Degree Year

2010

Document Type

Thesis - Open Access

Degree Name

Bachelor of Arts

Department

Economics

Advisor(s)

Barbara Craig

Committee Member(s)

Ellis Tallman

Abstract

The poorest individuals in the United States face some of the highest marginal tax rates on additional earned income. These tax rates arise from the benefit reduction rates of cash and in-kind transfer programs, and are often above 100%. Tax rates over 100% create a situation for low-income individuals where earning more leaves them with less after tax income. These implicit tax rates caused by welfare programs have an additive effect. If an individual participates in multiple welfare programs he or she will face a higher tax rate on his or her earned income. This study reveals that the structures of the federal welfare programs SNAP and HUD, cause participants who have a high cost of housing to experience higher marginal tax rates. In addition to federal programs, this study analyzes the TANF and Medicaid programs across five states. Within my five state sample, TANF programs that have a graduated system of work programs and relatively high per capita spending on TANF job assistance are more successful in encouraging participant self-sufficiency.

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