The 45 Percent income tax

A couple with 2 children that makes $18,700 a year is eligible for food stamps. They are also eligible for the Earned income credit (EIC). If after earning $18,700 in one year they choose to continue working in that year, then for every dollar they make, their benefits will be reduced 45 cents.

Our poorest people, the ones whose basic needs have to be subsidized by the government are being taxed at a rate of %45. Allow me to explain.

A couple with 2 children that makes no money are eligible for around $540 a month in food stamps. They can then make a small amount of money without any reduction in their benefits, after which their benefits will be reduced 24 cents for every dollar they make. When their benefits get close to zero, they will reach a cut off point and they will no longer be eligible for benefits. They are still eligible at $18,700 a year, therefore they will continue to lose 24 cents for every dollar that they make at that point.

A couple with 2 children are eligible for an earned income credit. This means that the government pays 40 cents for every dollar they make until they make $12,000 at which point the government has paid them about $4800. Once they make 18,700, the government starts to phase out the EIC. At this point for every dollar they make, the EIC goes down 21 cents.

21 plus 24 equals 45 percent. That means that if I have a job paying 15 dollars an hour, I only make $8.25 profit. If I would need to pay a babysitter for the hours I was working then I'd make even less, I might even come out losing money. It looks like we have a preliminary answer to the question I started this blog with. It's not worth my time and energy to make more than $18,700 a year.

The question we have to ask is, why is the lower class being taxed at such a high rate? Even the upper class is not taxed more than 35% of their income.

The Work Versus Welfare Trade-Off: An Analysis of the Total Level of Welfare Benefits by State

The Work Versus Welfare Trade-Off: An Analysis of the Total Level of Welfare Benefits by State

Here's a quote from the beginning of this article written in 1995

The value of the full package of welfare benefits for a typical recipient in each of the 50 states and the District of Columbia exceeds the poverty level. Because welfare benefits are tax-free, their dollar value is often greater than the amount of take-home income a worker would have left after paying taxes on an equivalent pretax income.

• In 40 states welfare pays more than an $8.00 an hour job. In 17 states the welfare package is more generous than a $10.00 an hour job.
• In Hawaii, Alaska, Massachusetts, Connecticut, the District of Columbia, New York, and Rhode Island welfare pays more than a $12.00 an hour job--or two and a half times the minimum wage.
• In nine states welfare pays more than the average first-year salary for a teacher. In 29 states it pays more than the average starting salary for a secretary. And in the six most generous states it pays more than the entry-level salary for a computer programmer.
• Welfare benefits are especially generous in large cities. Welfare provides the equivalent of an hourly pretax wage of $14.75 in New York City, $12.45 in Philadelphia, $11.35 in Baltimore, and $10.90 in Detroit. For the hard-core welfare recipient, the value of the full range of welfare benefits substantially exceeds the amount the recipient could earn in an entry-level job. As a result, recipients are likely to choose welfare over work, thus increasing long-term dependence.

It's getting late. I've got to go to sleep. I'll continue investigating this later this week. I don't have time to work on this blog everyday, if this blog interests you and you'd like to follow it I suggest you use the rss feed (atom actually) so that you can be notified of updates.

How have you been living until now?

How have you been living until now? This is a question that I anticipate will be asked of me, so I am answering it now. Until now my wife's father has been paying the bills. He has now decided to stop. So now I turn to you, the taxpayer. You chose to elect officials that choose to take your money and give it to people like me. Thank you.

The truth is that I do not like the laws. I think that you taxpayers have made some bad decisions. The officials you elected are telling me "If you work, we will take a lot of what you earn, but if you stay home and watch TV we will give you a small reward". I wouldn't mind living off of my own work instead of yours, but given the current conditions, I'll have to settle for staying home and accepting my small reward.

Everyday people use food stamps

Everyday people use food stamps.
In case you thought food stamps were only for poor people not capable of working, New Jersey's website is here to correct you.

The price of working

My name is Scott Banks. I live in New Jersey I'm married and I have two children. At this point in time neither myself nor my wife work. Recently, a friend of mine found me a job. It pays 15 dollars an hour with no benefits. It's a job that anyone can do without any college education, which is good because I haven't stepped inside a school since I graduated high school.

My goal here on this blog is to determine after how may hours of work, does it no longer pay to continue working. The first hour that I work I will make $15. That's good, but there will come a point where a large portion of every hours' wages will go to taxes. I may even stand to lose money if I work too much, because it could disqualify me from receiving welfare.

I don't enjoy work. Every hour I work is an hour I could have spent at home watching TV. I like watching TV. So if I find that by working more hours that I'm not making more money than I could if I stay home and watch TV, I'll just stay home and watch TV.

The question is: At what point is it no longer profitable to work? To start answering this question, we first have to figure out how much money I stand to gain without working at all. That is, how much can I make from welfare. Next we have to figure out how much of the money I make goes to taxes? What are my other work related expenses? Lastly, we have to figure out at what income level do I start losing my benefits from welfare.

I'm going to start with estimating the true value of welfare. I'll be looking into programs like HUD (section 8), food stamps, New Jersey family care (health insurance), Assistance with utilities etc. This is going to be a big job and I will need help, so I sure hope someone helpful is reading this.