Executive Actions on Immigrants Will Bring Increased NY Tax Revenue

April 16, 2015. A new 50-state study, Undocumented Immigrants’ State and Local Tax Contributions, by the Institute on Taxation and Economic Policy finds that undocumented immigrants’ tax contributions would increase significantly under the Obama Administration’s executive actions and even more substantially under comprehensive immigration policy reform. The report is being co-released in New York by the Fiscal Policy Institute and is particularly relevant in connection with the hearing tomorrow, Friday April 17, on executive action at the 5th Circuit Court of Appeals.

The report’s key findings about New York:

  • Undocumented immigrants in New York State contribute significantly to state and local taxes, collectively paying an estimated $1.1 billion in 2012.
  • The amount of state and local taxes collected from unauthorized immigrants is estimated to increase by $86 million once federal executive actions are fully in place.

Click here for the New York data and press release.

Click here for the full national report.

Summary of Selected Tax Provisions in 2015-2016 State Budget

April 14, 2015. The Final FY 2015-16 budget is more notable for the tax proposals that were left out than for what is included. In the FY 2015-16 Executive Budget, the governor proposed three major tax changes: a new property tax circuit breaker for low- and middle-income homeowners and renters, an education tax credit, and a modest reduction in taxes on small corporations. None of these changes were included in the final budget, however, property tax relief and the education tax credit are expected to be revisited later in the legislative session. This FPI brief summarizes selected tax provisions proposed by the governor or legislature.

New York City’s Recovery Finally Starts Generating Wage Gains

April 13, 2015. In this report, FPI’s analysis shows that New York City’s recovery is finally starting to generate wage gains.

After years of wage and family income declines since the 2008-09 recession, several signs are emerging of real wage growth in New York City. The three major current government economic data sets all point to fairly widespread and firmly-established wage growth beginning in 2014.

  • Bureau of Labor Statistics (BLS) average private hourly earnings data show a 2.7 percent real gain for the six months to February 2015 vs. the same period a year ago, compared to an annual average decline of 0.4 percent from 2009 to 2013. (This pronounced improvement in real wage gains is not mainly a result of the slowing of inflation since early 2014; the improvement is apparent whether the comparison is done in nominal or inflation-adjusted terms.)
  • New York Labor Department census of employment and wage data show a 1.8 percent real increase in average private non-financial sector wages and a 2.2 percent real increase in average government wages for the first three quarters of 2014 compared to the same period a year earlier. Annual average real changes from 2009 to 2013 were 0.2 percent for private non-financial wages and -0.6 percent for government wages.
  • Data from the Current Population Survey, sponsored jointly by Census and BLS, show real wage gains across the spectrum in 2014 after declines from 2009 to 2013; low wage New York City workers saw 2-to-3 percent real hourly wage gains while the median wage rose by 7 percent and wages rose by nearly 8 percent for higher-wage workers. In contrast, average annual real changes form 2009-2013 were -0.1 percent for the first wage decile, -2.0 percent for the second decile, 0.8 percent for the median (or the fifth decile), and -0.2 percent for the ninth decile.

While the wage trend is clearly up over the past year, average wages for the typical New York City worker are still below where they were before the recession. Inflation adjusted average annual wages were 2.1 percent lower in 2014 than in 2007 for private non-financial workers. Because average weekly hours have fallen by nearly four percent since the recession began, real private average weekly earnings were also 2.1 percent lower in early 2015 than in the same months in 2008. (Family income data for 2014 will not be available until late September.)

Why is this recovery finally starting to generate wage gains after so many years of stagnant or declining wages and incomes? Rising labor demand and falling unemployment are key factors.

  • New York City’s job growth continued strong in 2014 for a fifth consecutive year with a greater share of job growth in middle- and high-wage jobs than earlier in the recovery;
  • Unemployment fell more sharply in 2014 than in prior years even though the city’s labor force continued to grow.

Employers responded by raising wages in many sectors of the local economy. In addition, policy choices played an important role.

  • Two state minimum wage increases have lifted the wage floor by 20 percent since 2013;
  • 2014 saw a flurry of activity in the government sector where union contracts raised wages for 300,000 workers who had labored for several years under expired contracts. Also, 70,000 1199 SEIU members working at private hospitals received 3 percent wage increases, as did 30,000 32BJ SEIU building service workers in residential buildings.

As long as the economy continues its moderate growth pace, average wages should continue to rise 2 to 4 percent a year over the next few years. Most of the settled City labor contracts will provide annual increases through 2017 or 2018.

It is very welcome that the recovery is finally generating real wage gains in New York City. Strong job growth and lower unemployment should create tight enough labor market conditions so that employers need to offer workers better pay. These long overdue wage gains will help hundreds of thousands of families cope with the city’s high living costs and will contribute to the sustainability of the recovery by pumping additional consumer spending into neighborhoods across the city. This will help extend the current expansion which is the first one in New York City since the 1960s that has not relied heavily on Wall Street.

Yet, further changes are needed so that the prosperity generated by the local economy is more broadly shared. Wage gains have been greatest for those who are already better-compensated. Public and private policies need to ensure better results for those lower down the wage spectrum.

Forty-two percent of New York City families, encompassing 2.7 million New Yorkers, have incomes below the level necessary to provide for basic family needs according to the new edition of the United Way-sponsored Self Sufficiency Standard for New York City.[1] Eighty three percent of the families below the self-sufficiency standard have one or more workers. Clearly, many workers just are not making wages adequate to sustain their families without having to turn to government for assistance. Government assistance is essential and should be available to aid families in need. But, wages for hundreds of thousands of low-wage workers continue to fall short in allowing them to provide for their families.

Additional policy actions will be needed to make sure that lower-wage workers see meaningful wage gains. For example, the sector of the city economy that pays the lowest average wages is Social Assistance, largely comprised of nonprofit organizations providing social services under contract to government, with the City by far the largest funding source. City government has a responsibility to fund wage increases in the Social Assistance sector where half of the workforce that is predominantly women of color earn less than $15 an hour.

In addition, Albany should follow the lead of a growing number of other states that are raising minimum wages well above $10 an hour. A target of $15 an hour may seem like a lot compared to current minimum wage levels ($7.25 federal, $8.75 New York State). On an annual basis that comes to about $31,000—roughly the supplemental poverty measure for a 4-person family as estimated by the City’s poverty research office, the Center for Economic Opportunity.

For wage gains to continue, it is important that the Federal Reserve keep interest rates low enough so that it doesn’t choke off economic growth, and with it, the long-delayed promise of rising living standards for millions of New Yorkers. Inflation has averaged only 1.5 percent per year over the past two years and the Blue Chip Consensus forecasts projects consumer inflation of only 0.3 percent in 2015 and 2.2 percent in 2016. As long as inflation stays in the low single-digit range there is no basis for the Fed to put the brakes on economic growth.

PDF of Full Report

[1] Diana M. Pearce, Overlooked and Undercounted, The Struggle to Make Ends Meet in New York City, Prepared for the Women’s Center for Education and Career Advancement with support from The United Way of New York City, The New York Community Trust, and City Harvest, December 2014. Seventy-eight percent of households with inadequate incomes are headed by a person of color.

Media Coverage on the Yacht Tax Exemption

March 30, 2015. After the Fiscal Policy Institute issued a media release about the state budget including a sales tax exemption, some of the coverage by media outlets included:

New York Times, March 30, 2015.

“We were simply looking for things like property tax relief for regular folks and we found the yacht exemption. I think it is incredibly sad you have so many New Yorkers who are struggling and this government’s priorities are on a yacht tax credit.” Ron Deutsch, FPI.

New York Daily News, March 30, 2015.

“I guess the yacht lobby is stronger than people thought,” said Mike Murphy, a spokesman for the Senate’s Democratic conference. “It is outrageous that we are giving tax breaks to buy a yacht but couldn’t raise the minimum wage or provide real property tax relief.”

Associated Press/Washington Times, March 30, 2015.

The measures angered those who favored raising the minimum wage or easing the burden of high property taxes as a means to help a broad cross-section of New Yorkers.

Syracuse Post Standard March 30, 2015.

Buffalo News, March 30, 2015.

Newsday, March 30, 2015.

The Atlantic, March 30, 2015.

Times Union, March 30, 2015.

Capital New York, March 30, 2015.

NPR/WXXI March 30, 2015.

Initial Response to Budget Agreement on Revenue Bill: No Property Tax Relief and No Reform of Tax Credits; But Wealthy Get Sales Tax Exemption on Luxury Yachts

March 30, 2015. “It appears our legislative leaders couldn’t agree to provide tax relief to struggling homeowners and renters through a middle class property tax circuit breaker but managed to find the political will to provide sales tax exemptions for people buying luxury yachts. This seems like a case of some seriously misplaced priorities,” said Ron Deutsch, executive director of the Fiscal Policy Institute. “We are also dismayed that the IDA tax credit reform proposal advanced by the Governor did not make it into the final budget.  Not reforming the broken IDA and Brownfield tax credit programs is yet another missed opportunity.”

Deutsch also notes that in addition to dropping the Circuit Breaker, the agreed-on revenue bill omits the Executive Budget proposal to expand the sales tax to marketplace providers (like eBay and Amazon).

It also eliminates many of the various tax enforcement/reform measures that were included in the Executive Budget Proposal including the IDA reform proposal and the reduction in net income tax for small business.

No Sales Tax on Yachts

One of the oddest and most offensive additions to the final revenue bill that was not in the Executive Budget, is Part SS, which exempts from the sales tax “vessels” (defined as “every description of watercraft other than a seaplane used or capable to being used as a means of transportation on water”). The sales tax exemption applies to the value of the yacht above $230,000 ( i.e., exempts purchase price of yachts over $230,000 from the state sales tax).

The Fiscal Policy Institute will release a more detailed analysis of the final revenue bill after a more thorough review.

Op-ed: De Blasio’s welfare reform correction: Critics who claim we’re sliding back to the bad old are blind to reality

March 27, 2015. An op-ed by James Parrott, Daily News.

Some see the slight increase in New York City’s welfare rolls in recent months as cause for alarm, warning that we are on an inevitable slide back to bad old days of chronic government dependency.

In fact, the uptick reflects a long overdue policy correction. Changes underway are about making temporary assistance “a leg up and not a hand out,” which is exactly what welfare should be.

Far from dismantling welfare reform, Mayor de Blasio and Human Resources Administration Commissioner Steve Banks are breathing life into the cadaver they inherited.

Under de Blasio’s predecessor, the city’s welfare policies were broken. During the four years of recession and weak recovery, 2008-11, unemployment doubled and food stamp rolls soared. Mayor Bloomberg’s own poverty measurement charted a 20% earnings decline for low-income families and a sharp poverty rise.

Yet at a time when an increase in the city’s welfare caseload would be expected, the numbers didn’t budge. Bloomberg remained wedded to his predecessor’s policy of thwarting recourse to public assistance.

Want proof of how unfairly stingy the city was? Many applicants who were routinely denied assistance appealed in the state-administered hearings to which they are entitled. The city’s denial was upheld in only 10% of such appeals.

Not a great batting average for a performance-metrics-obsessed mayor. The state eventually threatened to impose its own sanction against the city, a $10 million annual penalty.

Meanwhile, while city public assistance rolls were flat, they surged in neighboring Nassau and Suffolk counties.

This is not a theoretical debate. Half of the city’s public assistance recipients are children. Many of the adult recipients can’t work due to disability, illness or age.

Of the households with an adult who should be engaged in work, an adult is working in 30% of cases, but earning so little that the household still qualifies for cash assistance.

We all know where the mayor stands on raising the minimum wage. For the balance of the roughly 56,000 work-eligible adults, the administration is focused on helping them find work or acquire the skills needed to find and keep a job.

Some welfare-reform types attack this as backsliding to the days when there were a million people on welfare and not much was done to help people earn their own way.

That’s just ridiculous.

Under de Blasio’s two predecessors, a “work-first” mentality prevailed. People got put in jobs no matter how low the pay or poor the prospects for achieving self-sufficiency.

De Blasio and Banks want to help people take care of themselves by customizing assistance to client needs, whether it’s for vocational training, educational credentials or English proficiency.

The new thrust also will phase out the work-for-benefits Work Experience Program and replace it with internships, work study, training or employment vouchers geared to real careers.

That’s not bleeding-heart liberal; it’s pragmatic. Only one in 10 city workers has not completed high school. Yet three out of five of HRA’s employable clients lack a high-school diploma.

Allowing recipients up to age 24 to pursue education, meeting yearly goals and making sufficient progress, is the smart thing to do. Others pursue college degrees, provided they maintain a required grade average and are engaged in work activities for 20 hours per week.

Part of the recent increase in cash assistance rolls takes the form of one-time cash assistance to prevent eviction and reduce homelessness. Given the high cost of shelters, that, too, sounds to me like a smart fiscal strategy, as well being better for families.

A revamped approach to welfare was long overdue. That may mean that cash assistance rolls rise modestly for a period of time. If it reflects a bridge to better long-term outcomes, it’s well worth the cost.

PDF of op-ed

Budget Savings from a Minimum Wage Increase

March 27, 2015. As negotiations over New York State’s budget draw to a close, Governor Cuomo and the legislature are trying to hammer out an agreement to raise the state’s minimum wage, which is currently just $8.75 and is currently scheduled to top out at $9.00 at the end of this year. Both Governor Cuomo and the Assembly have proposed measures to raise New York State’s minimum wage, including a higher minimum wage level for New York City in the Governor’s bill, or, in the case of the Assembly bill, for New York City and the large downstate suburban counties (those with populations in excess of 900,000, i.e., Nassau, Suffolk and Westchester counties).

This policy brief details how, beyond significant benefits for New York’s workers, an increase in New York’s minimum wage will entail significant budget savings for New York State and other levels of government – savings well in excess of $1 billion, depending on the amount of the wage increase. The savings come from reduced costs for public assistance to low-wage workers—in effect a taxpayer subsidy to large low-wage employers—and increased tax payments by workers benefiting from the wage hike. The families of minimum wage workers will be much better off as a result, better able to move toward self-support, and the economy will benefit from increased consumer spending.

Comparison of the Executive, Assembly, and Senate Education Proposals FY 2015-2016

March 24, 2015. The governor’s Executive Budget proposal would increase school aid by $1.07 billion. The increase in school aid is contingent on passage of a package of changes to teacher evaluation, tenure, and other procedures called the Education Opportunity Agenda. The budget also includes an Education Tax Credit which would provide a large credit for donations to schools and the Dream Act which would provide tuition assistance to undocumented immigrants who came to the country as children. The Assembly’s proposed budget would increase school aid by $1.8 billion without contingencies and includes the Dream Act but not the Education Tax credit. The Senate’s proposed budget would increase school aid by $1.9 billion and includes a modified Education Tax Credit but not the Dream Act.

The Executive Budget would also establish a grant program for pre-Kindergarten for 3 year olds and raises the charter school cap and a small increase in funding. Neither the Assembly nor the Senate included the grants for pre-Kindergarten for 3 year olds. Only the Senate would raise the charter cap and increase their funding.

Click here for details on the Executive, Assembly, and Senate education proposals.

Comparison of the Executive, Assembly, and Senate Property Tax Relief Proposals FY 2015-2016

March 23, 2015. The governor’s Executive Budget proposal includes a significant new property “circuit breaker” that would provide relief to households (both owners and renters) whose property taxes are unreasonably high relative to their income. Circuit breakers address a serious shortcoming of the property tax—that payments are not linked to the taxpayer’s ability to pay. The State Assembly’s proposed budget also included the circuit breaker with an important modification—removing the link to the property tax cap. The Senate, in contrast, replaced the circuit breaker with a tax rebate for homeowners only based on the existing STAR exemptions.

In addition, the Executive Budget would make a number of changes to the STAR school tax exemption program including reducing the annual growth in the maximum credit to zero and converting the exemption to an income tax credit for new recipients. The Assembly and the Senate each include some but not all of the changes proposed by the governor.

Click here for details on the Executive, Assembly, and Senate property tax relief proposals.

Policy Brief: Schools and Poverty

March 17, 2015. The state can improve low-performing schools and help students who face learning barriers by increasing funding for key education programs and poverty-fighting efforts. Proposals by the governor and the legislature are a start, but still fall short of what is needed.

In a report issued in February, the state identified 178 schools in 17 school districts as “priority” or “failing” schools. These schools score in the bottom 5 percent in student proficiency tests or have low graduation rates, or both. The school districts that are home to these priority schools teach students who face many challenges.

  • They live in communities that are among the poorest in the state with the least resources to improve local schools. Three times as many school age children live in poverty in districts with priority schools than in other New York school districts.
  • Over three-fourths of the students in priority schools are eligible for the federal free or reduced price lunch program.
  • Many of these students are not proficient in English or are from minority families with disproportionately high levels of unemployment and poverty. More than 9 out of 10 students in these schools are minorities.
To read the full report, click here.
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