To Change the Minimum Wage or Not to Change the Minimum Wage, THAT is the Question

It’s no secret that income disparity is the widest it’s been since the 1970s and that real wages have fallen. What’s fascinating is that corporate profits are the biggest in history as well. Clearly, the spoils have not gone to the line workers, receptionists and mail staff, many of whom do not organize into unions and operate under collective bargaining.

To address this issue, many would argue that the minimum wage should be increased under the “it’s simply not fair” statute. But that’s not quite the capitalist (albeit modified capitalist) society we live in (for better or for worse).

Another argument, and one that I’d make, is that the minimum wage should be increased for macro-economic reasons.

The vast majority of Americans are in the lower and middle classes. This group will drive economic growth simply because it spends the most. How many people do you know who can’t wait to get their tax refund so they can use that money to make needed home repairs, buy new clothes, pay off some debt or go out and eat? Now imagine this happening on almost each and every pay day because of a few more dollars in the bank.

Minimum Wage kitty

With more people buying products and services, businesses will need to adjust and hire more people, build new plants, buy more equipment, etc., to meet this demand. If I’m a local restaurant, say Ben’s Chili Bowl, and I usually serve about 1,000 people each week, I should start to see that number increase as more people can afford to eat out more often. As I start to feed more people, I will need to purchase more ingredients (so my suppliers will have to sell more ingredients to me), hire more staff to serve patrons and, maybe even, add another location (which could mean more work for architects, more rent for landlords, more construction jobs if building from the ground up, etc.). The point is that at least some of this growth funnels back into the economy.

Now, Ben’s probably won’t see this increase until after its patrons start to see more money in their wallets. So, can businesses really afford to wait? For those corporations with record profits, sure. Stockholders (including regular folks whose retirement plans have stock in them) could take a hit (higher payroll expenses would not be immediately offset by higher revenues). But, this seems temporary. Revenues would eventually pick up as consumers purchase more products and services at, ideally, a much faster pace than expenses.

And for those businesses that truly cannot afford the increase? Honestly, I don’t know. Many businesses already cannot afford minimum wage (or Living Wage, which is higher). I would suggest exempting certain businesses, as DC’s Large Retailer Accountability Act suggests. This could work in a very competitive labor market, but those businesses may eventually have to increase wages in order to compete for talent in a less competitive market.

Then there’s the inflation argument. Yes, theoretically, inflation could be triggered if you have enough people making more money. If Ben’s Chili Bowl has to pay its staff higher wages, then it might raise the price of chili half-smokes to compensate. It may also raise prices simply because more people with more money are waiting in line and are willing to pay the higher price.  But actually, over the last decade, inflation has been kept in check by a number of factors, brilliantly defying some economists’ expectations.  And I’m not convinced that raising the minimum wage will be material enough to be THE cause of inflation.

In short, I think increasing the minimum wage would be a net good for the economy.

Do you support an increase in the minimum wage? Tell us why or why not!

My Week on a Food Stamp Diet

CEO George A. Jones

Yesterday was the final day of the social justice protest known to anti-hunger advocates as the Food Stamp Challenge, and I have to admit that I am relieved.

As the CEO of Bread for the City, a DC nonprofit that has been fighting hunger since 1976, I felt obligated to join my fellow advocates who agreed to a week-long diet, consisting of foods purchased with a total of $30.  You see, $30 is the average weekly allotment food stamp recipients receive through the Supplemental Nutrition Assistance Program (SNAP); a program, for which the Federal government is threatening to cut between $4 million and $16 million from its budget.  This all in the face of the fact that the food stamp program infuses over $2 million per year into the DC economy, not to mention its economic impact for the remaining 50 states. So I and advocates from across the country have spent the last seven days challenging ourselves to walk in the shoes of those for whom we advocate to bring attention to the fact that SNAP is foolishly on the chopping block.

And as I stated in my initial sentence, I’m relieved that the challenge has come to an end. After only 7days, I am not only hungry; I’m quite humbled by the difficulty I had this week stretching my $30 worth of groceries.

I actually purchased $29.92 worth of groceries. This got me 3 cans of tuna, 1 small bag of frozen corn, 1 small bag of frozen broccoli, 3 cans of tuna, 1 bag of white bread, 1 small bag of navy beans, 1 large can of baked beans,1 16 oz. jar of peanut butter, 1 bottle of apple juice, 1 bag of green apples, 1 box of grits, 1 box of oatmeal, 1 dozen eggs, 1 small plastic bottle of mustard, 1 raw baking potato, 1 raw sweet potato and 4 bananas. When I arrived at the grocery store checkout line, my cashier told me I had to put something back if all I had was $30 to spend.  I put 4 items back: crackers, beef chunk, milk and cereal.

Now let me confess, I am a very hearty eater. So it’s in that context that I report that after only 3 and half days, I had eaten two of my three cans of tuna, all of my apples, 6 of my eggs, all four bananas and nearly all of the baked beans. I had also eaten one serving of grits and one of oatmeal. By Monday, October 15th, with three meals left to negotiate, I found myself left with a jar of peanut butter, dry grits and oatmeal, frozen corn and the remains of a pot of navy beans I cooked for Sunday dinner.  Somehow, all of my white bread – which I don’t normally even eat – is gone. And I have no meats. In fact, I have no food source at all that might be considered a main course.

Hind sight is 20-20 so I’m sure if I started the experiment over, I would purchase different items, and definitely ration them differently. But it’s plain to see that for a person living on a $30 food allowance per week, there is little margin for error.

At the beginning of my week, I was bothered by the fact that I couldn’t afford any of my favorite foods. And I’m not talking steak or even chicken. I was unable able to buy any cereal, milk, raisin bread, and certainly not any desserts.  And by the week’s end I was perpetually anxious simply about the general lack of food I had.

Ironically, one revelation I had during my week of the challenge was that virtually every day, there was at least one free meal that I turned down to remain true to the Food Stamp Challenge: breakfast and lunch at the DCPCA Annual meeting, lunch with a donor, and dinner and lunch at two events sponsored by my own agency. These were meals that I would ordinarily have been afforded simply during the course of my week as one of the nutritional “haves” in our society.

So as sit at my desk writing and eating the last of my oatmeal lunch, I pledge to continue my work at Bread for the City fighting for food justice. And I pledge to call the Senate and the House to urge them to fight against cuts to the SNAP program, so that food stamp recipients can at least afford some oatmeal to feed their families. 

I hope you’ll pledge your support to Bread for the City’s work and will call your representative requesting no food stamp cuts.

City Divests from Supports for Low-Income Families and the Local Economy

The Income Maintenance Administration announced yesterday that TANF cash assistance will be cut by 20% for most households that have received TANF for at least five years. This benefit reduction, which impacts about half of the 16,000 households on TANF, was decided at the last moment as part of the budget shortfall decisions by the City Council in December. It goes into effect April 1.

The TANF program is the primary source of support for women who are raising children and struggling to get and keep good jobs. One in three children in DC is raised with a parent in the TANF program. Beyond Bread blogger Patty Anne wrote about the shortsightedness of removing supports for TANF recipients, and Save Our Safety Net added that the decision was made even as high-income households — those who have suffered the least in the recession — were not asked to invest in a strong safety net.

Families face many different situations — waiting for job training, dealing with a domestic violence situation, recovering from a health problem, looking for work, etc. Regardless of their different timelines, needs, and goals, families need enough cash assistance to stay stable. At an event last month, TANF recipient and Academy of Hope student Ernestine McSwain said, “It helps you to buy food and puts clothes on your children’s back.” Given all the expenses these families face, nearly every penny leads to even more local economic activity. This reduction will put assistance at $342 for families that have been in the program more than five years and do not meet one of three very narrow exemptions. (The benefit is currently set at $428 for a family of three.)

The notice from IMA about the reduction says, “We want to help you find a job so you can leave TANF. If you got a letter to go to a work program, you should go to the program.” Unfortunately, TANF is not set up to support women as they work toward their goals. Program administrators, TANF recipients, and advocates have pushed for better assessments to determine the appropriate mix of education, job training, and support services (like mental health treatment) for each recipient. There’s also an education and job training capacity issue. While additional funding for training was put in the budget voted on last fall, the DC Fiscal Policy Institute reports that “even if every new adult training slot went to a long-term TANF recipient — which is not required under the current plan — only one of eight affected families could participate.”

Suggestions for how the District could better provide opportunity and stability to TANF recipients were identified by TANF recipients themselves in a 2009 report that I authored along with the DC Fiscal Policy Institute. While the administration has been receptive to the changes we suggested, very little has been implemented. Why punish TANF recipients for the District’s shortcomings? Instead, our city should invest greater oversight and funding for these programs to ensure we can emerge from the recession with healthy families and a strong local workforce.

What Budget Cuts Really Mean

>As you’ve read here, the Mayor’s proposed budget cuts would slash $52 million dollars from services helping people in poverty. These cuts will have a painful effect on our clients, as well as a direct effect on Bread for the City.

In total, we stand to lose $503,408 if the proposed cuts go through. That’s more than the operating cost of an entire month’s worth of Bread for the City’s services.

This has been a tough year for us: we’ve already cut $500,000 from our expenditures, mainly by reducing staff salaries and service hours for clients. These cuts weren’t “fat” from our budget—we lost bone. If there ever was fat to cut, there certainly isn’t now.

Bread for the City could accomplish all of the following with $500,000:
• We could distribute a three-day supply of groceries to 2,874 hungry homes
• We could conduct 2,332 social services visits
• We could conduct 2,243 examinations in our medical clinic
• We could provide 2,332 hours of legal representation

These services save the District real money. If Bread for the City received the full $500,000, we can provide these cash benefits to the City:
• The average BFC medical clinic visit costs $122.60. The national average cost of an emergency room visit is approximately $1,000. 758 patients visited BFC last year who did not qualify for any public health insurance programs, and did not have one provided by their employer. The potential cost savings for these patients to visit Bread for the City over an emergency room is $758,000.
A cot in the average DC shelter costs the government approximately $27,000 a year. Bread for the City prevented 111 evictions last year. If even 10% of these clients had ended up in the shelter system, it would have cost the DC Government $299,700.
The average monthly food stamp benefit is $101 per person. Last year BFC screened 10,095 DC residents for all public benefits, including food stamps, and provided assistance through the application processes. If even just 10% of these residents receive the national average monthly benefit for a single person, that’s $1,222,908 in revenue to spend at DC grocery stores.

In short, Bread for the City is a blue chip investment.

The DC Council faces a very difficult challenge, and I do not envy them. All we’re asking is that the pain of these cuts be spread fairly across the board, and that serious revenue raising actions are taken to minimize the blow.

If you haven’t already signed the Safe our Safety Net petition, do so now: http://www.saveoursafetynet.com/. If you have, Call the DC Council today and urge them to show responsible and humane leadership.

Budget crisis: DC’s safety net is in danger

>DC’s budget crisis is coming to a head. Our elected officials have proposed budget-slashing actions that are far more severe than we had anticipated, and we are alarmed.

Mayor Fenty’s proposal puts massive amounts of funding for the city’s social safety net on the chopping block: some $54 million worth of funding for programs that provide assistance for families with children, affordable housing, services for the disabled, etc. Proportionally, the proposed cuts to the safety net are dramatically larger than cuts to other government services – according to the DC Fiscal Policy Institute, they are at least three times larger! Meanwhile, the Mayor has proposed hardly any measures that would actually raise revenue.

Let it be clear that by raiding the social safety net, the Government will send thousands of our neighbors lives into crisis. These are programs that keep people off the streets, keep children safe, keep the vulnerable secure, and so on. As a result, these are programs that save the city lots of money. Ultimately, cuts to these programs will make this recession more prolonged and painful for the City as a whole.

Bread for the City receives funding from the city to provide some of these critical services – like our Court Based Legal Services Project, which helps prevent evictions and keeps people out of shelters. At a time when people need help more than ever before, and funding for our work is already threatened by the economy, these cuts would force us and our partner organizations to scale back our services. Rather than turn to the safety net as a first resort for freeing up capital, the City should be doing everything in its power to protect these programs.

The City has other options. The DC Fiscal Policy Institute has proposed alternative solutions that would raise revenue, tap special sources of funding for the city, and maintain DC’s safety net. Bread for the City, along with the Coalition for Community Investment, urges our elected officials to consider more humane and responsible strategies for this budget crisis.

It’s not too late. The Mayor and the Council still have time to change course. The Council will vote next Friday the 31st, so this week and next are our only opportunities to weigh in. You can also join us at the Council’s budget hearing this Friday, July 24th, 1350 Pennylsvania Ave, Suite 500, at 10am. You can also email and call city leaders to express your support for an alternative course of action that will protect the safety net – and let us know that you’ve done so.

Bread for the City will keep our community updated about the process from here on out. Please spread the word that this crisis is looming.

In the meantime, here is a list of the proposed cuts:

Enhancements previously secured for the 2010 budget that now face rollbacks include:
$2 million for rent supp
$1.5 for TANF grants
$750k for Housing First
$5.4 million for adult job training
$2 million for literacy
$1.5 million for grandparent caregivers
$500 k for rapid housing (this cuts half of the enhancement)

Cuts to existing programs include:
$6.2 million cut to TANF benefits for poor families with kids
$1.8 million for legal services to poor/poverty loan program,
$3.5 million taken from HPAP special purpose fund (not sure what impact is in 2010)
$340,000 from Office of Victims’ Services
$4 million from libraries
$1.9 million “supported work program” within income maintenance administration
$575,000 from school mental health programs
$5 million from “community health administration” (not sure the impact)
$3 million cut to neighborhood investment fund
Cut to health care contract at DC Jail
$2.5 million cut in grants for the Children Youth Investment Trust Corp
$5 million from the Dept of Disability Services

The only revenue enhancement measure is $7 million from raising a tax applied to phone bills that pays for 911 and 311 services.

Growing Unemployment: A “Game Changer” for TANF?

>[We're delighted to have another post about TANF by Joni Podschun from SOME. Word on the street is that SOME and Joni are on Twitter! - ed]

Facing a major budget crisis, Governor Arnold Schwarzenegger recently suggested his troubled state eliminate CalWORKS, California’s version of Temporary Assistance for Needy Families (TANF). This proposal was labeled both “bad economics” and heartless. Indeed, it seems incredibly shortsighted to cut safety net programs (and forfeit federal money) even as people are falling out of work and struggling to survive.

Surely enough, the California legislature’s special committee on the budget has just voted to reject the Governor’s proposal. For now, the program lives on.

And yet, most policy makers, social workers, and advocates would agree that TANF is not meeting its objectives. As I explained here before, caseloads are stagnant at best, and in many cases falling, even as unemployment claims and Food Stamp participation skyrocket. Nationally, the share of families eligible for TANF that are receiving assistance has gone from 85% in the mid-90s to 40% now.

There are many factors behind this trend. For starters, let’s consider one of the primary principles behind the Clinton-era Welfare Reform that created TANF: “Work First.” Work First presupposes that TANF participants can quickly find employment in the job market and thereby reduce dependence on public assistance. TANF was originally devised under the assumption that it just would take a little help for most TANF recipients to find and keep a job (if only a low-wage entry level job).

That principle has been debated ever since, but in this economic climate it presents a glaring disconnect that is hard to avoid: these days, finding and keeping a job is hard for everyone, everywhere. 5.7 million jobs have been lost since the recession began in December 2007 and the rate of loss is only just now beginning to slow.

This graph from the Center for American Progress (CAP) shows the severity of the jobs lost compared to recent recessions. Meanwhile, the stimulus package passed a few months ago promises to preserve or create only about half of the jobs we have lost so far.

At a recent poverty conference I attended, Heather Boushey, an economist with CAP, called the economic crisis a “game changer” for TANF. The New York Times article on the conference quotes Dr. Timothy Smeeding, who says, “We’re really in a pickle.”

The cold hard truth that they’re getting at is that the workforce doesn’t really have room for TANF recipients — and it won’t for quite some time.

So, does this mean that the Governator is actually right to move to cut TANF? If TANF is meant to put people to work, but there’s no work out there, should TANF get scrapped?

Not at all. At least in DC, the TANF program could be adapted to effectively help needy families even in this economic climate. So far, the program has not been responsive to the “changing game.” But the potential is there.

The first step would be rebalancing TANF services to go beyond Work First.

Currently, TANF-funded employment services focus primarily on soft skills: how to dress, how to interview, how to conduct yourself in the workplace. In theory, that’s enough to get people into basic labor. But it doesn’t actually equip people with the hard skills and education needed to be a truly valuable member of the work force.

Programs that focus on hard skills already exist within the current TANF structure in DC. TANF recipients can receive tuition assistance towards a college degree, for instance; they can also engage in subsidized employment and on-the-job training. If they know who to ask, TANF recipients are usually able to get permission to go to GED classes or hard skills training like SOME’s Center for Employment Training.

But the process for finding out about these programs is inadequate. In a study that SOME will release next month with the DC Fiscal Policy Institute called “Voices for Change: Perspectives on Strengthening Welfare-to-Work from DC TANF Recipients,” we find that service providers and recipients don’t know about their options for training, support services, and education. As a result, these alternatives to Work First are vastly underutilized (the final numbers will come out in our report).

More effort is needed to make the most of these programs. Part of the solution is simple enough: better procedures for assessment, screening, and orientation.

There should also be shift in funding priorities. These programs are a bigger investment, in terms of both public dollars and participants’ time. But they are also a better investment. With the contracting job market unlikely to absorb TANF participants anyway, more long-term programs would actually be an optimal use of available resources, rather than leaving so many people to cycle back through the program. And when the economy rebounds, participants will be able to get better jobs that allow them to provide for their families.

In the meantime, however, there’s another pressing need: greater income support. Even with more effective job training programs, TANF recipients are facing a long stretch of unemployment as our country winds through the Great Recession. During that time, we need to ensure that these needy families have adequate income, as we’ve discussed before. (Currently, the TANF benefit for a family of three is just $428 per month. That’s intended to cover housing, transportation, utilities, household expenses, etc.)

We applaud DC Councilmembers, led by Jim Graham, who voted last week to increase the TANF benefit in the fiscal year 2010 budget. We should take the next step and look at what families really need to be healthy and stable.

National Poverty News Roundup for 28 April

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Here in the week following the signing of the Edward M. Kennedy Serve America Act — a piece of national legislation that, among other things, sets in motion a dramatic expansion of AmeriCorps and inaugurates a new “Summer of Service” program for middle and high school students — it appears that the need for such service remains as high as ever. Food banks across the country continue to see increased demand and decreased supplies, while tent cities, sometimes populated by long-term residents, continue to be a feature of the contemporary US housing scene. And although we have both successful examples of and expert knowledge about particular policies that can address the problem of homelessness, funding remains a challenge, especially in these economic times.
The economic downturn is not only affecting poverty-reduction efforts in the United States, of course, but is also having an effect globally. US Treasury Secretary Geithner cautioned that international financial institutions needed to alter their practices in order not to give up global gains in fighting poverty, and focus more on “long-term development objectives.” The Obama administration is seeking $100 billion in new aid money, and for the first time in its history the IMF has agreed to issue interest-bearing bonds to finance its programs. All this at the very same time that the World Bank has issued a report forecasting that Eastern Europe and Central Asia will see millions of people pushed into poverty over the next few years. In such circumstances, it’s inspiring to see rallies and assemblies of concerned groups, raising consciousness and perhaps helping make solutions politically viable.
On another front, things continue to go poorly for the mortgage modification bill that continues to meet with industry opposition as it makes its way through Congress. The relief system at the moment is perverse to the point where, reportedly, some struggling homeowners are purposely skipping mortgage payments in order to qualify for some kind of payment modification from their lenders. This hardly seems like a recipe for a sustainable program of keeping people in their homes. Given other societal and global needs, is a bailout of homeowners with unsustainable mortgages ethically justifiable? Yes, argues Randy Cohen, because “a foolish financial decision need not be a moral failure or even unusual.” Agree or disagree, the claim — and the discussion it provoked — is worth taking a closer look at.

National Poverty News Roundup for 21 April

>The news roundup is back after a slight absence. Top of the list for this week, even though the report is a couple of weeks old by now, is the national March unemployment report, which puts the national unemployment rate at 8.5%. Although that’s up 3.4% in the last twelve months, this is the kicker sentence in the report’s summary: “Half of the increase in both the number of unemployed and the unemployment rate occurred in the last 4 months.” Half. There may be isolated bright spots in the national economic picture, but overall, it looks like we’re continuing to see the effects of earlier financial and housing collapses rippling through various sectors. Hawai’i can’t build planned homeless shelters, and Minnesota’s plans to end long-term homelessness are also threatened by budget cuts. Although the U.S. Department of Housing and Urban Development continues to award grants, it remains unclear whether these grants will be sufficient to replace the funds that localities and regions have lost in the current economic climate.

Layoffs continue to spread into new industries and sectors, affecting people who never thought they’d lose their jobs. One food bank manager reports that the demand for food is up 40% in his region; other food banks are turning to grow-your-own policies in an effort to supplement the other food that they distribute. Tax day, always a stressful time, was worse this year for many people unable to pay their bills; some tax preparers report a large increase in the number of people paying taxes with credit-cards. And mortgage lenders continue to resist the Obama administration’s foreclosure-reduction plans that give bankruptcy judges the authority to change loan terms; that might signal even more foreclosures to come, now that the voluntary moratorium on foreclosures enacted by many of those lenders seems to have come to a close.
Stalemate? Amid the negative, some positive signs, not of economic recovery, but of ways that people are managing. Students and sports stars continue to engage in fundraising efforts. The Obama administration is in the process of unveiling a number of major policy initiatives, such as this plan for a national high-speed rail network; will this kind of infrastructure spending get the economy moving again? In the meantime, look for green jobs and maybe even the return of the barter economy, at least on a small scale. In the end, perhaps many of the solutions we seek can be best formulated and implemented regionally.

Coalition for Community Investment supports the Equitable Income Tax Act

>As part of the Coalition for Community Investment, Bread for the City has signed on to the following letter in support of the 2009 Equitable Income Tax Act, which would adopt revenue-raising measures without unduly burdening the most vulnerable DC residents in this time of economic crisis.

The Coalition for Community Investments supports the Equitable Income Tax Act of 2009, a bill that would set a new income tax bracket for households earning more than $500,000. This proposal, which closely follows one of the Coalition’s revenue-raising recommendations, would raise revenues to address DC’s serious budget shortfall and help preserve services that support DC families and neighborhoods. The Equitable Income Tax Act would raise revenues in a progressive way, with no effect on low-and moderate income households. It offers a good alternative to several revenue proposals in the FY 2010 budget that would fall most heavily on low-income residents.

A number of states have established a new income tax rate for higher-income households in recent years, including Maryland, California and New Jersey — and other states such as Delaware are considering doing so. The new tax rate of 8.9 % in the DC bill would increase taxes by just $400 for a family earning $600,000. It would leave the DC’s top income tax rate below the top rate in the Maryland suburbs — now 9.45 percent when both state and county income taxes are considered.

Leading economists endorse this approach to addressing state budget deficits. Peter Orzag (now head of the U.S. Office of Management and Budget) and Nobel Prize-winner Joseph Stiglitz have noted that “tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run.” They note that cuts in government programs can be damaging to local economies. Tax increases on higher-income families have a more limited effect because these families spend and invest much of their income outside of the local area and because modest tax increases are unlikely to affect their consumption.

The revenues that would be raised by the Equitable Income Tax Act could be used to restore funding to a number of programs that have been cut in recent years — such as affordable housing or pre-K education. These services are important to DC residents and to the DC economy.

The proposal to raise revenues through a new income tax bracket offers a good alternative to regressive revenue-raising provisions in the FY 2010 budget. The budget would eliminate cost-of-living adjustments to three tax benefits that are important to low-income families: the personal exemption, standard deduction, and property tax homestead deduction. And it would establish a new streetlight maintenance fee and increase the E911 fee, adding roughly $60 to annual utility bills for DC households. These would fall especially hard on low-income families who already struggle to pay utility bills and often face the threat of a utility shut-off.

In February 2009, the Coalition for Community Investment released recommendations for raising revenues or finding budget savings, including a recommendation to create a new bracket for families above a certain income level. The Coalition thus supports the Equitable Income Tax Act as one of several possible ways to raise revenues and preserve services, without adversely affecting low- and moderate-income families.

The Coalition for Community Investment represents over 160 diverse organizations and individuals committed to public investments that expand economic opportunity for our neighborhoods and families, and support a fair and transparent budget process. If you or your organization would like to join with us in the Coalition for Community Investment, please email signstatement[AT]some[DOT]org.

Sign on letter: No regressive taxes in the budget

>It’s Budget Season. With an $800 million deficit crisis, the city faces tough choices. Overall, Mayor Fenty’s budget proposal is encouraging: in particular, he has proposed to raise $120 million in new revenues. This will help preserve funding for many important public services.

But several of the proposed tax and fee increases (among them, the elimination of cost-of-living adjustments for certain tax credits) would fall most heavily on low-income residents.

The DC Fiscal Policy Institute is calling for action. The letter below urges Mayor Fenty and Chairman Gray to raise critical revenue in ways that don’t disproportionately impact the poor. Bread for the City has co-signed; will you, or your organization, join us? (The deadline for signing on is Wednesday April 22; please email Ed Lazere to join.)

We are writing to express our concern over several tax and fee increases in the proposed FY 2010 budget that would fall most heavily on low-income residents, particularly on renters and the working poor. We urge the Council and Mayor to develop alternate ways to raise revenues that are progressive and do not adversely affect low-income residents.

We applaud the Mayor’s efforts to identify additional revenues to offset the city’s serious budget shortfall. The additional revenues help preserve funding for important public services in the FY 2010 budget. Many of the revenue proposals are sound, such as the proposal to close the “Delaware Holding Company” corporate tax shelter.

Some of the tax and fee increases, however, would be highly regressive, including the proposal to eliminate cost-of-living adjustments for the standard deduction, personal exemption, and property tax homestead deduction, as well as the proposals to create a new “streetlight maintenance” fee and to raise the E911 fee. Together, these regressive tax and fee changes total $26 million.

The standard deduction, personal exemption, and homestead deduction make DC’s tax system more progressive. The standard deduction is claimed by households that are not able to itemize deductions, including most renters and lower-income households. The personal exemption applies to all taxpayers and the homestead deduction applies to all homeowners. But because the value of these deductions is the same for all taxpayers, the deductions offset a larger share of income and home value for lower-income households.

Making annual cost-of-living adjustments to these tax benefits is important. Until recently, each of these deductions had remained frozen for 15 years or more and had lost significant ground to inflation. The deductions have been increased in recent years, and the DC Council adopted cost-of living adjustments in 2007 so that the deductions would not lose value in the future.

Eliminating cost-of-living adjustments to the standard deduction, personal exemption, and homestead deduction would result in higher taxes for DC residents than if current law were maintained. The impact of rising taxes would fall most heavily on lower-income residents, who benefit the most from these deductions. And the tax increases would grow each year, as these deductions fall further and further below the value they would reach if they were adjusted for inflation.

The proposals to create a new streetlight maintenance fee and to increase the E911 fee also are regressive and will adversely affect low-income residents. The streetlight maintenance fee would add $51 dollar to annual electricity bills, and the increased 911 fee would add roughly $10 a year to phone bills. While these fees may be manageable for middle and higher-income families, they would place a burden on low-income families, many of whom struggle to pay utility bills and face utility shut-offs as a result of non-payment.

For these reasons, we urge the Mayor and Council to maintain the cost-of-living adjustments for the standard deduction, personal exemption, and homestead deduction. We also recommend rejection of the streetlight maintenance fee and the E911 fee increase — unless steps can be taken to ensure that all low-income households can be exempted. We urge the Mayor and Council to find alternate revenue sources for the FY 2010 budget that would not adversely affect low-income residents.

For more about the budget, check out DCFPI’s as-yet-unnamed new blog, and also their excellent and accessible Budget Toolkit. Many thanks to Ed Lazere and DCFPI for their vital work.