18 Kasım 2012 Pazar

Marginal Tax Rates In The 450 Percent Of Federal Poverty Guidelines And Under Group Will Rise To 35 Percent In 2014: Higher Marginal Tax Rates Provide Incentives Not To Work Or To Increase Work Hours: Similar To The Unemployment, Part-time And Labor Force Participation Data During This Post Recession

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According to CBO, the combined effect of the expansion of SNAP (Food Stamp) eligibility, the temporary reduction in payroll taxes, the refundable tax credits in the Affordable Care Act to help cover the cost of health insurance, along with new subsidies for cost sharing under health insurance policies, will raise marginal tax rates for taxpayers in the 450 percent of Federal Poverty Guidelines and under, the group CBO studied, to 35 percent in 2014, on average.

High marginal tax rates of individuals receiving means tested benefits reduces an individual member's incentive to find work and to earn more income through extra work hours.

CBO is indirectly saying that the benefits put into place during the recession and Obama's first term, including tax benefits and subsidies in the new health care law and the temporary reduction in payroll taxes, raised and will further raise marginal tax rates and create incentives not to work. The potential loss of tax credits, subsidies and benefits provide incentives not to find work and increase unemployment, increase part-time employment and lower employment participation rates. These are the effects seen in the current post recession US employment data.

From Congressional Budget Office report, "Effective Marginal Tax Rates for Low- and Moderate-Income Workers:"
Working Taxpayers with Income Below 450 Percent of Federal Poverty Guidelines Face a Marginal Tax Rate of 30 Percent, On Average, Under 2012 Law
Some provisions of taxes and transfers, such as statutory income tax rates and federal payroll taxes, affect most workers. (Statutory income tax rates are specified in law and apply to the last dollar of earnings.) Other provisions, such as reductions in tax credits and SNAP benefits, affect fewer people but result in relatively high marginal tax rates for those affected.
  • Federal Individual Income Taxes. Under the federal income tax system, workers with income below 450 percent of federal poverty guidelines (commonly known as the federal poverty level, so abbreviated as FPL) face, on average, a marginal tax rate of 11 percent. (Poverty guidelines vary by household size; in 2012, the guideline for a household of four is $23,050.)

  • Federal Payroll and State Individual Income Taxes. For most low- and moderate-income workers, payroll taxes cause marginal rates to rise by about 12 percentage points. State income taxes contribute a modest amount to marginal rates, on average.

  • Reduction of SNAP Benefits. For recipients, the reduction in benefits that occur as income rises adds an average of 25 percentage points to their marginal tax rates. However, CBO estimates that under 2012 law, only about 18 percent of taxpayers in the group it studied receive SNAP benefits. As a result, SNAP increases marginal tax rates for the group as a whole by only 5 percentage points.
The combined effect of federal and state individual income taxes, federal payroll taxes, and the reduction of SNAP benefits results in an average marginal tax rate of 30 percent among working taxpayers with income below 450 percent of FPL.
Source: CBO
Source: CBO
the marginal tax rate for taxpayers in the group CBO studied will rise from 32 percent in 2013 to 35 percent in 2014, on average.

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