Its not the direct tax, it’s the often counterproductive limits around welfare that many people receive alongside employment income. Welfare cliffs.
To give NZ as an example, a person can earn up to 37k and be eligible for a “community services card” which entitles them to discounts on a lot of things such as doctors fees, public transit and dental care. Earn just a dollar over thay threshold though, and you lose all the benefits, having to pay them out of pocket. Which means for someone on the cusp of eligibility, theyre often better off to turn down small pay raises.
The student allowance is similar but less punitive in that you are allowed to earn 270 per week without affecting your allowance, but after that, your allowance is reduced dollar for dollar up to the 360 per week of your allowance. A student working minimum wage would therefore need to get a 30 per hour payrise before their total income actually changed.
Can you think of some tax systems where this is true? It’s not true in the United States at least. https://en.m.wikipedia.org/wiki/Progressivity_in_United_States_income_tax
Its not the direct tax, it’s the often counterproductive limits around welfare that many people receive alongside employment income. Welfare cliffs.
To give NZ as an example, a person can earn up to 37k and be eligible for a “community services card” which entitles them to discounts on a lot of things such as doctors fees, public transit and dental care. Earn just a dollar over thay threshold though, and you lose all the benefits, having to pay them out of pocket. Which means for someone on the cusp of eligibility, theyre often better off to turn down small pay raises.
The student allowance is similar but less punitive in that you are allowed to earn 270 per week without affecting your allowance, but after that, your allowance is reduced dollar for dollar up to the 360 per week of your allowance. A student working minimum wage would therefore need to get a 30 per hour payrise before their total income actually changed.