Thomas E. Petri: “the biggest single problem facing lower income Americans, especially those with children, is that they face a crippling…”

“the biggest single problem facing lower income Americans, especially those with children, is that they face a crippling array of marginal tax rates that almost completely destroys their incentives to try to earn more income. They are virtually trapped at low incomes. That same array of taxes on additional income will take away most or all of a minimum wage increase from the very people everyone talks about helping--that is, minimum wage earners supporting children. Childless people are above the poverty line if they work full time at the current minimum wage. They are not usually the folks we shed tears over when we talk about increasing the minimum. It is family heads we are concerned about. But in virtually all cases, parents earning the minimum wage will also receive food stamps, the earned income tax credit, child care subsidies, Medicaid, and possibly housing subsidies, as well as other benefits like school lunch, Head Start, WIC, and energy assistance. As earnings go up, many of these benefits go down, effectively canceling out most or all of the earnings gain. That is the marginal tax problem, and it hamstrings people all the way up the scale to incomes in the high twenty thousands.”