Wednesday, May 17, 2017

Opportunities for Youth and Young Adults to Break the Cycle of Poverty

Comments for the Record
United States House of Representatives
Committee on Ways and Means
Hearing on Opportunities for
Youth and Young Adults to Break the Cycle of Poverty
Wednesday, May 17, 2017, 10:00 AM
2020 Rayburn House Office Building
By Michael G. Bindner
Center for Fiscal Equity

Chairman Smith and Ranking Member Davis, thank you for the opportunity to submit these comments for the record to the House Ways and Means Committee, Subcommittee on Human Resources.  As usual, we will preface our comments with our comprehensive four-part approach, which will provide context for our comments.
  • A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.
  • Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 7% and 28%.  
  •  Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.
  • A VAT-like Net Business Receipts Tax (NBRT), which is essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age 60.
Educating young people does seem like an intractable problem. It need not be if adequate incentives are applied. There are few opportunities to many in this age group, either educational or professional. Indeed, many end up in the drug trade, prostitution, prison or dead-end jobs. Pay them to finish their educations, especially if remedial work is necessary, and only then provide them with technical or collegiate training on the Job Corps model, also with pay, and the intractability of this problem will only be with those who refuse to fund it. Some members of the subcommittee may wish to look in the mirror at this point.
The Center’s proposal for a subtraction value added/net business receipts tax is useful here. First, the national or regional governments will fund their adult education and Job Corps activities with this tax. The state level version of the NBRT will fund the remainder. In the long run, much of this tax will migrate to the state level, provided we can make sure the funding is adequate (if not, a regional or national tax and program is necessary - conservatives cannot call for local control and then underfund the program). Programs will shift to possible regional funding (Job Corps), but most likely to direct service by state and local school systems and community colleges, sectarian institutions (Catholic Votech high schools seem a natural fit, it is a wonder they have never been tried, especially given some of the needs of their younger members) and even programs operated by taxpaying companies themselves, who would get an offset from the tax for performing them.
I remind the subcommittee that the beauty of the NBRT is that it can allow taxpaying employers to find non-governmental solutions and thereby reduce the size of the public sector while increasing performance. Tax levels must be set high enough to make sure the work is done, with assessment to make sure it is done well, so this is no tax avoidance scheme or libertarian dodge.

There is a moral hazard here that mainstream students might demand remedial help in order to get paid. The solution to this is obvious. Pay them too. It will decrease the abortion rate among youth, especially if all students are given access to the NBRT child tax credit should they be found with child. You would think that the pro-life movement would embrace this concept. Sadly, it has not, which tells me that its concern is more about regulating sexuality than promoting life. Even the Church is sadly silent.
The second most important factor in moving youth out of poverty is an adequate wage for work.  Ideally, this should come from a higher minimum wage, which puts the burden on employers and ultimately customers for fair pay, rather than a tax support for low wage workers (regardless of parental status). 
The market cannot provide this wage, as there will always be more desperate employees who can be taken advantage of to force wages lower for everyone else.  A minimum wage protects those employers who would do the right thing by their employees if not for their competitors.
A $15 per hour minimum wage is currently being demanded by a significant share of the voters.  Perhaps it is time to listen.  If the marginal productive product of these employees is more than this rate, job losses will not occur – of course, the estimates of this product can be easily manipulated by opponents who believe that managers provide much more productivity than people who actually work, so such estimates should be examined critically.  Internally, people usually have the correct number, but are loathe to share it if doing so hurts their political point.
In some industries, of course, there are plenty of low wage workers who are not as productive as the wage is high (although this makes one wonder whether such industries are worth supporting in the economy).  For these employees, paid education should be available – and by pay we mean tuition and wages.

Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.

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