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Measuring Poverty: A New Approach
asks about tax payments for the previous year. (SIPP panels also generally obtain information about dependent care and housing costs.) Questions on tax filing status, number of exemptions, type of form filed (joint, single, etc.), and schedules filed (A, C, etc.) are answered by more than 90 percent of respondents, but questions on adjusted gross income, itemized deductions, tax credits, and net tax liabilities have high nonresponse rates. The primary reason for the nonresponse is that respondents are asked to produce their tax form and use it as the basis for answers to these questions, but only about one-third do so; see Bureau of the Census, no date(a). The Census Bureau has begun work to develop a tax estimation model for SIPP similar to the one used for the March CPS. The SIPP tax information, even with quality problems, should make possible improved estimates of income tax liabilities for families in the survey.
The current poverty measure takes no explicit account of expenses, such as child care and commuting costs, that are necessary to earn income. As originally developed, the official poverty thresholds implicitly included some allowance for such costs (through the multiplier), but the thresholds have never been adjusted to reflect increases in these costs due to changes in societal work patterns. In particular, many working families face sizable child care expenses that would not have been necessary 30 years ago. Perhaps more important, the fact that the allowance in the official thresholds for work-related expenses is averaged over all families means that the thresholds do not adequately distinguish between the needs of working and nonworking families. To properly assess poverty for both working families and nonworking families, we believe it is incumbent either to develop thresholds that appropriately account for needed work-related expenses or to deduct such expenses from income.31 Our proposal is to deduct child care and other work-related expenses from income (rather than creating additional thresholds, for the reasons that we presented above).
In 1960, an estimated 72 percent of families with children had a parent who could care for the children at home, while the remaining 28 percent had both parents in the work force or were headed by single parents. The situation was just the reverse in 1990, when an estimated 69 percent of families with children had both parents in the work force or were headed by single parents
Not discussed here are various arguments for distinguishing between working and nonworking families in terms of the value of time, see Appendix C.