Families across the United States are contending with record-high inflation. But while the prices they face at the grocery store are rising, the values of several government benefits and tax credits meant to provide relief to struggling families are not keeping up, because they were not designed to increase with inflation. As a result, the effectiveness of these benefit programs and tax credits is increasingly undermined, leaving families—and local economies—further and further behind.

Congress has looked to address this mismatch between rising prices and stagnant income supports in a variety of ways, with several proposals that would, among other things, index the value of the Child Tax Credit to inflation.1 These proposals put a spotlight on an often overlooked aspect of policy design: how benefit levels change over time in response to increasing costs of living. This feature of policy design is known as indexation. As this report argues, indexation is a key feature of policy design that is responsible for the degree to which policies can achieve their goals sustainably over time. This report illustrates this argument using the example of the expanded Child Tax Credit of 2021, which was designed to drastically reduce child poverty, and which multiple studies have shown has the potential to cut child poverty nearly in half.

How benefit levels change over time also varies across policies and programs. That is, under current law, some policies automatically increase in nominal terms every year to track inflation, while others only increase when new laws are passed by Congress or by executive order. A typical example of the former is Social Security. Enacted in 1935, Social Security provides old age insurance for retirees based upon taxes paid into the system over a lifetime of work. In 1975, Social Security benefit levels were formally indexed to inflation, ensuring that retirees’ benefits would keep pace as the prices of goods and services in the economy increased.2 On the other end of the spectrum is the federal minimum wage program. Introduced in 1938, the federal minimum wage sets the floor of what public and private organizations may pay their workers; and the federal minimum wage only increases when Congress and the president choose to increase it.

Whether and how policies are indexed to inflation has major implications for their power to improve economic well-being and reduce poverty in the long run. Figure 1 shows how the so-called real value of the federal minimum wage has changed over time. Real value indicates the value of the minimum wage in constant dollars over time; that is, adjusted for inflation. As the figure shows, the real value of the federal minimum wage reached its peak in the late 1960s, and has generally eroded since, albeit in fits and starts as policy makers periodically increased its value in specific years. Social Security benefits, on the other hand, move each year in lockstep with changes in prices (that is, inflation); each year, beneficiaries receive a cost-of-living adjustment (COLA) to their benefit levels based upon the prior year’s level of inflation.

FIGURE 1

What are the implications of such policy design choices for the poverty reduction potential of antipoverty policies? This report sheds light on this question by examining the antipoverty potential of one policy, the expanded Child Tax Credit (CTC), under two scenarios: (1) where the expanded Child Tax Credit is indexed to inflation; and (2) where it is not indexed to inflation. By juxtaposing the potential impacts of this policy over time under these two scenarios, this report puts a spotlight upon the importance of inflation indexation for optimizing the antipoverty effects of government policies.

The expanded Child Tax Credit established in 2021 through the American Rescue Plan Act (ARPA) offers an opportunity to examine inflation indexation’s impact. In expanding the credit, the ARPA:

  1. increased maximum benefit levels from $2,000 per child to $3,000 per child for older children (ages 6–17) and $3,600 per child for younger children (ages 0–5);
  2. made the credit fully refundable, meaning nearly all low-income children3 could receive the full credit regardless of their parents’ earnings or income; and
  3. distributed benefits monthly in the latter half of 2021.

This expansion has since expired, but numerous research groups have shown the expanded credit’s antipoverty potential, especially with regard to child poverty.4 This antipoverty potential is large and relatively unprecedented in recent decades. It also provides an opportunity to explore how the impacts of such an expansion, if extended, would or would not change over time, depending on whether and how benefit levels were indexed to inflation. Moreover, while the expanded Child Tax Credit has expired, its extension continues to be debated in Congress. President Biden has called for its permanency, the House has passed a version of a permanent extension of the policy, the vast majority of Democratic senators support its extension, and one Republican senator has put forth a version that includes the poorest children as well. Indeed, in the wake of the ARPA, states have begun passing their own Child Tax Credits that include the poorest children. The results of this examination, of course, could also be extended to other policies, either existing or proposed.

These analyses may be particularly relevant given the current economic climate, in which inflation is at record highs relative to recent decades. The costs of goods and services most relevant to low-income individuals and families, such as food and gasoline, have accelerated at the fastest pace. Thus, how income supports designed to help low-income individuals and families afford necessities are pegged to inflation (or not) is critical to how well they can achieve their goals of reducing poverty and enhancing economic well-being and maintain these reductions in the long run. The remainder of this report briefly lays out the data and methods used to assess the importance of indexation, and then describes the results.

Our Analytic Approach

Our analytic approach is straightforward. We first simulate the expanded Child Tax Credit in a base year—in this case 2018, following prior analyses by our group at the Center on Poverty and Social Policy at Columbia University.5 We then simulate the Child Tax Credit’s effects on child poverty (as well as deep poverty and near poverty, defined as under half the poverty threshold and under 200 percent of the poverty threshold, respectively) five and ten years out from that base year. We do this under two scenarios, one where the base year Child Tax Credit amounts are indexed to inflation and one where they are not. We use the Consumer Price Index for all Urban Consumers (CPI-U) as our inflation index. There is some debate among economists about the most appropriate inflation index, and the choice of index does have important implications for how well benefits meet families’ needs over time.6 However, given that this analysis is essentially a thought experiment, changing the index used would change the magnitude rather than the overall pattern of results. In the Appendix, we provide more technical detail about how we assume each component of the poverty measure is projected forward in time five and ten years following the base year. We use the Census’ Supplemental Poverty Measure (SPM) for all analyses, as this measure captures a fuller array of resources including tax credits that are the subject of our simulations and projections.

The Importance of Indexation

We begin by illustrating how the real value of the Child Tax Credit would erode if not indexed to inflation. We show the benefit values for a one- and two-child family (see Figure 2). Without indexing to inflation, the real value of a $6,000 benefit to a two-child family in the base year (in 2018 dollars) is reduced to just a bit over $4,500 ten years out. Put another way, the benefit would lose about a quarter of its value over ten years.

FIGURE 2

Figure 3 shows what would happen to projected poverty rates with and without inflation indexation. When indexed, the antipoverty reduction from the Child Tax Credit would stay robust, cutting child poverty by over 40 percent in all years. But if not indexed, this antipoverty effect erodes substantially over time, in this case falling to just over 30 percent in ten years. These projections are only meant as a thought experiment, as they make various assumptions about how each of the components of the poverty measure would change over time (see the Appendix), and these assumptions can change the magnitudes presented in Figure 3. But the story would be the same: failing to index benefits to inflation allows significant erosion in their antipoverty potential.

FIGURE 3

Figure 4 shows analogous results for antipoverty reduction among families with children in deep poverty (left panel) and near poverty (right panel). We see less dramatic, but still substantial, erosion in the Child Tax Credit’s effects on deep child poverty, falling from cutting child deep poverty by almost half in the base year to under 40 percent ten years on. For child near poverty, the Child Tax Credit reduces this rate to a lesser degree overall (by under 20 percent in the base year) but when it is not indexed, its effect on the poverty rate is cut nearly in half ten years on (11.5 percent when not indexed versus 20.3 percent when indexed).

FIGURE 4

In conclusion, indexation is a powerful yet oft-ignored component of poverty reduction resulting from government policies. Indeed, the indexation of Social Security benefits has maintained the benefit’s value for decades, contributing to the historic and sustained drops in elderly poverty over the past half century. While the expansion to the Child Tax Credit embodied in the American Rescue Plan Act has not been extended beyond 2021, policy makers continue to consider expansions to the credit now that its antipoverty potential is widely understood. Indeed, indexing the value of an expanded, fully refundable Child Tax Credit will be essential both to maintaining its impact on poverty reduction and to providing a consistent credit to the middle class as well. Simply put, not indexing the policy would be akin to creating an ever-shrinking credit.

Appendix: Methodology

Our approach for estimating the impact of the expanded CTC on child poverty with and without indexation requires adjusting all components of the Supplemental Poverty Measure—income sources and thresholds—for projected changes in economic conditions between our base year (2018) and the ten subsequent years. We use various approaches to account for these possible changes. This includes accounting for legislated changes (such as the annual increase to Social Security benefits); projected changes from the Congressional Budget Office (CBO) and other government agencies (such as projected wage growth); and using historical trends to adjust for changes where these projections are not available. Below, we provide an overview of the steps taken to make these adjustments. Note that our estimates do not account for changes in population size and we assume no changes in the underlying tax code after the base year beyond those that adjust for inflation.

Our primary estimates rely on data from the 2019 Annual Social and Economic Supplement to the Current Population Survey (CPS-ASEC), representative of calendar year 2018.7

Step 1: Predict changes in the poverty threshold

First, we predict changes in the poverty threshold defined under the Supplemental Poverty Measure (SPM). The SPM threshold is designed to be representative of the amount of resources needed to afford a basic set of goods, including food, clothing, shelter, and utilities, and other basic needs (such as household supplies).8 Under standard practice, the threshold is derived as follows:

  1. Estimate the cost of a basic set of goods (food, clothing, shelter, and utilities) for a two-adult, two-child family based on housing-tenure status (renter, homeowner without a mortgage, homeowner with a mortgage) in the most recent five years of Consumer Expenditure Survey data. The cost is set at roughly the thirty-third percentile of median spending in these categories, and this step provides three thresholds for a two-adult, two-child unit (one for each housing tenure status).
  2. Multiply the three estimated thresholds by 1.2 to account for other basic necessities.
  3. Adjust the shelter and utilities portion of the threshold by variations in the cost of living across the country. Variations in the cost of living are determined using five years of data on median gross rents reported in the American Community Survey.9
  4. Create thresholds for various family sizes using a three-parameter equivalence scale. 10

The data used to produce the annual poverty threshold for the coming years (2022 through 2028) is not available and the BLS does not release projections for changes in spending in the categories that comprise the threshold. We thus use historical changes in the average SPM poverty threshold to make predictions about the average thresholds in coming years. We begin with the most recent five years of CPS-ASEC data (2017 to 2021, representative of 2016 to 2020) and find the average SPM threshold in each year and the average of year-to-year change in the threshold between each of these five years (see Table A1, column titled Average Year-to-Year change). Overall, across the most recent five-year period for which we have data, we see an average year-to-year change in the threshold of 2.9 percent. We then assume that the SPM threshold will rise by 2.9 percent in each year after 2020. The average thresholds estimated using this method are listed in Figure A1.

TABLE A1
AVERAGE POVERTY THRESHOLD AND YEAR-TO-YEAR CHANGE, ACTUAL AND PREDICTED
Survey Year Reference Year Average Threshold Average Year-to-Year Change
2016 2015 $22,828
2017 2016 $23,289 0.020
2018 2017 $24,023 0.031
2019 2018 $25,024 0.042
2020 2019 $25,833 0.032
2021 2020 $26,372 0.021
Average Year-to-Year change (five years): 0.029
FIGURE A1

Step 2: Projecting change in income from various sources

We adjust the income sources accounted for in the SPM to estimate their values in future years using various indices and approaches, including legislation regarding benefit indexation, projections from the Congressional Budget Office and other government agencies, and historical trends, where applicable. In Table A2, we present the method used to adjust each income source in the data and then discuss these adjustments in further detail.

TABLE A2
METHODS FOR ADJUSTING INCOME SOURCES
Income source Adjustment method
Cash income sources Wages  Employment Cost Index for Wages and Salaries 
Business Income CBO Proprietor Income (non-farm) projections 
Farm Income CBO Farm Income Index Projections 
Interest CBO Interest Income Index Projections
Dividends CBO Income from Dividend’s Index Projections
Rents CBO Income from Rents Index Projections
Social Security CPI-U
Veterans Benefits CPI-U
Survivor’s Benefits CPI-U
SSI CPI-U
Disability Average year-to-year change over past five years
Unemployment Average year-to-year change over past five years
Worker’s Comp Average year-to-year change over past five years
Cash assistance (TANF/GA) Average year-to-year change over past five years
Pell grant/educational income Average year-to-year change over past five years
Child support Average year-to-year change over past five years
Regular income Average year-to-year change over past five years
Other Average year-to-year change over past five years
Retirement and pensions Average year-to-year change over past five years
In-kind benefits SNAP CPI-food and CPI-U
School Meals CPI-food away from home and CPI-U
WIC Average year-to-year change over past five years
LIHEAP Average year-to-year change over past five years
Housing Following Fox et al. method

Income from: Wages and salaries, business income, farm income, interest, dividends, and rents

The SPM includes incomes from wages and salaries, business income, farm income, interest, dividends, and rents in its tabulation of family resources. We adjust each of these sources of income using projections from the Congressional Budget Office (CBO). The CBO regularly publishes economic projections that include expected changes in the Employment Cost Index for wages and salaries, which measures the change in the cost of labor due to changes in wages and salaries, which we use to adjust income from wages and salaries.11 The projected changes in the ECI are listed in Table A3. The CBO also produces estimates of the total change in business income, farm income, interest, dividends, and rents, which we used to adjust these income sources. These projected changes are also listed in Table A3.

TABLE A3
INDICES USED TO ADJUST WAGE AND SALARY INCOME, BUSINESS INCOME, FARM INCOME, INTEREST, DIVIDENDS, AND RENTS AS A PORTION OF GDP
  ECI Business Income  Farm income Rental Income Interest Income (personal)  Dividend Income (personal)
Base year (2018) 133.4 1542.0 39.0 682.0 1615.0 1253.0
Five years later  162.2 1927.0 58.0 813.0 1798.0 1538.0
Ten years later 191.6 2296.0 44.9 937.0 2648.0 1838.0
Note: Predictions listed in italics.

Source:  The Budget and Economic Outlook—2022 to 2032 (Washington, D.C.: Congressional Budget Office, 2022), www.cbo.gov/publication/57950.

Income from: Social Security, Supplemental Security Income (SSI), survivor’s benefits, and veteran’s benefits

All benefits administered by the Social Security Administration, including Social Security, SSI, and survivor’s benefits, are adjusted annually using a standardized cost of living adjustment (COLA) which is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The same is true for veteran’s benefits.12 The CBO does not release projected changes in the CPI-W, but trends from the past ten years show similar year-to-year changes in the CPI-W and CPI-U (Figure A2), we thus adjust income from these programs using the CBO’s projected changes in the CPI-U listed in Table A4.

FIGURE A2

TABLE A4
CPI-U PROJECTIONS USED TO ADJUST SOCIAL SECURITY INCOME
  CPI-U 
Base year (2018) 251.1
Five years later  296.4
Ten years later 332.8
Note: Predictions listed in italics.

Source: See The Budget and Economic Outlook—2022 to 2032 (Washington, D.C.: Congressional Budget Office, 2022), www.cbo.gov/publication/57950.

Income from: Income from disability, unemployment insurance, worker’s compensation, and cash assistance

Income from disability programs, unemployment insurance, worker’s compensation, and cash assistance include income from various state and federally run programs. For example, disability income includes all income from “company or union disability; federal government civil service disability; U.S. military retirement disability; state or local government employee disability; U.S. Railroad Retirement disability; accident or disability insurance; black lung miner’s disability; or state temporary sickness payments.”13 In addition, the unemployment insurance program and workers compensation programs are all run at the state level and program rules vary from year to year. Due to this variation, and lack of details as to how these programs may change in the coming years, we adjust these income forms using historical trends. For each of these income sources except unemployment insurance, we use the 2016 to 2021 CPS-ASEC data (representative of 2015 to 2020) and found the average year-to-year change in average income levels from each of these sources among those who reported receiving such income. We then determined the average of these annual changes over that five-year period. These averages of the annual year-to-year changes in income from these sources are listed in Table A5.14 We followed the same approach for unemployment insurance, but used the 2015 to 2020 CPS-ASEC give the substantial but temporary expansion to UI that occurred in 2020. In our model, we assumed that these income sources would change by these average rates in each future year into which we project, and that the changes would compound over time.

TABLE A5
ANNUAL ADJUSTMENTS TO DISABILITY, UNEMPLOYMENT INSURANCE, AND WORKER’S COMPENSATION
Income source Average annual adjustment
Disability income -0.3%
Unemployment insurance 1.8%
Cash assistance 3.5%
Worker’s compensation  2.6%
Source: Authors’ calculations using 2016 to 2021 CPS-ASEC (see description for details). 

Income from: Pell grants and income from educational sources

Income from educational sources includes income from Pell Grants or other aid from government sources, non-governmental scholarships and grants, and financial assistance from employers or friends (excluding household members).15 Pell grants are run at the federal level, and under current parameters, the grant levels are not adjusted annually and there is thus no statutory increase in Pell grant levels.16 However, from year-to-year, the amount of income from educational sources reported in the CPS-ASEC does rise. Thus, to adjust this income source, we use the same approach described above based on the 2016 to 2021 CPS-ASEC, finding an average year-to-year increase in income from educational sources of 3.4 percent over the past five years. We assumed that these income sources would increase by these average rates in each year which we examine and that the changes would compound over time.

Income from: Retirement, child support, other regular income, and other income

Income from retirement, child support, other regular income, and other income are all derived from various sources, and there are no official indices for adjusting income from these sources. We thus follow the same approach described and use historical changes in these income sources over the past five years to make predictions about changes moving forward. Again, these estimates are based on 2016 to 2021 CPS-ASEC data. The average annual increases are listed in Table A6, and we assumed that these income sources would increase by these average rates in each year which we examine and that the changes would compound over time.

TABLE A6
ANNUAL ADJUSTMENTS TO DISABILITY, UNEMPLOYMENT INSURANCE, AND WORKER’S COMPENSATION
Income source Average annual adjustment
Retirement income  2.4%
Child support 2.2%
Other regular 3.3%
Source: Authors’ calculations using 2016 to 2021 CPS-ASEC (see description for details).

Income from: Supplemental Nutrition Assistance Program (SNAP) and school meals

Under current legislation, Supplemental Nutrition Assistance Program (SNAP) benefits increase annually by the food component of the Consumer Price Index, and the value of free and reduced prices school meals increases by the food away from home component of the Consumer Price Index.17 Neither CBO or the U.S. Department of Agriculture publishes predictions of the food or food away from home components of the CPI. However, the CBO does produce projections of the CPI-U, which we make use of for this adjustment.

We begin by finding the year-to-year change in the CPI and the food component of the CPI between in the last five years for which we have data (Table A7). We then find the average year to year change over the past year for this five-year period, which is 0.023 for the CPI-U food component and 0.024 for the CPI. This means that, on average, the year to year change for the CPI-U food component over the past five years was 5.7 percent lower than the total CPI-U. Thus, we assume that the year-to-year changes for the food component of the CPI in the years for which we examine, will be 5.7 percent lower than the year-to-year changes in the total CPI-U. We follow the same approach for adjusting income from the school meals program, but using the food away from home component of the CPI (Table A8).

TABLE A7
ADJUSTING CPI-FOOD FOR SNAP ADJUSTMENT
  CPI-Food CPI
Index Year-to-Year Change Index Year-to-Year Change
2016 247.93 240.01
2017 250.07 0.009 245.14 0.021
2018 (base year) 253.56 0.014 251.10 0.024
2019 258.32 0.019 255.65 0.018
2020 267.21 0.034 258.84 0.012
2021 277.75 0.039 270.98 0.047
Projections     
Five-year average 0.023 0.024
Ratio of averages (CPI-food: CPI) 0.943
Index level five years after base year 302.30 296.40
Index level ten years after base year 337.31 332.79
Source: Authors’ calculations using U.S. Bureau of Labor Statistics as cited in “Consumer Price Index for All Urban Consumers: Food in U.S. City Average,”  FRED, Federal Reserve Bank of St. Louis, June 2022, https://fred.stlouisfed.org/series/CPIUFDSL and “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average,” FRED, Federal Reserve Bank of St. Louis, June 2022, https://fred.stlouisfed.org/series/CPIAUCSL.
TABLE A8
ADJUSTING CPI-FOOD AWAY FROM HOME FOR SCHOOL MEALS ADJUSTMENT
  CPI-Food Away CPI
Index Year-to-Year Change Index Year-to-Year Change
2016 262.70 240.01
2017 268.83 0.023 245.14 0.021
2018 (base year) 275.89 0.026 251.10 0.024
2019 284.41 0.031 255.65 0.018
2020 293.94 0.034 258.84 0.012
2021 307.30 0.045 270.98 0.047
Projections    
Five-year average 0.032 0.024
Ratio of averages (CPI-food away: CPI) 1.307
Index level five years after base year 345.23 296.40
Index level ten years after base year 401.43 332.79
Source: Authors’ calculations using U.S. Bureau of Labor Statistics as cited in “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average,” FRED, Federal Reserve Bank of St. Louis, June 2022, https://fred.stlouisfed.org/series/CPIAUCSL and “Consumer Price Index for All Urban Consumers: Food Away from Home in U.S. City Average,” FRED, Federal Reserve Bank of St. Louis. https://fred.stlouisfed.org/series/CUSR0000SEFV.

Income from: Supplemental Nutrition Program for Women, Infants, and Children (WIC)

WIC provides food assistance to low-income pregnant and postpartum women and infants. To value WIC benefits in the SPM, the Census Bureau uses reported receipt of WIC benefits in the CPS-ASEC and state-level average WIC values published by the USDA Federal Nutrition Service. The future changes in income derived from the policy will thus vary by state and we do not have reliable estimates of how they will change. Thus, to adjust this income source, we use the same approach described earlier and use the 2016 to 2021 CPS-ASEC, found the average year-to-year change in income from WIC in the past five years, which fell by an average of 0.2 percent per year. We assumed that WIC benefits will continue to depreciate going forward.

Income from: Low-Income Home Energy Assistance Program (LIHEAP)

The Low-Income Home Energy Assistance Program (LIHEAP) assists low-income families with heating, cooling, and energy costs. It is operated as a block grant and states have flexibility in terms of setting eligibility requirements and benefits levels; appropriations for the program also vary by year, and they are not indexed.18 Thus, to adjust this income source, we use the same approach described earlier and use the 2016 to 2021 CPS-ASEC and found the average year-to-year change in income from LIHEAP in the past five years (3.7 percent per year). We thus assume that LIHEAP benefits will continue to increase at this level going forward and that the changes would compound over time.

Income from: Housing subsidies

To adjust for income from housing subsidies, we follow the approach taken by Liana E. Fox and her colleagues.19 Under this approach, the housing subsidy is set at the lesser of 30 percent of household cash income (adjusted using the methods discussed thus far) and the shelter and utilities portion of the SPM poverty threshold (adjusted using the same method used to adjust the SPM threshold).20

Step 3: Projecting changes in tax liabilities and tax credits

The National Bureau of Economic Research runs a tax simulator named TAXSIM that can be used to calculate tax liabilities.21 Through 2023, TAXSIM accounts for all changes in the tax code under current legislation by adjusting each tax parameter by 2.5 percent to account for inflation. To account for changes in tax liabilities in years post 2023 but under the current tax code, we deflate income to 2023 dollars, calculate taxes and then inflate tax liability depending on the year of focus. Our estimated changes in tax liabilities thus do not account for changes in the underlying tax code. This allows us to isolate the effect of the indexed and unindexed CTC absent the changes set to occur in 2026 when the changes to the tax code under Tax Cuts and Jobs Act sunset and the maximum CTC reverts to $1,000 per child.

Step 4: Projecting changes in expenses

The SPM accounts for expenses such as out-of-pocket medical spending, work-related expenses, and childcare expenses. We account for changes in medical spending using projected changes in national medical expenditures produced by the Centers for Medicare and Medicaid Services (these adjustments are listed in Table A9). Such projections are not available for childcare or work-related expenses, so we follow a similar approach described earlier and use the average annual changes from the past five years to project changes going forward. We calculate an average annual change of 1.8 percent.

Table A9
PROJECTED NATIONAL HEALTH EXPENDITURES USED TO ADJUST MEDICAL OUT OF POCKET EXPENSE
  National Health Expenditures 
Base year (2018) 3604.5
Five years later  4720.5
Ten years later 6120.9
Source: National Health Expenditure Data (Projections), Center for Medicare and Medicaid Services, 2022, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData.

 

Notes

  1. These proposals include the American Family Act of 2022 (H.R. 928) , the Family and Community Inflation Relief Act of 2022 (S.4589), as well as Senator Romney’s Family Security Act and Family Security Act 2.0.
  2. Barry F. Huston, “Social Security Primer,” Congressional Research Services, updated September 15, 2021, https://sgp.fas.org/crs/misc/R42035.pdf.
  3. Eligibility was limited to children with Social Security Numbers.
  4. Gregory Acs and Kevin Werner, “Expanding the Child Tax Credit Could Lift Millions of Children out of Poverty,” Urban Institute, August 2021, https://www.urban.org/sites/default/files/2022-06/expanding-the-child-tax-credit-could-lift-millions-of-children-out-of-poverty.pdf; “A Poverty Reduction Analysis of the American Family Act,” Center on Poverty and Social Policy, January 25, 2021, https://static1.squarespace.com/static/610831a16c95260dbd68934a/t/61f1af1bdbca791a405e8c7c/1643228988580/Poverty-Reduction-Analysis-American-Family-Act-CPSP-2021.pdf; Irwin Garfinkel, David Harris, Jane Waldfogel, and Christopher Wimer, “Doing More for Our Children: Modeling a Universal Child Allowance or More Generous Child Tax Credit,” The Century Foundation, March 16, 2016, http://tcf.org/content/report/doing-more-for-our-children/; Chuck Marr, Kris Cox, and Arloc Sherman, “Build Back Better’s Child Tax Credit Changes Would Protect Millions from Poverty-Permanently,” Center on Budget and Policy Priorities, November 11, 2021, https://www.cbpp.org/sites/default/files/11-11-21tax.pdf; Chuck Marr, Kris Cox, and Arloc Sherman, “Recovery Package Should Permanently Include Families With Low Incomes in Full Child Tax Credit,” Center on Budget and Policy Priorities September 7, 2021, https://www.cbpp.org/sites/default/files/9-7-21tax.pdf; Zachary Parolina, Sophie Collyera, Megan A. Currana, and Christopher Wimera, “Monthly Poverty Rates among Children after the Expansion of the Child Tax Credit,” Poverty and Social Policy Brief 5, no. 4 (August 20, 2021), https://static1.squarespace.com/static/610831a16c95260dbd68934a/t/6125831bb2d0cb07e98375b9/1629848348974/Monthly-Poverty-with-CTC-July-CPSP-2021.pdf; H. Luke Shaefer et al., “A Universal Child Allowance: A Plan to Reduce Poverty and Income Instability Among Children in the United States,” Russell Sage Journal of the Social Sciences 4, no. 2 (2018), https://www.rsfjournal.org/content/rsfjss/4/2/22.full.pdf.
  5. “A Poverty Reduction Analysis of the American Family Act,” Center on Poverty and Social Policy, January 25, 2021, https://static1.squarespace.com/static/610831a16c95260dbd68934a/t/61f1af1bdbca791a405e8c7c/1643228988580/Poverty-Reduction-Analysis-American-Family-Act-CPSP-2021.pdf.
  6. There are other ways to change benefit levels over time rather than just indexing them to inflation. For example, benefit levels in the Supplemental Nutrition Assistance Program (SNAP) change with meal plan values set by the U.S. Department of Agriculture. The common principle at work in these methods, however, is to ensure that benefit levels somehow keep pace with actual costs faced by recipients.
  7. This data was retrieved from Sarah Flood, Miriam King, Renae Rodgers, Steven Ruggles, J. Robert Warren and Michael Westberry, Integrated Public Use Microdata Series (IPUMS), Current Population Survey: Version 9.0 [dataset], 2021, https://doi.org/10.18128/D030.V9.0.
  8. Additional details regarding the SPM poverty threshold can be found in Liana E. Fox and Kalee Burns, “The Supplemental Poverty Measure: 2020 Current Population Reports,” U.S. Census Bureau, September 2021, https://www.census.gov/content/dam/Census/library/publications/2021/demo/p60-275.pdf.
  9. For additional details regarding this calculation, see By Liana E. Fox and Kalee Burns, “The Supplemental Poverty Measure: 2020 Current Population Reports,” U.S. Census Bureau, September 2021, https://www.census.gov/content/dam/Census/library/publications/2021/demo/p60-275.pdf.
  10. This scale is as described in Liana E. Fox and Kalee Burns, “The Supplemental Poverty Measure: 2020 Current Population Reports,” U.S. Census Bureau, September 2021, https://www.census.gov/content/dam/Census/library/publications/2021/demo/p60-275.pdf.
  11. Note that the total compensation ECI also accounts for changes in the cost of employees above and beyond their wage—that is, the cost of employer provided benefits. We use the ECI for wages and salaries in our calculation.
  12. Dawn Nuschler, “Inflation-Indexing Elements in Federal Entitlement Programs,” Congressional Research Service, April 24, 2013, https://sgp.fas.org/crs/misc/R42000.pdf.
  13. See description of variable in IPUMS codebooks, Integrated Public Use Microdata Series, Current Population Survey: Version 9.0, https://cps.ipums.org/cps-action/variables/INCDISAB#codes_section.
  14. The change in average annual income from these sources could also be driven by the change in the composition of the population receiving these forms of income. To test for the effect of these compositional changes, we also estimated the average year-to-year change in income from these sources in a model controlling for the composition of the recipient population. There were some differences in the average year-to-year change using this method compared to the results in Table A5, but there were not substantial differences in the antipoverty effects of the indexed versus non-indexed versions of the expanded CTC over a ten-year time horizon when we used these estimates versus those in Table A5. We thus rely on the methods described above and the adjustments listed in Table A5 to produce our results.
  15. Sarah Flood, Miriam King, Renae Rodgers, Steven Ruggles, J. Robert Warren and Michael Westberry, Integrated Public Use Microdata Series (IPUMS), Current Population Survey: Version 9.0 [dataset], 2021, https://doi.org/10.18128/D030.V9.0.
  16. “The Federal Pell Grant Program: Recent Growth and Policy Options,” Congressional Budget Office, September 2013, https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/44448_PellGrants_9-5-13.pdf.
  17. Dawn Nuschler, “Inflation-Indexing Elements in Federal Entitlement Programs,” Congressional Research Service, April 24, 2013, https://sgp.fas.org/crs/misc/R42000.pdf.
  18. Olivia Wein, “The Low-Income Home Energy Assistance Program (LIHEAP),” National Association of Regulatory Utility Commissioners (NARUC), 2022, https://nlihc.org/sites/default/files/2022-03/2022AG_5-07_LIHEAP.pdf.
  19. Liana E. Fox and Kalee Burns, “The Supplemental Poverty Measure: 2020 Current Population Reports,” U.S. Census Bureau, September 2021, https://www.census.gov/content/dam/Census/library/publications/2021/demo/p60-275.pdf.
  20. Given that the threshold we begin with is from 2018, we use the shelter and utility portion of the threshold from this year.
  21. Information about the TAXSIM program available at: https://taxsim.nber.org/.

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