[bena]

The tax code (at least in the US, YMMV in other countries) is already progressive. Making more will never have you taking home less.

However, most welfare systems have hard cutoffs. If you get $500 in SNAP a month and make $500 a month, you have $1000 to last a month. And if the cutoff is $501, making that one extra dollar is going to cost you $499.

What would be more difficult, also gameable, but better all around is to have benefits adjusted to get people to a baseline.

Say the poverty level is $1000 a month. You get $1000 - X, where X is how much you made in that month.

[dragonwriter]

> However, most welfare systems have hard cutoffs.

Most welfare systems have phased benefit reductions (there is a point where the benefit hits zero, which can be viewed as a hard cutoff, but it doesn't go "full benefit up to the line and then zero at the line" in most cases, though there are exceptions.

> If you get $500 in SNAP a month and make $500 a month, you have $1000 to last a month. And if the cutoff is $501, making that one extra dollar is going to cost you $499.

If the SNAP cutoff applicable to your situation was $501, then your actual benefit at $500 would be $24 (the minimum SNAP benefit), not $500. Because SNAP does a $0.30 per dollar of income clawback until the minimum benefit is reached, and then stays at the minimum benefit until the eligibility limit income is reached.

There is a cliff still, but its a lot smaller of a cliff (for SNAP alone) than you are painting.

[LorenPechtel]

I'm talking about the US. You're looking at the simple version: just income. But the tax code is more than income--there are many benefits that go away at a specific AGI--if you use that benefit you can have an effective tax rate of over 100% in the realm just above the fence.

And your system doesn't work. Working is almost never truly free, you have to spend some money to make money. And you don't have that time available to do other things that stretch the money you have.

[gamblor956]

Almost all income tax related benefits are phased out. Which ones are subject to a hard cap?

[sokoloff]

> Making more will never have you taking home less.

There are corner cases where making more can leave you with less outside of welfare. Tripping into the next IRMAA bucket is one simple to understand one.

[phil21]

Medicare is a form of welfare, just branded differently. It's a means-tested benefit funded in a pay-as-you-go manner via income tax just like any other. The means are just different amongst various programs.

Are there any actual cases of making more earned income via a regular job worse than taking that extra dollar of pay? I'm guessing a few very rare corner-cases exist, but I can't immediately think of any. I imagine they would be somewhere in the neighborhood of the EITC or AMT type things.

[LorenPechtel]

I didn't need to press enter. Just started typing agi limit and a whole bunch of search topics came up asking about agi limits for various tax things.

[seanmcdirmid]

Medicaid is a form of welfare, Medicare is an entitlement. Where is Medicare means tested?

[bena]

That's dealing with Medicare, not taxes.

And basically, as your income goes up, so does your Medicare premium.

[parpfish]

Wouldnt it be easier to just give everybody $1000/mo but then use the yearly tax bill to get high earners to pay it back rather than having graduated payouts?

That ensures that everybody gets prompt payouts and feels that there’s a safety net, but no complex means testing and bureaucracy. And the same net cost, although the timing of the payouts will shift a bit

[limagnolia]

But SNAP doesn't have a hard cutoff. There are welfare programs that do, but SNAP doesn't.

School lunch programs have two phases, free, and reduced. Medicaid varies a bit by state, but transitions to Obamacare subsidies. Hitting the cutoff for medicaid can really hurt, though, if your employer doesn't provide healthcare benefits.