The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include taxes, inequality, the impact of demographic shifts on retirement security, education, and housing regulation.
The 2011 tax season officially came to a close this week. The New York Times ran a piece highlighting the “country’s largest antipoverty program, the earned income tax credit….Nearly one in five filers now receive the credit — about 28 million returns in the 2010 tax year, the most recent year figures are available — representing the highest percentage since the program began in the 1970s, according to the Brookings Institution.” The credit is not without its problems: Mae Watson Grote of the Financial Clinic explains that the windfall can be hard to manage, creating a “feast or famine” phenomenon. Kai Wright from Colorlines bids adieu to the refund anticipation loan in a piece that also explores the links between predatory lending, racial inequality and poverty. At The Atlantic, Derek Thompson outlines some of the common complaints about the tax code and gives a nice shout out to this year’s Assets Report. Check out Justin King’s reaction here. The Washington Post reports on a poll that shows 56% of people would rather spend more and raise taxes to promote economic growth, while 37% would rather lower taxes and cut spending.
The Center for American Progress has a new brief out about income inequality that looks at how tax policy has shaped inequality over the years. Check out this New Yorker essay from Nicholas Lemann for a longer read on the history of inequality and the politics and public response to it. Two economists look at this same history in the New York Times: Piketty and Saez have argued that historically countries have successfully had higher tax rates to mitigate inequality. Piketty has this to say: “The United States is getting accustomed to a completely crazy level of inequality. People say that reducing inequality is radical. I think that tolerating the level of inequality the United States tolerates is radical.” Saez adds, “Absent drastic policy changes, I doubt that income inequality will decline on its own.” Ezra Klein argued for a point that we’ve often made, that wealth inequality might matter more than income inequality, “So if you're a middle-class American family that owns your home, your main asset likely hasn't recovered, and you may still be out of a job. If you're a wealthy investor, your portfolio has likely reached new heights, or come very near to it. That's exacerbated inequality on the wealth side, which we don't track as closely, but which arguably matters more as it governs the sort of investments families can make in their future.”
Demographic Shifts and Retirement
NPR looks at “the millions of people sandwiched between their aging parents' growing needs and their children's "launch" costs — from first-car purchases to higher education.” The Baby Boomer generation is experiencing economic pressures that are having a profound impact on demographic trends across the U.S. Lengthier lifespans are also a threat to retirement security, the Boston Globe reports. While the piece offers a perspective focused on the retirement concerns of higher-income people, the point still stands for people at all incomes: economic insecurity in old age is widespread. Research from Wider Opportunities for Women is featured in this Reuters piece which reports that “52 percent of elderly households report incomes that do not provide economic security to cover costs for housing, food, transportation, healthcare and miscellaneous expenses.” The rates are even higher for older Americans of color. However, as the Washington Post reports, “tax preferences for retirement savings tend to provide bigger benefits to wealthier taxpayers, who not only are able to save more but also receive a more valuable tax break because they pay higher rates.” This echoes the sentiment of our Assets Report which finds that federal spending on retirement and savings overwhelmingly goes to higher-income people. Check out our Hunger Fellow Aleta Sprague’s post about how the budget exacerbates the retirement income gap for more.
Brookings released a new report that looks at residential segregation as a driver of educational inequality. The Huffington Post has more about the report, linking it to a story last year of a Connecticut mom who was charged with felony larceny after sending her son to school in a better performing district where they were not residents. Dana Goldstein (a New America Foundation fellow) looks at opportunities to redefine the future of vocational education. She interviews Nancy Hoffman, an expert on Western European models of apprenticeships for high school aged youth, which she suggests are one solution to widespread youth unemployment.
Housing and Financial Regulation
The Consumer Financial Protection Bureau is sending a strong message to banks and lenders about discriminatory lending practices. Richard Cordray, CFPB director, explained, "It is important to recognize that this subtle but powerful form of discrimination creates damages that are no less direct than the kind of overt and blatant discrimination that, we hope and assume, is increasingly a relic of a bygone era.” U.S. News has more about the CFPB’s work on this. The Washington Post interviewed Joseph Smith, Jr. who has been tasked with monitoring banks following the landmark $25 billion mortgage settlement in February. The Post explains, “Smith’s primary role over the next several years will be to ensure that banks — Wells Fargo, Citigroup, JPMorgan Chase, Bank of America and Ally Financial — live up to their end of the deal by overhauling their troubled mortgage servicing operations and following through with the billions in aid they agreed to give struggling homeowners."
- The Economist has a chart up showing the gender wage gap by occupation, drawing on data from the Institute for Women’s Policy Research.
- “I’d take the $3.95 any day over the $35 overdrafting or for some other fees.” TIME reports on attitudes toward prepaid cards.
- The New York Times reports that Florida’s policy of drug testing welfare (TANF) recipients ended up costing the state an extra $45,780 and failed to "dampen" the caseload.