Immigration Reform 2013-14: Will Comprehensive Reform Bring More Jobs for Americans?

December 31, 2013. Northern Voices Online considers the prospects for immigration reform, focusing on the economic benefits that political action would bring, focusing on the immigrant role in small business ownership.

The Fiscal Policy Institute Businesses mentioned in a June 2012 study that immigrant owned businesses employ nearly five million Americans in 2010 and generated an estimated $776 billion in revenue.

Immigration Reform 2013 News: Studies Show Immigrants Help Boost the U.S. Economy, Create More American Jobs

December 30, 2013. The Latino Post reviews reports about the economic impacts of immigrants on the U.S. economy, including one by the Fiscal Policy Institute.

Research proves that immigration and economic progress go hand in hand. Contrary to fears that immigrants will take American jobs and make unemployment even worse, studies show that mending our broken U.S. immigration system would actually help end America’s job crisis….

According to a 2012 study from the Fiscal Policy Institute, immigrant-owned small businesses employed nearly five million Americans in 2010 and generated an estimated $776 billion in revenue. Plus, the Partnership for a New American states that more than 40 percent of Fortune 500 companies were founded by immigrants or first generation Americans.

Revitalizing Baltimore Through Immigration

December 26, 2013. An opinion piece in the Baltimore Sun draws extensively from the Fiscal Policy Institute’s research on small business ownership, and describing city efforts to make it clear that immigrants are welcome.

Baltimore Mayor Stephanie Rawlings-Blake said Baltimore is “open for business, particularly in the area of Latino immigrants. We’ve actively recruited Latino immigrants to Baltimore, and when they come here, they’re thriving. Many have opened businesses, employed individuals. … I think it’s a win-win.”

Examining the Final Report of the Pataki/McCall Commission

December 20, 2013. Last week, Governor Andrew Cuomo accepted the final report of the New York State Tax Relief Commission that he had appointed earlier this Fall. This commission, which was co-chaired by former Governor George Pataki and former State Comptroller H. Carl McCall, had been charged by Governor Cuomo with identifying ways to provide property and business tax relief to New York’s homeowners and businesses.

Today, the Fiscal Policy Institute joined with six of New York’s leading progressive groups in releasing a report analyzing and critiquing the recommendations of the Tax Relief Commission. That report, which is entitled Taking New York Backwards: Pataki Commission’s Tax Cuts Exacerbate Inequality and Favor the Wealthy, details the flawed budgeting and severe inequity of the recommendations, which fail to adequately address urgent needs in education funding, health care, infrastructure investments, and progressive tax relief for lower and middle-income families. While we have criticized some of the specific recommendations of the Governor Cuomo’s other tax advisory commission, the Tax Reform and Fairness Commission, chaired by investment banker Peter Solomon and former Comptroller McCall, that Commission’s report shows that it is possible to implement tax cuts that make sense from a tax fairness and/or an economic competitiveness perspective without reducing revenue.

The Pataki Commission delivered on the Governor’s charge to focus on homeowner property tax relief and business tax cuts by recommending $1 billion in property tax relief for homeowners, and $706 billion in corporate tax cuts. But, the Commission also went beyond that charge in proposing two additional measures which, if and when fully implemented, would deliver $4 billion a year in tax relief to the state’s wealthiest residents. These two measures involve

  • Reductions in New York’s estate tax which applies to only the three percent largest estates by increasing the threshold, below which there is no tax, from $1 million to $5.25 million, and reducing the tax rate for estates above $5.25 million from 16% to 10%. The Commission’s report estimates the cost of its proposed Estate Tax cut, as it is phased in over time, at $381 million in the 2016-17 state fiscal year, $627 million in FY 2017-18 and $772 million in 2018-19.
  • The reduction in 2018 of the state’s current, temporary top Personal Income Tax rate of 8.82%, which applies only to families with taxable incomes above $2 million a year and individuals with taxable incomes above $1 million, to the permanent top rate of 6.85%. This would represent a 22.4% reduction in the personal income taxes paid by the highest-income one-half of one percent of New York taxpayers. No estimate is given by the Commission of the cost of this proposal but based on state budget reports, we know that the revenue lost from this proposal would be at least $3.2 billion a year.

After a full analysis, our conclusion is that even businesses should be questioning the recommendations made by the Pataki Tax Commission. Cutting $1.5 billion in taxes per year for corporations ($706 million) and the wealthy ($772 million in estate tax reductions) will leave New York State little room for programs that actually promote economic growth. Ensuring the financial and economic viability of the state’s local governments is essential if New York is to have a strong business climate. And strong schools to provide well educated workers are much more important to the success of New York State businesses than the dollars they will receive from these ill-conceived tax giveaways. If the top personal income tax rate on millionaires were to be cut as recommended by the Commission, the situation would be substantially worse.

Corporate Tax Cuts

Corporate tax cuts have not been shown to promote economic growth in the past and are an expensive way to make a symbolic statement about being open for business. By using resources that could be used for critical local infrastructure investments and for the provision of adequate state aid for education, the business tax cuts proposed by the Commission may in fact cause business to leave New York. Businesses decide where to locate on the basis of the total economic environment not just taxes as the Pataki Commission’s Report implies.

Estate Tax

The recommended changes to the estate tax will have little impact on New York’s economy while cutting greatly needed revenues. The NYS Department of Taxation and Finance has shown that millionaires are not leaving the state because of the estate tax. The estate tax cuts recommended by the Commission will cost nearly $800 million a year when fully phased in. The bulk of this windfall would go to a relative handful (fewer than 200) of the very wealthiest estates valued at over $10 million each. The Pataki Commission can only justify this giveaway by totally ignoring research by the State’s tax policy experts who, in the Department of Taxation and Finance’s recent report on the estate tax, concluded that  “Migration studies regarding the impact of taxes such as the estate tax have shown that taxes generally are not a major factor in the decision of where to live or retire.” These studies generally show that taxes have very little impact on cross-state migration and estate tax revenues.

Property Tax Relief

The property tax freeze proposed by the Commission is clearly regressive. Homeowners with more expensive homes (and normally higher incomes) will get larger tax breaks than owners of more modest homes, even when those latter households have property taxes that are extremely high relative to their incomes. Moreover, the freeze proposal will send less tax relief to our hard-pressed cities. Targeted tax relief is a much better plan and the Circuit Breaker approach, also recommended in the Commission report, will give a much bigger bang for the buck IF designed and implemented appropriately. Giving meaningful relief to those hardest hit by property taxes, in addition to being progressive and fair, can be done in a way that is both revenue neutral and good for economic growth.

Fiscal Policy Institute Names Frederick Floss Executive Director

December 19, 2013. The Board of Directors of the Fiscal Policy Institute announced today that it has appointed Frederick G. Floss, professor of economics and finance at Buffalo State College, as FPI’s new Executive Director.

Floss is the Fiscal Policy Institute’s third executive director. He succeeds Frank J. Mauro who led FPI for the past 20 years.

“Fred Floss brings an excellent combination of knowledge, skills and experiences to the leadership of FPI and to the discussion of the key fiscal and economic issues facing New York State,” said FPI Board Chair Michael Burgess. “Fred’s knowledge of economics and finance, his research credentials and his commitment to social and economic justice along with his years of experience in the New York State policy making process will be important in moving FPI forward.”

Floss has taught at Buffalo State College since 1983 and has been a full professor of economics and finance at Buffalo State since 1999. He was Vice President for Academics of the United University Professions for 8 years and served as the chief negotiator for UUP’s 2007-2011 contract with New York State. He also serves as the Co-Director of Buffalo State’s Center for Economic Education and is a Director of the Buffalo Fiscal Stability Authority.

“I am honored to have been chosen as FPI’s Executive Director and excited about the opportunity to work with FPI’s excellent and dedicated staff. I look forward to working with a strong committed board to further the development and implementation of public policies and private practices that improve the lives of low- and middle-income New Yorkers,” Floss said. “I am also proud to announce that Frank Mauro has agreed to become executive director emeritus. His leadership over the last 20 years has helped all New Yorkers and I am happy he will continue to work with me and FPI.”

Holder of a Ph.D. in Economics from the University at Buffalo, Floss has taught a wide variety of courses in both economics and finance over the past 30 years. His primary fields of concentration are public finance, forensic economics and microeconomic theory.

“Fred Floss will be an outstanding leader for FPI as the organization continues to produce fiscal and economic analysis that lawmakers, media, and the public rely on,” said Nicholas Johnson, Vice President for State Fiscal Policy at the Center on Budget and Policy Priorities. “For two decades FPI has been a leader in the fight for fair and sound fiscal policies, and we look forward to continuing our collaboration with FPI as New York State and the rest of the nation face new and challenging policy decisions.”

Full Press Release

Immigration Reform Isn’t Republican or Democratic — It’s Commonsense

November 25, 2013. An op-ed by Congresswoman Elizabeth Esty of Connecticut about the benefits of immigration reform. Esty is a Democrat, but as she stresses, this should not be a Democratic or Republican issue; it is an American issue. In making the case, she cites FPI’s report on small business owners:

Since taking office, I’ve had the honor of meeting with business owners from around our district and our state. They are eager to share with me their successes as well as their concerns. When I ask what I can do to support them as they grow their businesses and create jobs, many say the same thing: Congress must fix our broken immigration system.

From the labs of our universities, to construction sites in our towns, to the small businesses on our Main Streets, and every job in between, immigrants make critical contributions to our economy here in Connecticut. As of 2011, almost half a million immigrants live in our state, and they make up more than 16 percent of our workforce.

Nationwide, immigrant-owned small businesses employed more than 4 million people in 2007, and 18 percent of small business owners in the United States are immigrants, according to the Fiscal Policy Institute.

 

New Report Examines Shale Drilling Impact

November 21, 2013. Drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim, according to a report by the Multi-State Shale Research Collaborative, a group of research organizations tracking the impacts of shale drilling that includes the Fiscal Policy Institute.

The Marcellus and Utica shale formations span six states: New York, Ohio, Pennsylvania, West Virginia, Maryland, and Virginia. Natural gas development in these six states was fueled by high commodity prices from 2000 to 2008. As prices have declined more recently, gas drilling activity has slowed while development of higher-priced oil has accelerated.

Recent trends are consistent with the boom and bust pattern that has characterized extractive industries for decades. It also points to the need for state and local policymakers to collaborate to enact policies that serve the public interest.

Below are the key findings from the new report:

  • While shale-related employment has made a positive contribution to job growth, the number of jobs created is far below industry claims and remains a small share of overall employment in the region.
    • Between 2005 and 2012, less than four new direct shale-related jobs have been created for each new well drilled, much less than estimates as high as 31 direct jobs per well in some industry-financed studies.
    • Region-wide, shale-related employment accounts for just one out of every 795 jobs. By contrast, education and health sectors account for one out of every six jobs.
    • Job growth in the industry has been greatest (as a share of total employment) in West Virginia. Still, shale-related employment is less than 1 percent of total West Virginia employment and less than half a percent of total employment in all the other states.
  • Many of the core extraction jobs existed before the emergence of hydrofracking.
    • Together, Pennsylvania, Ohio, and West Virginia had 38 percent of all producing wells in the country in 1990 and 32 percent in 2000.
    • Some counties with a long history of mineral extraction have experienced a shift in employment from coal to shale extraction.
  • Industry employment projections have been overstated.
    • Some industry supporters have equated “new hires” with “new jobs” and attributed ancillary job figures to shale drilling even when they have nothing to do with drilling.
    • Industry-funded studies have used questionable assumption in economic modeling to inflate the number of jobs created in related supply chain industries (indirect jobs) as well as those created by the spending of income earned from the industry or its suppliers (induced jobs).
  • Drilling is highly sensitive to price fluctuations, which means that job gains may not be lasting.
    • In some counties, employment gains have been reversed as drilling activity shifted to more lucrative oil shale fields in Ohio and North Dakota.
    • Direct shale-related employment across the six-state Marcellus/Utica region fell over the last 12 months for which there are data — the first quarter 2012 to the first quarter 2013.

Press-Release

Full Report

MSRC Report Overview

Visit the  Multi-State Shale Research Collaborative web site for more information, reports, and resources.

Statement on the Solomon/McCall Tax Reform and Fairness Commission Report

November 14, 2013. Statement from Ron Deutsch, Executive Director, New Yorkers for Fiscal Fairness, and Frank Mauro, Executive Director, Fiscal Policy Institute.

Any discussion of fair taxation in New York must acknowledge that our state has the greatest income inequality in the nation and that our tax system is partially to blame. We are experiencing record child poverty rates and levels of hunger and homelessness that are unprecedented. Too many of our residents are suffering and struggling to make ends meet and today’s report by the Governor’s Tax Reform and Fairness Commission does little to address this growing problem. The report discusses expanding the Earned Income Tax Credit, which we believe would be a great mechanism to begin to help these desperate families. Noticeably absent are any proposals to address the state’ income tax structure which needs to be made more progressive in order to begin to raise the needed revenues to address our growing income inequality and which the Commission was originally charged with examining.

The Governor’s Tax Reform and Fairness Commission has developed a package of tax options that is literally a smorgasbord of reforms with a little something for everyone. We support many of the proposals from the Commission and strongly support scaling back our system of tax credits to big business and making them more accountable and transparent.

While the commission did meet with our organizations and a number of business, labor and tax reform groups, the broader public, the people that pay taxes, need a chance to weigh in. We strongly recommend that the Governor’s office and the Commission hold a series of public hearings to get input from the general public on these critically important tax issues. We further recommend that the Commission develop a website to post their findings and take recommendations from the public.

We applaud the commission for submitting revenue neutral recommendations. Further draining state revenues at a time when needs are so great would be a huge mistake. Further cuts in essential state and local public services would create an unwarranted drag on the economy in the short run and hurt the state’s economic competitiveness in the long run.

The report raises a number of questions:

The report mentions the possibility of providing some sort of targeted property tax relief for residents (by tying your property tax burden to your income—commonly called a circuit breaker). We believe that this is the most important and critical tax relief mechanisms recommended in the report and were happy to see its inclusion.

A Fiscal Policy Institute analysis of the US Census Bureau’s American Community Survey (ACS) microdata confirms that hundreds of thousands of low, moderate and middle-income families in New York State are already paying an inordinate share of their income in property taxes on their primary residences. The situation in which these families find themselves will not be addressed by New York’s cap on the growth of local governments’ property tax levies. Only a middle-class Circuit Breaker can provide effective relief for these families in a targeted and cost-efficient manner. The report recommends that $400 million of the revenue that would be generated by eliminating the sales tax exemption on clothing under $110 be used to “provide broad-based real property tax relief.”  We believe that $400 million is woefully inadequate given the enormity of the excess property tax burden borne by many low- and middle-income households.

The report does, however, say that some or all of another $1 billion that could be generated by other sales tax base broadening could be used for “future” property tax relief.  But it also leaves open the possibility that some or all of this revenue could be used for personal income tax relief. It would be extremely unfortunate if some of these resources went to reducing the top rate on the income tax for high-income households at a time when the property tax remains so burdensome for so many low- and middle-income families and when the state continues to cut needed services and insist that it cannot afford to fully fund its foundation formula for public schools.

The Commission’s proposal to eliminate the sales tax exemption on clothing under $110 also requires additional scrutiny. While this proposal is regressive in nature, the Commission recommends “targeted tax relief to ‘make whole’ low- and middle-income taxpayers impacted by the sales tax base broadening.” But the report never presents an incidence analysis of the clothing sales tax exemption; nor does it indicate the income thresholds for this “targeted” tax relief. The report, however, does provide the following information regarding the impact of the state’s sales tax exemptions for “certain necessities” including clothing:

Of the $3.2 billion the State annually forgoes in revenues as a result of these tax exemptions, only $900 million—less than one-third—benefits households earning under $50,000, while households earning in excess of $100,000 reap $1 billion in tax savings.

The report uses this information to argue that exempting necessities from the sales tax is a “highly inefficient way to protect lower income households.” But it never mentions that these figures mean that $1.3 billion of these “savings” go to households with incomes between $50,000 and $100,000. Nor does it indicate how households with incomes in this range would fare on net, factoring in both the elimination of the clothing exemption and the “making whole” of middle-income taxpayers.

The Commission proposes to raise the threshold on the Estate Tax from $1 million to $3 million stating:

The current exemption threshold of $1 million has been criticized as too low given significant increases in the value of assets and concerns that it may serve as a factor in taxpayer migration from New York to other states (e.g. Florida) that do not impose any estate tax.

There seems to be a great deal of worry about wealthy people migrating out of New York State with little concern for the low and middle income families that are moving because they cannot afford the property tax burden. While New York had a high rate of net domestic out-migration from 2000 to 2010, the IRS’s bottom line income tax data shows that New York’s share of the nation’s highest income taxpayers and its share of the income of the nation’s highest income taxpayers increased over this ten-year period. The number of federal taxpayers with Adjusted Gross Income (AGI) above $1 million increased 17.1 percent nationally between 2000 and 2010 but 38.9 percent in New York State! And, the amount of these taxpayers’ AGI increased 20.8 percent nationally but 57.4 percent for federal taxpayers from New York.

Almost 3.2 million New Yorkers to See a Cut in Food Assistance Beginning Today

November 1, 2013. Beginning today, almost 3.2 million people in New York will see their food assistance benefits cut as the federal government ends a temporary boost to the Supplemental Nutrition Assistance Program (SNAP). The New Yorkers affected by this cut—in what used to be known as the “food stamps” program—include more than 1.2 million children and over 1 million elderly and disabled individuals. Overall, New York residents will receive $332 million less in SNAP benefits in the 11 months from November 1, 2013 through September 30, 2014.

Today’s cut hits all of the more than 47 million Americans, including 22 million children, who currently benefit from SNAP. The boost in benefits expiring today was part of the 2009 American Recovery and Reinvestment Act (ARRA). This increase was implemented to strengthen the economy while easing hardship for needy families.

For a family of three in New York, today’s cut will mean a reduction of $29 each month. This is a serious loss for families whose benefits, after this cut, will average less than $1.40 per person per meal.

“While the Great Recession is officially over, the economy has not bounced back with the strength of previous recoveries. For those families that are suffering the most from our nation’s unacceptably high unemployment and underemployment rates, this is not the right time to eliminate the small but crucial increase in SNAP benefits that the federal government has been providing,” said Frank Mauro of the Fiscal Policy Institute.

In addition to helping to feed hungry families, SNAP is one of the fastest, most effective ways to stimulate a struggling economy. Every $1 increase in SNAP benefits generates about $1.70 in economic activity.[1]

On top of the cuts going into effect today, the U.S. House of Representatives recently passed legislation that would cut an additional $40 billion from SNAP, potentially eliminating assistance for at least 211,000 people in New York and nearly 4 million nationwide. That legislation would provide strong financial incentives for states to reduce the number of people receiving assistance,[2] making it significantly harder for struggling families to put food on the table, and completely eliminating assistance for some of the poorest Americans. The House-passed plan for SNAP coupled with today’s cuts would deal a significant blow to millions of Americans who continue to struggle to make ends meet as the economy continues its slow and uneven recovery.


[1] Center on Budget and Policy Priorities, November 1 SNAP Cuts Will Affect Millions of Children, Seniors, and People with Disabilities: State-by-State Figures Highlight the Impacts Across the Country, October 24, 2013 at http://www.cbpp.org/cms/index.cfm?fa=view&id=4036#interactiveMap.

[2] A provision in this legislation would allow states to cut off SNAP benefits to most adults if they are not working or participating in a work or training program for at least 20 hours a week. States could keep half of the federal savings from these reductions and use the funds for any purpose. Moreover, states that do not utilize this option would lose all federal matching funds for their SNAP employment and job training programs. This means that states like New York that run strong SNAP employment and training programs would have to choose between altering their current programs to satisfy the new federal requirements, or losing all federal matching funds.

Further information on the upcoming cuts can be found at SNAP Benefits Will Be Cut for All Participants in November 2013, Center on Budget and Policy Priorities: http://www.cbpp.org/cms/index.cfm?fa=view&id=3899 and Cuts in House Leadership SNAP Proposal Would Affect Millions of Low-Income Americans, Center on Budget and Policy Priorities: http://www.cbpp.org/cms/index.cfm?fa=view&id=4009.

The Taxpayer Costs of Low-Wage Fast Food Jobs in New York State

October 16, 2013. Fast food jobs are by far the biggest source of job growth in New York State and New York City in this recovery and over the past decade. But, with a median hourly pay of only $8.90 an hour in NYC, this growth in fast food jobs is one of the reasons that poverty has risen sharply during the recovery.

NYC has a record number of working poor—one out of every 10 workers in NYC works, but can’t earn enough to lift their family earnings above the poverty line. The rapid increase in fast food employment is a huge contributor to this condition. The single most important way for NYC to reduce its widening income polarization is to make sure that more workers can earn enough through their labor to rise out of poverty and pay their own way.

A new report documents that the low-wage business model of large fast food chains sticks taxpayers with a huge tab. The study, by researchers at the University of California at Berkeley and the University of Illinois, shows that the earnings of fast food workers around the country and in New York are so low that over half qualify for one or more forms of public assistance, such as Medicaid or food stamps.

This new study documents the three major challenges faced by fast food workers:

  • Low wages: front-line fast food jobs pay an average of $8.69 an hour nationally;
  • No benefits: 87% of fast food workers do not receive health benefits from their employer; and
  • Not enough hours: fewer than 3 in 10 (28%) work 40-hour weeks.

The low-wage business model that drives so much of the fast food industry in the U.S. leaves hundreds of thousands of its workers with no choice but to apply for Medicaid and food stamps. This costs taxpayers an estimated $7 billion per year.

Yet, as a companion report by the National Employment Law Project shows, the 10 largest fast food chains in the country are very profitable and pay their top executives in the millions. Last year, the 10 largest fast food chains booked $7.4 billion in profits and paid their CEOs an average of over $7 million each. These 10 corporations employed 2.25 million workers in the U.S., costing taxpayers an estimated $3.8 billion based on their low-wage business model.

According to the Berkeley-Illinois report, there are 104,000 front-line fast food workers in New York State receiving an estimated $708 million in publicly-funded subsidies such as Medicaid and food stamps. Three out of every 5 fast food workers in NYS received one or more forms of public assistance.

Last year, NYC’s fast food restaurants employed 57,000 workers. Over the past 4 years, the number of fast food jobs in NYC increased by nearly 30%, almost 10 times as fast as the 3% overall increase in private sector employment over that period. The number of fast food outlets in the five boroughs grew even faster, by 42% from 4,600 in 2008, to 6,600 in 2012.

Manhattan has 2,400 fast food outlets employing over 25,000 workers. While average annual wages in the fast food industry were $19,100 in Manhattan in 2012, average wages were much lower in the other boroughs, ranging from $14,000 in Staten Island to $15,500 in Brooklyn.

Since 2000 (first half of 2000 to first half of 2013), in the downstate suburbs and upstate New York, the growth in the number of fast food jobs alone is nearly as great as the net gain of 38,000 jobs in total public and private employment, according to data from the New York State Labor Department.

Because of their visibility and rapid growth, prominent fast food chains exert a dominant force in pay practices at the low end of the job market. Their low-wage business model involves paying workers so little that 60% of the fast food workers in New York State have to turn to food stamps, Medicaid or other public subsidies just to get by. This practice keeps the profits of giant fast food chains high by shifting part of their labor costs to taxpayers. It would be far better if fast food workers were paid wages that allowed them to pay their own way.