tv [untitled] June 27, 2012 4:30pm-5:00pm EDT
we need more focus on those real problems, rather than on the small issue that is raised by today's hearing. and i yield back. >> now i turn to the chairman of the ways and means subcommittee. >> thank you, mr. chairman. thank you for your leadership on this issue and it's a real pleasure to have an opportunity to have a joint hearing with our subcommittees today. s making sure government does not stand in the way of americans who want to work to achieve a better life and fulfill their american dream. i know firsthand for the need for a safety net. when i was in high school, my father who emigrated to america
with my mother with nothing lost his job of 25 years, lost his pension, and our family lost our health care. at that time, i was thrown into the free and reduced lunch program in high school. good news is, my dad found a job. he was rewarded and we went on being a family again. today, what is dangerous with our tax code is it appears that people or the tax code is saying to people, americans who are down on their luck, who had a job loss, that they will be penalized if they turn their luck around and are fortunate to find an opportunity of work. comprehensive tax reform is a chance to solve this problem and tax reform, we should ensure that low income americans are not punished through marginal
rates. we should reduce complexity, as well. there's no reason that my father should have to see a tax accountant for his tax returns. our current code is a nuisance, where taxpayers claiming the earned income tax credit, and many times and many places have to use a paid tax preparer, costing them money from their open pockets. i look forward, mr. chairman, to discussing how we can fix this issue to empower americans to live the american dream. i yield back. >> thank you very much. the chair recognizes mr. neil, ranking member of the subcommitt subcommittee. >> thank you, mr. chairman. i want to quote ronald reagan. the earned income tax credit is the best anti-poverty program, the best pro family, the best job creation measure to km out of congress. the earned income tax credit is
a bipartisan idea and it was signed into law by president ford with a democratic congress and expanded by every president since ford, both democrat and republican. here's an opportunity where we might change the rhetoric in congress when we frequently hear that 47% of the american people don't pay taxes. of course they do. they pay the most onerous taxes, payroll taxes. it would be an easy way to stop some with the harsh rhetoric with that simple acknowledgement. president reagan was absolutely right, the earned income tax credit is extremely successful at increasing work and lowering welfare receipt. making our tax rules more fair for low and moderate income families and most importantly reducing poverty. in 2010, the credit lifted about 6. 3 million americans out of poverty. almost 3. 3 million children. without the earned income tax credit, the number of children
living in poverty would have been one quarter higher. there's no provision in our tax code that's perfect. i'm open to working with my republican friends and colleagues to strengthen the credit. i do get antsy for some that imply we should increase taxes on low income families. majority cantor stated, we know that 45% of the people in this country don't pay income taxes at all, and we have to question whether that's fair. again, an opportunity to reshape language. we clearly have different deaf worses of the word "fair." some are calling for increasing taxes on the poor, at the same time calling for lowering taxes on the wealthy. that's hardly fair. republicans say we can't increase taxes on the wealthy because of the negative impact on jobs. but they link increasing taxes
on poor people because they say it will encourage them to work. we've come a long way since those days when president reagan proclaimed that "millions of the working poor will be dropped from the tax rolls all together and the wealthy will pay their fair share. that's ronald reagan's quote. let me highlight that i'm open to working on this legislation. i hope that the one year enhancements we're attempting to offer will make their way toward the end of the year and i hope that members of the subcommittee can find a common path forward on these issues. yield back. >> we'll now turn to our member panel. representative moore and i have worked on legislation affecting affordable housing and domestic abuse.
i would like to remind representative moore to limit her oral statement to five minutes. without objection, all of the written testimony will be made part of the record. >> thank you so much, chairman davis and chairman tavary and ranking members. it's certainly a privilege to be here as an expert witness. i am indeed an expert, as many of you may know, i had my first child at age 18. she's now 42 years old and talks back very regularly. but let me say that times were not always so easy. the very first welfare benefit that i received, sir, was medicaid, because i gave birth to my daughter on medicaid. the subject of this -- and i can tell you that if, in fact, welfare reform would live up to its promises and rhetoric of
making more pay, of helping to lift people out of poverty, to give people a hand up instead of a handout, i can guarantee you that the 4 million people who are now receiving it, would storm the capital and demand welfare reform. but of course, that is more rhetoric than reality. i was able to listen to some of the testimony of our distinguished guests, the honorable duncan smith. i must say that as a britainer, he must appreciate the fact that britain is the country with probably the least social mobility among the oecd states which means that you can predict people's social mobility more by
their father's station, whether they were a duke or earl, what their income was, than you can than with anything welfare would have done. and i say that with all due respect, mr. chairman. and i mean it with all due respect, that the title of this hearing, how welfare and tax benefits can discourage work, is at best a misnomer and at worst, it's nonsequitor. it doesn't talk at all about if structural intent of these welfare programs. i want to quote, since i see my time is expiring, against my will, i would just like to quote from charles dickens.
i think that's appropriate, given our first panel. the theme of david copperfield focuses on orphans, women and the mentally disabled to show that exploitation, not pity or compassion, is the rule of an industrial society. so when we look at the tax benefits, just because our benefits are not high enough to make more pay, i would submit that people don't work just for their self-esteem or dignity. they need to make enough money to be able to pay the rent, put a barbie doll under the christmas tree at christmas. in my case, and i'm happy to share details of that, my daughter had her first asthma
attack at 4 days old. i could not afford to have a job that would have separated me from the medicaid benefits. i once had a job and begged my supervisor not to give me a 50 cent raise less i lose my daycare. i worked 80 miles away and as a person who survived childhood rape, i knew how important it was to have reliable daycare. so if we want to encourage work, things like providing child care and food supplements, encourage work, not just simply take the position that we're going to take the approach and say, well, the thing to do is to snatch food benefits, snatch medicare so that we can literally deliver this poor group of people primarily women to the workforce so they'll be forced to work.
because in fact, they will not have any other choice. and with that, i would be happy to apc your questions, mr. chairman. >> do any members have a question? >> thank you very much for your expert testimony, miss moore. do you think that americans that are out there looking for work are more focused on the issues of child care, job training, job availability than they are on calculating their potential mark natural tax rate if they work a certain number of hours? >> no, sir. i can tell you that they are not. but i would want to stipulate that welfare recipients are not stupid. they have common sense, even though they may not have the ability to figure out marge tall
tax rates. it's just common sense. what i learned as the parent of 4-day-old child is i had to have health care. i think i would have been very successful as a waitress, because i love people, i love engaging them. but i would not have been able to afford, as a 4-day-old parent, go work in a restaurant that didn't provide health care and risk at that time losing medicaid. i couldn't afford to lose medicaid. my daughter is 42 now and still has asthma. and i couldn't afford to lose medicaid. it's a benefit -- if the government wants to help people, i would want to work if in fact i didn't risk losing medicaid. same thing with daycare. my tay care provider told me
that earning $17,000 a year with three kids, that i had in fact hit that marginal tax rate and if i earned anymore -- i'm still poor, and so when the -- so when january came around and the automatic increases in title 20 occurred, then i could take the 50 cent an hour raise. so i want to stipulate to the fact that there are implicit marginal tax rates that people hit. but the conclusion that poor people have been gaming the system or you should just take the benefit away, is fallacious. what it mines is that the cost of daycare in 2012 terms, $1,000 a month.
$1,500 a month. it's so great that it -- work does not pay. women cannot afford to work without governmental assistance. >> the purpose of the hearing, in fact, is in fact to address these questions. you said yourself that you begged not to get a raise -- >> yes, sir. and i want to -- >> i'm reclaiming my time. i would just like to make the point that what we're trying to address are broken processes that we've worked on over the course of this congress to address this very thing. and i think it -- what i'm hearing from your commentary is agreeing with the premise of our hearing to look at best practices and avoid people getting into the situation that you were in as a young mother. with that, i would like to recognize mr. neil --
>> mr. chairman, can i respond to that? that was not your time, i think that was someone else's time. >> actually, that was my time, miss moore. we'll go ahead to mr. neil. >> thank you. i think you hit some very important points. job training, health care, transportation, daycare. the other agreement that we had when -- in '96 that was really very far reaching, and maybe you can speak to it, because you invited the question, but what about the role of child support? we do a good job of trying to enforce child support here. maybe if you can give us a practical assessment of that. >> thank you for asking that, because i'm a huge fan of child support. as a matter of fact, for several years the only bipartisan amendment that's passed out of the subcommittee has been me and
mr. ryan's amendment to try to do 100% pass through of child support to a custodial parent. i'm a huge fan of child support, particularly since all of the other sorts of supports are wanting. so i think child support is very important. i want to respond to something that chairman davis said with my agreement about hitting these marginal tax rates. i come to a different conclusion about it. instead of saying let's take away the work support, i'm saying perhaps you ought to expand it. because right now, for example, if you want a woman who is on welfare to go to work, to get decent daycare, you know, and i
mean very modest daycare for an infant, this would cost $1,000 a month in the midwest, not new york city or washington, d.c. how can a woman earn $1,000 a month and still pay the rent, buy food? she can't. and so if she hits that cliff in terms of eligibility for daycare, at $7.52 an hour, your premise is -- or honorable smith's premise is that she's a lazy person who is lacking in character. so therefore she would quit work. and i am saying she is someone like me who very much wants to continue work but needs more support in order to be able to continue to work. so that's the clarification i would make with regard to our
agreement on that. >> mr. larson is recognized for five minutes. >> thank you, mr. chairman. i appreciate the spirit of which this hearing is being conducted and i especially appreciated the value that my colleague from wisconsin brings. you underscore a point. to look at the magnitude of this situation, it goes beyond anecdotes. and i'm speaking i think with a great deal of knowledge, just in my own staff here at the capital. when we talk about daycare, i
to be out and employed. so it underscores i think what you're saying, representative moore, of the need for us to continue to augment. as the chairman has said, when we get to these cliffs, what is it at that cliff that we have to decide? zigler used to say why is it we don't utilize public schools that are already on bus routes, that are safe, that we can put people there and provide the kind of affordable daycare that is safe, fundamentally sound and would be helpful? take a look around. especially if you're a young mother and in the workforce, pursuing a professional career,
take look around at what kind of daycare there is for you and then consider where you may have the means of the situation so many fellow americans that don't. i hope that underscores some of what you had to say, representative. >> well, thank you for that commentary, commentary, representative larson, because it is. i can tell you what the alternatives are to having $1,000 a month to pay for decent daycare. you know, you can have a loving mother or mother-in-law who will take care of your kids the two days of the week that she's not on dialysis. you can have a next door neighbor take care of your kids, and maybe this will be a good family, and that chester the molester will not be a resident of that household. it's a crapshoot, as you said. you can do as i did for so many years before i found this daycare that finally told me that i was going to hit the cliff, and i sent my kids down to the corner to a babysitter who sat my kids in front of a television with a stick and if
they moved she hit them and beat them. so much so that my daughter who is now 42 refused to take her brothers down there again. you -- you know, or you can just hang a key around your kid's neck and your 8-year-old or 6-year-old kid and tell them to stay in the house, don't open the door, fix a peanut butter and jelly sandwich and hope you're lucky enough that nothing will happen to them while you're gone. those are the options that i know plenty of people who have resorted to those options. that's what happens. it's not that you're sitting there calculating the implicit marginal tax rate. you just are trying to figure out how -- if you have to work, and it's not -- if you don't works, it's not because you have poor character. it's because you cannot figure that out. you're not lucky enough to be able to figure that out. >> yield back. >> i thank the gentleman.
and as one of those kids with the key around his neck from when he was 7 years old, i care very deeply about this issue, and in no way has there been any attempt to prejudice individuals who are caught in these situations. again, though, it is absolutely critical as a nation like great britain is doing, that we address all of the process issues to integrate agencies effectively and be willing to ask the hard questions. and with that, i thank the gent gentle woman for her testimony and would ask for the next panel to come up. thank you very much. >> and just thank you, mr. chairman. and thank all of you for listening to my testimony.
moving on to our third panel, joining us today, several distinguished gentlemen who are going to share their thoughts on the issues of reforms and addressing the issues of taxation and benefits. dr. clifford thies. eugene sterily, the urban institute, dr. bernstein, the center on budget policies and ike brandon, phd, director of congressional relations. i would like to remind all of
our witnesses, the testimony is limited to five minutes. however, without objection, all of your written testimony will be made part of the permanent record. dr. theis, please proceed with your opening statement. >> good morning. i appreciate very much the emotion with which certain people have addressed the loss of health insurance upon passing over certain thresholds and the article i wrote on the dead zone three years ago, i myself got a little emotional at those points. it seemed so unfair, as well as social inefficient to have these cliffs over which people would fall. and there is an opportunity with health reform to address this. we have grown a series of supports to provide an economic safety net. one of these supports, the eitc, has a positive incentive for
working. it stands out in that regard. the impact it had in terms of increasing labor force participation was noticeable upon its enactment the and upon it's ex papgss. it does testify to the importance of these programs, and although it's anecdotal, there are lots and lots of anecdotes. almost everybody knows these anecdotes of people who were making the calculations, about whether working more was worthwhile. and these people maybe sometimes are called gamers of the system. in truth, they are heroic, often. my own mother, she would complain about not having health insurance, and working. she said prisoners get health care when they need it. of i said, mom, if you need you can go rob the bank. now, in europe, they have health insurance, and it's paid for
primarily by payroll taxes and sales taxes. and it's not -- it haven't -- it has a much bigger apparent cost than our system does. our system has a larger real cost in terms of the disincentive effect in terms of keeping people in certain status in society. instead of moving from addressing security, to moving to self actualization in their work. instead of being engaged as a fully human person in terms of working with diligence and with judgment and with a degree of creativity in their work, they are trapped in a different strike thatta. not participating fully with the rest of us in a free society. we should want a seamlesses transition from the place where we have the economic safety net to the place where we -- most of us, at least, in our lifetime,
certainly our children, will be in their lifetime in terms of acting as a free person, self actualizing, associating with other people, on the basis of a free association. now, i was interested in the other calculations of the numbers, the actual implicit tax rate, as somewhat problematic, because of the cliffs that are involved. the eitc phases in and phases out. that's pretty easy calculate, the implicit tax rate. how do you handle something where you have a cliff, where you lose eligibility entirely, or the adults lose health insurance, and then the children are still covered for a while, and then they lose eligibility? so -- there is some art to making those calculations. i wondered whether i should update the calculations i had in my 2009 article for this presentation. but i, like everybody else, am
waiting for the supreme court to speak on the issue of health care reform. and then also we have the problem of the payroll tax going up. of the federal income tax rate for the first bracket going up. and of the child tax care credit going down. so i thought, let me just have the same calculations i had several years ago. the point is pretty clear. when you consider income after taxes, and plus benefits that you receive, that there isn't much incentive for a lot of our fellow americans to work. the take-home net effect may be 50 cents for some, may be as much as 100% for others. we should have a big, robust, positive tangible effect for everybody in our system. this speaks to tax simplification and tax reform, so that all pay their fair
share. the focus today being that the poor not pay more than that fair share on the marginal dollar of productivity. and the payroll tax is a very big tax, and it's paid twice by the worker and by their employer. it is a very large tax. why do we have that tax when we're trying to help people? now, if you look at an alternate measure of income for the purpose of calculating poverty, based not on the official income that we currently base our poverty rate on, but based on income after taxes, plus benefits, at least for the state of minnesota, the urban institute shows that you have about the same poverty rate. we push about as many people into poverty as we pull out. we pull the same people in and out, yo yoing them in the process. >> dr.