IPP research director Peter Fisher says they looked at several of the programs. “Most support programs are designed to gradually reduce benefits as the family earns more. And by tapering the benefits off in that fashion, it pretty much always pays to get a better job, to work more hours to raise your income,” Fisher says.
But Fisher says they’ve found that most families need to earn two to three times the poverty level to meet their budget. But in some cases families can drop off a cliff when the increased income doesn’t match the loss of government support.
“What we find in these programs is that the majority end benefits well below twice the poverty level. So in other words, well before a family is to the point where they can be self sufficient — most of these programs disappear,” Fisher says. He says child care support is one key example they focused on in this report.
“Families start to pay a little bit toward child care once their income exceeds 100 percent of poverty. But then when they hit 145 percent of poverty they loose all childcare assistance,” Fisher says. “And that can be a 5, 10, 12,000-a-year cost.” Fisher says only ten states have a lower poverty threshold for child support and raising that a little may be part of the solution to preventing the cliff drop off.
“What if you went up to 200 percent of poverty — which a lot of states are at — and then increase, in effect about doubling that copay by the time you get to that 200 percent of poverty.The copay is much larger than it is under the current formula,” Fisher says. “When you do that, you can phase co-pays out and you can eliminate the cliff effect.”
Other recommendations include expanding the Earned Income Tax Credit to provide even stronger support to low-wage workers, encourage more work effort, and keep children out of poverty. And expanding the Child and Dependent Care Credit to cushion the loss of Child Care Assistance.
This report is the third a series called “Cost of Living in Iowa, ” which you can find out more on the IPP website.