This example is NOT the consequence of so-called "notches" or "cliffs".
When unemployed people make more than they did on their prior job, or more more than they would by accepting a new job, economists agree that economic policy has gone wrong and is depressing the labor market. This paper estimates the numbers of people in those situations in 2009 under the American Recovery and Reinvestment Act (a.k.a., stimulus), and shows how the number would have been different without the stimulus, or with a bigger stimulus.
Shows that private sector mortgage modification would have positive marginal tax rates, but not exceeding 100 percent.
An early paper showing the massive marginal tax rates created by the housing cycle.
Tobin, James. “On Improving the Economic Status of the Negro,” Daedalus (Fall 1965), 94(4).
Another interesting quote on the marriage tax implicit in welfare programs:"Our present system of welfare payments does just that [with 100 percent taxes], causing needless waste and demoralization. This application of the means test is bad economics as well as bad sociology. It is almost as if our present programs of public assistance had been consciously contrived to perpetuate the conditions they are supposed to alleviate."
All too often it is necessary for the father to leave his children so they can eat. It is bad enough to provide incentives for idleness but even worse to legislate incentives for desertion.
