Indicators of Welfare Dependence: Annual Report to Congress, 2006. Economic Security Risk Factor 4. Poverty Rates with Various Means-tested Benefits Included

08/30/2006

Figure ECON 4. Percentage of Total Population in Poverty with Various Means-Tested Benefits Added to Total Cash Income: 1979-2004

Figure ECON 4. Percentage of Total Population in Poverty with Various Means-Tested Benefits Added to Total Cash Income: 1979-2004

Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1980-2005, by the Congressional Budget Office.


  • The official poverty rate – the definition of which includes means-tested cash assistance (primarily TANF and SSI) in addition to pre-tax cash income and social insurance – was 12.7 percent in 2004, as shown in the bold line with empty boxes in Figure ECON 4. Without cash welfare, the 2004 poverty rate would be 13.5 percent, as shown by the top line in the figure above.
  • Adding other non-cash, public assistance benefits to this definition has the effect of lowering the percentage of people who have incomes below the official poverty line. Including the value of food and housing benefits in total income reduces the poverty rate to 11.5 percent in 2004.
  • When income is defined as including the Earned Income Tax Credit (EITC) and federal taxes, the percentage of the total population in poverty decreases to 10.5 percent in 2004. Federal taxes and tax credits have had a net effect of reducing poverty rates following the EITC expansions in 1993 and 1995.
  • The combined effect of means-tested cash assistance, food and housing benefits, EITC and taxes was to reduce the poverty rate in 2004 by 3.0 percentage points, as shown in Table ECON 4. Net reductions in poverty rates were somewhat lower during the recession of the early 1980s, and somewhat higher in the mid-1990s, largely due to expansions in the EITC.

Table ECON 4. Percentage of Total Population in Poverty with Various Means-Tested Benefits Added to Total Cash Income: Selected Years

  1983 1986 1989 1992 1995 1998 2000 2002 2003 2004
Cash Income Plus All Social Insurance 16.0 14.5 13.8 15.6 14.9 13.5 12.0 12.8 13.2 13.5
Plus Means-Tested Cash Assistance 15.2 13.6 12.8 14.5 13.8 12.7 11.3 12.1 12.5 12.7
Plus Food and Housing Benefits 13.7 12.2 11.2 12.9 12.0 11.3 10.1 10.9 11.2 11.5
Plus EITC and Federal Taxes 14.7 13.1 11.8 13.0 11.5 10.4 9.5 10.0 10.4 10.5
Reduction in Poverty Rate 1.3 1.4 2.0 2.6 3.4 3.1 2.5 2.8 2.8 3.0

Note: The four measures of income are as follows: (1) “Cash Income Plus All Social Insurance” is earnings and other private cash income, plus social security, workers compensation and other social insurance programs. It does not include means-tested cash transfers; (2) “Plus Means-Tested Cash Assistance” shows the official poverty rate, which takes into account means-tested assistance, primarily AFDC/TANF and SSI; (3) “Plus Food and Housing Benefits” shows how poverty would be lower if the cash value of food and housing benefits were counted as income; and (4) “Plus EITC and Federal Taxes” is the most comprehensive poverty rate shown. EITC refers to the refundable Earned Income Tax Credit, which is always a positive adjustment to income whereas federal payroll and income taxes are a negative adjustment. The fungible value of Medicare and Medicaid is not included.

Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1984-2005, by the Congressional Budget Office.

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