Experts: Obama’s Action Should Increase Tax Collections

November 21, 2014. The Arizona Republic ran a story about President Obama’s administrative action on immigration that cites the Fiscal Policy Institute’s work, as well as our partners at the Institute on Taxation and Economic Policy:

 

Undocumented immigrants who qualify for President Barack Obama’s executive action, announced Thursday, will pay far more in new taxes than they will gain in credits, providing a significant boost to state and federal coffers, tax researchers predicted Friday.

Legalizing millions of workers also will tend to push up wages for both immigrants and U.S. citizens, researchers said.

Undocumented immigrants who qualify for deferral will be able to get work permits and Social Security numbers. They also must pay all relevant state and federal income and payroll taxes.

Under the executive action, they will be eligible for child and earned-income tax credits, but will not be eligible for other government benefits, according to White House officials.

“The net of that is undoubtedly going to be positive and pretty substantial,” both at the state and federal level, said David Dyssengaard Kallick, a senior fellow at the Fiscal Policy Institute, a nonpartisan New York think tank.

“While estimates are obviously imprecise, about half of undocumented immigrants pay payroll taxes already, and about half file income-tax returns,” Kallick said.

Elaine Maag, a senior researcher at the Tax Policy Center, a Washington-based nonpartisan think tank, said undocumented parents of children who are U.S. citizens or legal permanent residents already qualify for child tax credits under current federal law.

“More people will claim that credit, but overall, you’ll see revenue go up,” Maag said.

And, a little further on:

Both Arizona’s Department of Revenue and the Joint Legislative Budget Committee said they have not estimated the tax and revenue impact of Obama’s executive action. However, the Institute on Taxation and Economic Policy, a Washington-based think tank, estimated last year that undocumented immigrants currently pay about $10.6 billion a year in state and local taxes around the country and more than $374 million a year in Arizona.

“Most of those are sales, excise and property taxes — taxes that don’t depend on citizenship status,” said Matt Gardner, the institute’s executive director.

The institute estimated that providing a legal presence to all the estimated 11 million undocumented immigrants in the country would boost state and local tax revenues by $2 billion a year and increase tax revenue in Arizona by about $54 million, most from gains in state income tax.

Although Obama’s executive action will allow 3.8 million to 4.3 million additional people to work legally, the basic dynamic is the same, and there would be a proportional gain in revenue, Gardner said.

“There’s absolutely going to be a wage boost; there will be in increase in income-tax compliance, and more will pay income taxes regularly,” he said. “That’s a win-win for states.”

 

Undocumented Workers, Meet the IRS

November 20, 2014. In Politico, a story about the economic and fiscal impacts of President Obama’s executive action on immigration:

Obama’s new immigration order, which will shield about 5 million undocumented workers from deportation, will have tax implications that are sure to irk Republicans who are already calling foul on his bid to bypass Congress to ease immigration laws.

That’s because most of that group of 5 million will be adults with U.S.-born children, meaning they’ll theoretically be able to claim up to $1,000 per child for child tax credit, or several thousand dollars as part of another tax credit for the working poor, experts said.

But the 5 million will also pay a modest amount of new taxes to Uncle Sam that experts said will more than make up for the credits the government pays to them — potentially even creating a small plus-up for the Treasury.

“You would see a gain in earnings, in tax compliance, and some gain in the claim of tax credits — and the net of all that would almost surely be positive,” said David Kallick, a senior fellow at the immigration research initiative at the Fiscal Policy Institute.

 

(A small correction: Kallick’s title is actually senior fellow and director of the Fiscal Policy Institute’s Immigration Research Initiative.)

Detroit’s Immigrants Sustain City as Debate Consumes Washington

November 20, 2014. As President Obama puts immigration back on the front burner of the national debate, a story in Bloomberg Business Week focuses on the important role immigrants are playing in the Detroit economy, using some data from a Fiscal Policy Institute report to make the case:

The 18th-largest U.S. city ranks 135th in the number of foreign-born residents, said Steve Tobocman, director of Global Detroit, a nonprofit agency that promotes legal immigration as an economic catalyst.

Still, in 2007 they accounted for 11 percent of the economic output in a four-county area that includes Detroit while making up 9 percent of the population, according to the most recent data from New York’s Fiscal Policy Institute, a research organization.

 

Fiscal Policy Institute Names Ron Deutsch as Interim Executive Director

November 17, 2014. The Board of Directors of the Fiscal Policy Institute announced today that it has appointed Albany veteran Ron Deutsch as Interim Executive Director effective immediately.

After a year of dedicated service, Dr. Frederick G. Floss has decided to return to his position as professor of economics and finance at Buffalo State College but will continue to work with the organization as a Senior Fellow.

“Income inequality and tax fairness will be two of the most important issues facing New York when the 2015 Legislature convenes.  For over two decades the Fiscal Policy Institute has been the most respected public voice on these issues and the Board is pleased to have Ron Deutsch lead us in a new era as we intensify our focus and advocacy for progressive policies that will serve all New Yorkers, especially those with lower and middle incomes,” said Michael J. Burgess, Chairman of the FPI Board of Directors.

Deutsch has been a tireless advocate for working families for the past 22 years in Albany.  He led the Statewide Emergency Network for Social and Economic Security (SENSES, a statewide anti-poverty advocacy organization) for 13 years and has been the Director of FPI’s sister 501(c)(4) organization, New Yorkers for Fiscal Fairness for the past 8 years. Deutsch will be taking the helm as FPI enters the 2015 legislative session and will use his decades of organizing and advocacy experience to complement FPIs outstanding analysis and research capabilities. FPI’s budget work will focus on building broad coalitions around the renewal of the millionaires tax, ending the States austerity budgeting and reinvesting in our schools and cities, boosting the wages of working families, addressing deficiencies in our economic development system and promoting a progressive state and local tax structure that works for all of us.

“I am honored to have been chosen as FPI’s Interim Executive Director and am very excited about the opportunity to work more closely with FPI’s excellent and dedicated staff. I look forward to working with FPI’s allies, elected officials and the public on the development and implementation of progressive public policies that improve the lives of low and middle-income New Yorkers,” Deutsch said. “The Board and I are also pleased to announce that Dr. Floss has agreed to become a Senior Fellow with FPI. His leadership during our transition period is greatly appreciated and I am happy he will continue to work with me and FPI.”

Deutsch is a graduate of the State University of New York at Albany.  He also leads an all volunteer non-profit (www.thegivingcircle.org) that works to help improve the lives of families in the Capital District, nationally and internationally.

“Ron Deutsch will continue the tradition of solid analysis and common-sense policy proposals that have made FPI a trusted voice in New York,” said Nicholas Johnson, Senior Vice President for State Fiscal Policy at the Center on Budget and Policy Priorities. “We look forward to continuing our strong relationship with FPI in the effort to bring broadly shared economic growth to New York State and the rest of the nation in difficult times.”

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Local Fiscal Stress: State Austerity Policy and Creative Local Response

December 9, 2014, Saratoga Springs. Hosted by the Fiscal Policy Institute and Cornell University’s Community Regional Development Institute, this dynamic free event represented a collaboration of unions, management, municipalities, schools and academia. It built from the 2011 State of Upstate New York conference and the March 2014 State of Cities conference. Municipal and school district officials, union leaders, fiscal administrators, state legislators and staffers, New York State agency representatives are all invited to attend. For a two-page summary of the conference, click here. For further information on this conference, visit Cornell’s Community and Regional Development Institute web site.

Event Flyer PDF

Economic and fiscal impacts of proposed consolidations involving 5 postal facilities

November 10, 2014.  The American Postal Workers Union asked FPI to estimate the net economic and fiscal impacts of proposed consolidations involving five postal facilities around the country. The proposed consolidations were part of a nationwide “cost-savings” plan that would have further slowed mail delivery times. One of these involved a proposal to downsize sorting operations at the mail processing center in Newburgh, New York, in the lower Hudson Valley and to consolidate these operations at the Albany processing and distribution facility, 90 miles away. The consolidation would have involved the loss of 360 postal jobs in Newburgh and an increase of 128 postal jobs in Albany. The Postal Service released its own study about the potential impacts on postal operations but that analysis dramatically understated the overall community economic impact.

FPI’s economic impact analysis of the proposed Newburgh downsizing concluded that the net annual savings to the USPS were dwarfed by the net decline in labor incomes in Newburgh and New York state overall associated with the loss in postal jobs, with job losses sustained in businesses that support postal operations as well as losses related to reduced consumer spending associated with middle-income paying postal jobs.  In addition, the federal government and New York State would lose personal and business income and payroll taxes and local governments would experience a decline in property and sales taxes associated with the downsizing of postal sorting operations.

The other four proposed consolidations involved postal facilities in ; Huron, South Dakota; Tucson, Arizona; New Orleans; and Youngstown, Ohio.

FPI did not attempt to quantify the impact of these postal operations downsizings on businesses and consumers who would experience longer delivery times and poorer service as a result. Even though the round of consolidations that FPI analyzed was subsequently put on hold, the Postal Service reduced service standards in January 2015, with a significant portion of single piece first class mail being reduced from one-day to two-day expected delivery times.

Postal service operations and employment have already been scaled by considerably since 2000. In New York State, postal employment declined by 38 percent from 2001 to 2014, greater than the one-third job decline nationally.

The Postal Service’s plans for further consolidations are not the result of postal operations losing money. Rather, it stems from an effort by some Washington officials seeking to privatize the post office. One of the key tactics in pushing that agenda has been the 2006 Congressional legislation requiring the Postal Service to fully prefund retiree health benefits 75 years into the future over a 10-year period, at a cost of approximately $5.5 billion annually. This is a requirement that no other public or private entity in the United States must follow, and was instituted to put the public’s postal service out of business, clearing the way for greater privatization.  The Postal Service is the nation’s largest employer providing middle income paying jobs and it disproportionately employs workers of color who represent 43 percent of the postal workforce compared to a 34 percent share of the entire U.S. workforce.

See also FPI’s May 13, 2016 testimony at the public hearing convened by the Grand Alliance to Save Our Public Postal Service.

Should Nonprofits Be Mandated to Pay Living Wages?

November 5, 2014. James Parrott was a panelist for the Philanthropy New York program “”Should Nonprofits Be Mandated to Pay Living Wages, and What is Philanthropy’s Role?”. A live recording and a PDF of the presentation is available here.

Existing New York City Wage Standards

November 4, 2014. This fact sheet provides an overview of New York City’s existing wage standards–including minimum wage, living wage, and prevailing wage.

Immigrants Aren’t Taking Your Jobs, They’re Making Their Own

October 15, 2014. A story in Vox stresses the role of immigrant entrepreneurship, citing FPI’s work on the subject. Economic research shows repeatedly that, overall, immigrants don’t displace U.S.-born workers. How can this be? One part of the answer is that immigrants are not just workers, they are also entrepreneurs, so they create jobs for themselves and also for others. (Another part of the story, which is not covered in this piece, is that immigrants also expand consumer demand, so at the same time as more workers enter a local labor market there is also an increase in the demand for goods and services.) In other words, immigrants are not just adding workers to a local economy, they’re expanding all parts of the economy – workforce, employers, consumption, and for that matter investment, too.

Here is FPI in the Vox story:

Over the last two decades, immigrant owned businesses have made up 30 percent of the growth in the small business economy, a significant chunk given that immigrants only account for 13 percent of the US population. Their businesses also performed better than your average American. Employees within these small companies earned over $55,000 a year over the median earned income of $41,000 a year, according to the Fiscal Policy Institute’s report.

 

NYC Median Family Income Up for First Time since Great Recession

October 15, 2014. After five years of decline, median family income in New York City rose by 3.5 percent between 2012 and 2013 in inflation-adjusted terms, according to recently-published Census data.[1] This compares with increases of 0.9 percent at the national level and 1.6 percent for all of New York State, including the city.

While the city’s increase far surpassed the nation’s and state’s, median family income in the city was still 5.2 percent lower in 2013 than it had been in 2008 at the start of the Great Recession. The corresponding national and state declines for the 2008 to 2013 span were 6.6 and 4.0 percent, respectively.

What explains this fairly solid one-year increase in family income? Did the finances of the typical New York City family, while not yet having made up the ground lost since 2008, get a healthy boost? An examination of other new Census data provides a mixed picture. Yes, there was improvement in some labor market outcomes, indicating that some of the city’s families did indeed see their incomes rise. The new data, however, suggest that an out-migration of low- and middle-income families and an in-migration of higher-income families also partially accounts for the increase in city median family income.

First, the good news—several indicators show that 2013 saw some improvements in the city’s labor market. For New York City residents, the employment rate—the number of people employed relative to the population aged 16 and up—increased by nearly half a percentage point from 2012, rising from 56.8 to 57.2 percent. The state’s employment rate also rose by the same amount, whereas the national rate dipped by 0.4 percentage points. The city’s increase continues a steady climb back from the 55.8 percent low seen in 2010. Having a larger share of the city’s working-age population employed obviously benefits family incomes.

Further, median wage and salary earnings, adjusted for inflation, increased by 1.5 percent, rising from $34,526 to $35,057. Over the same period, median earnings increased at a much lower rate (0.6 percent) at the national level and fell by 2.4 percent statewide.

Next, the share of city residents holding private wage and salary jobs versus being self-employed also rose in 2013. Private wage and salary jobs in New York City, on average, have earnings 60 percent greater than self-employed earnings. As a share of the total job pool, those holding private wage and salary jobs increased by nearly one percentage point (rising from 79.8 to 80.7 percent), while the share who are self-employed dropped by nearly half a percentage point (from 6.6 to 6.2 percent). Again, this is a positive shift from the standpoint of family incomes. (The share holding government wage and salary jobs also declined in 2013.) In contrast to the city, the national and state data show roughly half-percentage point gains in the share of jobs held by private wage and salary earners, and very small 0.1 percentage point declines in the self-employment share.

Looking at the employment of city residents by occupation and industry, two other statistics also suggest why the incomes of the city’s families may have increased. Among the five broad occupational groupings, the largest increase between 2012 and 2013 was in Management, Business, Science, and Arts. This category comprises relatively high-paying jobs, and the share of resident workers employed in these fields increased by nearly one percentage point (0.9 of a percentage point). This occupational grouping also ranked first with respect to growth nationally and statewide, but the respective share increases (0.2 and 0.7 of a percentage point) were smaller.

In terms of changing shares of jobs by industry, of the 13 broad industry groups, the largest share increase in the city (half of a percentage point) was for Professional, Scientific, and Management, and Administrative and Waste Management Services (reported as one broad industry grouping). Generally, this category is associated with relatively high-paying jobs. The share of jobs falling under this umbrella also registered the largest increase at the state level (0.5 of a percentage point) and nationwide (0.2 of a percentage point).

While these developments—increased employment rate, increased share of jobs held by private sector wage and salary earners, and increase in the share of jobs in relatively high-wage occupations and industries—offer clues as to why the city’s median family income rose in 2013, the new Census data also suggest that the increase in median family income may reflect both the in-migration of higher-income families and the out-migration of lower-income ones.

As shown in the table below, the number of families in the top Census Bureau income bracket—$200,000 and up—increased by 19,000, nearly 14 percent, approximately double the rate of increase at the national level and more than one-and-a-half times the rate of increase statewide. There was an overall 10,000 net increase in the number of New York City families from 2012 to 2013.

All of the top four New York City income brackets saw gains in the number of families. An influx of high earners accounts for some of the increase in the median family income and is consistent with the growth in higher-wage jobs and educational attainment. The share of city residents with at least a bachelor’s degree increased by 1.1 percentage points, far outstripping the national 0.7 percentage point increase and the 0.5 percentage point statewide increase.

At the other end of the income spectrum, the number of families in the city’s three lowest income brackets shrank. While some families likely moved up the income ladder over the past year, the much larger magnitude of the net increase among the top three income brackets compared to the net decline among the bottom three brackets (a gain of over 27,000 vs. a decline of nearly 18,000), suggests a net influx of families with high incomes. The net decline in the number of lower-income families may reflect some out-migration. Some of the job growth in high-paying occupations and industries benefitted new in-migrants, particularly given that the disproportionate increase in just one year in the share of city residents who are highly educated is most likely associated with in-migration.

In conclusion, the reversal of the five-year recession-related decline in the city’s median family income offers some encouragement. Between 2008 and 2012, New York City’s median family income fell by $5,100, an 8.4 percent drop. In 2013, the median gained by nearly $2,000, a 3.5 percent rebound. The new Census figures show some clear positive signs of an improving job market. However, in looking at the broader picture painted by the Census data, it appears that a significant part of the income rebound reflected a demographic shift with respect to income levels of the city’s families.

Taking into account the much more rapid growth in high incomes in New York City than in the nation, and the greater proportionate decline in the share of families with lower incomes, this shift means that roughly 10,000 families moved from below the median in the $56,000-to-$58,000 range to above the median. Given that there are roughly 10,000 families in each $1,000 increment of the city’s income distribution in the range from $50,000 to $60,000, this change alone would have lifted the median point from $56,000 to $57,000, an increase of 1.8 percent. Thus, we conclude that about half of the city’s 2013 3.5 percent median family income growth is due to the in-migration of higher-income families and the out-migration of lower-income families.

 

By Michele Mattingly, Research Associate, and James Parrott, Deputy Director and Chief Economist

 

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[1] FPI analysis of Census American Community Survey data. Census estimates adjusted for inflation by FPI using U.S. City Average All Urban Consumers Consumer Price Index.

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