All in the Family: Assessing Need in the Fiscal Unit

Abstract

This paper contrasts the measurement of family neediness based on economic units used for economic analysis and fiscal units used for tax purposes. The paper makes three contributions to the literature. First, the author identifies ways in which the economic unit and the fiscal unit are in discord and argues why this matters. Second, he presents evidence of the prevalence of discord between measures of neediness based on economic and fiscal units; he finds that about 28 percent of Canadians live in economic units that differ from their fiscal units. Third, the author demonstrates the quantitative relevance of this discord using two case studies. In a case study of the measurement of poverty, he finds that about half of the people living in fiscal units that appear needy when only the fiscal unit’s income is considered are not below the official poverty line when the economic unit’s income is used. In the other case study, the author finds that a proposed basic income scheme spends almost two-thirds of its budget on people who are not in poverty and 40 percent on children age 18 and over living with their parents.

Keywords: Income Taxes, Families, Transfers, Poverty, Tax Policy, Carter Commission