EITC successful in assisting the poor
Published 7:53 pm Wednesday, June 24, 2015
To allow the current level of welfare to become the “new normal” wouldn’t just be fiscally irresponsible — it would be cruel, as well. We can help thin the ranks of those on welfare by increasing the Earned Income Tax Credit.
Andy Puzder is CEO of the CKE Restaurant Holdings group. He writes in The Hill that just cutting benefits isn’t real welfare reform, and punishes the wrong people.
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“After six years of a recovery that has failed to meaningfully help working-class Americans, our nation is facing a crisis of entrenched poverty and declining opportunity,” he writes. “Despite claims that the economy has come roaring back, gross domestic product growth remains anemic (actually negative in the first quarter). For more than 18 months, labor participation has been stuck at lows last seen during the Carter administration.”
The Great Recession has left many on welfare rolls.
“The number of people dependent on the Supplemental Nutrition Assistance Program (SNAP), federal housing assistance and Medicaid continues to grow,” Puzder says. “The number of people receiving SNAP benefits (food stamps) alone has doubled since 2008, to 74.7 million; in troubled cities like Baltimore, more than 1 in 3 residents receives them.”
As a restaurant owner, Puzder has seen how dependent people can become on government assistance.
“Consider that some of our crew members are declining promotions to shift leader positions because the increase in income would disqualify them for food, housing, medical or other government benefits,” he explains. “Called the ‘welfare cliff’ by policy wonks, this growing trend is little more than people responding to incentives. Simply, people get trapped into working less and keeping valuable benefits over working more and losing them.”
The result, he says, is that people choose security over opportunity. But there’s a simple fix for this problem.
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“There is a solution that fulfills society’s obligation to help the poor without reducing opportunity: the earned income tax credit (EITC),” he explains. “The EITC supplements incomes of the working poor through the tax code. Rather than access to myriad and complex government programs, people receive a government check supplementing their paycheck.”
It works something like a negative income tax. Instead of encouraging people to not work, the EITC rewards them for working. There’s no welfare cliff anymore, but as a person’s income increases, the help they receive from the government declines.
Currently, about 28 million Americans receive EITC benefits — for a cost of about $66 billion. It works; an estimated 6.5 million Americans were lifted out of poverty in 2013 by the EITC.
It’s the rare federal program that has demonstrable, definitive results.
“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,” Puzder says. “Presidential primary candidates from both parties should have the courage to support an expanded EITC as a means for rescuing millions of Americans facing a hopeless tomorrow because existing social welfare programs lock them into a cycle of poverty.”
The EITC works. Let’s expand it.