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Appendix A: Estimating State Benefit Generosity
- Brookings Institution Press
- Chapter
- Additional Information
This appendix explains the sources and methods that we used to estimate the income and benefits provided by work support programs.As we stated in chapter 4, the income and benefit estimates are based upon a family of three with two children and one adult. The adult emerged from the cash assistance welfare system a little more than one year ago and became a minimum wage worker. In addition, to establish the family’s eligibility for the school breakfast and lunch programs and the need for child care, we assumed that one child was of school age and the other was pre–school age. Finally, to estimate the amount of rental assistance, we assumed that a twobedroom apartment was appropriate housing for the family. Except where noted, the eligibility guidelines and benefit estimates we present reflect the value of program benefits and the status of policies that were in effect in 2000. The nominal estimates we present in chapter 4 are based upon tables 7-11 and 7-12 in the 2000 Green Book, which provide state-level estimates for a single parent with two children for several work support programs, including federal EITC payments, TANF earned income disregards in month thirteen of employment, and food stamps.1 We complemented that analysis with estimates of the value of earned income from minimum wage work (less federal and state income taxes and federal payroll taxes), refundable state EITC benefits , medical assistance, child care grants, school lunch and breakfast programs, and rental assistance. 181 Appendix A: Estimating State Benefit Generosity 1. U.S. House of Representatives, Committee on Ways and Means (2000) (hereafter, Green Book). 10-8191-1 App A 11/2/05 4:22 PM Page 181 Earned Income Less Taxes Earned income was calculated by multiplying the minimum wage rate for each state by 2,080, representing forty hours per week of year-round employment ; or 1,040, for year-round, half-time employment. Based on the specific assumptions we made about family structure, we estimate that none of the minimum wage workers has a federal personal income tax liability. The highest gross income provided by minimum wage employment was $13,520 in the states of Oregon and Washington. It was assumed that the workers were heads of household and qualified for the $6,450 standard deduction, as well as $2,800 for each of three exemptions, for a total of $14,850 in income adjustments , leaving no income to tax. We estimated FICA taxes by multiplying gross earned income by 0.0765, representing the employee’s share of these taxes. To estimate state income tax burdens, we relied on the work of Zahradnik, Johnson, and Mazerov, who report state income tax burdens for full-time minimum wage workers with two dependent children.2 For states that do not have a state income tax, a value of zero was entered. To estimate the state income tax burden of half-time workers, the tax thresholds of the states that taxed full-time workers were examined; we determined that no state taxes the income of a half-time minimum wage worker with two children. School Lunch and Breakfast Programs The estimate of the value of school meal programs was applied to state income and benefit totals only for the one child who was assumed to be of school age. (This assumption is important also for establishing the need for child care benefits.) The value of these benefits depended upon whether full-time workers on state-level minimum wages were eligible to receive free or reduced-price lunches for their children. Recipients of TANF and food stamp benefits are categorically eligible for free school lunches. For others, eligibility is based upon income guidelines.3 The school lunch and breakfast programs have one set of income eligibility guidelines for the forty-eight contiguous states and the District of Columbia and special guidelines for Alaska and Hawaii. Table A-1 shows the income thresholds for benefit eligibility that were in effect from July 2000 to 182 Appendix A 2. Zahradnik, Johnson, and Mazerov (2001). 3. The initial scenario presented in the analysis assumes TANF participation; consequently, the child is categorically eligible for a free lunch. However, later scenarios make different assumptions about program participation, and so income eligibility guidelines are relevant. 10-8191-1 App A 11/2/05 4:22 PM Page 182 [3.230.128.106] Project MUSE (2024-03-19 04:00 GMT) June 2001. Eligibility is determined monthly.4 For the...