Perverse incentives
UPDATE 3
Important, additional information has surfaced. Please read this follow-up post.
I distinctly remember back in the mid-to-late 90s seeing an ad in The Daily World in Aberdeen, Wash. – the paper I worked for – advertising some sort of public assistance for the poor.
Why did I remember this particular ad? Because I did the math and realized that I didn’t qualify for public assistance – barely. My second journalism job, 2+ years experience and a college degree and I was making probably $50 a month too much to qualify for public assistance. I’d been told repeatedly that if you wanted to make money in journalism, marry rich, but this was ridiculous.
What spurred the reminiscence? This.
In Entitlement America, The Head Of A Household Of Four Making Minimum Wage Has More Disposable Income Than A Family Making $60,000 A Year
Tonight's stunning financial piece de resistance comes from Wyatt Emerich of The Cleveland Current. In what is sure to inspire some serious ire among all those who once believed Ronald Reagan that it was the USSR that was the "Evil Empire", Emmerich analyzes disposable income and economic benefits among several key income classes and comes to the stunning (and verifiable) conclusion that "a one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year." And that excludes benefits from Supplemental Security Income disability checks.
We’ve got a serious problem if this turns out to be accurate – and I’ve little reason to believe it isn’t.
UPDATE
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UPDATE 2
There appears to be some controversy on the blogosphere regarding this chart. At some Web sites they've pointed out that the credit line on the chart can't be true, because Wyatt Emmerich owns some competing Mississippi newspapers, but not the Cleveland (Miss.) Current and the article does not show up on the Cleveland Current web site.
I put on my old reporter's cap and made a phone call to Michael Simmons, editor of the Cleveland Current. He confirmed to me that the article and chart in question were indeed published in his paper.
So, the sourcing is accurate. However, some questions have been raised about the other figures in the chart, so more investigation may be warranted.
6 comments on “Perverse incentives”
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Unfortunately, this is too true. My oldest daughter graduated from college just over two years ago, and works full time in a chemistry lab at a low-wage entry level job. There were over 400 applicants for her job in this economy, and she feels lucky to be working fulltime, even though it wasn't what she had hoped for/expected after taking a tough course of studies in a "hard" science degree. She often works overtime and weekends to make project deadlines. The "overtime" pay she earns often puts her in a slightly different tax bracket, and there have been several instances where the increased withholdings means that she takes home less pay after working overtime -- so working hard doesn't pay and is an disincentive.
Her housemate in the apt above, however, works only part time, as she is an "artist" and needs to be free to express herself and her art. She collects pretty much all the benefits you can in California -- food aid, rent aid, utility aid, free landline telephone, etc. She works less hours, at less pay, but ends up far ahead of my daughter in net income not to mention other intangible benefits.
My daughter finally realizes that if she finally breaks out of her low wage entry level job and starts making enough money to have a reasonably comfortable middle-class existence, she'll be excoriated for being "selfish" and "greedy" for advocating for lower taxes and reduced entitlements.
You need to check your figures. Using the the 2010 IRS tax tables and payroll tax percentages, I can't come close to the federal tax listed. I suspect Mississippi tax is incorrect also.
Would you provide the figures you found? You went through the trouble of looking them up. Please share.
Based on $60k--payroll tax is $4590. Assuming head of household with 3 dependents I reduced the 60k by about 23k(exemptions and standard deduction). That gets you to about $4800 in income tax on the 37k taxable less child care credits. If you add the payroll tax you get to about 8k, not the 13k on the chart. I don't know the Mississippi tax rate but doubt that it would come close to 3k when the feds are at about 4k. This is rough figuring so feel free to correct it, but I bet I am pretty close.
Just checked the Mississippi tax site and the 3k cited in the article is based on no exemptions or standard deduction. Actual tax should be closer to 2k. The way health coverage is addressed is also curious. If the 60k earner is not employer covered then what happens? Does his family use the emergency room when ill and how does that figure in. Frankly, this whole chart appears to be an attempt to make a political statement by skewing the numbers.
[...] Emmerich is a publisher of a variety of small community newspapers in Mississippi. He exists and a recent column of his was in fact printed in a The Cleveland Current – a newspaper that he does not [...]