The Justice Leauge Against Poverty Just Got Stronger

Just like fighting crime, fighting poverty takes a strong team. Medicaid, SNAP (or, food stamps), and TANF all provide a distinct and necessary role in making sure that low-income families can meet their most basic needs like food and medical care. Too often though, due to complexity and lack of coordination, people don't receive the assistance they need and the result ends up resembling the safety-net equivalent of this:

One of the factors that has contributed to the disunity of the group is the treatment of the Earned Income Tax Credit in determining the eligibility for other safety-net programs. Since EITC provides benefits in the form of cash, its a versatile member of the team. So versatile, that it could compromise access to other members of the team. If you have Batman, do you really also need the Green Lantern? This takes the form of counting the EITC against either or both the income and resource limit that means tested programs have in place. For TANF, EITC counts toward the resource limit in the month after it's received. For SNAP, it's 12 months. For SSI, it's 9 months.

However, thanks to a policy change that took place at the end of last year, some harmony will be restored among the team. EITC, as well as any additional value of a recipients tax refund, will be disregarded as income completely and as an asset for 12 months when calculating program eligibility. There are several significant benefits to this change, and, as noted to state agencies administering TANF, simplicity is chief among them. Tax refunds aren't itemized. There is no way to distinguish between EITC and any other portion of the refund. Producing the necessary tax documentation to make this distinction adds to an already burdensome verification process. The process from determining eligibility and benefit size for means tested programs can be considerable, around $1 billion a year for food stamps alone. Often this cost is absorbed by the states, who are also not having an easy time. Where states have eliminated asset tests entirely, and consequently the need to verify a participant's asset holdings, cost savings have followed. Oklahoma, for instance, saved $1 million a year when it eliminated its asset test for Medicaid and Virginia estimates that it will save around $250,000 a year by doing the same to its TANF program. Treating different parts of the tax refund differently also muddies the waters for recipients as to what portion of their refund they can retain and which they are required to spend down. While EITC could be disregarded as as a resource for as long as a year, the Child Tax Credit, which is also claimed by millions of EITC recipients, could count as soon as the month after it is received. Disregarding the entirety of the refund neutralizes this problem for both case workers and program participants.

The crosscutting, rather than the current piecemeal, nature of the disregard also brings significant benefits. First, since low-income households are often eligible for a suite of programs, the length of time they can retain their refund is dictated by the program with the shortest term. One of the super-powers that EITC brings to the anti-poverty Justice League is that it can be leveraged for asset building purposes. You can't put Food Stamps in a savings account. Being required to spend down your refund by the end of the next month is strong kryptonite. Second, it reestablishes EITC, as well as the rest of the tax refund, as a team player. 56 percent of low-income working households and 71 percent of poor working households receive EITC as part of a suite of other safety-net programs. One program that helps fight poverty shouldn't put at risk eligibility for others that do the same.      

Treating all components of a household's tax refund the same across all means tested programs is an important step in assuring that the Justice League Against Poverty is working together on behalf of the families its charged with serving.