Tax Day Call to Action: Expand the EITC for Young, Childless Workers

On tax deadline day, we want to put a spotlight on a proposal contained in the President’s 2015 budget that would expand the federal Earned Income Tax Credit (EITC) for lower-income, childless workers.

As quick background – the federal EITC is a fully refundable[i] tax credit that is targeted to support low- to moderate-income workers.  The credit becomes available to workers with their first dollar of earned income, peaks at certain predetermined amounts (which are based on marital status and family size), and phases out until it eventually reaches $0 for higher income earners.

The EITC has been routinely cited as a highly effective tax policy that both encourages and rewards work – and has seen support from both the left and right. Research shows that the credit produces major long term benefits for children that go well beyond a single tax year — this study finds that children in families who receive the EITC have higher test scores, fewer teen births, and live in better neighborhoods as adults.

However, the EITC falls short, and should do more, when it comes to supporting young and childless workers. Childless workers under age 25 are completely ineligible for the credit and the average credit for qualifying workers between 25 and 64 is less than one-tenth the average credit for families.

Yesterday the Center on Budget and Policy Priorities created an infographic that further demonstrates the problem with the current structure of the EITC:

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The Center has found that childless workers are in fact the only group that are pushed further into poverty as a result of the federal tax code.

In his 2015 Budget, the President has proposed reducing the qualifying age to 21 and raising the credit amount available to childless workers (from a max of $500 to a max of $1,000). The President’s proposal also raises the phase out point for the EITC for these workers from $15,000 to $18,000. There are also several proposals before Congress that would expand the EITC beyond the changes proposed in the President’s budget — potentially creating even larger credits for these workers.

A change to the federal EITC could also bring a change to our state’s EITC — Connecticut is one of 21 states (there are total 26 states with a state EITC) that sets its tax credit as a percentage of what is offered on the federal level. We know that the combination of a state EITC with the federal credit helps bring an even larger number of families out of poverty.  We should be extending this same opportunity, at both levels, to our young and lower-skilled workers who we know are facing an extremely difficult time in this economy and in this job market.

We call on politicians in Washington to adopt these measures, and to provide much needed support to these working Americans.

 

[i] A fully refundable tax credit is one where a payment will be made by the IRS directly to the taxpayer in the event that the amount of the credit exceeds the individual’s income tax liability.

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Will the end of low wages bring higher prices?

Krissy Clark, from Marketplace, and Andrew Bouvé, from Slate, have a look at what would happen if Wal Mart raised wages to its workers enough to make it a living wage:


Their conclusion: not a whole lot. Wal Mart would have to raise the hourly wage for its salaried employees to $13.63/hour, for a total cost of $4.8 billion annually. This might sound like a lot of money, and it is, but Wal Mart had a $17 billion profit last year alone, and that´s after spending $15 billion on stock buybacks to make its shareholders happy.

Even without reducing its profits one dime, the reports find that the retail chain would only have to raise prices on its stores by 1.4% to cover the increase in wages.

The video is part of a wonderful series from Marketplace, “The Secret Life of a Food Stamp“, giving an in depth look on how companies like Wal Mart rely on public benefits both to make money and to pay workers low wages. Make sure to have a look.

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Remedial Education reform: seeing the whole picture

A few days ago CAHS presented at the Capitol our latest report: “Developmental Education Reform: Ensuring Success for All in Connecticut“.

The report discusses the implementation of PA 12-40, the remedial ed reform bill approved by the legislature two years ago, and how it will affect new community college students. Our focus is, above all, in those students that need the most remedial education – usually adult workers that have been outside of academic environments the longest, usually low income or minority. These students often require several remedial courses before they are considered to be ready to attend college-level classes – and under the old, pre-reform system, often were discouraged and left way before they even finished them.

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Student status after three years, by age.

Our report is divided in four different sections:

  1. Why reform was needed – with a brief look at completition rates by group, and how remedial education was the least effective with adult students and minorities.
  2. An overview of the reform – including a description of the new “tiered” system established by the reform and a special focus on those groups that need the most remedial education.
  3. Challenges facing the reform – an overview of potential issues that students might be facing.
  4. Policy recommendations – including the need for more resources.

You can find the full report here. For more details on the basic framework of PA 12-40, the Board of Regents has an excellent FAQ page.

The legislature is considering adding additional resources for the implementation of the law this session. Last week the Appropriations Committee increased the budget allocation for developmental education from $4.5 to $11 Million. It is still unclear if the funds will be dedicated to transitional programs, those serving students that need the most remediation. CAHS will continue following this issue in the coming weeks and months, tracking the roll our of the reform.

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Policy background: remedial education reform (PA 12-40) basics

“Policy background” is our article series explaining the basic elements of a piece of legislation or specific issue – a reference article of sorts.

A remedial education reform (PA 12-40) primer:

PA 12-40 has three main components:Opportunity

  • Placement reform. Higher education institutions are required to use “multiple commonly accepted measures of skill” to decide if new students need remedial education. The legislators believed that the overreliance on Accuplacer, the testing software used to evaluate students, was forcing too many of them into remedial classes. Under the act, colleges need to use are least two measures to gauge the students’ level of knowledge.
  • Limits to the amount of time that students can spend in remedial classes. Under PA 12-40, students cannot be enrolled in non-credit bearing remedial classes for more than one semester.  (Classes in different subjects can be taken in different semesters.)
  • Tiered, three level system for developmental education. Students will receive their remedial education either embedded in college level classes, through intensive remedial courses, or via transitional programs associated with the community college structure. The Board of Regents estimates that about a third of community college students who need developmental education will fall into each category.

The three remedial education tiers are:

Embedded remediation: Students who are close to being ready for college-level courses, but need some additional help to be fully up to speed. Students take part in college level courses for credit, but with embedded remedial education, attending a regular credit bearing class while receiving addition support from the teaching staff. Students can attend additional teaching hours, receive support from tutors, and undertake extra course work.  The support is wedded into the subject of the class, so the student is not learning these concepts in a vacuum and can re-learn concepts without having to resort to a dedicated class.

Intensive remedial education: The embedded remedial education is viable for students who are close to being college ready. For those who will not be able to follow a course with additional math or English built in, PA 12-40 allows higher education institutions to provide intensive remedial classes.  Community colleges are shifting their programs to shorter courses with more class hours and teacher support, often including additional lab time.

Transitional students: For those students who are not yet college ready and need more than one semester of remediation, PA 12-40 requires higher education institutions to create a pre-enrollment program to get them college ready. We discuss these models in depth in this report, and these students are the focus of our concern with remedial education reform.

In 2013, the Connecticut General Assembly provided additional program and budget support to help implement the requirements of PA 12-40, including:

  • $250,000 for development of embedded and intensive model courses.
  • $2 million for implementation of pilot programs for community college remedial students at all levels.
  • Additional money for guidance counselors at each campus, as well as the creation of new faculty positions.

In addition, the Board of Regents dedicated $200,000 to develop transitional model strategies.

Have more questions? The Board of Regents have an excellent FAQ here.

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Report: CT Black/Hispanic Kids Fall Behind Early, Never Catch Up

In  Connecticut, black and Hispanic children fall behind their peers early on education, and never catch up.

Results by group

Click on the graph to access the interactive version.

Small differences in the early years grow over time. Children of color report only slightly lower rates of participation in early childhood programs, but  this early disparities end up  hurting their test scores in 4th and 8th grade. Once black and Hispanic children fall behind, they never catch up.

It is time to really look closely to the programs that are serving our youngest children, and look for results. The numbers show that early years are critical. We need programs that give all children with the tools they need to succeed.

Data from Annie E. Casey KIDS COUNT release, Race to Results which can be viewed here.

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New Scorecard Shows Troubling Obstacles for Connecticut’s Children of Color

A new report, released this morning by the Annie E. Casey Foundation, finds that while overall Connecticut’s children are doing well compared to national standards, the state’s black and Hispanic children remain far behind in important development measures. CAHS is the Casey Foundation’s KIDS COUNT grantee for Connecticut.

race4results-aecfurlThe KIDS COUNT® policy report, Race for Results: Building a Path to Opportunity for All Children, ranked Connecticut ninth, using a first-of-its-kind index measuring child progress.

The report, which can be viewed here, contains both national and state-level data, and the new Race for Results index has been designed to see how children are progressing on key milestones across racial and ethnic groups. The indicators for the index were chosen based on the goal that all children should grow up in economically successful families, live in supportive communities and meet developmental, health and educational milestones. Examples of the indicators, reported by race, include the percent of babies born at normal birth-weight, the percent of young children enrolled in an early learning program, and the percent of high school students graduating on time. Each state is ranked, from 1 to 50, based on a combined “Race for Results” index score.

Overall, Connecticut ranks 9th in the nation. This high-rank masks the persistent and large disparities between races here in the state. Connecticut’s white children ranked third compared to their peers across the 50 states, just behind New Jersey and Massachusetts. Black children ranked 16 out of 46 states in the index, and Connecticut’s Hispanic children ranked 24 out of 47 states (in some states the population of black and Hispanic children was too small to provide enough data for comparison).

So while the main driver behind our high ranking is from white children doing very well, black and Hispanic children contribute by doing better than one-half to two-thirds of the rest of the country. The good news, however, is tempered when we look internally and compare the scores between white and minority children, to reveal a stark inequality in Connecticut. The differences in scores places Connecticut 39th (out of 46) when comparing white children to black children , and nearly last (46 out of 47) in the difference between white and Hispanic children.

We believe that the findings of this report highlights a troubling reality in the state – that children of color are not receiving the same opportunities as their white peers. We also believe that the findings are a call to action, and that the index underscores the need to invest in high quality early childhood education, workforce development programs, and wrap-around supports for low-income and vulnerable parents.

We have prepared a short document that uses the report’s indicators to compare Connecticut’s children with children nationwide – the chart can be viewed here.

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Statement from our Executive Director, Jim Horan, on House and Senate Passage of a Raise to the Minimum Wage (Senate Bill 32)

Hartford, CT – Today, both chambers of the Connecticut General Assembly passed SB 32, a bill which increases the state’s minimum wage to $10.10 by 2017 and provides a meaningful raise to our lowest income families. With these votes, SB 32 is now being transmitted to the Governor, and once signed, the State of Connecticut will have the highest enacted minimum wage in the country. We applaud our state lawmakers for their leadership on this issue, and for providing a strong example to the rest of the country and Congress.

This increase in the minimum wage will directly help 140,000 workers, many who are women with children, move out of poverty. Under Connecticut’s current minimum wage of $8.70, a minimum wage worker working full time, 52 weeks a year, earns only $18,096 a year. The federal poverty level for a family of three (for example a mother, and two children) is $19,790. With the increased minimum wage of $10.10, this same mother will now earn $21,008 a year. This higher wage means greater financial stability for families, reduced need for government safety net programs, and higher earnings for students who are working to pay for college.

We thank Governor Malloy for his leadership on raising the minimum wage to $10.10 and the members of both the House and Senate for passing Senate Bill 32. Connecticut is a leading state in addressing poverty and promoting economic success through progressive policy change, including the state EITC and paid sick days, and now this increase in the minimum wage.

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The Connecticut Association for Human Services (CAHS) is a nonprofit policy and program organization that promotes family economic security strategies to empower low-income working families to achieve financial independence. Our mission is to end poverty and engage, equip, and empower all families in Connecticut to build a secure future.

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A Minimum Wage Increase for ALL Workers

We have been talking a lot about the importance of the minimum wage here at the CAHS Blog. Past posts have tackled the issue of who really earns low wages (parents, not just teens), whether a raise hurts business (it doesn’t!), and how taxpayers subsidize big corporations when companies fail to pay workers a living wage.

Waiter taking order

Today we wanted to discuss another group of low wage workers — tipped workers. According to state and federal law, if an employee receives more than $30 a month in tips their employer is allowed to pay them an amount lower than the minimum wage. So in 2014, CT’s “full” minimum wage is $8.70. Employers who hire bartenders are allowed to count 11% of tips received as part of that bartender’s wage, and therefore are only required to pay these workers $7.34 an hour. The wage for hotel workers and restaurant employees is even lower — state law allows an employer to count tips as 31% of these employees’ wages, and therefore these workers only receive $5.69 an hour.

Seven states have decided to abandon this complicated “tip credit” system entirely and require full minimum wage payment for ALL workers. Restaurant Opportunities Centers, an amazing organization with a wealth of resources, has put out a number of papers discussing the problem with this tip credit system. ROC has shown that employees rarely recover wages when they receive insufficient tips (as required by law), that the instability of a tip wages means a greater reliance on government programs, and that a disproportionate number of women hold service jobs and suffer as a result.

Here in Connecticut the tip credit issue is about to get even more complicated. When our state passed a minimum wage increase in 2013, which raised the base wage to $9.00 effective January 1, 2015, the law modified the tip credit to prevent an increase in the tipped minimum wage. This means servers will stay at $5.69 an hour. While the rest of our state’s workers get a raise, these vulnerable employees remain subject to the same uncertainty and low earnings.

Fortunately, the Governor’s new minimum wage bill, Senate Bill 32, has been written to allow servers and bartenders to receive a higher wage as the full minimum wage increases. We want to encourage advocates and legislators to support this parity, and to fight on behalf of our state’s lowest earners, as we continue the campaign to raise the minimum wage to $10.10.

Additionally, CAHS has created a one-page fact sheet that dives into the tipped minimum wage a little further. We encourage you to share broadly and to reach out if you have any questions.

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Office of Early Childhood Clears First Hurdle

 

This afternoon the legislature’s Education Committee placed Senate Bill 25, An Act Establishing the Office of Early Childhood (OEC), on its consent calendar —  a move which allows the bill to leave the committee and go to the Senate for a possible vote.

This development is an important first step for the OEC. The OEC currently exists only by Executive Order, with funding that was provided last year by the legislature. As those following this office may remember, last year the General Assembly failed to pass a bill that would create the OEC, but at the same time passed a budget that included reference to it and resources for its creation. (Read more about this here.)

It is critical that the legislature complete the work necessary to codify the Office of Early Childhood. The OEC represents an opportunity for real reform in the early care community.  If fully implemented, this office will bring together early childhood and education programs from across five state agencies, and puts these programs under a team that is dedicated to creating a true system that works for children, parents, and providers. The failure to put the OEC securely in statute threatens the success of this effort.

We will continue to track SB 25, as well as other important early childhood bills including:

  • SB 26, An Act Expanding Opportunities for Early Childhood Education — contains parts of the Governor’s initiative to expand access to preK;
  • HB 5522, An Act Concerning School Readiness Funding — increase the per child reimbursement for full-day school readiness programs; and
  • Senate Resolution 9 and House Resolution 5 — these resolutions approve the collective bargaining agreement between the Office of Early Childhood and the new child care worker union, includes raises in Care4Kids funding.

Keep checking the blog for future updates throughout the session.

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Connecticut’s minimum wage worker? – She is not who you think.

As we continue to follow Governor Malloy’s proposal to raise the state minimum wage to $10.10, and the President’s effort to do the same on the Federal level, we wanted to share with you some great work that is being done by our friends at the Economic Policy Institute (you can read some of our previous blog coverage on the minimum wage campaign here).

One of the most pervasive myths about the minimum wage (second only to the fear that a raise is a job killer — in a previous post we shared a number of resources that debunk this misconception) is that it is mostly being earned by teenagers who need spending money.  This infographic produced by EPI shows us that this is not the case:

A 2012 analysis produced by EPI told a similar story; in that year EPI determined that if the minimum wage had been raised to $9.80 here in Connecticut over 80% of the effected workforce would have been individuals over age 20.

These minimum wage earners are also disproportionately women. This map from the National Women’s Law Center shows that nationally almost two-thirds of minimum wage workers are women, while here in Connecticut, women are six out of every ten minimum wage earners.

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So as we can see — a minimum wage increase is a targeted reform that will help women and families in Connecticut, and across the country, move out of poverty and towards economic stability. Continue to follow us here on the blog, as well as on Twitter and Facebook, for updates on the state and federal campaign.

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