Tuesday, August 21, 2007
Last week, I blogged Todd Zywicki's Wall Street Journal op-ed, The Two-Income Tax Trap. Todd follows up with an even more detailed post on The Volokh Conspiracy: An Even More Confusing Presentation of the Two-Income Trap and Taxes.
[T]he difficulty with presenting the data in this manner is that it obscures the underlying dynamic of what is happening in the example. Adding the second worker increases household income by 75% --this is actually a greater increase than the expenditures on mortgage, automobiles, and health insurance, all of which increase by less than the income growth of 75%. The problem is that total tax obligations over this period increase from about $9000 to about $22,000 -- an increase of about 140%. Thus, assuming that the authors' argument is theoretically sound (a proposition open to question) it seems clear that the increase in tax obligations is the driving dynamic in their example.