Monday, August 22, 2022

Testing The Means

When I was younger and more beautiful, "high marginal tax rates" were considered to be a great evil, in that they were a great disincentive for working (or doing whatever activity the tax was levied one). Even if one supported a high overall state share of the economy, lower tax rates on a broader base were the way to go, according to all the smart people. This argument was very prominent until the top rates for rich people went down!

For some reason this argument is rarely invoked against middle class (or any) means testing, which claws back any tax benefits or similar (ACA subsidies, for example) as incomes go up. In fact, economists who hate high tax rates love means testing! Weird!  The result is lots of relatively well off but certainly not rich people end up paying really high effective marginal tax rates while actual rich people don't!

Any time you means test something enough to actually "save money" (get a better CBO score), you end up dipping into middle class income territory, and after decades of doing that with everything...