Welfare Solved : Earned Income Tax Credit?

Can the welfare nightmare, that is gripping our country now, be solved by a policy change alone? I don't think so, but it would be a good place to start. It will take some heavy lifting by politicians developing programs that will convince people to believe working is better for them physically and mentally, a very tough slug but worth the effort.

It comes down to convincing the unemployed to go back to work, where ever they can, and it won't result in a loss of income. As it stands now, there aren't many jobs available that pay more then what the welfare recipient gets in federal and local subsides. So why work?

More Work, Less Welfare
Source: Andy Puzder, "More work, less welfare" , The Hill, June 22, 2015.

June 24, 2015

Despite claims that the economy has come roaring back, Gross Domestic Product growth remains anemic. The number of people receiving Supplemental Nutrition Assistance Program (SNAP) benefits, or food stamps, alone has doubled since 2008, to 74.7 million; in troubled cities like Baltimore, more than one-third of the residents receive them. Called the "welfare cliff" by policy wonks, this growing trend is little more than people responding to incentives.

For example, eligibility for food stamps ends when annual income exceeds 130 percent of the poverty line, or a little more than $15,000 a year, for an individual. When the minimum wage increases above this level, as it has recently in many cities and states, employees reduce their hours to keep their benefits. As a result, people forgo opportunity for safety.

There is a solution that fulfills society's obligation to help the poor without reducing opportunity: the Earned Income Tax Credit (EITC). The EITC supplements incomes of the working poor through the tax code. As their income increases, their government supplements declines. The decline is never so steep that it results in a decline in total income.

The IRS recently estimated that nearly 28 million Americans received more than $66 billion in EITC payments in 2013, lifting an estimated 6.5 million people out of poverty, including 3.3 million children. While programs that provide food, housing and medical benefits are certainly important, the EITC is more effective in helping people rise out of poverty.

These existing programs should be rolled into an expanded EITC The only way to truly reduce poverty and finally get the economy going again for working-class Americans is to create greater opportunity for the economically disadvantaged.