New Insights Into Housing (In)security for DC’s Lowest-Income Residents

July 24, 2014

Nobody who lives in the District of Columbia — or follows housing issues — needs to be told that rents are too damn high here. Nor that they consume an inordinate portion of low-income residents’ budgets.

A just-released study by the Urban Institute is nonetheless newsworthy because it provides many and diverse figures on our affordable housing situation, along with details on our homeless population and its needs — met and unmet.

The full study covers not only the District, but other jurisdictions in the Washington metro area. So we get comprehensive figures and interesting opportunities for comparisons.

As is always the case, however, the figures for the District understate affordability problems because they’re based on the median income for the entire area.

For the 2009-11 period covered by the housing portion of the study, that was $106,100 for a family of four. By way of rough comparison, the median income for four-person D.C. families was $84,400 last year.

But we’ve got to go with what we’ve got. So here are a few of the many things one can extract about what the study labels housing security in the District. As you’ll see, it might more appropriately be labeled housing insecurity for the lowest-income residents.

Housing Burdens

The Urban Institute, like most analysts, uses the U.S. Department of Housing and Urban Development’s affordability measures.

HUD sets 30% of household income as the affordability cut-off. A household that pays more is said to have a housing-cost burden. A household that pays more than half its income has a severe housing-cost burden.

Slightly more than half of all District households were, to some degree, cost-burdened — and 28% severely so. But housing-cost burdens were vastly more common for the District’s 63,700 or so extremely low-income households, i.e., those with incomes at or below 30% of the area median.

All but 16% of them paid more than 30% of their income for housing — generally rent, plus basic utilities, though 18% were classified as homeowners.

And nearly two-thirds (66%) had a severe housing-cost burden. This is nearly three times greater than the percent for very low-income households, i.e., those in the next income tier.

Rental Housing Availability

The rental housing market was — and still is — extremely tight. Of the total rent units the Urban Institute identified, only 8% were vacant during the 2009-11 period.

So the old law of supply and demand helps explain the housing-cost burdens for lower-income residents, as well as the cost burdens for some much better-off households.

Only 26% of the units rented for less than $800 a month — roughly what an extremely low-income family of four could afford.

But the story is more complicated. About a third of these units were occupied by higher-income households. And only 0.9% of them were vacant.

So the rental housing market was shy 22,100 units that extremely low-income families could have lived in without a cost burden.

More units affordable for very low-income households were occupied by those with higher incomes. But because the District has more such units — and because more were vacant — the Urban Institute finds no shortage.

Subsidized Housing

In 2012, HUD subsidized roughly 33,900 housing units in the District. Housing Choice (formerly Section 8) vouchers accounted for 41% — some of them vouchers awarded to developers so they could charge affordable rents and some given directly to eligible households, which could then rent on the open market.

Public housing accounted for an additional 25% of the affordable units. Subsidies for the remaining 11,600 units came from a mix of programs. It’s not clear that all these units were affordable for the District’s lowest-income households.

What is clear is that there were far more extremely-low income households than HUD-subsidized units — and that the District’s own voucher program fell far short of closing the gap.

Looking only at renter households, the Urban Institute reports 43 subsidized units for every 100 extremely low-income households during the 2009-11 period. This, recall, is before HUD’s budget got hit by sequestration.

What’s Missing

As informative — and depressing — as all these numbers are, they tell only part of the story. We need also to consider where the affordable units were.

As the Urban Institute says, “they may not be in neighborhoods of opportunity that were transit accessible, close to jobs, or had amenities like grocery stores.” For the District, this is probably more apt now as gentrification has spread.

We need also to consider whether the affordable units were livable. The recent Washington Post exposé of conditions at Park Southern tells us that some surely weren’t. Leaks, mold, rotting dead birds on the stairwell, etc.

Not a unique case, by any means, as a recent NPR story indicates.

What Now?

It would be nice to end this long post with a policy solution. The best I can do isn’t good enough.

Clearly, as the DC Fiscal Policy Institute says, we need to invest more in affordable housing. Like the Urban Institute, it also says we should increase the total number of housing units, since this could relieve the demand pressures that are driving up costs.

The”we” here ought to be the federal government, as well as our local government and private sources. But it almost surely won’t be any time soon — even if the House doesn’t altogether get its way on what the HUD budget should be.

We need also to help extremely and very low-income households join the higher income tiers. An obviously large and varied agenda here.

 


DC Bans the Box, Gives Returning Citizens a Better Shot at Jobs

July 21, 2014

An estimated 60,000 District of Columbia residents have criminal records. Roughly 8,000 return to the community each year after serving time behind bars.

And about half of them will be back behind bars within three years. One, though not the only reason is that they can’t get legal, paying work. And one reason they can’t is that their job applications get tossed before they’re read.

That’s going to change. And it ought to change their extraordinarily high unemployment rate — 46%, according to a 2011 survey. Here’s why.

Last week, the DC Council passed what’s commonly known as a “ban the box” bill. Like others of its kind, the new law prohibits generally employers from including queries about criminal records in their job applications.*

They thus can’t automatically screen out anyone and everyone who’s ever been arrested, charged and/or convicted of a crime. Nor, in the District’s bill, can they ask about any of these during interviews.

They may, however, ask about convictions — or conduct a background check — after they’ve made a conditional offer of employment, i.e., one contingent on what they learn about the candidate’s criminal offenses or other matters they’ve said they’d look into.

They may then withdraw the offer, but only for a “legitimate business reason.” For this, the law establishes criteria, e.g., the responsibilities the candidate would have, how long ago s/he committed the crime(s).

But they don’t have to explain an about-face, as they would have in the original version. Nor does the rejected candidate have a right to sue, though s/he can file a claim with the Office of Human Rights — a lot of hassle for minimal compensation, the DC Jobs Council said.

For these reasons, as well as others, the law isn’t as strong as it might be.

Employers with fewer than 11 workers get a free pass, for example. This, as the Employment Justice Center’s Deputy Director testified is a large loophole because even big projects in some industries, e.g., construction, often include small contractors.

But the bill is ever so much better than nothing. And it might have been nothing without the exemptions and other concessions to employer concerns.

In fact, it’s somewhat better than the revised version lead sponsor Councilmember Wells produced in an effort to accommodate the altogether predictable complaints from some business interests, e.g., the local restaurant association.

So count the about-to-be law as a piece of good news in the midst of so much truly terrible stuff.

The District will join the dozen states that have banned the box. And with a stronger law than most. Only four of the states cover private employers. And only one — Hawaii — unequivocally prohibits conviction history inquiries before an offer is made.

The law will surely open doors for some returning citizens — and citizens who returned some considerable time ago. It will also keep doors open for those who are working because the law extends similar protections to employees. Some, we know, have been fired when their criminal records came to light.

The law won’t be a cure-all, however. And no one, to my knowledge, thinks it will be.

The Center for Court Excellence survey cited above indicates some employment barriers beyond the scope of any “ban the box” law, e.g., lack of a pre-incarceration work history and/or in-demand skills and credentials.

There are others — extraordinary difficulties in getting housing, for example. Some Ban the Box Coalition members advocated an expansion of the law to remedy this. So there’s more work to do on the policy front.

But experience tells us that anti-discrimination laws can go only so far — even when they’re strongly enforced, which they generally aren’t. I rather doubt the District’s “ban the box” law will prove an exception, since it’s complaint-based.

Management consultant Wendy Powell argues that such laws “can provide false hope to candidates with a felony conviction” because their job histories will inevitably have a gap. And that, she says, is always a legitimate basis for inquiry.

Whether the criminal record emerges during an interview or, as she recommends, is preempted by voluntary disclosure, employers will have to give returning citizens a chance.

The same, I think, is true when they decide whether to exercise their “legitimate business interest” because they’ve got wiggle room if they’re predisposed to use it — not in all cases perhaps, but I can imagine many.

Ultimately, the success of the new law will depend on whether employers fully embrace the intent. The more that do, the more that will, I think.

* The bill exempts employers that provide programs, services and/or direct care to minors and “vulnerable adults.” This, I’m told, basically reaffirms a provision stating that the pre-offer provisions don’t apply when a federal or local laws and rules require consideration of an applicant’s criminal history.

 


Less Known, But More Urgent Social Security Shortfall

July 17, 2014

I supposed you’ve read that the Social Security Trust Fund will run out of money long about 2035. This date applies to the Old-Age and Survivors Insurance Trust Fund — that one that helps pay for workers’ retirement benefits and the benefits their dependent family members may ultimately receive.

The Trust Fund for SSDI (Social Security Disability Insurance) is in far worse shape. The latest report from the trustees projects insolvency in 2016. Unless Congress does something PDQ, the so-called DI Trust Fund will be able to pay only about 80% of benefits.

They’re already far from generous — currently, on average, about $1,146 a month for disabled workers themselves or less than $1,000 if eligible spouses and children are included. Yet they’re a major source of income for most recipients and their families.

In 2010, for example, they accounted for more than half of total family income for 78.5% of beneficiaries. For nearly one in three, they were the only income source.

Benefits notwithstanding, nearly one in five lived in poverty. And well over a third (37.4%) were poor or near-poor, i.e., living below 150% of the federal poverty line.

These are hardly families who can afford a 20% cut.

Congress could avert it, at least temporarily, by shifting funds from the OASI Trust Fund to the DI Trust Fund, as it did in 1994. But this Congress isn’t that Congress.

Hence a panel discussion hosted by the Center for American Progress Action Fund, whose parent organization concurrently released a fact-packed brief on SSDI.

The lead speaker, Senator Sherrod Brown, argued that Democrats should push for an expansion of Social Security, along the lines that he, among others, has proposed. The best defense is a good offense, as they say.

Unfortunately, as things stand now, SSDI needs a good defense too. Because it’s been subject to a barrage of negative media coverage.

Brown says that the attacks on SSDI are actually “backdoor attempts” to dismantle the whole social insurance system, which Republicans still want to privatize, i.e., convert into something like a compulsory IRA.

I’m not so sure. But some surely are casting aspersions on SSDI — and its beneficiaries. Though SSDI is basically an insurance policy that they and their employers have paid for, much of what we hear recalls attacks on safety net programs.

It’s rife with fraud. People perfectly able to work are gaming the system — in this case, with help from rapacious lawyers. Look at all those “squishy” diagnoses, e.g. some musculoskeletal disorder that’s allegedly excruciatingly painful.

The fuel for this fire, I think, is essentially the same as the source of the impending — but easily avertable — crisis.

Many more workers are now receiving SSDI than in the program’s earlier days — about 8.9 million, as compared to 1.4 million in 1970.

And we saw an uptick when the recession set in, though not nearly so large as the uptick in claims. (Notwithstanding alleged laxities, fewer than 40% of claims are ultimately approved.)

Social Security’s Chief Actuary, Stephen Goss, told the CAP Fund audience that the increase over time was predicted, even before the recession, because the largest drivers are demographic.

First, we’ve had a 43% increase in the working age population, i.e., adults between the ages of 20 and 64, since 1980.

Baby boomers are partly responsible for that, of course, And they’re now old enough to be at much higher risk for disabling conditions. A 50-year-old is twice as likely to be disabled as a 40-year-old and a 60-year-old twice as likely as a 50-year-old, according to another CAP brief.

At the same time, far more women are working — and for quite a long time, as they must to qualify for SSDI. So the pool of workers who’ve become eligible when disabilities make it impossible for them to continue doing the same kind of work — or any other kind they might qualify for — has increased for this reason as well.

Expansions in the potential pool tell only part of the story. Roughly half of the disabled workers receiving SSDI benefits have, at most, a high school education. They’re likely to have had jobs that required a lot of standing, walking, lifting and the like.

They’re not likely to have in-demand skills that would enable them to shift into more sedentary occupations — something the Social Security authorities would consider before approving their claims.

Policy changes also help explain why the SSDI rolls have grown. These include the phased-up increase in the age workers can qualify for full retirement benefits — at which point SSDI recipients are automatically shifted over to the OASI program.

Basically, we’ve still got baby boomers — and some younger disabled workers as well — who wouldn’t be receiving SSDI if Congress hadn’t raised their full retirement age to 67.

What this means is that the pressure on the SSDI program will eventually diminish because the boomers will all reach full retirement age.

This is why some recommend that a slightly larger percent of payroll taxes be allocated to SSDI. An initial shift from 1.8% to 2.8% of the total 12.4% collected, with smaller shifts thereafter would keep both trust funds wholly solvent until 2033, according to the Social Security actuaries.

Another option Goss has mentioned would be a small increase in the payroll tax. Or, he adds, Congress could just let the benefits cuts happen.

As if we don’t already have enough poor people in this country.

 


Why Not Just Give Poor People Money?

July 14, 2014

Not long ago, a Chinese millionaire decided to invite some homeless people for a fancy free meal, with $300 checks as a post-dessert treat. The operators of the shelter he contacted agreed to supply the guests, but only if he donated the money to the shelter instead.

Some of the guests might use their cash gifts to buy alcohol and drugs, the executive director reportedly said.

The story provoked some sputtering and muttering, as you might imagine. It also gave rise to a New York Times op-ed that teed up an idea that’s been around for awhile. Why not just give the poor cash?

This, in fact, has been done, to a limited extent, in some developing countries. Professor Christopher Blattman, who wrote the op-ed, provides examples, including some trial programs he and colleagues had assessed.

For the most part, recipients used the money to improve their lives. Some extremely poor women who were given $150, plus a few days of business skills training nearly doubled their earnings, invested in some “durable assets” and, on average, tripled their savings.

Even homeless men and drug users in Liberian slums bought themselves some clothes and “ate and lived better.”

In most of the trials, people worked more after they got the grants, though the trials apparently didn’t impose work requirements, as our major cash assistance program does — and SNAP (the food stamp program) for people like at least some of the Liberian slum-dwellers.

Would handing out cash, with no strings attached, work here — and on a large scale? We don’t know. The U.S. projects Blattman mentions required families to set goals and report on progress, make efforts to “build up their human capital,” etc.

What we do know is that private donors, public officials and nonprofits like the New York City shelter are likely to take a dim view of addressing poverty in the simplest, most direct way, i.e., by giving poor people money.

Even one of the projects that linked cash to goal-setting and the like encountered “mistrust from donors and other nonprofits who held hard to the view that poor people can’t make good decisions,” Blattman says.

This is a commonly held view, I think. In some cases, it’s a form of blaming. People are poor because they made bad decisions — didn’t finish high school (or go on to college), had children before they were married, etc.

And how many stories have we read of the extravagant and/or unhealthful things people buy with their food stamps? How many proposals to keep them from using their benefits this way?

We see something of the same view in widely-reported experiments designed to show that poor people make bad decisions through no fault of their own, but because their brains are overloaded with worries about not having enough money. Note the assumption here.

Awhile ago, blogger Matt Bruenig figured that we could cut poverty in half by giving every American about $3,000 a year, which we could each use however we chose.

This was perhaps more a thought-provoker than a serious proposal — a way, as he said, of showing that the obstacle to “dramatic poverty reduction” is politics, not the inherent complexity of devising effective solutions. Nor the cost.

Yet he’s not enthusiastic about simply giving everyone who’s poor enough money to lift them over the poverty line. This, he says, “would probably cause intolerable numbers of people to drop out of the labor market.”

Reihan Salam at the National Review objects to “unconditional income support” — and for somewhat similar reasons. “[I]t might help the most motivated poor people with the strongest social networks to raise their earnings potential,” he says. But it would harm the rest because they wouldn’t engage in gainful employment.

The biggest worry for him, it seems, isn’t what this would do to our economy, but rather that the poor would miss out on the personal benefits work provides.

Brink Lindsey, a “bleeding heart” libertarian whom Salam cites, elaborates on this point at length. “Joblessness,” he says, “means not only lack of income, but also lack of status, lack of identity, and lack of direction. It is the path … to anomie and despair.”

I suppose, in our society, this is generally true, though we can all think of exceptions — just as we can all think of jobs that, if anything, impair one’s sense of personal identity.

What’s interesting to me is that both Salam and Lindsey assume that poor people will make a decision that’s bad for them. They’ll forgo personal fulfillment and chose “anomie and despair” instead.

I doubt that giving no-strings cash to poor people is the solution to poverty. Among other things, it’s unimaginable that we’d give them enough. But, as Blattman says, “why not try” and see what happens?

 


What’s a Poor Mother With No Childcare Subsidy to Do?

July 10, 2014

Perhaps you’ve read about Sanesha Taylor. She’s the Scottsdale, Arizona mother who left her baby and toddler in the car while she interviewed for a job.

Got arrested and put in jail. Lost custody of her children. Story picked up by a local TV channel and spread all over the internet. So no job, of course. And dimmer prospects because she’s already got a felony charge on her record — and could be convicted.

No one — least of all Sanesha — thinks it’s okay to leave your kids in a car unattended, especially on a hot day. But she was between the rock and the hard place because she needed that job and had no one to look after her children.

She had thought she would until the last minute, but the informal babysitting arrangements she’d relied on fell though. So she felt she had no choice but to blow off the interview — and the chance of a job that would pay more than enough to end her family’s homelessness — or to take the kids with her and leave them in the car.

This story would be altogether different — and we would never have read it — if she’d had affordable, high-quality child care. For her — and many, many other low-income parents — that means child care subsidized with public funds.

She once had a child care subsidy, but lost it when her employer cut her work hours — and then fired her when she took time off to prevent a miscarriage. Reportedly was offered a job elsewhere, but couldn’t take it because she couldn’t find child care.

Arizona isn’t the only state that terminates childcare subsidies when parents lose their jobs and don’t find another PDQ.

Witness for Hunger member Tangela Fedrick, who lives in Philadelphia, tells of a similar experience. Like Sanesha, she managed to piece together part-time childcare arrangements.

But, she says, her five-year-old son no longer has “a sense of stability and security.” And “he’s not learning anything,” the way he did when he was at a childcare center that gave him “instruction and pushed [him] to learn more.”

She worries that he won’t have the “tools” to help him “excel” when he starts grammar school — and that the months without high-quality child care “will always be a time of lost potential.”

In short, we have two major problems here: parents whose lack of reliable child care is an obstacle to getting a job and children who miss out on early learning experiences, which scads of research tell us provide lifelong benefits — both to them and our society.

The problems are obviously related because they’re both rooted in lack of money — for parents to afford high-quality child care without a subsidy and for state and local agencies to provide subsidies to all parents who need them.

Not only to provide them, but to reimburse providers at a rate that doesn’t cause them to limit the number of subsidized children they’ll accept and/or to skim on investments in quality, e.g., staff training.

To some extent, the money shortage reflects choices by state and local governments. In 2012, for example, three states cut spending on childcare assistance by more than 30%. All three — Georgia, North Dakota and South Carolina — also cut state taxes.

But the federal government is to blame as well. The Child Care and Development Block Grant, a.k.a. the Child Care and Development Fund, hasn’t kept pace with rising needs and costs.

Nor, as I’ve said over and over again, has the TANF block grant — another major federal funding source. Combining CCDBG with states’ uses of their federal TANF funds and funds they must spend to get those, childcare spending was lower in 2012 than in any year since 2002.

The multiple funding streams make it hard to put a figure on the total number of children served — and not. This much we know. The number of children served by CCDBG was the lowest since 1998 — only one in six eligible children.

That leaves more than 5.6 poor and near-poor preschoolers without child care subsidized by the largest federal source. And at least some older children with working parents need child care too.

In 2011, 13.6% of poor preschoolers whose mothers worked had no regular childcare arrangements — as of course, did some unknown percent whose mothers were actively seeking work. And this was when at least some states still had Recovery Act money for child care—and before sequestration had taken a bite out of CCDBG.

Tangela has a job now. She hopes this means she’ll get her childcare subsidy back. If she doesn’t she’ll probably still have to rely on her network of friends and relatives because center-based child care for her son would set her back somewhere around $8,600 for the year.

That’s 36.4% of the median income for Pennsylvania’s single-mother families. And its far from the costliest, whether measured in dollars or as percent of median income.

President Obama has proposed increases for CCDBG totaling $807 million, including $200 million states would have to use to support improvements in childcare quality. This would leave somewhat under $5.9 billion for subsidies.

The National Women’s Law Center says that “the additional funding would help maintain low-income families’ access to help paying for child care.”

Not, you’ll note, make subsidies available for anywhere near the number of low-income families that need them — and at reimbursement rates that would ensure access to high-quality care.

One would think that a program that supports both work and early learning could get more — or at least one would if one knew nothing at all about this Congress.


Should DC Support More Affordable Housing … or Less?

July 7, 2014

The DC Council has two bills pending that force decisions on how — and to what extent — local taxpayer dollars should be used to create and preserve affordable housing in our increasingly unaffordable market.

One bill quite clearly would increase the stock of housing affordable to low and moderate-income residents. The other would, over time, have the opposite effect, though it’s doubtful that’s what the sponsors intend.

Leveraging Public Land

A bill introduced by Councilmember Kenyan McDuffie would require private-sector developers that buy or lease District-owned land for multi-family housing to make a specific portion of units affordable for specific categories of low-income residents.

The requirements would apply to both rental housing and condos, but in both cases, only those with 10 or more units.

For housing near a Metro station, major bus route or streetcar line, at least 30% of the units would have to be affordable. A 20% minimum would apply to housing less convenient to public transit.

Those who know how dicey affordable housing requirements can be will be pleased to know that the bill sets quotas. These are all based on the customary 30% of household income and, as is also customary, the Washington-area median income, adjusted for family size.

The affordable unit requirements differ according to the type of housing, as well as where it’s located.

For rental housing, 25% of the set-aside units would have to be affordable for what the bill defines as very low-income households — those whose incomes are no greater than 30% of the AMI. (Those familiar with U.S. Department of Housing standards know them as extremely low-income households.)

The rest of the units would have to be affordable for households in the next tier — 31-50% of the AMI. For a four-person household, this would currently mean a maximum monthly cost of about $1,338 a month.

Half the set-aside for ownership units would have to be affordable for households in this tier. The remainder would have to be affordable for households with incomes between 51% and 80% of the AMI.

These restrictions would remain in place “for the life of the building,” which I assume means for as long as it’s used for housing. (Keep reading to see why this is so important.)

The District would subsidize the affordable units by selling or leasing the land at less than its appraised value. Developers could request waivers from the affordable unit requirements if that, plus other subsidies wasn’t enough.

Cutting Back of Affordability Requirements

A bill introduced by Councilmember Anita Bonds would change rules designed to ensure that condos and single-family dwellings developed with Housing Production Trust Fund subsidies remain affordable for a goodly number of years.

As things stand now, owners of subsidized units generally must sell them at a price that’s affordable to other people in the same income bracket until 15 years have passed — or longer if their purchase agreement says so.

Once the time limit expires, they can sell to anyone at any price. But they must reimburse the Trust Fund for the subsidy that made the home affordable for them. The time limit drops to 10 years if the home is in a high-poverty neighborhood. The repayment requirement remains the same.

The Bonds bill would cap the affordability limit at 15 years, making some types of homeowner affordability programs ineligible.

More importantly, it would reduce the affordability requirement to five years for homes in “distressed neighborhoods.” Owners could then sell at whatever price they could get.

They’d still have to repay the Trust Fund. So it might seem that the subsidy were merely being recycled — repaid by one owner, available for the next.

But in a housing market like the District’s, the second subsidy would often have to be larger. And the cost of subsidizing the creation of a new affordable unit would generally have to be larger yet.

So the repayment wouldn’t fund a replacement in either case — or at least not in the same neighborhood as the unit that got sold at market rate. At best, the Trust Fund would be re-creating affordable homeownership units, rather than expanding the shrunken stock.

Which brings us to the second big problem with the Bonds bill — the definition of “distressed neighborhoods.” It would reduce the definition used for the current 10-year time limit from a 30% to a 20 % poverty rate.

For technical reasons, the rate wouldn’t reflect the current poverty rate, as the DC Fiscal Policy Institute’s Jenny Reed has explained. So we’d have many “distressed neighborhoods” that haven’t been distressed for some time, e.g., Columbia Heights, Logan Circle, parts of Penn Quarter.

The five-year limit would also apply to neighborhoods that will soon be wholly redeveloped — and pricey. I see condos sprouting up near the Navy Yard every time I walk down that way.

The end result would be affordable housing losses in nearly 40% of the District’s Census tracts — the technical definition of “neighborhoods.”

And as housing advocate Angie Rodgers points out, it’s not only prospective homeowners who’d be affected. Any new Trust Fund money invested on their behalf would mean less to subsidize affordable rental housing, which we’re already so short on.

Preserving the current affordability requirements wouldn’t deny homeowners the opportunity to build wealth, as homeownership is said to do. It would merely ensure that future homeowners can benefit from subsidies we’ve paid for to preserve some modicum of diversity and opportunity in our community.

The current law probably isn’t the best way to do this, as Urban Institute housing and community policy expert Brett Theodos (and others) have explained.

But it’s a whole lot better than shrinking the time limits — and over-defining neighborhoods that prospective homeowners might shy away from if they couldn’t turn a maximum profit for 15 years.


Nothing Friendly to Low-Income Families in House Republicans’ Child Tax Credit Reform

July 2, 2014

Republicans on the House Ways and Means Committee took another step in their piecemeal approach to tax reform last week. The focus this time was the individual tax code — specifically, the Child Tax Credit.

No big surprise here, I suppose. We know Republicans have decided they need to show they care about the interests of working families. And what could be more family friendly than a more generous Child Tax Credit?

For better-off families, the Ways and Means bill surely is that. But for low-income families, nothing of the sort. Some millions, in fact, could no longer claim it at all.

What Is the Child Tax Credit?

Like the Earned Income Tax Credit, the Child Tax Credit reduces federal tax liabilities for filers who claim it. In the case of the CTC, those eligible are parents with dependent children under the age of 17. Each of the kids is worth a credit of up to $1,000.

Also like the EITC, the CTC phases in and then out. However, anyone with earned income can claim the EITC. For the CTC, the phase-in currently begins at $3,000.

This threshold isn’t permanent law. It was set by the Recovery Act and extended through 2017 as part of the fiscal cliff deal. Without the extension, the threshold would have been about $13,300 last year — and higher this year because the permanent law provides for an annual adjustment to reflect inflation.

The income level at which the phase-out begins depends on whether the filer is a single parent or married — and if married, whether filing jointly or separately.

The phase-out threshold for a single parent is more than twice the threshold for a married couple filing jointly — $75,000, as compared to $110,000. The threshold for a married person filing separately is simply half the joint filer threshold.

The fact that the threshold for a married couple is less than double the threshold for two single parents is sometimes referred to as a marriage penalty. The penalty here, i.e., the ability to claim the full credit, kicks in only when a single working parent marries — and obviously not always then.

Unlike the EITC thresholds, the CTC phase-out thresholds aren’t indexed to keep pace with inflation. But they’re considerably higher. For example, a married couple becomes ineligible for the EITC when its income is less than half the phase-out threshold for the jointly-filing couple claiming the CTC.

What Does the Ways and Means Bill Do?

The bill House Ways and Means Republicans passed would eliminate the so-called marriage penalty by raising the phase-out threshold for married couples filing jointly to twice the threshold for single parents — $150,000.

The higher threshold would be indexed to inflation, as would the threshold for single parents. The maximum $1,000 per child credit would also increase with the inflation rate.

The maximum credit boosts would, of course, benefit only families with earnings high enough to qualify for the full credit. Many already don’t. In 2011, 23% of children with working parents received only a partial credit, according to a Tax Policy Center brief.

These changes would all become permanent law — at an estimated cost of nearly $115 billion over the first 10 years. Again, no offset, since tax breaks seem to have a privileged status.

But not altogether. The CTC improvements initiated by the Recovery Act would be left to expire. So the threshold set in permanent law would kick in at the end of 2017, with all the inflation adjustments since it was temporarily superseded. And that qualifying threshold will rise — and rise — because there will be ongoing annual adjustments.

How Would the Bill Affect Low-Income Families?

As of 2018, families earning less than about $14,500 wouldn’t qualify for the CTC at all, according to the Center on Budget and Policy Priorities’ analysis of the bill.

A single mother with two children and that $14,500 a year income would lose $1,750. Parents with somewhat higher incomes would lose as well, since their credits would, as now, be calculated on the basis of how much they made over the threshold.

At the same time, a married couple with two children and a joint income at the new phase-out threshold would gain $2,200. And families with considerably higher incomes would still qualify for a partial credit.

Looking forward to 2023, the Tax Policy Center projects that more than two-thirds of the credit, in dollars, would benefit families in the top two-fifths of the income scale.

The refundable Child Tax Credit lifted about 3 million people — more than half of them children — above the poverty threshold in 2012, according to another CBPP analysis.

Without the Recovery Act improvements, roughly 900,000 more people would have been officially poor. This, as I’ve often remarked, is very poor indeed.

One can understand then why no Democrats on the Ways and Means Committee voted in favor of the misnamed Child Tax Credit Improvement Act.

Improvements friendly to better-off families, for sure. But as in the past, Republicans don’t extend their friendliness to families at the bottom of the income scale — not even those who work.

UPDATE: The House Rules Committee added a provision to this bill that would deny the CTC to parents who file using an Individual Tax Identification Number, rather than a Social Security number. These are mostly immigrants. According to recent estimates, about 5.5 million children would lose the credit. All but about a million are U.S. citizens.

 


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