allow her to make 401(k) or HSA contributions. But, she CAN make an IRA contribution (Roth or traditional). If you can invest that additional money in long-term plans without making too many sacrifices now, you'll come out ahead.
Thanks for the tip. We’re already maxed out on the HSA and my 401(k), but the IRA is something I should look into if we can swing it.
We had a bunch of one-time out-of-pocket medical expenses in 2012. I’m hoping they will hit the ridiculously high threshhold where I can deduct some of them and that will give us a little extra $ that we could put away.
But if she can only make a non-deductible contribution to an IRA, here's a neat little trick. Check with your accountant to make sure it is done right:
The conversation came up at tax season with our estate attorney that we might consider a "legal divorce" in order to reduce tax basis by filing separately.
Pretty damn sad when that conversation comes up.
Four times the hours, four times the per-hour productivity, same income.
Telling a large fraction of the population they have to work 16 times harder with no net gain will not go over well.
Stock up folks. Gonna be a bumpy ride.
I was a product development engineer. I had a record of two smash successes in a row, making millions in profits and saving (along with my chemist compatriot) a $100 million division of a Fortune 200 company. In 1995 all they were paying me was about $85K. After Federal and California State taxes, the day care bill, the private school bill, the extra car, gas, etc, after working 90 hour weeks, living 25% of my time overseas, watching my poor wife deal with two young children while holding a job, watching the kids' behavior deteriorate under all the stress and BS that came from the school... I was making a net profit of about $10K.
We pulled the kids from school and I quit my job to write a book. I told the wife that if we produced outstanding kids as a result we'd be money ahead from the scholarships and that is exactly what happened. We're sending two girls to college now for about $10K per year beyond what it cost us to have them at home. They will graduate from Stanford and Utah State with no debt.
Had I stayed at work I have little doubt that I would have seen much of that money disappear into medical bills, possibly a shrink or a divorce lawyer, goodness only knows but they'd have almost all been Democrats.
My dad did it the usual way. While I was growing up, we'd moved 16 times and my family had endured three divorces. He lost three houses and ended up a bitter and broken man. Nobody in the family has recovered from it.
In return for quitting, I had the great privilege of raising my children to be wonderful people. They were born, raised, and went to college from the same house. I had the great privilege of research and discovery. It has been hard, but in my judgment it was worth it.
Meanwhile, I've written a second book, patented a free market environmental management system, and made important discoveries or developments in three distinct career fields. Don't know where it will lead, but it sure as hell was better than workings.
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