Benefits Cliffs across the United States
Some working families experience financial barriers to economic mobility. One significant barrier occurs when career advancement puts a family above the income eligibility threshold for public assistance programs. Due to the loss of these programs, career advancement opportunities can result in the family being financially worse off (a benefits cliff) or no better off (a benefits plateau) than before the wage increase.
This loss of means-tested public assistance is an effective marginal tax rate on income gains. High effective marginal tax rates mean that some workers have a financial disincentive to invest in their own human capital and advance from lower-wage work to jobs that lead to economic self-sufficiency.
The severity of benefits cliffs and plateaus depends on factors such as the worker’s family composition and geographical location. The charts below illustrate the benefits cliffs that a single mother with two children would face in different cities.
Use the drop-down menu above the charts to select a location. Click on a benefits program in the second chart to remove it from the net resources calculation.
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For more information on The Fiscal Analyzer, see kotlikoff.net/wp-content/uploads/2019/03/Online-appendix-6-5-19-.pdf