Not Enough Money for Low-Income DC Residents, But Tax Cut for Wealthy Unchanged

By Guest Contributor, on May 31st, 2016

Cross-posted from Poverty & Policy Written by Kathryn Baer

As you local readers probably know, the DC Council passed a budget for the upcoming fiscal year last week. Some changes in what the Mayor had proposed for programs that serve low-income residents.

The DC Fiscal Policy Institute’s overview of the budget confirms what I’d expected. Mostly, a bit more here, a bit more there. No more for some critical priorities. And less for at least one. (The one large, new investment it cites — for new family shelters — isn’t part of the budget proper.)

I suppose we’ll be told that the Council did its best with what it had to work with. I don’t know because I don’t know nearly enough about the funding needs and prospective impacts of every program and service the budget covers.

But I do know that the Council could have had more revenues to work with. It had only to postpone — or better yet, repeal — the tax cuts prior legislation has made automatic whenever revenues rise above the estimate used for the latest budget.

The triggers have already reduced otherwise available revenues by many millions of dollars — dollars the Council could have used to shore up under-funded programs.

So much water under the bridge. And as the Chairman, who likes those triggers says, the revenues lost from cuts not yet triggered couldn’t have been used for the new budget. But the Council could have had them to spend as early as next fiscal year — and thereafter.

All tax cuts are not created equal, of course. Some on the pending list will benefit residents who’ve got enough income to owe taxes, but not a lot.

The second cut on that list, however, is a higher threshold for the estate tax. The most recent revenue forecast indicates that it will lock in soon, DCFPI’s latest account of the trigger impacts says.

So henceforth, no assets a deceased resident leaves to heirs will be taxable until they’re worth $2 million — twice the current minimum.

As things stand now, this will be the first of two estate tax cuts. The second — and considerably larger — will raise the threshold to the same minimum as applies to the federal estate tax, currently $5.45 million.

Why the District should embrace a regressive measure gained in a crisis by Congressional Republicans who could never be elected here baffles me.

True, the Tax Revision Commission recommended parity with the federal threshold, including the ongoing upward adjustments for inflation. But the Council could have taken a pass, just as it has on the revenue-raisers in the Commission’s package.

The District will forfeit $18.8 million next fiscal year alone, according to DCFPI’s estimate. And for what?

Not so that more money can pass to charities tax free. Bequests to them are already exempt. Not so that surviving spouses will have more to live on, since what passes directly to them will also still reduce the value of what counts toward the threshold.

Not even necessarily what other heirs wind up with, since a will-maker can give them as much as $14,000* each or the equivalent every year while still alive — again reducing the value of what’s potentially taxable afterwards.

The estate tax giveaway won’t just make larger investments in programs that reduce hardships for poor and near-poor residents unnecessarily difficult. It will increase income inequality in the District by giving the rich more, as well as denying the poor supports and services that help close the income gap from the bottom.

And the gap will grow from one generation to the next in part because of the way the taxable value of assets is determined. Essentially, it’s set at their value when the person bequeathing them dies.

So heirs pay capital gains taxes when they sell the assets for more, but no tax on how much the assets’ value increased between the time they were purchased and the time inherited.

And, of course, heirs don’t have to sell them. They can pass them along to their heirs, compounding the revenue loss — and wealth at the top of the income scale.

The estate tax then is a way of partly recouping the loss and, at the same time, averting a rollback to the inordinate wealth concentration of the Robber Baron days.

The higher the threshold, the less an already-shaky control on income inequality can do. And the gap between the richest and poorest District households is already . . . → Read More: Not Enough Money for Low-Income DC Residents, But Tax Cut for Wealthy Unchanged

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No Shortage of Ideas for Better, More Affordable Child Care

By Guest Contributor, on May 9th, 2016

The cost of un-subsidized child care is extraordinarily high, raising sometimes insurmountable barriers to low-income parents who want to work. The community-based child care centers that many low-income families rely on are reimbursed at ridiculously low rates. But there are answers. We need only the will to implement and pay for them. . . . → Read More: No Shortage of Ideas for Better, More Affordable Child Care

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DC TANF Program Short-Changed Core Purposes

By Grassroots DC, on April 23rd, 2015

Cross-Posted from Poverty & Policy Written by Kathryn Baer

My last post focused on the “cautionary tale” we can find in how states spent their Temporary Assistance for Needy Families funds. Now here, as promised, is what we learn about the District of Columbia’s TANF spending.*

The figures are somewhat dated, but they’re still relevant to decisions the DC Council must make as it works on the Mayor’s proposed budget for the upcoming fiscal year.

The District reported $254 million spent on TANF in 2013. Twenty-three percent went for cash assistance. This is a tad higher than the percent reported for 2012. But a family of three was still left at 26% of the federal poverty line. And that’s about where it is now, unless it’s one of the 6,300 families whose benefits have been cut three times already.

They’ll get zero, come October if the Council doesn’t approve the Mayor’s proposal to give them a one-year reprieve. Even if it does, our three-person family will have to get along somehow on $156 a month — roughly 9% of the current FPL.

The Bowser administration justifies the reprieve on the basis of continuing weaknesses in the employment component of the District’s TANF program.

I’ve previously reported the results of an audit that focused on outcomes for the parents facing benefit cut-offs who were actually referred to a contractor for job training and/or help in finding a job. Not encouraging.

But there are two other parts to this story. One is that some parents have had to wait for nearly a year to get those job-related services. This may be in part because the Gray administration froze additional funds for them.

And that’s perhaps because the Department of Human Services didn’t spend all the TANF employment funds in its budget, according to the new director. We certainly see what seems to be under-spending in the Center on Budget and Policy Priorities report I’m using here.

Only 15% of TANF funds spent on work-related activities in 2013. And even this was a marked improvement over 2012, when only 7% went for what surely ought to be a top priority for a TANF program.

At the same time, the District spent an unusually low percent of its TANF funds on administration and systems — 2%, as compared to a nationwide 7%.

This matters because the DC Council enacted exemptions from the benefits phase-out for families facing specified hardships, i.e., difficulties, beyond the usual, that parents would face trying to support themselves and their kids.

One, added for the current year, would temporarily stop the time clock for mothers with infants to care for. But the department hasn’t actually granted this exemption. The reason, we’re told, is that it doesn’t have the computer capacity to suspend time-counting for the moms and their babies.

I personally believe that the TANF time limits merit rethinking altogether. DHS itself is looking into a policy that would convert the one-time hardship exemptions for at least some of the designated families and perhaps others into hardship extensions, as federal law has always allowed.

But that’s not even on the drawing board yet. The proposed reprieve is on the Council’s must-decide agenda.

A rollback of the benefits cuts should be too, given what we know about job training waiting lists — and the many months families had to wait for the assessments used to decide what training and/or other services they should get to give them a reasonable chance of success in the workplace.

Beyond these obviously urgent issues, the Council should, I think, take a hard look at how DHS spends its TANF dollars. In 2013, the department spent nearly as much on “non-assistance” as on work activities. What’s in this catch-all category is a mystery. Not the department’s fault, but rather a flaw in the U.S. Department of Health and Human Services’ reporting format.

The new DHS director, unlike her predecessor, shared a break-out of TANF spending with parties interested enough to have attended a recent briefing. Some money here, some there, some someplace else.

I doubt the Council has ever delved into the dispersal of TANF funds. Every dollar may support something worthwhile. But the mechanism is hardly responsible — let alone transparent — budgeting.

And it inevitably diverts funds from cash support for very poor families and from work-related services that can help the parents get to the point where they can pay for their families needs.

These, I think most of us view as core . . . → Read More: DC TANF Program Short-Changed Core Purposes

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