Category Archives: Taxes

Blog: Paul Ryan: Let’s Work Together to Expand the EITC – AND Increase the Minimum Wage – America Needs Both

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Blog: Paul Ryan: Let’s Work Together to Expand the EITC – AND Increase the Minimum Wage – America Needs Both

Laura Peralta-Schulte
Jul 31, 2014

It is not often that Sister Simone and Rep. Paul Ryan agree on policy issues. That is why NETWORK was thrilled to see that a core idea in Ryan’s recent Expanding Opportunity in America discussion draft was a call to dramatically expand the Earned Income Tax Credit (EITC) to include childless workers and workers between the ages of 21 and 64.

At the American Enterprise Institute unveiling of his anti-poverty proposal, Ryan credited the EITC as an idea inspired by the late economist Milton Friedman–or “Uncle Milton” as he affectionately called him–who proposed the merits of a “negative income tax” to provide assistance to low income Americans. At NETWORK, we believe that the EITC is a just, progressive tax policy where those who work and live on the edge of poverty pay less tax than those who can afford to pay more. Regardless of philosophical bent, economists across the spectrum believe that the EITC is one of the most effective anti-poverty programs in America and we strongly encourage all politicians–Republicans and Democrats–to move forward to enact this change that would lift millions out of poverty.

Much of Representative Ryan’s comments in the section related to the EITC argue that the EITC is a policy that should be enacted as an alternative to raising the minimum wage. We at NETWORK respectfully disagree with Rep. Ryan’s analysis and believe that expansion of the EITC coupled with an increase in the minimum wage is the most effective way to combat poverty.

Our advocacy is informed by the Catholic Church’s fundamental belief in just wages. Since 1891, the leaders of the Catholic faith have taught explicitly that:

“Before deciding whether wages are fair, many things have to be considered; but wealthy owners and all masters of labor should be mindful of this—that to exercise pressure upon the indigent and the destitute for the sake of gain, and to gather one’s profit out of the need of another, is condemned by all laws, human and divine” (Pope Leo XIII, Rerum Novarum 20)

Pope Francis recently restated this sacred obligation by suggesting that a society that “does not pay a just wage,” that “only looks to its balance books, and that only seeks profit “is unjust and goes against God.” He further states in his papal exhortation, the Joy of the Gospel, “As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets…and by attacking the structural causes of inequality, no solution will be found” to lift people out of poverty.

Three million workers in the United States live in poverty despite working year-round, full-time jobs; one-third of families with children living in poverty include a full-time worker; and nearly 60% of families living at 200% of the federal poverty line—which includes a family of four trying to get by on less than $50,000 a year—have at least one member of the household working. Put another way, in 1968 the minimum wage was enough to keep a family of three out of poverty; into the early 1980s, the minimum wage was enough to keep a family of two out of poverty; but the minimum wage can no longer keep even a family of two above the poverty line.

One of the structural changes that needs to occur is for employers to pay their full-time workers a living wage orat least wages above the poverty line. The latter, in current dollars, is a rate of $10.10 an hour. Paying full-time employees poverty wages is unjust.

Contrary to Ryan’s analysis, there are many economic benefits to raising the minimum wage. An increase in wages increases demand in an economy that is in desperate need for it; an increase to $10.10 would raise wages for 28 million workers by $35 BILLION and two-thirds of those workers are women many of whom are sole breadwinners for their families. Further, data shows that states that have raised the minimum wage in 2014 have added more jobs than the states that didn’t.

In addition, in Ryan’s “opportunity grants” described elsewhere, he forces people to set goals of getting a job that pays above the minimum wage. If Ryan recognizes that a minimum wage job does not lift someone out of poverty, wouldn’t the easier solution just be to raise the wage? Without an increase, Ryan is only changing the WHO in who lives in poverty because minimum wage jobs will still need to be done; so really he would just be feeding new people into poverty as he lifts others out. The only thing to break that cycle is increasing the federal minimum wage.

If Ryan wants to save government funds, why isn’t he asking companies to pay their workers a living wage? We know that a significant portion of people receiving government assistance for food and other necessities actually work full-time, but don’t make enough to support themselves or their families. Is it fair that the average CEO of profitable companies make 933 times more than a minimum wage worker? We at NETWORK believe the time for structural change is now.

Finally, Representative Ryan proposes to pay for an increase in the EITC through three mechanisms: cutting social programs, cutting access to the Child Tax Credit (CTC) for low income, undocumented working families who pay their taxes through an IRS-issued Individual Tax Identification Number (ITIN) rather than a Social Security number, and by cutting “corporate welfare.” As we begin a dialogue on tackling issues of poverty, we suggest a good place to start is to agree to a simple guiding principle: any proposal to help lift people out of poverty should not be paid for by people living in poverty. In particular, we reject any call to deny CTC benefits to legal residents and undocumented workers who file their taxes using ITINs and who pay billions of dollars in taxes—payroll, Social Security and Medicare—and yet are not eligible for benefits. Cutting them off from the CTC will hurt up to 5.5 million children, 4.5 million of whom are U.S. citizens. These taxpaying families—like all families—deserve support and an opportunity to succeed.

We do believe, however, that Ryan’s proposal to cut corporate welfare, rather than the safety net, is the way to pay for these increased benefits to families living in poverty. In his presentation at AEI, Ryan specifically called for a cut in oil and gas subsidies. Here too NETWORK is in full agreement to close tax loopholes to wealthy corporations and individuals, in order to pay for programs to support the common good.

Representative Ryan, we welcome this important dialogue and hope to work with you to expand the EITC and, more generally, to promote programs in support of the 100%.

Blog: The Many Effects of Inequality

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The Many Effects of Inequality

By Carolyn Burstein
October 15, 2014

Although there have been several blogs on this website on the topic of inequality, the issue is increasingly relevant for so many reasons, not the least of which is the fact that inequality is the source of so many economic ills. Wherever one looks the specter of inequality rears its head.

In my recent blog on the Census Bureau’s poverty data, I referred to a recent article in the Washington Post about the effects of the wealth gap on the inability of young people to purchase their first home. I referred as well to a recent study by Standard and Poor’s describing how states were experiencing a decrease in normal revenue from sales taxes due to wage stagnation and a lack of demand among the majority of their populations. Earlier I had written a blog about the use of “dark money” in political campaigns, thanks to the Supreme Court decisions (Citizens United v. FEC and McCutcheon v. FEC), which give the wealthy an outsize influence in elections. And the list goes on.

Let’s consider some of the effects of inequality on economic growth, various social issues, global trade, higher education, and even the Scottish vote. Naturally, the results of inequality are even more far-reaching (and damaging), than this disparate list suggests, but we will scrutinize these for starters. But first, let’s focus on a few issues related to inequality. Did you know that regressive payroll taxes, which cost people in poverty proportionately much more than the wealthy, are projected to raise about one-third of federal revenue in 2015? Or that the U.S. ranks highest among the high-income countries (according to a study by the Organization for Economic Cooperation and Development – OECD) in its share of relatively low-paying jobs? These are just two fascinating details in an October 1, 2014 article in the Financial Times by Martin Wolf, economics editor of the paper.

So, how much wealth do these rich people have? A very similar question has recently (mid-September 2014) been put to people in various countries. They were asked in a poll how much money top executives of major companies make relative to the average workers in their firms, and in the U.S. the median respondent believed it was about 30 times more. Unfortunately, chief executives earn more than 300 times as much as ordinary workers, an amount vastly underestimated by nearly all Americans and reflecting the concentration of wealth at the top of the financial pyramid. This situation is what Thomas Piketty in his bestselling Capital calls the super salaries of “supermanagers”.

Celebrities and sports/movie stars earn far less than many of the financial barons who dominate the upper strata of the wealthy. In 2013 the top 25 hedge fund managers received, on average, almost a billion dollars each, according to Paul Krugman. Ignorance about this problem may be one reason why income inequality hasn’t yet become a dominant issue in elections!

Data from Thomas Piketty and Emmanuel Saez, the academics who have made a specialty in documenting the rise of income inequality around the world, shows that during the first three years of the recovery from the Great Recession (2009-12), the top 1% of the population, took home 95% of the income gains, while incomes actually fell for the bottom 90%. Until the recessions of the 1970s, most income gains experienced during subsequent expansions accrued to most of the people, but with each expansion since that time, the bottom 90% captured a smaller and smaller part of income. Family net worth, a measure of accumulated wealth, showed a similar skewing upward.

Some say that the Federal Reserve’s policies of zero interest rates and quantitative easing (buying bonds with newly-printed money) are inadvertently responsible for the income inequality the nation is currently experiencing. Certainly, inequality could have been worse without these policies, since they helped to prevent massive joblessness in 2008-09. But there is no doubt that extremely low interest rates hurt small savers who were not able to diversify into higher-yielding investments. And Wall Street enjoyed the Fed’s “easy credit” and the profits of the bull market. Many couldn’t help noticing that years of an ultra-loose monetary policy might risk skewing the U.S. income distribution upward. However, most of the evidence for income inequality indicates that its rise started many decades before and its causation is multiple, not least of which is the fact that tax and spending policies are much less redistributive than they were even a few decades ago.

It’s time to consider the effects of inequality on the various issues raised above. First, let’s look at inequality’s effects on economic growth. At an IMF seminar in mid-April 2014 there was a clear conviction that economic growth and inequality were mutually incompatible. The participants welcomed the growing consensus around the world on the need to address inequality and the IMF’s role in this process. The Deputy Managing Director of the IMF clarified that their advice to countries now always includes jobs, growth and employment in policy formation.

There is a strong belief that inequality today has reached levels that threaten economic stability and growth. As Joseph Stiglitz, the Nobel Prize-winning economist, has written in The Price of Inequality, “Widely unequal societies do not function efficiently, and their economies are neither stable nor sustainable in the long term. Taken to its extreme – and this is where we are now – this trend distorts a country and its economy as much as the quick and easy revenues of the extractive industry distort oil-or mineral-rich countries.”

In the U.S., the Great Recession illustrates how an excess of inequality can warp an economy. The housing boom crisis showed that a strong segment of the public was unwilling to accept their depressed spending power, and encouraged by those who, often illegally, eased credit standards, were able to sustain their purchasing power by borrowing using flimsy home mortgages. Marianne Bertrand and Adair Morse of the University of Chicago have found that legislators who represent constituencies with higher inequality are more likely to support the easing of credit. And credit splurges, they find, bring on instability in the financial sphere. The economy, propped up on shaky credit, becomes more vulnerable to shocks, so that when a recession comes, the economy virtually collapses as banks fail and consumer spending drops.

Income inequality also exerts a significant drag on demand, as people with low-incomes have been forced through credit contraction to spend less. This situation acts as a vicious circle, since business investment is curbed by weak growth in demand for products and services. Many companies have been encouraged to replace unskilled labor with machines, contributing further to downward wage pressure. It is this wage stagnation that is a major contributor to today’s weak recovery. So, income inequality comes full circle. The global trends are stark. Stefano Scarpetta, director for employment, labor and social affairs at the OECD, says’ almost all advanced economies have seen labor’s share of gross domestic product fall over the past 20 years.”

Income inequality causes a range of social problems by undermining social cohesion and increasing social divisions and placing greater importance on social hierarchy, status and class. Distinctions between rich and poor neighborhoods become paramount. Social relationships are severed and trust is lost. Indicators of women’s status are generally better in more equal societies. Rates of both property crimes and violence increase as income differences widen. Inequality drives status competition, which drives personal debt and consumerism, and the latter is a major threat to sustainability. Stronger community life in more equal societies also means that people are more willing to act for the common good – they recycle more, spend more on foreign aid, and focus more on peace. Business leaders in more equal countries rate international environmental agreements more highly. The social fabric of society allows populations to either flourish or fail.

What has been the impact of our global trade efforts on income inequality? Our trade agreements of the past 20 years have led to a massive decrease in tariffs from over 40% in the 1950s to less than 3% on most industrial goods today, and other barriers to trade have been radically reduced, with the result that prices for these goods over the past 10 or 20 years have been drastically reduced. But it is well to keep in mind that the U.S. comparative advantage is in capital and technology and our disadvantage is in labor, particularly unskilled labor. Thus, our lower-income people are competing with those whose wages are significantly depressed by American standards.

A recent study by the U.S. International Trade Commission has concluded that global trade in general has contributed to 10 to 20% of the wage gap between more skilled and less skilled workers, certainly not a majority of the difference, but a significant slice of it. In negotiating a free trade agreement with some developing countries, such as Vietnam and Malaysia, in the Trans-Pacific Partnership (TPP), the U.S. should bear in mind that a number of Asian countries have suppressed the value of their currencies (currency manipulation), which has severely hurt our economy and depressed the wages of U.S. workers. The TPP must address issues like currency manipulation so that income inequality does not become greater than it already is.

Also, the study points out that the U.S. needs a robust Trade Adjustment Assistance (TAA) program to provide funds to help workers who have been laid off to get the training and education they need to launch a new career and get unemployment benefits during their transition. The current TAA is considered worthless by many of the workers it has been intended to help because it either fails to provide the unemployment compensation for the jobs they have lost or fails to provide them with adequate training and skill levels needed to enable them to acquire jobs in new areas. The 113th Congress has not taken any action on this issue.

Although not the only concern of many Democrats regarding global trade – issues like labor rights, environmental protection and patents are others – income inequality is central for many. For example, Robert Reich writes: “This massive deal [TPP] would further erode the jobs and wages of working and middle-class Americans while delivering its biggest gains to corporate executives and shareholders.” Harold Meyerson, writing in the Washington Post earlier this year agrees with Reich but also notes that the U.S. trade deficit with Canada and Mexico rose from $27 billion in 1993 to $181 billion in 2012. Meyerson writes, “when the case for free trade is coupled with the case for raising workers’ incomes, it enters a zone where real numbers, and real American lives, matter…Such deals [referring to the TPP] increase the incomes of Americans investing abroad even as they diminish the incomes of Americans working at home.”

A Huffington Post article earlier this year noted that the Peterson Institute for International Economies – a strong supporter of global free trade – estimated that nearly 40% of the observed growth in U.S. labor inequality was attributable to trade trends. It isn’t difficult to understand why after calculating the employment effects of trade flows using the government’s own methodology for translating the U.S./Canada-Mexico trade deficit figures for 2012. This trade agreement alone has been responsible for the American loss of one million jobs and doesn’t include the loss of jobs associated with the U.S.-South Korea Free Trade Agreement, which have been substantial.

The Huffington Post article warned that one should not necessarily focus only on the number of jobs lost, but on their composition. The millions of workers who had belonged to the middle class but did not have a college degree were competing for non-offshorable, low-skill jobs in sectors such as food service and retail, where wage stagnation had already occurred, due in part, to the excess supply of laborers. According to the U.S. Bureau of Labor Statistics, two of every three displaced manufacturing workers who were rehired experienced a wage reduction, most of them more than 20%. Is it any wonder that Democrats in Congress are reluctant to grant the president “Fast Track Authority” which would enable trade agreements similar to those negotiated in the past 20 years, to be voted up or down in Congress without changes?

So, what are the chances of higher education coming to the rescue of income inequality?  If, as Alan Blinder (former Federal Reserve vice-chair, Princeton economist and NAFTA supporter) says, one out of every four American jobs could be offshored in the foreseeable future, then, it would seem, young, disadvantaged “millennials” must overcome barriers to a first-rate higher education. In a September 21, 2014 article in the New York Times, Vicki Madden, a former high school teacher, lamented the social isolation and alienation that most of the bottom 50% of Americans experience in the 200+ “top-tier” colleges across the country. Colleges now are more divided by wealth than ever, she writes. Many of these kids struggle academically and do not feel comfortable asking their professors for help or feel welcome in student study groups. These are among the prime reasons so many drop out.

In a recent paper, Anthony Carnavale and Jeff Strohl found that at 193 rather selective colleges, only 14% of students were from the bottom 50% of Americans in terms of socioeconomic status. And Martin Wolf, in his October 1, 2014 article in the Financial Times (referred to above) quotes a Standard and Poor’s report that for the poorest households college graduation rates increased by only about 4 percentage points between the generation born in the early 1960s and the early 1980s. The graduation rates for the wealthiest households increased by about 20 percentage points over the same period. Yet without a college degree, the chances of upward mobility remain dim. One can only hope that those born since the early 1980s fare better than their older brothers and sisters.

What in the world does the Scottish Vote for independence have to do with American income inequality? We Americans probably paid little heed to that all-important UK vote on September 18, 2014. This was the same week that the U.S. Census Bureau released data on U.S. poverty which divulged that so-called middle-income Americans made eight % less in 2013 than they did in 2007. What these facts have in common is that many millions of people in both Scotland and America (and many other countries, too) no longer trust their more wealthy governing bodies.

The Scots have little in common with our “Tea Party.” They are more left-wing than the majority in the British parliament and its ruling party, desire more social welfare spending rather than austerity, want greater efforts in the environmental area and oppose the British parliament’s emphasis on defense. Millions of Scots proved that their tolerance for their governing institutions had badly diminished. And London has heard the results of the vote (closer than many believed possible) and promised reform, although specifics were in short supply.

The U.S. poverty data are bleak and make clear that a middle-class American family is worse off financially today than it was 15 years ago. The fact that the system isn’t working for most American workers pervades public opinion polling as well as mid-term election results for the past few years. The causes are multiple, as the foregoing indicates. The issue in this country is whether tolerance of the current system will continue or what direction the opposition to it will take.

If the ability to tolerate our economic system wanes, we, at NETWORK, oppose the tools of violent conflict. We strongly believe in the power of the ballot box and legislation to right  grievances. Because we are a government of, by and for the people, we believe that people with a comprehensive vision, compassion, and real leadership qualities will run for office, be strongly supported by those who oppose the status quo and, if elected, will serve the common good by supporting all Americans, including especially poor and vulnerable families. Often this will mean supporting policies that require uncommon courage to change the status quo in ways that are innovative but desirable for those who have borne the scourge of injustice. All government leaders have a shared duty to all segments of society, but especially to ensure that no one is left behind. And that means that today’s level of income inequality requires a sizable level of moderation.

Blog: What We Propose If Congress Renews a Host of Expiring Tax Provisions

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What We Propose If Congress Renews a Host of Expiring Tax Provisions

By Carolyn Burstein
November 21, 2014

Economists generally agree that temporary tax policies are ineffective for economic growth, yet Congress has consistently extended a host of tax provisions that are known collectively as “tax extenders” in lieu of genuine tax reform.

A study by economists at George Mason University entitled “The Economic Costs of Tax Policy Uncertainty” shows that policy uncertainty itself has negative implications for the economy by reducing investment, consumption, employment and growth.

The study maintains that regular renewal of tax breaks is nothing more than a vehicle for politicians to acquire financial and political support from special interests in exchange for tax handouts. The only employment achieved is a growing supply of lobbying jobs to protect various industries’ tax privileges. So the primary beneficiaries of “tax extenders” are private interests, especially high-income taxpayers and various corporations (e.g., racetrack builders, the rum industry in Puerto Rico, and the Virgin Islands) and lobbyists.

The Economic Policy Institute (EPI) points out that the four largest “tax extenders” are:

  1. The research and development tax credit
  2. The renewable electricity production credit
  3. The active financing exception, which allows financial services firms and manufacturers to defer U.S. taxes on certain types of income earned overseas
  4. The deduction for state and local taxes

Combined, these account for 60% of the value of the most recently passed extender package. EPI says that these “tax extenders” are both regressive and inefficient because they provide benefits to individuals and businesses that act in ways they would have acted even without the tax provision. Furthermore, the “temporary” classification of these and several other tax provisions is deceptive because they have been routinely extended for years.

Unless the “temporary” tax provisions are extended by December 31, income taxes for individuals and businesses will be affected for 2014. Politico reports that powerful conservative groups funded by the Koch brothers (e.g. Americans for Prosperity, Heritage Action for America) as well as many House Republicans want the GOP to capitalize on their election victory by killing some of the “tax extenders,” such as one subsidizing the wind energy industry. Some Republicans are threatening a refusal to pass any “tax extenders” bill until at least January when they take over both houses of Congress. Representative Dave Camp (R-MI), Chairman of the House Ways and Means Committee during the lame duck session, along with several other Republicans, favor comprehensive tax reform with no temporary extenders.

While it is true that many of the 50+ “tax extenders” provide tax relief for certain businesses and high-income taxpayers, provide some benefits for ordinary taxpayers, such as a deduction for sales taxes and another offering a break to those who have had mortgage debt forgiven in the aftermath of the housing crisis. For these and other reasons, Democrats in both houses of Congress want to make only minimal changes in the bills and extend all tax provisions for two years, whereas Republicans want to permanently renew a few tax provisions and end tax breaks for most, including the wind credit, and prepare for major tax reform when they will control Congress in January 2015.

At the present time (November 20, 2014) top Republicans and Democrats on the Senate Finance and House Ways and Means committees are in negotiations to forge a deal on the “tax extenders.” Senator Ron Wyden (D-OR), current chairman of the Senate Finance Committee, told Politico this week that he was pushing for the bill introduced by his committee earlier this year (but never passed) that continues almost all of the “tax extenders” for two years (through 2015), but was willing to consider making some of the tax provisions permanent, specifically mentioning the R&D credit. He conceded, however, that negotiations are in a preliminary stage and have a long way to go. Like Dave Camp, Wyden wouldn’t rule out any possibility for the tax provision package at this time.

EPI says that the R&D credit is based on the widely accepted premise that some private research may not just improve the quality and lower the prices of goods and services produced by the firm itself, but may have “spillover effects” by increasing productivity growth across an entire industry and even the entire economy. The R&D credit is designed to offset only the costs of a company’s new research, not its entire research budget. Despite these good qualities, the current structure of the R&D credit is not flawless, as Wyden would quickly point out, especially the lack of data collection to show that the R&D credit is actually incentivizing R&D spending. There may not be time in this session of Congress to solve this problem and others that exist in the structure of the R&D credit.

Time is of the essence, as IRS Commissioner John Koskinen warned lawmakers last week that failure to address the tax provisions soon – in early December – could greatly complicate the tax filing season and delay tax refunds.

Another key fact about “tax extenders” that cannot be overlooked is their cost to the Treasury. Americans for Tax Fairness (ATF), basing their calculations on those of the Congressional Budget Office (CBO), has estimated that the two-year cost of extending these tax breaks would amount to $142.4 billion; a permanent extension (based on a 10-year cost) would amount to $691 .1 billion. By far, business tax provisions predominate among the “tax extenders.” For a two-year extension they constitute 78.1% of the costs; energy, individual, charitable and community assistance provisions constitute the remaining 21.9%.

As Congress debates whether these tax provisions, all of which assist the upper three quintiles of Americans, are worth the cost, we at NETWORK believe that policymakers must also address the needs of individuals and families in the lower two quintiles, who are struggling on a daily basis to make ends meet. Specifically, it is critically important to extend two credits that will soon expire – the Earned Income Tax Credit (EITC) and the refundable Child Tax Credit (CTC). Let’s not talk about the permanence of tax cuts without considering the permanence of these two significant credits.

Economists agree that the EITC and the CTC continue to be the most effective anti-poverty programs developed in this country. Together they keep about 16 million Americans, including more than 5 million children, out of poverty. As Sister Simone Campbell’s letter to Chairman Wyden, dated November 13, 2014, states: “[A]nother 50 million Americans, including 31 million children, would lose part or all of their Child Tax Credit or Earned Income Tax Credit if it is not extended. These credits strengthen opportunity for workers who are struggling to get by and help families become more economically secure. They – along with a strong minimum wage – have the power to raise the living standards and lift millions of working Americans out of poverty.”

EITC and CTC help create a more equitable and secure society, promote the common good, and lay the groundwork for a truly healthy economy. Only by ensuring that the 100% are strengthened will we be able to create strong communities that can resolve the crises that beset our society from time to time.

Both the EITC and the CTC encourage and reward work and the Center on Budget and Policy Priorities (CBPP) reminds us that there is growing evidence that income from these credits leads to improved school performance, higher college enrollment, and increased earnings in adulthood. Both credits have consistently enjoyed bipartisan support in Congress, and making them permanent should be a congressional priority. As Pope Francis wrote in The Joy of the Gospel “the dignity of each human person and the pursuit of the common good are concerns which ought to shape all economic policies” – and that includes tax policies!

Blog: Extend and Expand the Earned Income Tax Credit (EITC) and the Child Tax Credit

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Blog: Extend and Expand the Earned Income Tax Credit (EITC) and the Child Tax Credit

Carolyn Burstein
Mar 09, 2015

Catholic Social Teaching is clear that all people have the right to live in human dignity, which for many is not possible without tax incentives since payroll taxes are taking a larger and larger bite out of their meager wages.

Next to Social Security, the EITC and the Child Tax Credit lift more people out of poverty than any other federal program. However, both programs will expire in 2017 if they are not extended. We believe that expanding the EITC and the Child Tax Credit for low-income workers themselves as well as for their families is a matter of basic tax fairness.

Economists across the political spectrum agree that the EITC has been one of the most effective anti-poverty programs we have. Together with the refundable Child Tax Credit, it helps keep about 10 million Americans, including more than 5 million children, out of poverty. There is also a consensus that making these programs permanent as well as expanding the EITC would strengthen opportunity for workers who are struggling to get by and help families become more economically secure. These tax credits have the power to raise living standards and lift millions of working Americans out of poverty.

Working Families Tax Relief Act

While we wait for a Republican proposal, we want to call attention to the “Working Families Tax Relief Act,” which has been introduced by Democrats. Senator Sherrod Brown (D-OH), the ranking Democrat on the Banking Committee, cosponsored this proposal with Senator Dick Durbin (D-IL). The measure would expand the EITC and Child Tax Credit to make permanent the expansion of credits that took effect in 2009, would expand the EITC for “childless workers” (more on this below), would extend both programs indefinitely, would index the Child Tax Credit to inflation and make it easier for qualified Americans to claim the EITC.

Senator Brown said, “The Earned Income Tax Credit and the Child Tax Credit lift families out of poverty, provide an incentive to work, and put real money back in the pockets of working Americans. That’s why expanding and strengthening these tax credits is so important. To reform our tax code, we must start in the homes of working Americans — not in corporate boardrooms.”

Reps. Richard Neal (D-MA) and Rosa DeLauro (D-CT) are co-sponsoring the House version of the bill.

Other Proposals

The other proposals led by the Senate leadership include “The 21st Century Worker Tax Cut Act,” which introduces a new tax credit worth up to $1000 for families in which both parents work; “Helping Working Families Afford Child Care Act,” which would increase the size of the typical credit for child and dependent care from the current $600 to $2800 (but could rise as high as $8000) for most middle-income families; the “American Opportunity Tax Credit,” which gives families up to $3000 credit for college tuition and includes families earning up to $200,000.

What would happen in 2018 if the EITC and Child Tax Credit provisions expire in 2017? It would have a dire effect on the economy as a whole and on working families in particular. A study released last month by the Center on Budget and Policy Priorities (CBPP) found that more than 16 million people in low-income working families, including 8 million children, would fall into — or deeper into — poverty; and some 50 million Americans, including 25 million children, would face substantial cuts.

History and Effectiveness of the EITC and Child Tax Credit

The Economic Policy Institute (EPI) produced a major study of both the EITC and Child Tax Credit in September 2013, from which much of the following information is gleaned. Because of the nature of the study, the findings are still timely.

The EITC was first signed into law in the 1970s by President Ford and was considered an anti-poverty program and an alternative to welfare because it incentivized work. The program was expanded by President George W. Bush in 2008 and by President Obama in 2009 as part of the American Recovery and Reinvestment Act (ARRA). Under ARRA, benefits for families with more than two children were boosted and marriage penalties were reduced (some EITC for certain couples were no longer lost when they married).

Originally in the 1970s, the EITC was intended to offset the Social Security payroll taxes for low-income workers as well as rising food and energy prices, but no longer covers those costs.

Let’s be sure we understand how the EITC works. The EITC is work-oriented in that the amount of the tax credit is based on earnings from wages and salaries or self-employment income. The amount of the credit increases as earnings increase, but reaches a plateau, and then falls as earnings increase. For example, for a couple with two children, the credit rate is 40% of the first $13,090 in earnings, with a maximum credit of $5,236 if earnings reach $22,300. Over that amount the credit rate drops substantially until it reaches zero for taxpayers over $47,162.

Low-income workers with no children and noncustodial parents are also eligible for the EITC, but the maximum credit is just a small fraction of that for families with children and often too complicated for potential recipients to bother with.

The Child Tax Credit was enacted as part of the “Taxpayer Relief Act of 1997.” The origin of the credit can be traced to a recommendation for a $1000-per-child tax credit by the 1990 National Commission on Children, but was substantially less generous in the original law. It was eventually increased to $1000 per child as part of the 2001 and 2003 Bush tax cuts. The ARRA expansion of the Child Tax Credit substantially lowered the threshold for earnings to qualify for the tax credit.

The Child Tax Credit allows a nonrefundable credit against income taxes of $1000 per qualifying child under age 17. Unlike the EITC, the Child Tax Credit is not targeted to just lower-income taxpayers. A couple with two qualifying children can receive the tax credit with adjusted gross income levels of $150,000 (those levels are in the top 10% of the income distribution).

The EPI summarizes the major findings on the effectiveness of the EITC and Child Tax Credit as follows:

  • Both the EITC and Child Tax Credit were initially proposed, supported and expanded by Republican lawmakers with broad bipartisan support
  • Both the EITC and Child Tax Credit fail one of the criteria of evaluating tax provisions: simplicity and convenience. Claiming the tax credits can be complicated and involves filing many forms, which leads to errors of both over-and under- payment
  • The EITC appears to increase the labor force participation of single mothers, yet the high marginal tax rates associated with its phase-out range do not appear to have a significant work disincentive effect
  • The EITC is the most progressive tax expenditure in the income tax code
  • The EITC reduces poverty significantly, with children constituting half of the individuals it lifts out of poverty
  • The EITC and Child Tax Credit are effective in increasing after-tax income of its recipients and reducing income inequality.

A recent paper (February 20, 2015) by the Center on Budget and Policy Priorities focuses attention on low-income “childless workers” — adults without children and non-custodial parents — who receive little or nothing from the EITC. At the present time, this is the only group whose income and payroll taxes together either push them into poverty or deeper into poverty. CBPP estimates that there are over 7 million people in this category.

The Brown-Durbin bill would substantially strengthen the EITC for this group by lowering the eligibility age to 21, raising the maximum amount of credit offered and increasing the phase in/out rates.

Based on studies done by several economists and psychologists, the CBPP paper maintains that strengthening the EITC for “childless workers” would have a number of social as well as economic benefits, including the following:

  • would increase labor force participation among low-skilled childless workers
  • may increase their earnings, and thus their marriage rates and stability
  • could help reduce crime and incarceration rates among the young
  • would help their children (many are noncustodial parents) financially and would assist them in serving as role models for their children

A Matter of Fairness

Just as those in Congress who believe firmly that the EITC and the Child Tax Credit should be extended beyond 2017 and expanded in scope are beginning this journey now, we, at NETWORK strongly encourage all advocates to begin planning effective ways to support this effort. As is clear from examining a history of these two programs, extension has always garnered bipartisan support. And there is little controversy about the effectiveness of either the EITC or the Child Tax Credit.

Blog: Inequality and the Estate Tax

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Inequality and the Estate Tax

By Carolyn Burstein
April 17, 2015

On April 16, the House voted (H.R. 1105) to repeal the estate tax. The vote (240-179) broke down largely on partisan lines. NETWORK actively opposed the bill.

Background

An estate may consist of property, stocks or any combination of assets that a person owns. The Center for Effective Government (CEG), in an April 15 article, calls this move “alarming.”

After clarifying that the estate tax affects a miniscule proportion of Americans – only .2%, according to the research of the Center on Budget and Policy Priorities (CBPP) — the CEG makes very clear that repeal would exacerbate wealth inequality in this country. That is because it would result in approximately $269 billion (a figure derived from the Joint Committee on Taxation – JCT) in less funding over the next decade for programs in education, healthcare, child nutrition, etc. These are programs that help average — low-income and middle-income — people. This situation is especially stark in the context of the House budget, which already proposes to cut health reform, Medicaid, the Supplemental Nutrition Assistance Program (SNAP) and Pell Grants.

Only about two out of every 1,000 people who inherit an estate owe any taxes because the amount of the estate’s worth has increased from $650,000 in 2001 to $5.43 million per person ($10.86 million for a couple) in 2015 before the tax is triggered. As the CEG article notes, for “99.8% of Americans, death is a time when taxes are forgiven, not owed.”

The Tax Policy Center (TPC) estimates that only about 20 small business and farm estates owed any estate tax in 2013, and those owners paid only an average of 4.9% of their value in taxes (TCP Table T13-0020, quoted in a CBPP report entitled “Eliminating Estate tax on Inherited Wealth Would Increase Deficits and Inequality” issued on April 13, 2015).

Examples

Following up on this issue of the number of taxable estates, let’s compare a few random years. In 1977, 139,000 estates had to pay the estate tax (the estate tax has been assessed since 1916); in the year 2000, about 52,000 estates filed for the estate tax; whereas in 2013 only 4,687 filed. An incredible diminution over time!

If owners’ wills set up trust funds for heirs, and, given the fact that capital gains that normally accrue on the appreciation of assets are only realized when the asset is sold, then the normal capital gains tax would not apply if the estate tax is repealed. According to CBPP, “Unrealized capital gains account for a significant proportion of the assets held by estates, ranging from 32% for estates worth between $5 million and $10 million to about 55% for estates worth more than $100 million.”

An even more consequential reason that repeal of the estate tax is unsettling is that it would bestow a tax windfall averaging more than $3 million apiece on those who are often already extremely wealthy, according to CBPP calculations.  That calculation is based on the fact that roughly 5,400 estates nationwide would face the estate tax in 2016. However, one must keep in mind that the 1,336 estates worth $20 million or more would receive a tax windfall averaging $10 million and the 318 estates worth $50 million or more would receive tax benefits averaging more than $20 million each. Since large inheritances play a substantial role in wealth concentration, especially at the top of the wealth pyramid, they are a prominent deterrent to economic mobility and belong in the category of “unearned income.”

While estate taxes constitute a tiny part of the federal budget — $269 billion between 2016 and 2025 – nevertheless, an April 15 online article  by “Think Progress” notes that this amount would be sufficient to fund the Food and Drug Administration, the Centers for Disease Control and the Environmental Protection Agency combined. Or more to the point, as the April 15 online edition of the Huffington Post  elaborates, $75 billion would let every low-to-moderate-income four-year-old attend preschool; or $209 billion would be enough to send 9 million striving Americans to a community college; or $89 billion would keep college affordable for millions more by reversing proposed budget cuts to Pell Grants; or ensure there’s enough food on the table for children, seniors, veterans and their families by restoring $125 billion in cuts to food stamps made in the House and Senate budgets.

Polls have long suggested that most people believe the wealthiest Americans don’t pay their fair share of taxes. Senator Debbie Stabenow (D-MI) said with a laugh on April 14, “I guess when it comes to helping the wealthiest people in the country, it’s never enough.”

House Ways and Means Committee Chairman Paul Ryan (R-WI) claimed that the estate tax is “absolutely devastating” for family farms, and he said that the repeal would remove “an additional layer of taxation” from assets that had already been taxed. An online Washington Post article on April 14 rebuts Ryan by indicating that only 120 small businesses and farms nationwide were subject to the estate tax in 2013. And because of all kinds of discounts and other breaks, such as low valuation rules and delayed tax payments, few heirs were hurt in any meaningful way. Furthermore, Congress has repeatedly cut the tax rate and increased exemptions. And there is no “double taxation.” Even the Americans for Tax Fairness conceded that 55% of the value of estates worth more than $100 million had never been taxed.

The Department of Agriculture estimates that with the exemptions, only .6% of American farms would have to pay an estate tax – more might file, but would owe no taxes. Even Senator John Thune (R-SD) and his staff could not identify any farms that were forced to be sold because of the estate tax. They indicated that in a few cases some new owners had to sell some acreage to pay the tax, but even in those cases this occurred because land prices had soared in certain areas.

We Must Not Increase Inequality

At a time when income inequality is one of our most vexing problems, the wealthiest .2% of Americans who have already become the permanent elite of this country, needs no help from Congress to ensure their status. One can partially rest in the knowledge that the estate tax proposal is unlikely to make it through the Senate or past a presidential veto. President Obama and many other senior Democrats want to expand the estate tax especially by targeting more estates with a higher top rate. On April 15, the online edition of The Hill pointed out that White House officials have reemphasized the president’s proposals to give tax breaks for child care and education and to two-earner families. They are right to conclude that such policies, if passed, would help far more people than the GOP’s estate tax repeal.

Indeed, this latter point is significant. The effort to repeal the estate tax does nothing to promote family stability, respond to the needs of people at the margins, or address the human needs of people. At a time when the gap between the wealthy and those barely able to afford the necessities of life is yawning widely, no one should support the repeal of the estate tax.

NETWORK believes that the accumulation of wealth (or profits) should never take precedence over ensuring adequate resources for all people to lead a dignified life, and that includes meeting the basic needs of the whole person. Giving a very few people who are heirs to a huge estate a tax windfall does not build a relational society based on achieving the common good for all. We are called to act beyond selfishness, to approve an outreach to community that supports the eradication of all injustice no matter what form that takes. And what some call the “repealing the death tax” falls into the category of classism—a major injustice today.

Guest Blog: Reflection on NETWORK’s “Just Advocacy Week”

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Reflection on NETWORK’s “Just Advocacy Week”

By Billy Critchley-Menor
July 13, 2015

Originally appeared on the Strength from the Cloud blog

 “We’re not about that polarization crap.”

To many millennials, the Catholic Church has become an outdated and irrelevant institution. Many in our parents’ generation have forgotten, watered down, or walked away from the Church. But what perhaps is even more tragic than the number of people leaving the church, is the divide we find inside it. Growing up in today’s Catholic landscape, millennials are exposed to a heartbreaking and toxic polarization between “liberal” and “conservative” Catholics and are often, it seems, pressured to choose a side, or get out. I am strengthened however, by the millennials I have met who refuse to choose a side and refuse to get out.

Recently, I flew from my home in Duluth, Minnesota, to Washington, D.C. to attend Just Advocacy Week, a week-long training on Catholic social justice and advocacy for college students. The event was put on by NETWORK, the Catholic Social Justice Lobby.  As a long-time fan, spending a week with the organization was almost a dream come true. Although, knowing that NETWORK and the institutional church have both publicly criticized each other on different occasions, I was skeptical of the crowd I would encounter. I expected to spend the week with people who were quick to correct “Catholic” to “liberal Catholic,” people who cared about social justice but demonized the Church and saw the sacraments as secondary. My expectations however, were shattered by the other young people I met.

I anticipated a week that would perpetuate polarization, but instead found beaming hope in millennials who said, “We’re not about that polarization crap.” I encountered a group of college students eager to salt the earth, to defy the stereotypes of their generation, and to serve their Church with the gospel as their guide and the sacraments as strength.

Our current culture tells us that we can’t have a conversation about abortion with differing opinions and still break bread together. It tells us that income inequality and canon law are conversations to be had with separate people, in separate occasions, and only with those who share your opinions on both of them. If we truly live out our Catholic faith however, we will be a paradox in the eyes of the world.

This radiant Catholic paradox is what gives me hope. Over the week the sixteen of us college students engaged in conversations about the Earned Income Tax Credit and women’s ordination. We shared the stories of our different confirmation saints and discussed the tragedy of such low tax rates on capital gains that allow the rich to get richer and the poor to get poorer. We spent time with Sr. Simone Campbell and learned from her witness to justice on Capitol Hill. We spent some time at the Poor Clares’ in Adoration of the Blessed Sacrament. We spoke with the same passion as we railed against for-profit prisons and lamented the death of innocent children and wrongly convicted men and women. We eagerly awaited, with the rest of the world, the release of Laudato Si and over breakfast and Metro rides, shared incredible wisdom as we read from and tweeted the papal encyclical with our smartphones.  We shed tears over our racist, sexist, and classist culture, but lifted each other up in joy, laughter, and especially in shared prayer. We refused to let our faith be put under a bushel basket.

Putting our faith into action, we closed the week on Capitol Hill lobbying our senators and representatives to make permanent the Earned Income Tax Credit and the Child Tax Credit. We were not lobbying as Democrats, or Republicans, we were lobbying as Catholics who understood their moral obligation to engage in the political sphere and work to end oppression of those who live on the margins in America.

On our last evening together, our group listened to a recording of Dr. King’s I Have a Dream speech and were reminded that so many of King’s lamentations in 1963 have been left unresolved. Though, as we shared our own dreams we were empowered with King, and the prophet Isaiah to “dream that one day every valley shall be exalted, and every hill and mountain shall be made low, the rough places will be made plain, and the crooked places will be made straight; and the glory of the Lord shall be revealed and all flesh shall see it together.” It became clear that our passion for justice was rooted in our immense love for God and God’s Church.

This generation of faith is falling in love with the right things. We are falling in love with the Catholic Church and its challenging and radically beautiful paradoxes in a new way. We are falling in love with Catholicism that preaches unity rather than one that requires labels. We are falling in love, and my prayer, like Father Arrupe’s, is that we stay in love and let it decide everything.

Blog: Important New Tax Information

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Important New Tax Information

By Laura Peralta-Schulte
August 28, 2015

NETWORK continues to advocate for making permanent the 2009 Earned Income Tax Credit (EITC) and Child Tax Credit improvements set to expire in 2017 as well as to strengthen the EITC to include younger, childless workers. These essential anti-poverty credits have been hugely effective at helping families achieve financial stability. If the key provisions expire, 16 million Americans, including 8 million children, will fall into — or deeper into — poverty.

So far, NETWORK has generated over 6,500 signatures of religious leaders and concerned citizens from around the country asking Congress to prioritize these anti-poverty tax credits. Members of our grassroots community in key districts have also met with key Members of Congress in their districts this August recess asking that the credits be made permanent.

From a process standpoint, there will be at least one, but possibly two, tax bills this fall that could provide an opportunity for action. The first is the Highway Bill, an important jobs bill that funds U.S. roads, bridges and public transportation. Republican leaders in the House and Senate have suggested that the highway bill be expanded to include making permanent select business credits, such as the research and development tax credit. Advocates for the EITC and the Child Tax Credit are urging lawmakers to also make permanent the working family tax credits, particularly if they are providing expensive tax breaks to wealthy corporations.

A second tax bill that could move forward is a short-term extension of a number of mainly business tax credits that are typically extended a year or two at a time. If we are unsuccessful in getting the EITC and CTC made permanent in the Highway Bill, we will seek an extension of the credits in this bill.

Decisions about whether to include the EITC and Child Tax Credit proposals are being made now. It is imperative for advocates to talk to their Member of Congress and explain why it is critical that they take action this fall in support of these key anti-poverty measures.

Guest Blog: Lessons from Just Advocacy Week

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Guest Blog: Lessons from Just Advocacy Week

Jalen Brooks-Knepfle
Feb 24, 2016

Jalen Brooks-Knepfle

My name is Jalen Brooks-Knepfle and I am a second-year student at the College of Charleston in South Carolina. I am majoring in English and international studies with a concentration in comparative literature and minoring in environmental studies. Last June, I took part in Just Advocacy Week, which taught me many important lessons.

First, in a world frequently torn apart by religious violence, the lessons I learned about social justice and advocacy rooted in Catholic faith reminded me that religion prompts many, many people to help others and care for those marginalized by society. These people include everyone from Sister Simone, to the other people working at NETWORK, to my fellow JAW students. This was very encouraging, and much needed at that point in my life.

In addition, Just Advocacy Week showed me how accessible government can be, despite my previous beliefs to the contrary. The most dramatic example of this was the opportunity to speak with my government representatives to promote the Earned Income and Child Tax Credits. Although I know I was not the one to do the legwork to arrange the meetings, I was still amazed at how easy it was to speak to the people who represent me. I had an image in my head of government as some unreachable entity up on Capitol Hill, but JAW proved to me that government is a lot more accessible than we often believe. Additionally, even though my representatives are of a different party than me, most of them were still very eager to hear what I had to say and made me feel like I had a right to talk to them (Which, in fact, I do; as we were taught at JAW, they work forus!).

Finally, my experience at JAW gave me access to a group of people who are making real change. One thing I learned is to go at every project with other people to support you, and JAW gave me access to such people.

I was lucky enough to be able to share what I learned at JAW with some of my peers in the College of Charleston’s Catholic Student Association. Our campus minister, Jim Grove, invited me to talk about my experience at JAW, as well as what I learned from NETWORK about advocacy in general, at one of our after-Mass Sunday dinners. I learned so much at JAW, so it was hard to condense it to one fifteen-minute talk. Basically, I explained how NETWORK was founded by a group of nuns, where Catholic social justice comes from, how Catholics have an obligation to seek social justice, and the basics of how to do that. To this end, I discussed some advocacy tactics like phone calls, letter writing, and visits to representatives, emphasizing what I learned about the accessibility of government. I also discussed how NETWORK was applying these tactics to the EITC and CTC. I had been nervous about my talk’s reception, but my fellow Catholic students reacted with enthusiasm, some of them expressing interest in applying to JAW this coming summer. Jim and I have also since made plans to collaborate with other religious groups in the area to discuss ways we can use advocacy to help alleviate the refugee crisis.

I learned so much through Just Advocacy Week and look forward to applying that learning in the future!

 

Apply for Just Advocacy Week 2016 here.

Blog: 10 Things Speaker Ryan Could Do to Address Poverty Right Now

10 Things Speaker Ryan Could Do to Address Poverty Right Now

NETWORK Lobby
June 7, 2016

NETWORK Lobby for Catholic Social Justice welcomes anyone, any time, to the conversation about how to make sure no one in the United States lives in poverty. But we strongly dispute the claim that this is a deeply complicated problem requiring a brand new agenda, such as the one likely to be presented by Speaker Paul Ryan in the coming days. The fact is Congress knows, and has always known, how to end poverty. It is simply not that difficult, in the richest country the world has ever known, to create an inclusive economy where everyone has the resources to live with dignity.

In fact, we could do much of it as early as tomorrow.

Toward that end, we offer Speaker Ryan, the driving force behind the Republican “anti-poverty” agenda, 10 things he could bring to the House Floor tomorrow that would actually work. This is not everything that has to be done to mend the gaps in the fabric of our society, but it’s a darn good start.

  1. Raise the minimum wage to $15 an hour — Even as the economic recovery has brought lower unemployment, too many people working full-time jobs (or even two or three of them) don’t make enough to get by. A study by the National Employment Law Project found that $15/hour was the lowest wage that would still allow a single worker to meet the basic cost of living just about everywhere in the United States. Speaker Ryan could help lift thousands of workers out of poverty by passing H.R. 3164, the Pay Workers a Living Wage Act introduced in Congress last year.
  2. Guarantee paid sick leave — 49% of workers in America still lack paid sick leave and are forced to choose between losing the salary they desperately need and jeopardizing their health and the health of those around them. After passing a comprehensive paid sick leave policy New York City found not only that it improved the health and financial security of workers, but also that unemployment dropped and businesses grew.The Healthy Families Act (H.R. 932) was introduced in Congress more than a year ago. There’s no excuse not to pass this legislation today.
  3. Guarantee paid family leave — In addition to ensuring that everyone has the ability to take a sick day to care for themselves or their family, we must also guarantee paid leave for new parents and those who have to take extended time to care for a sick family member. Only 5% of workers in the lowest 25% wage category have access to paid family leave, compared to 22% of workers in the highest 10% wage category. The FAMILY Act (H.R. 1439), introduced in Congress last year, builds on successful legislation passed by cities and states around the country to create an insurance program that provides workers with the family leave they need.
  4. Expand and protect the Earned Income Tax Credit — The Earned Income Tax Credit (EITC) is one of our most effective anti-poverty programs. It provides tax relief to low-income workers to ensure that no one who labors to earn a basic wage is taxed back into poverty. According to the Center on Budget and Policy Priorities, the EITC helped lift 6.2 million people out of poverty in 2013. But the current law overlooks too many workers in need, including those low income workers without children and workers under 25 or over 65. Speaker Ryan himself discussed his support for addressing these gaps when he was Chairman of the House Budget Committee, now he has the means and the opportunity to make those changes today.
  5. Expand childcare subsidies — The high cost of quality childcare takes a dramatic toll on low-income families across the country. A report from theEconomic Policy Institute found that in every state, quality childcare cost more than 30% of a minimum-wage worker’s earnings. Access to high quality childcare allows parents to support their families and better prepares children to learn and grow into healthy adults. We shouldn’t ask people to choose between their kids and their paychecks — H.R. 4524, the Child CARE Act, is one way that Speaker Ryan could solve that problem.
  6. Ban the box — It’s no secret that admitting to having a criminal record is the kiss of death for job applicants. Conviction records are likely to reduce the prospect of a job offer or interview by almost 50%. There are currently 70 million people in America with arrest or conviction records, we are only just beginning to realize the massive economic implications of discriminating against the people who are reentering society and the workforce. Passing the Fair Chance Act (H.R. 3470) would allow people seeking to reenter the workforce the opportunity to apply based on merit, without facing discrimination.
  7. Pass immigration reform with a path to citizenship — For the millions of people who live in the U.S. without documentation or with only temporary permission to work, finding stable employment can be nearly impossible. Many more immigrants are barred from accessing the social programs they need because of decades of anti-immigrant legislation. By allowing immigrants to come out of the shadows and fully participate in society, immigration reform would benefit individual families and our community; the CBO estimated that immigration reform would reduce our federal budget deficit by $200 billion over ten years. H.R. 13, the Border Security, Economic Opportunity, and Immigration Modernization Act, had the votes to become law in 2014 and is a viable solution to fixing our broken immigration system. Speaker Ryan should work with his fellow members of Congress to pass real immigration reform now.
  8. Expand eligibility and opportunity for low-income housing units — There is a significant shortage of affordable housing units across the country. Bipartisan legislation in the Senate rumored to be introduced in the House of Representatives (The Affordable Housing Credit Improvement Act) would incentivize the building and preservation of almost 1.3 million homes. Speaker Ryan can move forward with his commitment to end poverty by developing a housing plan that focuses on ensuring that everyone has a home.
  9. Continue to make healthcare more affordable — The Affordable Care Act was a critical step toward making sure that all Americans can access the healthcare they need, but it stopped short of realizing the goal of universal healthcare. H.R.3241, the State-Based Universal Health Care Act of 2015, would allow states more flexibility and freedom to work toward universal healthcare. Speaker Ryan can move forward today to ensure that no one lives in the healthcare gap and take a powerful step toward alleviating the economic uncertainty and financial burden of families still left without health insurance.
  10. Reauthorize and improve the Child Nutrition and WIC Reauthorization Act — The landmark legislation that helps feed children in schools across the country has been under attack by congressional Republicans. Congress has sought to cut the number of schools eligible to feed all of their students and increase the amount of time and effort schools must put into qualifying for the program. Beyond these initial changes that will kick thousands of students out of the program, Republicans in Congress want to replace the entire program with ‘block grants’ that will seriously jeopardize our ability to feed children in need. Congress has an opportunity to improve child nutrition programs to feed more children who are hungry. If Speaker Ryan wants to lead on poverty, he can start by leading his party away from policies that take food from children.

As NETWORK’s Nuns on the Bus reminded Congressman Ryan in 2012, to implement programs that work to eliminate poverty, Congress must have the political will to raise reasonable revenue for these responsible programs. We can pay for these programs by closing tax loopholes and having the courage to fix our broken tax system. Right now, a loophole in tax law allows hedge fund managers to call a portion of their earnings a ‘capital gain’ instead of ‘income’ and that small difference costs the nation billions in tax revenue every year. The Carried Interest Fairness Act (H.R. 2889) is one such piece of legislation that promotes tax fairness in the United States.

Creative solutions to solving poverty are necessary, but we don’t need to look far to find the answers. What if — instead of giving the billionaires another break — we took that money and used it to expand Section 8, the federal program that helps low-income families find affordable housing? NETWORK Lobby judges all legislation by how it would affect people experiencing poverty. If Speaker Ryan is serious about this issue, we encourage him to use the same criteria.

Photo courtesy of Gage Skidmore. 

Getting Tax Reform Right for Our Nation

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Getting Tax Reform Right for Our Nation

US Representative Mike Thompson (CA-05)
August 7, 2017

Economic inequality is a real problem that too many families face. Incomes have not kept up with the cost of living, and hardworking Americans are struggling to get by. So as Congress considers reforming our tax code, it must focus on leveling the playing field for the middle class and working families.

It’s been over thirty years since Congress made comprehensive changes to our tax code. A lot has happened in the interim—and our policies haven’t kept pace. We’ve seen the rich get significantly richer while the middle class keeps shrinking. Congress has the power and responsibility to change this trend. We can and should focus on reforms to create good, stable, high-paying jobs and help the men and women in our communities take advantage of the opportunities available to them now.

For instance, I’ve spoken with a number of my constituents who are trying to care for their kids, work a fulltime job, and go back to school so they can land a promotion or change careers. They are superheroes trying to do it all for their families, and they could benefit greatly if Congress expanded access to the American Opportunity Tax Credit, which helps millions of students and working families pay for college.

We should also look at policies that combat inequality. Expanding the Low-Income Housing Tax Credit, for instance, would provide more families with a place to call home. Improving the Child Tax Credit to keep pace with inflation would ensure families with young kids are able to pay their bills. I’ve co-sponsored legislation to expand all of these tax credits and provide additional help to everyday Americans.

These are not the only solutions, but they should be part of the discussion. Unfortunately, a number of my colleagues seem to think tax reform simply means tax cuts. That’s just not true.

It’s especially irresponsible to just cut taxes for the wealthiest among us—forcing everyday Americans to carry the bulk of our nation’s tax burden. Unpaid-for tax cuts create serious shortfalls, forcing our government to borrow more and more money. As lenders cut checks to federal borrowers, there could be less financing—and opportunities—available to entrepreneurs, mom-and-pop shops, and new startups. That’s bad for economy, American ingenuity, and anyone who wants to achieve their dreams.

We can make our tax code fairer, more competitive, and more efficient, but it shouldn’t come at the expense of a ballooning national debt. And Congress shouldn’t make promises it can’t keep.

While the corporate tax rate is in need of reform, simply slashing it to 15 percent is not going to help middle class families. It benefits big businesses that in some cases already pay less than their fair share in taxes while shipping jobs overseas. Tax cuts alone will not solve our problems. We need comprehensive reforms and programs that put people first.

We need to have the difficult conversations about what’s fair and what’s best for our communities. Tax reform isn’t easy, but it’s necessary if we want to close the wealth gap and help our families thrive.

Partisan rhetoric and ideology can’t be allowed to divide us. One party alone shouldn’t make changes to a tax code that affects all of us. We need to make sure we address the concerns of all our constituents, regardless of party.

As a senior member of the House Committee on Ways and Means, I’m ready to work with Chairman Kevin Brady and my colleagues on both sides of the aisle to make our tax code fairer. But make no mistake: Democrats will oppose any tax plan that only helps the rich get richer while forcing working families to shoulder even more of our country’s tax burden.

Originally published in Connection magazine. Read the full issue here.