How Ohio can reduce poverty
People pick up food from the Sugartree Ministry food bank. (Photo by Joe Raedle/Getty Images)
Last month, the Census Bureau released its 2022 report on poverty in America. This report confirmed that poverty numbers increased dramatically in 2022 as the pandemic expansion of the child tax credit lapsed.
With after-tax poverty increasing more in a single year than ever before and child poverty more than doubling in 2022, the outlook on poverty in the United States is bleak. But state lawmakers still have tools at their disposal to fight poverty.
The National Academies of Science, Engineering, and Medicine released a report last month on policies to break the cycle of intergenerational poverty. While this report runs the gamut of different interventions, here I will list five policies specifically tailored toward increasing incomes for people in poverty.
Ohio last increased its real minimum wage in 2006 and it has increased every year since in nominal terms due to inflation adjustments built into that change. Minimum wage increases can help people in parts of the state with few options for work who can have their wages artificially depressed by employer market power.
Temporary Assistance for Needy Families (TANF)
TANF is designed to be the low-income cash assistance program for the United States and states have wide latitude for how to spend these funds. Ohio only spends 19% of its TANF budget on basic assistance, which is generally paid out as cash assistance to families in deep poverty. Others are earmarked specifically toward child care, eaten up by administration, or pay for work activities.
Nationally, states spend 23% of their TANF budgets on basic assistance. West Virginia spends 34% of its TANF budget on basic assistance and Kentucky spends 75% of its budget on basic assistance. Spending more of this budget on cash could instantly pull families out of poverty who are experiencing it now.
Earned Income Tax Credit
The Earned Income Tax Credit is a cash program that pulls more people out of poverty than any program nationwide besides social security. Many states, including Ohio, have a state-level earned income tax credit. A 2019 study by my firm Scioto Analysis found refundability reforms could put an extra $150 to $900 per household in the pocket of low-income Ohioans. By expanding the state credit by changing a refundability loophole that makes most families in poverty ineligible for the program, the state could improve incomes for hundreds of thousands of low-income Ohioans.
Child Tax Credit
The culprit for the increase in poverty rates in 2022 was expiration of pandemic-era expansion of the Child Tax Credit. The Child Tax Credit gives cash to families raising children and has been shown to improve future health and labor market outcomes for those children. Scioto Analysis has estimated that a state child tax credit in Ohio could generate between $60 million and $300 million in net benefits.
Negative Income Tax
If Ohio wanted to swing for the fences on poverty, it could do that with a negative income tax. This is a cash transfer program that could theoretically abolish poverty with the stroke of a pen. Cash transfers funded by income taxes on people earning more are the most straightforward way to tackle poverty. A negative income tax was proposed during the Nixon administration, but never implemented at the federal or state level.
Ohio has options to raise incomes for people in poverty. Poverty is a policy choice and one that is made by policymakers every single day. It has options to make better ones.
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