[Congressional Record Volume 149, Number 21 (Wednesday, February 5, 2003)]
[Extensions of Remarks]
[Page E132]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   THE POVERTY TRAP STUDY ACT OF 2003

                                 ______
                                 

                          HON. THOMAS E. PETRI

                              of wisconsin

                    in the house of representatives

                      Wednesday, February 5, 2003

  Mr. PETRI. Mr. Speaker, today I am introducing the Poverty Trap Study 
Act of 2003. Although we have moved millions of families off welfare 
and into work, the road to advancement and self-sufficiency remains a 
difficult challenge. For a long time I have been concerned by the 
disincentives to working hard, earning more money, and even getting 
married, that we have created over time through the many support 
programs that provide assistance to lower income families. Too often a 
low-income household will find that, despite a rise in earnings, the 
family is actually worse off than it was beforehand.
  One by one over the decades we have created programs to help the poor 
as we have perceived needs for housing assistance, nutritional 
assistance, health care, etc. At some income level these programs had 
to be eliminated or phased out. Unfortunately, as each program was 
designed individually without regard for the cumulative effects, we 
ended up phasing out all of them over the same income range, generally 
just above the poverty level. Tax liability also begins around the same 
income level. As a result, many working families in the income range of 
about $12,000-$30,000 lose a dollar or close to it in taxes and lost 
welfare benefits for each additional dollar income they earn--a 
combined marginal tax rate over 100 percent! Specifically, a family 
with two children in this income range pays 30 percent of income as 
rent if they are in subsidized housing, loses 21 percent of additional 
income to the EITC phaseout, 24 percent to the food stamp phaseout, 15 
percent to the federal income tax, 7.65 percent to the employee share 
of FICA and, depending on the state, around 3 percent state income tax.
  It's time for Congress 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. My legislation would create 
a commission to examine the cumulative effective marginal tax rates for 
low income families with children in a cross section of states, measure 
the effects, and make recommendations to fix the problem.

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