National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Taxes

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Suggested Citation:"Taxes." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 406

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APPENDIX B 406 homes. Presumably, findings of this sort stem from such phenomena as self- employed people who report zero income or losses on a business accounting basis but who have adequate cash flow for their own needs. Or some of these people may be students or others with low cash income but access to assets or other resources. Or some people may simply underreport their income, particularly if it is from "off-the-books" sources. Scattered evidence suggests that SIPP may have fewer reporting problems of this sort, perhaps because SIPP takes more of a cash-flow approach to reporting of self-employment income. For example, in 1984, the proportion of people with income-to-poverty ratios of less than 50 percent was 38 percent of the total poverty population in the March CPS but only 29 percent in SIPP (Bureau of the Census, 1986: Table 6; Radbill and Short, 1992: Table 1). Also, SIPP data for 1984 (Radbill and Short, 1992: Table 10) showed steeper relationships of income-to-poverty ratio categories with such well-being measures as home and vehicle ownership than did the 1980 census data analyzed by Christopher Jencks (private communication). For example, home ownership ratios were as follows from the two data sources: Unit's Income Level Relative to Poverty Home Ownership Ratios 1980 Census 1984 SIPP Income less than zero .80 .19 Zero or positive income up to 0.50 of poverty .38-.41 .19 Income 0.50-0.99 of poverty .38-.46 .33 Income 1.00-1.99 of poverty .50-.62 .49 Income 2.00 or more of poverty .78 .65-.84 THE MARCH CPS AND SIPP COMPARED This section provides a more detailed comparison of the March CPS income supplement and SIPP, focusing on the adequacy of information from each survey that is relevant to measuring poverty. It also discusses the ability of each survey to construct poverty measures with shorter or longer than annual accounting periods, to construct poverty measures for states, and to construct other measures related to poverty (e.g., measures of access to material goods or access to health care along the lines of work by Mayer and Jencks, 1993). Finally, it offers some comparisons of the quality of income reporting in the two surveys. Categories of Information Taxes The March CPS income supplement asks no questions about any type of tax payment. Currently, for use in its experimental poverty estimates, the Census Bureau models federal income taxes, state income taxes, and

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Measuring Poverty: A New Approach Get This Book
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Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

In Measuring Poverty a distinguished panel provides policymakers with an up-to-date evaluation of:

  • Concepts and procedures for deriving the poverty threshold, including adjustments for different family circumstances.
  • Definitions of family resources.
  • Procedures for annual updates of poverty measures.

The volume explores specific issues underlying the poverty measure, analyzes the likely effects of any changes on poverty rates, and discusses the impact on eligibility for public benefits. In supporting its recommendations the panel provides insightful recognition of the political and social dimensions of this key economic indicator.

Measuring Poverty will be important to government officials, policy analysts, statisticians, economists, researchers, and others involved in virtually all poverty and social welfare issues.

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