A 2012 Congressional Budget Office report looking at the example of Pennsylvania, found that unemployed single taxpayers with one child would face an effective marginal tax rate of 47 percent for taking a minimum wage job in 2012, and if their earnings disqualified them from Medicaid, they could have faced an astonishing marginal tax rate of 95 percent.
Missouri’s new plan stretches out the phase-out of benefits by lengthening the income range over which the phase-out occurs. Under the plan, recipients would receive some benefits up to 300% of poverty.
This plan is expensive – because it involves giving money to people who aren’t poor. But it may save money in the long run by reducing the number of people who linger in poverty.