Paul Krugman reads his Modeled Behavior

Conservative economists love to point out that means-tested programs like food stamps in effect create high marginal tax rates for low-income families, since they lose benefits if they work and earn more. Well, means-testing Medicare would do the same thing: your reward for a life of hard work and accumulation will be higher copays and deductibles.

Actually this is a pretty basic Public Finance result. However, it is one that is probably going to take a lot repeating to make it into the conventional wisdom. So, here I go again: means-testing is a marginal tax increase.

And, to be clear, its not just a “tax increase” it’s a marginal tax increase. The kind folks who focus on tax incentives should fear most.

Cutting Social Security benefits is a marginal tax increase as well. I’ll do more on that when I get the chance but its worth getting the meme started.

About these ads