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Jun 24, 2019

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An expert in policy advocacy and coalition building, Chaer has dedicated her career to helping people meet their basic needs and expanding economic opportunity. She serves on the executive committee of the All Families Deserve a Chance (AFDC) coalition. Staff page ›

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Support tax policies that help the rest of us

by | Jun 24, 2019

Family Economic Security

To make a big difference on financial security to families with low or middling wages — for better and worse — let’s talk taxes.

The last overhaul of the federal tax code occurred not long ago. Approved by Congress in 2017, the Tax Cuts and Jobs Act (TCJA) had a big effect on taxpayers all along the economic spectrum, but largely benefited those in the top tier. Case in point: While the bottom 80 percent of workers received a tax cut of about $795 a year, the biggest (and permanent) cuts were reserved for corporations who saw their tax rate cut from 35 percent to 21 percent. This reduced corporate tax revenue to the U.S. by 40 percent, and accounted for $1 trillion of the $1.5 trillion cost of the bill. In total, 51 percent of the income gains from the legislation went to the wealthiest 5 percent of Americans. The legislation provided some tax relief for Americans by reducing tax rates, doubling standard deductions and increasing the Child Tax Credit.

When policymakers think of meeting the needs of the middle class, businesses or the wealthy, they think in terms of tax incentives and tax policy changes. For people who are struggling to make ends meet, the discussion generally centers on programs. For example, to help the middle class and wealthier individuals meet their needs, the U.S. offers the Home Mortgage Interest Deduction. For low-income Americans, the U.S. provides Housing Choice Vouchers for one out of four eligible applicants. The middle class and wealthier get tax breaks on their 529 College Saving Accounts, while poorer students can apply for Pell Grants.

In 2018, CCLP, together with United for a New Economy and Colorado People’s Alliance, and in consultation with the national Economic Security Project, developed a proposed ballot measure to re-craft Colorado’s income tax code. The proposed measure would have replaced our flat income tax of 4.63 percent with a more progressive structure; a Working Families Tax Credit.

The WFTC would have been funded with higher marginal tax rate on Coloradans earning more than $500,000 per year. According to the Who Pays report from the Institute on Taxation and Economic Policy, the bottom 20 percent of earners would have seen the share of their income they pay towards state and local taxes drop from 8.7 percent to 3.7 percent, while the top 1 percent of earners (who currently provide the smallest share of their income towards taxes) would see their share of income going towards taxes increase from 6.5 percent to 8.8 percent. More than half of Coloradans (those earning less than $70,000) would have seen some benefit, including working individuals without children, parents, low-income independent college students, and caregivers for small children and older relatives. In all, 2.7 million Coloradans would receive a benefit, compared to the 340,000 Colorado households who currently receive the state’s Earned Income Tax Credit.  Learn more in this analysis. Given our late start, and because of a competing ballot measure, we decided to not move forward with the initiative.

Bold new ideas
Meanwhile, a number of presidential candidates have put some bold ideas on the table, including several proposals to use the tax code to reduce inequality, lift families out of poverty, and address rising costs and income stagnation. While none of these bills has a chance to pass through a divided Congress, they may inform the policy discussion for leveling the playing field for people with low- to middling incomes in the months leading to the election and the years to come.

  • Kamala Harris has proposed the Lift Act, which would be structured like our proposed Working Family Tax Credit but provide a $3,000 year refundable tax credit for individuals ($6,000 for couples). It would build upon the EITC to provide more benefit to individuals without children, caregivers, independent college students, etc. It would be paid for in part by rolling back much of the TCJA.
  • Cory Booker has introduced the Rise Act to double the income eligibility ceiling on the EITC, expand coverage to caregivers and low-income college students, and reduce the age of eligibility for single adults from the current 25 to age 18. If approved, it would provide up to $4,000 a year for an individual (or $8,000 per year for a couple). The proposal would cover 154 million Americans and lift 15 million people out of poverty. Senator Booker has also proposed legislation to increase the estate tax and tax rate on capital gains to fund Child Savings Accounts.
  • Businessman and presidential contender Andrew Yang has proposed a universal basic income of $1,000 per month to all Americans, paid for with a new value-added tax (consumption tax levied on products or services), to reduce inequality, supplement wages and enable people to meet their basic needs.
  • Colorado Sen. Michael Bennet has proposed the Working Families Tax Relief Act, which would lift 7 million people out of poverty. It would make the federal Child Tax Credit fully refundable- so that families in poverty would get the same $2,000 for a child that wealthier families do under the TCJA. It would provide an extra $1,000 per year for those with a child under 6, since families with the youngest children are the most likely to struggle to meet basic needs. It would increase the current EITC by 25 percent. It would dramatically expand the EITC for workers without minor children at home, and expand the age of eligibility from the current 25-64 to 19-67.
  • Bernie Sanders has proposed increasing the Estate Tax to 45 percent on estates over $3.5 million and 77 percent on estate over $10 million. Meanwhile, Sen. Elizabeth Warren has proposed a tax of 2 percent on wealth over $50 million and a 3 percent tax on wealth over $1 billion. In both of these proposals, extra revenue created would fund programs.

Tax policy changes are high-stakes, as our elected officials, and by extension, our voters decide whether and how this powerful tool is used. Who should get tax relief? Who should pay more? Which tax cuts should be permanent? Which credits or deductions, or changes in tax rates should expire? At a federal level, should we allow tax cuts to increase the deficits, or should previous tax cuts be reversed to pay for different tax reductions? What is the value of more cash to individuals? What is the value of services and programs we would want the government to provide?

What’s happening in Colorado
At CCLP, we prioritize state-level policy. We have worked to create and make permanent our current state EITC. We have worked with Colorado Fiscal Institute and Colorado Children’s Campaign to create a refundable Child Care Tax Credit for families earning under $25,000, which passed with bipartisan support. We supported the unsuccessful effort to start paying Colorado Child Tax Credit this year. We have opposed efforts to reduce the state income tax rate further. That would lower revenues for essential state services and benefit most the wealthiest Coloradoans and provide no benefit to those with incomes too low to pay state income tax.

Our proposal for a Working Families Tax Credit functions as a blueprint for how the tax code can be restructured to reward work and supplement low wages, recognize the unpaid work of caregiving, and finishing one’s education. Whether at the legislature or the ballot box, CCLP will fight to ensure that any proposed changes in tax policy will benefit struggling Coloradoans.

– By Chaer Robert

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HEALTH:
HEALTH FIRST COLORADO (MEDICAID)

Health First Colorado is the name given to Colorado’s Medicaid program. Medicaid provides public, low-cost health insurance to qualifying adults and children. It is an entitlement program funded by the federal, state, and county governments and is administered by counties in Colorado. Those who are required to pay must pay a small co-pay when receiving certain health care services.

State Department: Department of Health Care Policy and Financing

Eligibility: Most adults 18 to 64 are eligible for Medicaid in Colorado if their household income is at or below 133% of the federal poverty limit (FPL). Pregnant women are eligible with incomes of up to 195% FPL, while children under 18 may be eligible if the live in a household with income at or below 142% FPL. Some adults over 65 may also be eligible for Medicaid.

Program Benefits: Through Medicaid, low-income Coloradans are eligible for a range of health care services at little to not cost. Services provided include doctors visits, prescription drugs, mental health services, and dental care. Co-pays for certain individuals may be needed for certain services.

Program Funding and Access: Colorado funds our Medicaid program through state and federal dollars. Medicaid is an entitlement program, which means that all who are eligible for Medicaid can access the program, regardless of the funding level in a given year. This does not mean that it is always easy to access Medicaid, even when eligible. And since the program is administered by counties, funding levels for county staff and other administrative roles can make it easier or harder for Coloradans to access the program. On top of this, not all medical providers accept Medicaid which limits the ability of Coloradans to seek health services even if enrolled, such as if the nearest provider is a 2+ hour drive away.

Note: This data is from before the pandemic and does not reflect changes in enrollment rules during the COVID-19 pandemic and public health emergency.

Statewide Program Access 2015-19: Over the study period of this report, an average of 89.0% of the population at or below 133% of FPL (i.e., the population who is likely to be eligible for Medicaid) were enrolled in Medicaid in Colorado.

FOOD SECURITY:
SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (SNAP)

The Supplemental Nutrition Assistance Program or SNAP helps low-income Coloradans purchase food by providing individuals and families with a monthly cash benefit that can be used to buy certain foods. SNAP is an entitlement program that is funded by the federal and state governments and administered by counties in Colorado.

State Department: Department of Human Services

Eligibility: Currently, Coloradans qualify for SNAP if they have incomes below 200% FPL, are unemployed or work part-time or receive other forms of assistance such as TANF, among other eligibility criteria. Income eligibility for SNAP was different during the study period of this report than today—it was 130% FPL back in 2019 for example. The US Department of Agriculture uses the population at or below 125% FPL when calculating the Program Access Index (or PAI) for SNAP. We follow this practice in our analysis despite Colorado currently having a higher income eligibility threshold.

Program Benefits: SNAP participants receive a monthly SNAP benefit that is determined by the number of people in their household and their income. Benefit amounts decrease as income increases, helping households avoid a sudden loss of SNAP when their incomes increase, even by a minor amount. Benefits are provided to an Electronic Benefit Transfer (EBT) card that can be used to purchase eligible food items, such as fruits and vegetables; meat, poultry, and fish; dairy products; and breads and cereals. Other items, such as foods that are hot at their point of sale, are not allowable purchases under current SNAP rules.

Program Funding and Access: SNAP, like Medicaid, is a federal entitlement program. This means that Colorado must serve any Coloradan who is eligible for the program. As such, funding should not be a limit to how many Coloradans can be served by the program. However, funding for administration of SNAP at the state and county level can limit the ability of county human service departments to enroll those who are eligible. Other program rules and administrative barriers can make it difficult for Coloradans to receive the benefits they are legally entitled to receive.

Statewide Program Access 2015-19: Over the study period of this report, an average of 61.1% of the population at or below 125% of FPL (i.e., the population who is likely to be eligible for SNAP) were enrolled.

FOOD SECURITY:
SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN (WIC)

The Special Supplemental Nutrition Program for Women, Infants, and Children, also know as WIC, provides healthcare and nutritional support to low-income Coloradans who are pregnant, recently pregnant, breastfeeding, and to children under 5 who are nutritionally at risk based on a nutrition assessment.

State Department: Department of Public Health and Environment

Eligibility: To participate in WIC you must be pregnant, pregnant in the last six months, breastfeeding a baby under 1 year of age, or a child under the age of 5. Coloradans do not need to be U.S. citizens to be eligible for WIC. In terms of income, households cannot have incomes that exceed 185% FPL. Families who are enrolled in SNAP, TANF, Food Distribution Program on Indian Reservations (FDPIR), or Medicaid are automatically eligible for WIC. Regardless of gender, any parents, foster parents, or caregivers are able to apply for and use WIC services for eligible children.

Program Benefits: WIC provides a range of services to young children and their parents. These include funds to purchase healthy, fresh foods; breastfeeding support; personalized nutrition education and shopping tips; and referrals to health care and other services participants may be eligible for.

Program Funding and Access: WIC is funded by the US Department of Agriculture. The state uses these federal funds to contract with local providers, known as WIC Clinics. In most cases, these are county public health agencies, but that is not the case in all Colorado counties. Some WIC Clinics cover multiple counties, while others are served by multiple clinics. Private non-profit providers are also eligible to be selected as a WIC Clinic.

Statewide Program Access 2015-17: Between 2015 and 2017, an average of 52.2% of the population eligible for WIC were enrolled in the program in Colorado.

Financial Security:
Colorado Works

Colorado Works is the name given to Colorado’s program for Temporary Assistance to Needy Families or TANF. It is an employment program that supports families with dependent children on their path to self-sufficiency. Participants can receive cash assistance, schooling, workforce development and skills training depending on the services available in their county.

State Department: Department of Human Services

Eligibility: In general, Coloradans are eligible to enroll in TANF if they are a resident of Colorado, have one or more children under the age of 18 or pregnant, and have very low or no income. For example, to be eligible to receive a basic cash assistance grant through TANF, a single-parent of one child could not earn more than $331 per month, with some exclusions—and would only receive $440 per month (as of 2022). That said, there are other services provided by counties through TANF that those with incomes as high as $75,000 may be eligible for. In addition to these, participants in TANF are required to work or be pursuing an eligible “work activity” or work-related activity. Any eligible individual can only receive assistance if they have not previously been enrolled in TANF for a cumulative amount of time of more than 60 months—this is a lifetime limit that does not reset. Counties may have additional requirements and offer benefits that are not available in other counties in Colorado.

Program Benefits:  While the exact benefits that one is eligible for under TANF can vary, all qualified participants are eligible to receive a monthly cash payment, call basic cash assistance. Other than cash assistance, counties are have a lot of choice in how to use their TANF funding; generally a use of TANF funds is appropriate so long as it advances one or more of the four purposes of the program: (1) provide assistance to needy families so that children can be cared for in their own homes or in the homes of their relatives; (2) end the dependence of needy families on government benefits by promoting job preparation, work, and marriage; (3) prevent and reduce the incidence of out-of-wedlock pregnancies; and (4) encourage the formation and maintenance of two-parent families.

It is important to note that those eligible for TANF are also eligible for many of the other programs we’ve included in this report, such as SNAP, Medicaid, and CCCAP.

Program Funding and Access: Colorado funds its TANF program through funds received from the federal government through the Temporary Assistance for Needy Families block grant. Most of the federal funds are allocated by the state to counties, which are required to provide a 20% match of state funding. Federal and state rules allow the state and counties to retain a portion of unspent funds in a TANF reserve.

Statewide Program Access 2015-19: Over the study period of this report, an average of 50.7% of the population at or below 100% of FPL (i.e., the population who is likely to be eligible for TANF) were enrolled in TANF in Colorado.

EARLY LEARNING:
COLORADO CHILD CARE ASSISTANCE PROGRAM (CCCAP)

The Colorado Child Care Assistance Program provides child care assistance to low-income families and caregivers living in Colorado in the form of reduced payments for child care. It is a program funded by the federal, state, and county governments and is administered by counties in Colorado. The share owed by parents/caregivers is determined on a sliding scale based on the family’s income.

State Department: Department of Early Childhood Education

Eligibility: Counties set eligibility for families separately, but must serve families with incomes at or below 185% of the Federal Poverty Limit. Families accepted to the program are no longer eligible once their income exceeds 85% of the state median income. Parents or caregivers must be employed, searching for work, or engaged in another approved activity to be eligible for CCCAP. Parents and caregivers enrolled in Colorado Works (Temporary Assistance to Needy Families or TANF) or in the child welfare system are also eligible to participate in CCCAP. Generally, CCCAP serves families with children under 13, although children as old as 19 may be eligible under certain circumstances.

Program Benefits: If a family is eligible for CCCAP and has income, they may likely have to pay a portion of their child’s or children’s child care costs each month. The amount that families owe is based on their gross income, number of household members, and the number of children in child care in the household. As such, households tend not to experience a benefit cliff with CCCAP when they see their incomes increase

Program Funding and Access: Colorado funds the CCCAP program using federal dollars it receives from the Child Care and Development Block Grant program. The state allocates federal and state funds to counties using a formula that takes into account factors like current caseloads and the number of eligible residents. Assistance is available until the county’s funds are spent, so the number of families that can be served is often a function of how much funding is available and the income and composition of the household that applies. It is not uncommon for counties to overspend or underspend their allocations of funds. The state reallocates unspent funds from counties who underspent to those who overspent. While underspending could indicate a problem with the way a county administers its CCCAP program, it could just as likely be a sign that there are few providers in the county who participate in CCCAP—or a lack of providers generally.

Statewide Program Access 2015-19: Over the study period of this report, an average of 10.8% of the population at or below 165% of FPL and younger than age 13 (i.e., the population who is likely to be eligible for CCCAP) were enrolled in CCCAP.

Housing:
HUD rental assistance programs

The US Department of Housing and Urban Development (HUD) has three housing assistance programs that we look at together: Housing Choice Vouchers (Section 8), Project-based Section 8, and Public Housing. In Colorado, these programs provided assistance to over 90% of the households who received federal housing assistance from all HUD programs. Through federally funded, local or regional public housing agencies (PHAs) are the agencies that administer these programs, through not all are available in all counties. These are not the only programs available in Colorado that assist households afford the cost of housing, such as units funded through federal and state tax credit programs.

State Department: Department of Local Affairs

Eligibility: Generally, households with incomes under 50% of the area median income (AMI) of the county they live in are eligible for these rental assistance programs, although PHAs have discretion to select households with incomes at higher percentages of AMI. That said, HUD requires that 75% of new vouchers issued through the Housing Choice Voucher/Section 8 program in a given year are targeted to households with incomes at or below 30% of AMI. PHAs are also able to create criteria that give priority to certain types of households who are on waiting lists for these programs.

Program Benefits: These rental assistance programs help households afford the cost of housing by reducing their housing costs to around 30% of their household income. In the case of the Housing Choice Voucher program, the PHA pays the voucher holder’s landlord the remaining portion of the rent.

Program Funding and Access: Funding and access are both challenges for these rental assistance programs. In addition to limitations on the number of public housing units or housing vouchers a PHA can manage or issue, lack of funding compared to the need constrains the ability of PHAs to assist low-income households. In 2020, Coloradans were on waitlists for Housing Choice Vouchers for an average of 17 months. Waitlists also exist for the other rental assistance programs.

Statewide Program Access 2015-19: Over the study period of this report, an average of 21.1% of renter households with incomes at or below 50% AMI (i.e., the population who is likely to be eligible for HUD rental assistance programs) were living in subsidized housing.