After Trump Tax Cuts, You Almost Can’t Be Poor in America if You Work Full Time: Analysis

After Trump Tax Cuts, You Almost Can’t Be Poor in America if You Work Full Time: Analysis
Construction workers in Los Angeles on Nov. 12, 2016. (David McNew/Getty Images)
Petr Svab

If you work a full-time job in America, there’s now almost no way for you to fall under the poverty line, according to an analysis by libertarian scholar Peter Ferrara. And a sometimes overlooked provision in the President Donald Trump’s tax cuts bill has much to do with it.

Almost 13 percent of Americans lived in poverty in 2016—about the same portion as 50 years ago, according to the official federal statistics (pdf).
But, Ferrara points out, the poor of today differ greatly from those of the 1960s (pdf).

In 1960, about two out of three poor households were led by working adults. By 1991, only one third worked, though many returned to work after the 1996 welfare reform, which required the poor people collecting cash benefits to find work or job training within 2 years.

In fact, getting a full-time job is the surest way to escape poverty, at least as defined by the government.

The federal poverty threshold income for a single person is $12,140 in 2018. Working full-time a minimum-wage job pays $15,080 a year. Moreover, 29 states have instituted their own, higher minimum wages.

Even for single parents with multiple children, the situation has significantly improved starting this year with the doubling of the child tax credit (from $1,000 to $2,000) under the Trump’s tax cuts bill, allowing for up to $1,400 in refunds per child.

A single mother with three children would be considered poor with an income under $25,100. Working a minimum-wage job wouldn’t cut it, but the Census Bureau doesn’t count much of the government assistance to the poor as income, prominently, the income tax credit and child tax credits. Counting those in, the working single mom collects almost $26,000 a year. The mother would have to have at least four children to sink into poverty in this scenario.

In addition, the seemingly unabating poverty levels mask dramatic differences between the lives of today’s poor and those of yore. Almost all poor households have basic amenities like electricity, running water, indoor plumbing, a stove, and a refrigerator. Most also have air conditioning, a cell phone, a TV, a DVD player, and a microwave. The majority also have a computer or a gaming console, a stereo, and a cable or satellite subscription. Two out of three own a car and more than a third have a wide-screen TV.

“Of course, poor Americans do not live in the lap of luxury. The poor clearly struggle to make ends meet, but they are generally struggling to pay for cable TV, air conditioning, and a car, as well as food for the table,” noted a 2014 report by the conservative Heritage Foundation.

Aside from joblessness, the second most prominent cause of poverty is having children out of wedlock, Ferrara states.

Over 44 percent of households led by a single mother fall below the poverty line, as counted by the Census Bureau. Less than 8 percent of married couples with children are poor. Even among black families, often singled out as downtrodden, the poverty rate is about 11 percent for married couples with children.

A couple with five children, if they both work at least minimum-wage jobs and collect their tax credits, reach an income upwards of $42,000—safely above the $38,060 poverty threshold.

Moreover, a single-parent family correlates with a slew of handicaps for the children.

“Out-of-wedlock births and single-parent families ... have very negative effects on children in general, a fact documented by a wealth of data, research and studies,” Ferrara says in the April 18 study done for the Goodman Institute. “The effects include lower educational achievement, failing school and being required to repeat grades, higher dropout rates, lower IQ, increased drug abuse, mental illness, suicide, teenage crime, sex and pregnancy.”

As the economy continues to break records, many Americans now see their chance to get a good job and escape the threat of poverty.
Indeed, in March, employers offered the most job openings ever recorded—6.55 million. That means there were almost as many job openings as the number of people unemployed (though the unemployment figures don’t capture the whole picture of joblessness).
More than two in three Americans believe it’s now a good time “to find a quality job”—the most positive response since Gallup started to ask the question in its polls 17 years ago.

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