Marginal Tax Rates & Program Cliffs

Congress has directed HHS to operate the Children’s Interagency Coordinating Council (CICC). The CICC is charged with fostering greater coordination and transparency on child policy across federal agencies and examining a broad array of cross-cutting issues affecting child poverty and child well-being.

IntroductionMeans-tested benefits are designed to support basic needs such as food, health insurance, and child care for households with low incomes. When considering whether to take a new job opportunity that will increase their income, recipients of these benefits may be forced to consider trade-offs. For example:

This project explored how workers with low incomes who receive federal benefits weigh factors including marginal tax rates, benefit loss, ease of resuming benefits once lost, and job instability when deciding whether to accept an earnings increase.

Infographic: Earnings, Benefit Loss, and Job Instability: What Do People Receiving TANF Consider When Offered a Higher-Paying Job?Related Products:

This project developed a calculator to help people anticipate how a change in earnings from employment would affect their net income, and in so doing, provide public benefit recipients with their estimated effective marginal tax rate on new earnings. Key Points:

In focus group discussions with 44 working parents receiving assistance from one or more federal programs, many parents shared the view that increasing earnings involves a number of risks. Participants described the sequence of possible risk events as follows: