Who Should Pay for Extended Unemployment Benefits?

February 3, 2014

Politico reports progress in the Senate toward renewing Emergency Unemployment Compensation. The “biggest sticking point” may again be amendments, it notes.

As I said last week, the effort to renew EUC broke down because Republicans wanted to offer amendments to the short-term, stopgap bill that was one of the options Majority Leader Harry Reid proposed.

Some of those amendments would have offset the costs in ways that many, if not all Democrats would have found too objectionable to vote for, even though defeating them could have led Republicans to again block a vote on the bill itself — and blame them for the harm.

Here, as promised, are how two of them would pay for the short-term extension. Each answers the question in the title above differently, but both deny safety net benefits to vulnerable low-income people.

Low-Income Children Should Pay for It

Senator Kelly Ayottte (R-NH) fished an old proposal out of a file and put some gloss on it. Her amendment, as originally proposed, would deny the refundable part of the Child Tax Credit to immigrants who don’t have Social Security numbers — even if their children are U.S. citizens, as an estimated four million are.

Well over two million families would have to pay, on average, $1,800 more in taxes a year, according to figures in a 2011 report by the Treasury Department’s Inspector General. That’s a big bite, since they reportedly earn, on average, $21,000 a year.

The money saved by denying the credit to immigrants who dutifully pay their taxes would far exceed the costs of the three-month extension Senator Ayotte wanted to attach it to.

Her amendment would commit nearly as much to restoring the full cost-of-living adjustment to pension benefits for some former members of the military services. The COLA took a nick in December’s budget deal.

As you might imagine, there have been howls from diverse quarters. So Ayotte cleverly aims to put Democrats in a bind, since a vote to protect low-income children, most of them Hispanic, would be a vote against our veterans.

Now she’s amended her amendment to single out only immigrants whose children aren’t citizens — and styled it solely as a way of righting a wrong “against our men and women in uniform.”

It’s nonetheless a punitive pay-for, affecting a million or so children who had no say in where they were born or where they live now.

Severely Disabled Workers Should Pay for It

Senator Reid found some of his pay-for in the President’s last budget, which proposed a dollar-for-dollar reduction in SSDI (Social Security Disability Insurance) benefits when recipients receive unemployment benefits.

Senator Rob Portman (R-OH) took this dubious cost-saving idea and made it far worse, as the Center on Budget and Policy Priorities explains.

Basically, his amendment would define eligibility for unemployment benefits as proof that the laid-off disabled worker was engaged in substantial gainful activity — and ineligible for SSDI.

This would wholly redefine SGA, which under current rules, means earning more than $1,070 for nine months within a five-year period. Part-time work that pays less — or any work that’s been engaged in for less time — has no immediate effect on SSDI eligibility.

It does enable some recipients to supplement their far from generous monthly benefits — on average, $1,146 last month. And it gives them an opportunity to see if they can return to self-supporting work.

You’d think that a member of a party that believes in giving people a hand up out of the safety net would avoid anything that discouraged work.

But Portman’s amendment surely would because SSDI recipients who ventured back into the workforce could be dropped from the program if they were laid off, even if they didn’t claim the unemployment benefits they were entitled to.

They’d have to wait five months to reapply, just as newly-disabled workers do. And once they’d managed to get reapproved, they’d have to wait two years to qualify for Medicare, even if they’d been enrolled before.

I think it’s only fair to note that the Obama administration opened the door to this pay-for and that the Senate Democratic leadership kept it open. It’s an awful idea in principle, as Los Angeles Times columnist Michael Hiltzig says.

But it’s also true that Portman hasn’t, as he claims, taken a proposal from the President’s own budget — or that unemployment insurance and SSDI are “mutually exclusive.”

“We should never be forced to meet the needs of one vulnerable population by robbing another,” as Senator Tom Harkin (D-IA) told his colleagues a few weeks ago.

Both the SSDI and the Child Tax Credit pay-fors would do this. And they’d make permanent changes in the laws. A lot of harm to offset costs that would represent less than 0.014% of the federal budget.*

* This is the 10-year figure produced by the Center for Economic and Policy Research’s responsible budget calculator.


Census Bureau Reports 16.1% Poverty Rate

November 15, 2012

Another round of news on poverty in the U.S. — this time from the Census Bureau’s latest report on the results of analyses using its Supplemental Poverty Measure.

Once again, the national poverty rate is higher than the rate the Bureau earlier reported, using its official measure — 16.1%, as compared to 15.1%.

In other words, about 3 million more people — a total of nearly 49.7 million — were living in poverty last year.

On the other hand, the percent of people living in extreme poverty, i.e., below 50% of the applicable threshold, is 1.5% lower than the official measure shows.

We get a mixed picture for state-level poverty rates, for which the Bureau uses three-year averages. Some of the rates are higher than the official rate. Some lower.

The rate for the District of Columbia rises sharply — from 19% to 23.2%. This is higher than the rate for any state except California.

As I’ve written before, the official measure sets poverty thresholds at three times the annually adjusted costs of what used to be the U.S. Department of Agriculture’s cheapest food plan.

The SPM starts from the costs of basic living expenses, adjusted for differences among major geographic areas and also differences in living situations, e.g., renting versus owning.

To these, it adds some other “necessary expenses,” e.g., payroll taxes, health care co-pays and other out-of-pocket costs.

On the other side of the ledger, it takes account of not only cash income, but some “near-money” federal benefits like tax credits and also some in-kind benefits, e.g., food stamps, two forms of child nutrition assistance, housing subsidies.

And it uses actual household size, rather than counting only household members who are related to one another, as the official measure does.

These differences explain not only the difference between the overall SPM rate and the official rate, but shifts in rates for different age and race/ethnicity groups.

We see, for example, that:

  • The child poverty rate drops from 22.3% to 18.1%, reducing the number of children in poverty by about 3 million.
  • The poverty rate for seniors rises from 8.7% to 15.1%, increasing the number of poor people 65 and older by somewhat more than 2.6 million.
  • The poverty rate for blacks drops from 27.8% to 25.7% — still far higher than the non-Hispanic white rate of 11%, but now 2.3% lower than the rate for Hispanics.
  • The poverty rate for Asians rises from 12.3% to 16.9% — the largest percent change for any race/ethnicity group reported.
  • For children, the extreme poverty rate is less than half what it is under the official measure — 5.1%, as compared to 10.3%.
  • For seniors, however, the extreme poverty rate rises — from 2.3% to 4.3%.

This year’s report is unusually timely because it gives us a read on the anti-poverty effects of some benefits that are at immediate risk. It tells us that:

  • Food stamp benefits lifted more than 4.6 million people, including  about 2.1 million children, out of poverty last year.
  • Well over 8.6 million more people, including nearly 4.7 million children, would have fallen below the poverty threshold if their family’s disposable income hadn’t been boosted by refundable tax credits.
  • Unemployment insurance benefits kept nearly 3.4 million people out of poverty — mostly adults, but about 963,400 children too.
  • And Social Security — the single most effective anti-poverty program we’ve got — accounted for 25.6 million fewer poor people than there would have been without its benefits. Poverty rates for all age groups would have been higher. The rate for seniors would have soared to 54.1%.

So there are the benefits. Now here are the risks.

The farm bills now pending in Congress would cut food stamp benefits for at least half a million households — 1.3 million if the House version prevails. The House bill would also mean no more food stamps at all for as many as 3 million people.

As you’re well aware, the Bush-era tax cuts are expiring. We can be quite confident that most will be renewed.

But Congressional Republicans want to extend earlier versions of the refundable Earned Income Tax Credit and Child Tax Credit, not the expanded versions that have made a significant difference to low-income working families.

The federal program that funds unemployment insurance benefits for longer-term jobless workers will also soon expire. Some two million workers and their families may face the new year with no source of cash income.

Lead Republicans in Congress are about to sit at the bargaining table with their Democratic counterparts and White House officials to thrash out an alternative to the so-called fiscal cliff.

They say they’ll be amenable to increased revenues (not to be confused with higher tax rates for the wealthiest 2%).

But the deal must also include “real changes to the financial structure of entitlement programs” — apparently something along the lines of the recommendations in the plan produced by the co-chairs of the President’s fiscal commission, a.k.a. Bowles-Simpson.

These recommendations would cut Social Security retirement benefits in several different ways. With the average benefit now only $1,230 a month, we could see more seniors in poverty if the Democrats don’t hold firm to the position they’re taking now.

NOTE: A couple of the benefits impact figures reported by the Center on Budget and Policy Priorities are a bit higher than mine. This is also true for figures reported by the Center for American Progress. I’m at a loss to explain the discrepancies.


Who Are Those Folks Who Don’t Pay Federal Income Taxes?

October 25, 2012

You recall, I’m sure, the 47% of Americans who don’t pay income tax and thus can’t be persuaded to “take personal responsibility and care for themselves.”

Romney’s since said his statement was “completely wrong” — undoubtedly referring to the part that wrote all these people off because the part about 47% not paying federal income taxes is basically correct. Or would be if we substitute “households” for “people.”

The Center on Budget and Policy Priorities dug into data from a Census survey and the Tax Policy Center to find out who they are.

Not surprisingly, 22% of the non-payers are elderly — many of them presumably former low-wage workers now trying to get by on Social Security benefits or very elderly people who now rely on Social Security because they’ve exhausted whatever they had in retirement savings.

But the tax code gives seniors some special preferences. Their standard deduction is higher, for example. And all or some portion of their Social Security benefits may be tax-exempt.

These preferences, plus a credit for those with low incomes help explain why so many elderly filers wind up not owing anything.

Another 17% of the non-payers are students, people who aren’t working because they’re too sick or too severely disabled and some heterogeneous others, e.g., jobless workers, those who retired early (maybe because they couldn’t find jobs.)

Which leaves a surprising 61% who are working, as indicated by the fact that they pay, through deductions, the taxes that go to Social Security and Medicare.

About half of these people don’t pay federal income taxes simply because they don’t earn enough. The standard deduction, plus however many personal exemptions they’re entitled to brings their taxable income down to zero, as Roberton Williams at the Tax Policy Center explains.

Another 30.4% of working families, especially those with children don’t owe federal income taxes because the Earned Income Tax Credit, the Child Tax Credit and, in some cases, the Child and Dependent Care Tax Credit wipe out whatever tax they’d otherwise owe.

I personally have some difficulty understanding why I should be able to claim a higher standard deduction just because I’ve managed to live past the age of 65.

The tax breaks for working families are an altogether different story.

Anyone, I think, can understand why federal policymakers — Republicans as well as Democrats — decided to give low-income parents an incentive to work instead of relying on welfare benefits.

Also why they expanded the incentives when they ended welfare as we knew it, putting time limits on the benefits and setting the stage for the extraordinarily low level of support they now provide.

What’s difficult for me to understand is why Congressional Republicans — and apparently Romney as well — want to let the EITC and Child Tax Credit revert to their narrower pre-Recovery Act forms.

These, after all, are tax preferences that support core bipartisan values — work, marriage, child rearing, etc.

They also, in and of themselves, reduce the official poverty rate, as CBPP’s analysis of the 2010 Census figures shows.

If their end result is some 11.5 million or so working families owing no federal income taxes, that’s mainly because our policymakers prefer spending through the tax code rather than directly, as outlays in the annual budget.

Has nothing whatever to do with defects in personal responsibility — or, it seems, lead to solid support for the President, though some might say it would if the 47% voted their enlightened self-interest.


What’s at Stake for DC If the Expanded EITC and Child Tax Credit Die?

August 2, 2012

Yesterday, the House passed a bill to extend the Bush tax cuts that’s virtually identical to the Senate Republicans’ recently defeated bill — this after defeating an alternative much like what the Senate passed.

What will happen next is anybody’s guess. What will happen if the Republicans finally prevail on the issue of the refundable Earned Income Tax Credit and Child Tax Credit isn’t — thanks to some great number-crunching by Citizens for Tax Justice.

As I earlier wrote, the Republicans don’t want to extend the tax credits in their current forms, i.e., with expansions originally made by the Recovery Act.

Without them, parents with more than two children wouldn’t get as large an EITC credit as they can now. And married couples would again incur a significant “marriage penalty.”

The refundable Child Tax Credit wouldn’t be available at all for very low-income working families. Refunds would be much smaller for many others because they’re a percent of income above a threshold that would rise from $3,000 to about $13,300 initially — and keep rising as time went on.

CTJ provides state-by-state breakouts for some of the impacts. Here’s what it tells us about the District of Columbia, with some additional observations from me.

In 2013 alone:

  • Nearly 7,940 District families, including an estimated 11,673 children, could no longer get any Child Tax Credit refund.
  • These families, plus those who could still claim the credit would collectively lose $7.6 million — a hit to not only their budgets, but our local economy because there’d be that much less for them to spend.
  • About 8,285 families, including 24,435 children, would lose some portion of their federal EITC.
  • These losses would total $5.3 million.

Families would also lose out because the District’s own EITC is linked to the federal. Taxpayers can get 35% of whatever their federal credit is — and reimbursements if claiming the credit brings the taxes they owe to less than zero.

Rough back-of-the-envelope calculation suggests that total EITC losses could be well over $7.1 million.

In 2010, 1.6 million more people would have fallen below the poverty line if the Recovery Act hadn’t expanded the EITC and Child Tax Credit, according to analyses by the Center on Budget and Policy Priorities.

Hard to believe we wouldn’t have more District families in poverty if Congress extends the credits in their earlier, more restrictive forms.


Follow

Get every new post delivered to your Inbox.

Join 141 other followers