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Experts Confirm Complex System of Welfare Benefits and Tax Credits Discourages Work

June 27, 2012

Today, the Ways and Means Committee’s Subcommittees on Human Resources and Select Revenue Measures held a joint hearing to explore how the complexities of today’s welfare and tax systems can discourage Americans from looking for and obtaining a job.  

The Subcommittees heard from several experts on welfare and work policies, including the Right Honorable Iain Duncan Smith MP, Secretary of State for the U.K. Department for Work and Pensions.  The Secretary spoke about the welfare and tax reforms his department is leading in the U.K. to simplify these benefits, which he said had become “a benefit system of such fiendish complexity that too many chose a life on benefits over work.”
Later in the hearing, Dr. Eugene Steurele of the Urban Institute used the chart below during his testimony to show that the welfare and tax systems in the U.S. have a “fiendish complexity” of their own.

With the numerous social welfare programs, different eligibility requirements, and varying benefit phase out rates, it’s easy to see how the combination of welfare benefits and tax credits in the U.S. makes it difficult to determine if work really pays, and how it can discourage individuals from working and earning more.  Washington should not provide incentives for people to refrain from working.  Instead, Washington ought to advance commonsense policies that reduce barriers to job creation and get the almost 13 million individuals that are unemployed back to work.