Trends in the Well-Being of America's Children and Youth, 1997. ES 2.4 Sources of family income

04/01/1997

Although most families with children receive most of their income from their own earnings and other private sources, federal transfer programs providing both cash and in-kind benefits are an important supplement for many families and the most important source of income for some. Thus, many children's standard of living is significantly affected by these programs. Most families with children pay taxes to the federal government to help pay for these programs.

Federal Cash Benefits. Many families receive some of their income in the form of government transfers, although the overwhelming majority of families (95 percent in 1993), had other, private sources of income as well (see Figure ES 2.4.A).

  • The most common federal cash benefit was the earned Income Tax Credit (EITC)15, which the federal government paid to 29 percent of families with children.
  • The federal government paid cash social insurance benefits (including Social Security, Workers' Compensation, and Unemployment Insurance benefits) to 20 percent of families with children.
  • Cash benefits from the AFDC program were paid to 16 percent of families with children.
  • Supplemental Security Income (SSI) benefits were provided to only 4 percent of families with children.
  • A small percentage of families with children received cash benefits from other means-tested cash programs.

Single-parent families with children are less likely than married-couple families with children to have pre-transfer income (see Table ES 2.4.A). While 98 percent of married-couple families with children had pre-transfer income, only 85 percent of single-parent families had income before transfers. It is not surprising, therefore, that single-parent families with children were more likely than married-couple families with children to receive means-tested cash benefits. For example, while only 6 percent of married-couple families received AFDC benefits, 40 percent of single-parent families received these benefits.

Federal In-Kind Benefits. Many families also receive in-kind benefits from the federal government (see Figure ES 2.4.A).

  • The federal government provided food stamps to 20 percent of families with children.
  • Housing benefits were provided to 6 percent of families with children.

Single-parent families with children were much more likely than married-couple families to receive in-kind benefits (see Table ES 2.4.A). For example, while only 9 percent of married-couple families received food stamps, 45 percent of single-parent families did so. Similarly, only one percent of married-couple families received housing benefits, but 17 percent of single-parent families did so.

Federal Taxes. Most families with children pay both social security (FICA) taxes16 and federal income taxes (see Figure ES 2.4.B). In 1993, 91 percent of all families with children paid social security taxes, while 76 percent paid federal income taxes. Married-couple families were more likely than single-parent families to pay federal taxes. While 97 percent of married-couple families paid social security taxes, only 76 percent of single-parent families did so. Similarly, while 88 percent of married-couple families paid federal income taxes, only 48 percent of single-parent families did so.
 

Figure ES 2.4.A  
Percentage of All Families with Children Receiving Various Sources of Income, 1993 

FIGES2_4A.GIF
Source: 1994 Current Population Survey, as processed by the Urban Institute's TRIM model. 

 

Figure ES 2.4.B  
Percentage of All Families with Children Who Pay Federal Taxes, by Type of Tax and Family Type, 1993 
FIGES2_4B.GIF
 
Source: 1994 Current Population Survey, as processed by the Urban Institute's TRIM model. 

 

Table ES 2.4.A 
Percentage of Families with Children Receiving Various Sources of Income, by Family Type, 1993

 
 
Single-Parent 
Married-Couple 
All 
 
______ 
______ 
______ 
Pre-transfer income
85 
98 
95 
 
Cash Benefits
  Social insurance income
21 
20 
20 
 
AFDC
40 
16 
SSI
Other means-tested cash benefits
 
In-Kind Benefits
  Food Stamps
45 
20 
 
Housing
17 
 
Earned income tax credit
51 
19 
29 
 
 
Source: 1994 Current Population Survey, as processed by the Urban Institute's Transfer Income Model (TRIM), which simulates for a representative sample of the U.S. population eligibility for and payment of cash and in-kind benefits based upon the characteristics of the persons, families, and households contained in the sample. TRIM also simulates the payment of federal income and payroll taxes for this same representative sample. The results of TRIM simulations may differ from the results produced by other data sets or models because, for most programs, TRIM uses data corrected for under- and non-reporting. In the case of the Earned Income Tax Credit (EITC), for example, TRIM estimates differ from those of the U.S. Treasury because TRIM assumes that nearly everyone who is eligible for the EITC actually receives it. In reality, some ineligible families receive it and some eligible families do not. The errors do not exactly offset one another.

 

Table ES 2.4.B 
Percentage of Families with Children with Federal Tax Liability, by Family Type, 1993

 
 
 
 
 
 
 
Single-Parent 
Married-Couple 
All 
 
 
 
 
 
Social Security (FICA)
76 
97 
91 
 
 
     
Federal Income Tax
48 
88 
76 
         
Source: 1994 Current Population Survey, as processed by the Urban Institute's Transfer Income Model (TRIM), which simulates for a representative sample of the U.S. population eligibility for and payment of cash and in-kind benefits based upon the characteristics of the persons, families, and households contained in the sample. TRIM also simulates the payment of federal income and payroll taxes for this same representative sample. The results of TRIM simulations may differ from the results produced by other data sets or models because, for most programs, TRIM uses data corrected for under- and non-reporting. In the case of the Earned Income Tax Credit (EITC), for example, TRIM estimates differ from those of the U.S. Treasury because TRIM assumes that nearly everyone who is eligible for the EITC actually receives it. In reality, some ineligible families receive it and some eligible families do not. The errors do not exactly offset one another.

 

15 This benefit is paid to families with children, at least one working parent, and relatively low family income. If the credit is larger than a family's federal income tax liability, the difference is refunded to the family. The 29 percent figure refers only to families that received a refund and not to families whose EITC only partially offset their federal income tax liability.

16 FICA taxes cover the Old Age, Survivors, and Disability Insurance (Social Security) program plus Medicare.
 

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