Child Poverty: Intergenerational or Not, Still Not a Mystery

Once again: How much would you pay to stop having to listen to rich people tell poor people how to run their families?*

In 2023, child poverty in the United States was a $52 billion problem. Is that a lot? No, it’s not. Below, I show we can pay for it with a tax of $668 (median) on just the richest 42% of families. Details below.

Why does this matter? Some people, including some smart social scientists, like to treat poverty as a big, complicated, intractable, almost mystical problem. And as a problem of individuals — as in, what do we have to change about people so they are not poor? That’s the approach taken by some Brookings Institution analysts, writing about “intergenerational poverty” (which occurs when poor parents have — wait for it — poor children). They have policy suggestions such as improving education and healthcare, increasing parents’ employment and earnings, and doing things to reduce crime (more police!).

This is all very roundabout, and ignores the number one proximate cause of poverty: low income. They say they recognize this, but they don’t act like they do. For example, they write:

There is strong recent evidence that the 2021 extension of the Child Tax Credit produced large reductions in child poverty, but we have no evidence to date on its long-term impacts on children. We believe that considering some extension for parents with little or no earnings makes sense, when combined with a more generous EITC for working parents.

What are the possible negative “long-term impacts on children” of giving their parents money? I mean, rich people are obnoxious, granted, but we don’t usually worry about the negative effects of money on people. That is, unless they’re poor people, for whom the problem is — them. Given that, “some extension” is OK, as long as it has strings attached.

My favorite ridiculous description of poverty is from David Brooks who said:

Poverty is an and/and issue, because it takes a zillion things to address it, and some of those things are going to come from the left, and some are going to come from the right. … And if poverty is this mysterious, unknowable, negative spiral-loop that some people find themselves in, then surely the solution is to throw everything we think works at the problem simultaneously, and try in ways we will never understand, to have a positive virtuous cycle.

I respectfully disagree. Poverty is the absence of adequate income – that’s it! (Wealth, however, which continuously produces enigmas like David Brooks is truly mysterious).

But wait, they say, if you just give poor people money so they’re not poor this year, they’ll just be poor again next year! Poverty is a mystery. Yet somehow, they never say this about national security — a problem we have attempted to solve with trillions of dollars over centuries, and yet it keeps coming back. Tricky.

The smallness of the problem

This is not a policy analysis, it’s an exercise in demographic and economic scale. I know the poverty level is defined badly, and is too low. I know the actual economic consequences of giving away money are somewhat complicated by the behavior changes they evoke. But none of that shakes my basic conclusion that the problem — in the United States — is just not that big. If we cared, we’d easily tackle those nuances.

The gist of it is very simple. For this exercise, I use the Supplemental Poverty Measure concept. This sets a poverty threshold, an amount of money (total economic resources) for a family’s “basic needs,” depending on its size and age composition, and on the food, shelter, clothing, utilities, and telecommunication costs in the area where they live. In 2022, the threshold for families with two adults and two children ranged from about $25,000 to $54,000 — which could come from earned income, tax credits, welfare benefits, and so on. Since the issue here is intergenerational poverty, I’m just focusing on families with children. (I use the 2023 ASEC [March CPS] from IPUMS; the Stata code is here.)

In 2023 there were 138 million family units in the US (families here include members of cohabiting couples, and anyone else related in the same household); people living alone count as a family, too. Of those, 20.1 million were below their calculated poverty threshold in 2022. Of the poor families, 21% included children. So that’s 4.3 million poor families with children.

Here are some round numbers. Among these poor families with children, the median total resources were about $23,000, and the median poverty threshold was about $34,000. So the median shortfall was about $9000. The mean shortfall was bigger, about $12,000 (for this, if people had negative incomes I changed them to $0, because they can drag things down unreasonably). So, to eliminate child poverty in 2022 we would have to give 4.3 million families an average of $12,000 each. It comes out to $52 billion.

Where are we going to get $52 billion per year? We could ask the US military to cover it — which the Pentagon could do 16-times over. Or get it from somewhere else. To understand the scale of the obligation, let’s see what it would look like to get it from relatively well-off families.

We’ll just tax the surplus income families have, over their SPM threshold. There are 118 million nonpoor families in the US, with incomes over their threshold. But we don’t want to punish people for being just a little over the threshold, so let’s only tax surpluses over $40,000. There are 57 million families with more than $40,000 in surplus (over the poverty threshold). Their mean surplus is $105,000 per family. Together they have $6,054 billion in surplus. If we tax that surplus at 0.87% it will cover the cost of eliminating child poverty. (Income means get big because the data are so skewed, which is great for taxation. Note this data doesn’t capture super high incomes well, but neither does income tax, so maybe that’s OK.)

How much Child Poverty Elimination Tax would you pay? If you’re family’s total income (from all sources) was less than $40,000 over the poverty threshold, you pay nothing. This means no one with a family income under $52,000 pays anything. Only the richest quarter of all families under $100,000 would be taxed.

The figure shows the average Child Poverty Elimination Tax by income bracket. This shows that for families between $50,000 and $80,000 of total income, the tax is less than $500 per year, on average. The top bracket would pay an average of $5,750. Within the top bracket I’m showing it’s further skewed than the figure shows, so that over $1 million in income families would pay more than $10,000 on average.

The policy details are obviously not my strong suit. The point is, it’s very affordable, so just rustle up the money and end child poverty.

Changing poor people to address poverty is complicated, difficult, as well as often coercive and demeaning. Most of them are unable to earn much for some good reason (like they’re children, retired, or have a disability), or have very low skills. Giving everyone lots of opportunities to get education and jobs — with childcare, and so on — is great and we should do it. But to the extent we fail at that, just pick up the slack with the Child Poverty Elimination Tax (or something like it, which is what a refundable Child Tax Credit is).

* This updates a legacy post that was previously updated in my book.

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Previously Published on familyinequality with Creative Commons License

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