A U.S. Senate committee took a hard look this month at a long-standing federal policy quirk that effectively taxes poor families for getting a raise: so-called benefit cliffs. These cliffs, which occur when a modest increase in earnings triggers a disproportionate loss of government assistance, are not just a drag on upward mobility—they also complicate hiring and retention for small businesses struggling to find workers.
The June 3 hearing before the Senate Small Business and Entrepreneurship Committee zeroed in on how the current safety-net system creates perverse incentives. According to national data, 22 percent of low-wage workers on government aid have responded by refusing extra hours, turning down raises, or skipping promotions for fear of losing benefits worth more than the new income. Senator Jon Husted (R-Ohio) illustrated the problem with a stark example: in Dayton, a single parent of two earning $33,000 a year could lose more than $4,600 in benefits by accepting a $1,000 raise.
That kind of math hits home for organizations like Goodwill Kentucky. Amy Luttrell, the group’s president and CEO, says many families they serve are already juggling work, childcare, and unstable housing. “Even a small increase in income can jeopardize the very programs that are helping them achieve stability, setting them back months on the path to self-sufficiency,” she explained. The fear of the cliff, she added, often forces people to pass up better-paying jobs or more hours.
Bella Johnson, a team lead at Goodwill, knows the trap firsthand. “It gets to a point where you are juggling food or getting to work,” she said. “I didn’t get into a better financial state until I got promoted again.”
Some states aren’t waiting for Washington. Utah launched a pilot program in 2025 that uses financial coaching and mentoring to help families navigate the cliff. This year, Governor Spencer Cox signed a resolution calling on Congress for more state flexibility. Kentucky’s House passed a similar resolution, and efforts are underway in Delaware, Georgia, and New England states. The message from state capitals is clear: we want to fix this, but federal rules won’t let us.
Enter the Upward Mobility Act, a bill that would create a pilot program allowing five states to consolidate funding from up to 10 anti-poverty programs. The goal: test new, work-based approaches to temporary assistance that actually encourage earnings growth. The legislation includes guardrails that distinguish it from past block-grant experiments. It requires federal oversight from the Administration for Children and Families, detailed state plans, independent third-party evaluation, and outcome metrics to track whether pilots reduce benefit cliffs and boost earnings. Funding would remain consistent, tied to prior-year levels and indexed to inflation.
“Far from being an open-ended block grant,” the bill’s sponsors argue, the Upward Mobility Act is a structured accountability framework that leverages state innovation with clear guardrails. It’s a response to concerns raised during the hearing that past block-grant efforts lacked oversight.
For advocates, the stakes are high. America’s social safety-net was well-intentioned, but it’s in dire need of reform to clear a path for hardworking families and employers who value work and independence. States are already moving, but Congress remains the bottleneck. The Upward Mobility Act offers a way to unstick the system—and give states the power to test what actually works.
