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.