Today’s Jobs Report in Pictures

April 6, 2012 at 9:09 am

Today’s jobs report disappointed expectations with employers adding only 120,000 jobs in March. The unemployment rate edged down to 8.2 percent, but that decline reflected people leaving the labor force, not people finding jobs.

Below are some charts to show how the new figures look in historical context. Read our statement with further analysis.

See our chart book for more charts.

Myths on Spending, Debt, and Taxes Fuel Ryan Vision

April 5, 2012 at 11:19 am

In my latest post for US News & World Report, I identify three myths about spending, debt, and taxes that conservative politicians use to justify the plan of House Budget Committee Chairman Paul Ryan — one that would set the nation on a path to end most of government other than Social Security, health care, and defense by 2050.  I ask:

Are those who advance these myths interested in fixing the deficit and debt problem, as most Americans would hope, or are they conducting a bait-and-switch in pursuit of anti-tax advocate Grover Norquist’s quest to “reduce [government] to the size where I can drag it into the bathroom and drown it in the bathtub?”

I draw on CBPP analyses to rebut the following three myths:

Myth #1: Spending Is Out of Control, and Only Draconian Cuts Will Rein It In

As CBPP analysis has shown, non-interest spending outside Social Security and Medicare spiked in the Great Recession but is scheduled to fall substantially as a share of Gross Domestic Product (GDP) over the next 10 years as the economy recovers.  Moreover, the aging of the population and rising health care costs economy-wide are responsible for the growth in government spending in subsequent decades, not uncontrolled growth in government spending generally.

Myth #2: The Country Faces a Looming Debt Crisis Due to the Debt Incurred In the Past Few Years

That myth fueled irresponsible brinksmanship over legislation to raise the nation’s debt limit last year, and it stands in the way of meaningful deficit reduction.  But the weak economy and the legacy of policies enacted under President Bush (especially his tax cuts) play a far larger role in explaining deficits and debt going forward than recent temporary measures that were designed to combat the financial crisis and recession.

Myth #3: Americans’ Tax Burden Is High and Rising

As this CBPP analysis shows, the most recent “Tax Freedom Day” report that the Tax Foundation released earlier this week gives a misleading impression of the tax burden that the average American faces.  And as this CBPP analysis shows, average federal income rates are at historic lows for typical taxpayers.  When total taxes, including federal and state and local taxes, are taken into account, the United States has one of the lowest average tax rates among all industrialized countries.

“Skin in the Game” No Excuse for Taxing the Incomes of Poor Families

April 5, 2012 at 10:13 am

I explained yesterday that, like the federal government, most states exempt the incomes of working-poor families from taxation, but that states’ progress in eliminating the income taxes of working poor families largely ground to a halt in 2011.  In recent years, a range of policymakers, political candidates, and commentators have questioned the wisdom of those exemptions.  They argue that everyone should have some “skin in the game” when it comes to paying for public services.  These arguments are off base.

In reality, poor families have plenty of skin in the game – whether or not they pay income tax. That’s because they pay significant amounts of other state and local taxes such as sales and property taxes.

In fact, these taxes take a bigger bite out of the incomes of low-income residents than of high-income residents, and they actually outweigh the benefits of not paying income taxes.  In 2009, the lowest income 20 percent of taxpayers paid over 12 percent of their income in state and local taxes, while the highest income one percent of taxpayers paid just over 8 percent.

It makes little sense for a family that struggles to put food on the table to pay a bigger share of their income in taxes than the wealthiest taxpayers.  Eliminating the income taxes of poor families can improve this imbalance.

Where Do Our Federal Tax Dollars Go?

April 4, 2012 at 4:27 pm

As we approach the April 17 deadline for filing our federal taxes, many people probably can’t help wonder what their tax dollars are buying these days. Here’s our attempt to answer the question.

Where Do Your Federal Tax Dollars Go?

Click here for the latest update of our Policy Basic on this issue.

Bipartisan Effort to Help Low-Income Families Work Toward Middle Class Falters

April 4, 2012 at 12:51 pm

As the income tax filing deadline approaches, working-poor families in too many states continue to owe state income taxes.  Worse, decades of bipartisan progress in easing taxes on such families is in danger of sliding backwards, our latest survey finds.

Taxing the income of working-poor families makes little sense.  Instead of pushing workers deeper into poverty, states should support their efforts to climb into the middle class.  For one thing, raising the income of poor families boosts their children’s chances of academic success and their earning potential in adulthood.  And a stronger middle class is a key ingredient in any state’s long-term efforts to create a highly-skilled workforce and vibrant economy.

Since the early 1990s, many states have cut taxes on the working poor.  The number of states levying income taxes on working poor families has fallen by more than one-third, thanks to a successful, bipartisan effort among policymakers who recognized that such taxation is counterproductive.

Many States Tax Working Poor Families Deeper into Poverty

But progress faltered in 2010 and remained stalled in 2011 thanks in large part to massive state budget shortfalls as well as a crop of newly-elected, extremely conservative policymakers.  No new states exempted working-poor families from income taxes in 2011, and in most of the states where such families still pay income taxes, they saw their income tax bills increase.

This issue is particularly important in today’s economy.  Income inequality is near its highest level since the 1920s; wages for those at the bottom are not growing, even as those at the top have seen their incomes surge.

States’ lack of progress in the 2011 tax year means that last year:

  • Fifteen of the 42 states with an income tax levied that tax on working, two-parent families of four with incomes at or below the poverty line, which is about $23,000 for a family of four.
  • In a number of states, these working-poor families faced steep income tax bills— $548 in Alabama, $509 in Illinois, $331 in Hawaii, $274 in Oregon, and $273 in Georgia.
  • Several states continued to tax families living in severe poverty.  Five states — Alabama, Georgia, Illinois, Montana, and Ohio — taxed the income of two parent families of four earning less than three quarters of the poverty line, or $17,264.

In some states, progress hasn’t just stalled; it has reversed.  Three states — Michigan, New Jersey and Wisconsin — raised taxes on working-poor families and individuals in recent years, even as they have cut taxes for corporations and/or wealthy individuals.

This year, North Carolina and Oklahoma are considering eliminating their state earned income tax credits (EITCs), which reduce the taxes of low-income workers while encouraging work and reducing poverty.

They should reconsider.  Instead of reversing course, states would be better off to preserve the progress they have made and build upon it as their budget outlooks improve.