The EITC Cannot Fight Poverty Alone

The Earned Income Tax Credit (EITC) is a powerful tool for helping low-income working families, but to effectively raise Marylanders out of poverty and foster broad-based prosperity, it must work alongside other measures, including a boost in the minimum wage.

Recently, some policymakers in Maryland have portrayed  the EITC as some kind of super-policy that can fight poverty on its own, but  this is not the case.

The EITC – a federal tax credit that Maryland supplements with a state EITC -- makes low-wage work more viable for families by offsetting some of the taxes they pay and boosting their income. However, as the non-partisan Center on Budget and Policy Priorities pointed out this week, there are some things that the EITC cannot do, like helping people who are out of work or unable to work, or helping the poorest families that do not make enough to qualify for the credit.

In addition, because families reap the benefits of the EITC once a year when they file their taxes, it does not help them when they may need a boost the most, like when the monthly rent is due or they need to repair the car they use to get to work. More broadly, because the EITC is based on wages, it does not automatically expand to stabilize the economy during recessions, the way that other services, like nutrition assistance, do.

The EITC also does not provide workers with health insurance.

Because of these limitations, we need other policies to complement the EITC, including nutrition assistance, access to health insurance through programs such as Medicaid, and unemployment insurance to see individual workers through job losses and help the economy as a whole through downturns. And, of course, a robust minimum wage that keeps up with the cost of living and allows workers to support themselves and their families.

Maryland policymakers need to recognize the importance of making these programs and policies work together on behalf of working families. For instance, as they consider legislation that would make the state’s EITC more generous, state lawmakers also should finish the task of raising the minimum wage. That would build on the strides Maryland has made recently in improving access to health care by expanding Medicaid and working to implement the Affordable Care Act.

It’s fortunate that so many policymakers agree the EITC is an important and effective way to provide economic assistance to working families in Maryland. The current proposal to expand the state EITC enjoys bipartisan support in the General Assembly, and the EITC has also won praise from conservative lawmakers such as U.S. Rep. Paul Ryan. Unfortunately, some of this acclaim portrays the EITC as an alternative to other policies such as raising the minimum wage, rather than as a supplement to those things.

The EITC is an important policy, but we should not rely on it to do everything. There is no silver bullet capable of singlehandedly ending poverty. Instead we need lots of programs and ideas to peck away at it from every angle.

Support for Raising Minimum Wage Gains Momentum

Last week, both Governor O’Malley and President Obama expressed support for raising the minimum wage. In the coming legislative session, the Maryland General Assembly has the opportunity to act on these calls and increase the economic security and earning power of Maryland workers.

On Thursday, President Obama expressed support for raising the Federal minimum wage to $10.10 per hour via the Harkin-Miller bill. The current federal minimum wage is $7.25. The Harkin-Miller bill would raise the minimum wage in three incremental steps of 95 cents over two years, after which the minimum wage would be indexed to inflation. Indexing the minimum wage to inflation is an important policy measure that would allow it to keep up with the cost of living so that workers’ earnings do not erode when policy makers fail to adjust the minimum wage even as prices increase.

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Source: Economic Policy Institute  

While the President’s support for raising the minimum wage is a positive step, Maryland lawmakers should not wait for the federal government to act. These days that seems like a losing proposition. Instead they should take a leadership role and raise the minimum wage in Maryland independent of federal action. Nineteen states and the District of Columbia currently have minimum wages higher than the level set by the federal government. Maryland is not one of them. Nor is Maryland among the ranks of the ten states which currently index their minimum wage to inflation.

For his part, Governor O’Malley argued that raising the minimum wage is a way to “give dignity to every Maryland family that works hard and plays by the rules” and other state lawmakers and candidates for office have expressed support for raising the minimum wage as well. Further, recent polls suggest that the public favors doing so by a four-to-one margin.

In the coming legislative session, Maryland lawmakers should capitalize on this momentum and enact an increase in the minimum wage that will reduce inequality and support economic growth.

EPI Report Shows MD Offers Better Climate for Workers than Many States, But Challenges Remain

Today, the Economic Policy Institute released a report describing actions in state legislatures across the country that have been detrimental to the ability of residents with moderate and low incomes to earn a decent living. EPI describes how this policy agenda has been financed by corporate interests and serves to drag down wages, lower labor standards, and erode employee protections for union and nonunion workers alike.

Fortunately, many of the most harmful developments outlined in the report - including laws restricting the minimum wage, removing regulations on child labor, and imposing new limits on benefits for the unemployed – have not taken place here. Rather, Maryland has enacted policies that improve the economic security of residents. These efforts include protecting Marylanders from catastrophic health expenses by implementing the Affordable Care Act and expanding Medicaid as well as providing tax credits and job training for workers through the state’s EITC and EARN Program.

However, Maryland needs to continue to enact policies that provide economic opportunity and overcome challenges to doing so. For example, EPI’s report notes that corporate lobbies have successfully defeated efforts to establish paid sick leave in cities and states across the country, including Maryland. In the coming legislative session, state lawmakers have the opportunity to enact paid sick leave as well as join other states across the country in raising the minimum wage. In this regard, EPI’s report serves as a useful reminder that the policies that provide security and opportunity for Maryland’s workers must be protected from those that seek to undermine them and that citizens and policymakers must continue to push for measures that help raise the living standards of all Marylanders.   

Week Ahead (Mother's Day Edition)

Yesterday was Mother's Day (hope you didn't need the reminder!), and we're celebrating by highlighting a blog post last week by the Bureau of Labor Statistics about working mothers.

Last week we blogged about U.S. Senate action on the internet sales tax, which has the potential to help Maryland businesses as well as state government. We also blogged about how unpopular Maryland is with CEO Magazine. And, we released our latest animated video, on the need for paid sick leave (watch other videos here).

For the week of May 13th through May 19th:

• On Tuesday, May 14th, the Advisory Council for Alternative Response holds their monthly meeting. From 1pm in room 1044 of the Department of Human Resources, 311 West Saratoga Street, Baltimore.
• The Maryland Commission on Artistic Property also meets on Tuesday, at 1:30pm in room 180 of the House Office Building, Annapolis. The Commission will discuss matters related to the State owned art collection.
• Later on Tuesday, the State Commission on Criminal Sentencing Policy meets at 5:30pm at 2009D Commerce Park Drive, Annapolis. 
• Finally on Tuesday, the Community Services Reimbursement Rate Commission meets from 6-8pm at the Mental Hygiene Administration office at 55 Wade Avenue, Catonsville. 
• On Wednesday, May 15th, the Board of Public Works meets at 10am in the State House, Annapolis.
• On Thursday, May 16th, the Maryland Health Care Commission meets at 1pm in their offices at 4160 Patterson Avenue, Baltimore.
• On Friday, May 17th, the Bureau of Labor Statistics (BLS) releases state-level employment figures for April. The initial BLS estimate for March found that Maryland's unemployment rate held steady at 6.6 percent, though the number of unemployed residents fell. However, the national figures for April included positive revisions to the February and March estimates, which may spill over to Maryland's figures.

State of Working Maryland 2012

The Maryland Budget and Tax Policy Institute releases The State of Working Maryland 2012 today, documenting the continued stress and uncertainty working families face in Maryland. Although there has been some improvement in employment compared to the 2011 report, many other indicators show that times remain tough. 

• Maryland’s unemployment rate stands at 6.7 percent for October. Over the course of 2012 the rate increased and then subsided, ranging from a low of 6.5 percent in January to a high of 7.1 percent in August.

• The productivity of American workers continues to grow, but wages are growing at a much slower rate. From mid-2011 to mid-2012 productivity increased by 1.7 percent but average wages only increased 0.1 percent nationwide.

• More than one of every ten Marylanders lives below the national poverty level. The rate doubles for African-Americans, for families where the head of household lacks a high school education, and for families of single moms.

• Maryland’s median household remains the nation’s highest. But there are large regional, educational and racial disparities. Median income in Allegany County or Baltimore City is just over one third that in Howard County.

• While incomes have grown for Maryland’s highest earners, incomes for the poorest segment of the workforce have fallen behind prices since 1986.

• 765,000 Marylanders lack health insurance coverage. The number of Marylanders who got health coverage through their employers continued to decline while those getting public coverage (such as Medicare, Medicaid and Children’s Health Insurance) increased.

• Property foreclosures are now declining, but decent housing remains unaffordable for many families. More than half of Marylanders—whether renters or homeowners—devote over 30 percent of their incomes to housing.

• The costs of other necessities for working families are high and growing. Energy costs for Marylanders at all income levels greatly exceed the benchmark level of 6 percent of income. Public energy assistance programs address less than 10 percent of the energy affordability gap. Childcare costs have increased to the point where they are essentially equal to college tuition.

• Education remains the best route to a secure job with a good wage. But college costs are growing as a share of income and unmanageable college debt is a looming problem for more and more graduates.

Maryland and national lawmakers need to support policies that support working families in the present and build broadly shared economic prosperity in the future. To read more of MBTPI's analysis and our policy recommendations for the new year read The State of Working Maryland 2012.

Working Marylanders Face Harsh Economic Problems

As the effects of the Great Recession drags on in Maryland and across the country, the state’s working families face continuing, severe challenges to their economic stability and overall well being.

We’re releasing State of Working Maryland 2011 today.  This annual report compiles and analyzes a wealth of statistical information that points to the deteriorating situation, and the necessary governmental responses. Even though Maryland now tops the country in number of millionaires (as measured by wealth), poverty has grown in the state, and is concentrated in both urban and rural areas.

Our findings include:

·         Over the last decade, the rate of poverty in Maryland has risen from 7.4 percent in 2000 to 9.1 percent in 2010, and for some populations poverty is much higher: 13.6 percent for African-Americans, and 12.8 percent for Marylanders of Hispanic descent. Baltimore City’s poverty rate exceeds 20 percent.

·         Maryland's unemployment rate remains stuck at 7.4 percent ­ the highest level since 1983 and twice the level prior to the Great Recession.

Getting and staying employed has become more difficult not only because of the difficult economic climate and paucity of jobs, but because work supports (such as childcare) have become less accessible; a waiting list for childcare support vouchers now looms.

·         Climbing up the income ladder has become more difficult as college affordability has waned. Over the past decade, in-state tuition costs at 4-year colleges have risen from 6.7 percent to nearly 10 percent of median family income.

·         Since 2000, median household income in Maryland has been flat, but income inequality has risen substantially. Maryland millionaires continue to do well, while others in the state struggle. 

But there are solutions to these problems. Maryland must invest to help spur job growth. The investments must be in human capital as well as infrastructure. State and local governments must help individuals become ready for work with appropriate training, and help them negotiate existing barriers to work, such as a lack of childcare or readily available transportation. Education must be a priority from pre-school to post-secondary.

If we leave working families to fend for themselves, our economic future will be grim and stark. If we invest in education, good jobs, and strong supports to help workers achieve independence, we can have broadly shared prosperity.