South By North Strategies, Ltd.

From a recent article in The Economist about poverty in the United States. In addition to considering policy issues, the piece reports on the struggles of Americans living in Sumter, South Carolina.

That said, America is unusually reluctant, compared with other rich countries, about giving cash transfers to the poor. The country has a long-standing political aversion to anything that seems to “reward” being poor; instead, it fights poverty using a progressive, if somewhat paternalistic, tax code. The child tax credit allows families with incomes below a certain level ($110,000 for married parents filing jointly, or $75,000 for single-parent families) to claim a $1,000 credit against their federal income taxes for every dependent child. Though its reach extends into the solidly middle-class, its greatest impact is on the poor. Credits can often eliminate most of their tax liability ….
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America’s most important tax-based cash-transfer programme is the earned income tax credit (EITC). It was originally enacted in 1975 as a means of encouraging the poor into the labour force, and has been extended and expanded enthusiastically since by both parties, most recently by Mr Obama in 2009. Unlike most tax credits, the EITC is refundable. Its amount varies with income and the number of dependants, but it is a credit amounting to a percentage of a taxpayer’s earned income. When that credit exceeds a payer’s tax liability, the government refunds the difference. Its benefits skew overwhelmingly toward families: the most a single person can claim is around $500, while a married couple with three or more dependent children can receive $5,000 or more. …