Poverty and Inequality » Working poor

What Tax Time can do for the Working Poor

Bill — Thu, 25 Mar 2010 20:43:19 +0000

By Joseph Martinez and Walen Ngo, United Way of Greater Los Angeles

The EITC, or Earned Income Tax Credit, has been known for over thirty years to be one of the more successful anti-poverty programs in the nation. The tax relief program is geared toward only workers earning income below a certain income threshold and is responsible for delivering much needed tax refunds to workers, who in turn use this money for medicine, rent, school supplies and food. Every year many people who are eligible for the tax credit in the U.S. and L.A. County fail to claim it, leaving behind billions in uncollected money. According to a 2008 research brief by the United Way of Greater Los Angeles, one in five taxpayers in L.A. County claimed the EITC in the 2006 tax year- that is, 750,000 taxpayers in L.A. County. These residents received a total of 1.5 billion dollars in refunds. Where does all this refund money go? What are the implications when eligible people don’t claim the refund and in essence, ‘leave it on the table’?

A new report by the New America Foundation examines the consequences. Money that is not claimed is never spent on local businesses, which in turn never create new jobs that could have been. In addition, potential local tax revenue from this forgone economic activity is never generated. The report does an excellent job of highlighting how we are all in the proverbial “same boat.” Even if you are not low income, and not receiving the tax credit, your community still benefits by the infusion of cash coming into your business, your neighborhood and in your infrastructure via tax revenues generated.

Among some of the findings:

L.A. County left over 370 million dollars in unclaimed refunds in year 2006. This meant a loss of over 440 million dollars to the economy in foregone sales.
Over 2,700 jobs were not created due to this loss to the economy. This translates into over 123 million dollars in forgone wages.
The EITC is particularly important in L.A. County because it has a higher level of poverty than the state and the nation- nearly 40% are considered low income. L.A. County has a lower median income compared to other large metro areas, and has a higher proportion of minorities (a constituency which claims the EITC in no small numbers).

If poverty prevention as well as alleviation is to be a public policy goal for our communities, then EITC expansion and funding for capacity and outreach is vital. To learn about EITC outreach efforts in Los Angeles, visit http://www.greaterlaeitc.org/.

Trends in LA and CA over the next few years

Bill — Mon, 22 Jun 2009 04:54:10 +0000

A common problem in trying to discern trends in poverty and inequality is that the data that we often have at hand are usually not particularly recent. The lag between when data are collected and publicly available can be significant, especially in a rapidly changing economy like we’ve been in over last several months. Also, to be really helpful, data would tell us as much as where we’re going as well as where we’ve been.

A new report from the LA-based Economic Roundtable attempts to meet those needs by providing a wealth of the most recent data on how the current recession is affecting everything from employment, income, housing, poverty and health in Los Angeles and the state. Using historical data on recessions and employment projections from respected forecasters, the report produces estimates for how residents will fare over the coming years. If you are interested in where we’ve been and could be going, check out Ebbing Tides in the Golden State: Impacts of the 2008 Recession on California and Los Angeles County.

In general, the report sees conditions continuing to worsen over the next year but then starting to improve steadily by 2011 or 2012. It even provides estimates of how much poverty and homelessness will increase or decrease. Are these accurate? Of course there is no way to know. As the Nobel Prize laureate physicist Niels Bohr said, “Prediction is very difficult, especially about the future.” At the very least, Ebbing Tides in the Golden State provides an important overall understanding of how deep the recession is affecting us.

The New and Already Poor

Bill — Tue, 16 Jun 2009 17:50:31 +0000

Barbara Ehrenreich is perhaps the best popular writer on issues of poverty, inequality and increasing financial insecurity in the U.S., chiefly through books such as Nickel and Dimed: On (Not) Getting By in America and Bait and Switch: The (Futile) Pursuit of the American Dream. In a recent New York Times op-ed, “Too Poor to Make the News,” Ehrenreich astutely observes that with all of the attention to the “Nouveau Poor” resulting from the current recession, the plight of those who were already poor has been largely ignored in the mainstream media. Revisiting some of the people she profiled in Nickel and Dimed and groups working with the long-term poor, she worries that the current crisis will only make conditions worse for them.

The deprivations of the formerly affluent Nouveau Poor are real enough, but the situation of the already poor suggests that they do not necessarily presage a greener, more harmonious future with a flatter distribution of wealth. There are no data yet on the effects of the recession on measures of inequality, but historically the effect of downturns is to increase, not decrease, class polarization.

The recession of the ’80s transformed the working class into the working poor, as manufacturing jobs fled to the third world, forcing American workers into the low-paying service and retail sector. The current recession is knocking the working poor down another notch — from low-wage employment and inadequate housing toward erratic employment and no housing at all. Comfortable people have long imagined that American poverty is far more luxurious than the third world variety, but the difference is rapidly narrowing.

We shouldn’t discount the negative effects the current crisis is having on a wide range of families who make up the newly poor; but neither should we forget the long-term poor, who will be less likely to bounce back once the crisis turns.

The high cost of poverty

Bill — Wed, 10 Jun 2009 17:20:48 +0000

The Washington Post ran an article by DeNeen Brown last month that began with the seemingly contradictory statement, “you have to be rich to be poor.” How can that be? As the article explains, the poor often pay higher prices for goods and services in their neighborhoods, and, perhaps more importantly, they pay much more in time and hassle:

“Prices in urban corner stores are almost always higher, economists say. And sometimes, prices in supermarkets in poorer neighborhoods are higher”

“Time is money, they say, and the poor pay more in time, too. When you are poor, you don’t have the luxury of throwing a load in to the washing machine and then taking your morning jog while it cycles.”

“The poor pay more in hassle: the calls from the bill collectors, the landlord, the utility company.”

“The rich have direct deposit for their paychecks. The poor have check-cashing and payday loan joints, which cost time and money.”

The article contains lessons from several “guest lecturers,” the poor themselves. Take a look and learn from their stories. Many of the things that most of us take for granted – shopping for fresh fruits and vegetables, paying bills and borrowing a little money, finding decent childcare – are infinitely more difficult for the poor.

The Annie E. Casey Foundation has been at the forefront of identifying the high cost of poverty, both for individuals and society. For example, see the essay on “The High Cost of Being Poor” in their 2003 edition of the Kids Count Report, as well as a Resource Kit with strategies for helping people overcome the high cost of poverty.

Layoffs increase the ranks of the uninsured

Bill — Sat, 14 Feb 2009 16:35:47 +0000

Thanks to Joe Martinez for sending the link to an interesting, though sobering, report from the Jim Lehrer NewsHour about the health care implications of the 2 million layoffs in the U.S. over the past three months. One example comes from a single mom whose job was outsourced, leading her to make difficult choices such as going without her arthritis medication for six months:

We don’t go bowling anymore, but I think the most important thing that I had to give up was doing without my medication, because I don’t have insurance now. I can’t afford to pay for my medication for my rheumatoid arthritis. And before my daughter got her insurance, it was either I buy my medicine or my daughter’s medicine, who has a heart condition and epilepsy. And her medication is $180 for one bottle. So I gave up my medicine to be able to buy her medicine.

You can read, view or listen to how layoffs are affecting people here.

Also highlighted in the clip is analysis supported by the Henry J. Kaiser Family Foundation, which found that:

A one percent rise in the nation’s unemployment rate is projected to lead to 1.1 million additional uninsured and 1 million new Medicaid enrollees (600,000 children and 400,000 adults), increasing overall state Medicaid spending by $1.4 billion while tax revenues fall 3 to 4 percent.

For more information on that analysis, go here.

According to the Bureau of Labor Statistics, the unemployment rate in the U.S. went up 1.6 points from September 2008 to January 2009, which would mean according to these estimates that the number of people without health insurance increased by about 1.7 million. Clearly, the economic meltdown is affecting all sectors of our society and placing strains on already-overburdened safety net systems.