U.S. aid, tax policies found to halve number in poverty

September 29, 1991|By Andrew Mollison | Andrew Mollison,Cox News Service

WASHINGTON -- A new federal report indicates that last year, if it hadn't been for the government, one out of every five Americans would have been poor.

Thanks to tax and benefit programs, the number who, by the most conservative government measure, had too little to live on was cut in half -- to one in 10.

That's still two to five times the level in most West European countries. And federal and state officials can be blamed for failing to cope better with the long-term economic challenges and the current recession that put so many Americans in danger of poverty in the first place.

Still, lifting 24 million to 27 million Americans out of poverty isn't bad, though it left another 24 million to 27 million still poor.

The poverty level for a family of four was $13,359 in 1990, according to the Census Bureau.

The role of government in reducing poverty despite the onset of the recession is outlined in the report, "Measuring the Effect of Benefits and Taxes on Income and Poverty," that the Census Bureau issued quietly last week along with its much-publicized annual report on poverty.

According to the annual report, this is what happened last year:

* Roughly 51 million people would have been poor when counting only their private income from wages, salary, interest and dividends.

* More than 17 million were pulled above the poverty line by cash benefits -- mostly Social Security pensions, but also such items as unemployment compensation, student aid and veterans' benefits. That is where the Census Bureau got its official estimate that 33.6 million Americans -- 13.5 percent -- were poor.

But the benefits and taxes report examines a dozen other influences on poverty that more closely reflect what goes on in the real world.

Start with the 51 million whose private "cash income" left them poor.

Capital gains -- the profits from the sale of goods, bonds, stock or real estate -- and the value of employer-provided health insurance lifted 1.6 million out of poverty.

Social Security payroll taxes, with federal and state income taxes, pushed 3.5 million into poverty.

The federal Earned Income Tax Credit lifted 1.1 million back out.

"Non-means-tested" cash benefits -- mostly Social Security and other pensions -- lifted 15.3 million out of poverty.

An additional 1 million were lifted out by Medicare for the old, 1.9 million by Medicaid for the poor and 2.6 million by such other "means-tested" cash benefits as Aid to Families with Dependent Children and Supplemental Security Income welfare payments.

Such non-cash benefits as food stamps, school lunches and rent subsidies lifted 3.7 million out of poverty.

That left 27.3 million poor Americans last year. It left only 24.4 million, if you believe that 2.9 million poor homeowners aren't really poor because they could cash in on their home equity and shift the money into an interest-bearing account.

The report's common-sense but politically volatile finding, backed by 195 pages of tables in tiny type: Government spending pulled more people out of poverty than government taxes pushed in.

The National Academy of Sciences is going to look into the Census Bureau's methodology and review the question of who is really poor.

Meantime, the bureau's report arrives as many Washington officials are talking less about these benefits and more about taxes -- most notably about new tax breaks for savers and investors, few of whom are likely to be among those most at risk of being poor.

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