More About Arloc Sherman

Arloc Sherman

Sherman is a Senior Researcher focusing on family income trends, income support policies, and the causes and consequences of poverty.

Full bio and recent public appearances | Research archive at CBPP.org


Understanding Marginal Tax Rates and Government Benefits

July 22, 2014 at 12:58 pm

Some Washington policymakers are increasingly focused on whether government benefits for low- and moderate-income people create disincentives to work — in particular, when these benefits phase down as the earnings of beneficiaries rise, our new commentary notes.  That phase-down rate is often called the “marginal tax rate” because it resembles a tax — benefits fall as earnings rise.  As we explain:

[P]olicymakers across the ideological spectrum share concerns about marginal tax rates and agree that, all else being equal, lower marginal tax rates are preferable to higher ones.  Unfortunately, all else is not equal, and lowering marginal tax rates entails significant and very challenging policy trade-offs. . . .

[M]arginal tax rates are the product not of bad policy design but rather of competing policy goals:  providing needed assistance to financially struggling individuals and families and limiting costs by not providing help to those with more adequate income.  Any serious discussion of the marginal tax rate issue must grapple with the fundamental tension between limiting assistance, controlling costs, and reducing marginal tax rates.

No such serious discussion is likely to result, however, from exaggeration of the marginal tax rates that most low-income families face, overstatement of the impact those marginal rates have on actual work behavior by low-income households, or glossing over the tough policy trade-offs that policymakers must face when seeking to reduce marginal rates.

Click here for the full commentary.

House Cuts in Census Funding Would Carry a Heavy Cost

June 3, 2014 at 12:01 pm

The House voted shortsightedly to cut $238 million from the Census Bureau’s budget for fiscal year 2015 relative to the President’s request.  Although the House funding level is $28.5 million more than last year’s Census budget, it’s far from enough to cover the cost of preparing for the 2020 census and the closely related annual American Community Survey (ACS).  The Senate, which will prepare its own bill this week, should give Census the needed funding to provide high-quality data on which policymakers and private businesses can depend.

In a barrage of amendments to the Commerce-Justice-Science funding bill, House members shifted funding last week from Census to pay for projects ranging from policing to weather research.  The cuts threaten the accuracy of the 2020 census, which will help determine the apportionment of congressional seats and drive redistricting decisions.

They also threaten the accuracy of the ACS, the nation’s main source of state and local data on affordable housing, household income, poverty, race, state-to-state migration, immigration, types of disabilities of local residents, and scores of other major topics.  The federal government uses ACS data to distribute more than $400 billion in federal formula funds each year, and the information helps communities and businesses decide where to build new roads, bridges, schools, homes, and stores.

The bill could prove costly to taxpayers in the long run by delaying adoption of innovative cost-saving steps such as online data collection, which could save $5 billion or more over ten years, according to the Census Bureau.

It could prove shortsighted in other ways as well, such as by weakening the quality of the information that helps inform policymaking.  For example, the Justice Department’s Community Oriented Policing Services (COPS) program — the biggest beneficiary of the House funding shuffle — requires law enforcement agencies applying for grants to submit data from the ACS.  Presumably that’s because policymakers believe that ACS data keep the program well targeted, but they can’t do that job as effectively if underfunding weakens the survey’s quality.

Further, a proposal by Representative Ted Poe (R-TX) that the House adopted takes another swipe at the ACS by making responding to the ACS “voluntary” for households.  A similar move by Canada in 2011 proved disastrous:  response rates plummeted from 94 percent to 68 percent, severely damaging data quality while raising costs, according to The Census Project.  Decades of experience show that a mandatory survey — regardless of whether it’s enforced with stiff penalties (which the requirement to fill out Census forms is not) — has far higher response rates and thus yields far more accurate data at lower cost. 

The House cuts come at a time when other areas of the Census budget are already tight.  Census is redesigning its Survey of Income and Program Participation (SIPP) to save money and reduce respondents’ burdens, for example, but that redesign effort is running into problems and the savings probably won’t appear as soon as earlier predicted.  Compromising the quality of Census data through severe underfunding would be penny-wise and pound-foolish.

Improving the Odds for America’s Children

April 21, 2014 at 12:18 pm

The safety net has been more effective than critics suggest, the Center’s Robert Greenstein, Sharon Parrott, and I explain in a chapter for Improving the Odds for America’s Children, which Harvard Education Press has just published.

For our chapter, we reviewed the last 40 years of anti-poverty policies for children and offered ideas for future decades.

Here’s some of what we found, and some of what we proposed:

Household incomes have risen since 1973 for the poorest fifth of children if you include the value of non-cash benefits, as most experts favor (the official poverty figures omit them).  If you eliminated the safety net today, another 9 million children would fall into poverty.

Also, studies show that income from safety-net programs like the Earned Income Tax Credit (ETIC) and SNAP (formerly food stamps) has a powerful effect on children’s long-term success, in school and beyond.

Yet poverty and hardship continue to stunt many children’s futures.  To help families obtain incomes that are adequate to raise successful children, we recommend steps in three core areas:

  • Jobs:  Creating a funding stream similar to the successful TANF Emergency Fund — through which states placed more than 260,000 low-income adults and youth in paid jobs during the Great Recession — but one that was permanent and expanded in an economic downturn.
  • Income support:  For example, expanding housing vouchers (and making it easier for people with vouchers to move to neighborhoods with more jobs and better schools), while preserving recent improvements in the Child Tax Credit and EITC.
  • Support for work and higher earnings:  For example, raising the minimum wage and providing more funding for job training and child care assistance.

Other chapters provide analysis and policy ideas from noted experts such as Greg Duncan and Richard Murnane (on inequality), Sara Rosenbaum (health care), Deborah Jewell-Sherman (education), Jane Waldfogel and Michael Wald (child protection and family support), Joan Lombardi (child care), and others.

Ryan Report Largely Ignores Anti-Poverty Programs’ Long-Term Successes

March 28, 2014 at 12:46 pm

House Budget Committee Chair Paul Ryan’s recent poverty report largely ignores evidence that anti-poverty programs can open doors of opportunity and yield lasting benefits for participants and society as a whole — even when this evidence comes from the same researchers whom the report cites for other purposes.

Here are a few examples:

SNAP (formerly food stamps).  Disadvantaged children born in counties with access to food stamps grew up to be healthier than children in counties without it, according to a major study.  They also were 18 percentage points more likely to finish high school, and girls from these counties rated higher on an index of adult “self-sufficiency” outcomes such as education, income, and staying off welfare.  The Ryan report ignores this evidence, while citing a different study by two of the same researchers on the program’s short-term work disincentives in its early years.

Working family tax credits.  Additional income from the Earned Income Tax Credit (EITC) and Child Tax Credit leads to significant increases in students’ test scores, a study found.  The authors also noted that such test-score gains tend to lead to sizeable improvements in students’ earnings as adults.  While the Ryan poverty report praises the EITC’s work incentives — and cites another study by one of the same researchers on the link between marriage and economic mobility — it ignores this and other research on the EITC’s long-term gains for children.

Head Start.  The Ryan report says that Head Start is “failing to prepare children for school,” citing the lack of measurable differences between Head Start students and a control group during elementary school.  But this conclusion ignores evidence of the program’s long-term benefits.

One study found that former Head Start attendees score higher than their siblings on a “composite index” of long-term outcomes in areas such as education, employment, and health status.  Another  study compared low-income counties that offered varying amounts of Head Start in 1965 (because some counties received more federal help launching the program) and found higher high school graduation and college enrollment and better health outcomes in the Head Start counties decades later for people of the right age to have participated in the program.

Importantly, such long-term gains don’t depend on sustained test-score gains, according to several studies of Head Start and similar interventions.  For example, a review of three leading preschool pilot programs notes that although participants’ test-score gains diminished over time, these participants were much likelier to finish high school and enter college than other students.  The Ryan report cites this study but only to show that the programs benefited girls more than boys.

To be sure, some Head Start programs need improving.  But these studies suggest that recent efforts by the Obama Administration and Congress to strengthen quality and accountability are a better way to go than simply abandoning the Head Start model.

The Ryan report grimly concludes that federal programs are “failing to address” poverty.  Poverty certainly remains too high.  But the report seems determined not to recognize the long-term successes of existing programs even when the evidence is in plain sight.

Emergency Jobless Benefits Cut-Off Has Hit Nearly 200,000 Veterans and Counting

February 28, 2014 at 12:53 pm

Close to 200,000 veterans are among the 2 million unemployed workers who’ve lost access to federal jobless benefits since Congress allowed Emergency Unemployment Compensation (EUC) to expire at the end of last year, CBPP estimates.

EUC provided additional weeks of unemployment benefits to people who were unable to find a new job before exhausting their regular state benefits, which run for up to 26 weeks in most states.  About 1.3 million workers were cut off from EUC when the program expired on December 28, the Labor Department estimates, and another 1.9 million (over 70,000 a week) will exhaust their regular state benefits in the first six months of this year.

We estimate that about 1 in 10 of EUC recipients were veterans (based on the Census Bureau’s March Current Population Survey, which shows that over the last three years, 9.7 percent of unemployment insurance recipients who were looking for work for between 27 and 73 weeks were veterans).  That means about 130,000 veterans were cut off when the program expired December 28 and roughly 7,000 more each week are exhausting their regular benefits and not receiving EUC.  That’s a total of nearly 200,000 veterans by March 1.

Congress should act quickly to reauthorize EUC retroactively.  That would restore benefits to those 200,000 and keep the total number of vets — and other long-term unemployed workers — denied emergency jobless benefits from continuing to grow.