Climbing the benefit cliff

Benefit cliffs are a real problem. The term is used to describe the predicament people get into when earning more income makes them ineligible for certain public benefits. Their income goes up, but then they fall off a benefit cliff.

“Benefit cliffs’ is also one of those technocratic terms that’s hard to get excited about. But that could all change if enough people read just a short section of the Final Report of the Vermont Tax Structure Commission. It cuts through all of the usually confusing information and describes clearly the reality of a problem that needs fixing.

I can’t improve on the report by paraphrasing, so I’m quoting it at length below. The text is accompanied by a chart that’s been published dozens of times before. But the report tells the story of the chart in a way that should stir anyone with a sense of fairness and a belief that work should be a path for all people to get ahead.

From page 35:

“Since most single parents with children are women, we’ll assume that this family is headed by a single mom. Note that as she works her way up from no income at all to an annual income of $27,500, she has more and more resources available for her and her children. Indeed, it is a testament to the Vermont community that someone with no income at all will have about $50,000 in resources, and as her income climbs from zero to $27,500, her total resources go from $50,000 to $70,000.

“However, as she continues to work hard and get raises and promotions, or takes on a second job, as her income goes up, her situation gets worse. From an income of $27,500 to an income of $40,000, every extra dollar she earns takes more than a dollar out of her total resources. It isn’t until she’s worked her way up to an income of $60,000 (and please reflect for a moment on how incredibly difficult it is to work your way up from earning $27,500 to earning $60,000) that she’s back to the resource level she was at when she was earning $27,500.

“However, then she hits another setback, and doesn’t get back to her $27,500 level until she gets to $67,500. Over years of hard work, she’s added $40,000 a year of income to her family, she’s more than doubled her income, and yet she’s exactly where she was all those years ago when she was earning $27,500.

“This is clearly not the intent of anyone working on these programs, and we don’t believe it would be too hard to solve, and that’s the first reason to restructure Vermont’s system of low-income assistance.”

Posted by Jack Hoffman on February 10, 2021 at 8:58 am

2 Responses to “Climbing the benefit cliff”

  1. Renee says:

    Your scenario is well-meant, I’m sure but fails to consider so many circumstances of parenting and realities of wage-earning and work (and certainly doesn’t factor in Covid-19-related obstacle to wage-earning.

    Children need parent-time to thrive and do well. Some children at some ages–and particularly if they’ve been exposed to violence, illness, and/or other trauma–need a LOT of time with a parent. Any old caregiver doesn’t always serve the needs of a child.

    If we learn anything from this pandemic, it should be that many socio-economic problems (like having a single income earner in an economy that requires at least two incomes to meet basic needs) can be solved by a Minimum Income Assurance Act:

    Yes, this needs to be a nationally subsidized program that taxes the obscene wealth to the top. The money is there. We must pressure politicians until we also have the political will.

  2. Jim Dodds says:

    Renee’s comment says it all. EVERYONE should be guaranteed at least a minimum of five basics: food, housing, education, medical care and legal representation, and taxing the obscene wealth at the top is EXACTLY the way to do this…for the world. Sliding scales to protect people from the benefit cliff are so doable, if everyone gets on the same page, with the same computer systems.