First, consider the Temporary Assistance to Needy Families program (TANF),
which provides cash benefits to low-income (primarily female-headed) families with
children. Holding constant any behavioral response, TANF will increase the incomes
of the poor. However, it is expected to have little effect on the poverty rate
because TANF transfers are phased out at income levels significantly below the
poverty line. In contrast, the EITC, a federal tax credit targeted to low-income
working families with children, transfers income much higher in the income
distribution, but because the official definition of poverty is based on pretax
income, tax benefits provided through the EITC do not directly affect the poverty