Marginal Tax Rate Hell

The US tax system is, by pretty much all measures, a bloated, contradictory, and overly complex mass of bureaucratic insanity. There's no time that I feel worse about my country than on or around April 15, as I struggle to figure out which targeted tax break I a) qualify for, b) saves me more money, or c) thought I would qualify for, but don't, and so have to rearrange funds at the last minute. What I wouldn't give to import the Kiwi tax system here.

And most times, I have it pretty good, at least on the margin. In good times, my family makes enough that our marginal tax rate is predictable, and significantly less than 100%. Clifford Theis at the Mises Institute details the problems the working poor face in the current system. Personally, I think the CBO should be required to produce these charts yearly for various family compositions (single, married with no kids, married with one, two, and three, and for single parents), just to show how the system is fundamentally broken.

And that analysis was done before the current health care "reform" proposals took shape. Were they to pass, they'd wreak even more havoc on the poor.  The Cato Institute has posted an analysis showing that, on its own, the current health care proposals will present low income workers with marginal tax rates over 100%. Combined with other benefits, subsidies, and means tests, and it appears that the working poor would potentially face marginal rates of over 200%.

That is, to put it bluntly, insanity. Serious tax code and benefit allocation simplification is needed.