Goldman Sachs Bolsters Case Against Renewing “Bonus Depreciation” Tax Break

March 11, 2014 at 3:36 pm

The business tax break called “bonus depreciation,” enacted in 2008 as a temporary stimulus measure, expired in December, and we’ve cited findings from the Congressional Budget Office, Moody’s Analytics, and others showing that it hasn’t been a particularly cost-effective way to boost the economy.  A recent Goldman Sachs analysis bolsters the case for letting this tax break, which allows businesses to take bigger tax deductions for certain new investments, stay expired.

The expiration of bonus depreciation “should have little effect” on the economy, according to the analysis, which states in part that:

“(1) low interest rates substantially diminish the present value of the tax deferral that results from bonus depreciation,

(2) there are multiple indications that firms do not respond strongly to this incentive, for various reasons,

(3) the tax benefit mainly accrues to a fairly small subset of overall corporate investment. . . .”

Congress should follow the lead of the President’s new budget and House Ways and Means Chairman Dave Camp’s tax reform plan, neither of which would restore bonus depreciation.  Congress should also follow Obama and Camp’s lead in a related area and fully pay for any of the corporate tax extenders that — unlike bonus depreciation — merit extension.

SNAP Benefit Cut Has Worsened Hardships for Low-Income Families

March 11, 2014 at 2:42 pm

Average SNAP (formerly food stamp) benefits fell by about 7 percent due to last November’s expiration of the temporary benefit increase in the 2009 Recovery Act, according to our updated paper.  This reduction, which matches our earlier prediction, will have a powerful impact on low-income households’ ability to afford adequate food — and on local economies.

Benefits fell in every state except Hawaii, as these state-by-state tables show.

Most SNAP recipients already had difficulty affording food, and the lost benefits equal about ten meals a month for an average SNAP household.  Because SNAP households spend 97 percent of their benefits by the end of the month, the reduction will likely cause more households to run out of money for food.  News reports indicate that food banks have seen a rise in need since the cut took effect (see here, here, and here).

Agriculture Department research shows that a drop in SNAP benefits can raise the number of households with “very low food security,” meaning that one or more persons had to skip meals or otherwise eat less because they lacked money.

The total benefit cut exceeded $400 million for November alone and will amount to about $5 billion over the rest of fiscal year 2014.  To put that in perspective, $400 million roughly equals the entire fiscal year 2014 federal funding for emergency food assistance delivered through food pantries and other sites.

Because SNAP recipients spend their benefits quickly, the loss in benefits will ripple through states’ economies.  Moody’s Analytics estimates that every dollar in SNAP benefits generates at least $1.70 in economic activity in a weak economy.

5 Proven Benefits of Housing Vouchers — and How Vouchers Help Your State

March 11, 2014 at 11:53 am

A key question for next fiscal year is whether policymakers will adequately fund the Housing Choice Voucher Program, which helps more than 2 million low-income families rent modest units of their choice in the private market but has been hit hard by the sequestration budget cuts.  Some 70,000 fewer families have vouchers than a year ago.  To show what’s at stake, we’ve prepared state-by-state fact sheets on the impact of vouchers and the sequestration cuts.

We’ve also issued a report reviewing research findings on vouchers’ impact on poor and vulnerable households.  In brief, studies show that vouchers:

  1. Reduce crowding, housing instability, and homelessness.  Low-income families with children that received vouchers are much less likely than families without vouchers to be homeless or doubled up with friends and family, to live in crowded conditions, or to move frequently.
  2. Reduce poverty.  Vouchers and other rental assistance lifted 2.8 million people — including 1 million children — above the poverty line in 2012 under the federal government’s Supplemental Poverty Measure, which counts non-cash benefits.  Vouchers alone likely produced at least half of that effect.
  3. Help low-wage workers make ends meet.  About two-thirds of voucher holders who aren’t elderly or disabled either work or worked recently.  Vouchers are critical to enabling low-income working families to make ends meet.  For a mother of two renting an apartment for $700 and working 30 hours a week at the minimum wage, a voucher is worth about $440 a month.
  4. Give families access to neighborhoods with better opportunities.  By allowing families to rent a unit of their choice in the private market, vouchers enable them to move to safer neighborhoods.  A growing body of evidence indicates that growing up in neighborhoods of concentrated poverty can adversely affect children’s health, education, and long-term economic prospects.
  5. Reduce costs in health care and other public services.  In addition to improving the lives of vulnerable low-income people, vouchers and other rental assistance can produce savings in other program areas that offset part (in some circumstances all) of the cost of the rental assistance.  For example, rental assistance combined with supportive services for homeless people with serious health problems can achieve savings in the health care, corrections, and emergency shelter systems that are close to or above the cost of the rental assistance and services.

More Evidence That SNAP Caseloads Have Started Falling

March 10, 2014 at 4:45 pm

A million fewer people received SNAP (formerly food stamps) last December than in December 2012, the Agriculture Department announced Friday — the fourth straight month in which participation fell from the previous year.  This is just the latest sign that SNAP, which critics claim is out of control, has begun to shrink as the economy slowly recovers from the Great Recession.

SNAP caseloads grew in the recession for two main reasons.  More people qualified for the program (due to the weak economy) and a larger share of eligible people applied (due in part to state initiatives to reach more eligible households — particularly working families and senior citizens — by simplifying SNAP policies and procedures).

As our report explains, SNAP caseloads expanded rapidly when the recession hit, but growth slowed in 2011 and 2012 and has begun to decline (see graph).  This flattening of participation follows the pattern of previous recessions.

The Congressional Budget Office (CBO) expects that, as the economy improves, the number of participants will fall by 2 to 5 percent each year over the next decade.

SNAP spending, which doubled as a share of the economy (gross domestic product or GDP) in the wake of the Great Recession, has also begun to decline.  SNAP fell slightly as a share of GDP in fiscal years 2012 and 2013.  CBPP projects it will fall further in 2014 — not only as a share of GDP but even in nominal (non-inflation-adjusted) terms — largely because of last November’s expiration of the temporary benefit increase in the 2009 Recovery Act.

Effective Home Visiting Programs for High-Risk Families in Jeopardy Unless Congress Acts

March 10, 2014 at 3:12 pm

A federal-state partnership that supports family- and child-related home visiting programs in every state is slated to expire October 1, threatening a host of programs that are effective at strengthening high-risk families and saving money over the long run, according to a paper we issued today with the Center for Law and Social Policy.

The Maternal, Infant, and Early Childhood Home Visiting Program (MIECHV) targets high-risk families who are most likely to benefit from intensive home visiting services, through which trained professionals (often nurses, social workers, or parent educators) help parents acquire the skills to promote their children’s development.  MIECHV provides the federal funds, while states and localities implement the programs.  Congress provided $400 million for MIECHV this year.

When Congress created MIECHV in 2010, it authorized and funded the program for five years (fiscal years 2010 through 2014).  If Congress doesn’t extend MIECHV by September 30, when fiscal year 2014 ends, no new federal funds will be available.

Research shows that home visiting programs promote children’s health and development and improve parenting skills while cutting the number of children in the social welfare, mental health, and juvenile corrections systems, with considerable cost savings for states.  

MIECHV funds have spurred important innovations.  For example, Iowa expanded home visiting to 15 at-risk, underserved communities and is taking steps to improve program quality and coordination, such as creating a statewide data collection system and requiring state certification for all home visiting and family support practitioners.   

Failure to extend MIECHV would have unfortunate consequences for communities in every state.  Fewer families in at-risk communities would be served, and states may have to end efforts to improve data collection and assessment and strengthen coordination across programs.  Moreover, states — and the nation — would lose the opportunity to build the evidence base for these effective programs and expand them.

Click here to read the full paper.