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The cliff effect is real," says Jones, who thinks families should be eased out of the benefit gradually by paying a little more in fees as income rises.
Colorado legislators have been working to eliminate the cliff effect for several years, but tracking the number of families affected has been a challenge.
Both programs phase benefits down very slowly as income from employment increases, thus avoiding the cliff effect inherent in other benefit programs, such as child care.
This Article argues that a cliff effect based on income is necessarily problematic on both equity and efficiency grounds because it improperly penalizes taxpayers and disincentivizes the economic empowerment the associated tax provision is intended to promote.
The most novel of these strategies awards a credit based on the severity of the cliff effect and ensures that no taxpayer is made worse off post-tax by virtue of earning more pre-tax income.
The nineteenth century economist Alfred Marshall observed that the cliff effect extends further over time as the price differentials become more known.
An estimate of the value of the cliff effect can be derived from examining the costs incurred by individuals participating in cross-border shopping.
The Economy and Fiscal Cliff Effect on Holiday Shopping Source: SOASTA Inc.
A sixteen-year-old taxpayer would experience a cliff effect on her sixteenth birthday but also become eligible for a driving license.
To satisfy horizontal equity, the differences between taxpayers subjected to the cliff effect and those not subjected to the cliff effect must render these taxpayers significantly dissimilar.
A minimum level of liquid assets should be held at banks to ensure their ability to sustain a short term liquidity stress and banks should also structure their funding profile to limit the impact of long term market disruptions and avoid cliff effects.