A Second Look at Census Bureau Data Shows Safety Net’s Profound Effect on Poverty

By Tara Schoenborn

The U.S. Census Bureau’s annual income and poverty data released today paints a grim picture. The official poverty rate remains stagnant at 14.8 percent in 2014. Nearly 46.7 million people, or about one in seven Americans, is living in poverty. Household median incomes have declined despite an improving job market.

What the official poverty measurement doesn’t account for is the profound impact of safety net programs such the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) on those living at or near the poverty threshold. The official rate is based only on pre-tax income. When key anti-poverty policies such as tax credits and the Supplemental Nutrition Assistance Program are taken into account, the poverty rate actually declined by a half of a percentage point, which underscores the critical role these policies play in preventing further increases in poverty.

With new provisions added in 2009 as a part of the American Recovery and Reinvestment Act (ARRA), the EITC and CTC have jointly lifted 9.8 million people, including 5.2 million children, out of poverty and have had a larger impact than any other federal program besides Social Security.

However, the 2009 provisions of the EITC and CTC are set to expire in 2017, which could threaten the already alarmingly high poverty rate. If these provisions are not extended or made permanent, nearly 50 million Americans will face a tax increase or be pushed into – or deeper into – poverty. Thankfully, there is still time for Congress to take action by extending these key provisions and expanding the EITC and CTC even further. With such actions the poverty data in coming years are likely to tell a much more hopeful story.

To learn more about how tax credits are reducing the poverty rate, visit our website.