Essay: EITC benefit on poverty line
For a married couple with two children, the maximum EITC benefit goes to families earning between 56 and 83 percent of the official four person poverty line. Above 83% the benefit gradually phases out, declining 21 cents for every additional dollar of earnings. This formula provides families near the poverty line with larger benefits than families in deep poverty. Also consistent with economists concern is that earners in the phase out range face a work disincentive because their net wage is reduced by 21%.
In the 1980s and early 1990s, working age families with zero market income received the largest average transfer benefit. The average declined steadily as market income rose. In 2004, after the major expansion of EITC benefits and continued erosion of AFDC and TANF benefits, the average benefit at zero market income was much lower than a decade earlier and it increased until market income reached about 40% of the poverty line. Beyond the 40% level, the average benefit steadily declined, as before (Scholz, Moffitt, & Cowan, 2008). This change means that, after 40+ years of growth and change since the War on Poverty, the transfer system no longer provides most assistance to working age families in greatest need. In this sense, the overall benefit structure of America’s major income tested programs has gradually moved in a direction consistent with the political logic described by BC. Yet it clearly does not concentrate benefits on families near the poverty line.
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