Political  Calculations
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Harvard economist Greg Mankiw offered a unique observation following the release of the findings of a CBO study on the effective marginal tax rates that many Americans really pay on their incomes, after taking into account any government assistance they might receive and the income levels at which their welfare benefits phase out:

The Congressional Budget Office has a new study of effective federal marginal tax rates for low and moderate income workers (those below 450 percent of the poverty line). The study looks at the effects of income taxes, payroll taxes, and SNAP (the program formerly known as Food Stamps). The bottom line is that the average household now faces an effective marginal tax rate of 30 percent. In 2014, after various temporary tax provisions have expired and the newly passed health insurance subsidies go into effect, the average effective marginal tax rate will rise to 35 percent.

Here's a chart from the CBO's report illustrating Mankiw's observation for the effective marginal tax rates that applied in 2012:

CBO: Figure 5 - Distribution of Marginal Tax Rates, by Earnings Relative to Federal Poverty Guidelines, Under 2012 Law

In 2012, the federal government's poverty guidelines would put the federal poverty level (FPL) at $11,170 for a single person household, at $15,130 for a two-person household, $19,090 for a three person household and at $23,050 for a four-person household. These values would correspond to 100% of the federal poverty level indicated in the CBO's chart above.

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Political Calculations

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