Benefits Cliffs and Effective Marginal Tax Rates

I study how the structure of the U.S. tax and transfer system - featuring phase-outs as income rise - create disincentives for economic mobility of low- and moderate-income families.

Below is the full list of my work that explores this issue.

Marginal Net Taxation of American Labor Supply
With David Altig, Alan Auerbach, Laurence Kotlikoff, and Victor Ye

The U.S. has a plethora of federal and state tax and benefit programs, each with its own work incentives and disincentives. This paper uses the Fiscal Analyzer (TFA) to assess how these policies, in unison, impact work incentives. TFA is a life-cycle, consumption-smoothing program that incorporates household borrowing constraints and all major federal and state fiscal policies.

Media Mentions
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Benefits Cliffs and the Financial Incentives for Career Advancement: A Case Study of the Health Care Services Career Pathway
With David Altig, Alexander Ruder, and Ellie Terry

Benefits cliffs, which occur when earnings gains are offset by the loss of public benefits, have long been recognized to create financial disincentives for low-income individuals to earn more income. In this paper, we develop a new methodology to study benefits cliffs in the context of career advancement. We illustrate the change in net financial resources for an individual pursuing the health care services career pathway from certified nursing assistant (CNA) to licensed practical nurse (LPN) to registered nurse (RN).

Restructuring the Eligibility Policies of the Child Care and Development Fund to Address Benefits Cliffs and Affordability
With Brittany Birken, Alexander Ruder, and Ellie Terry

This paper explores how the current eligibility policies of the federal Child Care and Development Fund (CCDF) create affordability challenges and benefits cliffs that act as barriers to economic self-sufficiency. By examining Florida data and policies, the authors demonstrate how the program’s existing co-payment schedule affects the same hypothetical family living in two contrasting Florida counties: one with state median living costs and one with high living costs.

Guaranteed Income (GI) Dashboard: Visualizing Public Benefits Loss for Participants in GI Pilot Programs
With Alexander Ruder and Ellie Terry

We have developed the Guaranteed Income Dashboard tool as part of our Advancing Careers initiative. Partners Update discusses the tool and how practitioners, policymakers, and GI recipients are using it in GI pilot programs across the country.

Policy Rules Database: Visualizing the US Social Safety Net
With Ellie Terry

We have developed the Policy Rules Database to provide clarity on the complexity of the US social safety net. This article provides an overview of the database and visualization tool.

The Racial Income Gap and Benefits Cliffs
With Alexander Ruder and Ellie Terry

Income gaps along racial lines are the result of long-standing structurally discriminatory policies across U.S. institutions. Although laws have changed, the legacy of these policies still affects people today. This article examines how benefits cliffs differentially affect minority populations.

Amid the COVID-19 Crisis, a Tale of Two Southeastern Cities
With John Robertson, Alexander Ruder, and Ellie Terry

Congress passed the CARES Act and other legislation to help workers who have lost their jobs during the pandemic. This article considers a case study of a hypothetical laid-off restaurant worker in Birmingham and Miami and the potential financial assistance he’d receive in each city.