The Petri-Tsongas Push on Work Incentives.

Rep. Tom Petri, a Wisconsin Republican, is working on addressing the work disincentives that flow from poorly designed benefit schedules:

For instance, consider the scenario of a single mother with two children making $17,000 a year living in Wisconsin in 2009 who claims all available deductions and participated in all eligible benefit programs. If this single mother were to work extra hours or receive a raise so that her earnings increase to $21,000, she would only see $540 of that $4,000 in new earnings—she would have lost $3,460 in benefits. That amounts to almost an 88 percent effective tax rate, leaving the hard-working parent and her children little to show for the extra effort. Even more shocking is that if this mother received a raise or worked more to raise her earnings another $1,000 to $22,000, she would actually have less in disposable income than she had when earning $21,000.

How can this be?

It all comes back to benefit phaseout schedules. For instance, SNAP benefits for a single mother in some states gradually diminish as income rise and eventually stop when earnings reach $23,000 annually, leading to over 100 percent in effective taxation at some point—meaning that you lose more than you bring in.

It takes a deep dive into the numbers for lawmakers and policy experts to understand the situation, but for millions of low-income families the results are an everyday reality. By comparison, a middle-class single mother of two making $55,000 a year whose salary rises by $5,000 would see approximately $3,500 of the increase—further suggesting that hard work pays more for middle-class families than those at the bottom. This is surely not the message government should be sending.

And so Petri is working with Rep. Niki Tsongas, a Massachusetts Democrat, on legislation that will establish a commission devoted to improving the coordination between federal and state programs. Oren Cass’s Flex Fund proposal, which was recently championed by Florida Sen. Marco Rubio, represents one strategy for tackling this coordination problem. But it certainly isn’t the only one, so here’s hoping that Petri and Tsonga’s effort gets the support it deserves from conservative lawmakers.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular

Culture

Courage: The Greatest of Virtues

EDITOR’S NOTE: The following is Jonah Goldberg’s weekly “news”letter, the G-File. Subscribe here to get the G-File delivered to your inbox on Fridays. Dear Reader (Or Listener), As the reporter assigned the job of writing the article about all of Sidney Blumenthal’s friends and supporters told his ... Read More
Immigration

My American Dream

This morning, at 8 a.m., I did something I’ve wanted to do for as long as I can remember: I became an American. I first applied for a visa in early 2011, and since then I have slowly worked my way through the system — first as a visa-holder, then as a permanent resident (green card), and, finally, as a ... Read More
U.S.

The Gun-Control Debate Could Break America

Last night, the nation witnessed what looked a lot like an extended version of the famous “two minutes hate” from George Orwell’s novel 1984. During a CNN town hall on gun control, a furious crowd of Americans jeered at two conservatives, Marco Rubio and Dana Loesch, who stood in defense of the Second ... Read More