Petri Bill Calls for Study, Reform of Poverty Programs
Congressman Tom Petri believes that America's hodgepodge of taxes and benefits discourage work and marriage, especially among low-income families. On Tuesday, July 12, Petri introduced legislation to establish a national commission to study the issue and recommend solutions. Petri said, "Low-income families deserve our support as they make positive efforts to improve their circumstances. Too often, however, government policy stands in their way."
Petri explained that the earnings of low-income families are subject to reductions from many sources, including the federal income tax, Social Security and state income taxes. In addition, eligibility for many federal and state aid programs is based on income, and because benefits phase out as earnings rise, the effects of these reductions are just like high marginal tax rates.
"The result is that the combined effective marginal tax rate for additional income earned by low income people can exceed 100 percent - and that can discourage people from working more hours, getting a raise, seeking training for a higher-paying job, or engaging in other economic and social activities. Low-income couples that marry face an immediate loss of disposable income," Petri said.
"We want people to have stable families and get ahead, but then we punish them when they try," Petri said. "The problem is that poverty programs, training programs, income supports and taxes have all been enacted individually, without regard to the disincentives when you put everything together. We have a rickety structure and we need coordination."
"There is a broad awareness of the problem, but solutions have been tough to find. We need some smart people to focus their attention on this issue," he said.
Petri's Making Work and Marriage Pay Act would authorize a commission made up of cabinet secretaries, governors and recognized policy experts to recommend solutions for increasing coordination in the design of benefits for low-income families in order to reduce effective marginal tax rates and decrease disincentives to work and marry.
The bill requires the commission to consider a policy which combines non-tax benefits into a single voucher and combines federal tax credits into a coordinated credit that minimizes phase-outs, encourages work, and does not penalize marriage. Furthermore, this policy must establish a single eligibility standard for all federal benefit programs. The commission may also include alternative recommendations.