Monday, February 1, 2010

Poverty in the Suburbs, Earned Income Tax Credit

According to the Institute for Financial Literacy, the average person filing for bankruptcy in 2006 was:
white, male, between the ages of 35 and 44, making less than $30,000 a year.

The official beginning of the recession was recorded in December, 2007 (although the feeling of being in recession was felt in 2006 by many); the Institute for Financial Literacy's follow-up on who filed bankruptcy in 2008 found the same group from 2006 was filing for bankruptcy - but that there has been a sharp shift into the middle class. Among the groups they found with the greatest rates of increase were the college educated, self-employed, making more than $40,000 a year.

Let's combine this with the Brookings Institute's study on the surge of poverty in the suburbs:
  • 7.2 million jobs have been shed from the economy since December, 2007
  • the majority of these job losses were in "decentralized" (not concentrated in industrial or city centers) i.e. real estate, construction, retail; and are part of a greater trend since the 1990s of the suburbanization of the poor
  • low-density "exurbs" have been particularly hard hit because these communities don't have the same infrastructural safety nets that have become structural in the city. This can be seen in the use of food stamps: although there are more poor people living in the suburbs, only 32% of suburban families received food stamps vs. 39% in the primary cities they surround.
And, finally, lets briefly jextapose these micro-level economic indicators with what the ruling class had to say in Davos, Switzerland:
  • Government debt has reached historical levels for peace time in a number of advanced economies.
  • With a few exceptions, the larger advanced economies have been the most affected by fiscal crises. According to the IMF, by 2014, the average debt-to-GDP ratio of advanced economies that are members of the G20 is expected to climb from the 2007 pre-crisis level of 78% to 118%.
  • According to the same IMF analysis, between 2007 and 2014 the average debt-to-GDP ratio of emerging countries that are members of the G20 will never exceed 40%.
  • The U.S. will continue to experience plant foreclosures and the the bankruptcy of small and medium size enterprises, one legacy of this may be a legacy of underemployment in the U.S. as there are 9 million part-time workers today seeking full-time employment (myself included, y'all).
Since it is tax time again, I think it's appropriate to remind the readership that there is no reason to pay someone to help you prepare your taxes. This is particularly a problem for the most vulnerable section of the economy: the working poor. The Nation has a fine article discussing the problem of tax refund advance loans here.

If you are concerned that you won't be able to file your own taxes or are having a difficulty with your tax preparation, please consider using a VITA site, the Atlanta Prosperity Campaign helps working families find many sources of support.

I've discussed the Atlanta Prosperity Campaign before. A primary tool in their belt is the Earned Income Tax Credit (EITC), a refundable federal income tax credit for low to moderate income working individuals and families. The EITC is an effective tool for asset-building among the working poor:
[T]he Internal Revenue Service estimates the EITC participation rate for eligible individuals ranges from 75% to 80% Thus, increasing the EITC participation rate for Atlanta families by a mere 10% (7,934) could result in over $15 million in additional benefits.
Good luck.


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