Tax Credits That Help Families Advance

Life seems to be measured in Seasons. The Holiday and Football Seasons are behind us; the Tax Season and Baseball Season are now upon us. (Pitchers and catchers officially began reporting on Feb. 11^th.)  But until the taxes are filed and regular season games begin, Tax Season takes precedence even over baseball in the minds of most Americans.

While the season may be met with anticipation by some and dread by others, for many low and moderate income families and policymakers, there is relief at the recent extension of some key tax provisions.  As the Center on Budget and Policy Priorities (CBPP) blogged about, Congress recently extended some important components of the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) through 2017.

To understand why these extensions are important we need to understand what makes them examples of good policy.  The EITC and the CTC are appealing to many policymakers because they encourage work and strengthen a family’s finances.  These credits encourage employment because individuals must report earned income to be eligible for the credits. They also give workers an incentive to achieve higher wages because the more an individual earns the larger their credit will be, until it begins to phase out at higher income levels.

Another key advantage to low-income families is that the tax credits are refundable, meaning that if the credit exceeds the amount of taxes owed by a low-wage worker, the IRS will still refund all or part of the balance.  Unfortunately, many Americans are unaware of the EITC.  Estimates show that one out of five eligible taxpayers failed to take advantage of it in 2011 alone.  It’s like hitting a home run, and failing to tag all the bases; many families earned the tax credit, but never took the necessary steps to receive the benefit.

Now we turn to the importance of these extensions in the lives of American families.  The EITC, which lifted an estimated 3 million children out of poverty in 2011, had two important elements added in the 2009 Recovery Act.

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Webcast: Budgeting the Next Generation

Thursday’s Child launches its 2010 year with a webcast on public investments in children and families:

New research by Urban Institute and Brookings Institution analysts reveals how children — collectively and at different ages — fare in the federal budget and how federal and state spending mesh. Drawing on these forthcoming reports, a panel of distinguished experts will begin a vital and timely exchange on how the nation can, amid severe fiscal and budgetary challenges, make the wisest public investments in its children.

The webcast is January 14 at 8:00am Central. Register here.

On an only mildly related note, did you know that “Thursday’s Child” is also the name of a David Bowie song. A lyric sampling:

Throw me tomorrow
Now that I’ve really got a chance
Throw me tomorrow
Everything’s falling into place
Throw me tomorrow
Seeing my past to let it go
Throw me tomorrow
Only for you I don’t regret
That I was Thursday’s child

Really not sure how that inspired the Urban Institute series. (Or was it the other way around?)

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In Need of More Workforce Wonkery

Washington Post writer Ezra Klein must be reading too, because he clicked over to that Council of Economic Advisors report on the jobs of tomorrow and had a thing or two to say:

The first is that the private sector is not projected to do a lot of job creation on its lonesome over the next couple of years. The second is that the public sector has a lot of influence over the shape of the industries with heavy growth over the next decade or so. And the third is that a lot of the job creation we are going to get is coming in sectors — health care and education — that everyone agrees aren’t working too well, and so it’s not clear that this will be a terrifically productive bunch of new jobs.

He also says that this CEA report is “a bit of a slog.” I guess healthcare wonks can’t also be workforce wonks. Too bad. I think Klein paid too much attention to the job growth projections (which aren’t really news at all) and not enough attention to the very important solutions being proposed in the report. And that misdirected attention is a consequence, I think, of too little familiarity with the relevant issues in workforce policy on the part of mainstream policy wonks, writers, and bloggers.

These solutions are a key to unlocking the limited success of job training and re-training programs, which many across the blogosphere noted a couple weeks ago (see here and here for good examples), and which I’d been meaning to write about. As summarized by the report, these innovations are:

institutions and programs that have goals that are aligned and curricula that are cumulative; close collaboration between training providers and employers to ensure that curricula are aligned with workforce needs; flexible scheduling, appropriate curricula, and financial aid designed to meet the needs of students; incentives for institutions and programs to continually improve and innovate; and accountability for results.

All of these components are important aspects of the career advancement project that the Tulsa Initiative has been developing over the past year with the Ray Marshall Center. In particular, our project seeks to be driven by employers, flexible and supportive to participants, and provide basic education and ESL training that is integrated with occupational skills training (often called I-BEST and is well-explained in the report).

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US House Heeds Quote of the Day

Congressman George Miller (D-CA), chairman of the House Education and Labor Committee, has proven himself an avid reader of our little blog! You see, in response to my highlighting of this morning’s Quote of the Day, about how the most important reform in post-secondary education is the advancement of early education, the good Chairman has introduced the Student Aid and Financial Responsibility Act.

SAFRA will lower the costs of higher education and help more Americans complete college by reforming the federal student program so that the federal government provides student loans directly rather than through private financial institutions subsidized by the tax dollars. (See here for more background.) Basically, the federal government’s Direct Loan Program is more efficient than the private student loan market and so tax dollars are wasted on needless subsidies to these companies – many of whom only exist thanks to the subsidy. SAFRA will eliminate these subsidies and capture the savings for other educational uses, primarily an increase in need-based Pell Grants.

So now we see how this is an important post-secondary reform, but how does it advance early education? Early Ed Watch is on the case:

Miller’s legislation would capture a portion of those savings — $10 billion over 10 years — to fund Early Learning Challenge Grants. […]

A summary of the bill posted online earlier today says that to win these grants, states would need to commit to build comprehensive early childhood systems that include:

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Getting Behind by Getting Ahead, continued

Last week I linked to an OK Policy post about “cliff effects” that reduce or disqualify people for benefits whenever they increase their earnings, sometimes leaving people even farther behind even as they get better jobs or benefits.

The Associated Press reports that ARRA, the stimulus legislation, is causing some cliff effects of its own, and giving the unemployed a little bit of boost and a little bit of bust:

Under the economic recovery plan, laid-off workers have seen a $25 weekly bump in their unemployment checks as part of a broad expansion of benefits for the poor. But the law did not raise the income cap for food stamp eligibility, so the extra money has pushed some people over the limit.

One unemployed man in Georgia was pushed over the limit by the bump, causing him to miss out on $300/month in food stamps assistance.

Since policymakers are becoming increasingly aware of the problems of cliff effects, they wouldn’t intentionally cause such dramatic consequences in entirely new, emergency relief programs, right? Wrong:

Lawmakers crafting the stimulus knew this would become a problem, said Stacy Dean, director of food assistance policy at Center on Budget and Policy Priorities, a liberal think tank. They could have headed it off by raising the income tax or declaring that the $25 stimulus checks would not affect food stamp eligibility. Both were expensive options that could have forced states to reprogram their computer systems.

But more importantly, hashing out those details would have taken time.

“People were aware of this but, as you recall, the stimulus was moving along and then it was passed in about a day,” Dean said. “There was not a lot of policy discussion on this.”

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Getting Behind by Getting Ahead

David Blatt at OK Policy does a nice job of explaning the “cliff effect”, whereby people lose important public benefits as their earnings increase. This means that struggling families who manage to raise their incomes face a sort of “tax” on their efforts toward economic self-sufficiency:

The cliff effect is most dramatic for Medicaid health insurance coverage, which tends to be an all-or-nothing benefit. Children in Oklahoma are eligible for Medicaid up to 185 percent of the federal poverty level, while adults lose eligibility when they make less than 50 percent of the poverty level. Other work support programs, including the earned income tax credit, the food stamp program, and child care subsidies, minimize the cliff effect by phasing out the amount of benefits at higher incomes, or in the case of child care subsidies, requiring higher co-payments. The cumulative effect, however, is that for most low-income workers who are attempting to move up the income ladder, additional earnings can be largely or fully offset by higher taxes and the loss of benefits. At a certain threshold, workers find themselves in a situation where the rational response to an offer of a raise or a better job is to respond, “Sorry, but I just can’t afford it.”

I did some work on this issue a while back, in order to better understand what exactly those “cliffs” look like to our families. We found that a single mom with two children takes home an average of just 34 cents for every additional dollar she earns, with the largest impact (as Blatt notes) caused by the loss of health care coverage for her and her children.

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The Politics of Oklahoma Education

David Blatt at the Oklahoma Policy Institute details some odd alliances in the Oklahoma legislature over education reform:

But on SB 1111, a bill authored by Sen. Clark Jolley that moves various education reporting and accountability functions from the State Department of Education to the Office of Accountability based with the Regents for Higher Education, it was four mostly liberal Democrats (Anastasia Pittman, Rebecca Hamilton, Seneca Scott, and Jabar Shumate), representing some of the lowest-income urban districts in the state, who joined with 54 of 59 Republicans to pass the bill in the House and send it to Governor Brad Henry…

The vote on SB 1111 suggests that on educational issues, old assumptions and old alliances seem to be breaking down. The bill represents at least the third time in three years that Oklahoma Democrats representing low-income urban districts have opposed their party leadership and most of the organized educational interest organizations on education bills.

What gives?

At its essence, these battles represent a profound frustration and disappointment in the poor performance of public schools in low-income, disproportionately-minority urban neighborhoods and a belief that poor families deserve a wider array of choices for their children.

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More Okie Wonkery Coming Your Way

The Oklahoma Policy Institute announced the coming launch of their very own blog. Citizens take note: you will have no excuse to lack basic (and thorough!) awareness of the most important policy issues facing our state. That includes this frightening fact: state revenues for February came in 30.4 percent below projections. That’s $104 million that we thought would be there and isn’t.

In other blog-related news:

• For CAP employees: We now have a link on the Inside CAP website, under “News and Info.”
• The Nudge blog linked to our story about behavior change and Tulsa printers. As Diama says, “this is nerd famous.”

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A Primer on the President-elect

No matter what your politics, you’ve got to admit that the times are a-changin’! I thought since it’s official I’d post up a few links on President-elect Obama’s positions/plans on topics of TI interest:

Children and Family: see the campaign page and a post on Early Ed Watch.

In a nutshell, the Obama administration intends to invest in zero-to-five early childhood programs using what they call “Early Learning Challenge Grants.” The goal is to build capacity and quality, improve state accountability standards, and encourage public-private cooperation. Additionally, Obama hopes to quadruple Early Head Start, increase Head Start funding (especially to build quality), increase funding for the Child Care and Development Block Grant, and support a proven intervention called nurse-family partnerships (called Children First in Oklahoma). The President-elect also supports policies that strengthen “work/family balance” by expanding the Family and Medical Leave Act, provide funding to states that establish paid leave laws, expand the Child and Dependent Care Tax Credit, and promote flexible work arrangements.

Economic Security

• Workforce and jobs: Obama proposes to fund career pathways that lead to steady jobs with opportunities for advancement, expand the EITC (especially for non-custodial parents), and improve access to job transportation.
• Poverty: The President-elect admires Geoff Canada’s Harlem Children’s Zone and hopes to replicate it by creating twenty “Promise Neighborhoods.” Like HCZ and even Tulsa Initiative, the program will support neighborhoods that offer intensive interventions in areas of concentrated poverty that focus on improving the prospects for low-income kids from birth to college. That includes early childhood education, after-school programs, youth violence prevention, and parenting education.
• Asset building: See this document (PDF) from the New America Foundation. Obama wants to encourage employers to make opting into retirement plans the default, which is shown to dramatically improve take-up. He also proposes to make the Saver’s Credit refundable and to use federal funds to offer a 50% match for the first $1,000 in contributions per family. Finally, Obama says he will clamp down on abusive credit practices by improving accountability in the subprime mortgage industry, improve bankruptcy protections for mortgage-holders, create a quality rating system for credit cards, and institute a bill of rights for credit cardholders.

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Health Care Ramifications of 1804

I’m supposed to be posting on my research role with the Tulsa Initiative, which I will shortly. But in the meantime, and because I’m having my annual birthday birthday-week checkup today, I thought I’d post on healthcare…

Great article in The Columbus Dispatch (Ohio), of all places, about the impacts of Oklahoma’s famous House Bill 1804 on the healthcare decisions of Hispanics. According to Laurie Paul, executive director of Community Health Connections, average annual visits for all clients have dropped 24%, from 2.5 to 1.9 visits. (Another way of looking at that is that clients now wait 7 weeks longer between visits than they did before.)

I also learned this:

After fear initially kept them away, some patients began returning to the Tulsa Health Department, where undocumented Hispanics make up 98 percent of its prenatal clients, 90 percent of its family clinic patients and 95 percent of its dental cases.

98, 90, and 95 percent? Wow. Can anyone tell me why that is? I mean, even if THD is the only way many undocumented Hispanics can receive these services, I would still expect a sizable percentage of non-Hispanics to also access those services through THD.

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