Taxes
Tax Burden Equal to 70% Rate Crushes Americans Unable to Pay
- Even small pay raises can wipe out income-based public aid
- Policy creates a ‘perverse incentive’ to try to exit poverty
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Millions of low-income Americans are locked into poverty thanks to U.S. tax policy, Federal Reserve Bank of Atlanta researchers say.
About a quarter of lower-income workers effectively face marginal tax rates of more than 70% when adjusted for the loss of government benefits, a study led by Atlanta Fed Research Director David Altig found. That means for every $1,000 gained in income, $700 goes to the government in taxes or reduced spending. In some cases, there are no gains at all.