New Tax Foundation study of poverty levels

Almost 60 percent of U.S. children and many childless adults would qualify for government-provided health insurance under an expanded State Children's Health Insurance Program (SCHIP) if plans popular on Capitol Hill become law, according to a new Tax Foundation study of poverty levels.

The new study analyzes how far up the income scale Congress may push the benefits of SCHIP, to people who earn far more than the originally intended beneficiaries: children living in households with incomes just above the poverty line who are therefore ineligible for Medicaid.

The median household income in America was around $46,000 in 2005, but this is far below the threshold for benefits that many lawmakers want to enshrine in law when the program is renewed during the next couple months, according to Tax Foundation economist Gerald Prante, the author of the study.

"Gov. Spitzer in New York has just proposed that the program there purchase health insurance for families that earn 400 percent of the poverty level, over $82,000 for a family of four," said Prante. "New York is an outlier in this, but even the more popular 300-percent threshold would convert a program for low-income people into a program for middle-income people, possibly undermining support for the program," said Prante.

States have latitude in implementing their SCHIP programs, and some states are already awarding SCHIP benefits to childless adults and to families with incomes well above the nation's median income.

Prante also comments that funding a broadly available health insurance program with a cigarette tax, as seems most likely, may not be fair to the mostly low-income people who smoke.

"The better way to funding SCHIP, at whatever level," said Prante, "would be a broad-based tax like the federal income tax, not a narrowly targeted tax like the federal cigarette tax. Then policymakers could honestly evaluate the trade-offs: the benefits of government-provided health insurance versus the costs of fewer incentives in the private marketplace and higher taxes."

The study is Fiscal Fact No. 91, "What Is 300 Percent of the Poverty Level?" available at http://www.taxfoundation.org/publications/show/22471.html.

The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day(R), the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.