Tax credits are attractive in a climate of austerity because they provide benefits to people that are counted in government budgets as tax cuts rather than spending. The real drive to replace regular welfare programs with tax credits was simply an outgrowth of a generalized push towards austerity, which favored cutting taxes and spending. McCabe is an expert on this history and apparently argues in his book that the conventional wisdom has it all wrong. Thus, trapezoid programs made perfect sense because their phase-in design excluded the very poor and concentrated benefits on low-wage workers who put in a decent number of work hours. The very poor were cast as undeserving of public support because they hardly worked at all while the merely and nearly poor were cast more sympathetically as people who were trying to play by the rules, even if their labor did not fetch them much income. The conventional wisdom seems to be that it was driven by the rather vicious anti-welfare sentiment of the 1980s and 1990s. I am not an expert in the history of why the trapezoids came into vogue. The result of this shift, according to Robert Moffitt, has been a spike in deep poverty rates. This was part of a general shift in US welfare policy that saw benefits cut for the very poor and expanded for the merely poor and the nearly poor. The CTC was created during that process in 1997 and the EITC, which was created as a modest benefit in the 1970s, was significantly expanded shortly before and after welfare reform. ![]() The two major trapezoid programs currently in existence - the CTC and EITC - rose to prominence primarily during the 1996 welfare reform. A program so designed creates a trapezoid-looking graph, as you can see in the CTC and EITC graphs below. LIFT, CTC, and EITC are part of a family of policies I like to call trapezoid programs: benefits that phase in based on how much you earn, plateau at some middle income point, and then phase out at higher incomes. The following TPC graph sums it up nicely:Ĭonnoisseurs of tax credits will recognize that the LIFT credit is basically the same thing as the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC). The LIFT credit pays people an amount equal to 100% of their earnings (or Pell grant benefits) up to a maximum of $3,000 for a single person and $6,000 for a married couple. Kamala Harris proposed a new tax credit on Thursday that is being called the LIFT credit.
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