Effects Of The Michigan Earned Income Tax Credit On The Economy And Working Families

People generally enjoy working and being productive members of society. The positive effects of the Welfare Reform Act is moving to eventually end poverty in America and promote economic growth. According to the 2005 report measuring welfare dependents “Poverty in 2003 remains much lower than in 1996, the year of passage of the Personal Responsibility and Work Opportunity Reconciliation Act. The official poverty rate for 2003 was 12.5 percent, compared to 13.7 percent in 1996.” ( Gil Crouse, Susan Hauan, Julia Isaacs, Kendall Swenson and Lisa Trivits, 2005 ) States that design welfare-to-work policies that emphasized getting recipients into jobs by shifting to “work-first” welfare systems can modify program rules to allow more earned income,

My topic of interest is the effects of raising minimum wage in the U.S. Minimum wage is defined as the lowest wage permitted by law or by special agreement. In 1938, President Roosevelt signed a bill called the Fair Labor Standards Act of 1938, which set the minimum wage at $0.25. Although, overtime inflation devalued the amount of the dollar so it was raised there on. After raising the minimum wage the cost of living would keep going up every year. Also, currently advocates are arguing that the living wage should be 125% above the poverty line so that full time workers can afford a living.

One of the most debated topics of discussion in Minnesota is whether or not the minimum wage in the state should be increased or stay the same. Many Minnesotans say that if we increase the minimum wage then prices on products will also increase and we will be back to where we started. Many other Minnesotan’s say that if we increase the minimum wage that is more money in our economy which would help everyone in that state. This topic has been very controversial over the years. I say that increasing the minimum wage in our state could be beneficial in many ways.

In an effort to address the youth and child poverty issues, the local government created the Child Poverty Prevention Council fund in 2008, its purpose and its goal to present and establish “programs which will reduce child poverty in the state by 50% over the next 10 years” (Child Poverty Prevention Council for Louisiana, 2009). This council is comprised of 19 member organizations that represent the state legislature, the state executive agencies, businesses and labor groups, higher education institutions, and New Orleans professional advocacy groups. The outline of the priority stages of action to tackle the child poverty within the city are improving birth outcome, early childhood education initiatives, strengthening disadvantaged youth connections to school and work, and raising the EITC (Earned Income Tax Credit) from 3.5% 27 percent of the Federal EITC amount. The greater New Orleans Foundation is a local governing foundation this housing and community development in the wake of hurricane Katrina includes the community revitalization fund. This five year $25,000,000 initiative is designated to support organizations, people, and systems that produce a portable workforce housing in the city of New Orleans. The greater in New Orleans foundation also works closely with the Center for

Income Tax Credit”. For the most part, it seems as though the general public is under

The effects of the 1996 welfare reform bill helped declined caseloads on the social and economic well-being of fragile families, single mothers, and children. Although, the welfare reform was documented for making several positive changes such as reducing poverty rates, lowering the out of-wedlock childbearing, and formulated a better family structure, it is undeniable that poverty remained high among single mothers and their children. The reality of the matter was that most welfare recipients experienced serious barriers to maintain a stable employment due to their lack of skills, not having anyone available to take care of their young children when they leave for work as well as not gaining long-time employment with decent pay to help foster the family. As a result, most poor women and children were faced with the instability of economic and social future as welfare eligibility exhausted their efforts of supporting their families.

One of the United States most effective tools is The Earned Income Tax Credit which encourages work and improvement of family poverty (Center for American Progress, 2016). In the year of 2014 Earned Income Tax Credit helped more than 6.2 million Americans in the fight against poverty (Center for American Progress, 2016). A disadvantage to the Earned Income Tax Credit, is experienced in workers whose income is relatively low without qualifying children (Center for American Progress, 2016). In these

Poverty in the suburbs has been a huge struggle for the government and its citizens. The suburbs make up about 60% of our nation’s populations. (Berube & Kneebone, 2013) Between 2000 and 2013, the suburban poor made up 56% of our nations poverty rate. Overall, poverty has increased and shifted substantially from just low income families to the working class. The main reason is wages are not covering individual needs. In efforts of the government, the Welfare Reform Act of 1996 was established. In 1996, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) was implemented. Federal welfare reform gave permission to states allowing them the opportunity to reform their welfare systems.

including the Earned Income Tax Credit ( EITC) and the Child Tax Credit ( CTC) that directly

However, this system of measuring poverty is flawed because if a family makes a dollar more above the set limit, they do not qualify for financial help from the government (NCCP, 2008).The poverty threshold is an inadequate measure of whether people are considered poor or not. Current poverty measures are flawed because it assumes how much a family spends and does not accurately include family resources such as Earned Income Tax Credit (NCCP, 2008). The way that the government measures poverty is based on outdated information that was set in the 60s. Because it has not been sufficient to keep up with the standard of living, those who are living in “high cost cities like New York and those who live in rural areas of the country” (NCCP, 2008) are barely getting by.

Tax time in poor neighborhood is not April but January, and this “income tax” is not what you pay but what you receive. As soon as the W-2s arrive, the working poor eager for their checks from the Internal Revenue Service (IRS) and immediately send the documents to the tax preparers who have flourished and gouged impoverished laborers since the welfare tie limits were enacted by the Congress in 1996. The checks that come from Washington include not only a refund of tax withheld but also an additional payment known as the Earned Income Tax Credit (EITC) (Shipler, 2005, p.13), which is a refundable tax credit designed to redistribute incomes and supplement low-wage workers. The EITC was initiated in 1975 and then expended under President Reagan,

Public Act 138 (WOWA) took effect on May 27, 2014. With this, the Michigan Minimum Wage and Overtime At (Act 154) was replaced. WOWA is enforced by the Wage and Hour Division, which is an agency within the Bureau of Employment Relations.

In 1938, the first national minimum wage laws in the United States were passed as part of the Fair Labor Standards Act, which served as “a floor below wages,” to reduce poverty and to ensure that economic growth is shared across the workforce. Today, many people who work for companies that pay at or near the minimum wage and remain near or below the poverty level rely on government health and food security and income programs to supplement their living expenses. Since 1938, there have been many additional policies to the Fair Labor Standards Act that have changed many things, such as increasing the national minimum wage numerous times to the currently salary level, which was set in 1997. The Fair Minimum Wage Act of 2007, from the United States Department of Labor Wage and Hour Division, was a policy to change the federal minimum wage from $5.15 to $7.25 in three additions, which began in July of 2009. (U.S., 2009).

One thing The United States government has tried to do is take care of the least among us. A couple examples of how the government attempts to do this are by tweaking tax code and implementing the minimum wage. My thesis in this essay is: If the government feels it must intervene in the market to help the working poor; then the earned income tax credit is a better, more targeted program that will produce better results. In order to support my thesis to the fullest, I will do four steps. First, I will give a brief history of each program. Second, I will explain the benefits of each approach to helping the working poor. Third, I will explain the disadvantages of each program. Finally, I will conclude with how the data shows

The U.S Census Bureau stated in 2012, that “the median household income was $51,000” (www.CongressionalDigest.com 12). The nation’s poverty rate in 2012, was fifteen percent which stands for 46.5 million people living at or below the poverty line (www.CongressionalDigest.com 12). Household income over the past five years has declined since 2007 by 8.3 percent (www.CongressionalDigest.com 12). Women who worked full time and year round, earned 77% of that of men working full time (www.CongressionalDigest.com 12). “In 2012, 6.3% of married couple families, 30.9% of families with a female house holder, and 16.4% of families with a male house holder lived in poverty” (www.CongressionalDigest.com 13). According to the Office of Management and Budget, “using the consumer price index, the average income for poverty for a family of four was $23,492” (www.CongressionalDigest.com 13). In 2012, 21.8% of children under the age of eighteen lived in poverty, (16.1 million) (www.CongressionalDigest.com 13). “The U.S recession has pushed the number of poor children to the highest level since 1994” (Duncan, Kalil, and Ziol-Guest 28).