Policies to Reduce Poverty

Policies to Reduce Poverty

• Welfare - government programs that supplement the incomes of the "needy." Some critics say too much welfare can encourage people to remain "needy" Example: Some people may remain single parents to continue getting assistance.

• Negative Income Tax - a tax system that collects revenue from high-income households and gives subsidies (negative tax) to low-income households. Critics say this might encourage people to become lazy to keep getting tax benefits.
• In-kind Transfers - transfers to the poor given in the form of goods and services rather than cash. These are not included in income, so actually the number of people under the poverty rate are lower than statistics show. Example: food stamps and health services for the poor.
• Antipoverty Programs and Work Incentives - a lot of the solutions suggested create an incentive not to work.
• This is because the marginal tax rate the poor face

  increases

  ---

  as they work more.
• If the government does a more gradual reduction in benefits to the poor, then it allows a lot of medium income families to become eligible for the assistance which makes it very costly for the government.
• One solution is to provide those people with a government job (workfare) or to only give assistance for a limited time.