Poverty Above Pre-Recession Levels in 47 States, New Census Data Show

September 18, 2014 at 4:46 pm

Poverty remained above pre-recession levels last year in 47 states plus the District of Columbia, our analysis of Census data issued this morning shows (see chart).  In some states, the increase was substantial — in Arizona, California, Florida, Georgia, and Nevada, poverty rates were four to five percentage points higher in 2013 than in 2007.  The stubbornness of high poverty rates in the wake of the Great Recession underscores the need for states to do more to help working families make ends meet.

Poverty rates in the states not still above pre-recession levels, Alaska and the Dakotas, weren’t statistically different from 2007.

Unequal wage growth and rising income inequality have played key roles in preventing more substantial improvements in poverty.  For workers earning low pay, wages are right where they were 40 years ago after adjusting for inflation, according to the Economic Policy Institute.  And since the recession’s official end in 2009, most workers’ wages have fallen, while workers at the top have seen some growth.

States have tools to help to address low wages and rising income inequality.  They can create or improve state earned income tax credits (EITCs), which promote work and reduce poverty and can improve low-income children’s chances of success both in school and, later, in the workforce.  States can also raise their minimum wage — the federal minimum wage is 22 percent below its peak value in 1968, after adjusting for inflation — and index it to inflation.  Improvements in these two areas are complementary for reasons we explain here, reaching a broader population than the EITC or minimum wage alone and keeping many more families out of poverty.

Income Inequality Remains at Historic High, Census Data Show

September 18, 2014 at 2:43 pm

Income inequality remained near a record high in 2013 by several measures the Census Bureau released earlier this week, with data going back to 1967.

The principal Census summary measure of household income inequality, known as the “Gini coefficient,” was not statistically different from the record high in 2012.  And the share of national income that goes to the top fifth of households was 51.0 percent, not statistically different from its record high of 51.1 percent in 2011.  The share of the nation’s income going to the top 20 percent has been growing for decades, but it only recently surpassed 50 percent.  That means the top 20 percent of households receive more of the nation’s income than the bottom 80 percent combined (see chart).

The Census figures provide an incomplete look at pre-tax income inequality — for example, they don’t include capital gains (a major income source for the affluent) and don’t ask about earnings above $1.1 million, while also leaving out key income sources for the poor such as government food assistance, rent subsidies, and tax credits.

Still, the trend of high and rising inequality that the new data show is consistent with other recent studies.  For example, a recent Federal Reserve study finds evidence of growing income concentration between 2010 and 2013.  “Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013,” the study found, as incomes grew for the nation as a whole but fell for middle- and lower-income households.  (Unlike the Census data, the Fed’s survey includes capital gains and SNAP — formerly food stamp — benefits.)

Preliminary tax-return data through 2012, as analyzed by economist Emmanuel Saez, provide further evidence about widening inequality in recent years.  Saez found that from 2009 to 2012, average pre-tax income of the top 1 percent of households rose 31 percent — or by about $300,000 per household — but rose by just 0.4 percent (an average of about $170) for the other 99 percent of households.  (These figures do not include government benefits and, thus, provide a picture of economic inequality before tax and transfer policies.)  The top 1 percent received 95 percent of the nation’s total rise in pre-tax income during this period, Saez found.

Coverage Gap Widening Between Medicaid Expansion States and Others

September 18, 2014 at 11:53 am

People in states that have adopted health reform’s Medicaid expansion had a lower uninsured rate in 2013 (before the expansion took effect) than people in non-expansion states — and non-expansion states are falling further behind in 2014, several recent government and independent surveys reveal.

Some 14.1 percent of the people in the 27 states (including Washington, D.C.) that have expanded Medicaid lacked health insurance in 2013, compared to 17.3 percent in the 24 non-expansion states, according to the Census Bureau’s American Community Survey (see chart).

Next year’s Census data, which will reflect the substantial coverage gains expected in expansion states in 2014 due to the expansion (which took effect January 1), should show a further widening of this coverage gap.

Results from several independent surveys — and this week from the Centers for Disease Control and Prevention (CDC), the first government survey data showing health reform’s early impacts — show that this is already happening.  For example, the Urban Institute’s Health Reform Monitoring Survey found that the uninsured rate for non-elderly adults in expansion states fell from 16.2 percent to 10.1 percent between the third quarter of 2013 and the second quarter of 2014, compared to a decline from 20.0 percent to 18.3 percent in non-expansion states.

Health reform’s Medicaid expansion creates a pathway to coverage for all non-elderly adults with incomes up to 138 percent of the poverty line, including, for the first time, low-income adults without children.  However, the 2012 Supreme Court decision upholding health reform made the expansion a state option.  States can opt in to the expansion at any time; the federal government will pick up all of the cost through 2016 and nearly all of the cost thereafter.

House Republicans’ Wrong-Headed Approach to Tax Extenders

September 17, 2014 at 1:00 pm

House Republicans are putting before the House this week a campaign-oriented bill of wide-ranging measures that have previously passed the House, including repealing portions of the Affordable Care Act and scaling back Dodd-Frank regulations.  The bill, which won’t advance beyond the House due to obvious Senate and White House opposition, also includes business tax provisions that lawmakers will likely consider again during Congress’ post-election lame duck session this fall.  For that reason alone, the legislation warrants some attention.

The House bill would make permanent certain “tax extenders” — so named because Congress routinely extends them for a year or two at a time — as well as bonus depreciation, which lets businesses take larger upfront tax deductions for certain purchases, such as machinery and equipment, and that historically has been a temporary measure to help revive a weak economy.  Congress should reject the House approach to these provisions because it is not fiscally responsible, is poorly designed from an economic standpoint, and is antithetical to tax reform.  Moreover, it reflects seriously misplaced priorities, putting the permanent extension of these business provisions ahead of more pressing provisions for hard-working families.

  • Its $500 billion price tag is fiscally irresponsible.  Policymakers have enacted significant deficit-reduction measures since 2010, with the vast majority coming from spending cuts.  The one revenue contribution stems from the 2012 “fiscal cliff” bill — i.e., the American Taxpayer Relief Act — that raised $770 billion in revenue from high-income taxpayers (from 2015 to 2024).  The tax extenders and bonus depreciation provisions in the House bill would reduce revenue by $500 billion over the decade, effectively giving back two-thirds of the revenue contribution to deficit reduction (see chart).  (The total cost of the House bill is about $575 billion, because of other revenue-losing provisions.)

  • It’s poorly designed from an economic standpoint because it makes bonus depreciation permanent.  Making bonus depreciation permanent accounts for more than half of the $500 billion cost of the business tax provisions.  But bonus depreciation was specifically designed not to be permanent because its temporary nature is what drives its (albeit limited) effectiveness during recessions.  Its modest economic boost comes entirely from inducing firms to accelerate some of their purchases into the period when the tax break is in effect and the economy is weak.  Making it permanent would negate this modest incentive effect.  That’s why the Bush Administration and Congress allowed it to expire after the 2001 recession ended and why this Congress should let it expire now.
  • It moves away from tax reform.  The fundamental nature of tax reform is to “broaden the base” by scaling back tax subsidies and to use the freed-up funds to lower tax rates, reduce budget deficits, or both.  For example, House Ways and Means Chairman Dave Camp (R-MI) earlier this year advanced a comprehensive plan that eliminated tax subsidies for certain business investments, including the repeal of bonus depreciation.  These changes were central to his base-broadening provisions.  But the package that House Republicans are now bringing before the House goes in the opposite direction.  Its provision to make bonus depreciation permanent narrows the tax base and, thereby, moves away from tax reform.

If, during the lame duck session, policymakers consider making any tax extenders permanent, they should focus first on making permanent important provisions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) that are due to expire at the end of 2017.  Failure to make the EITC and CTC provisions permanent would have a significant impact on low- and moderate-income families, pushing 17 million people (including 8 million children) into — or deeper into — poverty.

Census Data Show Continued Wide Disparities in Health Coverage

September 17, 2014 at 11:46 am

Certain groups of Americans continue to be uninsured at particularly high rates, the new Census Bureau data show.  African Americans and Hispanics, residents of the South and West, adults under age 35, and households with incomes under $50,000 had uninsured rates in 2013 well above the national average of 13.8 percent (see chart).  Hispanics’ 24.3 percent uninsured rate, for example, was nearly twice the national average.

These estimates, from the Current Population Survey (CPS), are the best source for comparing coverage rates among population groups in a single year but can’t be compared to CPS estimates from previous years because of changes to the CPS questions for 2013.  For health coverage trends over time, one should look instead to Census’ American Community Survey data, which we discussed yesterday.

Health reform’s major coverage expansions — the Medicaid expansion in many states to cover more low-income adults and the availability of subsidies for private marketplace coverage — will help reduce the disparities in health coverage among population groups.  But the expansions didn’t begin until 2014, so the new Census figures for 2013 don’t capture those coverage gains.  The Centers for Disease Control and Prevention released data yesterday covering the first quarter of 2014, and they show that the coverage gains in 2014 were greatest among some of the groups with the highest uninsured rates, including young adults, Latinos, and low-income households.