Wednesday, January 26, 2005

greyshade's Universal marginal rate

This is grey shades universal marginal rate document -
The problem is that if you give a benefit and then remove the benefit when one earns over a certain wage taking a low income job becomes highly unattractive. In fact the calculations here are not complete. Because as a person who has been in this situation one must also consider that there are transportation costs in relation to going to work - lets say 3 stage bus both ways (from a suburb cheep enough to rent - to work in the city) that is about $3.30 lets say both ways comes to 6.60 a day (if they have to use a car it could be worse!) or $1,650 dollars a year but in addition there is also the cost of food at lunch time and coffee breaks etc and uniforms, new shoes, cleaning and washing, exposure to risk (such as the risk of damaging equipment and having to pay for it or of hurting yourself).
In fact person earning 5000 dollars in a part time job that lets say is if the "mowing the lawns delivering papers cleaning houses variety (i.e. close to home no transport not too many costs but limited in quality - seems like a likely assumption) may take a net economic loss by changing to a 15000 dollar full time job in town as the 2370-1650 = $720 needs to cover all of his additional costs related to working besides transport for the whole year let alone the fact that he is being paid probably just under 50 cents an hour for his work (subtracting transport and benefit abatement but not other costs)

I suffered from an even worse situation where my partner began work and thus my allowance (student) was reduced - but because it worked on a "cut off" basis the tax rate was effectively well over 100% - and I was forced to force my partner to work less. Effectively she could not have a full time job or we would loose a significant amount of money.

working families with students with student allowances may also find themselves in the greater than 100% (about 114% I think) tax bracket which is of course much grater because one does not get to deduct job related costs from ones tax (unless one is a contractor I guess).

Grey shade was right - the system is screwed up.


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