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Actually....the welfare bureaucracy does all it can to make sure that folks cannot get off!
Here are the figures....you draw the conclusion.
Here:
1. There is no way out of the Poverty Trap- those who try to work to find their way out of the trap will find that, as income rises, the loss of their welfare benefits is the same as a huge tax on their earnings!
a. Take the example of someone receiving $12,000 in welfare benefits. She takes a new job earning $16,000 a year. But if she loses 50 cents in benefits for every dollar she now earns, that is the equivalent of a 50% tax! Plus, the payroll tax is another 7.65%, and federal tax is another 10% on the margin, plus state tax of 5%.... total: 72.65% tax. Where is the incentive to work? Comes to a salary of $84.15/ week. Now subtract transportation, lunches, etc., etc.
b. but the central point is obvious. Marginal tax rates for inner-city inhabitants are prohibitively high. Over the entire wage range from zero to $1,600 per month (equivalent to a gross paycheck of $1,463 per month), the family's monthly spendable income rises by $69. This corresponds to an average tax "wedge" of 95.7 percent. More shocking, between zero and $1,200 per month in gross wages, the family loses $46 in monthly spendable income -- an average tax in excess of 100 percent. This loss in net spendable income is concentrated between gross wages of $700 and $1,200 per month. As monthly wages paid rise by $500 in this span, the family loses its entitlement to $385 in AFDC benefits and $9 in food stamps. In addition the housing subsidy is reduced by $23 and the value of medical benefits declines an estimated $130. At the same time the family's tax liabilities increase by a total of $161 -- $8 in state income and disability insurance taxes, $68 in payroll taxes, and $85 in federal income tax. (Details of these calculations are given in the appendix.) The Tightening Grip of the Poverty Trap
2. Reagan discussed welfare from th same perspective: bureaucrats kept recipients so economically trapped that theres no way they can get away. And theyre trapped because the bureaucracy needs them as clientele to preserve the jobs of the bureaucrats themselves.
Reagan invokes his experiences with welfare reform in California. While he easily could have used that theme to stir racial animus against minority-group members on public assistance, Reagan empathizes with those on relief:
I dont believe the stereotype, after what we did, of people in need who are there [on welfare] simply because they prefer to be there. We found the overwhelming majority would like nothing better than to be out, with jobs for the future, and out here in the society with the rest of us. The trouble is, again, that bureaucracy has them so economically trapped that theres no way they can get away. And theyre trapped because that bureaucracy needs them as a clientele to preserve the jobs of the bureaucrats themselves. Reagan, No Racist - Deroy Murdock - National Review Online
