The Poverty Trap

“In a Clean Air Act overview report published by the EPA, the fact that we can't “see, taste or smell” sounds may explain why it has not received as much attention as other types of pollution, like air pollution. We are constantly surrounded by noise, yet many of us are unaware of the danger environmental noise poses to our health.”  Environmental Health Sciences Center at UC Davis, March 3, 2023

Those of us who have lived in urban areas most of our adult lives have learned to accept the human-made noise that envelops us. While our brains seem to filter it down to a low roar, our bodies tell us something different: Chronic noise, whether intermittent intrusions like several daily flights over your neighborhood, or the constant sound of road traffic and construction, “ …is a largely unrecognized health threat that is increasing the risk of hypertension, stroke and heart attacks worldwide, including for more than 100 million Americans.”, according to a recent New York Times article. And those maladies are in addition to hearing loss, increased stress and anxiety, and sleep disturbance as a direct result of exposure to excessive, unnatural noise in our environment.

I’d love to hear your thoughts on your own communities and the level of noise pollution you live with. Anyone, like me, suffer from hearing loss that is at least partially attributable to high decibel sounds where you live or work? Please take a moment and share your thoughts in the Comment Section below:

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“C.E.O.s may rant about lazy or (per Musk) “immoral” workers who don’t want to go back into their cubicles, but the purpose of an economy is not to make bosses happy.”

Paul Krugman, Nobel Prize-winning economist and NY Times opinion columnist. NY Times May 22, 2023

I read Krugman’s Times op-ed a few days ago and have been thinking about it ever since. He discusses a few ways remote work impacts our economy, focusing primarily on the reduction in commuting time, and how that impacts both the Gross Domestic Product (GDP) and perhaps more importantly, our personal lives:

But it’s not hard to make the case that the overall benefits from not commuting every day are equivalent to a gain in national income of at least one and maybe several percentage points. That’s a lot: There are very few policy proposals likely to produce gains on that scale.

For the last few years, I’ve been thinking about the additional benefits of remote work—not only the literal commuting time (and if you drive, the fuel, car wear and tear and stress of daily traffic), but the less talked-about and less quantifiable pluses of working from home.

If you are not already a subscriber, why not take this opportunity to join our community with a free or paid subscription? A new paid subscription or an upgrade from a free to paid subscription will allow me to expand this newsletter with additional, primary source information, like interviews and public information requests, and expanded podcast offerings to include real, live guests. Although I won’t be going on strike any time soon, the current TV writer’s strike demonstrates that writer’s deserve to be paid, and paid well for their work, just like any other profession. Thank you in advance for your financial support of my writing!

Photo: Library of Congress. Some of the first recipients wait to receive [unemployment] benefits at the State Employment Service in San Francisco, California, 1938. Marketplace, 2020

Last week, I wrote a post critical of how the unemployment compensation system is being administered, particularly the expansive leeway given to states, and the disparity in the amount and distribution of benefits that result. Today, I’d like to share my recent experience with the unemployment system in Ohio to better illustrate the frustration and specific roadblocks anyone can face when they attempt to access government help.

Check out my Notes for a bit of additional information on unemployment benefit work requirements…

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What have your experiences been with unemployment benefits? Have you applied and been successful or were you denied benefits? Please share your thoughts in the Comment Section below.

If you are not already a subscriber, why not take this opportunity to join our community with a free or paid subscription? A new paid subscription or an upgrade from a free to paid subscription will allow me to expand this newsletter with additional, primary source information, like interviews and public information requests, and expanded podcast offerings to include real, live guests. Although I won’t be going on strike any time soon, the current TV writer’s strike demonstrates that writer’s deserve to be paid, and paid well for their work, just like any other profession. Thank you in advance for your financial support of my writing!

The federal law establishing unemployment compensation was part of the 1935 bill signed by President Franklin D. Roosevelt which created the Social Security system. It was designed not just to pull our economy out of the Great Depression, but to provide a safety net going forward for average working Americans, specifically when things got economically tough through no fault of their own. Unemployment Compensation helps those of working age who are temporarily out of a job, and Social Security provides a cushion for those over 65, who are no longer employed.

And if you are not already a subscriber, why not take this opportunity to join our community with a free or paid subscription? A new paid subscription or an upgrade from a free to paid subscription will allow me to expand this newsletter with additional, primary source information, like interviews and public information requests, and expanded podcast offerings to include real, live guests. Although I won’t be going on strike any time soon, the current TV writer’s strike demonstrates that writer’s deserve to be paid, and paid well for their work, just like any other profession. Thank you in advance for your financial support of my writing!

Crime and Punishment: Why the Poor Stay Poor In America is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Earlier this week, Speaker of the U.S. House of Representatives, Kevin McCarthy, gave a speech at the New York Stock Exchange where he discussed (in incredibly vague terms) the Republican party’s proposal to raise the debt ceiling so our country doesn’t default on its financial obligations. This proposal is conditioned with all sorts of budget cuts, including repealing parts of the Inflation Reduction Act; for example, rescinding $80 million in IRS funding to target auditing of the wealthy and large corporations, and certain green energy subsidies. It also imposes additional work requirements on those who already qualify to receive public assistance—in this case the Supplemental Nutrition Assistance program (SNAP), which was previously called food stamps, and Medicaid (health insurance for the poor).

What do you think about these recycled proposals for work requirements to receive health insurance and food? Please share your thoughts in the Comment Section below.

As always, I appreciate your interest and thoughtful ideas that make our Crime and Punishment community a welcoming space to visit and chat. There’s no time like the present to become a free or paid subscriber…and there’s no time like the New Year to Upgrade your free subscription to paid — it’s easy, and will allow me to continue and expand Crime and Punishment. Thanks in advance for your support!

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“In February, Natee Amornsiripanitch, an economist at the Federal Reserve Bank of Philadelphia, published an analysis of more than 9 million mortgage applications collected through the Home Mortgage Disclosure Act from 2018 to 2020. He found that rejection rates rose steadily with age, particularly accelerating for applicants over 70.” The New York Times, April 8, 2023

The reason mortgage rejection statistic rates for older Americans are important to explore is because of the dichotomy between what the law says, specifically in the Equal Credit Opportunity Act (ECOA), and what actually happens when lenders look at an application. The ECOA prohibits discrimination in lending on the usual array of factors like race, color, religion, national origin, sex or marital status, or age. In fact, the Consumer Financial Protection Bureau (CFPB) has fleshed out this statutory requirement in a rule explaining what constitutes discrimination in lending and what doesn’t.

On the other hand, lenders still have a legitimate need to determine an applicant’s credit-worthiness. So how are these two, competing goals reconciled? Not easily, it seems. And according to this new, extensive research on the increasing rate of mortgage denials for seniors, not necessarily in favor of those the law is trying to protect.

Crime and Punishment: Why the Poor Stay Poor In America is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

“ …Cards with the highest value rewards are often available only to the rich. First, you’ll need a credit score of at least 700 to qualify for a premium card. That eliminates half the country….Second, issuers consider your income and debt-to-income ratio, which can be used to disqualify card applicants with high credit scores.” The New York Times, March 4, 2023

(Thanks to Jan Peppler, PhD, who writes the fabulous newsletter, Finding Home for sending me this article!)

There are a good number of both esteemed economists and elected officials who disagree with the Federal Reserve’s decision to raise interest rates in an attempt to lower inflation. One major reason for this disagreement is that it translates to higher interest rates on credit cards, auto loans and mortgage loans. The cost of borrowing money goes up, which is exactly the point from the Federal Reserve’s view. The theory is if it costs more to borrow money, people will borrow less and thus buy less, resulting in decreased demand and then presumably, lower prices. Unfortunately, less borrowing and buying slows the economy, people lose their jobs…and eventually our economy sinks into a recession.

As always, I appreciate your interest and thoughtful ideas that make our Crime and Punishment community a welcoming space to visit and chat. There’s no time like the present to become a free or paid subscriber…and there’s no time like the New Year to Upgrade your free subscription to paid — it’s easy, and will allow me to continue and expand Crime and Punishment. Thanks in advance for your support!

“IRS Audits Poorest Families at Five Times the Rate for Everyone Else." Based on IRS data reported to The Transactional Records Access Clearinghouse (TRAC) for FY 2021

I’m not going to comb the Internal Revenue Service (IRS) code for each section that hurts the poor or benefits the rich, because that would, well, take too long. But I will explore a few areas of the tax code that don’t seem to have a logical rationale behind them, meaning to evenhandedly maximize revenue for the treasury, rather than a seeming predilection to punish those who make the least money. Keep in mind that the IRS simply implements the laws dictated by Congress, like the tax structure and rate, although it does have latitude on how to implement those laws and can choose which taxpayers to audit.

Starting with some good news: President Biden signed the Inflation Reduction Act in 2022, which allocated nearly $80 billion over 10 years to beef up the IRS, and over half of that amount is allocated to enforcement and audits, supposedly to focus on corporations and higher income earners.

This is a much-needed influx of funds for the Service because its budget has been gutted by Congress over the last ten years, which might explain the overall decline in audits, coupled with an uptick in audits of the poor. As this report from the Center on Budget and Policy Priorities explains, it takes extremely experienced auditors (revenue agents) to review corporate and higher income individual tax returns, and the money to hire these workers has been consistently slashed. Additionally, the number of taxpayers overall has not only increased during this time, but the number of millionaires has soared.

It turns out that the decrease in funding resulting in a massive loss of personnel, including the experts required to audit complex tax returns, has led the IRS to audit the poor more frequently, and particularly those claiming the Earned Income Tax Credit (EITC). This credit, while a boost for lower income workers (although in 2022, a taxpayer could earn up to $59,187 and still claim the EITC), is of course, only for those who work, which leaves out the disabled and others living on only social security, for example, and benefits taxpayers with children the most. And to add insult to injury, this recent article from Axios highlights a study showing that single, black men with dependents taking the EITC are the most likely to get audited of all taxpayers. Great. Most likely group to die at the hands of police and most likely to get audited by the IRS.

The EITC, established in 1975, and the Additional Child Tax Credit (ACTC) an extension of the Child Tax Credit included in the 2021 American Rescue Plan Act, have helped millions of Americans make ends meet at tax time. But what “tax time” means has shifted a bit. It’s obvious that if you’re getting a tax refund, whether you’re claiming a tax credit, you’ll likely file your returns the second you receive your W-2, which is usually shortly after January 31 or before, and you force yourself to endure hours or even days of drudgery to file immediately because you need that money as soon as possible.

In 2017, however, the Protecting Americans From Tax Hikes Act (Path Act) went into effect, which requires the IRS to hold onto the refund of those claiming either the EITC or the ACTC until after February 15 of each year … while it checks for “Tax ID” theft, and more generalized fraud. Although not a horribly long time, it can delay the receipt of your entire refund from two to six weeks, depending on the year.

According to Investopedia, the PATH Act delays these specific types of refunds because:

An attempted fraud can occur when someone files a tax return that falsifies the person's earned income, the number of children in the family, or both.

But can’t tax fraud occur under any scenario for these same reasons, and not just for filers claiming tax credits designed to help the poor? The (PATH) Act was signed into law in 2015 and does have some good points, like permanently extending the tax credits that help lower income taxpayers and small businesses, but to delay an entire refund to those who need it the most seems like overreach and proactive punishment to me.

Another federal tax that directly impacts those who are in a bad financial position is the tax imposed on unemployment compensation benefits . Before 1979, unemployment benefits were not taxed at all by the federal government or states, but taxation was eventually phased in over the next few years. By 1987, the federal government taxed all unemployment compensation benefits, starting at a 15% tax rate and finally settling on a 10% tax rate in 1992. And most states that have income taxes (all but eight states), also tax unemployment benefits.

When I checked the legislative history behind the 1987 change, I knew I would find this reason to justify taxing unemployment benefits:

The rationale for full taxation of UC benefits was to treat UC benefits the same as wages and to eliminate the work disincentive caused by favorable tax treatment for UC benefits relative to wages. (Emphasis added)

This is a repeating thought pattern because the same rationale (disincentive to work) was used in 2021 by 26 states to cut off the extra $300 pandemic unemployment benefits a few months early, even though it was federal money, and the federal government paid all administrative costs associated with dispersing the funds. So getting a little extra money when you are unemployed during the most pervasive and deadly pandemic in over 100 years will disincentivize millions of otherwise healthy, previously employed workers from getting a new job. Keep in mind that most of these states cut off the extra funds in June or July of 2021, when the federal government ended the program on September 6 of that year, just two months later.

To summarize, workers whose incomes are low enough to qualify for tax credits are audited more often than other taxpayers and treated like criminals who must wait for their tax refund while the IRS looks into the remote possibility they are frauds. And those who have lost their jobs through no fault of their own (otherwise, you cannot receive unemployment benefits), suddenly become glued to their couches, content to live off the paltry amount of benefits for the approximately six months they are eligible to receive them.

Taking a look at the larger tax code, rather than focusing just on federal taxation is perhaps even more important to help understand how taxes impact inequality. This 2022 article from The Center for American Progress details five ways (different from the ones I’ve already discussed) our tax system benefits the rich and burdens or punishes the poor. I’ll discuss one of the five ways that is the most impactful —the payroll tax, defined as “…the taxes employees and employers pay on wages, tips, and salaries. These taxes include federal, state, and local taxes, as well as FICA taxes, which are taxes for Social Security and Medicare.”

Although, the tax code is progressive, so that those earning more usually pay more, the more you earn from traditional employment where your employer automatically deducts the taxes you owe and pays them to the respective entities for you, and the lower your income (under $100,000/year), the higher percentage you owe in payroll taxes. The wealthy and uber-wealthy earn more of their income from stock dividends, interest, rental income and other passive income sources which are taxed in a different way and often at a lower rate. And because taxes on these passive income sources are not automatically deducted by an employer, the filer has access to loopholes and other deductions that benefit those earning this type of income.

In President Biden’s State of the Union Speech earlier this year, he summed it up nicely.

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Let me know what you think of our tax system in the Comment …

“A condo deconversion is a real estate transaction in which a savvy investor acquires an entire condo building through a bulk sale to turn into rentals. This investment trend has been seen in Florida and California for a number of years and is picking up steam in other coastal metros and even in the Midwest.” Forbes, July 22, 2019

It is startling for someone like me, who has never been a part of a for-profit business, to see the word “savvy” used to describe a real estate investor who buys a condominium complex with the sole purpose to change the structure from home ownership to rental, so the investor can make oodles of money. While the basic idea of investment is to earn a high return, this particular scheme can throw people out of homes they own again their will. A savvy investment, indeed.

“Three weeks after the toxic train derailment in Ohio, an independent analysis of Environmental Protection Agency data has found nine air pollutants at levels that, if they persist, could raise long-term health concerns in and around East Palestine…The analysis by Texas A&M University researchers stands in contrast to statements by state and federal regulators that air near the crash site is completely safe, despite residents complaining about rashes, breathing problems and other health effects.” The Washington Post, February 24, 2023

East Palestine, Ohio, a small town of about 5,000 residents, is a stone’s throw from the Pennsylvania border, and a three hour drive north and east from the capital city of Columbus. The recent train derailment and subsequent release of hazardous materials into the areas’ land, water and air has made national news for several weeks, and for good reason—this type of accident can happen practically anywhere, and for this community and surrounding area, it will have a decades-long impact.

Crime and Punishment: Why the Poor Stay Poor In America is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.