Association for Public Policy Analysis & Management

Since the federal welfare reforms of 1996, cash assistance has become a less important anti-poverty program, while food stamps and refundable tax credits have played a more prominent role. There has also been a proliferation of variation in state welfare policies; states have much more latitude in the administration of food stamps and TANF, and some have adopted supplements to federal tax credits. In this paper we exploit this state-level variation to better understand what could be achieved if all states adopted the most generous state policies. We do so by simulating the child poverty reductions that would occur if every state were as generous as the most generous state in four key policy areas: food stamps, the Earned Income Tax Credit (EITC), TANF, and the Child Tax Credit (CTC). For food stamps and TANF, generosity refers to the proportion of eligible individuals enrolled in the program. For the EITC and CTC, generosity refers to the presence of state credits and their match rate to federal credits. We find that a “race to the top” in state EITC policies would have the largest impact on child poverty (reducing it by 1.2 percentage points for the nation as a whole), followed by Food Stamps, the CTC, and lastly TANF. There is more child poverty reduction to be achieved through the EITC than any of the three other programs because of the relatively large number of people who qualify for the EITC, their clustering around the poverty threshold, and the large average amount of the credit. Taken together, if all states were as generous as the most generous state in all four policies, the child poverty rate would be reduced by 2.4 percentage points, and almost five and a half million children could be lifted out of poverty.