Income Insurance in the Fifty Nifty: Evidence from America’s Working Poor


This paper explores how income support for working poor households varies across US states. We overcome limitations in survey data by approximating the lower tails of state income distributions and by building an imputation model which measures the combined response of federal and state income taxes and transfers to changes in earnings. Our imputations account for the geographic uniformity of federal policies as well as regional variation in income distributions, price levels and net transfer policies of state governments. We find large geographic differences in cumulative marginal tax rates and show that these differences materialize as variation in public insurance against transitory earnings shocks; their pass-through to disposable income ranges from 30 to 90%. Cross-state differences remain after adjusting for the local purchasing power of tax credits and transfers. States with higher shares of Black residents and lower mean incomes provide less insurance while those with income taxes, higher price levels and more Democrat leaning voters provide more.