The Benefits Cliff in Forsyth County
Learn and Take Action:
Opportunities for Action
There are lots of ways to improve policy to address the benefits cliff and support people and families’ economic stability. This section includes examples of policies at the local, state, and national levels, along with links where you can learn more and connect with organizations advocating for policy change.
Improve Child Care Subsidies
The child care subsidy program creates one of the biggest benefits cliffs because the high cost of child care often far exceeds the increase in income which can make families suddenly ineligible. The eligibility limits are set by the federal government.
Create local “bridge” programs
Counties can use local funds to create a “bridge” program for families who reach the income limit. (In North Carolina, it’s important to note that the county needs to have administrative capacity, either through the Department of Social Services or a separate organization, to run the program and track county funds separately from federal funds.)
For example, Mecklenburg County is using county funds for the Expanded Eligibility for Working Families Subsidy Program, a two-year pilot project to provide child care subsidies to families with incomes up to 300% of the federal poverty level. A family that is enrolled in the subsidy program and hits the benefit cliff can now be covered under the Expanded Eligibility Program until their income reaches 300% of the federal poverty level.
Learn more: Mecklenburg County Government — County to Expand Child Care Assistance for Working Families
Change federal eligibility limits
Federal policy changes have the greatest power to directly address the childcare subsidy benefit cliff by raising the income limit and adjusting the amount that families pay at different income levels. The child care proposal in the federal Build Back Better Act, passed by the U.S. House of Representatives in November 2021, would have expanded the subsidy program to reach the vast majority of families with young children. Parent copays in the proposal are based on a percent of family income that’s adjusted as incomes rise so that families with the lowest incomes would pay nothing for childcare, while families with higher incomes would pay 7% of their income.
The Murray-Kaine Child Care & Early Education Proposal, introduced in 2022, would expand funding for the existing child care subsidy program while also piloting a program for states to offer child care benefits to families with higher incomes.
Get involved: MomsRising and Child Care Aware advocate for federal policy changes to improve the child care subsidy program, including addressing the benefits cliff. (MomsRising also has a North Carolina Chapter that advocates for state policy change.)
Expand Working Family Tax Credits
Two key federal tax credits, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), provide income boosts to families with low and moderate incomes and can help offset a loss in benefits and/or an increase in taxes that people owe when they start to earn more. The federal EITC is available to working families with low and moderate incomes, with a very small credit available for working adults with very low incomes and no children. It is fully refundable, meaning that if the credit amount is higher than the taxes a recipient owes, they will receive a payment for the difference. The federal CTC is available to most families with children and is partially refundable. Many states also have their own EITCs and CTCs which complement and strengthen federal policy.
Reinstate a state EITC and CTC
North Carolina used to have a state EITC and CTC but eliminated them beginning in 2014. Most recently, in 2021 state legislators proposed bill to reinstate a state EITC worth 5% of the federal credit, and to reinstate and expand a state CTC, including by making it fully refundable.
Get involved: The NC Budget & Tax Center advocates for a state-level EITC & CTC.
Make temporary changes to the federal CTC permanent
A temporary 2021 expansion of the CTC put into place through the American Rescue Plan increased the credit amount, made it fully refundable, and implemented monthly (rather than one-time annual) payments for half the credit amount. Monthly payments are a key way to make tax credits more effective at stabilizing family income, since annual payments may not be well-timed to meet a family’s expenses. Making the CTC fully refundable is also an important way to address racial equity. The CTC expansion led to a historic — although temporary — decrease in child poverty while in effect, and making it permanent would have major effects on improving family and children’s wellbeing.
Get Involved: Children’s Defense Fund — Expanded CTC Advocacy HUB
Eliminate or Increase Asset Limits
Some benefit programs have asset limits (also called resource limits) in addition to income limits, meaning that people cannot receive benefits if they have savings or other assets above a certain amount. Asset limits penalize savings that provide people with a financial cushion for emergencies and could help cover costs created by losing access to benefits from an increase in income. Federal rules give states flexibility in deciding whether to use asset limits. Like most states, North Carolina has eliminated asset limits for SNAP (which is referred to in North Carolina as Food and Nutrition Services or FNS) benefits under a program called Broad-Based Categorical Eligibility, but the state has an opportunity to reduce further or eliminate asset tests for other programs.
Eliminate asset limits in state TANF and LIHEAP programs
North Carolina currently has an asset limit of $3,000 in its Temporary Assistance for Needy Families (TANF), which the state calls Work First. Eight states have eliminated TANF asset test, including Virginia, Alabama, and Louisiana. Forty-three states and Washington, DC have eliminated the asset limit for LIHEAP. North Carolina has paused the asset test for the LIHEAP program during the COVID-19 pandemic and could permanently eliminate it.
Eliminate asset limits at the federal level
The federal Allowing Steady Savings by Eliminating Tests (ASSET) Act, would eliminate all asset or resource tests in the SNAP, TANF, and LIHEAP programs. It would also expand the asset limit for Social Security Income (SSI) from $2,000 to $10,000.
Learn more: Prosperity Now Scorecard — Financial Assets and Income; CLASP — Eliminating Asset Limits: Creating Savings for Families and State Governments; Urban Institute: Asset Limits, SNAP Participation, and Financial Stability
Expand Medicaid
North Carolina is one of just 11 states that has not expanded Medicaid benefits under the provisions in the federal Affordable Care Act (ACA). Adopting Medicaid Expansion would mean that nearly all adults with incomes under 138% of the federal poverty level would qualify for coverage and would reduce the harm of the current Medicaid benefit cliff. Currently, over 200,000 uninsured adults currently fall into a “coverage gap,” with incomes too high to qualify for Medicaid but too low to be eligible for coverage through the ACA marketplace.
Learn more: Kaiser Family Foundation – The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid
Get Involved: Many organizations are involved in advocating for Medicaid expansion in North Carolina, including the Health Advocacy Project at the NC Justice Center and NC Child.
Additional Resources
Learn more about how states are studying and acting on the benefits cliff from the National Conference of State Legislatures.