The Center's Poverty Research Flash series disseminates research summaries of recent poverty-relevant research by Center Faculty Affiliates, grantees, and others associated with the Center community. The Center also posts interviews with authors on how they became interested in the research topic, the most significant findings in the study, and implications for further research and policy. See our Poverty Research Flash Archive for past issues in the series.
The West Coast Poverty Center’s first Poverty Research FLASH featured research by Stephen D. Holt and WCPC affiliate Jennifer L. Romich.
Progressive federal and state tax structures impose higher tax rates and reduce eligibility for tax credits as earnings increase for all workers. In addition, as their earnings rise, many low and middle-income workers must attempt to replace the value of the benefits they lose from means-tested programs such as food stamps. The amount of every additional dollar earned that is absorbed by such additional expenses as earnings grow, known as the marginal tax rate or MTR, can be particularly high for families who lose multiple means-tested benefits. For example, families using food stamps, public health coverage, and child care subsidies would see little increase in discretionary income between earnings of $10,000 per year and $30,000 if they attempted to replace the value of those lost benefits. Read the full FLASH here.
Holt, S. D.; Romich, J. L. 2007. "Marginal Tax Rates Facing Low- and Moderate-Income Workers Who Participate in Means-Tested Transfer Programs." National Tax Journal 60(2): 253.
The WCPC interviewed FLASH author Jennifer Romich about her research on effective marginal tax rates for working families. When asked about the implications of her work for policy makers, Romich responded, "Reforms in the 1990s made work pay more than welfare. However, in some cases, more work doesn't pay more than less work. That, I think, is a problem. Benefits to the poor phase out quickly and well before families can take advantage of some of the other supports (such as the mortgage interest deduction or tax-advantaged retirement savings)." Read the full interview here.