A family of four in the northeastern U.S. needed to earn close to $151,100 in 2022 to be economically secure, according to a Washington, D.C.-based think-tank.
The Urban Institute, a nonprofit economic and social policy research group, also found in a recent report that roughly half of people in Connecticut and nationally don’t enjoy this status.
“Our conventional measures of economic insecurity, like the poverty rate, only capture acute need and shed no light on the hardships of millions of people who struggle to pay their bills and save for the future,” Urban Institute researchers wrote in “Measuring the True Cost of Economic Security,” a report issued last month.
The Federal Poverty Level, a metric with roots going back 60 years, holds that a family of four was impoverished in 2022 only if it earned less than $27,750. (The FPL this year for a family of four is $31,200.)
The Urban Institute’s True Cost of Economic Security or TCES measure, unlike the FPL, examines what a household needs to be economically stable. For example, does it have enough resources to pay all regular expenses and still save something to cover health care emergencies, or to assist children with higher education?
The poverty level is a simple metric developed in the mid-1960s by U.S. Social Security Administration economists and based largely on the cost of a minimum food diet.
To assess economic security, the Urban Institute evaluates adequate food, clothing, housing, health care, child care, transportation, postsecondary education, debt service, savings for unexpected expenses and retirement, and additional miscellaneous costs.
It also looks at a wide array of resources including: household earnings from wages and investments, available tax credits, and public assistance programs such as food stamps or Social Security.
The Urban Institute estimates the median cost of economic security, nationally, is $134,800 for a family of four with no adults older than 65.
For a household with no seniors and no children, the median earning threshold nationally is $88,900.
The study also found that 52% of all people in the U.S., including three out of five children, live without economic security.
The institute reported that 71% of Hispanics, 67% of Blacks and 46% of Asians and Pacific Islanders live below the security threshold, while only 42% of whites fall below these levels.
The institute also broke the country down into four regions and found that the Northeast, which includes Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont, required the second-highest amount of income and other resources to be economically secure.
While a family of four needed $151,100 in 2022 in the Northeast, a similar household required $126,200 in the Midwest and $124,000 in the South. In western states, though, a family of four needed $153,300 to achieve economic stability and begin to save.
Institute study echoes findings of CT group
A nonpartisan organization, the Urban Institute does not recommend specific policy options to help more households achieve economic security.
But researchers did not suggest that any effective response must be comprehensive.
“Policymakers, advocates, and the public must make choices on a range of policies affecting taxes, earnings, employment conditions, education, health care, and social insurance and public assistance programs that will all affect people’s economic security and ability to thrive,” the report states. “That over half of all people in the U.S. are struggling to achieve economic security in 2022 illustrates the need for action, and the solutions will need to be as diverse as the challenges.”
The institute’s findings likely will provide ammunition for groups in Connecticut looking to assist a huge segment of the population struggling financially.
The new findings echo many trends reported in recent years by the United Way of Connecticut, which established a new metric to assess households’ fiscal health.
According to the ALICE methodology — an acronym for Asset-Limited, Income-Constrained and Employed — a Connecticut family of four needed $108,324 in 2022 not to be economically secure, but simply to survive. And that’s assuming the household took full advantage of all tax credits available to it, something the United Way says is often missed.
Without full tax credits, that same Connecticut family of four needed $113,520.
The United Way estimates roughly four of 10 Connecticut households were struggling to survive financially two years ago.
“We were really pleased to see that others are really delving into this important question,” Lisa Tepper Bates, president of the United Way’s Connecticut chapter, said of the Urban Institute analysis.
The United Way and other policy groups have been pushing the General Assembly and Gov. Ned Lamont to create a new state income tax credit for low- and middle-income families. One of the most popular proposals involves a credit of $600 per child, up to $1,800 per household.
The credit also would be refundable.
That means that even if a household earns so little it has no state tax liability to apply the credit to, it still could have as much as $600 per child added to its refund.
Supporters estimate the annual cost to the state to provide this relief would be about $300 million.
Bates, whose organization has been leading an online petition drive to build support for a state child tax credit, called the Urban Institute study “an additional piece of very credible evidence that tells us families in Connecticut are struggling.”
Rep. Josh Elliott, D-Hamden, founder of the Tax Equity Caucus in the state House of Representatives, said the child tax credit is one of his highest priorities.
But while Elliott said he believes the proposal enjoys strong legislative support, he also warned that it will face fierce competition.
Many Democratic lawmakers, who hold majorities in the House and Senate, are pushing for increased funding in the next two-year state budget for K-12 and higher education, child care and other social services, and for the first comprehensive increase in Medicaid rates for providers since 2008.
Elliott did not speculate on what might be enacted in the regular 2025 session, which convenes on Jan. 8 and runs through early June. But some advocates for a child tax credit have said the best strategy to win approval would be to phase in the tax break over several years, an option Elliott would consider.
“I’m willing to get there however we can get there,” he said.
But there also may be some competing proposals for tax relief.
House Republicans in recent years have proposed an income tax deduction, rather than a credit, for middle-income households.
The deduction would lack the refundable element of the credit proposal, meaning poor households that owe no state income taxes could not claim this relief.
House Minority Leader Vincent J. Candelora, R-North Branford, said he expects Republicans also would want to revisit sales tax rules to provide new relief on purchases of vehicles, meals and clothing.
“All of those things we’ve got to reexamine,” said Candelora said, who has been pushing in recent years for state government — which has achieved record-setting surpluses over the past five years — to send more dollars back to middle-class households.
This story was originally published in the Connecticut Mirror Dec. 10, 2024.