Suspicious Discontinuities

U.S. tax and subsidy policies contain sharp income thresholds that create perverse incentives, such as those in ACA, TANF, Medicaid, and CHIP programs, where earning slightly more income can result in losing thousands of dollars in subsidies—effectively penalizing income growth. The article argues that gradual phase-outs rather than sharp cutoffs would eliminate these discontinuities and the problematic behavior they encourage, comparing the issue to similar discontinuity problems in software queue management.