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Income Tax Credits: An Antipoverty Strategy for the 1990s
| Article
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19637 |
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Section : |
MODERN THOUGHT
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| Issue
Date : |
10 / 1991 |
3,942 Words |
| Author
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Sheldon Danziger and Glenn Beamer
Sheldon Danziger is professor of social work and public policy
and faculty associate in population studies at the University
of Michigan. Glenn Beamer is a graduate student in political
science at the University of Michigan. |
Despite a lengthy economic expansion following the recession of the early 1980s, poverty rates in the United States remain high relative to those of the 1970s and to those of other countries. Why didn't poverty fall further during the "Reagan recovery"? Three interrelated changes--in economics, demographics, and public policy--provide the answer: Real wages declined in some sectors of the economy for many workers and for less-educated workers in most sectors; the number of female-headed families continued to increase; and government employment programs and income supports for the unemployed and other poor families were scaled back.
High poverty rates cause current hardships for the affected families, but they also adversely affect the health and development of children and, hence, the productivity of the next generation. Since the mid-1970s, the poverty rate for children has been higher than that of any other age group. In 1989, the rate for all persons was about 13 percent, while the child poverty rate has hovered around 20 percent for the past decade. Poverty is particularly severe for minority children--nearly 40 percent of all black and Hispanic children are poor.
Child poverty remained high even though unemployment rates fell from about 10 percent in the early 1980s to less than 6 percent at the end of the economic recovery. Yet, the rising economic tides did not reach many poor children, even though about half of them had at least one parent working.
The current recession will certainly increase poverty. Thus, if existing public policies remain in effect, poverty in the mid 1990s will be higher than it was in the mid-1970s. This represents an American anomaly--a generation faring worse than its parents. Poverty can be reduced if we can find the political will to implement a range of effective antipoverty strategies. Such policies would enable working families to provide a decent standard of living, ensure the physical and cognitive development of children, and encourage nonworking welfare recipients to find jobs. Such programs would not be costless, but they are affordable in the short run, and, in the long term, their benefits outweigh their costs.
We begin with a short history of government antipoverty programs during the past twenty-five years and their effects on poverty. Then we highlight the evolution of the Earned Income Tax Credit, and income tax-based subsidy for the working poor. We then turn to our antipoverty strategy for the 1990s. We would replace the personal exemption in the federal income tax with a
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