The Center's work on 'Poverty and Income' Issues

The Center analyzes major economic developments affecting low- and moderate-income Americans, including trends in poverty, income inequality, and the working poor. In addition, we analyze the asset rules in various public benefit programs that can discourage low-income people from building modest savings and highlight potential reforms.


Support for Home Visiting Programs Slated to Expire

February 13, 2015 at 10:44 am

A federal-state partnership that supports home visiting programs in every state will expire March 31 unless Congress extends it, jeopardizing programs with a proven record of strengthening high-risk families and saving money over the long term.

The Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program funds programs through which trained professionals — often nurses, social workers, or specialists in early childhood development— help parents acquire the skills to promote their children’s development.

More specifically, MIECHV works to improve maternal and newborn health, prevent child injuries and abuse, help children succeed in school, reduce crime and domestic violence, and make families more economically self-sufficient.  Research shows that it helps keep children out of the social welfare, mental health, and juvenile corrections systems, with considerable cost savings for states.

A new report and 22 state and tribal profiles from the Center for American Progress and Center for Law and Social Policy explain how states and tribes use MIECHV funds to improve and expand home visiting programs to serve more vulnerable families.

For example, MIECHV funds help these programs create or expand data collection systems that enable them to evaluate and report on outcomes for children and families.  (Most MIECHV funds go to rigorously evaluated programs for which there’s well-documented evidence of success.)  MIECHV funds also support training, technical assistance, and professional development for home visiting workers.

Many families have benefited from MIECHV-funded services.  Continued federal support would help states build on that success by reaching more vulnerable families.  Congress should reauthorize the program at current funding levels.

Plan Would Cut Child Poverty by 60 Percent

January 29, 2015 at 11:51 am

America could reduce child poverty by 60 percent by investing another 2 percent of the federal budget each year in programs that boost employment and low wages and help meet children’s basic needs, a new Children’s Defense Fund (CDF) report shows.  By lifting 6.6 million children out of poverty, these steps would generate long-term benefits for those children and the nation as a whole.

CDF commissioned the Urban Institute to analyze how a package of policy proposals would affect child poverty.  The findings include:

  • Investing more in housing assistance for poor families with children so 2.6 million more families could afford safe, stable housing would reduce child poverty by 21 percent.
  • Raising SNAP benefits by 30 percent to cover a larger share of children’s nutritional needs would reduce child poverty by 16 percent.
  • Making the Child Tax Credit fully refundable would reduce child poverty by 12 percent.
  • Expanding subsidized minimum-wage jobs programs for older teens and adults would reduce child poverty by 11 percent.
  • Moderately raising the federal Earned Income Tax Credit (EITC) would reduce child poverty by 9 percent.  (Expanding state and local EITCs would also reduce child poverty.)

At an annual cost of $77 billion, these and the report’s other recommendations would directly benefit 43.3 million children — that is, most U.S. children — while lifting 6.6 million of them out of poverty, the Urban Institute found.

Reducing child poverty has widespread benefits, the report explains.  Children who grow up poor are less likely to graduate from high school and more likely in adulthood to be poor, suffer from poor health, and become involved in the criminal justice system; they also are less productive workers.  Such problems cost the nation half a trillion dollars a year.

State and Local Tax Systems Hit Lower-Income Families the Hardest

January 15, 2015 at 9:59 am

In nearly every state, low- and middle-income families pay a bigger share of their income in state and local taxes than wealthy families, a new report from the Institute on Taxation and Economic Policy (ITEP) finds.  As the New York Times’ Patricia Cohen wrote, “When it comes to the taxes closest to home, the less you earn, the harder you’re hit.”

Only California taxes the top 1 percent of households at a higher effective rate (8.7 percent) than middle-income taxpayers (8.2 percent), ITEP found.  In the ten states with the most regressive tax systems, the bottom 20 percent pay up to seven times as much of their income in taxes as their wealthy neighbors.

Washington State’s tax system is the most regressive, according to ITEP.  The bottom 20 percent of taxpayers pay 16.8 percent of their income in taxes, while the top 1 percent pay just 2.4 percent.  After Washington, the most regressive state and local tax systems are in Florida, Texas, South Dakota, Illinois, Pennsylvania, Tennessee, Ari­zona, Kansas, and Indiana.

A number of states, including Kansas, North Carolina, and Ohio, have made the situation worse in recent years by cutting income taxes, the only major state revenue source typically based on ability to pay.  Income tax cuts thus tend to push more of the cost of paying for schools and other public services to the middle class and poor — exactly the opposite of what is needed.

Our Big-Picture Look at Inequality

December 10, 2014 at 11:58 am

“The broad facts of income inequality over the past six decades are easily summarized,” our newly updated Guide to Statistics on Historical Trends in Income Inequality explains:

  • The years from the end of World War II into the 1970s were ones of substantial economic growth and broadly shared prosperity.
    • Incomes grew rapidly and at roughly the same rate up and down the income ladder, roughly doubling in inflation-adjusted terms between the late 1940s and early 1970s.
    • The income gap between those high up the income ladder and those on the middle and lower rungs — while substantial — did not change much during this period.
  • Beginning in the 1970s, economic growth slowed and the income gap widened.
    • Income growth for households in the middle and lower parts of the distribution slowed sharply, while incomes at the top continued to grow strongly. (See first graph below.)
    • The concentration of income at the very top of the distribution rose to levels last seen more than 80 years ago, during the “Roaring Twenties.” (See second graph below.)
  • Wealth — the value of a household’s property and financial assets, minus the value of its debts — is much more highly concentrated than income. The best survey data show that the top 3 percent of the distribution hold over half of all wealth.  Other research suggests that most of that is held by an even smaller percentage at the very top, whose share has been rising over the last three decades.

The guide describes common sources of income data and discusses their relative strengths and limitations in understanding income and inequality trends.  It also highlights the trends that those key data sources show and gives additional information on wealth (which helps measure how the richest Americans are doing) and poverty (which measures how the poorest Americans are doing).

Letting Tax-Credit Provisions Expire Would Push Millions Into Poverty

November 12, 2014 at 1:55 pm

As Republicans and Democrats look for areas where they can work together, they should be able to agree to make permanent three key provisions of two pro-work tax credits:  the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC).  More than 16 million people in low- and modest-income working families, including 8 million children, would fall into — or deeper into — poverty in 2018 if these three provisions expire as they are currently scheduled to do after 2017, our new paper (with state-by-state data) shows.  Some 50 million Americans, including 31 million children, would lose part or all of their credits.

The EITC and CTC encourage and reward work, and there is growing evidence that income from these credits leads to improved school performance, higher college enrollment, and increased work effort and earnings in adulthood.

Both credits have enjoyed bipartisan support, and their underlying provisions are permanent parts of the tax code.  But several key features of the credits will expire at the end of 2017 unless lawmakers act.

The stakes are high for millions of workers in low-wage jobs, from custodians to health care workers.  If these provisions expire:

  • Not one penny of earnings of a full-time, minimum-wage worker would count toward the CTC. For example, a single mother working full time at the minimum wage and earning $14,500 would thus lose her entire $1,725 CTC.  That’s because the earnings needed to qualify for even a tiny CTC would jump from $3,000 to $14,700.  The earnings needed to qualify for the full CTC (of $1,000 per child) would jump from $16,330 to more than $28,000 for a married couple with two children, so many low-income working families that would still qualify for the CTC would see their credit cut dramatically.
  • Many married couples would face higher tax-related marriage penalties due to a cut in their EITC. To reduce marriage penalties, the income level at which the EITC begins to phase out is now set $5,000 higher for married couples than for single filers.  After 2017, it would be set $3,000 higher, which would shrink the EITC for many low-income married filers and increase the marriage penalty for many two-earner families.
  • Larger families would face a cut in their EITC. After 2017, the maximum EITC for families with more than two children would fall more than $700 to match the maximum for families with two children.

Some 65 percent of the families that would lose part or all of their credits include at least one full-time, year-round worker.  About 450,000 veteran and armed forces families with children would lose all or part of their CTC in 2018; a similar number would lose all or part of their EITC.  Also, 15 percent of the families that would lose all or part of their credits include at least one member with a disability.

For more on the impact on specific types of families if the provisions expire, see this interactive calculator.