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President Trump’s Budget: Wealth Building for the Wealthy at the Expense of Working Families

By Anju Chopra, Joanna Ain, Emanuel Nieves and David Newville on 05/24/2017 @ 03:00 PM

Tags: News, Federal Policy

Yesterday, the President released his fiscal year 2018 budget proposal, and it contains few surprises. While providing more details than the “skinny budget” that was released in March—such as the inclusion of mandatory spending programs such as Medicare and Social Security—it does not drastically deviate from what was included in this earlier, less fleshed out version of the budget. It still reflects the President’s basic goal of benefitting the wealthiest individuals with tax cuts while drastically defunding programs that help the low- and moderate-income households who are already struggling to get by.

Titled, A New Foundation for American Greatness, the budget prioritizes large tax cuts for the wealthy along with defense spending and border security by increasing the Department of Defense’s (DOD) budget by more than $50 billion as well as allocating more than $70 billion to the Department of Homeland Security (DHS) and Justice Department (DOJ) for police and immigration enforcement. It proposes to pay for this through very deep cuts to the core of safety net and beyond that millions of working families depend on for their social and economic well-being.

And it does not stop there. The President proposes spending reductions of more than $3.5 trillion dollars over the next decade, with safety net and other important social programs receiving the lion’s share of cuts. This includes cutting funding for the Medicaid program in half, or more than $600 billion over this time frame.

Below is a high-level overview of proposed cuts and changes to key programs related to each of CFED’s four advocacy campaigns.

Safety Net Programs

Safety net programs took the biggest hit in the President’s FY2018 budget. Recommended are “reforms,” including work requirements and tightened eligibility, to programs that support our most vulnerable families. For programs that are managed jointly between the federal government and the states, like Supplemental Nutrition Assistance Program (SNAP) and Medicaid, there is also a massive cost shifting to the states that would put growing pressure on state budgets in the years to come.

Although the President has insisted that he would not cut Social Security benefits, he cuts benefits for disability programs by $72 billion over the next 10 years. These cuts result in changing Social Security Disability (SSDI) from 12 month retroactive payments when someone is accepted to the program to six month retroactive payments and creating a sliding scale for families receiving Supplemental Security Income (SSI) who have multiple recipients within the household.

Cuts to Health and Human Services (HHS) and the Department of Agriculture (USDA) can greatly impact anti-poverty programs. Within the 16.2% cut to the HHS budget, the President eliminates funding for the Assets for Independence (AFI) program that was cut in the FY17 Omnibus spending bill a few weeks ago. A $616 billion cut to reform Medicaid and the Children’s Health Insurance Program (CHIP) will take healthcare away from families and children who need it the most over the next 10 years.

Temporary Assistance for Needy Families (TANF) is reduced by $1.2 billion in FY2018 and the TANF Contingency Fund, which was created for use by states during economic downturns, is eliminated. The USDA is cut by 20.5% next year—the Supplemental Nutrition Assistance Program (SNAP) alone faces a $4.6 billion cut in FY2018 and a cut of over $190 billion over the next decade, along with a call for work requirements as well.

Other programs that were eliminated include the Low Income Home Energy Assistance Program (LIHEAP), the Community Services Block Grant (CSBG) and the Social Services Block Grant (SSBG).

Housing, Homeownership and Community Development

Federal programs that support housing and community development for low- and moderate-income households would also experience severe cuts under the President’s budget, including more than $6 billion of funding slashed from the Department of Housing and Urban Development’s budget.

It also does not diverge from the “skinny budget” in calling for the elimination of a whole slew of vital housing and community development programs and organizations that support working families, including Choice Neighborhoods, the Community Development Block Grant and the CDFI Fund. For the more detailed list of defunded programs, please see the blog we wrote on the skinny budget.

It also adds the Neighborhood Stabilization Program (NSP) and the Housing Trust Fund (HTF) to the list, as well as gutting the very popular 502 Direct Loan and 504 Home Repair Programs. The NSP and HTF were enacted during the housing crisis to reduce neighborhood blight and housing foreclosures as well as help boost the supply of affordable homeownership, while 502 and 504 provide low-cost loans for the purchase or repair of housing for low-income borrowers that live in rural communities. The budget does preserve the 502 Guaranteed Loan Program, where loans made by intermediary lenders are backed by the government, but at a much lower level than what was budgeted for 2017.

The budget also calls for a reduction in funding for research related to housing and enforcement activities to curb housing discrimination. Given the large racial homeownership gap and growing racial wealth divide, these cuts are particularly troubling.

While much of this news is bleak, there is – thankfully – one positive development. Funding is maintained for the Family Self-Sufficiency program in the budget proposal. This is a small - but meaningful - victory.

Consumer Protections

Unlike the “skinny budget” proposal from earlier this year, the President's full FY18 budget proposal provides us with a more complete picture on how he would fulfill part of his promise to 'do a big number' on Dodd-Frank Wall Street reform. Outside of a handful of regulatory-focused Executive Orders he’s already signed this year, the President’s budget calls for restructuring the Consumer Financial Protection Bureau (CFPB) so that not only is the Bureau brought under the Congressional appropriations process but also refocused towards solely enforcing consumer laws. In calling for such changes, the President’s budget mirrors efforts on Capitol Hill—such as The Financial CHOICE Act of 2017—which would leave countless consumers susceptible to the very same predatory products, services and behaviors that brought our economy to the brink of collapse.

If enacted as the president has proposed, the CFPB's current funding of $650 million would see an immediate 22% reduction in FY 18, which would precede the agency’s transition to a strictly consumer law enforcement agency. As bad as this already is, it is made even worse by the fact that over the next ten fiscal years the president also proposes reductions that are at and above the agency’s current level of funding. Put differently, the President’s future aspirations for the CFPB seem to be not only rooted in reducing the Bureau’s effectiveness to protect consumers, he essentially wants the agency wiped out entirely.

Given the devastating economic impact the Great Recession had and the actions that led to millions of Americans to lose their homes, their jobs and their wealth, it is clear that consumers need a federal agency whose sole mission is to protect them in an ever-changing and complex financial marketplace. Instead of reducing the ability of the CFPB to do the job it was given and one that it has been exceptionally good at doing—including its work towards returning nearly $12 billion back to a total of 29 million consumers—the President should work to elevate and strengthen the CFPB, not gut it.

Tax Time

As mentioned previously, many of the reductions in this proposal are intended for the purpose of providing tax cuts to the wealthy or turning the tax code further upside down than it already is. But this document does not contain any further details on what these tax cuts would look like and the administration has thus far only released one page of bullet points so far that outlines their tax reform plans.

The budget proposal does however go after immigrants’ access to two of the most important poverty fighting and opportunity building tax credits: the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). While the EITC and CTC are kept on the books and receive more than $80 million in funding, the administration mandates additional exclusions for those who do not have a valid social security number, even if they are claiming a child with a legitimate number.

The budget also calls for a further crackdown on improper payments and fraud in the tax system, and there have been claims and strong insinuations by this administration and others in Congress that this fraud is being driven by immigrants and low- and moderate-income households through programs like the EITC. However, the evidence simply does not support these claims. Programs like the EITC have been found to only make up 6% of the tax gap and if you are truly serious about stopping improper payments for this program, there are better and more effective ways to do this without making it harder for working families to access these credits or reduce their positive impact.

One way to do this is through requiring paid tax preparers to meet basic competency standards, so they do not file inaccurate or fraudulent tax returns on behalf of working families. The budget proposal includes a provision about regulating paid tax preparers. There are not many details on this provision, but it is one of very few promising pieces in this proposal.

One other bit of positive news is that the budget calls for level funding the Volunteer Income Tax Assistance (VITA) Program at $15 million, which is no small thing and a victory for low- and moderate-income tax filers.

How You Can Stop This Deeply Misguided Budget Proposal from Becoming Reality

First – Stay Positive! Remember, this is just a proposal and we can still stop these cuts and bad proposals. Congress is also the one who writes the actual budget, not the President, but if you do not let them know how you feel about this, some pieces of this may become part of the actual budget, which leads to part two . . .

Second – Contact your Members of Congress Today. Congress is currently in the process of putting together the fiscal year 2018 budget and if they do not hear from you and others about why these proposals are bad, they might decide to adopt some of them.

The only way to stop this is by calling your Representative today and telling them how much you oppose the President’s budget proposal and why. Include details on how these cuts would impact you, your programs and your community. Share personal stories with them and any numbers you have about the impact of these programs if you have them.

Don’t forget to remind them that you will be watching to see what they do and how they vote and will be staying on top of them and calling again as the budget process progresses, which leads to part three . . .

Third – Stay Up to Date on the Budget Process by Signing Up for Our Campaigns. In order to stop these cuts, we need to remain vigilant and not let up on our Representatives as they put together the budget in the coming months. Congress is focused on finalizing the budget by the end of September and there will be several key points to influence them between now and then. To stay up to date on the latest developments and the best ways to engage with your Representatives and stop bad provisions from being included in the final budget, we strongly encourage you to sign up for one of more of our advocacy campaigns. Signing up is the best way to stay informed and be alerted when it is time to act. Together, we can stop these cuts and help build an opportunity economy instead of an inequality economy.

Reintroducing….the Save for Success Act!

By Joanna Ain and Chad Bolt on 05/05/2017 @ 03:00 PM

Tags: Federal Policy, Education

Yesterday, Representative Ben Ray Luján (D-NM) reintroduced the Save for Success Act (H.R. 2378) to help turn the tax code right-side up and support low- and moderate-income families as they save for college. The bill reforms the American Opportunity Tax Credit (AOTC) to give families a boost at tax time as soon as they start putting money aside for higher education. By allowing them to claim up to $250 of the AOTC each year they save in a 529, families see tax benefits as soon as they save – not after they’ve gone to college and paid tuition.

We all know the benefits of saving for college and have shouted them from the rooftops. Research shows that starting to save early for college results in stronger college expectations, higher graduation rates, improved social-emotional development and greater likelihood to own savings accounts as adults.

But 529s don’t work for everyone. The Government Accountability Office found in 2012 that families with 529 plans or Coverdells (similar to 529s but also applicable to primary and secondary schools) had median incomes of about $142,000 per year compared to $45,100 for families without. That’s in part because the tax advantage comes when money is withdrawn from the account – not up front when a deposit is made. The Save for Success Act fixes this, creating a stronger incentive for families to start saving early.

As is, the AOTC allows low- and moderate-income families with college expenses to receive a $2,500 tax credit for each of a student’s first four years of higher education. The problem is that this support only comes months after families pay for college, so low- and moderate-income households who don’t have the ability to outlay this expense still struggle to keep up with college expenses. The Save for Success Act will encourage these families to start saving early for college by making them eligible for up to $250 of the AOTC for every year that they save in a 529, starting with the birth of their child. Instead of having to wait to until the college years to get the tax benefits of paying for college, they would be incentivized to start saving from the birth of their child.

The lifetime cap of $10,000 for the AOTC remains. So if the family saved $250 for every year until their child turned 18, they would still be eligible for $5,500 in support during the college years to pay for tuition, fees, books and other college expenses. The bill doesn’t raise the value of the credit — it would just deploy existing federal spending on higher education more effectively.

Endorsed by the National Education Association, the American Federation of Teachers, 529 Dash, Center for Global Policy Solutions, Center on Assets, Education, and Inclusion at the University of Kansas, Center for Social Development at Washington University in St. Louis, First Focus and “I Have a Dream” Foundation, other features of the bill include improved outreach around the AOTC to bolster awareness so that more families know about and can take advantage of the program and a volunteer pilot program to test “real-time” payments of the AOTC so that students can receive financial relief when their education expenses are due throughout the year instead of waiting until tax season.

By restructuring the AOTC, the Save for Success Act has the potential to increase the number of low- and moderate-income families saving for their children’s future. Ask your member of Congress to cosponsor the Save for Success Act (H.R. 2378) today, and if you want to learn more about legislation like this, sign up for our Turn It Right-Side Up campaign today!

The Financial CHOICE Act Ignores One of the Greatest Lessons Learned from the Great Recession

By Emanuel Nieves on 05/05/2017 @ 10:00 AM

Tags: Federal Policy

Yesterday, in the midst of the House voting to repeal and replace the Affordable Care Act, the House Financial Services Committee approved HR 10, the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act of 2017. The legislation, which was reintroduced just last week by Financial Services Committee Chairman Jeb Hensarling, is billed as necessary to spur economic growth, hold Wall Street accountable and foster consumer financial independence. Despite how the Financial CHOICE Act is being framed by supporters, at the core of what it aims to achieve is a dismantling of common-sense Wall Street reforms and consumer protections put in place as a response to the Great Recession.

At the top of that list is a fundamental reshaping of the Consumer Financial Protection Bureau (CFPB), which despite the characterization by opponents of the Bureau that it is a ‘rogue agency,’ in the six-years since it’s been around it’s been both highly successful and extremely accountable to the very people it was set up to serve: consumers. In part, that success and the level of accountability we’ve seen over these past few years can be attributed to the CFPB’s sole-mission of helping and protecting consumers, which has been made possible by a number of agency functions, including:

Consumer Tools

Through its consumer-focused abilities, the CFPB has helped countless consumers make informed financial decisions by providing valuable tools and information that have helped many navigate a financial system that can be complex to even the most knowledgeable consumer. As part of this effort, through its consumer complaint portal, the CFPB has given a voice to consumers who have found themselves unable to resolve issues with financial service providers. To date, the CFPB’s consumer complaint tool has resolved issues for over one million consumers.

Educational Resources

Part of the CFPB’s enormous value to consumers everywhere has been its ability to proactively provide educational resources about the best financial practices available, so that consumers can not only interact with the financial system in a safe manner but can also build long-term financial security. Among some of these tools are the Your Money, Your Goals toolkit—which is a set of resources available for front-line services providers to use with clients as they work to achieve their financial goals—as well as tailored information for libraries, tax preparers and parents.

Data & Research

As impressive as the CFPB’s front-facing consumer work has been, its research capabilities have been instrumental to its success so far. In addition to helping the agency better understand trends within a number of consumer financial markets—from mortgages to payday lending—their research functions have also allowed them to discover and take action against a number of unfair financial practices.

Policy & Compliance

In addition to the above-mentioned functions, the CFPB’s policy & compliance abilities—including rulemaking and enforcement—have given the agency the ability to craft common-sense policy solutions and rules to protect consumers against predatory practices. Despite CFPB’s work so far to develop a number of common-sense rules—including establishing new mortgage lending and disclosure standards—much work remains to be done. Among some of this outstanding work are efforts to prohibit consumers from being entered into forced-arbitration, ensuring that consumers of prepaid cards have access to basic consumer protections and ending the debt trap perpetuated by payday and auto-title lenders. Despite the amount of work ahead, so far, the Bureau’s policy and compliance abilities have allowed it to provide about $12 billion in financial relief to 29 million consumers—about one out of every 10 consumers in the country.

So what does the Financial CHOICE Act aim to do to the strongest watchdog consumers have had on their side? Essentially, it would gut it.

While the bill does not propose converting the CFPB into a multi-person commission, thus setting the stage for internal gridlock at the Bureau for years to come, it would move the agency’s funding under the appropriation process, which would provide an opening for members to starve the agency of much-needed funded in the years to come. In addition, it would undermine the CFPB’s independence and give members of Congress the ability to stop the agency from working on certain issues.

Unfortunately, this change is just one small piece of what the Financial CHOICE Act aims to do to the CFPB. Some of the other not-so-subtle changes include:

  • Limit rule-making authority to enumerate statutes, which has provided the CFPB with flexibility to develop common sense rules that respond to the latest threats against consumers in an ever-changing financial marketplace, recognizing that the problems of today may not be the problems facing consumer tomorrow.
  • Repeal of Unfair, Deceptive or Abusive Acts and Practices (UDAAP) authority, which the agency has used to bring enforcement actions against a number of bad financial actors, helping to return billions back in the pockets of consumers.
  • Repeal of advisory boards, supervision and market monitoring powers, which has helped the agency cultivate broad stakeholder engagement and identify market trends that could pose threats to consumers.
  • Complete prohibition from regulating payday, auto-title or other forms of small-dollar lending, which each year strips over $8 billion dollars from the pockets of financially vulnerable consumers through triple digit interest rate loans that keep consumers trapped in a long-term cycle of debt and financial insecurity.
  • Allowing the Bureau to eliminate certain offices and functions, such as its consumer education and research arms as well as the office of fair lending, which has been critical to ensuring all communities have fair and equal access to credit, whether it’s to go to school, start a small business or buy a home.
  • Blocking the CFPB from making the consumer compliant database public, which has helped to create more transparency between consumers and the marketplace and has provided consumers with an invaluable tool to remedy issues across a whole range of financial products and services.

Beyond the CFPB changes, the Financial Choice Act also includes a whole host of other provisions that would roll back a number of tools and laws, including the Dodd–Frank Wall Street Reform and Consumer Protection Act. Among those provisions is one that would harm vulnerable individuals and families seeking to purchase a manufactured home—which make up one of the largest sources of unsubsidized affordable housing in the country—by stripping away needed protections that protect these homebuyers against a number of predatory practices that have plagued this industry, including loan steering.

If this is what it takes to spur greater economic growth, hold Wall Street accountable and foster consumer financial independence, then the costs are too high—especially after going through the Great Recession in which clearly showed why an agency like the CFPB is needed. While some may need what the Financial Choice Act is selling, families and consumers throughout the country need a strong, effective and independent consumer watchdog along with an array of strong federal resources to protect them.

Toxic Inequality: It’s Not Just an Environmental Issue

By Emanuel Nieves on 05/04/2017 @ 09:00 AM

Tags: News, Federal Policy

Despite recent attention to the economic and social vulnerabilities facing people of color—Black and Latino populations in particular—the Trump presidency has shifted a great deal of national attention to the plight of White, working-class voters, many of whom elevated the President into office. While the 2016 presidential election may have catalyzed these voters’ sense that their concerns were finally being addressed, the attention being paid to White, working-class Americans since Election Day has also reshaped our conversation about the growing problem that is impacting us all and will continue to well into the foreseeable future: the racial wealth divide.

Today, African American and Latino families face a racial wealth divide that sees them owning just $11,000 and $13,700 in median wealth, respectively, compared to the $142,000 owned by the median White household. While solving issues of economic insecurity requires that we be sensitive to the economic insecurities of all Americans, as President Obama suggested during his farewell speech, we must be mindful that not all economic suffering is experienced in the same ways, nor are they the result of the same historical factors.

With this in mind, CFED and New America co-hosted an event last month to feature Dr. Thomas Shapiro and his new book, Toxic Inequality: How America’s Wealth Gap Destroys Mobility, Deepens the Racial Divide and Threatens Our Future.

The event, which welcomed several expert panelists—Washington Post’s Janell Ross, New America’s Cecilia Muñoz and CFED’s Jeremie Greer—set the stage for a conversation on the racial wealth divide, public policy and the politics that continue to deepen our financial, racial and social divides. During the conversation, Dr. Shapiro and others noted that although recent public policies have been blamed for the pain experienced by White, working-class Americans, there have been a whole host of discriminatory public policies—from redlining to the tax code—over the past century and beyond that fueled the unfortunate realities faced by communities of color today. Indeed, as we work to uncover the social and economic unrest felt by White, working-class families, we must also remain steadfast in our work to reverse the trend of growing racial economic inequality.

As we look toward building an economy that works for everyone, Toxic Inequality is a solid playbook from which we can start. Putting a job with a livable wage and good benefits, access to education, homeownership that is affordable and more within the reach of everyone—not just the select few—will require policies at all levels of government that intentionally lift up communities of color who for far too long have been left behind.

Congress Agrees to a Spending Bill That Funds VITA But Not AFI

By Chad Bolt and Leigh Tivol on 05/01/2017 @ 05:00 PM

Tags: Federal Policy

Over the weekend, Congress agreed to an “Omnibus” spending bill that will fund the government through September 30, 2017. Votes are expected on this bill by the end of the week. The bill finalizes spending levels for FY17 and comes as the FY18 process has already started, with the release of President Trump’s skinny budget earlier this spring. Below is an overview of some of the major asset building related items in the budget.

VITA

The Omnibus funds the Volunteer Income Tax Assistance (VITA) grant program at $15 million, level funding from the previous year. This provides certainty to VITA programs that the grant funding will continue for at least the near future.

CFED continues to advocate for legislation that permanently authorizes the VITA grant program. Fortunately, Senators Brown (D-OH) and Heller (R-NV) have introduced a bipartisan bill that would provide that long-term certainty, the VITA Permanence Act (S. 797). This is a promising development that puts us on a path toward permanently authorizing the program.

Community Facilities

The Omnibus funds the Communities Facilities program at $2.6 billion, a $400 million increase from last year. This program provides low-cost loans to build critical community infrastructure like hospitals, schools and public safety facilities. It targets historically underserved rural communities throughout the country.

A portion of this funding supports the Department of Agriculture’s relending program, which leverages CDFI partnerships to build and repair critical community facilities. The Uplift America program, which CFED plays an important role with, assists CDFIs in this endeavor by providing additional technical assistance and resources to deploy this critical financing.

Assets for Independence

Unfortunately, there is some very bad news in the Omnibus for the asset building field: the Assets for Independence (AFI) program is not funded. Despite nearly a year long advocacy campaign from the field, AFI’s $18.95 million in funding that fueled Individual Development Accounts (IDAs) across so many programs and states was eliminated as part of a broader $900 million cut to the Departments of Health and Human Services, Labor and Education.

For nearly 20 years, AFI has been a central element of the asset-building landscape. Many of you have had the honor of witnessing firsthand the dedication and determination of the savers AFI has supported – and the incredible transformation of their lives. This is a disheartening loss of opportunity.

This news brings about many critically important concerns for the hundreds of AFI-funded IDA providers about both the short- and long-term implications – about what will happen with current grants, pending applications and savers already in the pipeline. We share your concerns – and while we don’t yet have answers to those questions, we’re working to learn more and will relay information as soon as it becomes available.

Here’s what we do know: This is a setback, but it is not defeat. We are more committed than ever to the goals of prosperity and economic mobility. We will keep fighting for this program and for others that empower families to climb the ladder of opportunity. We’re already thinking creatively not only about how to restore AFI funding in the long run, but also how we can build support for other ways of going about this critically important work.

Advocacy is more important now than ever.

AFI did not go down without a fight. Together, we fought long and hard to defend AFI over the past year, and you responded to our calls to action time and time again:

  • Last June, when we first heard AFI was defunded in the Senate funding bill, you stepped up and – thanks to you – funding was restored in the House version of the bill.
  • In September, an army of asset builders descended on Capitol Hill and asked Congress to fund AFI in more than 500 separate Hill meetings.
  • Last fall and again earlier this year, you answered our call to sign on to a letter to key members of Congress in support of AFI.
  • This spring, a number of you contacted key members in a final, targeted push for FY17 support.

CFED will continue to support our network members in every way we can to drive federal advocacy efforts, as they are more important now than ever. To that end, we hope you will join CFED’s Action Center, a new Facebook Group where those committed to building a more prosperous economy can identify opportunities to sound their voices and be heard on a range of financial security policy issues. Also, if you haven’t already, please sign up for one or more of our campaigns to stay on top of advocacy opportunities and key action alerts.

Thank you as always for your ongoing energy and efforts. We couldn’t do this work without you. In the current policy environment, we will not win every advocacy battle, but together we can help make the dream of an opportunity economy for all a reality eventually.

Celebrating Teach Children to Save Day with Policy Recommendations to Build Financial Capability

By Joanna Ain on 04/28/2017 @ 03:00 PM

Tags: Children's Savings Acccounts, Integrating Financial Capability, Federal Policy

Today is the 20th anniversary of Teach Children to Save Day. To celebrate this, as well as the wrap up of Financial Capability Month, CFED is thrilled to release “Leveraging Schools to Help Students Reach Financial Success”—the final brief in our five-part series around how to integrate financial capability services into social service programs. Unlike other integration platforms we’ve featured—housing, workforce development programs and community health centers—integrating financial capability services into schools focuses our attention on the critical stages of development throughout youth in order to get children to a lifetime of financial security.

We’ve learned a lot in the past 20 years. Teaching children to save, while valuable, is not enough—to reach financial security, children need more. Throughout their financial capability development, children also need to build good financial habits and norms, learn financial knowledge and strengthen their financial decision-making skills. And financial capability services integrated into the school system can lead children towards financial security—whether it be in an elementary school, a middle school or a high school.

For example, school-based banking and Children’s Savings Accounts (CSAs) can provide opportunities for experimental learning starting in elementary school. Later on in high school, youth can be exposed to financial coaching and incentivized savings programs. This brief highlights a variety of specific programs that help students build their financial security in schools, including Junior Achievement Finance Park, a program that combined lessons in the classroom with hands-on real world simulation, and Moneythink, a program where college mentors guide high school students in small group classroom learning and mobile technology.

But even with these innovative, promising programs that meet children in the schools they attend every day, there are challenges to integrating financial capability services into schools. Teachers are overburdened and under resourced. They are not necessarily experts in financial capability and, like social service providers, may feel ill equipped or uncomfortable with financial topics. Despite the importance of building the financial security of their students, schools themselves may not be capable of funding financial capability services, and school administrators may not know how to pick the best programs for the needs of their schools. Finally, further research is still needed to identify best practices for each stage of a child’s development.

So how can we work through these barriers and effectively use schools as a platform for financial capability services? There are roles to help integrate financial capability services into schools for many government departments and agencies. Here are a few of the suggested federal policy changes we outline in our new brief:

  • Congress should pass legislation similar to the USAccounts: Investing in America’s Future Act of 2015, introduced in the 114th Congress, to open a CSA for every child at birth with an initial deposit of $500. This is one of the biggest steps that the federal government can take to advance financial capability integration in schools—providing children with an account in which they can save for their future. Schools could then use these accounts as platforms to deliver a broad array of financial capability services, either directly or through partnerships. Compared to those without college savings, a Center for Social Development study showed that children from low- and moderate-income households with college savings from $1 to $499 were more than three times more likely to attend college and more than four times more likely to graduate from college.
  • Through the Administration, the Corporation for National and Community Service (CNCS) should create an AmeriCorps program for college mentors providing financial capability services. Using college mentors to build the financial capability of younger students has been found to be a highly effective strategy with the added bonus of relieving schools from having to train or hire staff to deliver these services themselves. Volunteer mentors can be recruited and enticed by utilizing the Segal AmeriCorps Education Award given to AmeriCorps volunteers for their service to repay student loans or pay for qualified educational expenses. By incentivizing college students to mentor their younger counterparts, we can support schools and continue to build students’ financial capability as we lower the debt rates of college students post-graduation.
  • Regulatory agencies can also help with integrating financial capability services into schools. The Consumer Financial Protection Bureau (CFPB) should fund more research to identify new innovations and potential additional benefits around financial capability services in schools—as should the U.S. Department of the Treasury. Ultimately, this research can help highlight the value of these services and encourage new methods for delivering them to a broader audience. By building the body of knowledge and practice in the field overall, the research can also help schools find effective financial capability services and partners.

Join us as we celebrate 20 years of Teach Children to Save Day and learn about why schools are such a critical platform for integrating financial capability services.

Trump’s Upside-Down Plan: Tax Cuts Come at the Expense of Working Families

By Chad Bolt and David Newville on 04/28/2017 @ 02:30 PM

Tags: Federal Policy

Editor's Note: This post originally appeared on Rooflines, the blog of Shelterforce Magazine. Read it here.

President Trump released his plan for reforming the tax code this week.

On Wednesday, President Donald Trump released a one-page outline of a tax plan that he says provides tax relief for the middle class, but in reality, the plan only provides a massive tax cut for the rich.

Don’t be fooled: like the American Health Care Act, which actually was a massive tax cut for the wealthy disguised as health care reform, this plan is also a massive tax cut for the wealthy. This time, the tax cut for the wealthy is merely disguised as “tax relief” and “simplification.”

For starters, the plan consolidates tax brackets from seven to three, but in doing so, it conveniently lowers the top tax rate for the wealthiest Americans by nearly 5%. It does raise the standard deduction—currently $12,600 for couples—to $24,000, but for low-income families that have no tax liability, raising the standard deduction does absolutely nothing to help them get ahead.

Even for middle-class families that may normally itemize, this might sound like good news on its own. But the trade off? The plan eliminates every single deduction in the tax code except for the charitable giving deduction and the mortgage interest deduction. The mortgage interest deduction alone costs the government over $60 billion every year, but to subsidize debt—not homeownership—including on second homes and even yachts. Of all the credits to preserve, this one is particularly problematic in that its benefits flow almost exclusively to the wealthiest households.

In another major giveaway to the wealthiest Americans, the plan slashes the corporate tax rate from 35% to 15%. In a significant change from current law, it also cuts the tax rate on so-called “pass-throughs”—business income on which individual tax is paid—to the same 15% rate. Pass-throughs are often thought of as small businesses, but in reality, many hedge funds, law firms and real estate companies function as pass-throughs. In fact, 70% of this type of income goes to the top 1% of U.S. households. In other words, this change would create a massive new tax loophole for many wealthy taxpayers to completely avoid even the new lower individual tax rates.

Two other features of the plan benefit only the wealthiest Americans as well. The first is the repeal of the estate tax—one of the most progressive features of the tax code—which currently only applies to estates worth over $5.3 million. The second is a recycled trick from the American Health Care Act: the repeal of the 3.8% investment income surtax that is also borne only by the wealthiest households.

An analysis of a similar version of this plan revealed it would cost $2.4 trillion over 10 years. That is a significant loss of revenue that would make it even more difficult to invest in education and housing, repair roads and bridges, and ensure quality child care—all to give another tax break to millionaires and billionaires. The Administration somehow claims these tax cuts will “pay for themselves,” but they have not offered any credible analysis to back this claim.

If the Administration truly wanted to help working families—which it consistently asserted throughout the campaign—it would reform the wealth-building subsidies in the tax code to make sure families who need the most help get the most help. The government spends over $600 billion every year helping Americans save for college, buy a home and build retirement security. The problem is that this spending is upside down; it only helps families that are already wealthy, and does almost nothing to help working families get ahead. What we should be doing instead is turning this spending right-side up.

In addition to expanding provisions like the Earned Income Tax Credit that have a proven track record of successfully lifting families out of poverty, wealth-building tax breaks should be preserved and reformed so that they actually give a boost to the families who need it most, not thrown out as part of a “tax reform” plan that is all about helping the wealthy. One immediate way to do this would be to truly reform the mortgage interest deduction so it actually helps more Americans buy homes, rather than just helping the wealthy pay their mortgages.

The American people have already rejected the Trump Administration’s plan to cut taxes for the wealthy once, through the failure of the American Health Care Act. The Administration should abandon its tired obsession with tax cuts for the rich and instead should put forth a serious plan that reforms the tax code so that it works for working families.

How the US Tax Code Drives Inequality—and What We Can Do to Fix It

By Jeremie Greer and Jocelyn Harmon on 04/20/2017 @ 03:00 PM

Tags: Federal Policy

Editor’s Note: This post was originally published on FordFoundation.org on April, 13, 2017.

What do millions of people who occupied Wall Street, felt the “Bern,” wore pink hats with pointy ears, and donned baseball caps with the slogan “Make America Great Again” have in common? They are all concerned about wealth inequality.

Today, the top 1% of Americans has more than half the nation’s wealth. The wealth gap is especially wide for people of color: the wealthiest 400 Americans own more wealth than the entire Black population and a third of all Latinos combined.

From a practical perspective, this means that millions of low- and moderate-income young adults are not getting to and through college. Millions of low- and moderate-income families can’t afford stable homes, and small business owners are going out of business.

One major culprit? Our US tax code.

If you want to understand why the rich are getting richer and the rest of us are barely getting by, look no further than the US tax code. In 2015, Congress spent $660 billion on tax benefits for homeownership, education, healthcare, retirement savings and income. This is more than the combined budgets of all US Cabinet agencies, excluding the Department of Defense. Unfortunately, this sum is disproportionately distributed to those who need help the least: the top 1% of all US household received more in federal spending than the bottom 80% combined.

For example, in 2015, the federal government spent $39 billion more on mortgage interest and property tax benefits than on rental assistance programs like Section 8 housing vouchers and Homeless Assistance Grants. In other words, the government is spending a lot of money—$141 billion—on housing, but most of it goes to wealthy people through the current tax code, rather than to those struggling to pay their rent through public programs.

The system is upside down. So how did we get here?

There are two major reasons that our tax code is so upside down: one structural and one political. First, the use of itemized benefits in our tax code disadvantages low-income taxpayers. Itemizing benefits lowers a person’s tax liability—or what they owe to the government in taxes—but the items that can be deducted almost always only apply to higher-income taxpayers. For example, a low-income taxpayer is more likely to rent their home than own it, excluding them from homeownership tax benefits, while a person who owns several homes is allowed to collect the benefit for each home—significantly lowering their tax liability.

The second reason is that most Americans don’t understand how the tax code works, and don’t have high-priced lobbyists to protect their interests. When low-income taxpayers don’t know exactly how the tax code is working against them, they aren’t equipped to advocate to their representatives for a fairer system. That means representatives only hear about tax issues from their wealthy constituents or from corporations looking for more benefits.

When we start to understand how much money the government spends on tax benefits, it becomes clear that there is no difference between receiving a housing voucher or food stamps and getting a tax benefit that lowers your tax liability—yet the government is spending more on benefits for wealthy families than on programs to help working families struggling to get by. As a country, we have the money we need to help many more families build wealth. It’s up to us to direct it more efficiently and effectively.

A better system would benefit all taxpayers.

This April, instead of thinking about taxes as a chore to check off your list, think about how fair tax spending could help all communities achieve the American dream. By making changes to the existing tax benefits aimed at wealthy households and expanding affordable homeownership programs, more families could achieve the dream of owning their own home. With a more robust Children’s Savings Account program, more students could get to and through college without crushing student loan debt. By removing barriers that prevent low-income workers from building flexible savings, more low- and moderate-wage workers could accumulate the savings necessary to weather life’s unexpected storms without turning to predatory and financially crippling debt. And with access to simple retirement account platforms and stronger consumer protections, more people could save for a comfortable retirement after a lifetime of hard work.

The tax code should help build an inclusive economy where all Americans can get ahead. If you think a more balanced tax code is common sense, learn more about CFED’s Turn it Right Side Up Campaign.

What Do Tax Policy and the Racial Wealth Divide Have to Do with Each Other?

By Emanuel Nieves on 04/18/2017 @ 05:00 PM

Tags: Federal Policy

Last month, my colleague Chad Bolt wrote a blog about the upside-down tax implications of the now-defunct-but-maybe-not-completely-gone American Health Care Act (AHCA). In it, Chad walked through how the AHCA would have taken some of the most right-side up tax credits created by the Affordable Care (ACA)—which are used by countless Americans each year to afford their coverage—and flipped them completely upside-down. Indeed, while the heart of the ACA/AHCA fight was about preventing 24 million Americans from losing their health coverage, it was also about taxes. More specifically, it was about ensuring that the more than $500 billion we’re slated to spend over the next decade through the tax code for healthcare continues to provide greater, more equitable support to those that need it the most. Now that the attempt to repeal and replace the ACA is behind Republicans in Congress and the President, both have already begun to move on to their next big ticket item: comprehensive tax reform.

While we can’t predict what the future holds, we can expect that much of the rhetoric around comprehensive tax reform will range from providing middle-class tax cuts, to boosting to our economy, to preventing huge tax cuts for the rich. As important as these discussion points are going to be during this debate, we’d be remiss if we didn’t say that these conversations around tax reform also have to be inclusive of race and the role that our current tax code plays in the ever-growing racial wealth gap.

While the IRS does not collect race data, researchers have found that the problems with the upside-down tax code aren't limited to just benefits accruing mostly to those at the top, they're also about those benefits overwhelmingly being concentrated in White households regardless of income. For example, in 2014, our partners at PolicyLink published research that not only reaffirmed the fact that high-income earners take a lion share of the most value tax breaks available—including exclusions, itemized deductions and investment tax breaks—it also revealed that across every income quintile, a majority of tax benefits are going to White households.

Click the image above to see the full size.

By and large, our tax code is the single largest tool the federal government uses to provide families with the support they need to build life-long wealth. Ever year our tax code spends $660 billion to help families buy a home, start a business, build retirement savings or even go to college. Unfortunately, much of that spending is going to support millionaires to build more wealth while providing little support for working families to do the same. Even more unfortunate then that, as PolicyLink’s work highlights, our tax code is also simultaneously bypassing communities of color who in just under a generation will command majority share of our nation’s population and our overall economic future.

We know that the economic challenges facing communities of color are great and that the task of closing the racial wealth gap is even greater but tax reform presents a once-in-a-lifetime opportunity to tackle these issues, all without spending new resources.

As Congress and the President pivot to tax reform, we hope that they, along with advocates throughout the country, take action to elevate this important piece of the tax reform conversation as it will be critical towards creating a more fair and equitable tax code that works for all families, particularly those of color.

To Preserve Fair Housing & Fair Lending, We Need a Strong CFPB

By Merrit Gillard and Emanuel Nieves on 04/17/2017 @ 04:00 PM

Tags: Housing and Homeownership, Federal Policy

Fair housing is about a lot more than just prohibiting discrimination when renting apartments. Fundamentally, it’s about protecting the freedom of all people to choose where they live, ensuring equal access to all communities. As Bryan Greene, General Deputy Assistant Secretary of the Office of Fair Housing and Equal Opportunity at HUD, mentioned at last week’s “Downpayment on the Divide” event, the U.S. has made great progress to expand equal opportunity and eliminate housing discrimination in the 49 years since the Fair Housing Act was enacted. However, many Americans still find the promise of fair housing out of reach, especially when trying to buy a home. When that happens, it’s not just HUD and the Department of Justice that have a role in combatting unfairness—the Consumer Financial Protection Bureau (CFPB) has a big part to play, too.

There are a number of different agencies that regulate all aspects of the financial industry, but the CFPB is the only agency dedicated solely to consumer protection. Since it was launched in 2011, the CFPB has done a tremendous amount to protect victims of predatory financial practices and foster fair practices in the financial industry. So far, the independent agency has secured about $12 billion in relief for 29 million consumers—about one out of every 10 consumers in the country. To put that in perspective, the CFPB has helped more people than live in the state of Texas, all while leveraging a total of $2.9 billion in funding, providing taxpayers with a return on public investment at a rate of 4:1.

In addition to returning to money back into the pockets of wronged consumers through its enforcement actions, the CFPB has also put in place new mortgage servicing rules to curb the risky lending that contributed to the financial crisis, proposed rules to rein in the predatory practices of the payday lending industry and the abuse of arbitration clauses and started work on regulations against abusive debt collection practices. Communities of color have disproportionately suffered from abuses in these areas and are positioned to benefit more from these rules.

Fair lending is critical to fair housing, and the CFPB has been integral in holding financial institutions accountable for discriminatory lending practices. In coordination with the Department of Justice, the CFPB has taken actions against a number of financial institutions for intentionally avoiding mortgage lending in communities of color, denying credit to African-American applicants more often than comparable White applicants. These efforts are working to help ensure that households of color get a fair shake in the home buying process. But despite these growing achievements on behalf of consumers everywhere, and the CFPB’s commitment through its Office of Fair Lending to prioritize tackling redlining for this year, plenty of work remains to be done to fight unfair lending.

That includes pushing back efforts by some leaders in Congress to scale back what the Bureau does to protect vulnerable homebuyers. Take manufactured housing, for example. The CFPB has the authority to regulate chattel loans, the personal property loans that are typically used to finance manufactured home purchases. Previously, chattel loans had been largely unregulated and interest rates were excessive, putting many homebuyers at risk of default. Now chattel loans are subject to many (though not all) of the same standards as regular mortgage loans, including the Home Ownership Equity Protection Act (HOEPA) and the CFPB’s Ability to Repay rule. However, before the new rules even went into effect (and any data on their impact), the Preserving Access to Manufactured Housing Act was proposed in Congress in 2012 to weaken consumer protections and clear the way for predatory, high-cost loans. Versions of the bill have been reintroduced repeatedly, including this March. Despite the name, this legislation would not increase access to manufactured home lending but would restrict the CFPB’s ability to protect vulnerable consumers, including home buyers of color who may experience discrimination and be targeted for more expensive loans in the manufactured home lending market.

Congressional challenges can be seen throughout the whole range of the CFPB’s portfolio—including its auto-lending, prepaid cards or payday work—but there’s also a big fight looming on the horizon that could upend the consumer watchdog agency entirely. Recently we’ve seen these attacks surface in the form of proposals to convert CFPB into a bi-partisan commission, which is likely to result in continual gridlock and/or a Congressionally hamstrung agency. The challenges to the Bureau are likely to come to head later this month with the re-introduction of the Financial CHOICE Act. This bill would essentially gut the CFPB and prevent it from doing the job Congress tasked it to do: protect consumers.

Fair housing can only go so far if mortgage originators are not held accountable for racial disparities in lending. Without a strong and independent CFPB, home buyers of color would be left vulnerable to the same practices that fueled the economic crisis and contributed to the vast racial wealth divide we see today. Instead of breaking down this critical agency, Congress should be building and supporting it.

Want to learn how you can help protect consumers and expand opportunities for affordable homeownership? Sign up for CFED’s advocacy campaigns here!

Campaign to Safeguard the Future of State-Run Automatic Retirement Programs

By Anju Chopra on 03/31/2017 @ 12:00 PM

Tags: Federal Policy

Yesterday, a resolution that makes it more difficult for cities and other “state political subdivisions” to set up retirement accounts for workers without plans came up for a vote in the Senate. Known as H.J. Res 67, the bill faced a very tough battle where it squeaked through by just one vote (the final tally was 50 YEAs and 49 NAYs with one no vote). Notably, those that supported the bill did not manage to win over a single democratic vote.

As we have discussed before, tens of millions of uncovered workers could starting saving for their retirement under these promising programs.

Over the past month, CFED, members of our Assets & Opportunity Network and other national and local organizations - including a number of State Treasurers – have worked tirelessly to support the rights of states and local municipalities to enact their own state or locally-run retirement programs by opposing this resolution as well as the three other companion resolutions – H.J. Res 66, S.J. Res 32 and S.J. Res 33 – that would do the same or similar things. Though the vote ultimately didn’t go our way, the fact that it was so close is a testament to these efforts, and we want to extend a thank-you for all the calls you made to your Senators urging them to oppose these resolutions. Your advocacy really makes a difference.

H.J. Res 66 is likely the next resolution to come to the floor, which could be as soon as this Monday. This resolution is like 67 but applies to the right of a state – rather than a city or “subdivision” - to enact these programs. S.J. Res 32 and S.J. Res 33 could also move at any time.

We only have one more week to push back on the other House resolution. We need you to act soon and we only need two Republican Senators to flip. Please contact your Senator and ask them to vote ‘NO’ on all of these resolutions. You can click hereto locate your Senator’s contact information. Your advocacy is truly appreciated.

Republican Senators we are particularly interested in targeting are: Paul (Kentucky), Portman (Ohio), Collins (Maine), McCain (Arizona), Rubio (Florida), Lee (Utah), Hatch (Utah), Enzi (Wyoming), Young (Indiana), Flake (Indiana) and Heller (Nevada).

An unacceptable number of people in this country do not have enough to retire on, and these resolutions threaten some of the most innovative solutions to close this gap that have come along in years. If they become harder to implement through passage of these resolutions, these workers stand to lose a great deal. Let’s not turn our backs on them.

Act Now to Preserve Consumer Protections for Buyers of Manufactured Homes!

By Merrit Gillard on 03/29/2017 @ 10:00 AM

Tags: Federal Policy, Housing and Homeownership

A bill recently introduced in Congress would roll back some basic consumer protections for buyers of manufactured homes. That's right: the Preserving Access to Manufactured Housing Act, H.R. 1699, has been resurrected once again—putting vulnerable homebuyers at risk.

Take action now!

Tell your Representative to oppose the Preserving Access to Manufactured Housing Act. Here's how:

  • Call 202.224.3121 and ask to be connected to your Representative's office. If you don't know who your Representative is, find out here.
  • Once you're connected, here's what to say:

My name is [your name] from [your city and state], and I’m calling to request that you oppose H.R. 1699, the Preserving Access to Manufactured Housing Act. This bill would roll back critical consumer protections for buyers of manufactured homes and would once again expose vulnerable homebuyers to predatory, high-cost loans that put them at risk of losing their homes.

Why does H.R. 1699 matter? Before the Dodd-Frank Act, chattel lending—which is used to finance most manufactured homes—was largely unregulated. Interest rates on chattel loans were high, as were default rates. Dodd-Frank gave the Consumer Financial Protection Bureau (CFPB) authority to regulate chattel loans; now, many of the same laws and regulations that govern mortgage lending also apply to chattel lending. The law already provides a few exemptions for manufactured home dealers and lenders, but H.R. 1699 would harm vulnerable individuals and families by stripping away needed protections.

Find out more about this bill and read the letter that CFED and consumers groups signed in opposition to the 2015 version.

The American Health Care Act Turns Right-Side Up Tax Credits Upside Down

By Chad Bolt on 03/23/2017 @ 10:00 AM

Tags: Federal Policy

Update: On Thursday, May 4, the House of Representatives passed a lightly amended version of the American Health Care Act discussed in this post. The bill’s changes to tax credits remain the same.

The House is poised to vote today on the American Health Care Act, the Republican Party’s legislation to “repeal and replace” the Affordable Care Act. Although the bill keeps some of the provisions of the current health law, it provides a massive tax break to the wealthy and to pharmaceutical companies and it changes the way states receive Medicaid funding from the federal government. An earlier version of the bill was scored by the Congressional Budget Office as causing 24 million Americans to lose their health insurance by 2026.

But one serious change the bill makes to current law is that it takes tax credits that are currently right-side up and turns them upside down. Unfortunately, that is consistent with the majority of provisions in our upside down tax code. Whether it’s dealing with homeownership, retirement or higher education – the more wealth you have, the more benefit you get from the tax code. We spend $660 billion each year helping the already wealthy build more wealth, while doing almost nothing to help Americans with lower incomes climb the opportunity ladder.

Tax Credits Under ACA: Right-Side Up

The Affordable Care Act (ACA) helped 23 million Americans gain health insurance coverage. 11 million of them gained coverage through the expansion of Medicaid and another 12 million gained coverage by purchasing private insurance through state or federal marketplaces with the help of tax credits.

These tax credits are among the most right-side up tax credits in the tax code. Simply put, that means they give the most help to Americans who need the most help.

That’s why ACA’s tax credits are such a rarity. ACA’s tax credits are primarily based on income, and the less income you have, the more help you get. For example, a single person aged 40 making $20,000 received an average tax credit of $3,337, but a single person aged 40 making $40,000 received an average tax credit of only $452. The tax credit assistance phases out completely when a single person reaches 400% of the Federal Poverty Level (FPL, about $48,000). This is right-side up.

Tax Credits Under AHCA: Upside Down

The American Health Care Act (AHCA) keeps the basic approach of using tax credits to help Americans afford health insurance, but flips it in a very significant way: the tax credits would be based primarily on age, not income. (The assistance does cut off at incomes of $75,000 and above.) The bill uses a flat credit, starting at $2,000 for those under age 30, $2,500 for those age 30-39, $3,000 for those age 40-49, $3,500 for those age 50-59, and $4,000 for those age 60 and older not enrolled in Medicare.

Take a single worker, aged 55, making $60,000. She would not have gotten any tax credit under ACA, but gets a $3,500 tax credit under AHCA. Compare her with another single worker, making only half that income, $30,000 – she would have received an average tax credit of $5,067 under ACA, but under AHCA she receives the same $3,500 tax credit. The tax credits under AHCA provide the same amount of help to both workers regardless of their income, so long as it is under $75,000. This is upside down.

Low-income Americans that receive significant help purchasing health insurance under the ACA’s tax credits receive much less help under AHCA. Vox, working with the Urban Institute’s Linda Blumberg, has an excellent tool to calculate the difference between credits received under each plan using CBO’s projections of premium costs. For example, a single person aged 26 with income of 140% FPL (about $17,000) sees a $76 increase in their monthly premiums moving from ACA to AHCA. A single person aged 46 with the same income sees a $243 increase in their monthly premiums moving from ACA to AHCA.

There are other problems with the tax credits under AHCA as well. They don’t grow at the same rate as medical costs, eroding their purchasing power over time. And they’re not adjusted for geography, meaning rural states are hit extremely hard.

Some workers – primarily young and healthy ones – do come out better under AHCA. And at the last minute, the House added a provision steering $75 billion toward affordability for older Americans not yet eligible for Medicare. But there are no details on this, just instructions for the Senate to come up with… something. It’s unlikely that the Senate will abandon the approach of basing credits primarily on age.

Take Action

Despite these deficiencies, the House is planning to vote on this bill later today. By doing so, they take tax credits that are, for once, right side up and turn them instead upside down.

If you want to take action, call your Senator now in advance of this bill moving to the Senate. Tell them you don’t support taking critical tax credits away from workers that need them to afford health insurance. And tell them you support changes to the tax code to make it more right side up, so it provides the most assistance to those who need it most.

The Need to Defend Promising Efforts to Protect the Retirement Security of Millions of Workers

By Anju Chopra on 03/22/2017 @ 01:00 PM

Tags: Federal Policy

While this country may be deeply divided on a number of issues, there is one subject that most people seem to agree on - that lots of households in this country do not have enough saved up for retirement. The results of a recent survey on retirement in America found that close to 90% of participants feel the country is facing a significant retirement crisis, and estimates suggest that more than half the workers in this country have no employer-sponsored retirement plans. This amounts to tens of millions of people with little or nothing to retire on.

Reported by the National Institute on Retirement Security (NIRS), the survey also reveals a lack of satisfaction with the actions the federal government has taken to close this gap. Approximately 85% of respondents said they do not think Washington understands the challenges faced by ordinary people when it comes to saving for retirement, and a similar percentage think the leadership in Washington should be doing more to address the issue.

Indeed, while Washington has come up with some retirement savings vehicles for uncovered workers - like myRA – it has yet to enact a program that would substantially reduce the number of people without savings plans.

The Good News

Faced with this federal inactivity, states have started to step up to the plate and enact innovative programs of their own that are aimed at ensuring the retirement security of their workers. State-run automatic enrollment programs are particularly promising initiatives. These programs set up retirement accounts for uncovered workers automatically, which they can opt out of at any time. Managed by the state, they alleviate some of the administrative burdens that keep employers – particularly small businesses – from offering retirement benefits.

These and other state-facilitated programs have the potential to provide retirement savings for a significant number of uncovered employees. Five states – California, Oregon, Illinois, Connecticut and Maryland – are in the process of developing programs, which research suggests could cover as many as 13 million workers. Many more states are considering them, and the NIRS survey indicates these programs are very popular. Seventy-five percent of respondents said they support state programs and more than 80% said they would participate if given the chance.

The Bad News

Unfortunately, there are actions taking place right now in Congress that could put these up-and-coming programs in jeopardy and discourage other states from considering them. Last year, the Department of Labor passed regulations that make these state-run programs simpler and safer to adopt.

Now Congress is trying to repeal them, using a little known law called the Congressional Review Act. In February of this year, the House of Representatives passed H.J. Res 66 & H.J. Res 67, resolutions that would abolish these regulations and bar the passage of any “substantially similar” agency rulemaking in the future. Then in early March, the Senate introduced S.J. Res 32 & S.J. Res 33, companion resolutions that would do the same thing.

What You Can Do

H.J. 66 & 67 and S.J. 32 & 33 may be coming up for a vote in the Senate very soon. We are urging people to call their Senators and ask them to vote ‘NO’ on all of these resolutions, which would make the already difficult problem of retirement security even worse. If you need contact information for your Senator, click here.

If these resolutions pass and the status quo is maintained, a lot of people are going to enter retirement without enough money, creating an untold number of hardships. That so many people could experience financial instability after working for years is a sobering prospect. It is time to oppose these resolutions and any other efforts to undermine the right of a state to implement innovative policy solutions to look after the retirement security of their citizens.

EITC: Enhancing Health and Wealth

By Chad Bolt and Joanna Ain on 03/21/2017 @ 10:00 AM

Tags: Data and Research, Federal Policy

At CFED, we’ve been diving deep into exploring the link between health and wealth. It seems like every day new evidence is coming about how one’s mental and physical health affects one’s financial health (and vice versa) alongside examples of how those connections come to light in practice, such as the integration of financial capability services into community health centers (CHCs). One of the most exciting connections we’re seeing in this space is between the EITC (Earned Income Tax Credit) and health.

The EITC is the most effective anti-poverty tool in the tax code. Last year, 27 million filers claimed the EITC, receiving an average benefit of $2,454. Significant expansions of the credit were made permanent in 2015, ensuring that approximately 16 million families – including 8 million children – won’t be pushed deeper into poverty. Many workers use their EITC benefit to pay down debt, set money aside to save, or make repairs to their car or home. The EITC is a rarity on Capitol Hill these days: because of its proven track record, it enjoys strong bipartisan support.

The long term benefits of the EITC have been studied as well. This means improved test scores in school, boosted college enrollment, increased earnings as adults and, finally, higher Social Security benefits in retirement.

In addition to those significant and wide-ranging effects, new research from Columbia University’s Mailman School of Public Health finds that receiving the EITC improves health outcomes as well. Researchers looked at data from 1993 to 2010 and found that receiving the EITC increased health-related quality of life and extended life expectancy. It also suggests that the EITC may be more effective than some health interventions in improving health outcomes.

The larger the EITC benefit, the more significant the improvement in quality of life. Researchers found that recipients living in states that had their own state-level match of the federal EITC gained additional quality of life over recipients in states that do not. Similarly, families that receive a larger EITC benefit because they have children gained more quality of life than single workers only eligible for a very small EITC benefit.

Along with the research indicating this connection, the link between EITC and health is coming out in practice, too. In early March, CFED featured StreetCred on our webinar about Your Finances, Your Health: Making the Health/Wealth Connection. StreetCred is an innovative organization that brings tax preparation into pediatricians’ waiting rooms at Boston Medical Center—a safety net hospital that serves many of Boston’s most vulnerable families. Recognizing the importance of EITC and its association with improved health, StreetCred works to help families access those credits more easily during their visits to pediatricians. In its first year, this program returned over $400,000 in tax refunds to almost 200 families. With the success of this program, StreetCred is now reaching out into the community health center (CHC) space to spread this momentum every further to the communities who most need these services.

This link between the EITC and health outcomes is just one more reason Congress should build on the success of EITC by expanding benefits to workers not raising children and empowering workers to save through a Rainy Day EITC program. While researchers noted that additional randomized control trials are needed to further demonstrate the EITC’s effects on health, we know that the EITC improves economic outcomes for workers and educational outcomes for children. Now is the time to protect and expand this critical program.

Join our Campaigns

Ready to tell Congress not to take away tax credits for low-income workers or cut safety net services? Sign up for our tax and safety net campaigns to stay on top of the latest developments in Washington.

Skinny Budget Starves Critical Programs

By Joanna Ain, Chad Bolt, Anju Chopra and Emanuel Nieves on 03/16/2017 @ 04:00 PM

Tags: Federal Policy, News

President Trump released his “skinny budget” earlier today – a document that is both a broad outline of his priorities and a troubling budget forecast for low- and moderate-income families trying to get ahead. It is not a budget that will help build an opportunity economy. It comes on the heels of an Affordable Care Act “repeal and replace” bill that turns tax credits to help Americans afford health insurance upside down and was scored by the Congressional Budget Office as causing 24 million Americans to lose their health insurance by 2026. It was accompanied by $33 billion in supplemental requests for the current fiscal year for additional funding for the Department of Defense and the Department of Homeland Security, to start building a wall on our southern border.

Light on details, the FY18 budget includes a $54 billion increase for defense spending, offset by commensurate cuts for “non-defense discretionary spending,” or the part of the budget that funds housing, consumer protection, community development and some safety net programs. These cuts underscore just how devastating this budget would be for low- and moderate-income families. The budget also exacerbates the ever-growing gap between the wealth of white households and households of color, by cutting or completely eliminating programs that make targeted investments in communities of color.

It’s important to reiterate up front that Presidents’ Budgets are usually very different from what Congress eventually adopts. Congress has its own prerogatives and priorities that will be debated over the next few months, first in what are called “budget resolutions,” expected in early spring. The budget resolution sets overall spending levels to begin the appropriations process, which determines specific program-by-program funding levels. In recent years, the whole process did not conclude until December. Along the way, Congress will likely make significant changes to the President’s budget, although it’s not clear yet where or by how much.

Nevertheless, this is a very challenging point from which to start the budget process for advocates for low- and moderate-income families. While there are very few specifics in the budget, highlights (really low-lights) include:

Safety Net

The budget proposes cutting programs that support low-income households and make up the first rungs of the ladder of opportunity that lead to financial security. While there are no specifics on the Assets for Independence (AFI) program, the budget proposes an 18% cut for the U.S. Department of Health and Human Services (HHS) – over $15 billion. These cuts include the elimination of the Low Income Home Energy Assistance Program (LIHEAP), which assists low-income families with energy costs, and the Community Services Block Grant (CSBG), which supports families in poverty with services that include housing, employment and nutrition.

Though it does not appear that the Supplemental Nutrition Assistance Program (SNAP) is at risk for now, the budget does propose a cut of $200 million to the U.S. Department of Agriculture’s Women, Infants and Children (WIC) program that provides nutritional and health supports to low-income women and their children.

Several independent agencies and commissions that support low-income communities are also being recommended for elimination, including the U.S. Interagency Council on Homelessness, which works to reduce our homeless population, the Legal Services Corporation, which funds free civil legal assistance for low-income households, and the Corporation for National and Community Service, which funds the AmeriCorps program, mobilizing Americans to serve vulnerable populations.

Housing and Community Development

The President's budget slashes spending on programs that support affordable housing and homeownership opportunities for low- and moderate-income families. The U.S. Department of Housing and Urban Development (HUD) receives just $40.7 billion in discretionary funding, a $6.2 billion reduction from 2017 levels. Notably, the budget only identifies $4.1 billion in program reductions of the $6.2 billion that that it eliminates from HUD. This 13% cut to HUD puts critical, asset-building programs like the Family Self-Sufficiency (FSS) program at risk of ending up on the chopping block.

A number of important programs that help make homeownership safer and more affordable for low-income families are also singled out in the budget for elimination. These include the Community Development Block Grant (CDBG) program, the HOME Investment Partnership Program, Choice Neighborhoods, the Self-Help Homeownership Opportunity Program and Section 4 Capacity Building for Community Development and Affordable Housing. It also eliminates the Department of Energy’s Weatherization Assistance program and the Environmental Protection Agency’s Energy Star program, which help families lower their energy bills.

NeighborWorks America, the Delta Regional Authority and the Appalachian Regional Commission would also be eliminated under this budget. These are organizations that give an economic and social boost to distressed, primarily low-income communities by improving job opportunities, investing in business development, identifying community leaders, improving infrastructure and transportation and developing programs that contribute to community health and wellness.

Finally, the budget eliminates $210 million in funding for CDFI Fund grants, asserting that the 20-year old program supports a “now mature industry where private institutions have ready access to the capital needed to extend credit and provide financial services to underserved communities.” The Fund, which continues to see increased demand for grants, invests in low-income communities and administers the New Markets Tax Credit, which continues to help attract needed private sector investment in distressed communities.

Consumer Protections

In line with the rest of his budget, the president’s regulatory focus is light on details as he focuses only on his action to enact a government-wide regulatory freeze and his two executive orders to curb regulations and enforce his regulatory agenda. Overall, despite the president’s focus on reining in burdensome regulatory costs and unnecessary regulations that cost jobs, consumer choice and economic growth, his budget’s focus on this issue is limited to a total of three pages.

While this may seem like a victory, the next budget will likely not be light on details or friendly to various agencies working to protect families in the consumer financial market as well as in other aspects of life, such as housing and retirement. If anything, the president’s initial take to eliminate 62 agencies and programs—many of which have shown to be effective in providing much-needed resources and support to communities and families throughout the country—indicates where the next round of cuts will come.

Key among future possibilities are reductions and changes to the Consumer Financial Protection Bureau (CFPB), which in just six short years has done a lot on behalf of families everywhere. In fact, despite being labeled as inefficient, the six-year old investment taxpayers have made to the agency since it opened so far has yielded a return of $4 dollars for every $1 spent. Overall, that’s resulted in nearly $12 billion being returned back to about 30 million consumers. The Bureau has not only been efficient with its resources, it’s also been effective as well. Through its supervisory and regulatory powers, the CFPB has not only given a voice to consumers through its complaint system, it’s also established rules to protect consumers across a number of markets, including mortgage, credit card and payday lending markets.

If the president truly believes “the American people deserve a regulatory system that works for them, not against them—a system that is both effective and efficient”, then his budget should strengthen, not eliminate or weaken, agencies like the CFPB and others that are protecting families against unfair, deceptive and predatory financial practices.

Tax Time

The budget proposes a $500 million cut to the Department of the Treasury, a 4.4% decrease from last year. This includes cutting $239 million by “diverting resources from antiquated operations that are still reliant on paper-based review in the era of electronic tax filing.” There are no further details on this proposal at this time, and the budget doesn’t come close to specifics on the funding level for Volunteer Income Tax Assistance (VITA) grants.

More Left Out and More to Come

Notably, the budget released today leaves out a number of components that are normally included in a budget – even “skinny” ones released in the first year of an administration. A summary of policy changes, revenue and tax policy proposals, entitlement reform proposals, and economic assumptions were all not included. OMB Director Mick Mulvaney has said we can expect more details on these components, along with program-by-program specifics, in May.

A budget that builds an opportunity economy would have proposed strengthening the Earned Income Tax Credit and integrating financial capability into Community Health Centers. It would have supported the CFPB and helped put affordable homeownership in reach for all Americans. And it would have included administrative actions to close the ever growing wealth gap between white households and households of color.

What can you do? If you haven’t already, sign up for one or more of our campaigns to stay on top of the latest developments and opportunities to defend and advocate for our priorities. The nuts and bolts of the budget process – including committee hearings and appropriations requests – often take place well below the headlines. Make sure you’ve signed up so we can let you know when these key opportunities for advocacy are coming up.

Upset about these cuts to programs you support? Contact your members of Congress and tell them you do not support these massive budget cuts. This is just the first of more bad news to come, but if we stick together and push back against policies and budgets that don’t reflect our priorities, we can lessen the impact – if not score outright victories for the opportunity economy.

Building on What Works: Congress Can Strengthen the EITC by Expanding and Simplifying Eligibility

By Chad Bolt on 03/15/2017 @ 06:00 AM

Tags: EITC, Federal Policy

Depending on who you talk to in Washington, tax reform is either charging full steam ahead or it’s completely dead. Either way, if Congress and the Trump Administration want to make the tax code work for working people – and not for corporations and the wealthy – they will focus on turning our upside down tax code right side up. This means reforming the biggest areas of wealth-building expenditures in our tax code – higher education, homeownership, and retirement savings – so that they actually help people who need the most help.

Opportunities to Strengthen EITC: Expanding to Workers Not Raising Children and Rainy Day EITC

But one right side up program that actually does help people who need it most is the Earned Income Tax Credit, the most effective anti-poverty tool we have. Last year, 27 million tax filers claimed the EITC, receiving an average benefit of $2,454. Many tax filers used their refund to put money aside for an emergency, pay down debt or invest in a long-term asset. The EITC has a proven track record of success and has long enjoyed bipartisan support.

Recent expansions of the EITC were made permanent at the end of 2015, ensuring that 16 million families won’t be taxed further into poverty. This was a major win for anti-poverty advocates, but Congress still has opportunities to strengthen the EITC with further expansion in eligibility and reduction in improper payments.

One major omission from the 2015 expansions were so-called “childless workers,” or workers not raising children. The disparity in benefits for a single worker not raising a child and a single worker raising a child is huge: $215 vs. $3,373 in 2016. Workers aged 24 and under not raising children are not eligible for the EITC at all. Not only are these workers taxed further into poverty, these non-existent or very small benefits provide little or no incentive to enter the labor force, which is one of the main purposes of the EITC. Congress should expand eligibility to these workers and increase the level of benefit, as Congressman Richard Neal’s Earned Income Tax Credit Improvement and Simplification Act does.

Another way to strengthen the EITC is to use it to empower tax filers to save for emergencies. First proposed by the authors of It’s Not Like I’m Poor and then introduced as legislation by Senators Jerry Moran and Cory Booker, the Rainy Day EITC proposal would allow filers to defer 20% of their EITC benefit for six months. Recognizing that many Americans living in poverty do not have $400 to cover a financial emergency, the Rainy Day EITC would empower filers to save up for those inevitable moments – 20% of the average EITC benefit is $480.

Further Reducing Improper Payments

Even though EITC improper payments represent a tiny slice of the overall tax gap and Congress recently passed “the most robust improvements to address waste, fraud, and abuse in the tax code in nearly 20 years,” the specter of “fraud” persists. As the Center on Budget and Policy Priorities points out, “the EITC’s ‘improper payment rate’ is not a ‘fraud rate’ and shouldn’t be characterized as such. Congress should increase the EITC benefit for workers not raising children, which would reduce the disparity in benefits between EITC claimants who are raising children and are not raising children. To further simplify eligibility and reduce confusion over which children qualify, the IRS should rely on the residency determinations of other benefit programs like TANF, Housing Choice Vouchers, SNAP or state benefit programs.

Finally, Congress should establish minimum competency standards for paid tax preparers. Paid tax preparers are more likely than any other type of preparer to file inaccurate returns and 68% of EITC filers use a paid tax preparer to file their taxes. The vast majority of paid tax preparers are not required to meet minimum standards of competency like passing a certification test or engaging in continuing education to demonstrate that they have an understanding of current tax requirements. The Volunteer Income Tax Assistance program – with its 94% accuracy rate – is a model for such competency requirements. Congress should establish standards to further reduce EITC improper payments.

As Congress considers tax policy over the next few months, whether it’s tax reform or just tax cuts, they should seize these opportunities to build on and strengthen a feature of the tax code that we know works well for working people.

CFED Collaborates with National Partners to Launch Tax Alliance for Economic Mobility

By Chad Bolt on 03/09/2017 @ 09:00 AM

Tags: Federal Policy, News

The federal government spends $660 billion every year on wealth-building subsidies to help Americans save for college, homeownership and retirement. The problem? These wealth-building programs are upside down—meaning they help the already wealthy build more wealth, but help families at lower income levels very little. As one piece of our broader strategy to flip this upside-down tax code right-side up, CFED partnered with PolicyLink to launch the Tax Alliance for Economic Mobility last week, a coalition of national organizations committed to building a tax code that is more inclusive, progressive and equitable.

CFED’s investment in the Tax Alliance couldn’t be timelier. With Congress gearing up to make changes to tax policy in some way—whether in the form of broad tax reform or simply via tax cuts—making sure the tax code works for everyone has never been more important. The Tax Alliance is made up of nearly 40 national advocacy organizations, racial justice groups, think tanks and tax experts coming together to ensure that tax reform debates move in the direction of equity, not exclusion. Organized around four broad areas of tax policy—homeownership, higher education, retirement and tax credits for low-income workers—the Tax Alliance has four working groups that respond to legislative proposals and looming congressional threats to an equitable tax code. The Tax Alliance has published four principles documents describing each of these areas.

The work of the Tax Alliance is fueled by a diverse group of leaders, but our success also depends on you. We’re committed to leveraging the Tax Alliance to deliver the tools and resources you need to be an effective advocate for inclusive and equitable tax reform. On our new website, you’ll find a series of resources and publications that explain key issues and how you can engage. There, you can also connect with the member organizations, all of which are respected leaders inside the Beltway and nationally on issues that affect the financial well-being of the most economically vulnerable communities. And, if you sign up for updates, you can receive periodic updates about recent developments on the national tax reform stage, including our brand-new newsletter.

The members of the Tax Alliance span a broad range of interests and missions, but they are united for a tax code that is more inclusive, progressive and equitable. We hope you’ll unite with us as we work to make this vision a reality.

President Trump & Congressional Republicans Are Putting the Interests of Wall Street over Working Families

By Emanuel Nieves on 02/07/2017 @ 11:00 AM

Tags: News, Federal Policy

By Seeking to Repeal Common Sense Financial Regulations, President Trump Sides with Wall Street over the Forgotten Men & Women that Elected Him

Last Friday, President Trump signed an executive order that would begin the process of rolling back critical financial regulations and consumer protection laws, including the landmark Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The order, signed after a meeting with a number of business executives, establishes a set of core principles for what the administration believes would constituent prudent financial regulations and instructs the Treasury Secretary to conduct a sweeping review of financial regulations to determine if current rules are promoting or inhibiting these principles.

Framed as a way to remove burdensome regulations, the exercise authorized by the President will only serve as a road map to weaken or eliminate common sense Wall Street reforms and consumer protections. Although the order does not get into specifics, we imagine that the review will target the good work done by Consumer Financial Protection Bureau (CFPB), which in just five years has returned $12 billion to 29 million wronged consumers across the country.

Yet, despite the value Dodd-Frank and the CFPB have demonstrated to working families, coupled with the fact that then-candidate Trump himself said he would not let “Wall Street get away with murder”, this action is another affirmative statement that it’s ok for Wall Street to continue with the same behavior that led to the 2008 economic crisis. Given that this behavior resulted in massive economic losses for the very same forgotten men and women he’s pledged to uplift and protect—including African-American, Latinos and Asian-American who lost more than half their wealth during the economic downturn—President Trump’s regulatory action will undoubtedly hurt working families.

Unfortunately, Congressional Republicans are Also Working to Block Consumer Protections That Would Protect Working Families

On the heels of President Trump’s Executive Order last Friday, Congressional Republicans in the House and Senate have begun to use an obscure piece of legislation—the Congressional Review Act (CRA)—to repeal several sensible regulations put in place by the Obama administration.

Among those efforts in one led by U.S. Senator David Perdue and U.S. Representative Tom Graves, along with several other congressional republicans, including Senator Johnny Isakson and Congressman Barry Loudermilk of Georgia, to block the CFPB’s prepaid card rule from going into effect. By using the Congressional Review Act, this action would not only block basic fraud protection and fee transparency protections from being extended to all prepaid card users, it would also indefinitely tie the CFPB’s hands from ever proposing a “substantially similar” rule the future.

Given the rapid growth in the prepaid card market over the past several years, including the fact in 2015 the FDIC found that nearly 10% of all underbanked households—over 12 million—used a prepaid card to manage their financial lives, blocking this common sense regulation should not be a priority for Congress. Instead of allowing prepaid card companies to make tens of millions of dollars in through costly fees, including overdrafts, or making it more difficult for these consumers to access their own money, Congress should allow the CFPB’s rule to take effect.

By doing so, these congressional republicans would ensure that American families that have been shut out of the mainstream financial system can enjoy in some of the same protections banking and credit cards consumers already have. Otherwise, congress is also just picking Wall Street over working families.

The CFPB Wants to Make the Debt Collection Industry Safer for Consumers

By Anju Chopra on 02/01/2017 @ 02:00 PM

Tags: Federal Policy

In early January of this year, the Consumer Financial Protection Bureau (CFPB) released two new reports on the debt collection industry, and the findings are consistent with older agency reports that have exposed debt collection practices that undermine consumer safety.

One report is the first nationally representative survey of consumer experiences with debt collectors, like how often they were contacted by collectors, whether they disputed a debt, and whether they were sued by a collector trying to collect on a debt. The other report examines the online debt sales industry, a market that buys and sells unpaid debt, along with personal information associated with a debt, including Social Security numbers, addresses and phone numbers of alleged debtors.

The survey revealed that over half the consumers targeted by collectors stated they did not owe the debt, and more than a third were contacted four times or more per week about the alleged debt. The debt sales report reviewed approximately 300 portfolios that carried a collective value of $2 billion, yet the sales price was around $18 million, meaning on average, purchasers were buying portfolios at less than a penny on the dollar.

Fortunately, the Bureau is working on regulations aimed at curbing abuses in the debt collection industry. The latest indication of their current thinking on this subject was shared in an agency outline last summer, and today, CFED is releasing a high-level summary of these initial proposals. The Bureau will be releasing a more fully baked set of proposed regulations in the near future that will be open to feedback from the public, and CFED will be sharing them when they are released, as well as recommending ways to make them as strong as possible.

Click here to read the summary.

This summary follows the release of a policy brief and the hosting of a webinar on debt collection late last year, and kicks off a new blog series on various aspects of the industry like medical debt and private collectors moving into the tax space, that will be shared over the next few weeks. Going forward, we will continue to engage in this space to share developments related to the industry and advocate for strong protections.

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