Final answer:
The question addresses income shifting, especially in the context of family policies such as the UK's 1970s child allowances alteration and the earned income tax credit strategy to avoid the poverty trap. These policies are strategic financial approaches aimed at empowering families and enhancing their economic stability.
Step-by-step explanation:
The question pertains to the concept of income shifting, which in this context refers to the assignment of income to different members within a family to achieve certain financial advantages. One such example is the mid-1970s policy change in the United Kingdom regarding child allowances, where funds were provided directly to the mother instead of being represented as a tax reduction for the father. This change posed the question of whether who controls household income makes a difference in financial behavior or outcomes.
Additionally, the discussion on earned income tax credit reflects on ways to mitigate the poverty trap, by phasing out benefits slowly to reduce the disincentive for increasing employment income. The example provided for the tax year 2013 shows that after a certain income threshold, tax credit is withdrawn gradually, in contrast to a one-for-one reduction which can disincentivize earning more.Overall, such policies, like the changed child allowance distribution and earned income tax credit adjustments, are designed to empower households economically, allowing potentially for saving money, working less, and even retiring earlier.