¶ … absolute measure" of poverty is not an accurate measure of policy in the United States. The "absolute measure" is based on the threshold below which any family is unable to meet basic needs for living, or those having not enough income for food, shelter and clothing. The thresholds are generally based on the economy food plan, since it was determined that families spend one third of their after tax income on food, or are adjusted based on changes to the Consumer Price Index. However, this method is not realistic in terms of modern society. The "absolute method" does not account for income such as food stamps, school lunches, or public housing, nor does it account for income expenses such as taxes, child support payments, medical costs, health insurance premiums, or child care. The model for poverty in the United States should be adapted to account for disposable income, and use an approach more in tune with the "relative method" of poverty, which calculates whether or not a family has significantly less access to income and wealth. The Earned Income Tax Refund is a refundable tax credit (otherwise known as a negative income tax) that allows low income working individuals with dependants to receive a credit against their income tax liability, or in some cases, a cash supplement, if their tax falls below a specified amount. The idea behind the EITC is to allow a transition from welfare to a working environment, without the punishment of higher dependant care costs. It is significant because it allows a benefit for the working, low-income sector of society. Additionally, because it is a refundable tax credit, eligible families receive the full amount of credit, even if that amount is higher than the taxes owed. It is not considered "assistance," and thus will not reduce food stamp receipt, nor Medicaid or Supplemental Security Income.

The middle class income bracket appears to be disappearing in the United States. There are a number of reasons for this idea....

Most researchers believe that changes in both the labor market and in household composition have caused increased income inequality. For example, workers in the top range of employment are paid even higher wages than before, while those at the low end are making less. Additionally, many "middle-income" positions are being outsourced overseas. The standard "household composition" has changed, in that there are more single parent, non-married households in the United States. Also, rises in the costs of health care, living expenses, and basic needs also contribute to the shrinkage of the middle class.
Inequality in the last decade is difficult to judge. The data which underlines the idea that income inequality is rising is based on the Gini Index, which can be slightly flawed. The Gini index is a summary of income distributions about households, and analyzes how far from perfect equality that distribution is. The Gini index looks at each proportion of the population, and analyzes how much of the total income that proportion gets. This means that if, for example, 20% of the population was to get 20% of the income, then the value of the index would be 0. If, on the other hand, one household were to get 100% of the income, the value would be 1. According to the Gini index, the distribution of income is more unequal now than it was in 1968. Additionally, the gap has been rising since that point.

However, some researchers believe the Gini index to be skewed, or at least, incomplete. First, the Gini index looks at money income only, rather than non-cash benefits such as food stamps, IRA accounts, health insurance, and other worker benefits. Also, the data is only snapshots of the income distribution, and does not follow specific groups over time. This means that, in terms of non-cash income, the low-income households are generally not affected, the middle-class income share in increased, and the upper class share of income distribution is actually lowered. So, if the…