MLPP Blog: Factually Speaking

Child poverty in the 21st century

Added February 27th, 2015 by Jane Zehnder-Merrell | Email This Entry Email This Entry
Jane Zehnder-Merrell

The number of Michigan children living in families with income below the poverty level drops by half when tax and non-cash benefits are included as income, according to the latest analysis from the national KIDS COUNT project at the Annie E. Casey Foundation.

The percentage of the state’s children who would be living in poverty if no government program benefits and tax credits were available, however, stood at 30 percent, as calculated by the Supplemental Poverty Measure.

This new measure, implemented in 2011 by the U.S. Census Bureau, was created after decades of research and recommendations from a National Academy of Sciences panel. The updated SPM not only adjusts for income but also for the variation in cost of living and work-related expenses, unlike the traditional poverty measure created over 50 years ago.

While 341,000 children in the state live in families lifted above the poverty level as calculated by the SPM, 339,000 remain in families with income inadequate to meet basic needs. Some may live in families ineligible for food assistance because of the state’s new asset test or those denied cash assistance due to redefined time limits that ignore the restrictive realities of low-wage work with unpredictable schedules and no benefits.

Child poverty undermines all aspects of child well-being, physical and mental health, safety and education.  Similar to the traditional poverty measure, the SPM shows that Latino and African-American children experience roughly triple the risk of poverty as their white counterparts.

Given the capacity of government interventions to lift families above poverty, state and federal policymakers who are concerned about improving educational achievement and workforce skills for the 21st century should be looking at ways to extend such benefits to more families and children, not reduce access.

In Michigan family savings must be depleted below $5,000 for family eligibility for food assistance, and the months that families receive as little as $10 cash assistance now count against the 48-month limit.  The eligibility level for the state child care subsidy and the hourly amount have not been adjusted for inflation in over two decades, severely limiting child care options for low-income families.

The SPM provides valuable information about the effectiveness and limitations of government investments in the next generation and its capacity to address the inequities of place and race.

 – Jane Zehnder-Merrell

Why kids count

Added February 19th, 2015 by Jane Zehnder-Merrell | Email This Entry Email This Entry
Jane Zehnder-Merrell

Recent news reports celebrate the decline in the unemployment rate and the quickened tempo of the recovery. But four years into the recovery, Michigan’s child poverty rates remain consistently high.

In 2013, one of every four children in Michigan lived in a family with income below the federal poverty level (roughly $18,800 for a single-parent family of three and $23,600 for a two-parent family of four), according to the latest Kids Count in Michigan Data Book, released today.

It’s not just the economy that results in these high levels of child poverty. State and federal policies shape the social and economic environment in our communities. Full-time minimum wage yearly earnings at the level passed last year by the Michigan Legislature ($8.15 an hour) leaves a family of three almost $2,000 below the poverty level and a family of four by almost $7,000. Proposals to raise the federal minimum wage to $10.10 an hour would at least lift a family of three above the 2013 poverty level.

The over half-million Michigan children living in financially strapped families are likely to face severe disadvantages not only during childhood but also during adulthood, as documented by a substantial body of research. Children who spend extended periods in poverty are more likely to be troubled by poor health and to attain minimal education as adults. They will not be equipped to fill the jobs that require postsecondary skills and training.

The 2015 Kids Count report highlights the problem areas for children and suggests state policy changes. For example, strengthening the safety net programs, including Food Assistance Program and the child care subsidy, would shield children from some the economic impact of the sluggish recovery.

Voting ‘yes’ May 5 on the road funding package will trigger the reinstatement of  the state Earned Income Tax Credit to 20% of the federal credit, which will help more than 1 million Michigan children in working families.

State policies are currently restricting, rather than expanding, access to families in need. Increased access to the child care subsidy would help both children and parents. A recent survey revealed that one of every eight parents in Michigan’s low-income families with young children reported changing, quitting or not taking a job due to child care constraints.

High-quality child care enhances child development during the critical early years so why would we curtail access by depressing the payment structure to roughly half the market rate in the state’s child care subsidy program? We want parents to work to support their families but low-wage workers can ill afford the average monthly cost of roughly $500 for full-time child care for a preschooler in Michigan. It represents over 40% of gross earnings from a full-time minimum wage job.

As Michigan retools for the 21st century, it will need to count on the next generation, and their future depends on their well-being today.

– Jane Zehnder-Merrell

An income tax cut won’t boost the economy

Added February 9th, 2015 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Cutting taxes won’t create jobs or grow the economy. Michigan is already facing budget cuts because there is not enough money to fund schools, public safety and other important services that we value. Reducing the income tax would create an even bigger hole in the budget, leading to more cuts and making it harder to create a strong workforce ready for the 21st century, according to a new fact sheet from the League.

Last week, House Republicans released their action plan that included rolling back the state’s income tax rate from the current 4.25% to 3.9%. Reducing the state income tax “remains the House Republicans’ single most important tax-relief measure,” the House GOP said in releasing the plan. This priority would largely benefit the wealthy, who do not need additional tax relief, and it would not improve the economy.

According to analysis by the Institute on Taxation and Economic Policy, $3 of every $5 in tax cuts would flow to Michigan’s wealthiest 20% of taxpayers (annual incomes of $89,000 or more) with the top 1% of earners (annual incomes of $362,000 or more) taking home 17% of the tax cut benefits. Giving to those at the top contributes to income inequality and doesn’t put money in the pockets of those who need it to meet basic necessities.

Across-the-board tax cuts would not boost the economy. They put additional financial strain and pressure on the state budget. Reducing state funds through income tax reductions while revenues are already down would only drain the necessary resources to support education, communities, and infrastructure—all of the critical components to a thriving economy that includes an educated workforce and communities where people and businesses want to locate.

 – Alicia Guevara Warren

‘Yes’ on road funding is right direction

Added February 3rd, 2015 by Gilda Z. Jacobs | Email This Entry Email This Entry
Gilda Z. Jacobs
From the League’s First Tuesday newsletter
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It’s a pivotal time for Michigan public policy. Decisions made in the next few months will determine the path Michigan takes into the future.

In three short months, voters on May 5 will decide Proposal 1, the road funding package. There’s no doubt that this is Michigan’s single best chance to raise sorely needed money to pay for road repairs and put new dollars into school classrooms all while protecting families earning the least.

A ‘yes’ vote on May 5 would end the era of delaying needed road repairs or paying for them with borrowed dollars. All with a penny sales tax increase. The sales tax increase to 7 cents will put Michigan in the middle of the pack of states — the same as Indiana’s.

For working families earning the least in Michigan, the penny tax will be offset by a full restoration of the state Earned Income Tax Credit to 20% of the federal credit.

The EITC is the best tool we have to reward work and lift families from poverty. More than 1 million Michigan children will benefit. What a win-win!

Also, this month, on Feb. 11, Gov. Snyder will unveil his executive budget, offering both challenges and opportunities.

The governor, in his State of the State address, announced the merger of the Department of Community Health and the Department of Human Services to a new Department of Health and Human Services under the leadership of Nick Lyon, the director of DCH and interim director of DHS.

At DCH, Lyon continued impressive strides in implementing the Healthy Michigan Plan so that a half-million previously uninsured or underinsured adults in Michigan get wellness care and care when they are sick.

Lyon has kept the League and other advocates informed about the merger and he seems sincere in efforts to help Michigan families and children. I pledge to work with him to find solutions that will make a positive difference in the lives of Michigan’s economically vulnerable kids and adults.

As the new department works to streamline programs with a “people first” rather than a “programs first” approach, we’ll monitor with this principle in mind: True efficiency must be found in making sure services match the needs of families rather than measuring success by the number of kids and adults dropped from programs.

In addition, there will be strong pressure to cut programs as the deep business tax cuts from 2011 resulted in revenue shortfalls that are now apparent.

Next year, business tax revenue is projected to contribute a small share (8.3%) of Michigan’s General Fund — the state’s main checking account that covers public safety, higher education, healthcare and other needed services.

That’s a far, far cry from two decades ago when business revenue contributed nearly a third (29%) of the General Fund. To succeed, businesses need those public services, and it’s a reminder, once again, that business tax cuts do not grow the economy.

So buckle your seat belts as we head into 2015 public policy debates! It’s going to be a bumpy ride. The League will keep you informed of developments, and we hope you will be engaged in these important decisions ahead.

– Gilda Z. Jacobs

Happy 40th Birthday, EITC!

Added January 30th, 2015 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Today is EITC Awareness Day, and this year marks the 40th anniversary of the widely recognized tool that lifts millions of working families and children out of poverty each year. States have the opportunity to build on the federal credit, which Michigan does. However, in 2011 the state’s Earned Income Tax Credit was cut leaving behind over 15,000 families in poverty in 2012. On May 5, the voters will have the opportunity to restore the credit by supporting an increase in the sales tax by one penny.

The Michigan EITC is only available to families who have earned income from working. The credit ensures that working families are better able to make ends meet. When combined with the federal EITC, working families are lifted out of poverty and children experience better outcomes, such as improved infant and maternal health; better school performance; greater college enrollment; increased work and earnings in the next generation; and Social Security retirement benefits. All of which also benefit Michigan’s economy.

The EITC works to reduce the amount of taxes paid to help struggling families keep more of what they earn. However, when the state EITC was cut by 70% low-income workers experienced a significant tax increase and fewer families were able to move out of poverty. The restoration of the state EITC back to 20% will help these families, who include over 1 million children.

In May, voters will have the ability to do this. By supporting an increase in the state’s sales tax by one penny, people in Michigan will be able to help reduce poverty all while voting to reform and increase funding to fix our roads. As we recognize the 40 years of evidence backing the EITC, let’s spread the word about how we can strengthen it!

–Alicia Guevara Warren

 

Lopsided income growth hurts Michigan

Added January 26th, 2015 by Judy Putnam | Email This Entry Email This Entry
Judy Putnam

The top 1% in Michigan earned 25 times the income of the bottom 99%, a new report from Economic Policy Institute concludes.

The report ranks Michigan as the 15th most unequal state in the country and offers new evidence on why Michigan policymakers should refuse more tax cuts so that they can invest in building the skills of a 21st century workforce.

In Michigan, inequality looks like this:

•    $942,993 a year on average for the top 1% of taxpayers.
•    $37,324 average annual income for the rest.

And what does it take to be a top 1% in Michigan? An income of $300,570 lets you in. It’s much harder to get to the very top – 0.01%. For that, you have to have income of nearly $7 million a year or more.

The report for the Economic Analysis and Research Network looks back to 1917 to find that income inequality – measured from the top to the bottom – is as large has it has been since 1928.

Since the Great Recession ended, incomes for the top 1% grew faster than the incomes of the bottom 99% in every state except West Virginia. In Michigan, the top 1% percent captured 82% percent of income growth in the period following the Great Recession.

“This is clear evidence why the economic recovery has not been felt by all  families in Michigan — only those who were already doing well,’’ said Gilda Z. Jacobs, president and CEO of the Michigan League for Public Policy, an EARN affiliate, said in today’s news release on the report. “Our lawmakers should look to this as they create the next budget. They should resist more tax cuts so that Michigan can help struggling families and grow the skilled workforce we need.’’

The lopsided growth is not new. From 1979 to 2012, the top 1% in Michigan saw a 115% jump in income. Meanwhile the bottom 99% realized nearly a 17% decline. Overall, income declined by 5%.

The report comes on the heels of a forum I attended last week hosted by the Institute for Public Policy and Social Research at Michigan State University. At the forum, I was reminded that it could have been far worse in our state.

Charles Ballard, MSU economics professor and vice chair of the League’s board of directors, cited research estimating that without the successful rescue of the auto industry, 1 million more jobs would have been lost in the Great Recession – most of them in Michigan and Ohio.

Michigan has 500,000 fewer jobs today than it did at the peak employment year in 2000, Ballard noted.

As the EPI report concludes, Michigan already has a large and growing income inequality problem. It’s hard to imagine what that would look like if tens of thousands or even hundreds of thousands of good-paying auto manufacturing jobs disappeared in addition to the 850,000 Michigan jobs that evaporated between 2000 and 2010.

– Judy Putnam

Tax policies gone wild

Added January 23rd, 2015 by Pat Sorenson | Email This Entry Email This Entry
Pat Sorenson

Shortsighted tax policy decisions by Michigan lawmakers have created a budget shortfall of $325 million in the current fiscal year, despite growth in the state’s economy.

Because Michigan must balance its budget every year, cuts will be made in the state’s General Fund, the major source of funds for health and human services, higher education and public safety – before the end of September. The 2016 budget, scheduled to be released by the governor on Feb. 11, has an additional revenue shortfall of $532 million.

This was the consensus of state economic and fiscal experts who met with lawmakers last week to determine how much the state has to spend for the remainder of this year and the upcoming year. They all agreed that although the economy is growing, revenues are not following suit.

At first blush, it is difficult to understand how state revenues can be dropping so quickly in a time of economic growth. One of the justifications for the 80% cut in business taxes approved by the Legislature in 2011 was that lower taxes would attract new businesses, create jobs, and ultimately increase state coffers by spurring economic growth.

So what happened? Why the budget gap?

  • Business tax cuts don’t grow the economy. With the 2011 changes, taxes on businesses were cut by $1.6 billion, placing Michigan 49th in the U.S. for business tax contributions to the state. Michigan businesses are now the source of only 2% of total state revenue, despite the fact that employers rely on many essential state services, including police and fire protection, the roads and bridges needed to transport their products, and a good educational system that can create the workforce they need. A major cause of the state’s current budget problem was the deep cut in business taxes in the face of known outstanding business tax credits that are expected to be a drain on the budget for many years to come. Net business refunds could exceed $680 million in 2015, and rise to more than $800 million in 2016.
  • Tepid economic growth. Michigan suffered a 10-year recession from 2000 to 2010, and while the state economy has strengthened in the last several years along with the rest of the nation, we have not yet regained lost ground. The state has recouped less than two-thirds of the jobs lost during the recession, and too many of those jobs are low-wage. And, while Michigan’s unemployment rate has dropped significantly, much of that decline can be attributed to nearly 90,000 discouraged and other workers leaving the labor force.

The state budget director has made it clear that there will be “real cuts.” We should be clear when we talk to our lawmakers that those cuts are the result of tax policies that have benefited Michigan businesses, but have not led to economic recovery for all of the state’s citizens. Government restructuring and efficiencies, while commendable if they can increase opportunities for families who are struggling to make ends meet, are not going to fill the gap.

– Pat Sorenson

Diving deeper into the river of opportunity

Added January 21st, 2015 by Judy Putnam | Email This Entry Email This Entry
Judy Putnam

At the League, economic opportunity is our mission so it was heartening to hear Gov. Rick Snyder talk about the ‘river of opportunity’ in his fifth State of the State address Tuesday. There is an assumption in that analogy, however, that deserves a closer look.

The governor spoke about his background growing up in a 900-square-foot home in Battle Creek in a supportive family. He said despite his family’s modest income, he was still able to be part of the river of opportunity. He spoke of the Michiganians who are not part – separated by poverty, absent parents or other barriers — and he talked about his desire to move them into that river of opportunity.

Though it was a welcome tone from the governor, it contained a flawed analogy. The governor  said government is in the background of the lives of those already enjoying opportunity while it plays a prominent role for those in need. Yet, there is no ‘them and us’ when it comes to government services because we all benefit.

Let’s take public education for starters. Free education is not just for kids from families with low incomes. The support of public universities, including $300 million a year to the governor’s alma mater, the University of Michigan, helps many, many children of the affluent. Tax dollars create the public transportation to move the goods that supports the jobs, helping job providers and workers. In short, public dollars are used to keep that river flowing, and enjoyed by the citizens who are benefiting from opportunity.

The governor also called for revamping of services to help those in need. At the Capitol Tuesday, several reporters sought out League President & CEO Gilda Z. Jacobs for comment on the merger of the Departments of Human Services and Community Health into a new Department of Health and Human Services. Jacobs was positive about the potential to really lift barriers for people and also about the leadership of interim Director Nick Lyon. (See the League’s statement.)

What will be important is making sure that there are savings resulting from true efficiencies and that the merger’s goal isn’t just to save dollars. Simply cutting people from services while poverty and unemployment remain high is not the way to measure success.

With revenues coming in below expectations, the pressure will be on to make those cuts. More insight will be offered in the governor’s executive budget recommendation in February. So stay tuned!

 – Judy Putnam

President urging seven paid sick days a year

Added January 16th, 2015 by Peter Ruark | Email This Entry Email This Entry
Peter Ruark

Imagine a line cook with a head cold having to turn aside and sneeze every few minutes while preparing your lunch. Or a couple of workers fighting the flu while caring for your child at a daycare center. Or your child sitting in school with a lot of sick classmates whose parents could not take the day off to care for them.

This kind of thing probably happens more than we would like to think, because many workers lose pay if they miss work due to sickness.

Thursday, President Obama urged  Congress to pass the Healthy Families Act, a law that would require employers to give their workers at least seven paid sick days each year. He also urged states and municipalities to pass similar laws.

This is good for families and good for public health. As argued in Forbes Magazine, it is also good for business because it helps keep workers productive when they do come to work, by giving them time to recuperate without fear of losing money or even their jobs.

Right now, only three states offer paid sick leave. Michigan is not one of them.

On the contrary, a House committee debated a bill last session going in the opposite direction — to prevent counties, cities and townships from enacting their own paid leave laws. That bill fortunately did not go anywhere, but the fact that a pre-emption bill was introduced shows that paid leave policies are gaining support.

Whether on the federal, state or local level, paid leave policies will help workers and their families and protect the public. Let’s hope that more cities, counties and townships in Michigan will pass paid leave laws as we wait for the Michigan Legislature and Congress to do so!

– Peter Ruark

Gov. Snyder signs Main Street Fairness Act

Added January 15th, 2015 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Today, we applaud Gov. Snyder and the Legislature for strengthening Michigan’s ability to collect sales taxes for online purchases. The League supports the Main Street Fairness Act (Public Acts 553 and 554 of 2014) as it:

Levels the playing field between brick-and-mortar retailers and online retailers by requiring both to collect sales and use taxes and removing an unfair advantage that online retailers currently have;
• Creates a more equitable system for low-income families, who are less likely to make online purchases, by expecting online consumers (usually higher wage earners) to also pay the sales tax on their purchases; and,
• Provides additional revenue, which is especially important since the state is likely to be facing a budget shortfall over the next couple of years.

It is estimated that the bills will bring in a relatively small amount of $60 million, though the state could actually collect more if Congress also acted. Any new revenue, however, is welcome as the state will be faced with making cuts in the current and upcoming budget years. These funds are expected to provide about $44 million a year for schools, $6 million per year for local communities, and $10 million for general state spending.

With a growing number of people shopping online, it just makes sense to collect sales taxes on those purchases as a way to make the tax system fairer for retailers and consumers alike.

– Alicia Guevara Warren

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