New report shows the importance of assistance programs to Oklahoma families

Oklahoma Policy Institute recently released a new report that provides a family-level understanding of Oklahoma’s assistance and tax credit programs for families. The report is designed primarily to help those who influence, create, and implement state policy, as well as those who support and advocate for families, to understand the programs’ essentiality and some of their shortcomings.

The report shows how many Oklahomans need assistance from these programs and how the programs lift many out of poverty. It shows how programs interact to make resources available to families. The report analyzes how other states have addressed some of these shortcomings and offers recommendations for better supporting Oklahoma’s working families.

Helping families who need assistance helps all Oklahomans. Poverty affects us all because many people living in poverty have poorer health, are less able to work, and more likely to engage in criminal behavior. Poverty saps our most precious resource; economists call it “human capital,” but it’s really just all of us being able to do our best. Some research shows that higher-poverty areas, such as Oklahoma, have lower economic growth. Impacts of poverty can keep people from entering the workforce and reaching their full capacity when they can work. As noted below, poverty (and thus the need for assistance) is greatest among persons of color. Citigroup estimates the cost of Black inequality alone is 0.35 percent of gross domestic product. In Oklahoma, with a gross state product of $202 billion before the COVID-19 pandemic, we’d be adding $700 million to our economy, the equivalent of 18,000 good-paying ($40,000) jobs. Assistance programs aren’t a handout — they’re an investment in Oklahoma’s health, safety, and economic growth. 

Many Oklahomans need the support and security that assistance programs provide

Oklahoma has maintained a higher poverty rate than the nation as a whole over the last decade. Poverty is considerably worse for some Oklahomans than others. Poverty was much higher in 2018 for children (22 percent), women (17 percent), Blacks (28 percent), Latinx households (23 percent), and Indigenous families (20 percent) than for whites (13 percent) and men (14 percent). Poverty is also closely related to education and employment. While only 4 percent of bachelor’s degree holders are poor, 26 percent of those without a high school diploma are. Of particular concern during the COVID-19 pandemic, poverty is devastatingly high for the unemployed (38 percent) and those working less than full time all year (47 percent). 

Simply being above the poverty line does not eliminate financial hardship. A single parent of two children in Ardmore earning $10.25 an hour is at the poverty level, but far below the $28.38 living wage that’s needed to fully support this family.

Assistance programs support hundreds of thousands of Oklahomans

America has a long tradition of providing direct assistance and tax relief to provide a more adequate living for moderate- and low-income families, particularly those with children. These programs help with essential goods and services like food, housing, child care, health care, home energy, and cash payments. Many households benefit from more than one of these programs.

The chart below shows the range of programs and how widely they are used in Oklahoma. The black bar at the left shows that nearly 1.4 million Oklahoman live in households with incomes below double the poverty level. This is a rough indicator of how many of our neighbors live well-below an income that would make them self-sufficient. Bars show how many Oklahomans receive assistance from each program. The state child/child care tax credit has the largest reach (1.3 million people), followed by Medicaid (branded SoonerCare in Oklahoma, 1 million), the state sales tax relief credit, federal and state earned income tax credits (EITC), and SNAP (Supplemental Nutrition Assistance Program). At the low end, fewer than 100,000 Oklahomans receive Temporary Assistance for Needy Families (TANF), unemployment, child care subsidy, and WIC, a nutrition program for mothers and young children. Note that Medicaid participation will grow in 2021 after expansion and unemployment participation has grown significantly due to the pandemic.

The full report shows how the amount of assistance varies by program, from $40 per person per year for the state sales tax relief credit to $9,335 per person per year for Medicaid.

Assistance programs lift people out of poverty

Assistance programs make a difference in the lives of many low-income Americans. Individual programs contribute significantly to reducing poverty. In 2019, Social Security raised 27 million Americans out of poverty; SNAP and housing assistance raised millions out of poverty as well. The EITC is a particularly effective anti-poverty program, lifting nearly 6 million over the poverty line and reducing the severity of poverty for 20 million more. 

Families need each of these assistance programs, and we can make them work better

The report shows how assistance programs help raise families above the poverty level and keep them there as their income grows. It also shows that the path from assistance to self-sufficiency can be complicated and unpredictable. Some benefits have cliff effects, where a family whose income rises loses a benefit and may be worse off than if their income had not changed. Benefit programs can also combine to create a plateau effect, in which benefits slowly decline nearly as fast as earnings rise, sometimes leaving a family little better off.

The report describes how the federal government and other states have improved assistance programs to reduce cliffs. This can be accomplished by:

  • reducing benefits very gradually, as federal rules provide for the EITC and SNAP,
  • extending the period that families maintain the same benefit regardless of income growth, so they have time to prepare for an upcoming loss in resources,
  • disregarding some earned income so that workers get bigger rewards for increasing their earnings, and
  • making benefits universal (not income-tested), like Social Security, Medicare, and many income tax exemptions and deductions.

The report concludes with recommendations to improve assistance programs for working Oklahomans. The most important, expanding Medicaid for adults, has been accomplished and will take effect in 2021. We can better support families and children and reward work by:  

  • increasing the maximum income for children to keep Medicaid assistance, 
  • disregarding some income in calculating TANF benefits, which are very low in Oklahoma, 
  • expanding eligibility for school nutrition programs, 
  • expanding state low- and moderate-income tax credits, and 
  • reducing the cliff that occurs when child care subsidy ends.

The chart below shows how much better off a single parent of one child would fare if all our recommendations were adopted. These recommendations (red line; current resources are shown in gray line) would greatly improve support when the family needs it most, when the parent earns under $12 per hour, and would eliminate the cliff and plateau the family currently faces if earnings exceed $15 hourly. This family will have better housing, nutrition and health care and will get to keep more of the parent’s earnings as income increases under these recommendations.

Assistance programs and tax credits provide families with significantly more resources than if they depended only on low‐wage jobs. Families need these programs, which are proven to reduce poverty and have significant noneconomic benefits for families and the state as a whole. It is important to remember that the side effects do not justify reducing these household and societal benefits. 

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Plateaus and Cliff Effects in Oklahoma: Understanding how public supports and income interact for low-income Oklahomans was written by Paul Shinn, OK Policy Budget and Tax Senior Policy Analyst and Kenneth Kickham, Professor of Political Science with the University of Central Oklahoma. This report was produced with support from the Charles and Lynn Schusterman Family Foundation. 

ABOUT THE AUTHOR

Paul Shinn

Paul Shinn is a Budget and Tax Senior Policy Analyst with OK Policy. Shinn has held budget and finance positions for the Oklahoma House of Representatives, the Department of Human Services, the cities of Oklahoma City and Del City and several local governments in his native Oregon. He's also taught political science and public administration at the University of Oklahoma, University of Central Oklahoma, and California State University Stanislaus. While with the Government Finance Officers Association, Paul worked on consulting and research projects for the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and several state agencies and local governments. He also served as policy analyst for CAP Tulsa. He holds a Ph.D. in Political Science from University of Oklahoma and degrees from the University of Oregon and the University of Maryland College Park. He lives in Oklahoma City with his wife Carmelita.

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