State taxes and transfers can be an important form of assistance for low-income families. But the amount of government help varies widely among the states. And, importantly, so does what happens to those benefits when such a family increases its wages. To help understand how those tax and spending programs work, the Urban Institute has created a new interactive Net Income Change Calculator (NICC). The calculator allows users to enter information about family and work characteristics, child care expenses, rent, and program participation. The calculator then provides estimates for taxes and transfers at five income levels so users can see how taxes and transfers change as income rises. It includes state and federal income taxes, the employee share of payroll taxes, and a wide range of subsidy programs, including Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps), the Supplemental Nutrition Program for Women, Infants, and Children (WIC) as well as subsidies for Housing and Child Care. All rules represent 2008 law. The calculator shows how different these benefits are, depending on where a low-income family lives. For example, in 2008, a single parent with two children aged 0 and 3 with poverty level wages could have received transfer benefits ranging anywhere between $4,000 in several states and $9,200 (Connecticut) if she participated in TANF, SNAP, and WIC. In addition, she could have received about $6,700 in federal tax credits and either owed state income taxes or received additional tax credits. For example, in Alabama her state tax bill would be over $300 while in Connecticut she would owe no states taxes. She would also have owed almost $1,300 in the employee side of payroll taxes. We assume her childcare costs, before subsidies, would increase to about $250 per month – some of which could be offset by childcare subsidies. Together, taxes and transfers could have changed this mom’s income from $17,000 in wages to between $27,500 and $32,000 in income and benefits, depending on where she lived. What happens if that mom gets a job?
Display Date