The Center's work on 'Individuals and Families' Issues


Ryan Roundup: What You Need to Know About Chairman Ryan’s Poverty Proposal

July 25, 2014 at 4:42 pm

We’ve compiled CBPP’s analyses and blog posts on House Budget Committee Chairman Paul Ryan’s new poverty proposal.  We’ll update this roundup as we issue additional analyses.

  • Blog Post: What Difference Would Ryan’s EITC Expansion Make for Childless Workers?
    July 29, 2014
    We’ve explained that House Budget Committee Chairman Paul Ryan’s proposed expansion of the Earned Income Tax Credit (EITC) for childless adults, including non-custodial parents, would encourage work and reduce poverty.  Our interactive chart allows you to compare the EITC that childless workers at different income levels would earn under current law and under the Ryan expansion, which mirrors a proposal from President Obama.
  • Blog Post: Ryan’s “Opportunity Grant” Would Likely Force Cuts in Food and Housing Assistance
    July 29, 2014
    House Budget Committee Chairman Paul Ryan maintains that consolidating 11 safety-net and related programs into a single “Opportunity Grant” would give states the flexibility to provide specialized services to low-income people.  But providing these additional services would require cutting assistance funded through the Opportunity Grant to other needy people.  And because SNAP (formerly food stamps) and housing assistance together make up more than 80 percent of the Opportunity Grant, the cuts would almost certainly reduce families’ access to these programs, which are effective at reducing poverty — particularly deep poverty.
  • Blog Post: History Suggests Ryan Block Grant Would Be Susceptible to Cuts
    July 28, 2014
    Ryan says that the block grant would maintain the same overall funding as the current programs.  But even if one thought that current-law funding levels were adequate, they likely wouldn’t be sustained over time under the Ryan proposal:  history shows that block grants that consolidate a number of programs or may be used for a wide array of purposes typically shrink — often very substantially — over time.
  • Blog Post:  Why Ryan’s Proposed Work Requirements Are Cause for Concern
    July 25, 2014
    House Budget Committee Chairman Paul Ryan’s new poverty plan predictably showcases the 1996 welfare law, which replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF), as a model for reforming other safety net programs.  For example, states would have to impose work requirements on all recipients of assistance funded through the “Opportunity Grant” — the block grant that would replace 11 safety net and related programs — who are not classified as unable to work.  We have four key concerns about this proposal.
  • Blog Post:  Dean: SNAP Is a Successful, Influential Component of the Safety Net
    July 25, 2014
    SNAP is not only one of the most efficient and effective safety net programs, but it’s also helping improve other programs, CBPP’s Stacy Dean told a House Agriculture subcommittee.
  • Commentary:  Ryan “Opportunity Grant” Proposal Would Likely Increase Poverty and Shrink Resources for Poverty Programs Over Time
    July 24, 2014
    A centerpiece of House Budget Committee Chairman Paul Ryan’s new poverty plan would consolidate 11 safety-net and related programs — from food stamps to housing vouchers, child care, and the Community Development Block Grant (CDBG) — into a single block grant to states.  This new “Opportunity Grant” would operate initially in an unspecified number of states.  While some other elements of the Ryan poverty plan deserve serious consideration, such as those relating to the Earned Income Tax Credit and criminal justice reform, his “Opportunity Grant” would likely increase poverty and hardship, and is therefore ill-advised, for several reasons.
  • Blog Post:  Ryan Adds Momentum to Expanding EITC for Childless Workers
    July 24, 2014
    House Budget Committee Chairman Paul Ryan highlighted the Earned Income Tax Credit as one of the most effective anti-poverty programs and joined growing bipartisan calls to expand it for childless adults (including non-custodial parents), the lone group that the federal tax system taxes into poverty.  We applaud this step, though we encourage him to reconsider some of his proposals to offset the cost — which would hit vulnerable families — and his opposition to a much-needed increase in the minimum wage.
  • Blog Post:  Ryan’s Rhetoric Doesn’t Match His Proposal’s Reality
    July 24, 2014
    House Budget Committee Chairman Paul Ryan left the impression that his proposed Opportunity Grant will allow low-income individuals to get income assistance as well as help they may need to go to school, get off drugs, and succeed in the workplace.  That picture, however, doesn’t reflect the reality of his proposal.

We also issued several pieces ahead of Chairman Ryan’s announcement of his proposal:

  • Analysis:  Deep Poverty Among Children Worsened in Welfare Law’s First Decade
    July 23, 2014
    Since the mid-1990s, when policymakers made major changes in the public assistance system, the proportion of children living in poverty has declined, but the harshest extremes of child poverty have increased.  After correcting for the well-known underreporting of safety net benefits in the Census data, we estimate that the share of children in deep poverty — with family income below half of the poverty line — rose from 2.1 percent to 3.0 percent between 1995 and 2005.  The number of children in deep poverty climbed from 1.5 million to 2.2 million.Blog Post:  Fewer Poor Children Under Welfare Law, But More Very Poor Children
  • Blog Post: CLASP: State Experiences Show Safety Net Programs Don’t Need Massive Overhaul to Work Better
    July 23, 2014
    Olivia Golden of the Center for Law and Social Policy (CLASP) took a closer look at the experiences of six states to debunk common myths about the delivery of safety net programs. . . . Golden explained that the experiences of the six states involved in the Work Support Strategies (WSS) initiative — a project coordinated by CBPP, CLASP, and the Urban Institute that is designing, testing, and implementing more effective, streamlined, and integrated approaches to delivering key supports for low-income working families — offer lessons for how to improve safety net programs.
  • Blog Post:  Why the 1996 Welfare Law Is Not a Model for Other Safety Net Programs
    July 22, 2014
    House Budget Committee Chairman Paul Ryan’s upcoming poverty plan will likely showcase the 1996 welfare law, which replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF) — a block grant with fixed federal funding but broad state flexibility — as a model for reforming other safety net programs.  A careful examination of the record, however, indicates that the 1996 law’s results were mixed and that if the goal is to reduce poverty, especially among the most disadvantaged families and children, there are serious downsides to embracing the 1996 law as a model.
  • Commentary:  Policymakers Often Overstate Marginal Tax Rates — and Understate Trade-Offs In Reducing Them
    July 22, 2014
    Some Washington policymakers are increasingly focused on whether government benefits for low- and moderate-income people create disincentives to work — in particular, when these benefits phase down as the earnings of beneficiaries rise.That phase-down rate is often called the “marginal tax rate” because it resembles a tax — benefits fall as earnings rise.  The relationship between marginal tax rates and disincentives to work is an important issue, one worthy of serious debate.  Some policymakers, however, often overstate the size of marginal tax rates and their impacts on work, and understate the trade-offs in trying to lower these rates.Blog Post:  Understanding Marginal Tax Rates and Government Benefits

House GOP Follows Ryan Anti-Poverty Plan With Pro-Poverty Legislation

July 25, 2014 at 11:12 am

House Budget Committee Chairman Paul Ryan (R-WI) extolled the anti-poverty effects of the Earned Income Tax Credit (EITC) and, in his new poverty proposal, wisely proposed expanding it for childless adults (including non-custodial parents).  The praise that Chairman Ryan correctly gave the EITC also applies to the refundable portion of the Child Tax Credit (CTC).  Both of these essential tax credits encourage work, expand opportunity, and reduce poverty.

Today, however, House Republicans are considering on the House floor permanent CTC legislation — a bill for which Rep. Ryan voted as a Ways and Means Committee member — that would lead to more poverty, not less.  The bill permanently alters the CTC by extending it higher up the income scale so that more families with six-figure incomes can benefit from it, while failing to make permanent a key CTC improvement from 2009 for working-poor and near-poor families that’s slated to expire at the end of 2017.  Census data show that letting the CTC improvement for low-income working families expire after 2017 would push 12 million people — including 6 million children — into or deeper into poverty (see chart).

As we have explained, the House bill raises the income levels at which the CTC begins to phase out and indexes those thresholds to inflation.  Couples with two children making between $150,000 and $205,000 would become newly eligible for the credit; a family making $160,000, for example, would receive a new tax cut of $2,200 in 2018.  But because the bill fails to make permanent the 2009 reduction in the CTC’s earnings threshold after 2017, a single mother with two children who works full time throughout the year at the minimum wage and earns $14,500 would lose her entire CTC of $1,725 in 2018.

The bill also indexes the current maximum credit of $1,000 per child to inflation, but that would not help most working families with low or moderate incomes because it benefits only those with incomes high enough to receive the maximum credit.  If the credit’s $3,000 earnings threshold (the level of family earnings at which the credit starts to phase in) is allowed to expire at the end of 2017, the threshold will nearly quintuple — and families making less than about $14,500 will lose their CTC altogether.  In addition, many working families with incomes somewhat above $14,500 will have their CTC cut substantially and no longer receive the maximum credit, making the inflation adjustment meaningless for them.  Under the House bill, indexing would not benefit a family with two children in 2018 until the family has earnings of at least $28,050 — nearly double full-time work at the minimum wage.

Chairman Ryan’s colleagues should consider the poverty-fighting effects of tax credits such as the CTC for low-income working families.  Then they should reverse course and put these families’ needs first, rather than last.

Robert Greenstein Discusses Ryan’s Poverty Proposal With MSNBC’s Lawrence O’Donnell

July 25, 2014 at 10:37 am

Center on Budget President Robert Greenstein discussed House Budget Committee Chairman Paul Ryan’s poverty proposal last night on MSNBC’s “The Last Word” with Lawrence O’Donnell.

Here’s the clip:

Understanding Marginal Tax Rates and Government Benefits

July 22, 2014 at 12:58 pm

Some Washington policymakers are increasingly focused on whether government benefits for low- and moderate-income people create disincentives to work — in particular, when these benefits phase down as the earnings of beneficiaries rise, our new commentary notes.  That phase-down rate is often called the “marginal tax rate” because it resembles a tax — benefits fall as earnings rise.  As we explain:

[P]olicymakers across the ideological spectrum share concerns about marginal tax rates and agree that, all else being equal, lower marginal tax rates are preferable to higher ones.  Unfortunately, all else is not equal, and lowering marginal tax rates entails significant and very challenging policy trade-offs. . . .

[M]arginal tax rates are the product not of bad policy design but rather of competing policy goals:  providing needed assistance to financially struggling individuals and families and limiting costs by not providing help to those with more adequate income.  Any serious discussion of the marginal tax rate issue must grapple with the fundamental tension between limiting assistance, controlling costs, and reducing marginal tax rates.

No such serious discussion is likely to result, however, from exaggeration of the marginal tax rates that most low-income families face, overstatement of the impact those marginal rates have on actual work behavior by low-income households, or glossing over the tough policy trade-offs that policymakers must face when seeking to reduce marginal rates.

Click here for the full commentary.

Congress Shouldn’t Renew Internet Tax Freedom Act Unless It’s Paired With the Marketplace Fairness Act

July 21, 2014 at 2:54 pm

The Internet Tax Freedom Act’s (ITFA) ban on state and local sales taxation of monthly Internet access fees costs state and local governments about $6.5 billion annually in forgone revenue, and the states and localities currently taxing access under ITFA’s “grandfather” provision would lose at least $500 million on top of that each year if the provision expired, as I’ve recently explained.  Despite these costs, the House last week approved making ITFA permanent while letting the grandfather clause expire.  A new bipartisan Senate bill, however, would help state and local governments make up for the lost revenue.

The Senate bill would pair a 10-year ITFA extension with the Marketplace Fairness Act (MFA).  The MFA would enable states and localities to receive a substantial share of the sales tax that is legally due on purchases of goods and services from Internet and catalog merchants like Amazon and L.L. Bean but that they can’t collect from the companies.

Due to 1967 and 1992 Supreme Court decisions, a state can require out-of-state companies to charge its sales tax only if they have a physical presence in the state like a store, warehouse, or sales force.  The tax is still legally due, and consumers are supposed to pay it directly to their state, but few people do.  Those lost revenues could help pay for schools, roads, police, and other critical state and local services, and they keep sales and income tax rates higher than they’d otherwise need to be.

MFA would authorize states to require out-of-state sellers with more than $1 million in nationwide interstate sales to charge the applicable taxes — provided that states simplify their sales taxes and give merchants free software that calculates the correct tax.

This change would allow state and local governments to collect as much as $23 billion in annual revenues that they are owed under current law.  That would help them maintain and possibly reinvest in public services they cut during the recent recession.  It would also help offset states’ and localities’ ITFA-related $7 billion revenue loss — lost dollars that will grow as more people subscribe to Internet service; others trade-up to faster, and therefore more expensive, service; and others cancel their taxable landline telephones and cable TV in favor of Internet-based alternatives like Skype and Netflix.

MFA’s long-overdue enactment would also:

  • Create a more level playing field for local store-based retailers.  Because combined state and local sales tax rates typically range between 5 and 10 percent, Internet retailers that don’t collect sales taxes outside their home states start out with a price advantage over their local competitors.  This makes it harder for Main Street merchants to create local jobs.  It also has a ripple effect on local economies, as depressed sales at the neighborhood book or musical instrument shop lead to fewer purchases by their owners and employees at the farmers’ market and dry cleaner. 
  • End the unfair sales tax treatment of consumers who don’t shop online.  Low-income people who lack the computers, Internet access, or credit cards needed to shop online pay more than their fair share of sales taxes because online shoppers can avoid these taxes. 

These are worthy goals, and Congress should have passed the MFA long ago to achieve them.  But if lawmakers decide to extend ITFA, it’s even more urgent that they also enact MFA.  Congress should not extend the moratorium without also enacting MFA.