This is Casey Mulligan:
When measured to include taxes and government benefits, poverty did not rise between 2007 and 2011, and that shows why government policy is seriously off track.
When somebody earns, say, $10,000 by working, he should keep some of it for himself and his family rather than handing it all over to the government. By the same reasoning, when someone loses $10,000 by not working, he should get some help from the government or from others in the forms of reduced taxes and enhanced benefits but still should bear a portion of that loss himself.
That implies that the combination of taxes and welfare benefits have created an implicit marginal tax rate of 100%!
As James Tobin, a John F. Kennedy adviser, Nobel laureate and leading Keynesian economist of his day, said in a 1965 article, a 100 percent tax rate causes “needless waste and demoralization”…Professor Tobin called the 100 percent tax situation demoralizing because the affected people find that all of the benefits of their hard work and success go to the government in the form of more tax receipts and fewer benefit payments.