Private Progressive Mechanisms

Many private pricing systems also attempt to achieve a progressive effect.  The most ham-handed and frustrating mechanism comes from colleges.  You need to fill out a FAFSA form to apply for financial aid, and any savings your family has accumulated will serve to reduce the aid for which you are eligible.  While this is strictly progressive, it is a tax on savings.  This Forbes article goes through some of the issues.

Studies show that while the rich save more, there are strikingly consistent cohorts of savers (savings/disposable income) through most of the income quintiles (see Choice, Chance and Wealth Dispersion; Venti and Wise).  Those who manage to save over a lifetime, despite a low income, get it partially confiscated by FAFSA when their child goes to college.  This feels almost criminal to me.

 

More here.

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