Americans should stay on welfare unless they can jump to the upper-middle class

The U.S. is a great place to live if you’re rich. There is no wealth tax and income tax rates, though much higher than in the most efficient countries (e.g., Singapore, Estonia), are still lower than in many European nations. Prices are low and there is no VAT so you can consume like crazy.

The U.S. is also a great place to live if you’re poor. You’re entitled to a lifetime of free housing, free health care, free food, and free smartphone. If you start at age 18 and navigate the policies and waiting lists you might find yourself in an apartment with a market rate of $60,000 to $100,000 per year in the heart of one of America’s most desirable cities, e.g., San Francisco, New York City, or Cambridge, Massachusetts.

What if you’re on welfare and want to give up some of your 168 hours per week of leisure time to work? According to a post by Greg Mankiw, an economics professor at Harvard, you’ll face a 76 percent marginal income tax rate unless you can vault beyond the middle quintile of income. You will have a slightly higher spending power as a middle-earner compared to if you were a bottom-quintile earner, but for most people it wouldn’t be worth the loss of freedom and aggravation that are entailed in having a full-time W-2 job.

Related:

• Book Review: The Redistribution Recession (it turns out that Americans who are eligibile for welfare do figure out all of the above and generally refrain from work at high marginal tax rates)