Politicians praise employment, self-reliance, and economic mobility. Meanwhile, overlapping government programs can punish workers for earning more.
This is not compassion. It is bad economics—and it demands enforceable reform.
This article builds on our earlier piece, Does America's Welfare System Punish Hard Work?
The Poverty Trap Government Created
Economists Craig Richardson and Zachary Blizard documented what they call disincentive deserts: extended income ranges where workers can lose nearly all the financial rewards of additional earnings.
Using a benefits simulator for Forsyth County, North Carolina, they identified substantial income ranges where modeled effective marginal tax rates approach the highest rates modeled in their research for certain households. [1] Richardson has also described effective tax rates of more than 80 percent in his writing for the American Institute for Economic Research. [4]
The U.S. Department of Health and Human Services has independently found that households with children just above the poverty line faced a median marginal rate of 51% (for a $2,000 earnings increase, per ASPE's 2019 analysis). [2]
The mechanism is straightforward. As wages rise, taxes increase while food, housing, medical, and other means-tested benefits may decline.
Government can effectively confiscate the financial reward for working harder—not through one tax, but through the combined effects of taxes and lost benefits.
Establish a Statutory Maximum
Congress should consider a legally enforceable ceiling on the combined effective marginal tax rate imposed on low-income workers.
Consider a 50% ceiling, strictly for illustration.
Suppose a worker receives a $5,000 annual raise:
| Current system | Proposed ceiling | |
|---|---|---|
| Additional wages | $5,000 | $5,000 |
| Higher taxes | −$500 | −$500 |
| Lost benefits | −$4,000 | −$2,000 |
| Worker keeps | $500 | $2,500 |
Hypothetical illustration, not an actual household or a prediction of reform costs.
Under the first scenario, the worker keeps just 10 cents of each additional dollar. The combined effective marginal tax rate is 90%.
Under the proposed ceiling, taxes and benefit reductions together could consume no more than half the raise. The worker would retain at least $2,500.
The principle: Government must not make earning more financially pointless.
Congress would have to coordinate benefit phaseouts across programs, prevent abrupt losses, and establish enforceable standards. The precise ceiling requires economic modeling, including its effects on taxpayers and government spending.
Require Work—Not Permanent Dependency
Reform must also address personal responsibility.
Some recipients genuinely cannot work. Others face temporary hardship. But able-bodied adults who can work should not receive indefinite assistance while refusing reasonable opportunities for employment.
Continued benefits should require employment, documented job searches, approved training, or other meaningful steps toward self-support.
Unjustified refusal should bring enforceable consequences, including eventual loss of benefits. Legitimate disability, serious illness, essential caregiving, and lack of available employment warrant appropriate safeguards.
Work requirements alone are not enough. The Congressional Budget Office found that certain welfare work requirements increased employment, while others primarily reduced benefits without comparable earnings gains. [3]
Our standard should be actual employment and economic independence—not simply fewer names on government rolls.
Five Rules for Real Reform
Congress and state legislatures should:
- Eliminate destructive benefit cliffs that leave workers poorer after earning more.
- Limit combined marginal tax rates so additional work produces meaningful financial rewards.
- Enforce work and self-sufficiency requirements for adults capable of employment.
- Publish annual accountability reports measuring work incentives, employment outcomes, and persistent dependency.
- Simplify overlapping programs and end rules that obstruct advancement.
A safety net should protect people facing genuine hardship. It should not become a permanent substitute for personal responsibility or a government-created obstacle to advancement.
If you can work, you should be expected to work. If you earn more, you should keep a meaningful share. And if government creates a poverty trap, government must dismantle it.
Join the Discussion — November 11
Economist Craig J. Richardson of Winston-Salem State University will address benefits cliffs, disincentive deserts, and economic mobility at the Raleigh Economics Club on November 11, 2026, at Cantina 18, 433 Daniels St., Raleigh, NC 27605.
Join us to examine how America can restore the rewards of work.
Register for November 11 — $25 advance →
Event details: raleigheconomics.org
Sources
- Craig Richardson and Zachary Blizard, “Benefits Cliffs, Disincentive Deserts, and Economic Mobility,” Journal of Poverty (2021), https://doi.org/10.1080/10875549.2020.1869665.
- U.S. Department of Health and Human Services, ASPE, Effective Marginal Tax Rates/Benefit Cliffs, 2019 research series, Brief #2, https://aspe.hhs.gov/topics/poverty-economic-mobility/marginal-tax-rate-series.
- Congressional Budget Office, Work Requirements and Work Supports for Recipients of Means-Tested Benefits (June 2022), https://www.cbo.gov/publication/57702.
- Craig Richardson, commentary on benefits cliffs and effective tax rates, American Institute for Economic Research, https://www.aier.org/?p=183527.
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