What the Child Poverty Rate Is Missing

House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer assured us in July 2021 that expanding the child tax credit would “halve the country’s child poverty rate.” Shortly thereafter, President Biden announced that the expanded credit would “halve child poverty this year.” The official census figures are in and in 2021 the poverty rate for children under the age of 18 was 15.3%. It fell just 0.7 percentage points from 16% in 2020 and was still 0.9 percentage points above the pre-pandemic low of 14.4% in 2019, despite the government spending an additional $2.6 trillion on transfer payments in 2020-21 spent.

As we have pointed out in these pages, the Democrats’ rosy pledge would not be included in the Census Bureau’s official poverty figures because the income figures used to calculate official poverty rates do not count eligible tax credits as income for recipients. No matter how much money the government puts into any of these tax credits, it will never increase the official measure of income given the way the census defines income. The omission of eligible tax credits from the official poverty rate calculation is not unique. The Census Bureau fails to include two-thirds of all government transfers to households in the income figures it uses to calculate not only poverty but also income inequality and income growth. In addition to not counting refundable tax credits paid by U.S. Treasury Department checks, the official measure of the Census Bureau does not count food stamps, Medicaid, the children’s health insurance program, rent subsidies, energy subsidies, and health insurance subsidies under the Affordable Care Act. Collectively, benefits from more than 100 other federal, state, and local transfer payments are not counted as recipient income by the Census Bureau.

https://www.wsj.com/articles/child-poverty-data-are-missing-something-refundable-tax-credit-tranfser-payments-census-estimates-household-income-11663689293 What the Child Poverty Rate Is Missing

Alley Einstein

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