Social Welfare System & Taxes

The poverty line for a family of two is $14,000 and the estimated minimal yearly expense is $28,000, double the poverty line. Given such a low poverty line and a high yearly expense, how does the US manage to have a poverty rate of only 12% to 17%? The US provides Section 8; the people receives vouchers, which are used to pay the rent, or the US can provide public housing; houses that have low rents. As for food, the government provides food stamps; the people use these monthly incomes with a card when purchasing food. Insurance companies like Medicaid and CHIPS pays for the medical bills. Daycare programs like Head Start takes care of the children when the parents are working and people can shop at the Salvation Army.

People do not get these stuff for free, they have to pay taxes. US has a marginal tax system. If a single (not married) person earns between $0 to $8,350, that person gets taxed 10% and if the person earns between $8,351 to $33,590, that person gets taxed 15%. These ranges of numbers are called brackets. US also has a progressive system: as one move from a lower bracket to a higher one, one's tax rate increases. To say that one gets taxed 15% does not mean that one pays 15% of their income; in fact, one pays less than 15%. If one earns $33,000, then one will get taxed 10% of $8,350, which is $835, and then one will get taxed 15% of $24,650 ($33,000-$8,350), which is $3697.50, paying a total of $4532.50 (the effective tax). But if one was really to be taxed 15%, then one will have to pay $4950 (the nominal tax). Under a marginal tax system, the rich people would be saving more than if under a flat tax system.

In the Danish system, medical bills and school is paid through taxes but the tax rate there is 50%-60%. The government supports the people for up to fours years so it motivates them to get a job but they only get $3000. Money is put into the bank account for the people to spend. They have a firm that gives you money, in addition to the money that the government gives, when one is unemployed; once one is employed, one has to pay the firm. Seniors get money from the government when they are retired between the ages of 62-67, no later than 70. Parents have the choice of sending their kids to pre-school, for children between 2-5, or nursing. In daycare, for children between 0-2, they have a ratio of 4 children to 1 teacher. After the age of 18, students get paid for going to school and private schools only cost $200-$300. The government pay for the college tuition and kids between the ages of 14-18 pay 8% tax.

I think the US should adopt the Danish system because I believe it is cheaper to pay a higher tax than pay a lower tax and have to pay for other things. In the US, people pay for social security and medicare tax, income tax, sales tax, and bills. On the other hand, you keep half your income and get free medical care, school, retirement money, daycare, and college courses. People get paid for going to school. I also think that the Danish system kind of solves the free rider and the ignored drown-er problem. The government gives the unemployed money for up to four years and then they must find a job to support themselves. Providing money for the unemployed solves the ignored drown-er problem and paying them for up to four years solves the free rider problem.