Evan Soltas
Nov 26, 2012

Poor Incentives

My latest in Bloomberg View is out, talking about the latest CBO report on effective marginal tax rates:

[M]arginal tax rates are not as large a problem for the wealthy as they are for the poor and working classes. According to a recent report from the Congressional Budget Office, the Americans paying the highest effective marginal tax rates are, for the most part, low- to middle-income individuals. It's these Americans -- not House Speaker John Boehner's "job creators" -- who are materially discouraged by their effective marginal tax rates...The marginal tax rate of earners making 100 percent to 150 percent of the federal poverty level -- between $23,050 and $34,575 for a family of four -- is more than 30 percent, as compared with a federal statutory rate of 15 percent. Almost one-third of earners in this range -- tens of millions of Americans -- paid a marginal tax rate higher than 39.6 percent, the top statutory rate. The average person paying a 40, 50, 60, or even 70 percent marginal tax rate isn't well-off: More likely than not he or she is below middle-income.