The Center's work on 'Trends' Issues


It’s Time to Bolster TANF

October 21, 2013 at 1:53 pm

Cash assistance benefits for the nation’s poorest families with children fell again in purchasing power in 2013, we explain in our annual update of state benefits under the Temporary Assistance for Needy Families (TANF) program.  Seven states increased TANF grant amounts last year — and encouragingly, no state cut benefits — but most kept family grant levels unchanged, allowing inflation to continue eroding the benefits’ value.

TANF is often the only source of support for participating families and, without it, they would have no cash income to meet their basic needs.  Yet, this critical safety net program supports fewer families — and its benefits are worth less — than ever before. Consider:

  • In 2012, just 25 of every 100 poor families received TANF benefits, down from 68 of every 100 in 1996, the year policymakers created TANF to replace the former Aid to Families with Dependent Children program.
  • TANF benefit levels are at least 20 percent below their 1996 levels in 37 states, after adjusting for inflation.
  • As of July 1, 2013, every state’s benefits for a family of three with no other cash income were below 50 percent of the federal poverty line, measured by the Department of Health and Human Services 2013 poverty guidelines (see map).  Benefits were below 30 percent of the poverty line in most states.


A few of the states that increased TANF benefits in 2013 were following through on past commitments to modestly raise benefits or adjust them for inflation. Three states — Connecticut, Ohio, and Wyoming — increased TANF benefits through annual cost-of-living adjustments (COLAs).  Such an automatic mechanism, built into state law, is the best way to prevent the value of TANF benefits from falling and to keep them even with inflation.

These are promising steps, but still more states should consider similar policy changes.  It’s time for states to halt the erosion of TANF benefits and slowly restore some of the purchasing power the grants have lost over the past 17 years.

Click here for the full paper and 50-state data.

Immigration Bill’s “Back Taxes” Amendment Much Harder to Implement than Senator Hatch Suggests

June 14, 2013 at 2:50 pm

As our new report explains, some senators are proposing amendments to the immigration bill that would make its long and difficult path to citizenship far more difficult — in some cases undermining the fundamental goal of enabling undocumented workers to legalize their status.

One such proposal, from Senators Orrin Hatch (R-UT) and Marco Rubio (R-FL), would require immigrants seeking legal status to prove they have paid all of their taxes since they entered the country before adjusting to a legal status.

On the Senate floor Wednesday, Senator Hatch claimed that the IRS is well-positioned to determine such individuals’ tax liability, even when workers lack earnings and tax records:

The IRS is well experienced at estimating the tax liabilities for people who, for whatever reason, lack the records that normally support a tax return. . . .  Using bank records, credit card statements, housing records, and other evidence of an individual’s lifestyle, the IRS is able to construct returns and estimate tax liabilities for nonfilers who are U.S. citizens and resident aliens.  The same process can be used for immigrants looking to certify they no longer owe any Federal taxes.  That is not a tough thing to do…

But the IRS does not routinely try to use such records to guesstimate people’s incomes.  These are extreme methods, which it resorts to in only a very small number of cases each year.

Senator Hatch is essentially arguing that it would be workable — and a good use of taxpayer money — to require the IRS to conduct extensive field audits of very large numbers of undocumented immigrants seeking legal status.

The audits would be very complicated in many cases; many of these workers’ past employers will be difficult to locate, will not have records for cash transactions made years ago, and (for obvious reasons) may be reluctant to cooperate.  Moreover, many of these immigrants likely will not have bank records or credit cards, will have moved many times, and will have been working in the United States for many years or even decades, so reconstructing their records for this entire period could prove extremely difficult.

The IRS’s experience in estimating a family’s income based on its “lifestyle” is largely restricted to a very small number of generally high-income people and small businesses where there is a large disconnect between their reported income and the person’s lifestyle or the business’s spending and the IRS has reason to believe large-scale tax evasion may have occurred.  The IRS has never used this method for large numbers of low-income workers.

Given that an estimated 11 million people are eligible to legalize under the bill, the increased workload for the IRS would be tremendous.  Of the 187 million individual and business tax returns filed in 2011, the IRS examined just 1.7 million — fewer than 1 percent.  Moreover, over 70 percent of these audits were conducted by mail (where information is requested and provided by mail) and were not the complex, intensive audits that Senator Hatch envisions.

Based on the total cost of current IRS enforcement efforts and the number of returns examined each year, each field examination would clearly cost thousands of dollars.  This means that the cost of conducting vast numbers of complicated audits, as Senator Hatch evidently envisions, would run into the billions.

Senator Hatch has not proposed any new funding for the IRS to conduct such audits or indicated that large numbers of new IRS staff would be hired.  If the IRS tried to implement his proposal, it would have to divert a very large portion of its total enforcement resources, probably for a number of years, from enforcement activities that yield a much higher return for the Treasury to auditing millions of legalizing workers, most of whom have modest incomes.

In 2012, the IRS conducted 31,700 field audits of corporations, leading to a total of $20 billion in recommended additional tax assessments — an average of more than $600,000 per review.  When both individual and business field audits are considered, the average tax assessment is close to $60,000.  Diverting IRS resources away from these high-return audits to try to reconstruct earnings records from modest-earning immigrants almost surely would result in a net loss of revenues to the Treasury, not the gain that Senator Hatch suggests.

More realistically, the IRS would never be able to conduct the required audits, so the process of legalizing undocumented workers would grind to a halt for many — leaving the basic goal of the legislation in tatters.  Undocumented workers would remain undocumented and the Treasury would collect less in taxes going forward than if these workers were allowed to come out of the shadows.

Purchasing Power of TANF Benefits Fell Further in 2012

March 28, 2013 at 1:36 pm

Cash assistance for the nation’s poorest families with children fell again in purchasing power in 2012, we detail in our annual update of state benefit levels under the Temporary Assistance for Needy Families (TANF) program.  Most states left their benefit levels unchanged last year, so benefits continued to erode by inflation.

In 37 states, and after adjusting for inflation, benefits are now at least 20 percent below their levels of 1996 — the year policymakers created TANF.

For all states, as of July 1, 2012, benefits for a family of three with no other cash income were below half of the federal poverty line, measured as a share of the Department of Health and Human Services poverty guidelines for 2012 (see map).  Benefits were below 30 percent of the poverty line in the majority of states.

On the other hand, no states cut benefit levels in 2012, and a few took the opportunity to increase the benefit level or to follow through on past commitments to modestly raise benefits or adjust them for inflation.  TANF benefits increased, in nominal dollars, in New York, Ohio, South Dakota, Texas, and Wyoming.

TANF provides a safety net to relatively few poor families:  in 2011, just 27 families received TANF benefits for every 100 poor families, down from 68 families receiving TANF for every 100 in poverty in 1996.  But for the families that participate in the program, it often is their only source of support and without it, they would have no cash income to meet their basic needs.

It’s time for states to halt the erosion of TANF benefits and slowly regain some of the purchasing power that they’ve lost over the past 16 years.

Click here to read the full paper.

TANF Provided a Weak Safety Net During and After Recession

March 4, 2013 at 2:13 pm

Temporary Assistance for Needy Families (TANF), which provides basic assistance to families with little or no income, responded only modestly to the severe recession that began in December 2007, exposing its inadequacy as a safety net, as we explain in a new paper.

We found that:

  • Nationally, the TANF caseload rose only modestly during the downturn and began to decline while need remained high. The caseload did not begin to grow until seven months after the recession started, and it rose only 16 percent before peaking in December 2010 (see chart).  In contrast, the number of unemployed individuals rose 88 percent over this period.  Over the course of 2011, the caseload fell 5 percentage points from that peak, while the unemployment rate remained at or above 8.5 percent throughout the year.

  • Changes in states’ caseloads varied widely. Forty-five states’ caseloads grew between December 2007 and December 2009 but by widely differing amounts, ranging from 2 to 48 percent; in more than half of these states, the increase was 14 percent or less.  After the recovery began, caseloads continued to grow in some states but fell sharply in others.  Between December 2009 and December 2011, 21 states’ caseloads rose from 2 to 56 percent; in 30 states, caseloads fell from 1 to 56 percent.  From December 2007 to December 2011, caseload changes ranged from Oregon’s 81 percent increase to Arizona’s 54 percent decline.
  • Variations in unemployment do not fully explain the variation in state caseload changes. There is no overlap between the ten states with the largest percentage increases in the number of unemployed workers and the ten states with the largest percentage increases in TANF caseloads.  The three states with the largest TANF caseload increases — Oregon, Colorado, and Illinois — ranked 28, 14, and 30, respectively, in the percentage increase in the number of unemployed.  Meanwhile, the three states with the largest TANF caseload decreases — Arizona, Indiana, and Rhode Island — ranked 5, 16, and 23, respectively, in the increase in unemployed workers.
  • In most states, TANF provides a weaker safety net now than it did before the recession. The number of families with children served by TANF for every 100 such families living in poverty fell in 35 states between 2006-2007 and 2010-2011, while it rose in just five states.
  • State actions had a significant impact on TANF caseloads. In response to budget pressures, several states cut TANF benefit levels, shortened or tightened time limits, or made other cutbacks during the recession, contributing to substantial caseload declines.

Our paper on which this post is based is the second in a series on changes in TANF caseloads since the start of the economic downturn.  Click here to read the paper in full, here to read the state-by-state fact sheets, and here to read the first paper in the series.

5 Ways TANF Work Requirements Could Better Promote Work

February 28, 2013 at 4:02 pm

A congressional hearing this morning examined the Administration’s policy of giving states waivers to test new ways to help recipients of Temporary Assistance for Needy Families (TANF) move from welfare to work.  Unfortunately, this focus on waivers takes policymakers’ attention away from what really needs to happen:  improvements in the program’s complex and rigid work requirements, which can force states to design their TANF programs in ways that compromise the goal of connecting recipients to work.

In fact, one of the biggest limitations of the work participation rate — the key measure by which the federal government judges states’ TANF programs — is that states don’t need to move TANF recipients into actual paid work to meet the rate.  TANF is likely the only federal or state employment program in which getting participants into paid employment is not a key measure of success.

Many states say that, with more flexibility, they could operate more effective work programs.  As we explain in a new paper, policymakers have several options to give states more flexibility while strengthening the work provisions and making them more effective.

  1. Give states the option to be accountable for employment outcomes (i.e., jobs) instead of the work rate. Policymakers could empower the federal Department of Health and Human Services (HHS) to authorize a limited number of demonstration projects that would give states that option.  Such a demonstration project would give states the flexibility to design work requirements that better reflect the needs of their TANF caseload and take account of local labor market needs.
  2. Simplify the work requirements and reduce paperwork burdens. States spend lots of time tracking what activities can count toward the work rate and how many weeks or months individuals have already participated — as well as verifying every hour of participation.  They could better spend the time focused on improving employment outcomes.  Simplification efforts could include streamlining countable activities by easing complex limits on when certain activities can count, and allowing participation in more education activities to count.
  3. Focus states’ incentives on improving actual employment placements. Currently, a state gets no more recognition for preparing and placing a recipient in employment than for excluding a family from its caseload and giving it no employment help.  States should get credit for successful employment outcomes, not for failing to serve needy families and children.  Possible steps include:  eliminating or limiting the credit that states get for simply reducing their caseloads; providing an employment credit in lieu of the caseload reduction credit; or allowing a state to count people who have left TANF for employment toward the work rate for a period of time.
  4. Redesign the work measures to support engagement of all recipients in activities that will prepare them for work. Policymakers could:  allow a wider range of activities, including those addressing serious barriers to employment, to count (separate from the job search/job readiness category, which has severe restrictions); lift certain limits on when particular activities, like vocational education or job search, can count; and allow partial credit for recipients who are engaged in activities for less than the required 20 or 30 hours per week.
  5. Require greater investments in work activities. Policymakers should require states to spend a specified share of their TANF resources on activities designed to prepare recipients for work.  In addition, states that do not meet applicable performance measures should be required to invest additional funds in work-related activities.  The current penalty structure withdraws federal funds from state TANF programs, further shrinking state resources to meet families’ employment needs.  Rather than pay a fiscal penalty, a state that fails to meet performance measures should be required to increase the share of its state and federal TANF spending that goes to work-related activities for families receiving assistance.