Petri, Tsongas: Remove Disincentives for Low-Income Families to Work and Marry
Washington, D.C.— Today, U.S. Representatives Tom Petri (R-WI) and Niki Tsongas (D-MA) introduced legislation to establish a national commission to study how multiple federal and state benefit programs create disincentives for low-income families to work and can discourage marriage.
“When you look at the reality of our multiple benefit programs, there is a clear disincentive for low-income families to live the American Dream by getting married and working harder,” commented Petri.
"Low-income families deserve our support as they make positive efforts to improve their circumstances. Unfortunately, all too often 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, payroll taxes, 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 as low-income individuals get a raise or put in extra hours, they are seeing less and less of their additional earnings in their take-home pay,” Petri continued. “And, low-income couples that marry face an immediate loss of disposable income. This is not the message that government should be sending—in fact, it’s the opposite. We want people to have stable families and get ahead, but then we punish them when they try."
Rep. Tsongas added that “Government should be encouraging low-income families to seek out career advancement, not dissuade it because of confusing and counterproductive benefit structures. This bill is an important first step toward better coordinating low-income benefits and helping American families avoid the poverty trap.”
The bill, the 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.
“The problem is that poverty programs, training programs, income supports and taxes have all been enacted individually, without regard to the real-world disincentives when you put everything together,” said Petri.
“This bill will bring experts and lawmakers together to come up with solutions so that government assistance programs no longer discourage hard work or marriage.”