Entitlement Program Research Paper: Negative Income Tax

Entitlement program
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Entitlement programs
Entitlement programs have played a significant role in alleviating poverty and raising living standards of low-income families. Entitlement program is a government initiative that guarantees members of a specific group access to some benefits. The specific group of people who benefit from the program are determined by legislation or based on established rights. Furthermore, entitlement programs are divided into non-contributory and contributory programs. Non-contributory program is one where benefit is given without regard to any prepayment, while contributory program is one in which recipient must pay something to receive benefit of the program. Non-contributory programs in U.S include welfare programs and Medicaid programs that target low-income earners in America. On the other hand, contributory programs include Social Security, Medicare, and unemployment insurance. This paper will focus on non-contributory programs, especially welfare programs. The paper will analyze the efficiency and social justice basis for public finance on the welfare programs, conduct a comparison between the welfare programs of U.S. with that of other countries, and highlight the pros and cons in terms of meeting social objectives (U.S. Welfare programs, 2015).
The U.S Welfare programs that provide benefits to low-income people and families fit into thirteen large categories. The programs include negative income tax, SNAP, housing assistance, SSI, Pell grants, TANF, child nutrition, head start, job training programs, WIC, childcare, LIHEAP, and lifeline (U.S. Welfare programs, 2015).
Negative income tax
This is a tax credit programs governed by the Internal Revenue Service (IRS) to distribute money to low income Americans. The tax programs include Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). The tax credits include a refundable portion, which is paid to individuals and families that owe no income tax for that year. Hence, this portion of the tax credits acts as a negative income tax and acts as a welfare program to assist low-income working families with children. EITC that is offered to individual or family is based on a complex calculation that includes the family size and the sum of qualifying earned income. Furthermore, some individuals or families who have earned income do not pay income tax because their earnings are less than allowable deductions. In 2015, annual EITC payments were limited according to family size. Individuals without children received $503, while families with one child received $3,359, families with two children received $5,548, and families with three or more children received $ 6,242. Families with annual earnings between $10,000 and $20,000 get the maximum payments, depending on the number of children. The program phases out to families with earnings of $39,131 to $52,267 per year. However, for individuals or families to qualify for EITC program they must have less than $3,400 in investment income (Oden & De Lopez, 2011).
On the other hand, CTC sums up to $1,000 per qualifying child under 17 years old. The credit phases out for married couples with adjusted gross income of $110,000 and single ...