Tax Policy for Economic Development/Affordable Housing

Finance: Tax Policy’s Role in Increasing Tax Tools for Local Economic Development, July 30, 2024

Do what’s right - human development:

Housing prices and incomes are again out of balance. Incomes are simply too low to make a mortgage payment for most Americans, particularly the working class (families making under $110,000 per year - the bottom 77% of population who receive only a third of total adjusted gross income).  Down payment assistance, whether through local grants or tax incentives, simply sets up people to fail. My family received such assistance, and neither our mortgage or our marriage survived the last housing bubble’s burst.  

As explained in the attachments, three things must occur:

• Raise the minimum wage (and let the effects flow through the working class,
• Pay peoples’ opportunity costs for seeking remedial education, college and job training by paying that minimum wage to do so, and
• Shift the award of unearned cost of living adjustments from an equal percentage to equal dollar amounts, starting with government employees and contractors.

Do no harm - oppose gentrification:

Too often, local development has had the effect - often intended - to remove minorities from an area that upper income Whites wish to colonize.  Historically, the placement of freeways was designed to destroy the Black middle class and neighborhoods. That torch was passed to local economic development, aka gentrification, for decades. Any incentives that support this which do not explicitly require human development and equitable housing in the same neighborhood must not pass and, where they already exist, be repealed.

Finance: Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families, March 7, 2023

Point One (was 2): Abandon the idea of tax incentives for development.

Urban renewal, which relocates poor and largely non-white people, leads to redevelopment that chases the 90th percentile. The tax incentives in the President’s budget are exactly the wrong approach. Instead, reform the entire tax system so that most families do not have to file income taxes. By most, I mean 99%. 

If an asset value added tax is adopted rather than capital gains taxes then other income taxes taxes could be replaced with goods and services taxes on consumption and subtraction value added taxes on net business receipts - so that wages and profits would be taxed at an equal rate, with higher income surtaxes for individuals who receive wages and/or dividends over the 90th percentile of income at graduated rates up to $450,000, with a top rate of 25% over the base rate. 

Income over $500,000 would be taxed between an additional 5% up to an additional 25%, with tax prepayment being an optional bond purchase for years in advance. If enough people or firms shift from holding marketable debt to tax prepayments, the debt can be reduced more rapidly and interest costs saved.

Point Two  (was 1): Housing is primarily an income issue.

The best cure for housing affordability is higher income. The President’s budget is on the right track regarding the Child Tax Credit. I would treble down on his amounts and distribute these funds through Old Age, Survivors, Disability and Unemployment Insurance payouts or with wages. Note that dependent children would only get the $1000 per month CTC.

Adult and Emancipated Juvenile Students, from ESL to Associates Degree, should be paid for pursuing their educations at a minimum wage level of at least $10 per hour (which had been the Republican counter-offer to a $15 wage). Take the deal and plan on an increase to $12 or just to $11 if the standard work week is cut to 28 hours - seven per day, not including lunch. Immigrant minors who have been trafficked to the United States and paroled to relatives or sponsors have had to go to work. Their only work should be education. No one should be brought in as a member of a permanent underclass!

The other income issue is how we distribute cost of living raises to government workers, beneficiaries, government contractors and in the private sector. While we cannot do much for the last one (except for offering paid education), the other three are firmly under government control.

The source of inequality, aside from abandoning the 91% top marginal tax rate, is granting raises at an equal percentage rather than by an equal amount. When this started, incomes were fairly equal, so it was not an issue. Fifty years later, the issue is huge, but not insurmountable.

From here on in, award raises on a per dollar an hour rather than on a percentage basis (or dollars per month or week for federal beneficiaries). Calculate the dollar amount based on inflation at the median income level. No one gets more dollars an hour raise, no one gets less dollars per hour in increases. Increase the minimum wage as above and consider decreasing high end salaries paid to government employees and contractors. Even without decreases, simply equalizing raises will soon reduce inequality. Why is this necessary?

Prices chaise the median dollar. The median dollar of income is actually at the 90th percentile, rather than the 77th percentile (which is about where the median is). This strategy would reduce inflation in both the long and short terms. 

Let me repeat this - prices chase income dollars, not income earners.

On the tax side, limit bracket indexing in the same manner - by dollars per bracket, not percentages.

Attachment: Affordable Housing   Part I Video  Part 2 Video

Closing Foster Care Gaps

Finance: Examining the State of Child Care: How Federal Policy Solutions Can Support Families, Close Existing Gaps, and Strengthen Economic Growth, July 9, 2024

WM: Strengthening Child Welfare and Protecting America’s Children, June 26, 2024

The best way to make sure foster children have adequate income is to give every child and aged out child remaining in the foster home, child whose parents are divorced or are receiving unemployment, retirement or disability the same income benefits, including those who have become parents themselves. 

The key to this plan is an adequate and fully refundable child tax credit. At the very least, the legislation passed by the House needs to be passed by the Senate. Pro-Life conservatives cannot, in good conscience, favor regulating abortion without providing for adequate funding for families. Doing so would be the height of cruelty.

The level passed by the House could easily be doubled under our proposal, provided the home mortgage deduction is ended, along with Supplemental Aid to Needy Families, dependent care benefits under Social Security survivors and disability benefits programs (thus securing the program’s long term health) and the paperwork intensive Earned Income Tax Credit. 

During the pandemic, the IRS managed CTC advance payments. This had the “stink of welfare” that even some Democratic Senators objected to, which led to its discontinuance.  We repeat our contention that, over the long-term, it would be more acceptable to distribute them either through other government subsidies, such as Unemployment Insurance, Disability Insurance, or a training stipend OR through wages. 

For middle income taxpayers whose increased credits are less than their annual tax obligation, a simple change in withholding tables is adequate. Procedures are already in place to deliver refundable credits to larger families. 

Employers can work with their bankers to increase funds for payroll throughout the year while requiring less money for their quarterly tax payments (or estimated taxes) to the IRS. The main issue is working out those situations where employers owe less than they pay out. This is especially true for labor intensive industries and even more so for low wage employers. A higher minimum wage would make negative quarterly tax bills less likely. 

Tax reform can be used to facilitate this process. Instead of having each family file to collect their child tax credits and EITC (as an end of the year bonus), enact an employer paid subtraction value added tax and make child tax credits and health insurance tax benefits an offset to the payment of this tax and remove most families from having to file taxes at all. Tax offsets could also be created to fund paid family medical leave, sick leave and childcare provided through employers. 

Enactment of a Credit Invoice Value Added Tax will make sure every family pays something, especially wealthy individuals who dodge income tax payments for themselves and their heirs by borrowing money against their wealth rather than receiving it as income, taking advantage of capital gains tax rules for the transfer of intergenerational wealth and using insurance policies to do the same thing. Such a reform would do more than offset a higher CTC. It will also help lower the deficit by a significant amount.

The second gap is being ready to work and joining the workforce, which should be without penalty to foster children prior to high school graduation unless they are served by an expanded Job Corps program..

To better meet the needs of the non-college bound, expand the Job Corps program, especially those centers with residential facilities. The program has been a demonstration project for long enough. It needs to be expanded and devolved to the states, but with sufficient block grant support.  

Students on an academic track should be enrolled at a four-year university or college (including private colleges) for the semester during which they age out.

To combat truancy or burnout from working instead of studying, sudents should be paid to attend school, in other words, they should be compensated for the opportunity costs they incur for not working, although they are eligible to do so after their sixteenth birthday. Such payments should be distributed by the school at the statutory minimum wage. 

All workers should have easy access to paid training, especially those with educational deficits, including linguistic ones. English as a Second Language should not only be free, but workers should be paid to attend, irrespective of immigration status. Part-time workers should also be eligible for this benefit.

Eventually, we must get to free community college (again, with payments to attend. Funding should include the freshman and sophomore year at four-year institutions as well. Technical training should be covered as well at both public and accredited private schools, including religious schools. In Espinoza v. Montana, prohibitions on funding private schools (Blaine Amendments) were found to be unconstitutional. New (and existing) funding should reflect that fact.

This is also the perfect time to reorganize the grade structures in education. Frankly, for some students, time spent in general education is wasted. College credits, where applicable, should be granted for advanced high school work so that graduation can occur earlier. Community college or technical high school could start after grade 10. 

As an aside, it is past time for the Catholic School system to join the non-college bound sector, rather than focusing mostly on college prep. Grades 8-10 would be combined, with middle school from grades 5-7. Neither of these would include full-contact football. 

Foster youth should be allowed to leave early (with fostered siblings) if their affairs are in order (including receipt of child tax credits as parents) and be provided with continued help if their affairs are not, especially those with emotional or cognitive challenges. For such individuals, different funding streams and supervision will be made available.

The foster care system must not be used to destroy the families of addicted or mentally ill parents. Rather, specially trained foster parents should foster the addict (including alcoholics) and their child or children. Addicts should not be pressured to give up permanent custody, nor should providers expect them too. This is not to say that they cannot be allowed to use without concern. 

Once diagnosed, relapse should be grounds for readmission in a longer term setting, but with the understanding that seeking recovery will not mean permanent loss of custody. Too many addicts use the desire to maintain relationships with children to not work on themselves adequately. Taking permanent loss of custody off the table takes that excuse away.

The attachment addresses the need to increase the minimum wage and to fund long-term unemployment. Aging out or early exit from foster care, even if education is not pursued, would be much easier with a higher minimum wage by higher minimum wage, an increase to $10 per hour should be immediate and indexed to inflation.  

It is the poor job indeed where the physical productivity of workers in comparison with other factors is under this level, especially when child tax credits are excluded from the equation. The intermediate goal should be either a $11 minimum wage (so that it is comparable to the buying power experienced in 1965) or an $12 wage with a 32 hour work week. Over time, the minimum wage should reach $16 (before indexing).

As an aside, that such a wage increase would drive other wages up is an additional reason to support a higher wage, especially when the difference between worker pay and the pay of “middle management” is glaring. 

Lastly, unemployment insurance must be less punitive, particularly where younger workers are concerned. In lower wage jobs, the preference is to find potential supervisors (whose compensation is usually subpar as well) and keep a file of infractions to justify firing workers who do not work out. A punitive work environment that does not exactly make any kind of work attractive. 

In certain circumstances, unemployment compensation should be available on a no-fault basis. Better still, employees should be allowed to voluntarily leave firms with a history of quickly dismissing employees without penalty. There should be no expendable jobs or workers. 

Attachment: Social Services, Disability and Long Term Unemployment Insurance

Attachment: Consumption Taxes (Video links included)