Economic Progress Institute

September 16, 2016

Latest poverty figures show too many Rhode Islanders still struggle to make ends meet

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Over one hundred forty thousand (141,035) Rhode Islanders lived in poverty in 2015, according to new data released today from the Census Bureau. The drop in the rate to 13.9% in 2015 from 14.1% in 2014 is not statistically significant. The poverty level for a family of four is approximately $24,000.

The one in seven Rhode Islanders with income below the poverty level do not have enough to meet basic needs. Child Care Assistance, SNAP and health insurance coverage help working families make ends meet when earnings are not enough. Rhode Islanders unable to work on a temporary or permanent basis turn to cash assistance and other programs to protect themselves and their children. The new on-line integrated eligibility system can facilitate enrollment in these vital programs. But the new technology cannot replace the need for staff. “In the two years that the HealthSource RI on-line system has been operative, most new applicants have required help either over the phone or in-person to complete their application. Access to computers and knowing how to navigate an on-line application have also been issues.” said Rachel Flum, Executive Director of the Institute. “With more programs accessible through the system, the need for one-on-one assistance is even greater. The state must ensure that there are sufficient staff to help people access these critical benefits.”

The Ocean State had the highest rate of its residents living in poverty among the New England state and ranked 26th among all states.

Today’s data also show that Rhode Island’s communities of color were much more likely to struggle to meet basic needs with nearly one in three Latinos, close to one in four African Americans and more than one in six Asians living in poverty. While the one-year census data does not permit sub-group analysis, multi-year analysis shows that South East Asians are not as economically secure as the Asian population as a whole (See analysis of five-year median wage data in “State of Working Rhode Island, 2015: Workers of Color”).

“It is unacceptable that so many Rhode Islanders are living in poverty and shocking that Black, Latino, and Asian households face such deeper economic distress compared to the white majority. To truly achieve economic equity now and into the future, our state must be intentional about targeted policies to address racial disparities in wages, income, and total wealth,” said Jenn Steinfeld, facilitator for the Racial Justice Coalition, a new collaborative effort to address shared barriers faced by all non-white Rhode Islanders.

The Census Bureau released extensive information on the economic and health insurance status of Americans. The Economic Progress Institute website provides additional analysis of the new data for Rhode Island, including the more positive news that median income increased in 2015 to $58,073 from $54,959 in 2014.

September 13, 2016

More Rhode Islanders have health insurance coverage thanks to health care reform

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New Census data show that the percentage of uninsured Rhode Islanders was 5.7 percent in 2015, half the rate it was in 2013, the year before the Affordable Care Act (ACA) went into effect. In 2014, 7.4 percent were uninsured.

Two new avenues for affordable health insurance made available through the ACA have helped significant numbers of Rhode Islanders gain coverage. First, new Medicaid eligibility for adults (Medicaid expansion) allowed around 60,000 single adults with income marginally above the poverty line to have health insurance coverage.

Second, the new state exchange, HealthSourceRI, provided a pathway to coverage for another 35,000 Rhode Islanders who purchase private insurance. Almost 90 percent of enrollees, those with income below four times the poverty level, quality for federal tax credits to help pay their monthly premium. The majority of enrollees (60 percent) have income below two and half times the poverty level ($29,000) and also receive assistance paying for out of pocket costs including co-pays and deductibles. (Source: HealthSourceRI, Open Enrollment 2016)

According to the Rhode Island Annual Medicaid Expenditure Report for SFY 2015, the federal/state Medicaid program provides health insurance to one in four Rhode Islanders. In addition to the 60,000 newly eligible single adults, 150,000 children and families with lower income and 12,000 children with special health care needs have comprehensive insurance through Medicaid. Seniors (19,000) and people with disabilities (32,000) rely on Medicaid for the services they need to live safely in the community or in a facility when home-based care is not feasible.

“Rhode Islanders should be proud that we are 7th in the nation for the percent of residents who have health insurance coverage”, said Linda Katz, Policy Director at the Economic Progress Institute. “With health insurance, people are more likely to keep up with yearly preventive care visits and people with chronic conditions can get the treatment they need to promote their well-being. Besides the obvious benefits for families and individuals, having a healthy work force is a good selling point for our state. Medicaid and coverage through HealthSourceRI are vital to ensuring that thousands of our residents can afford comprehensive health insurance.”

May 11, 2016

State estate taxes are vital tools for broadly shared prosperity

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A new report released this morning by the Center on Budget and Policy Priorities (CBPP) emphasizes the importance of state estate taxes as tools for broadly shared prosperity and as a means to ensure that the very wealthy don’t avoid taxes by sheltering their wealth.

This report comes at an opportune time for Rhode Island, just a week after learning that policymakers are considering increasing Rhode Island’s estate tax exemption from the current $1.5 million to $2 million, a move that would benefit the heirs of fewer than 100 estates.[1] As seen in Figure 1, the increase in the estate tax exemption enacted two years ago already has significant negative impact on state revenues.

As Rachel Flum, Executive Director of the Economic Progress Institute, notes, “We face a choice: we can either invest in the things that help our communities thrive and all of us prosper, or hand yet another tax break to a few of our state’s wealthiest people.” Changes to our estate tax have already compromised our ability to make critical investments in the Ocean State. Increasing the estate tax exemption from $1.0 million to $1.5 million in the 2014 General Assembly depleted revenues by $8.4 million in 2015 and by $6.1 million already in 2016, according to the Department of Revenue.[2]

The CBPP report, State Estate Taxes: A Key Tool for Broadly Shared Prosperity, calls on states that have repealed their estate taxes to reinstate them, and suggests that the eighteen states that have estate taxes in place (including every state in the Northeast except New Hampshire) consider improving them. At $1.5 million, the Rhode Island estate tax exemption falls midway between the $1.0 million exemption in Massachusetts, and the $2.0 million in Connecticut.

The CBPP report emphasizes three compelling public policy purposes that result from estate taxes:

Providing revenue for investments that promote a strong economy. Estate tax revenue supports services that make a state an attractive place to do business and live.
Reducing inequality. The vast majority of taxpayers would never owe estate taxes. These taxes are paid by a small share of very wealthy families — those most able to afford them.
Taxing income that would otherwise escape state taxation. Without an estate tax, many unrealized capital gains go untaxed at the state level. This happens when an asset that has increased in value is not sold during the owner’s lifetime, leaving the heirs to gain the profit.

Report author, Elizabeth McNichol, emphasizes the price we pay when we erode state revenues:

You can’t get something for nothing. States that have reduced or eliminated their estate taxes have less money for public investments, so they are seeing higher tuition at public colleges; cutbacks in teachers at K-12 schools; and deteriorating roads, bridges, water treatment facilities, and other public infrastructure.”

Important investments in tens of thousands of Rhode Island’s low- and middle-income working families – such as increasing the state earned income tax credit to 20 percent of the federal credit, and helping families pay for child care–should take priority over tax breaks for a few dozen of our wealthiest families. These investments are particularly important given Rhode Island’s overall tax system, which is “upside down”. The more money you make the smaller share of your income you pay in state and local taxes. A robust estate tax helps to reverse that upside-down tax system, as do changes at the lower end, such as increasing the state EITC.

Douglas Hall, Director of Economic and Fiscal Policy at the Economic Progress Institute notes that “Preserving the estate tax at its current levels gives us revenues needed to give Rhode Island working families a boost, strengthen our economy, and invest in education and infrastructure, while making our tax structure more fair, and preventing those most able to pay from avoiding taxes on their accumulated assets.”

[1] Based on the most recently available data, after reducing by more than half the number of estates subject to the estate tax via changes adopted in 2014, only about 86 filers would remain, 39 of which would see their estate tax completely disappear if we were to raise the exemption to $2.0 million

[2] Revenue projections from the estate tax, seen in Figure 1, incorporate the revenue impact from changing the exemption level, but also reflect the number of estate tax filings, which vary from year to year.

May 4, 2016

Legislators should prioritize Rhode Island workers

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On Friday it was reported in the Providence Journal that Speaker Mattiello’s budget priorities include reducing the estate tax by increasing the threshold for paying the tax from $1.5 to $2 million at an estimated cost of $4.3 million, as well reducing the corporate minimum tax from $450 to $400 at an estimated cost of $3.2 million. Reducing the estate tax and corporate minimum tax will provide little benefit to the overwhelming majority of Rhode Islanders and are not a good use of public funds.

“We hope that lawmakers will not reduce state revenues by over $7 million for tax changes that would benefit a handful of Rhode Islanders and businesses,” said Rachel Flum, Executive Director. “There are many wiser ways to use $6 million to support thousands of working Rhode Islander and to ensure that businesses have the workforce they need to succeed.”

The state increased the estate tax threshold in 2014 effective January 2015, essentially increasing estates exempt from paying the tax from $1 million to $1.5 million and reducing the tax on higher income estates. The estimated revenue from the estate tax in 2014 was $43.6 million, dropping to $34.2 million in 2015, a 20% loss of revenue after the change.

Further increasing the exemption to $2 million would benefit approximately 100 estates, of which 35 would not have to pay any tax at all.

In stark contrast, increasing the EITC to 15% of the federal credit, as proposed in the governor’s budget would put $4.4 million into the pockets of 83,000 working Rhode Islanders. Increasing it to 20% as proposed by bills pending in the house and senate would provide an additional economic boost of $8 million to the direct care workers, servers, salespeople and other Rhode Islanders who earn low to moderate wages. These state investments are then recycled directly into local economies.

“The estate tax is a vital tool for broadly shared prosperity,” added Douglas Hall, Director of Economic and Fiscal Policy at the Institute. “Our analysis shows there is no good public policy reason to reduce state revenue by reducing the tax that is paid by only a small number of heirs of large estates. The state’s priority should be to help struggling working families.”

One such priority is to help working families pay for child care assistance so they can enroll their young children in quality early learning programs and know that their older children are in a safe place after school. A pilot program allowing working families who are receiving child care assistance (income below 180% FPL) to remain eligible as their income rises to over twice the poverty level is set to expire in September, 2016.

As of March 2016, just over 400 children are enrolled in the pilot. Trend data since the onset of the program in October 2013 shows that the pilot has allowed parents to have a glide path to earning higher wages since around half of the families have income between 200 and 225% FPL and half have income between 180 and 200% FPL. It is estimated that making this “exit income” permanent would cost $1.6 million for FY 2016, an investment that not only helps working families but supports the child care sector. And with the lowest eligibility limit for child care assistance in New England, policymakers should also consider increasing the “entry income limit” from 180% FPL to at least 200%.

Just as there are far wiser ways to invest in our workforce, there are wiser ways to help businesses. The Statistics of Income for 2014 shows that 91% of Rhode Island businesses paid the minimum corporate tax, including 8,000 companies with gross receipts that total more than $10 million. Last year companies were given a break – a reduction of the minimum corporate tax by $50, from $500 to $450, taking revenue the state needed to pay for the public services and infrastructure that businesses use and rely on. Another $50 reduction is unlikely to significantly impact individual businesses, while a $3 million investment in workforce training for the 83,000 Rhode Islanders who lack a high school diploma and/or are in need of English language services would benefit all businesses who are looking for workers with basic skills.

January 25, 2016January 25, 2016

CFED Report: Rhode Islanders still struggling, especially with homeownership

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New data released today by CFED (the Corporation for Enterprise Development), a national partner of Rhode Island’s Economic Progress Institute, shows that too many Rhode Island families remain economically vulnerable. Smart public policies that create opportunities for families to save and make investments in their future prosperity pay huge dividends for all of us. The Assets and Opportunity Scorecard, now published annually, shows Rhode Island ranked 35^th overall in Outcomes, despite ranking 8^th overall in the Scorecard’s Policy measures.

Doug Hall, Director of Economic and Fiscal Policy at the Economic Progress Institute isn’t surprised by these findings: “We see the economic vulnerability of Rhode Island families in wage and income data (as shown in our recent State of Working Rhode Island: Workers of Color report). Until Rhode Islanders have good jobs that pay economy-boosting wages, they won’t be able to set aside savings or invest in homes or businesses.”

Across five main issue areas, Rhode Island fares in the middle of the pack in four issue areas (Financial Assets and Income, Businesses and Jobs, Education, and Health Care) but nearly dead last for Housing and Homeownership.

Rhode Island’s outcome indicators point to a number of areas where improvements need to be made to improve the financial security of Ocean State families. Rhode Island scores very poorly (40^th or worse) in 14 areas, including 8 indicators for housing/homeownership:

Income inequality (46^th out of 50 states and the District of Columbia)
Business value by race (44^th)
Underemployment Rate (40^th)
Homeownership rate (46^th)
Homeownership by race (50^th)
Homeownership by income (51^st)
Homeownership by family structure (50^th)
Delinquent mortgage loans (49^th)
Affordability of homes (43^rd)
Housing cost burden – homeowners (46^th)
Housing cost burden – renters (45^th)
Uninsured by race (45^th)
Uninsured by gender (49^th)
Average college student debt (46^th)

While Rhode Island’s poor performance on housing/homeownership outcomes in the Assets and Opportunities Scorecard is not new, it is striking. Jim Ryczek, Executive Director of the Rhode Island Coalition for the Homeless responds:

“While Rhode Island clearly has much work to do to meet the state’s housing needs, we have significantly increased funding of programs to solve homelessness. We need to match that progress with investments that provide housing options for all Rhode Islanders.”

It is also noteworthy that Rhode Island falls in the bottom 11 rankings in three of the six outcome measures that look at disparities by race/ethnicity. National data show stark disparities in wealth based on race and ethnicity. We know that here in Rhode Island, racial disparities in wages and income are significant. The lack of good state-based data on wealth prevents us from fully understanding these disparities, which in turn prevents us from addressing the challenges with the necessary urgency. Another new report released last week by the Annie E Casey Foundation addresses the need for better data:

“To properly gauge the effects of policies and practices on families’ ability to build assets, we must have the right tools. Data on family assets are meager and difficult to access, particularly for various racial and ethnic groups. The federal government should explore better mechanisms to track that information, such as representative surveys for national and state use with questions on savings behavior and asset holdings or additional questions in the U.S. Census Bureau’s American Community Survey.” Annie E Casey Foundation, Investing in Tomorrow: Helping Families Build Savings and Assets

CFED has been publishing the Asset and Opportunities Scorecard since 2002. It remains a key benchmark in tracking important policy and outcome measures, and highlighting best practices in state policies addressing these areas.

Key policies that Rhode Islanders can adopt to provide greater opportunities for Rhode Island families include:

Increasing the state Earned Income Tax Credit to 20 percent of the federal credit.
Further Increasing the minimum wage.
Providing protections from predatory lending such as payday loans.

These and other measures that boost family incomes will help families set aside savings while investing in assets such as a home.

[From a press release]