Give Families’ Second Earners a Break

Dec. 3 (Bloomberg) -- Conservatives who worry about the illeffects of marginal tax rates on high earners rarely discuss theeven higher marginal tax rates that some low- and moderate-income families face. A low-income single parent can experiencea marginal rate as high as 95 percent -- for each dollar earned,the person takes home only 5 cents. And for married parents, themarginal rate for the family’s secondary earner can be almost ashigh.

This happens mostly because various means-tested benefitprograms are phased out as income increases. A secondary earnerwho raises the family’s income to $30,000 from $15,000, forexample, will trigger a decline of about $1,500 in the family’sEarned Income Tax Credit and a drop in food stamp benefits ofalmost $3,000. Factor in the child-care costs necessary for thesecond parent to work, and the family will take home less than40 cents of each additional dollar earned.