Suspicious Discontinuities(danluu.com) |
Suspicious Discontinuities(danluu.com) |
The childcare cliff edge is probably the worst, but the personal allowance taper isn't ideal either as it's compressed over a relatively short income range
And of course all the thresholds remain frozen, creating plenty of fiscal drag on top.
Graph: https://www.economist.com/cdn-cgi/image/width=600,quality=10... from this article: https://www.economist.com/britain/2024/04/22/how-to-fix-brit...
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The opening story is fabricated and/or bullshit.
Last year (2025) there was no limit on income for health insurance subsidies. That ended for this year, but last year there would have been no reason for anyone who knew what they were doing to try to lose money to drop their income (especially in the cited range of $48-55k/year).
That is the case this year, in most states (thankfully not where I live), but that's not what TFA is talking about.
Suspicious? It certainly makes me skeptical that the author has got the details of the other examples correct.
I can't see a date on the post (on mobile) but the archives link has month and year.
The basic story was that until the end of 2025, nobody in the USA had any reason to pay more than (roughly) 8.3% of their AGI for health insurance.
Even for a simple system like US social security that has a gradient. For every $2 you make over the limit, you lose $1 in benefits. I've heard countless times misconceptions of people thinking they'd be losing money (as in literally having less money net) by working.
In reality they are step functions. It is surprisingly common to have people refuse promotions because if would put them above an income tax threshold, bump up their rate, and end up with less money after taxes in the end.
The UK tax system is far from fair but at least it has clear brackets: income above threshold X is taxed at rate Y.
They don't have to understand how it works to do their own taxes.
I've heard the same thing -- if they take a job they will lose money. What they really mean is that if they take a job (trade time for money), they will lose some of the pension they have already earned. This is a real economic loss (even if they might have a few more bucks at the end of the week) to say nothing of their lost time.
I think it's likely that politicians and their funding sources have found ways to profit off of these discontinuities. The infamous Medicare "donut hole" [2] was arguably a "benefit discontinuity" of the sort mentioned by the author and pharmaceutical companies profited off of it (more than a hypothetical Medicare structure without a donut hole, not relative to the spending cap that replaced it—which profits them even more).
[1] https://www.pennstatelawreview.org/penn-statim/dont-be-silly... (2013) ...which argues that this is a good thing!
[2] https://www.medicalnewstoday.com/articles/what-is-the-medica...
Because that is a marginal system, (and unless they've messed up the calculations, which they haven't in this case) you should never end up with less from earning more. Can you give an example of two income amounts where the lower income ends up with more money after-taxes than the higher income?
Or is it the additional municipal, church, or health levies mentioned on that page which have the discontinuities?
