The Poverty Reduction and Targeting of the United States Safety Net
Abstract
This paper analyzes the poverty reduction and targeting effects of taxes and transfers in the United States, using a groundbreaking set of linked survey and administrative data called the Comprehensive Income Dataset (CID). The administrative data consist of IRS tax records and program participation data from various federal and state agencies. These data cover earnings, asset, and retirement income, tax liabilities and credits (including the EITC and Child Tax Credit), and transfer income for a myriad of safety net programs including Social Security, SSI, SNAP, Unemployment Insurance, Veterans’ Benefits, Public Assistance, housing assistance, Medicare, Medicaid, WIC, and energy assistance. We link these data to the Current Population Survey Annual Social and Economic Supplement (CPS), the source of official poverty and inequality statistics and the Survey of Income and Program Participation (SIPP), the most comprehensive survey of income sources in the U.S. Linking the administrative data to the surveys is vital given that a large and rising share of benefits and other income sources is not recorded in the surveys.To analyze the targeting of government programs, we start by calculating the share of programs dollars paid that go to families below various income cutoffs, focusing on how estimates using the CID compare against estimates using survey data alone. We then assess program targeting on other dimensions by examining the material well-being of families receiving a given program. We examine family characteristics including permanent income and mortality in both the CPS and the SIPP. A wide group of additional measures of material well-being are available in the SIPP including material hardships, appliances owned, and home quality problems. By comparing targeting on a wide range of dimensions of material well-being, we obtain a more comprehensive picture of the families to whom transfer dollars are paid out.