

The Dead Zone: The Implicit Marginal Tax Rate - bokonist
http://mises.org/daily/3822

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rw
> "Actually, this being a democracy, there is nobody to blame but the
> electorate. Especially the left-liberal do-gooders."

...

~~~
DenisM
He's still got a valid point - negative incentives to work are undeniable.

~~~
camccann
Unfortunately, his point would be stronger if he had made it more in terms of
a practical problem to be solved, not as an excuse to get in shots against The
Evil Other Guys.

Partisan feuding is for people who want political power, not solutions.

~~~
DenisM
Or who are simply bitter. But yes, it would be better. The actual income tax
is progressive yet it is continuous so you never have to ask your boss to
lower you salary by $2 in order to save $20 on taxes.

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bokonist
These numbers are really disturbing. I think something like Charles Murray's
"The Plan" ( [http://www.amazon.com/Our-Hands-Replace-Welfare-
State/dp/084...](http://www.amazon.com/Our-Hands-Replace-Welfare-
State/dp/0844742236) ) where each citizen just recieves a $10,000 check every
year has a lot of merit. The poor are still helped, but it eliminates the
disincentives to do work. Since it's just shuffling dollars, it also minimizes
the amount of money lost in the bureaucracy. Another idea is to turn the U.S.
government into a joint stock corporation and simply give every citizen
dividend paying shares. That way the pie is divided equally, once and for all,
and then government can simply concentrate on growing the pie.

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netcan
Economic critics tend to present things as 'Here. This is simple. Policy
makers are sooo stupid that they haven't noticed.'

While the current policy may be wrong, this issue exists because the problem
is hard. Subsidies & assistance for the poor create perverse incentives. That
is true. But they are there for a reason. Most people consider it morally
important. We have two things we need to do that conflict with each other.

How do we subsidise to a minimal level without destroying incentive to work?
It's not an easy question to answer. Creating an incentive that puts more
people in employment but also more people onto the street is not a solution,
at least no to the problem as it is implied.

~~~
bokonist
_While the current policy may be wrong, this issue exists because the issue is
hard._

You make it sound as if the policy makers are talented engineers who made the
design decision because it was the best compromise on how to deal with the
various trade-offs. That's simply not the case.

In reality, these welfare policies are a result of a chaotic process of
various factions battling to get their hands on dollars. This process is not
designed, and the welfare law has simply evolved into a giant mess over the
course of many decades.

That said, politicians and policymakers are not idiots. They are simply
controlled by events larger then themselves. It's the incentives of the
political system that are at fault. ( See Government's End by Jonathan Rauch )

 _How do we subsidise to a minimal level without destroying incentive to work?
It's not an easy question to answer._

Roll up all the welfare programs into one program - give every American over
21 a check for $10k a year. For people without a job, give a guaranteed
government job for $6 an hour. For people who need hands on help, go back to
relying on local charities and local government aid. They are closer to the
problem and have the right incentives to actually fix things (and empirically,
the local welfare systems of the late 1800's worked far, far better than our
national system today).

~~~
netcan
You are right. Political systems are not in a good position to design policies
in the best possible way. I am completely willing to accept that. But there is
some design going on, it is not complete chaos. It's not like neither of these
goals has ever had any sort of influence on policy. It isn't as if this is
just some big, obvious & uncontroversial policy mistake that everyone would
see if they only visit reason.org that politicians have just overlooked.

The system, flawed as it is, is "trying" to solve the problem as I
articulated, more or less.

Take your solution as an example. Don't you think these sort of blog posts
could easily criticise it's consequences too? First, the same criticism of
perverse incentives applies. It takes more compensation to motivate a person
take a job if he already has $10k + $6h/hr. Second, you'd have a lot of people
in guaranteed 'make work jobs' that are probably more expensive to run then
just giving away money.

I'm not yours is a bad idea, but only because the problem is hard. Pretty much
every proposed solution is messy & ugly with lots of loose ends & perverse
incentives.

The elegant solutions can be found on either extreme of the political spectrum
where you don't have to worry about one of the conflicting goals. They are
also conveniently excused from reality because neither socialism nor
capitalism has ever been _truly_ applied.

~~~
bokonist
_It isn't as if this is just some big, obvious & uncontroversial policy
mistake that everyone would see if they only visit reason.org that politicians
have just overlooked._

Well, all I can say is this. I've spent too much of my time in life studying
politics. I've worked in multiple levels of government ( U.S. Congress, city
government, state senate), worked in non-profits trying to help the homeless,
tutoring inner city kids, etc. I used to browse my college's social library
for fun to read journal articles, and on almost every single issue I've read
the top books and articles.

My conclusion is that, actually, yes, there is almost always a much, much
better, solution, that would make most people much better off, that the
political system has simply overlooked.

Note, I do not feel this way about things outside of politics and government.
At the company I work at, I think the management generally makes the very
reasonable decisions given the trade offs involved. But when I worked in
government, I thought the process was insane.

For a few examples:

On the healthcare issue, see my blog post: [http://intellectual-
detox.com/2009/09/10/the-perfect-healthc...](http://intellectual-
detox.com/2009/09/10/the-perfect-healthcare-plan-and-why-well-never-get-it/)

Or consider Iraq/Afghanistan. If you believe that the U.S. should just get
out, then you probably already believe that our current policy is insane. If
you believe that the U.S. should stay in and build a workable
government/economy, our policy is also insane. For comparison, Britain once
ruled Egypt, which at the time had 1/3rd of Iraq's population, with a mere
5,000 soldiers, ruled it so well that Cairo was a notable international
destination, and actually turned a profit. The tactics the British used are
well documented, and in the end resulted in far, far less bloodshed and
collateral damage than our current tactics. Yet we ignore them, and everyone
loses. Iraq and Afghanistan remain in chaos and both the Iraqi civilians and
the American taxpayer bleed red. Again, insanity.

Or consider education: [http://steve-olson.com/how-the-public-school-system-
crushes-...](http://steve-olson.com/how-the-public-school-system-crushes-
souls/) and <http://www.paulgraham.com/nerds.html> Again sheer insanity. And
again, if you actually study the history and politics of the educational
system, you'll find that the system is not the result of balancing hard
tradeoffs. It's the result of an insanely dysfunctional political system.

And don't even get me started on economics and the financial crisis.

Again, I spent a lot of time in the political world and it only slowly grew on
me just how insane the system was. I basically went from believing the
mainstream academia/NYTimes view ( ie. the American system is flaws, but
generally arrives at a workable solution given the constraints) to being
legitimately scared at how badly everything is being run.

 _First, the same criticism of perverse incentives applies. It takes more
compensation to motivate a person take a job if he already has $10k + $6h/hr._

There is still a bit of a disincentive, but it's much, much, much better than
a _110% marginal tax rate_.

 _Second, you'd have a lot of people in guaranteed 'make work jobs' that are
probably more expensive to run then just giving away money._

$6 an hour is still a lower wage than ~98% of the jobs out there, so people
would still have the incentive to switch to a higher paying, not-make work
job.

~~~
netcan
Lets not get too caught up in the specifics of particular policy. I was just
trying to point to the fact that there is a genuinely hard problem with
inevitably messy solutions. Your solution is also messy. Maybe it is better.
but it is not uncontroversially better & it does not give a solution with no
perverse incentives.

I also agree that the political system does not produce optimal decisions. I
agree with you. But there is a big gap between sub optimal & random.

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tptacek
mises.org is to Austrian-school libertarians what Redstate is to conservative
Republicans. Make your own call about whether we ever want posts from here on
Hacker News, or posts that include the words "left-liberal do-gooders". I made
my choice, and flagged this.

~~~
jamesbritt
I'd rather choices be made per article, and not avoided because of a domain
name.

Likewise with choice of phrasing. I'd be almost happy to block every article
that used the words "awesome" or "douchebag" (and variants), but I realize
that's an awfully blunt ax to wield.

Is there a term for besmirching an article because of the domain and not the
content? I suggest ad domaininem, analogous to ad hominem. (Latin scholars,
please correct me here ...)

~~~
tptacek
It'd probably be ad principatum.

(-em is the accusative of hominis, the stem of which is "homin").

