K T Cat here with a guest post for Dean. I normally can be found boring people over at The Scratching Post, but today I decided to come over here and bore people.
In business analysis, an opportunity cost is what you fail to gain because you made a decision. An article in Forbes applies this in a way I hadn't considered before by discussing the opportunity cost associated with work.
What government goodies do you miss out on by working? In essence, they can be treated as a kind of tax. Since most benefits are income-based, the more you earn, the fewer benefits are available to you. Looked at this way, it turns out the government is punishing effort even more that you thought.
Instead of providing a big universal exemption, Congress has created a grab bag of family-friendly-sounding tax goodies, almost all with income-based clawbacks. Both liberals and conservatives have bought into this--the former because it concentrates relief at the bottom of the income scale and the latter because it helps hold down the advertised top marginal rates...Read the whole thing.
"Don't think the American public is stupid," says Cheryl Morse, a tax practitioner in eastern Massachusetts with both middle- income and affluent clients. "People call me and say, 'What's the most I can earn before I lose the earned income tax credit?' [They] may not understand marginal rates, but they're shocked when they lose the college or child credits. You hear all the time, 'The harder I work, the more they take away from me.'"