Expanding Opportunities and Improving City Social Services Quality through a Career Ladder Approach

September 24, 2014. The City of New York delivers most human services through $5 billion in annual contracts with non-profit providers. However, there are insufficient opportunities for lower-level social service case workers at these providers to acquire the education needed to move up a career ladder to more responsibility and better compensation. The result is a two-tiered job market that confines many women of color to the lower tier making inadequate wages. Thisprogram, explored a unique opportunity to address this challenge.

Presenters

A PDF of the presentation is available here.

Hispanic Business Owners to Share their Experiences

September 22, 2014. This opinion piece by Galen Spencer Hull celebrates Hispanic Heritage Month by focusing on immigrant and minority businesses.

Tennessee has one of the fastest-growing immigrant communities in the U.S., earning Nashville the sobriquet as an “Ellis Island.” Immigrants are making notable contributions to the region’s economic development. Music City has become a hub, attracting a steady stream of immigrants. Davidson County alone has an immigrant population of about 40,000, or 7 percent of the total, followed by Williamson County (4 percent) and Rutherford County (3.6 percent).

A recent study of immigrant small-business owners in the U.S. by the Fiscal Policy Institute highlights their contributions to economic development. The study notes that the small-business sector employs 35 million people, accounting for 30 percent of all private sector employment. Of these, firms for which more than half of the owners are immigrants employ 4.7 million people, or 14 percent of all those employed by small businesses. The immigrant share of small-business owners, 18 percent, is higher than the immigrant share of the overall population.

Hull has done groundbreaking research on immigrants in Nashville himself, and recently met with FPI staff to discuss immigrant small businesses in Nashville for an upcoming FPI report.

FPI proposes a tax on the most expensive NYC pied-à-terre residential units

September 22, 2014. By James Parrott, FPI Deputy Director and Chief Economist.

Introduction

In the context of the continued global concentration of income and wealth, a growing number of ultra-luxury residences in New York City are being bought by people who are not full-time city residents. For many such owners, a Manhattan pied-à-terre is one among several residences they own around the world for occasional use. Some owners see it as an investment, or simply as a place to park a portion of their substantial wealth. The City’s Independent Budget Office notes that in some of the newer luxury residential developments being built in Manhattan, the share of owners who are not primary residents “could approach 50 percent.”[1]

Such non-primary owners are unlikely to be paying New York City personal income tax, and because of the arcane nature of the City’s property tax, or because such units benefit from tax breaks mainly intended to benefit more affordable housing for low- and middle-income residents, chances are they pay a very low effective property tax relative to the real market value of the property. Yet, the high value of their property depends on local tax dollars supporting the infrastructure and public services that contribute to the city’s quality of life and attractiveness.

Background

According to NYC Department of Finance, there are nearly 89,000 coops and condos in NYC owned by persons for whom the unit is not their primary residence. State legislation enacted in 2013 phased out these units from eligibility for the coop & condo tax abatement. The total annual tax savings to the City from this exclusion will eventually be $120 million.

Based on citywide ratios, the estimated “market value” for these nearly 89,000 units is about $20 billion. This is the Department of Finance “market value” estimate based on the assessment method currently mandated by state law that bases the value of coops and condos on the income of comparable rental buildings.

The City’s Independent Budget Office estimates that, based on citywide averages for FY 2012, the DOF “market value” reflects about one-quarter of a sales-based market valuation method. Thus, an IBO-adjusted sales-based market value would be a very conservatively-estimated $80 billion for these 89,000 non-primary resident coops & condos. The true aggregate market-value of such units could be much greater. Owners of pieds-à-terre very likely own units more expensive than the average NYC coop or condo, plus there have been several buildings go up in recent years catering to the ultra-expensive end of the market, with many news stories about units selling in excess of $50 million each.[2]

Proposal to tax high-end pieds-à-terre

  1. Rationale: Non-primary residents do not pay NYC personal income tax and their units are being phased out of eligibility for the coop & condo tax abatement per the renewal legislation enacted in early 2013. These owners bid up the price of NYC residential real estate, and since they don’t spend much time in these units, contribute little to the local economy compared to full-time residents. There are many flaws to the city’s current property tax system, so many of these properties are paying very little in regular property tax to begin with, and some of the most expensive recent developments with ultra-luxury coops have received special tax breaks courtesy of Albany, despite the action with regard to the coop & condo tax abatement.
  2. Apply a graduated 4% tax based on comparable sales-based market value over $5 million. (The following estimates are based on coops and condos only, although the proposal should also extend to single-family homes as well. The Fiscal Policy Institute estimated the number of non-primary resident coop & condo units valued in excess of $5 million—1,556—and estimated the distribution of the value of units above $5 million.)
  3. With the tax starting at 0.5% for the first $1 million in value over $5M, and rising such that the 4% rate applies for the value over $25 million, an estimated $665 million could be generated from the 1,556 coops and condos that have a sales-based market value in excess of $5 million and that are owned by non-primary residents.
  4. Thus, this proposal would affect only 1.75% of all non-primary resident owned coops & condos (1,556 out of 88,851), but these units valued at >$5 million account for a third of the total market value of all non-primary resident coops and condos ($26.1 billion out of $79.9 billion).
  5. The proposed tax is really geared to reach the most expensive pieds-à-terre, those valued at $25M+. There are an estimated 445 such units and they would pay 83% of the proposed tax, i.e., $551 million of the $665 million total. That means an average tax of about $1.2 million for these 445 units. The graduated rate structure means that even these top-selling units would pay an effective tax of only 3.44%. Units $10M-$25M would pay an effective tax of only 2%. Units valued from $5 million to $10 million would pay an effective rate of less than 1%.
  6. The 4% tax could generate more if there are a significant number of non-primary resident owned single family homes.

*    *    *

This proposal was featured in an article by Dana Rubinstein in the Capital New York online news organ on September 22, 2014, “Could de Blasio do a pied-à-terre tax?”

 


[1] New York City Independent Budget Office, Budget Options for New York City, December 2013, p. 53.

[2] See, e.g., Andrew Rice, “Stash Pad,” New York Magazine, June 29, 2014.

Immigrant City

September 18, 2014. The Baltimore Sun ran a long editorial about the city’s efforts to attract 10,000 new families to the city, with a particular focus on immigrants, including this reference to FPI’s work:

…a 2012 report from the Fiscal Policy Institute’s Immigration Research Initiative found that immigrants made up 9 percent of Baltimore’s population but 12 percent of the workforce and a remarkable 21 percent of business owners.

Which U.S. Immigrants End Up Becoming Small-Business Owners?

August 27, 2014. The National Journal looked at immigrant small business owners, highlighting an aspect of the Fiscal Policy Institute’s 2012 report that few others have focused on: which immigrant groups are the most entrepreneurial? Greek immigrants, in fact, have the highest percentage of people in the labor force who are small business owners.

According to a report from the Fiscal Policy Institute’s Immigration Research Initiative, using data from the U.S. Census Bureau, there are 75,000 Greek immigrants in the U.S. labor force. And of those, 16 percent are small-business owners. This tops immigrants from Israel at 13 percent, Syria at 12 percent, and Iran at 12 percent.

Influx of South Americans Drives Miami’s Reinvention

July 19, 2014. A New York Times story about Miami’s economic growth is grounded in data from the Fiscal Policy Institute about immigrant business owners.

Of immigrants in the Miami metro area, the article says:

Their relative wealth has allowed them to ramp up businesses like import-export companies and banks, and to open restaurants that dish out arepas from Venezuela, coxinhas from Brazil and alfajores from Argentina. Partly as a result of that influx, the Miami-Fort Lauderdale region eclipsed Los Angeles in 2012 as the major metropolitan area with the largest share — 45 percent — of immigrant business owners, according to a report by the Fiscal Policy Institute, a research group.

Hundreds of thousands of low-income families would benefit from a New York minimum wage increase

July 17, 2014. David Neumark’s piece in the July 6 Wall Street Journal (“Who Really Gets the Minimum Wage?”) argues that because some low-wage earners are in high-income families, increasing the minimum wage isn’t a very effective way to reduce poverty. In particular, he cites research to the effect that “if we were to raise the minimum wage to $10.10 nationally, 18% of the benefits of the higher wages (holding employment fixed) would go to poor families [but] 29% would go to families with incomes three times the poverty level or higher.”

But what is more relevant, more than half (52%) of those who would get a raise if $10.10 became the new minimum are in families whose incomes are below twice the federal poverty level (FPL)—i.e., those who are poor or near-poor. And in the New York State or City context, that would affect a huge number of low-income families.

In New York State, the numbers are similar: 52% of those earning less than $10.10 per hour are in families below twice the FPL (with 23% in families below the FPL.) Even among all those earning less than $14 an hour, 43% are in families whose income is below twice the FPL (Figure 1). Of the 1.3 million wage-earning New Yorkers in poor or near-poor families, 735,000 (57%) would get a raise if the minimum were increased to $10.10.

The federal poverty standard was originally established in the 1960s when food was a much larger share of family expenses. It has only been adjusted for over-all consumer prices since, and because it is not adjusted for regional cost of living differences, it is a terribly inadequate indicator of whether a family is “poor.” While the FPL in 2010 for a 4-person family with two children was $22,000, such a family would have needed to earn $55,400 in Erie County, NY; $49,900 in Tompkins County; or $79,900 in Nassau County, in order to meet basic family budget needs to pay for housing, food, child care, clothing, transportation and other necessities. Even families at twice the FPL must count every penny.

In New York City, there is an even closer relationship between low wages and family poverty. In the city, 29% of those earning less than $10.10 an hour are in families below the FPL, and 66% of their families have income below twice the poverty level. Among all those earning less than $14 an hour in the city, 55% are in families with incomes below twice the FPL (Figure 2). Of the 694,000 wage-earners in poor or near-poor families, 435,000 (63%) would get a raise with a $10.10 minimum.

Neumark argues that increasing the Earned-income Tax Credit (EITC) would be a better way to aid working people. The EITC is indeed a program that should be enhanced, at the federal, New York State, and New York City levels. But the EITC cannot handle the job alone (remember that the tax benefit shows up only once a year, while low wages show up every week); increasing low-wage workers’ net income through a combination of a higher minimum and a richer tax rebate via the EITC would be the best approach.

Given that the purchasing power of the minimum has fallen so far, raising it will help raise many families of low-wage workers out of poverty. To suggest that it will not help the poor enough is the height of disingenuousness.

We should also remember that since the original minimum wage was part of the Fair Labor Standards Act, it was always intended to be a floor under wages, a way to limit the race to the bottom that happens whenever the labor market is weak. If the floor sinks in real terms—as it has been for decades—financial security for all wage-earners is in jeopardy.

Brent Kramer, FPI Senior Economist

 

PDF Version

 

Family poverty status Total
Under federal poverty level Under 2 x FPL Under 3 x FPL 3 x FPL or more
Hourly wage Under $10.10 23% 52% 70% 30% 100%
Under $12 19% 49% 69% 31% 100%
Under $14 16% 43% 66% 34% 100%
All 5% 17% 33% 67% 100%

Iowa Gets $64 Million in Taxes from Immigrants in U.S. Illegally, Report Says

July 2, 2014. A Los Angeles Times article about a report by our colleagues at the Iowa Policy Project talks about the economic and tax contribution of immigrants to the state of Iowa. The Iowa report was developed with data that the Fiscal Policy Institute developed with the Economic Policy Institute, and the article also mentions the FPI report directly:

About 120,000 immigrants live in Iowa, and nearly 75,000 are in the U.S. illegally, Fisher said. With Iowa’s median age trending upward, immigrants help bolster Iowa’s workforce and economy, the report said.

Nearly 80% of the immigrants in Iowa are of working age, between 18 and 64, the report says, while 60% of native-born Iowans fall into that demographic.

A similar report issued in 2013 by the Fiscal Policy Institute, a nonprofit research group that aims to improve public policy, showed that immigrants who are in the U.S. illegally paid $744 million in state and local taxes in New York.

That report asserted that immigration reform would raise the tax benefits to $968 million.

 

Parrott Presentation: Confronting New York City’s Retirement Crisis

June 17, 2014. The New York City Central Labor Council and the Schwartz Center for Economic Policy Analysis at The New School sponsored a June 17 conference, Confronting New York City’s Retirement Crisis. FPI’s James Parrott made one of the opening presentations at the conference. Other speakers included State Comptroller Thomas DiNapoli, New York City Comptroller Scott Stringer, and New York City Public Advocate Letitia James, as well as leading labor union officials, union pension experts, and academic and finance sector experts. National retirement security expert Teresa Ghilarducci of the New School co-convened the conference together with Vinny Alvarez, President of the New York City Central Labor Council. Ghilarducci also moderated the two panel discussions. In his remarks, Parrott discussed the economic implications of the aging of New York City’s population and workforce, and he reviewed racial and economic disparities in retirement income sources for New York City’s elderly population.

Over one-third of New York City employees are paid less than $14 an hour; workers of color are twice as likely to be low-wage

June 17, 2014. The Fiscal Policy Institute (FPI) released a new data brief today showing the sector of employment and race/ethnicity for New York City workers paid less than $14 an hour. On an annual basis, $14 an hour would put a family $1,900 below the $31,039 poverty threshold for a New York City family.

Altogether, 1.2 million New York City workers are paid less than $14 an hour, 36 percent of all public and private wage and salary workers. This includes part-time as well as full-time workers.

The FPI analysis showed that the largest employers of low-wage workers are the Leisure & Hospitality and Retail Trade sectors. Sectors with the greatest reliance on low-wage workers relative to their total employment are, in order, Home Health Care, Leisure & Hospitality, Retail Trade, and Social Services.

According to James Parrott, FPI’s Deputy Director and Chief Economist: “Nearly four out of five low-wage New York City workers are persons of color, and workers of color are twice as likely as a white, non-Hispanic worker to be low-wage—48% of black workers and 55% of Latino workers are paid less than $14 an hour, while 23% of white workers are paid less than $14 an hour.”

The report noted the difference that union representation makes to the works employed in otherwise low-wage sectors like Retail Trade and Leisure and Hospitality. Stuart Appelbaum, President of the Retail, Wholesale and Department Store Union stated: “The disturbing numbers in FPI’s report show what happens when workers are not able to act collectively to improve their lives. We need policies in place that increase unionization and give voice to these hardworking people in New York City. When workers have the support of a union they are able to live better lives and survive economically in this city.”

Parrott observed that in addition to unionization, low-wage New Yorkers would benefit if New York City is permitted to establish a minimum wage higher than the statewide minimum. Legislation pending in Albany would grant New York City the authority to set its own minimum wage.

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