In Case You Missed It…

April 18, 2014 at 1:40 pm

This week on Off the Charts, we focused on Tax Day (April 15), the federal budget and taxes, health reform, state budgets and taxes, and the safety net.

  • On Tax Day, Chris Mai compiled CBPP’s top charts on state tax issues and Chuck Marr compiled our top federal tax charts.  We recognized the efforts of volunteers who helped file more than 3 million federal tax returns free of charge for low- and moderate-income people.  We also listed our most recent analyses on tax issues.
  • On the federal budget and taxes, Chuck Marr excerpted his National Journal op-ed on why policymakers should strengthen the Earned Income Tax Credit (EITC) for childless workers.  Will Fischer highlighted proposed legislation creating a tax credit to help low-income families afford housing.
  • On health reform, Paul Van de Water pointed to new Congressional Budget Office projections that health reform’s coverage expansions will cost less than previously estimated.  Dave Chandra highlighted CBPP’s new interactive database to help states design and operate their insurance marketplaces.
  • On state budgets and taxes, Elizabeth McNichol listed five questions for states considering whether to start refilling their “rainy day” reserves.
  • On the safety net, Becca Segal explained that next month’s expansion of “community eligibility” will help alleviate hunger in thousands of high-poverty schools.  Chad Stone noted that the number of jobless workers affected by policymakers’ failure to restore emergency federal unemployment benefits continues to grow.

In other news, we issued papers on when and how states should strengthen their rainy day funds and why the lone group taxed into poverty should receive a larger EITC.  We updated our guide to statistics on historical trends in income inequality and our papers explaining that federal income taxes on middle-income families remain near historic lows and that the EITC promotes work and encourages children’s success at school.

CBPP’s Chart of the Week:

A variety of news outlets featured CBPP’s work and experts recently. Here are some highlights:

Ryan budget represents the height of irresponsibility
The New Journal & Guide
April 16, 2014

7 Facts About Our Broken Tax System
The Nation
April 16, 2014

It’s Time to Strengthen the EITC to Give Childless Workers a Much-Needed Boost
National Journal
April 15, 2014

CBO: Health Reform Is Working — and Costing Less
Huffington Post
April 15, 2014

Where your tax dollars go, in one chart
Vox
April 14, 2014

New York Times Is Right: “No Spring Break for the Unemployed”

April 18, 2014 at 12:30 pm

“As members of Congress enjoy their extended spring break, 2.3 million unemployed Americans have been left to worry about whether lawmakers will ever get around to renewing federal unemployment benefits, which expired at the end of 2013,” today’s New York Times editorial points out.  And the total number of jobless workers affected grows each week.

As we’ve explained, the Labor Department estimates that 4.9 million people will miss out on emergency benefits by the end of the year if policymakers don’t restart the federal program, known as Emergency Unemployment Compensation (see graph).

For state-by-state figures on those 4.9 million workers, click here.  For state unemployment rates and the number of weeks of state unemployment benefits available, click here.

Tax-Credit Bill Would Help Low-Income Families Facing Higher Rents

April 17, 2014 at 2:48 pm

House Ways and Means Committee member Charles Rangel (D-NY) has introduced legislation to establish a new federal tax credit to help low-income renters afford housing.  As we’ve explained, a renters’ credit along these lines would be a valuable tool to address low-income families’ mounting housing needs.

As the graph shows, the typical or median rent has risen much faster than inflation over the last decade, while renters’ median income has fallen in inflation-adjusted terms.

In fact, in 90 cities around the country, a median-income resident would have to pay more than 30 percent of his or her income to afford the median rent, the New York Times reports.  (The federal government and many private-sector landlords and lenders consider housing unaffordable if it exceeds 30 percent of household income.)

As a result, families with incomes well below the median must pay high and growing shares of their income for rent or live in substandard, overcrowded, or unstable housing arrangements.  In 2011, 8.5 million families with incomes under half of the local median received no rental assistance and either paid more than half of their income for housing or lived in severely substandard conditions, according to the Department of Housing and Urban Development — an increase of more than 40 percent since 2007.

And Department of Education data show that 1.17 million school-age children were homeless during the 2011-2012 school year.

Despite these needs, the federal government provides much more help to higher-income homeowners, through tax subsidies like the mortgage interest deduction, than to low-income renters.  Due to funding limitations, Housing Choice Vouchers and other low-income rental assistance programs reach fewer than one in four eligible families.

The Rangel proposal would help address that imbalance by giving states about $5.8 billion in annual tax credits to distribute among low-income renters based on federal income eligibility rules and state policy priorities.  We estimated last year that a credit similar to the Rangel proposal (but with added provisions to ensure that most of its benefits go to the neediest families), capped at $5 billion, would help 1.2 million households, reducing their rent by an average of $400 a month.

The renters’ credit would complement the Low-Income Housing Tax Credit (LIHTC), which Representative Rangel helped enact in 1986.  LIHTC is an effective subsidy for building and rehabilitating affordable housing but doesn’t typically make housing affordable to the poorest Americans by itself.  A renters’ credit could help these households afford rents in developments subsidized through LIHTC and in other buildings.

If the President and Congress move forward on tax reform, they should use savings from scaling back other tax expenditures to establish a renters’ credit along the lines that Representative Rangel proposes.

CBPP Releases New Resource on State Marketplace Design and Policies

April 17, 2014 at 11:28 am

Health reform’s marketplaces launched in every state on January 1, offering individuals and small businesses the opportunity to shop from an array of affordable, comprehensive health insurance plans.  Now that the open enrollment for 2014 coverage has closed, states have a chance to fine-tune their plans for next year.  A new database that CBPP has launched will give them critical information that they’ll need to make those decisions.

The health reform law gave states the option to establish and operate their own marketplace as a State-based Marketplace (SBM), partner with the federal government through a State Partnership Marketplace (SPM), or defer to the federal government to provide a Federally-facilitated Marketplace (FFM) in the state (see map).

The states that opted to develop their own marketplaces or to partner with the federal government have significant design and operational flexibility to exceed federal minimum requirements and tailor the program to meet state-specific needs.

CBPP has analyzed the 17 SBM and 6 SPM states across a number of design questions as well as best practices.  We’ve summarized the findings in a new database that states can use as they work to ensure that their marketplaces meet adequate competition, affordability, accessibility, and customer satisfaction requirements.

Among our key findings:

  • Marketplace governance:  In an effort to ensure independence in governance and policy setting, avoid conflicts of interest, and ensure long-term viability, 11 states created a quasi-governmental agency to operate their marketplaces.  Governing boards composed of experts and key stakeholders oversee the new agencies; the majority of states prohibit insurers and/or brokers from serving on the board.
  • Marketplace plan standards:  States adopted a variety of innovative standards to enhance competition and affordability, improve value and transparency for consumers, and mitigate the risk of “adverse selection,” under which sicker-than-average people buy marketplace insurance compared with those who enroll outside the marketplaces, which would result in higher marketplace premiums.  In fact, several require that issuers offer a standardized plan design to enable consumers to more easily compare plans based on price and provider networks.
  • Customer service and website features:  States used a variety of interactive web features to provide a customer-friendly application and shopping experience, including allowing consumers to browse plans before creating an online account or submitting an application.  Many states also allow consumers to effectively filter and search marketplace results by plan features, including by premium, deducible, co-pays, or provider.

CBPP will continue to collect and update information on each State-based Marketplace and State Partnership Marketplace, and we’ll provide additional analysis to assist states as they institute marketplace policies for the 2015 plan year and beyond.

Click here to access the interactive database.

States Are Starting to Save for Another Rainy Day

April 16, 2014 at 1:19 pm

With the budget challenges of the Great Recession and its aftermath still fresh in their minds, state policymakers are considering ways to strengthen their “rainy day funds” — budget reserves they can use when recessions or other unexpected events cause revenues to fall or spending to rise.  But, it’s still premature for most states to act aggressively to refill the funds until their revenues rise well above pre-recession levels, unemployment has declined further, and they have restored programs cut during the recession, as we explain in a new paper.

States used their rainy day funds to avert over $20 billion in cuts to services, tax increases, or both, in each of the last two recessions, highlighting the funds’ importance.  Since draining reserves to a low of 2.4 percent of spending in state fiscal year 2010, states have begun to refill them partly (see chart).

The decisions about when and how quickly to refill a rainy day fund will be different for each state.  Here are some questions that states should consider:

  • Have tax collections recovered from the recession?  One sign that a state has sufficient funds to begin refilling its rainy day fund is that both its annual tax collections and its annual growth in tax collections have returned to pre-recession levels, after accounting for inflation.  Fewer than half of the states have recovered to this extent.
  • Has the state’s economy recovered?  A return to pre-recession unemployment rates and personal income indicates that the state’s economy is on the mend.  Then the state can more likely meet the needs of its residents and also set funds aside for future downturns.  Most state economies have not yet fully recovered from the downturn.
  • How big is the rainy day fund?  Resuming fund deposits is a higher priority in states with little or no funds remaining.  These states may want to spread the replenishment over more years and should consider beginning sooner.  At the end of fiscal year 2013, 16 states had general fund reserves of less than 5 percent of the budget. 
  • What else might states do with available funds?  A rainy day fund’s ultimate goal is to help maintain state support for education, health care, transportation, and other services that promote economic growth and meet residents’ needs.  If depositing money in the fund would jeopardize a state’s ability to support these programs adequately — especially after years of funding cuts in an economic downturn — program funding should take priority. 
  • Is the state experiencing a revenue “windfall”?  Some states’ revenue collections are temporarily high as a result of a court settlement or other short-term reason.  For example, Connecticut received $175 million this year from a temporary tax amnesty program, and Louisiana is receiving payments from BP as a result of the 2010 oil spill.  States should use caution when deciding how to spend these temporary windfalls.  Shoring up a rainy day fund is a prudent use of one-time funds, while enacting ongoing program expansions or permanent tax cuts could contribute to future budget imbalances.

Click here to read the full paper.