Today's CT Mirror reports on a Congressional Research Service report, concluding that cutting taxes to the wealthy has not been shown to increase the number of jobs, and in fact is contributing to the widening income divide:
"A congressional research service is challenging the candidates who say that preserving Bush-era tax breaks for the rich are a way to increase jobs.
"In fact, the non-partisan Congressional Research Service not only found no evidence that six decades of relief for the wealthy helped the nation's economy, they also warned that this may have expanded the gap between the rich and the poor.
" "The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth,' researchers wrote in their latest report to Congress."
Sobering news, but different policy choices can give us different result. Jacob Hacker's new report, "Prosperity Economics: Building an Economy for All," offers a similar and sweeping analysis of the income in equality and shrining tax rate on our wealthiest citizens, and proposes a detailed three-pronged policy agenda to invigorate our democracy and turn the tide.
In Connecticut, Better Choices for Connecticut is a coalition working for a more fair and transparent revenue structure. A training this Friday afternoon will offer Connecticut revenue options and tips for advocates on how to talk about taxes. Contact me, email@example.com, or Suzanne Haviland, firstname.lastname@example.org, for details.
The latest row over the property taxes at a big residential development in downtown New Haven looks like a fairly local issue. A big new 32 floor building, 360 State Street was recently hit with an unexpectedly steep property reevaluation. The building owners, MEPT, claim that their tax burden will quadruple next year, and have been furiously lobbying both the city and the state to get some form of a tax break.
I won´t get into the specifics on who is right in this particular debate (as New Haven resident "enjoying" tax reevaluations in East Rock, I am not that impartial) but the underlying issue behind it is important. New Haven, as most Connecticut cities, are "tax-base poor" - most of the buildings or their grant list are comparatively cheap, often part of dense, low-income neighborhoods. Property values are, consequently, fairly modest; although areas like East Rock, downtown and Westville are fairly expensive, the median home price in New Haven is still below $160,000. Trouble is, the need for municipal services is anything but low; New Haven has a similar percentage of residents under 18 that the rest of the state, but they are poorer, 50% more likely not to speak English at home and with steeper education needs. No matter how much money the state contributes to city budgets through the ECS formula, New Haven (and Bridgeport, Hartford, Waterbury and the rest of urban areas) will have higher mill rates than suburban towns with higher property values.
This creates two problems for the cities. First, attracting any kind of new development it is extremely difficult, as the high mill rates quickly become a big barrier. North Haven´s taxes are 20 points lower than on the urban core; Branford´s are even lower. Any new business seeking for a new location to its facilities will probably bypass New Haven based on this disparities alone.
In addition, anyone foolish enough to invest in the urban core (investments that make sense, like building housing besides rapid transit like 360 State does) faces the sad truth of being an island of high property values in an overwhelmingly poor city. An expensive, fancy building in downtown New Haven will get hit almost invariably by a huge tax bill, as what it adds to the grant list is nowhere close enough to leave room for a lower mill rate. Turning a profit is, consequently, much harder, further complicating new development.
The result is a self reinforcing cycle of disinvestment. Cities have a harder time attracting development, meaning they create less jobs. Existing business and residents face a higher tax burden, which drives more of them to leave. The fact that Yale is New Haven´s biggest builder is not an accident; as a non profit, they do not pay property taxes.
The current property tax system reinforces the divide in Connecticut between poor cities and wealthy suburbs, and contributes to the huge income inequality we see in the state. Changing this, or at least seriously tackling how we fund our schools, should be on the table when we talk about poverty in Connecticut.
Connecticut Voices for Children has released the "State of Working Connecticut 2012."
The gap between rich and poor continues to widen, the report finds, adding that the recovery has not helped minorities and young workers. Left unchecked, our economic trajectory "will leave our next generation worse off than the previous one."
Solutions include public support for high-quality universal preschool and community colleges and universities and investing in initiatives to fight poverty, raise wages and support families.
Median wages statewide fell for the second straight year -- but those earning wages above the 90th percentile saw their wages increase by 11% from 2006 to 2011. "Workers with wages below the 10th percentile saw their wages fall slightly over the same period," the report says, "by -0.2%."
- "Connecticut's black and Hispanic workers have not had a recovery." In 2011, the unemployment rate for black workers was 17.3% - for Hispanics, 17.8%.
- Connecticut's private sector is recovering faster than its public sector.
- Higher-paying manufacturing jobs are disappearing and being replaced by lower-paying jobs in healthcare, hotels and restaurants.
- Increasingly, a college education is required for a good job in Connecticut.
The report examines unemployment data, job sector data and wage data, analyzing the state as a whole and by race, gender, educational attainment, and by nine labor market areas.
CAHS and Connecticut Voices for Children are members of Better Choices for Connecticut, which advocates for a more progressive tax structure, including higher income taxes on the state's top earners and greater transparency and accountability for businesses.
Being as it is a presidential election year, the debate about jobs, private sector growth and the role and size of government are taking a good amount of space in the headlines. Job growth, in particular, hast been fairly disappointing during this recovery, specially if we look at the headline numbers.
When looking the numbers with a bit more detail, however, a different picture emerges. It turns out that job growth has been pretty decent on the private sector; in fact, faster than the dismal average during the previous decade. In the public sector, however, the picture looks much different (via):
While the private sector has been creating jobs at a steady clip, the public sector has been shedding workers at an unprecedented pace. Outside the short term boost of census hiring, state and local governments have fired close to 600,000 workers in the last three years. Most of these jobs, incidentally, are on the education sector; we are not talking about bureaucrats, but teachers.
If the Federal government had provider more support to state and local governments (or at least enough to keep employment levels stable), unemployment would be below 8%. If government expansion would have followed the same clip as the one we had during the Clinton years (only natural, following population growth) we would be close to 7%.
The weird thing is, some people insist that what had a massive expansion of the size of government during these past three years. It is hard to see where they see it.
The richest 1% of Americans pay a 21% of all the taxes. That really sounds like a lot of money, until you compare that number to another relevant piece of information: the richest 1% of Americans make 21% of all the income. This study from Citizens for Tax Justice (via) gives a good idea on how the tax system really works:
If we take into account all three levels of taxation in the US, the system as a whole is far from progressive: what we have is, essentially, the world´s most convoluted flat tax in the planet. The Federal tax system, with all its loopholes, it is fairly progressive; the state and local taxes, however, are incredibly regressive almost everywhere in the country. Connecticut, despite having a progressive income tax, follows this pattern, due to the extremely nature our local property tax system. Despite all the chatter about soaking the rich, the facts point out on the opposite direction.
Shannon wrote a few days ago on social mobility or lack thereof, and how lionizing the wealthy is frankly a bit ridiculous. Those with money have access to a set of advantages, resources and tools that low income families can only dream about, even when trying to get help from the government.
Case in point: Mitt Romney and how he has a lobbyist on contract to help facilitate the construction on his new
house mansion in California:
To help facilitate the construction plans, Romney has paid San Diego attorney Matthew A. Peterson $21,500 since 2008 to lobby city officials for the renovation after dropping out of the 2008 GOP presidential primary.
The leading Republican presidential contender wants to replace the beach house with a structure more than three times larger.
The fees, doled out in four installments and detailed in municipal quarterly lobbying disclosure reports, paid for Peterson’s lobbying of four city officials involved in the proposed construction of the Romneys’ home in the exclusive La Jolla section of San Diego along the Pacific coast.
The San Diego Reader first reported in 2010 that Romney had paid $1,000 to a La Jolla architecture firm to lobby city officials for a coastal development permit for the seaside property. The $21,500 paid to Peterson is in addition to those fees.
I am pretty sure that all the clients that CAHS advocates at the Department of Social Services would greatly appreaciate having $20,000 to have a chasing down their case worker. Pretty sure they can´t afford it.
One of the main reasons to make sure that the social safety need works well is precisely this: low income families neither have the time or the money to have to deal with paperwork, delays and entry barriers when they are trying to get some help. The wealthy don´t mind bad governance that much, as they can always hire someone to deal with the paperwork. The rest of us can´t do the same.
There has been a lot of talk about taxation both in Congress and the State Capitol in the past few months. Some commentators, like former governor Rowland, have been complaining about the terribly unfair tax system in Connecticut and how it is all about giving money to the poor, who don´t pay any taxes, while soaking the rich with an ever-increasing tax burden.
¿Is there any truth to these claims? Well, a recent study by the Corporation for Enterprise Development just took a good look on this claims (via Kevin Drum), creating a handy scorecard on this subject. They compare the taxes paid as percent of income from both the poorest 20% and the top 1% households by state, taking into account both local and state taxes. The results? Not good for those free-riding poor guys, I am afraid:
The bottom 20% families in Connecticut pay 11.2% of their income in state and local taxes. Those opressed souls in the top 1% of the income distribution pay a staggering 5.5% of their income in taxes. Only half of what the poor pay in the state.
So much for the undeserving poor.
The main driver behind these numbers in Connecticut, incidentally, are the local taxes, not state. The property tax system in the state is highly regressive, heavily penalizing the region´s cities. But more about this on a later post.
Yesterday, a story ran in the NY Times entitled, "Aid for Child Care Drops When It Is Needed Most. This article told the story of stuggling families forced to make an extremely difficult decision between their need to work and their desire to keep their children safe and cared for. The cost of childcare varies across the country, anywhere from 27% of a family's median income to 67%. The average cost of full-day care for an infant represents about 41% of the median income for single mothers.
The cost of childcare is expensive and quality childcare comes at an even higher premium. For the working poor, both cost and access are an issue, seeing as many low-income individuals do not work the traditional 9-5 job when many childcare centers and family based child care operate. In the 90's, during the federal welfare overhaul, there was a recognition that childcare is essential to helping low-income women work. Unfortunately, as the federal government and states face tough fiscal times, childcare subsidies are being cut.
As this article so vividly portrays, when families are forced to choose between work and childcare, they place their children in less than ideal sitautions. Investing in childcare subsidies would not only allow parents to work, but it would allow children to be in a stable environment where they will ideally be developmentally stimulated, learn and grow. Cutting these subsidies is extremely short sited and has many long term implications for both families and children.
Unfortunately, as I suspected, the majority of the public comments on this NY Times article questioned a woman's decision to have a child in the first place, rather than questioning a system that makes it nearly impossible for women and families to work and provide care for their children. The expense of childcare is a universal that most people can commiserate about, regardless of your income level (maybe not the 1%). Rather than judging one another, why not look at ways in which we can improve our underlying systems in order to improve outcomes for working families and children.
Statistically speaking, the most unequal city or metro region in America is in Connecticut.
According the Census Bureau, the Bridgeport-Stamford-Norwalk metro area has the most income inequality of any area in the U.S. The area's bottom 20% earn an average of $17,000. The top 5% take home $823,000 a year, according to Bloomberg News.
Better Choices for Connecticut, a coalition dedicated creating a more sustainable and fair revenue system for the state, lauds two positive steps this week: Comptroller Kevin Lembo’s call for more evaluation and accountability to measure the success of tax credits and other incentive programs, and a new proposed tax structure in New York state that would generate $1.9 million in additional revenue.
New York Gov. Andrew Cuomo and legislative leaders announced on Tuesday that they had reached an agreement to overhaul New York State’s income tax, creating a higher tax bracket for the highest-income residents and reducing the tax rate for millions of middle-class residents. The income ranges will be indexed to inflation. Additionally, a new 13-member state Tax Reform and Fairness Commission will examine long-term changes to the tax structure, including income, sales and corporate.
Better Choices for Connecticut is a community coalition working to help Connecticut make better choices on ways to improve the state’s imbalanced revenue system so that it advances opportunity for shared prosperity for all Connecticut residents; preserves services for children, families and the elderly; creates and sustains good jobs; and reinvests in the middle class and our communities.