The official federal poverty rate measures pretax income—period. It doesn’t consider government benefits such as food stamps, nor does it factor in the costs of housing, taxes and child care, all of which vary greatly across states and help determine how rich or poor people feel.
At the urging of the National Academy of Sciences and others, the Census Bureau in 2010 began calculating a Supplemental Poverty Measure as a way to create a more nuanced picture of poverty in America. The Census Bureau recommends using three years of data to compensate for small sample sizes in some states, so this is the first time the supplemental rates are statistically valid for comparing states.
Nationally, the supplemental poverty rate in 2012 was only a single percentage point higher than the regular rate—16 percent as opposed to 15 percent. But in 41 states, there was a significant difference between the 2010-2012 averages of the two measures.
For example, under the supplemental measure, California has a three-year average poverty rate of 23.8 percent, compared to its three-year average official rate of 16.5 percent. By comparison, Kentucky’s supplemental three-year average is 13.6 percent, compared to its three-year average official rate of 17.4 percent.
The wide disparity in housing costs between states and regions is the main reason why a family with the same income may feel poor in one place but not in another. For example, in 2012 the supplemental poverty threshold for a family of four living outside a metropolitan area in Kentucky was $18,000. The threshold for the same family living in the San Francisco/San Jose metropolitan area of California—one of the most expensive housing markets in the country—was $35,500. Nationally, the official federal poverty threshold for a family of four is $23,283.
Differences in states’ tax and public assistance policies also play a role, according to Trudi Renwick, chief of the Census Bureau’s Poverty Statistics Branch. The supplemental measure takes into account state and local taxes, and how generous a state is distributing housing and energy assistance. State policy also influences participation rates in federally funded programs such as the Supplemental Nutrition Assistance Program, known as food stamps.
Using the average of 2010-2012 data, the supplemental poverty rates were higher than the official poverty rates in California, Colorado, Connecticut, Florida, Hawaii, Illinois, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, Washington, D.C., and Virginia.
In 28 states, supplemental rates were lower than the official statewide poverty rates. The states were Alabama, Arkansas, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Vermont, West Virginia, Wisconsin and Wyoming.
In the remaining nine states, the differences between official poverty and the supplemental rate were not statistically significant.