Category: Poverty

Sales-taxImagine you’re at the checkout line at the supermarket and the clerk asks how much income your family earns each year. Offended, you ask why that is any of her business.

“We need to know to determine how much sales tax you need to pay,” the checker politely explains. “If you’re classified as the ‘working poor’ you need to pay more sales tax.”

“I think you have that backwards,” you helpfully add. “You mean the working poor need to pay less sales tax, right?”

“Oh, no sir,” she say, still blissfully cheerful. “It’s a new anti-poverty program initiated by the federal government that helps the poor by making them pay an addition sales tax on their groceries.”

Although it isn’t stated so clearly or applied so directly, the federal government has in fact implemented an “anti-poverty” initiative that does just that. As economist Thomas Macurdy says, “Most Americans wouldn’t cheer this program, nor would most political leaders champion it. Yet that is what happens when Congress raises the minimum wage.”

Earlier this year Macurdy published a study in the Journal of Political Economy that examined the effect of the minimum wage on the poor. As he explains in the Wall Street Journal, his findings show that the minimum wage serves as a tax on the poor:
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Conversations about justice tend to quickly devolve into debates over top-down solutions or mechanistic policy prescriptions. But while the government plays an important role in maintaining order and cultivating conditions for society, we mustn’t forget that justice begins with right relationships at the local and personal levels.

In Episode 4 of For the Life of the World: Letters to the Exiles, Evan Koons explores topic from the perspective of hospitality, a theme we find throughout the Biblical story.

How do we approach and treat our neighbors? How do we act and interact, collaborate and exchange, relate and participate alongside each other? Are approaching our neighbors as co-creators made in the image of a holy God, and structuring our associations and institutions in a way that reflects his design for creation? (more…)

aeibrookingsreportIn our increasingly polarized society, it’s often difficult  for conservatives and progressives to find common ground. It’s even more rare for policy experts on the left and the right to find proposals that they can jointly agree on. So it’s rather remarkable that just such a diverse group has created a detailed plan for reducing poverty and increasing economic mobility.

With support from the American Enterprise Institute and the Brookings Institution, a group of scholars “worked together for more than a year to review the best available evidence and craft a plan that all believe would be effective.” Despite differences in moral values, they found consensus on three values that all Americans share: opportunity, responsibility, and security.

Next week I’ll be posting some of the individual details and recommendations from the report. But for now I wanted to highlight their twelve broad recommendations:

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Blog author: jcarter
Monday, November 30, 2015
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PoorTaxImagine you’re a single mom with one child who receives $19,300 a year in government benefits. A local business offers to hire you full-time at an hourly rate of $15 an hour. At 2,000 hours a year (40 hours for 50 weeks) you would earn $30,000. Should you take the job or stay on the government dole?

The additional $10,700 a year certainly sounds enticing. But because you would lose your benefits and have to pay taxes, your disposable income would be about 31 percent less, around $20,700. By working full-time you’d only earn $1,400 a year more than when you were on welfare. That means you are working full-time to earn an additional 70 cents more an hour than when you were unemployed. Why bother?

That 31 percent is the effective marginal tax rate for low- and moderate-income workers will face, on average, in 2016. The marginal tax rate is the percentage of an additional dollar of earnings that is unavailable to an individual because it is paid in taxes or offset by reduced benefits from government programs. As the Congressional Budget Office points out in a statement of the obvious, that rate affects people’s incentives to work: “In particular, when marginal tax rates are high, people tend to respond to the smaller financial gain from employment by working fewer hours, altering the intensity of their work, or not working at all.”

As Robert VerBruggen notes, that marginal rate remains high well above the poverty line:
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schoolpantryFrom lame dad jokes to awkward mom hugs, parents have nearly inexhaustible means to embarrass their children in front of their friends. But when I was a young teenager my mother had a surefire way to fill me with shame and dread: ask me to buy groceries using food stamps.

In the early 1980s—an era before EBT (electronic benefits transfer) cards could be disguised as a debit card—food stamps took the form of easily recognized slips of colored paper. In my small town grocery store, it was all but impossible to pay for groceries without several people from my school seeing me using food stamps and discovering my family was “on welfare.” Rather than submit to that shame, I’d have preferred to go hungry.

It’s easy to dismiss such adolescent concerns, especially for adults who have never endured the awkwardness of being a kid in poverty. But for many young people from poor families, the lack of resources is a constant source of embarrassment and stress.

That’s why it’s encouraging to discover the simple, yet innovative, approach taken by a high school in Washington, North Carolina to help such students:
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Blog author: jcarter
Tuesday, November 17, 2015
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driving-carOne of the most important socio-economic factors in America is social mobility, the ability of an individual or family to improve (or lower) their economic status. And one of the major factors in increasing social mobility is to simply increase mobility. For example, if you have to walk to work, you are limited to jobs within a few miles of your home. But if you can drive to work, the number of job opportunities available to you may increase considerably.

Most of us who have access to individual means of transportation take that connection for granted. But for the working poor, a car may not only help them get to a place of employment, it can help them drive away from poverty. For instance, a recent study finds that for low-income residents of high-poverty neighborhoods, having access to an automobile can lead to greater economic opportunities:
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Poverty Inc., the new documentary that has grown out of the Acton Institute’s PovertyCure initiative, was awarded Atlas Network’s Templeton Freedom Award at an event last night in New York.

Brad Lips, chief executive of the Washington-based Atlas Network, which administers the award, said the documentary is “without question” worth the attention it is receiving. “Shining a light on an uncomfortable side of charity — where a paternalistic mindset puts the aid industry at the center of efforts to rescue the poor — Poverty, Inc. calls on us to embrace a different mental model,” he said. “The film makes a persuasive case that the most effective solutions to poverty lie in unleashing entrepreneurs to find new, innovative, and efficient ways to meet people’s needs.”

Acton Executive Director Kris Mauren said the award recognizes that the entire business of international development and foreign aid is at a tipping point. “While entrenched interests remain, mounting evidence is causing people of all political stripes to question whether their actions are really helping the poor,” he said. “This is where Poverty, Inc. comes in. Operating under the conviction that thoughtful documentaries change culture, we designed Poverty, Inc. to spearhead a broad reconsideration of poverty that is nonpartisan but pro-market.” (more…)