Extend Tax Credits to the Poor

October 12, 2015. The following op-ed by Ron Deutsch appeared in the Times-Union.

Millions of Americans go to work each day, sometimes balancing multiple low-wage jobs, and yet they still struggle to make ends meet for themselves and their families. The fact is, far too many hardworking Americans slip into poverty each year. I see this firsthand in my role at the Fiscal Policy Institute.

We do, however, have two powerful and effective tools that encourage work and help lift working families out of poverty by ensuring that they get to keep more of their hard-earned dollars to pay for essentials like groceries, reliable transportation, and child care. These proven tools are the federal Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). And they work—in a single year, these credits lifted 9.4 million Americans out of poverty, including 5 million children. In our state, the credits lifted 307,000 children and 597,000 New Yorkers overall out of poverty.

But important provisions of the EITC and CTC will expire in 2017 unless Congress acts. Fortunately, there is a critical opportunity this fall for Congress to make these provisions permanent.

Currently, Congress is considering whether to extend or make permanent various tax provisions, including tax breaks for businesses.  Congress should not consider making any business tax breaks permanent without also doing the same for the EITC and the CTC provisions that benefit millions of hardworking families. Both the EITC and CTC have enjoyed bipartisan support over their history, and it’s time for Congress to once again demonstrate support for these crucial tax credits. We simply can’t afford to leave America’s hardest working families and communities behind.

If Congress lets important provisions of these tax credits expire, more than 50 million hard-working Americans, including 25 million children, stand to lose a crucial piece of their family budgets. In our state, 755,000 working families and over 1.4 million children would lose all or part of their tax credits.

Significant research tells us the effects of the EITC and CTC are long-lasting. Children in families who receive a boost from policies like the EITC and CTC are healthier, do better in school, and are more likely to go to college and earn more as adults. This means today’s investment in these tax credits goes far beyond the hardworking Americans who receive them; our economy and our children will reap the benefits for years to come.

A single mother with two children who works full time at the federal minimum wage would lose her entire Child Tax Credit. That’s money that could have put food on the table, gas in the car, and school supplies in her child’s backpack.

Most of our upstate cities have horrendously high child poverty rates, some higher than 50 percent. The EITC and CTC are a lifeline for many of these families.

I and many other organizations in New York that are combatting poverty are asking our lawmakers to save key provisions of these tax credits.

While they’re at it, our legislators should work to close the glaring hole in the EITC for very low-income working childless adults that both means they are virtually taxed into poverty and causes young workers without kids to miss out on the tax credit entirely.

The EITC and CTC not only help individuals living in poverty, but they put much needed federal dollars back into local economies.

In 2012, the Earned Income Tax Credit put about $4 billion into the New York State economy and more than $122 million into the Capital Region area alone. This not only helps poor families but small businesses as well.

We are a nation that values hard work. Every family deserves the chance to work toward a brighter future; the EITC and CTC are important components of making this a reality for more of our community members.

FPI-NELP Response to NYS Business Council Statement on Gov. Cuomo’s $15 Minimum Wage Proposal

October 8, 2015. The New York State Business Council’s statement on the Governor’s proposal to raise New York’s minimum wage to $15 by 2021 leaves out several “inconvenient” truths:

1.     A phased-in minimum wage increase will boost the purchasing power of roughly 3 million low-wage New York workers, pumping that increased consumer spending into local businesses and jobs all across the state. Above all else, small businesses need customers; a minimum wage increase will provide them.

2.     A higher wage floor benefits businesses because workers will stay of the job longer and be more productive; turnover costs will go down and customer service will improve.

  • There is a growing recognition on the part of businesses and institutional investors that higher wages are key to reducing turnover, improving customer service, and enhancing profitability.[1] Several large employers including Walmart, Target, Aetna, IKEA and the Gap are starting to raise wages as a result.
  • A recent study from the Purdue’s tourism management school concluded that the fast-food industry could accommodate a $15 an hour minimum wage through savings related to reduced turnover and small price increases not much greater than recent experience.[2]

3.     The Business Council ignores the fact that a high proportion of low-wage workers are paid so little that they qualify for one or more forms of public assistance. In effect, taxpayers end up subsidizing low-wage employment practices, and in New York this amounts to $13 billion annually in public assistance costs that goes to working families whose wages are too low.[3]

  • The minimum wage increase would save New York taxpayers and the state budget hundreds of millions of dollars in reduced public assistance spending.

4.     Over 800,000 New Yorkers work but are officially below the federal poverty line, and a much larger number do not have wages sufficient to meet basic family budget needs.

  • Higher wages would lift thousands out of poverty and improve life opportunities for thousands of children in low-income families across the state.

5.     Even in lower-cost regions of like Buffalo and Rochester, a single worker will need over $15 an hour by 2021 to meet basic living costs, according to the Economic Policy Institute’s Family Budget Calculator, adjusted based on projected inflation through 2021.   In higher cost regions like Long Island, a single worker will need over $22 an hour by 2021 — and workers supporting children need even more.

6.     The Governor’s proposal calls for a gradual phase-in of the minimum wage increase. Employers will have ample time to adapt to the increase and, since it would be across-the-board, no individual business would be at a competitive disadvantage.

The average New Yorker knows a minimum wage increase would be beneficial to the state’s economy; that’s why two recent public opinion polls showed sizable majorities of New Yorkers – 62% (Quinnipiac) and 59% (Siena) – support Governor Cuomo’s proposal for a $15 minimum wage.

Speaking recently in New York City, Nobel laureate economist Paul Krugman said the increase in New York’s minimum wage to $15 an hour would be good for the state’s economy, and that a growing body of management literature has documented the business success of companies that choose to pay higher wages rather than pursue a low-wage business model.

In a similar vein, more than 200 leading economists have endorsed a $15 minimum wage, finding that raising the minimum wage “to $15 an hour by 2020 will be an effective means of improving living standards for low-wage workers and their families and will help stabilize the economy. The costs to other groups in society will be modest and readily absorbed.”[4]

For more background on Governor Cuomo’s $15 minimum wage proposal, see
Fact Sheet | Governor Cuomo’s Call for Raising New York’s Minimum Wage to $15 Statewide

PDF Version

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[1] Lauren Weber, “Why Fund Managers Want Better HR,” The Wall Street Journal, September 8, 2015.

http://www.wsj.com/articles/why-top-fund-managers-want-better-hr-1441749764

[2] Christopher Gunn and Thomas Michl, “Higher Wages Serve Up Better Economics for Workers and NY,” Oneida Dispatch, August 18, 2015. http://www.oneidadispatch.com/opinion/20150818/guest-column-higher-wages-serve-up-better-economics-for-workers-and-ny

[3] Ken Jacobs, Ian Perry, and Jenifer MacGilvary, The High Public Cost of Low Wages, Poverty-Level Wages Cost U.S. Taxpayers $152.8 Billion Each Year in Public Support for Working Families, University of California Berkeley Center for labor Research and Education, April 2015. Not included in the Berkeley report but incorporated in the $26 billion cited in the text above is the $1 billion annual cost of New York State’s Earned Income Tax Credit.

[4] http://www.sanders.senate.gov/newsroom/press-releases/sanders-introduces-bill-for-15-an-hour-minimum-wage