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Comment by bigbob2 | Hacker News Reader

I used to make $9 an hour and was not eligible for Medicaid. ACA exchange in Kentucky (Kynect) wanted well over $100 a month which was not affordable for me, but then again neither was the fee imposed by not having insurance. I paid around 30% of my wages in taxes, which I consider to be quite a lot more than nothing. I was able to live in a very cheap place (with room mates, of course), but not put anything away.

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> 30% of my wages in taxes...

That seems a high rate for making $9/hour.

At $9/hr you’re getting EIC and the Federal tax rate is probably negative, not positive.

The US does not have a negative federal tax rate, unless you are referring to an effective tax rate (which is the calculated rate you effectively pay based on income, deductions, credits, etc.)

The USA does effectively have a negative tax rate at that level with EITC, that's what he's saying.

$9/hr * 2080 hours = $18,720 After deductions that's $6,520 of taxable income. Eligible for EITC so a tax rate of negative $3,526. So if they paid zero federal income tax all year they'd get a "refund" check of $3,526 (except its not a refund, since they paid zero, its a negative tax rate)

You can see here: https://www.calculator.net/tax-calculator.html?cfilestatus=S...

> I paid around 30% of my wages in taxes

Before or after your tax return?

Regardless, having a double digit percent of your income held hostage every year is not exactly a win for the worker. Rent is due on day 1, not day 365.

It's not a win, but it's only a problem for the first year of your employment. After the first year, you get the tax back, and you can use it to pay next year's rent.

Low wage and part time workers are typically not employed all year around. The tax back can be hard to predict in these conditions and vary quite dramatically. It's really hard to work with when one lives paycheck to paycheck and needs the money now.

Right, but then the problem is general lack of funds, not having them delayed by a year. With the exception of the first year of employment, one will have funds from previous year's tax return. I agree that this is annoying, but with minimum level of financial planning and responsibility (e.g. by withdrawing 1/26th of previous year's tax return every two weeks, or by withdrawing whatever fraction of the year one actually works), the effects of tax withholding can be almost completely mitigated.

Is your argument that low-wage and part-time workers are irresponsible and cannot be trusted with large windfalls of money around tax return time, because they will squander them faster than they would if the same amount instead was given to them via biweekly installments?

If you get significant tax back year after year and the delay causes you problems, increase your W-4 exemptions until that stops happening. There's no constraint on W-4 claims unless you've had tax consistently (which seems to mean for multiple years, though what the threshold is isn't clear) underwithheld, in which case the IRS may send a lock-in notice to your employer setting a minimum withholding level and preventing reductions, but if you have gotten any tax refund, you aren't having tax underwithheld, so that's not going to affect you.

I agree that many of the people who need to know this don't, though.

Maybe it helps you save. Saving is more important when you are poor since it's hard to save when cash is short.

This isn't something that happens unless you've set up your tax withholding egregiously incorrectly.

This is true, but but I've known a number of people in a similarly low-wage position who were never informed of that option until their 30s. I myself was only taught about that option at 20, two years into the workforce by a coworker.

Our education system often fails to deliver financial literacy and basic life skills to a large portion of the population, leaving them instead to overwhelmed parents trying to feed their families.

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