Authors libby rittenberg 821
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States. They used a commercial tax analysis program, Economic Security
Planner™, and added their own computer programs to incorporate the
effect of additional income on various transfer payment programs. Their
analysis assumed the taxpayer lived in Massachusetts, but the general
tenor of their results applies to people throughout the United States.
Consider a 60-year-old couple earning $10,000 per year. That couple is
eligible for a variety of welfare programs. With food stamps, there is a
dollar-for-dollar reduction in aid for each additional dollar of income
earned. In effect, the couple faces an effective marginal tax rate of 100%.
Considering all other taxes and welfare programs, the economists
concluded that the couple faced a marginal tax rate of about 50% on labor
income. Overall, they found that a pattern of marginal rates for various
ages and income levels could be described in a single word: “bizarre.”
The tables below give the economists’ estimates of marginal rates for
current year labor supply for a single individual and for couples with
children at various incomes and ages. While the overall structure of taxes
in the United States is progressive, the special treatment of welfare
programs can add a strong element of regressivity.
Marginal Net Tax Rates on Current-Year
Labor Supply (Couples, percentages)
Total Annual Household Earnings
(000s)
Age
10
20
30
50
75
30
−14.2 42.5 42.3 24.4 36.9
45
−11.4 41.7 41.8 35.8 36.1
60
50.9
32.0 36.3 36.3 45.5
Age
100
150 200 300 500
30
37.0
45.9 36.8 43.9 44.0
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
821
