Introduction

After falling sharply in the late 1990s, poverty has risen in this decade. Although the upward trend has been modest, the trajectory is all wrong -- especially considering that the U.S. economy has grown steadily since the "dot com" bust of 2001. What makes this decade different from the previous one? One answer is the absence of creative public policy.

For all his talk of "compassionate conservatism," President Bush's efforts to empower America's poor have been marginal at best. Over the past seven years, he has done little to build on his predecessor's most important social legacy -- the decision to "end welfare as we know it" and make work the organizing principle of U.S. social policy.

The Democratic presidential candidates, however, seem determined to put poverty and social mobility back on the nation's agenda. This welcome development gives progressives a chance to pick up where President Clinton left off. But where reformers in the 1990s focused on moving welfare recipients -- mostly single mothers with children -- to work, we must now add a new emphasis on the plight of poor men.

Cutting poverty among low-income men must begin by drawing them back into the labor market. If policy makers want to affirm the necessity and dignity of work, however, they cannot ignore the reality that many entry-level jobs do not pay enough to help families obtain what most Americans would consider a minimally decent living standard. Public policy, therefore, must remedy the defects of markets by subsidizing low-wage work.

The key policy tool for making work pay is the Earned Income Tax Credit (EITC), a refundable tax credit that supplements the wages of workers in minimum wage and low-paying jobs. Only people who work receive the EITC. As their earnings increase, their EITC benefits increase up to a maximum benefit level that is linked to family size.

Currently, the maximum federal EITC benefit is $4,536 for families with two or more children and $2,747 for families with a single child. Low-income workers who are not raising children get far less -- an annual maximum benefit of only $412. Fathers who do not have custody of their children fall into this category, because in order for a parent to receive the credit, his children must live with him for more than half a year.

In short, the EITC's work incentive is much less powerful for low-income fathers than for mothers. Moreover, the credit imposes an unintentional but substantial penalty on marriage because a woman stands to lose thousands of dollars in tax benefits if she marries a man with earned income. These flaws must be corrected if the EITC is to reach its full potential for rewarding work and reducing poverty in America.

The Progressive Policy Institute debuted in 1989 by calling for a dramatic expansion of the EITC. Today the credit has become a key pillar of America's post-welfare social policy, which PPI believes should be guided by a simple, morally compelling proposition: No American family with a full-time worker should live in poverty. By making low-income men eligible for a more generous work credit and eliminating the EITC marriage penalty, we can move America closer to that progressive goal. To underscore the vital link between opportunity and responsibility, we must also insist that, to qualify for the more generous credit, men work full-time and pay their child support.

There is no shortage of proposals to expand the EITC. This paper, however, offers a novel twist: combine EITC expansion with tax simplification. Building on a previous PPI idea, we propose to fold three similar provisions -- an EITC expanded and targeted at men, the Child Credit, and the Child and Dependent Care Credit -- into a single, unified Family Tax Credit (FTC). Qualifying families would receive $1 in a refundable credit for every $2 earned, with a maximum credit of $3,500 for a family with one child, $5,200 for two children, and $7,000 for three children.