My plan aims to: expand the current entitlement system, by ensuring its equality; ending the current punishment and discouragement of hard work; all while reducing the expenditures for various entitlement programs.
The Current System
First let me compile the hard facts, how we are suppressing hard work and holding back people from earning higher pay checks.
Currently, those now infamously described as the 47 percent, are ending up in a much easier financial situation - thanks to government assistance - than the the higher earners, in the next 20+ percent. (these are rough, estimated, and outdated numbers - as is the whole notion of 47 percent - but the pattern definitely holds).
The charts below are of two households of four in Brooklyn, one with a minimum wage income, and the second with a breadwinner earning a the median wage. The first one will end up receiving over $62,000 annually, and over $50,000 will be totally tax free, while the second one will end short of $45,000, and almost everything will be taxable (at least for social security and medicare, which will bite down over $2,500 from the total amount).
Family of 4, with minimum wage for 30 hr. work weeks
(as often required to receive these program)
| ||
Income
|
Monthly
|
Annually
|
Wage
|
$942.50
|
$11,310
|
$2,053
|
$24,636
| |
$668
|
$8,016
| |
Medicaid/ FHP[2]
|
$1,000
|
$12,000
|
Federal EIC tax credit
|
$4,530
| |
State EIC tax credit
|
$1,510
| |
Total Income
|
$4,663.50
|
$62,002
|
Family of 4, with national median wage
| ||
Income
|
Monthly
|
Annually
|
Wage
|
$3,699
|
$44,389
|
Section 8/ Public Housing
|
$0
|
$0
|
$0
|
$0
| |
$0
|
$0
| |
Federal EIC tax credit
|
$350
| |
State EIC tax credit
|
$105
| |
Total Income
|
$3,699
|
$44,844
|
[1] Tenant has to pay 30 percent of income towards the rent and the rest is picked up by section 8. A family of 4, will be eligible for a bedroom for the parent/s, and an additional bedroom per 2 kids, or per 1 kid if if they are of the opposite sex. Thus, I calculated the eligible rent for a 3 bedroom apartment, less 30 percent of their income. Public housing tenets usually enjoy even sweeter deals.
[2] I calculated it as earnings/savings of $1,000 per month. It’s a huge underestimation, versus today’s premiums health insurance premiums, and Medicaid clients save on deductibles co-pays etc. So this amount may be much higher.
[3] Family Health Plus is for higher earners. I don’t know the income limits under the Health Care Reform Act.
Now, these charts include Section 8, a program that is currently closed for new recipients, but about 100,000 NYC families are on it. And there are plenty of other benefits that this low-income family is eligible for, with a similar or higher value. For example, it may receive child care, paying about $4-7,000 per child for day care or after school services; if one of the family is legally disabled, they will qualify for SSI, worth about $8,000 annually; they may qualify for welfare, which will be another couple of thousand dollars.
Can anyone explain this system? Is this making any sense?
Granted that there is a minimum standard that we owe to each American, but why are we not owing the same to those who try to make a living? Why should a low-income worker try to receive a promotion, if he know that it will actually be a demotion, money-wise?
It is like we are telling those who try to make a leaving: "dare not! if you decide to climb out of the system, you are on your own."
While young, single Americans may still rise in this system, thanks to their dignity and willpower to pass this dire stage on the ladder where you are in a lose-lose situation, those who are already caring for families find it almost impossible to surpass this roadblock. They can't feed, cloth or house their kids with their inspirations to achieve a hi-paying job (and honestly, most will not reach a lot higher, anyway).
This inequality is detrimental to our economy, and it is even worse to the ambitions of low-income workers.
Solution
I'm sure that there is awareness to the problem, but am perplex that no one is seriously tackling this unfairness.
I thought of a solution that seems to make a lot of sense, and let me put in one sentence:
Make entitlement benefits countable when applying for other programs, and taxable, and raise the income levels to qualify for these benefits.
Let me elaborate: entitlement programs should be considered an income when determining eligibility for other subsidies (i.e. when you receive section 8 and apply for food stamps, your voucher amount shall be included in your income to determine if you are still eligible and how much you’ll receive), and it should be taxable as any other earning. The fact that you haven't worked for it, doesn't make it any less money, and although it is allotted for food expenses, it is under the premise that such a family must spend such an amount for food. Still, we don't deduct from workers' paycheck the same amount that must go for food.
Now, this system will free up more money in these programs to enable us to raise the income cap to qualify for these programs, thus shifting the pot to those with modest incomes crushed by the current system. Part of the savings may also be used to reduce the deficit.
I think that this plan - while it may raise the ire of a bunch of my readers - can be embraced by both parties: It may be called entitlement reform, or entitlement expansion. You can label it a tax increase, or middle class relief. And it will finally bring something for the 'crushed' middle class.
I thought of a solution that seems to make a lot of sense, and let me put in one sentence:
Make entitlement benefits countable when applying for other programs, and taxable, and raise the income levels to qualify for these benefits.
Let me elaborate: entitlement programs should be considered an income when determining eligibility for other subsidies (i.e. when you receive section 8 and apply for food stamps, your voucher amount shall be included in your income to determine if you are still eligible and how much you’ll receive), and it should be taxable as any other earning. The fact that you haven't worked for it, doesn't make it any less money, and although it is allotted for food expenses, it is under the premise that such a family must spend such an amount for food. Still, we don't deduct from workers' paycheck the same amount that must go for food.
Now, this system will free up more money in these programs to enable us to raise the income cap to qualify for these programs, thus shifting the pot to those with modest incomes crushed by the current system. Part of the savings may also be used to reduce the deficit.
This plan will stop punishing working people, and it will encourage the lowest earners to climb up the income ladder.
For a step two, we can expand on this idea, by counting a workers wage only at 75% of the income when determining benefits eligibility. This way, we will ensure that when you work, you actually earn more.
We can also make entitlement programs as earning when applying for a mortgage or loan, so we can help low-income people take their situation in their own hands. Also, we should allow low-income people to save, while savings is currently disqualifying them from some programs and raising red flags at others.
For a step two, we can expand on this idea, by counting a workers wage only at 75% of the income when determining benefits eligibility. This way, we will ensure that when you work, you actually earn more.
We can also make entitlement programs as earning when applying for a mortgage or loan, so we can help low-income people take their situation in their own hands. Also, we should allow low-income people to save, while savings is currently disqualifying them from some programs and raising red flags at others.
I think that this plan - while it may raise the ire of a bunch of my readers - can be embraced by both parties: It may be called entitlement reform, or entitlement expansion. You can label it a tax increase, or middle class relief. And it will finally bring something for the 'crushed' middle class.
If you think that this is a good plan, please try to spread it and bring it to the attention of policy makers in high places. This may be worthwhile for your country and for those families stuck in the system.
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