Taxes: a Tool for Reducing Poverty and Hunger

Shannon MaynardUpdates

Every year when I file my personal taxes, I am filled with mixed emotions. I hope the online tax calculator shows green, indicating a refund, instead of a red, indicating I owe. On the other hand, I also feel patriotic because I am helping pay for the social contract that our country has with its residents. If you have spent time traveling around the world, it becomes obvious that our U.S. tax system predictably allows for public goods and services many of us take for granted—parks, highways, schools, and libraries. If we lived without these things for any time, we would grow to appreciate them more.

The green/red dichotomy, though, can be slightly misleading. I’ve been paying taxes all year long—invisibly, every two weeks—and the money is already sitting in the U.S. treasury. Come April, the only thing left to calculate is whether too much or too little was withheld. In theory, if I wanted to ensure I had a refund every year, I could have 90% of my paycheck withheld. It wouldn’t be the most practical way to arrange my finances, but if my sole focus was the green checkmark, it would be a sure bet.

Reducing important questions to simple binary responses—fair or unfair; too much or too little; deserving or undeserving; red or green—oversimplifies how taxes work, disguises who they serve, and closes down conversations on whether our current system reflects our society’s values. For those interested in ending hunger and poverty, it’s crucial to consider and re-consider the implications of different aspects of tax policy.

Where Do Federal Tax Revenues Go?

I’ve written above about how taxes fund our social contract. But what are the elements of that social contract at the federal level? Where does the approximately $5 trillion in federal tax revenue go? According to analysis from the Center on Budget and Policy Priorities, in 2023:

  • 24 percent went to healthcare across Medicare, Medicaid, CHIP (Children s Health Insurance Program), and the Affordable Care Act;
  • 21 percent went to Social Security benefits;
  • 13 percent went to national defense;
  • 10 percent went to paying interest on the national debt;
  • 8 percent went to programs and benefits for veterans and federal retirees;
  • 8 percent went to programs that provide aid to individuals and families facing hardship including the Earned Income Tax Credit, SNAP (Supplemental Nutrition Assistance Program), and School Meals;
  • Less than 1 percent was spent on international aid,
  • And the remaining balance was for miscellaneous categories including education, transportation, natural resources, agriculture, science and research, and law enforcement.

Note the two in bold, the categories focused on the safety net for people experiencing poverty in the U.S. and building food and economic security globally. Put together, they add up to less than a penny on every dime.

Who Deserves Government Assistance?

As someone who is committed to creating a food secure world, I often think about the narratives we have created around public assistance and the distinction between tax expenditure programs and social welfare programs. Just exactly who do we deem worthy of government assistance, and how do we prefer to provide it?

There are two broad sorts of benefits from the federal government. The first group includes spending on social welfare programs like SNAP, WIC, school meals, TANF, and so on. You might think about this spending as money going out from the federal government to eligible households across the country. Contrast these with tax expenditure programs, or tax credits, which reduce people’s total bills. This approach provides a benefit by letting people keep more of their money in their pockets (or returns it to them as a tax refund if they’ve paid too much).

In the book The Other Side of the Coin, political science professors Christopher Faricy and Christopher Ellis explore why the public seems to be more supportive of government aid through tax expenditure programs than social welfare programs. The authors conclude that the public is more supportive of indirect forms of government aid because they are viewed as benefiting more deserving populations of workers and taxpayers.

The question of “deserving” versus “underserving” aside, if you’ve managed a household budget before, you may already see a false dichotomy at play here. Crucially, both categories have costs associated with them—the former in terms of money that leaves the Treasury, and the latter in terms of reducing the total amount of money that goes in. Both sets of activities cost the federal government resources that could otherwise be spent on other priorities. Distributing $100 in SNAP benefits reduces the government’s potential to invest just as much as collecting $100 less revenue due to the mortgage interest tax credit.  However, the shift in framing seems to make a difference in people’s perceptions.

In his book Poverty by America, sociologist Matthew Desmond examines tax policies and the hidden welfare that many middle-class and wealthier Americans receive. As Desmond has stated, “We often protect tax breaks that accrue to the wealthiest among us, tax breaks for wealth transfers and mortgage deductions that starve anti-poverty spending. And then we have the audacity to ask how we can afford to drive down child poverty and end hunger in America.”

Tax Credits, Enforcement, and Referenda as Tools for Addressing Hunger and Poverty

One of these tax expenditure programs that enjoys wide popularity is the Child Tax Credit, which provides direct financial assistance to families with qualifying children. By increasing the amount of credit, families receive more money, which can help them meet their basic needs such as food, housing, and childcare. This additional income can lift families out of poverty or prevent them from falling into poverty in the first place. The 2021 expansion of the Child Tax Credit led to a historic reduction in U.S poverty in the United States, particularly for children. Research showed that child poverty fell to 5.2%, the lowest level in recorded history.

The U.S. Senate may be ready to vote on expansion of the child tax credit after the April 15 tax filing deadline. The proposed $79 billion legislation would fund an expansion of the current child tax credit and lift 400,000 children out of poverty, as well as the continuation of tax incentives for businesses that were authorized in 2017. While some critics argue that the current bill does not go far enough in helping more families, it is hard to oppose lifting 400,000 more children out of poverty.

We’ve seen already how tax credits cost governments money by lowering the amount of revenue generated. But there’s another way that governments miss out on tax revenue: research from Oxfam highlights how tax evasion and avoidance perpetuate inequality and hinder efforts to reduce poverty. When wealthy individuals or corporations stash their wealth in tax havens, they dodge paying taxes in the countries where they do business and make money, which deprives those governments of resources to provide public services and infrastructure. In poorer countries, Oxfam estimates that $100 billion in tax revenue is lost annually. This would be a sizeable investment in transforming our global food systems. Oxfam estimates that the funds would prevent the deaths of almost eight million mothers and children annually.

According to a recent study by the University of Chicago Harris School and Associated Press-NORC Center for Public Affairs Research, 60% of American adults say federal income taxes are unfair, and 59% say the same about local property taxes. Would people respond the same way if they had a greater say in what their taxes paid for? In 2022 in Colorado, through a first of its kind ballot measure Proposition FF, voters chose to reduce the state tax deduction amounts for families making more than $300,000 annually to raise the $100M in annual revenue needed to make school breakfast and school lunch free for all K-12 students in the state.

Funding What We Value

How we spend our federal tax revenue and who benefits from tax cuts have a direct impact on our ability to increase food security in the U.S. and around the world. It comes down to our priorities and how they are reflected in our elected officials and their votes in Congress. In 2025, tax reform will become a major focal point as many of the tax cuts established in 2017 are set to expire. That means that there is a chance for Congress to reassess $350 billion in federal tax cuts and revenue. Those of us who want to see an end to hunger in our lifetimes better be paying attention to the tax reform debate. The charge to all of us will be to see through familiar false choices like the ones presented above, and to consider whether the social contract we fund is one that reflects the values we want for our society.

About the Authors

Shannon Maynard assumed the position of Executive Director of the Congressional Hunger Center in September 2015. Prior to working at the Hunger Center, Shannon served as Chief Talent and Knowledge Officer at Grameen Foundation, where she was responsible for ensuring talent, knowledge management, performance measurement, and planning efforts that were aligned with the global poverty-alleviation organization’s strategy. Shannon joined Grameen Foundation in 2009 as the founding director of Bankers without Borders, a global skills-based volunteer initiative to connect top volunteer talent with social enterprises using market-based solutions tailored to the needs of the world’s poorest people.

Previously, Shannon was the Executive Director of the President’s Council on Service and Civic Participation under the George W. Bush administration and managed strategic initiatives for the federal agency the Corporation for National and Community Service where she spent almost nine years including posts with AmeriCorps*VISTA and the Office of Public Affairs. Earlier in her career, Shannon held various leadership positions managing AmeriCorps programs for local and national nonprofits focused on hunger and youth empowerment. Her work has been featured in the Stanford Social Innovation Review, Nonprofit Quarterly, and the Chronicle of Philanthropy. She also serves as adjunct faculty at the University of Maryland’s School of Public Policy.

Shannon was a Hunger Fellow with the Congressional Hunger Center from 1997 to 1998. She received an MBA from Johns Hopkins University and a B.A. in journalism and political science from the University of Richmond.

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