The only people that do this are ones that have no understanding of marginal tax rates and progressive taxation.
Which is how some parts of US taxation works, but not other parts. You seem to be in one part, and unaware of the rest.
(And is a mix of taxation and other "eligibility" issues, with poorly advertised massive cliffs here and there for extra helpfulness).
The absurd thing in your scenario is the steep cliff on the benefit...this doesn't change the observation that some people have absurd beliefs about how progressive taxes are implemented.
Some huge number of people think "writing it off as a business expense" means it's basically almost free.
Most people like receiving a big fat refund.
Many don't understand saving for anything, let alone retirement.