Wednesday, September 03, 2003

Make more room in the Frigidare box

The number of people living in poverty has risen, though not as much as expected. Currently, 12.4 percent of the population is living below the poverty line, a small .3% increase over the previous year. Poverty in the United States is a hard thing to accept, as we are the wealthiest nation on earth. This position lends itself, however, to solutions that do not work, such as people who say we should increase child tax credits and unemployment insurance. There are a couple of things wrong with this approach. First, there are people in poverty with no kids, which makes the credits useless for them. But second, and more important, this approach makes these people more dependent on government. Increasing tax credits and unemployment insurance does nothing to lift these people out of poverty. It imposes ceilings on assistance and encourages the recipients to remain on the plan, because if they gain employment, they could lose the funds. This weds them to government largess, which should not be the goal. If we want to raise these people out of poverty, this first step is to determine the financial level at which poverty occurs. Let's use the level for a household of three including one child, which is $14,480. The government should declare that all income earned up to the poverty level is tax-free, including Social Security taxes. Normal taxation rates resume once that level is exceeded. This should be combined with a partial reduction in federal aid, since these families are receiving more cash. I'd extend the tax relief to everyone, and combine it with a 1% Social Security tax on all incomes above the current cutoff level ,which is around $87,000. This would be much more effective in combating poverty than forcing these families to remain on the dole.

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