A myriad of federal programs are either designed to support, or incidentally support, the economic resources of families with low incomes. Programs include cash transfers, tax credits, and assistance with basic needs. In this section, we briefly review the histories and varying eligibility requirements of the key federal anti-poverty programs.
Temporary Assistance for Needy Families, or TANF—previously Aid to Families with Dependent Children (AFDC)—is a cash assistance program for families with children who have incomes well below the poverty threshold. The program is implemented at the state level using a combination of federal and state funds. AFDC was established by the Social Security Act of 1935 and was designed to help support children in families in which a parent was absent from the home, deceased, or unable to work. Benefit levels were set by individual states, with the maximum benefit going to families with no income and benefits decreasing as earnings increased.
Concerns that AFDC disincentivized employment led to welfare reform and, in 1996, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) replaced AFDC with TANF. TANF imposed work requirements and a lifetime maximum of five years of benefits. In addition, states were granted flexibility to spend the federal funds on programs other than direct cash assistance (e.g., work, education, and training activities; child care subsidy programs; child welfare services). PRWORA also largely restricted immigrant access to TANF to “qualified” immigrants who have been in the United States for at least five years.
Refundable tax credits include the Earned Income Tax Credit (EITC) and the refundable portion of the Child Tax Credit (CTC). Eligible families who file taxes and claim these refundable credits receive cash back from the government if the credit amount is larger than taxes owed.
The EITC, which was first enacted on a temporary basis in 1975 and made permanent by the Revenue Act of 1978, is generally targeted to low- and moderate-income working families and designed specifically to encourage work and reduce dependence on cash welfare. Credit amounts depend upon family type, number of children, and income level. Workers are eligible for the EITC with their first dollar of earned income, with the credit amount increasing (during what is called the phase-in range) as earnings rise, until it hits the maximum credit (almost $6,000 in 2020 for two qualifying children). At higher incomes (after a “flat range” at the maximum credit), the credit begins to phase out as incomes increase until the income limit is reached; in 2020, this was $47,440 for a single parent with two children. All family members must have a Social Security number (SSN) to qualify, which precludes access for families that include unauthorized immigrants or those with alternative taxpayer identification numbers. The EITC was expanded in 1986, 1990, and 1993. In addition, some states have enacted their own EITCs, modeled after the federal credit but typically smaller in size, with the amount of credit also varying considerably across states.
The CTC, which was introduced in 1997, has a similar phase-in/phase-out structure as the EITC, but primarily goes to higher-income families. When first introduced, the CTC phased out at incomes as high as $110,000 for a married couple filing jointly or $75,000 for those filing as head of household or single. The original credit was $400 per child and was non-refundable, limiting its value for many lower-income families who did not have any tax obligations. A refundable Additional Child Tax Credit (ACTC), which extended a portion of the credit to lower-income families who had no tax obligations in the form of a tax refund, was introduced in 2001 and expanded in 2009. Through 2017, taxpayers were required to provide a taxpayer ID for each child claimed; however, beginning in 2017, SSNs are required for each child claimed (although other family members can provide taxpayer IDs). In 2021, the American Rescue Plan made several temporary changes to the CTC, including eliminating the phase-in range, making the full credit completely refundable, increasing the maximum amount of the credit to $3,000 for each child ages 6 to 17 and $3,600 for each child from birth to age 5, and delivering half of the credit in monthly advanced payments. These changes sunsetted at the end of 2021.
The Supplemental Nutrition Assistance Program (SNAP), previously known as the Food Stamps program, provides vouchers or debit cards that can be used to purchase food from grocery stores to families with incomes at or below 130 percent of the federal poverty threshold. The program was first implemented from 1939 to 1943 as a key component of the New Deal series of programs and reintroduced by the Food Stamp Act of 1964. The program has been federally administered with uniform national standards since 1977. In 1999 and the early 2000s, states were granted the power to broaden eligibility. However, as with AFDC/TANF, most groups of immigrants are not eligible for full SNAP benefits until they have been in the country for at least five years and are legal permanent residents. In 2009, as part of the American Recovery and Reinvestment Act, the level of SNAP benefits was temporarily increased to offset economic hardship as a result of the Great Recession; this temporary boost expired toward the end of 2013.
Other nutrition programs include the Special Supplemental Nutrition Program for Women, Infants, & Children (WIC), established in 1974, which provides children under age 5 and pregnant women in low-income households monthly food vouchers for the purchase of specific types of nutritious food; and the National School Lunch Program (NSLP) and School Breakfast Program (SBP), begun in 1946 and 1966, respectively, which provide free or reduced-price school meals to children who live in low-income households.
Housing assistance programs, first enacted under the U.S. Housing Act of 1937, provide housing vouchers or designate rental units for low-income renters to restrict their housing cost burden to no more than 30 percent of their income. From 1937 through the 1960s, public housing was the only form of housing assistance available. Public housing provides assistance in the form of low-rent housing units that are subsidized by the federal government but are owned and administered by local public housing authorities. Beginning in the 1960s, privately owned subsidized housing (sometimes called privately owned project-based housing) was added. It similarly provides assistance in the form of low-rent housing units that are subsidized by the federal government but, in this case, units are owned by private property owners who have long-term subsidy contracts with the Department of Housing and Urban Development (HUD). Beginning in the 1970s, the federal government also began providing housing assistance in the form of rental vouchers that could be used to secure housing of the family’s choice in the private market, up to a locally determined maximum. Since the 1980s, this is the only one of the three main forms of federal housing subsidy programs that has expanded substantially. In addition to housing subsidy programs, the Low-Income Home Energy Assistance Program (LIHEAP) helps eligible low-income households with their heating and cooling costs.
Social Security, established by the Social Security Act of 1935, is not specifically designed for low-income children or families, but nonetheless plays an important role in reducing child poverty. In addition to providing adults protection against the loss of earnings due to retirement, death, or disability, it also provides benefits to nearly 4 million children (as of May 2022) of insured workers who have died, become disabled, or retired.
Supplemental Security Income (SSI) provides cash benefits for low-income aged and disabled individuals.
Unemployment insurance is also not specifically designed for low-income children or families, but does play a role in protecting children from poverty. Unemployment insurance provides temporary relief (in most states, up to 26 weeks) for workers who have lost their jobs through no fault of their own and, in so doing, protects children of eligible workers from loss of family income due to involuntary unemployment. In states experiencing high rates of unemployment, unemployment insurance benefits can be extended for an additional period of time.
In addition, Medicaid and the Children’s Health Insurance Program (CHIP) provide health insurance coverage to low-income families, thereby reducing their out-of-pocket medical expenses. Finally, Head Start, Early Head Start, and Child Care Development Fund (CCDF) programs provide early care and education resources for low-income families.
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