I call it “the Lambda Effect.” The biggest shocker for me in all of this is how reliably you can take someone from $20k/yr to $80k+/yr with a few thousand dollarspic.twitter.com/xgJea30GJ7
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Glad to hear it is reasonable. With other taxes and benefits losses that should still push their marginal significantly over 100%. But it sounds like your school is providing so much value & it is so much cheaper than alternatives that students shouldn’t mind.
Oh, oops! Per month, I read that as per year last night. That's a huge/really significant disincentive. I wonder if you'll notice a very significant absence of students making between $50k & $70k in your numbers going forward.
Apologies for the spam, but I don't think you understood what I meant by the concept of a marginal tax rate > 100%. https://www.investopedia.com/terms/m/marginaltaxrate.asp … In this case, the marginal dollar earned from 49.9 to 50 is hugely negative. The marginal $10k from 49 to 59 is even negative after taxes.
I get what you’re saying but Lambda isn’t a tax rate so I was confused by what you meant. Yes, it’s possible to increase your salary by less than 17% and pay Lambda back 17%, but it’s never happened. Also, you keep the increase in income forever, not just for the two years.
I'm not challenging the overall value proposition for students and the system isn't weird around your $90k median. It's just noticeable when a designed incentive system makes certain scenarios very perverse.
(And just FYI - a 50% fee on the marginal dollar after $50k until it catches up to a 17% total fee ends up being equivalent to your current fees just before pre-tax salary hits $76k. Above $76k no revenue would be lost.)
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