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TANF effective benefit guarantees, tax rates, and child-only penalties, 2000-2016 Erik Hembre

By: Hembre, Erik.
Material type: ArticleArticlePublisher: 2020Subject(s): ASISTENCIA SOCIAL | PENSIONES NO CONTRIBUTIVAS | RENTAS MINIMAS DE INSERCION | IMPUESTOS | INCENTIVOS FISCALES | ESTADOS UNIDOS In: National Tax Journal v. 73, n. 2, June 2020, p. 401-428Summary: Temporary Assistance for Needy Families (TANF) has changed considerably since 2000 with lower benefit levels, increased child-only cases, greater work incentives, and increased in-kind transfers. This paper describes the national and regional trends in TANF policies by measuring effective benefit guarantees, tax rates, and child-only penalties using administrative TANF data. Effective policies are the average policies observed in data and often differ from statutory policies because they incorporate behavioral responses to numerous benefit determination policies. The share of child-only cases, where the parent is ineligible for benefits, has risen by 20 percentage points during this period. This is the first paper to estimate the effective child-only penalty, or the benefit guarantee reduction associated with moving from a single-parent to a child-only case, and will help in modeling household decisions related to work requirement compliance and response to time limits. Effective cash benefit guarantees average $437 per month for a three-person household, 88 percent of the statutory benefit level. Between 2000 and 2016, these guarantees decreased by 22 percent. The child-only penalty averages $75 per month in cash benefits, a modest 17 percent reduction in benefits. TANF increasingly uses in-kind transfers such as subsidized child care. When included in the benefit amount, effective benefit guarantees rise to $569, earned income tax rates drop by 14 percentage points, and the child-only penalty increases to $180.
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Temporary Assistance for Needy Families (TANF) has changed considerably since 2000 with lower benefit levels, increased child-only cases, greater work incentives, and increased in-kind transfers. This paper describes the national and regional trends in TANF policies by measuring effective benefit guarantees, tax rates, and child-only penalties using administrative TANF data. Effective policies are the average policies observed in data and often differ from statutory policies because they incorporate behavioral responses to numerous benefit determination policies. The share of child-only cases, where the parent is ineligible for benefits, has risen by 20 percentage points during this period. This is the first paper to estimate the effective child-only penalty, or the benefit guarantee reduction associated with moving from a single-parent to a child-only case, and will help in modeling household decisions related to work requirement compliance and response to time limits. Effective cash benefit guarantees average $437 per month for a three-person household, 88 percent of the statutory benefit level. Between 2000 and 2016, these guarantees decreased by 22 percent. The child-only penalty averages $75 per month in cash benefits, a modest 17 percent reduction in benefits. TANF increasingly uses in-kind transfers such as subsidized child care. When included in the benefit amount, effective benefit guarantees rise to $569, earned income tax rates drop by 14 percentage points, and the child-only penalty increases to $180.

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