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  "id": "R45971",
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  "number": "R45971",
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      "title": "The Impact of the Federal Income Tax Code on Poverty",
      "source": "CRSReports.Congress.gov",
      "retrieved": "2020-11-15T04:03:27.865990",
      "date": "2020-10-19",
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    {
      "source": "EveryCRSReport.com",
      "id": 606431,
      "date": "2019-10-17",
      "retrieved": "2019-10-21T22:17:42.616347",
      "title": "The Impact of the Federal Income Tax on Poverty: Before and After the 2017 Tax Revision (\u201cTCJA\u201d; P.L. 115-97)",
      "summary": "The federal individual income tax is structured so that the poor owe little or no income tax. In addition, the federal individual income tax (hereinafter referred to simply as the income tax) increases the disposable income of many poor families via refundable tax credits\u2014primarily the earned income tax credit (EITC) and the refundable portion of the child tax credit, referred to as the additional child tax credit, or ACTC. These credits are explicitly designed to benefit low-income families with workers and children and can significantly boost families\u2019 disposable income, lifting many of these families above the poverty line. \nUsing the federal government\u2019s Supplemental Poverty Measure (SPM), CRS estimates that under current law, the income tax reduced total poverty by 15% (from 14.5% in poverty to 12.3% in poverty). The impact of the income tax on the overall poverty rate was larger than the impact of many needs-tested benefits programs targeted toward the poor. In contrast, the income tax\u2019s ability to lift the poorest Americans out of poverty\u2014to reduce the \u201cpoverty gap\u201d\u2014was limited in comparison to many needs-tested programs. (The poverty gap is the difference between the poverty threshold and a family\u2019s disposable income, aggregated over all poor families, and is a measure of the degree of poverty.) CRS estimates that under current law, the income tax reduced the poverty gap by about $13.9 billion annually (from $150.8 billion to $136.9 billion), approximately half the effect of other needs-tested programs.\nVirtually all of the poverty reduction from the income tax\u2014both in terms of reducing poverty rates and the poverty gap\u2014was concentrated among families with children and workers. For example, CRS estimates that poverty among children who lived in families with workers fell by almost 40% (from 14.7% in poverty to 8.9% in poverty) as a result of the income tax. For nonaged (i.e., nonelderly) adults in families with children and workers, poverty fell by almost a third (from 12.3% in poverty to 8.3% in poverty). (In contrast, CRS estimates that the poverty rates among individuals who lived in families with no workers were unchanged by the income tax.) Similarly, all of the estimated $13.9 billion in poverty gap reduction from the current income tax occurred among families with children and workers. \nThe current income tax includes the effects of legislative changes made by P.L. 115-97, commonly referred to as the Tax Cuts and Jobs Act (TCJA). The TCJA made numerous changes to the federal income tax system, including many that affect individuals and families. A comparison of the effect of the current income tax (i.e., the post-TCJA income tax) and the pre-TCJA income tax on poverty rates and the poverty gap (assuming all else unchanged) provides one measure of the law\u2019s impact on poverty. CRS estimates suggest that the TCJA marginally reduced poverty rates and the poverty gap, with the impact of the post-TCJA income tax similar to the impact of the pre-TCJA income tax. This suggests the law provided relatively small benefits to poor families. \nInsofar as policymakers are interested in expanding the antipoverty impact of the income tax, they could expand or modify the EITC or ACTC, or create new refundable tax credits targeted toward the poor. However, refundable tax credits are subject to several limitations as a poverty reduction policy: the current credits primarily benefit those who work (and have children), limiting their ability to reduce poverty among those who do not or cannot work; they are received only once a year when income tax returns are filed, limiting their ability to help the poor meet ongoing basic needs; and they are difficult for the IRS to administer, subjecting the credits and their recipients to additional scrutiny.\nOverview of the Estimated Antipoverty Impact of the Federal Income Tax\n\nEstimated Before-Tax and After-Tax Poverty Rates for Selected Individuals\n\n\n\nAfter Tax\n\nIndividual by Family Type\nBefore Tax\nCurrent Law\nIncome Tax\n(Post-TCJA)\nPrior Law\nIncome Tax\n(Pre-TCJA)\n\nAll Individuals Living in Families of All Types\n14.5%\n12.3%\n12.5%\n\nChildren\n17.5%\n12.0%\n12.3%\n\nNonaged Adults in Families with Children\n14.5%\n10.6%\n10.8%\n\nIndividuals Living in Families with Workers\n10.8%\n8.1%\n8.3%\n\nChildren\n14.7%\n8.9%\n9.2%\n\nNonaged Adults in Families with Children\n12.3%\n8.3%\n8.5%\n\nIndividuals Living in Families with No Workers\n34.7%\n34.7%\n34.7%\n\nChildren\n64.1%\n64.1%\n64.1%\n\nNonaged Adults in Families with Children\n64.3%\n64.3%\n64.3%\n\n\n\nEstimated Before-Tax and After-Tax Poverty Gap for Selected Poor Families\n\n\n\nAfter Tax\n\nFamily Type\nBefore Tax\n($ in billions)\nCurrent Law\nIncome Tax\n(Post-TCJA)\n($ in billions)\nPrior Law\nIncome Tax\n(Pre-TCJA)\n($ in billions)\n\nAll Poor Families\n150.8\n136.9\n138.1\n\nPoor Families with Children\n52.3\n38.3\n39.1\n\nWith Workers\n37.8\n23.9\n24.7\n\nWith No Workers\n14.5\n14.5\n14.5\n\nPoor Families with Aged Adults, but no Children\n29.5\n29.6\n29.6\n\nPoor Families without Children or Aged Adults\n69.1\n69.0\n69.4\n\nSource: CRS estimates using TRIM3 and the ASEC 2017. For methodology, see Appendix A.\nNote: The 2018 parameters of the current-law income tax (post-TCJA) and the prior-law income tax (pre-TCJA) are modeled. Due to data limitations, the impacts of the federal income tax in effect in 2018 (both pre- and post-TCJA) are modeled as if they were in effect in 2016. Items may not sum to totals due to rounding.",
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      "topics": [
        {
          "source": "IBCList",
          "id": 4799,
          "name": "Individual Tax"
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        {
          "source": "IBCList",
          "id": 4890,
          "name": "Poverty"
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  "topics": [
    "Domestic Social Policy",
    "Economic Policy"
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}