[Congressional Record Volume 146, Number 23 (Monday, March 6, 2000)]
[Extensions of Remarks]
[Page E227]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page E227]]



                   THE POVERTY TRAP STUDY ACT OF 2000

                                 ______
                                 

                          HON. THOMAS E. PETRI

                              of wisconsin

                    in the house of representatives

                         Monday, March 6, 2000

  Mr. PETRI. Mr. Speaker, today I am introducing the Poverty Trap Study 
Act of 2000. This legislation would create a commission to study the 
combined effects on low income families of effective marginal tax rates 
resulting from the simultaneous phaseouts of a number of welfare 
programs as well as payroll taxes and federal and state income taxes.
  Why does this prosperous country still have millions of people living 
in poverty? Why, in the face of tremendous economic growth, does the 
poverty rate barely drop if at all? It's not because we are a selfish 
country; it's not because we spend too little on welfare and it's not 
because the minimum wage is too low. It's because we have adopted tax 
and welfare policies which bring about that exact result!
  Not that it was the intent of those who wrote those programs to keep 
people in poverty. I'm sure that when the housing assistance program 
was created, it was thought that taking 30 percent of income as rent 
was not too much of a disincentive to work. Likewise, when the Earned 
Income Tax Credit was created and later revised, I'm sure no one 
thought that a 21 percent phaseout of benefits for two-child families 
just over the poverty level was a drastic disincentive. And when the 
Food Stamp Program was begun, a 24 percent phaseout didn't seem so bad. 
But add them up and we already have a 75 percent effective marginal tax 
rate from just these three programs. Now add in a 7.65 percent payroll 
tax, federal and state income taxes, and possible phaseouts of other 
state welfare programs, plus copayments for child care, and in most 
states families with children with earnings around the poverty level 
face marginal tax rates over 100 percent! Furthermore, at an income 
level where most of these phaseouts are still in effect, these families 
face the ``cliff effect'' of Medicaid and lose their health coverage. 
It's not surprising that we have a seemingly intractable problem of 
poverty no matter how high the economy soars. What is amazing is that 
some people are able to work their way out of poverty anyway.
  We have created this mess by designing every program in a vacuum 
without ever considering the combined effects. I supported the welfare 
reform of 1996, sending most of the decisions back to the states. The 
main effect has been for states to institute work requirements for most 
able-bodied recipients, moving them off of AFDC and into subsidized 
jobs. That's good but it is only the first step. Phase II has to be to 
move people from subsidized jobs into self-sufficiency, and that is 
never going to happen until more work actually means more money in 
their pockets.
  Likewise, I supported the recently passed marriage penalty relief 
act. However, as a percentage of income, the biggest marriage penalties 
have nothing to do with moving to higher tax brackets or the size of 
the personal exemption. In some cases in my home state of Wisconsin, a 
single parent with two children who marries someone with a similar 
income loses ALL of the spouse's income to lost benefits and taxes and 
the family of four has to live on less than the family of three did! 
Ending the poverty trap should also be considered phase II of marriage 
penalty relief.
  It's time to look at welfare and tax policy for low income families 
in a coherent fashion instead of the hit or miss piecemeal approach we 
have been employing. That is why I have introduced the Poverty Trap 
Study Act of 2000. This legislation would create a commission to 
examine the poverty trap problem and make recommendations to fix it. I 
call on my colleagues who support ending marriage penalties, cutting 
taxes for low income families and fighting poverty, to support this 
bill.

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