According to international standards set by LIS (the Luxemberg Income Study Database), one fifth of American children are poor. Despite having the highest GDP in the world, the United States experiences higher child poverty rates than 29 other economically developed countries (OECD). Research from the nonpartisan Tax Policy Center has found that current US policy disproportionately benefits wealthy Americans to a dramatic degree: Barely 1% of the $40 billion in child tax deductions goes to the poorest fifth of Americans. For poor families, this benefit averages out to $10. We see the same outcome with tax credits as well; on average, the poorest fifth receives $120 per year. Presidential nominee Hillary Clinton has proposed restructuring tax benefits to provide greater assistance to those making less, a plan which is expected to raise 1.5 million out of poverty. But new research has indicated an even more effective: replacing tax deductions and credits with a monthly child stipend of $250.
The idea is being championed by the Russell Sage Foundation, which has brought together nine poverty experts to work on the proposal. The stipend would ensure that all families reach a bare minimum of support and well-being. The stipend would amount to $3,000 annually, still lower than child benefits in other developed nations such as Germany and Canada. The Russell Sage Foundation anticipates that the policy change would reduce child poverty by more than 40%. The stipend would be provided universally to all families with children, although higher-income earners would return a greater portion back in taxes. Unlike most other forms of welfare in the US, the policy is designed to avoid the threshold pitfall. With typical welfare programs, recipients on the edge of the benefit cutoff can end up taking home less money when they work extra hours or receive a slight raise, a catch-22 for achieving economic mobility.
While it may take time for the proposal to gain traction, it serves as a compelling example of the role that foundations can have in advancing meaningful policy.
Read more at The New York Times.