09-16-2016, 08:38 PM
One has to be careful with providing welfare, because of things like the poverty trap, a situation in which the incentives to look for work are greatly diminished, or even eliminated altogether because people would lose too many benefits when accepting a job, even if low pay is part of the problem here.
That's one reason why tax credits have been popular, but the disadvantages of these is that they are regressive (and might not always work the intended efffect):
Child benefits is another example:
And of course we have Trump's paid family leave that comes in the form of a tax credit which would disproportionally benefit the well-off.
That's one reason why tax credits have been popular, but the disadvantages of these is that they are regressive (and might not always work the intended efffect):
Quote:The discredited old model focused only on using "nudges," especially in the form of tax credits, to encourage private market actors to carry out social goals. The idea was to keep government nimble. As Gov. Mario Cuomo summarized this position in the 1980s: "It is not government's obligation to provide services, but to see that they're provided."The "new liberal economics" is the key to understanding Hillary Clinton's policies - Vox
Once again, this approach has hit a wall. Take, as just one example, the tax deduction that encourages people to invest in 401(k)s and other private retirement savings. Tax deductions are most beneficial to those with the highest tax burden, and nearly two-thirds of this value goes to the top 20 percent of earners.
It’s not even clear that the deduction encourages people to save. Studying a similar program in Denmark, the economist Raj Chetty and others found that such programs only encourage rich people to shift the way they save to pay less in taxes without actually saving any more, and have virtually no impact on poorer savers. In embracing 401(k)s over other kinds of retirement policies, we’ve ended up with a regressive policy that doesn’t even accomplish what it sets out to do.
Child benefits is another example:
Quote:According to a recent report by the Century Foundation, a nonpartisan think tank, offering families an annual benefit of $4,000 for every kid would reduce child poverty in the United States by more than half.The New Hillarycare | New Republic
A universal child allowance would fix what’s broken in our current system. Right now, families qualify for a federal child tax credit only if they make more than $3,000 per year. That leaves out the poorest of the poor—disproportionately hurting black kids and the children of single mothers. (The number of children who live on $2 a day or less has more than doubled, to three million, since Bill Clinton signed welfare reform into law.) What’s more, the child tax credit arrives just once a year, at tax time. A universal child allowance, by contrast, would provide cash on a regular basis—allowing parents to use it for daily expenditures such as groceries and child care.
And of course we have Trump's paid family leave that comes in the form of a tax credit which would disproportionally benefit the well-off.