Policy Tools to Fight Poverty and the Rising Cost of Living

Despite strong top-level economic indicators like a low unemployment rate, experts and policymakers at an event Tuesday in Washington, D.C., described an economy in which many Americans face stagnating wages and a rising cost of living. Speakers at the Urban-Brookings Tax Policy Center event highlighted potential tools to address poverty and promote opportunity, focusing on the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC) and policies based on those credits.

Sen. Sherrod Brown (D-OH), in a keynote address, emphasized the dignity of work. “Dignity of work means hard work should pay off for everyone, no matter who you are or what kind of work you do,” he argued. “Dignity of work is a message that speaks to everyone.”

Brown defined dignity of work as encompassing a living wage, benefits, health insurance, work schedules, secure retirement and childcare. But, he said, “We can’t accomplish any of these things … without a tax code that puts people first.”

The EITC and the CTC are “the two most effective ways to put money into the pockets of the American people,” Brown said. A number of policy proposals expand the credits in different ways, but he said Democrats are united behind common goals for tax legislation. He also urged support for the Patriot Corporation of America Act, which he co-sponsored, and which would reduce taxes for corporations that commit to staying in the U.S., to hiring in the US, and to providing good wages and fair benefits for workers. He also said he will introduce a renters’ tax credit this summer.

Moderator Eillie Anzilotti, an assistant editor at Fast Company, introduced the panel by citing a recent study finding that a third of Americans who earn an income feel they need to take on additional work to afford basic necessities like rent and food. Panelists described a number of policies that could combat wage stagnation and increase economic security.

Aisha Nyandoro, chief executive officer of Springboard to Opportunities, said her organization has witnessed “the power of cash” through the Magnolia Mother’s Trust basic income pilot, which gives a small group of black mothers living in subsidized housing in Jackson, Miss., $1,000 per month for a year.

Unlike vouchers and subsidies, “quite simply, cash provides the dignity to solve problems in your own life; it gives people that agency,” Nyandoro said. “We’re saying we see you, we hear you, we’re not going to put additional barriers in place … and our moms are doing amazing.”

Adam Ruben, campaigns director for the Economic Security Project, described the Cost-of-Living Refund, a proposal to expand the EITC, expand the definition of work beyond paid work in the formal economy and simplify the delivery of the EITC.

Elaine Maag, principal research associate at the Urban-Brookings Tax Policy Center, explained the popularity of tax-based anti-poverty approaches like the EITC: “It is cumbersome and difficult to get the EITC, but compared to transfer programs, it’s a walk in the park.” She said the policy has “ripple effects” as well.

“When we put cash in people’s pockets, moms buy foods for their kids,” Maag said. “When we put cash in people’s pockets, people get the health care they need.”

Aparna Mathur, resident scholar at the American Enterprise Institute (AEI), affirmed the merits of the EITC, but she warned that expanding the credit can be costly and suggested considering tradeoffs and other approaches. “We tend to view the Earned Income Tax Credit as solving a lot of problems across the country,” Mathur said. “Everyone seems to jump to the EITC … I think we need a broader package of reforms if we want to address the holistic issue of poverty.”

The event concluded with remarks from Rep. Gwen Moore (D-WI). “This is very personal to me,” she said, recounting her time as a young, single mother and student. “I’ve also been a victim of the ‘welfare queen’ trope, which I proudly acknowledge now that I’m definitely a queen and a welfare queen,” she said.

Moore said that wage stagnation is profoundly impacting families and that the current EITC is “inadequate.” She described her forthcoming Worker Relief and Credit Reform Act, which would simplify the EITC, eliminate the age minimum of 25 and maximum of 65 and increase the amount of the credit.

“We [the United States] have plenty of money. Having money is not a problem,” Moore said.  Rather, the problem rising inequality.

Moore cited Martin Luther King Jr.: “Dr. King said that the only solution to poverty is to abolish it directly.”