The Marginal Tax Rate Hike of 2009

I interrupt WMD week to announce the marginal tax rate hike of 2009:

AP reports "As the nation sinks deeper into recession, the IRS is offering to waive late penalties, negotiate new payment plans and postpone asset seizures for delinquent taxpayers who are financially strapped, but make a good-faith effort to settle their tax debts. ...those seeking help will have to demonstrate their inability to pay." [see also this report]

I explained in a number of previous posts (here, here, here, here, here, here, here, here, and here) how when mortgage debt collectors offer forgiveness, but only for persons with incomes that are low in comparison with their debts, that creates financial disincentives for working.

You might guess that the economics is much the same for tax debt collectors: when they offer forgiveness, but only for persons with incomes that are low in comparison with their debts, that creates financial disincentives for working. That's why I call that new IRS policy a marginal tax rate hike.