In Case You Missed It…

September 19, 2014 at 4:23 pm

This week on Off the Charts, we focused on the new Census Bureau data on poverty, income, and health coverage; the federal budget and taxes, housing, food assistance, and state budgets and taxes.

  • On Census Bureau data, we excerpted Robert Greenstein’s statement.  Danilo Trisi explained why the Census Bureau’s official poverty rate provides a real but incomplete picture of poverty and anti-poverty policies in the United States and noted that income inequality remained near a record high in 2013.  Matt Broaddus highlighted improvements in uninsured rates but found wide disparities in health coverage among certain groups of Americans.  He also noted that states that have expanded Medicaid had lower uninsured rates in 2013 (before the expansion took effect) than non-expansion states, which are falling further behind in 2014.  In addition, he analyzed new figures from the Centers for Disease Control and Prevention that show that the number of uninsured fell in the first quarter of 2014 by 3.8 million.  Paul Van de Water highlighted the rise in full-time work in the Census data, which undercuts claims that health reform is causing large increase in part-time employment.  Sharon Parrott noted that despite gains for families with children, poverty is still higher and incomes are still lower than before the recession.  Erica Williams pointed out that poverty remained above pre-recession levels for 47 states in 2013 and explained how states can reduce child poverty.
  • On the federal budget and taxes, Chye-Ching Huang debunked myths about corporate inversions on a Heritage Foundation panel.  Chuck Marr raised concern over a House Republican bill that would make permanent certain tax “extenders” and bonus depreciation.
  • On housing, Douglas Rice explained why policymakers should make a priority of fully restoring housing vouchers lost to 2013 sequestration budget cuts.
  • On food assistance, Brynne Keith-Jennings described a Brookings Institution report that found that the health of caregivers, access to stable housing, and child care can influence children’s food insecurity.
  • On state budgets and taxes, Elizabeth McNichol pointed to a new report from Standard & Poor’s that finds that growing income inequality in recent decades has slowed state tax collections.

Robert Greenstein issued a statement about the newly released Census Bureau data on poverty, income, and health coverage.  We posted the recording from our media briefing following the release of the Census Bureau’s new figures.  We also posted information about our SNAP Academy webinar series that seeks to educate states and local advocates, application assisters, and outreach workers with information on the program.

CBPP’s Chart of the Week:

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

Is Obamacare causing a surge in part-time work?
CBS News
September 18, 2014 

Poverty rate posts 1st notable drop since ’06; Latinos show big strides
Los Angeles Times
September 16, 2014

U.S. Incomes End 6-Year Decline, Just Barely
Wall Street Journal
September 16, 2014

Incomes for Most Americans Won’t Budge 
The New York Times
September 16, 2014

Poverty in U.S. Declines for First Time Since Before Recession
Bloomberg News
September 16, 2014

Beacon Hill needs legislative fiscal office
Boston Globe
September 15, 2014

Don’t miss any of our posts, papers, or charts — follow us on Twitter and Instagram.

Debating Corporate “Inversions”

September 19, 2014 at 3:32 pm

At a Heritage Foundation panel discussion this week, CBPP Senior Tax Policy Analyst Chye-Ching Huang debunked myths surrounding the recent wave of corporate “inversions,” in which U.S.-based firms move their headquarters overseas for tax purposes, and explained why policymakers should take strong action against them, explaining:

People think that there is a simple story that is driving inversions . . . that there are companies that are changing their tax headquarters to escape the highest statutory rate in the OECD [Organisation for Economic Co-operation and Development].  But that simple story is not what is happening. . . . The problem is really about U.S. multinationals and other multinationals gaming the tax system in the U.S. and all throughout the OECD so that they can claim that all of their profits are in tax havens.

Other panelists included CNBC Senior Economics Contributor Larry Kudlow, Heritage Chief Economist Stephen Moore, and Walter J. Gavin, Retired Vice Chairman of Emerson Electric.

As we’ve explained (see here and here for examples), the effective tax rate that U.S. multinationals face on their worldwide income is well below the 35 percent top U.S. statutory rate.  A big reason why is that multinationals report vast amounts of their income as coming from tax havens where they pay little or no tax.  Adopting a foreign headquarters could make it easier for multinationals to claim that their profits are made offshore and to use tax havens to avoid taxes anywhere.

Child Poverty Remains High, But States Can Make a Difference

September 19, 2014 at 12:55 pm

More than half of the states plus the District of Columbia had child poverty rates of 20 percent or higher last year (see map), new data from the Census Bureau’s American Community Survey show, and in some states — like New Mexico and Mississippi — poverty affected as many as one in three kids.  Such extensive child poverty unnecessarily damages the prospects of millions of children.

Relative to their better-off peers, poor children have poorer health, do less well in school, and complete fewer years of education.  Over the long term, they are more likely to have chronic bad health and to work fewer hours and earn less as adults, which can contribute to a vicious cycle of poverty.

In addition, the stress of hunger, unsafe neighborhoods, and unstable housing, among other hardships that many poor families face, can have harmful physiological effects on children’s still-developing brains.  This “toxic stress” can impede their social and emotional development and ability to learn.

States have a range of effective tools to reduce child poverty and the associated hardships. They can, for instance:

  • Raise the state minimum wage in conjunction with creating or improving the state’s earned income tax credit.
  • Provide quality early childhood education to help boost the future prospects of children in poor families while allowing their parents to work and build a better future for them.
  • Connect more poor children to a full range of federal supports, including nutrition, housing, and health care.

Why More Inequality Means Less State Revenue — And How States Can Respond

September 19, 2014 at 11:06 am

Growing income inequality in recent decades has slowed state tax collections, a new report from Standard & Poor’s finds, making it harder to fund public services ― like education ― that lay the groundwork for a strong future and help push back against rising inequality. States need to adapt their tax codes to take growing inequality into account.

Virtually all states collect more taxes (as a share of family income) from low- and moderate-income families than from high-income families.  So it makes sense that collections would slow when, as we’ve documented, the lion’s share of income growth goes to the richest families.

  • Many states have a flat-rate or nearly flat-rate income tax.  A flat income tax raises less revenue from economic growth — especially when most of the gains go to people at the top of the income scale — than a graduated income tax, which taxes higher incomes at higher rates.
  • Growth in sales tax collections weakens when low- and middle-income families’ incomes stagnate or grow more slowly, since they spend (rather than save) a larger share of their income than wealthy families do.
  • States’ antiquated sales tax rules favor high-income consumers.  Those at the top tend to spend more on services, like lawn care or health club memberships, which remain exempt from sales tax in many states.  They also spend a larger share of their income online — purchases that often are effectively tax-free.

States can respond to slowing tax collections by making their income tax more progressive through a more graduated rate structure.  This would make tax collections more responsive to economic growth, bringing faster revenue growth when the economy expands.  Tax collections would also fall more when the economy slows, but states can address this with stronger reserve funds, better mechanisms to manage surpluses, and other policy tools, as we have explained.

States also can broaden their sales tax base to include more services, including those used by high-income families, and extend the sales tax to Internet sales.

Over time, these changes would give states more resources to push back against rising inequality by investing in education and training, providing supports like child care assistance for low-wage workers, and adopting or expanding state earned income tax credits.

Conversely, if states fail to adapt their tax systems to this growing problem, they will have an even harder time stemming the harmful rise in inequality.

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.