urban institute nonprofit social and economic policy research

Income and Wealth Distribution

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Redistribution Under the ACA is Modest in Scope (Policy Briefs/Timely Analysis of Health Policy Issues)
Stan Dorn, Bowen Garrett, John Holahan

Claims that the ACA involves "the largest income transfer in American history" are exaggerated. Low- and moderate-income people receive benefits equaling 0.9 percent of GDP, a fraction of spending on Medicare, Social Security, and tax preferences for employer-sponsored insurance. The affluent contribute just 0.2 percent of GPD, with taxes limited to 2.4 percent of tax-filers, who pay an average of 0.5 percent of income. Nearly three-quarters of ACA's funding comes, not from the wealthy, but from the health care industry, through reimbursement cuts or taxes and fees. However, these contributions are offset by new revenue from people gaining health insurance.

Posted to Web: February 12, 2014Publication Date: February 14, 2014

Child-Related Benefits in the Federal Income Tax (Series/Perspectives on Low-Income Working Families)
Elaine Maag

The federal income tax system provides substantial benefits to families with children. In 2013, the Tax Policy Center estimates that five major child-related tax benefits – the earned income tax credit (EITC), the child tax credit, the child and dependent care tax credit, the dependent exemption, and head of household filing status – will reduce taxes and provide credits totaling $171 billion (roughly $3,400 per family) for families with children. Nearly all families benefit, but low- and middle-income families tend to benefit most. This paper highlights who benefits from each major provision and how much benefit is received.

Posted to Web: January 27, 2014Publication Date: December 31, 2013

A Demographic Snapshot of Disconnected Low-Income Men (Research Brief)
Marla McDaniel, Margaret Simms, Karina Fortuny, William Monson

In 2008-10, 16.5 million civilian men nationwide age 18-44 lived in families with incomes below 200 percent of the federal poverty level; 15 million of these men lacked college degrees. Low-income men are more likely to have never married than men the same age nationwide, and they are disproportionately African American or Hispanic. Using data from the American Community Survey, this brief presents estimates of the number of low-income men in the 50 states and the District of Columbia, focusing on metropolitan areas with at least 50,000 low-income men.

Posted to Web: January 08, 2014Publication Date: January 08, 2014

The War on Poverty Moves to the Tax Code (Article/Tax Facts)
Leonard E. Burman, Elaine Maag

In 1975, the federal income tax code joined the "War on Poverty" with the enactment of the earned income tax credit (EITC). Today, tax credits form some of the largest and most effective anti-poverty programs in the US. In 2012, the Census Bureau estimated that tax credits cut poverty (under a broad measure that includes the effect of programs like Supplemental Nutrition Assistance Program benefits and the EITC) by 3 percentage points – more than SNAP (1.6 points) and TANF (0.2 points). The tax credits cut child poverty by a whopping 6.7 percentage points.

Posted to Web: January 07, 2014Publication Date: January 06, 2014

New Perspectives on Homeownership Tax Incentives (Research Report)
Amanda Eng, Benjamin H. Harris, C. Eugene Steuerle

This report presents three tax reforms designed to promote homeownership through a channel other than the deductibility of mortgage interest. These reforms include a first-time homebuyer tax credit, a refundable tax credit for property taxes paid, and an annual flat amount tax credit for homeowners—all paid for by limiting current tax expenditures for housing. Although far from perfect, these reforms would provide a more efficient and equitable allocation of housing subsidies. Our simulations show that relative to existing incentives, each policy would raise home prices and make the tax code more progressive.

Posted to Web: January 06, 2014Publication Date: January 06, 2014

Closing the Wealth Gap: Empowering Minority-Owned Businesses to Reach Their Full Potential for Growth and Job Creation (Testimony)
Signe-Mary McKernan, Caroline Ratcliffe

The racial wealth gap grows sharply with age. When people are in their 30s and 40s, whites have about 3.5 times more wealth than people of color. By the time people reach their 60s whites have about 7 times more wealth. Skewed federal subsidies exacerbate wealth disparities and the racial wealth gap. Five suggestions to close the racial wealth gap are: make homeownership tax subsidies more progressive; promote retirement savings through IRAs and expand the Saver's Credit; reauthorize the Assets for Independence program; increase access to high-quality education; and improve access to micro and small business capital for low-wealth groups.

Posted to Web: November 26, 2013Publication Date: September 18, 2013

Validating Longitudinal Earnings in Dynamic Microsimulation Models: The Role of Outliers (Research Report)
Melissa M. Favreault, Owen Haaga

Rapid growth in the earnings of the highest earners over the past 25 years has contributed to strains on Social Security’s finances and made projecting lifetime earnings on a year-by-year basis-already a complicated technical problem-even more challenging. This project uses descriptive techniques and high-quality administrative data matched to household surveys to explore questions about the changing earnings distribution. We describe high earners' characteristics, both at a point in time and over longer periods (from 1983 through 2010). We then evaluate how well SSA's MINT7 model projects inequality in the earnings distribution and the long-term characteristics of earnings paths.

Posted to Web: November 15, 2013Publication Date: November 08, 2013

Social Security and Medicare Taxes and Benefits over a Lifetime: 2013 Update (Fact Sheet / Data at a Glance)
C. Eugene Steuerle, Caleb Quakenbush

These tables update to 2013 previous estimates of the lifetime value of Social Security and Medicare benefits and taxes for typical workers in different generations at various earning levels based on new estimates of the Social Security Actuary. The "lifetime value of taxes" is based upon the value of accumulated taxes, as if those taxes were put into an account that earned a 2 percent real rate of return (that is, 2 percent plus inflation). The "lifetime value of benefits" represents the amount needed in an account (also earning a 2 percent real interest rate) to pay for those benefits. All amounts are presented in constant 2013 dollars.

Posted to Web: November 12, 2013Publication Date: November 12, 2013

Has Social Security Redistributed to Whites from People of Color? (Research Report)
Caleb Quakenbush, Karen E. Smith, C. Eugene Steuerle

This brief considers how Social Security’s many benefit and tax features have redistributed across groups over time. Using Current Population Survey data from 1970 through 1994 and microsimulation projections from the Urban Institute’s DYNASIM3 model, we find that for many decades, Social Security redistributed from blacks, Hispanics, and other people of color, to whites. These transfers will likely to continue in future decades. Our findings suggest that future reforms that place the burden of Social Security reform solely on younger, more diverse generations may have undesired distributional consequences if the aim of the program is to provide greater relative protections to more vulnerable groups.

Posted to Web: November 07, 2013Publication Date: November 06, 2013

Housing Finance at a Glance: A Monthly Chartbook: October Edition (Research Report)
Laurie Goodman, Ellen Seidman, Jim Parrott, Jun Zhu, Wei Li, Bing Bai, Pamela Lee, Taz George, Maia Woluchem, Alison Rincon

At A Glance is the signature monthly publication of the Housing Finance Policy Center. It is designed as a single reference for mortgage market data, through a public policy lens. Drawing from a range of sources that are often difficult to access and interpret, At A Glance contains key measures of housing affordability, credit availability, and other topics related to the government role in the mortgage market. The authors compile and illustrate this critical information in a comprehensive and easily digestible format so that stakeholders across the housing finance sphere—government, advocacy, academia, and private markets—can contribute to data-driven policy debates. Highlights of the October issue include the GSE portfolio wind-down, tapering HAMP and HARP activity, and housing affordability by MSA.

Posted to Web: October 24, 2013Publication Date: October 24, 2013

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