Archive for 2012

Rising inequality in Oklahoma as lower- and middle-class incomes stagnate

by | November 15th, 2012 | Posted in Economy | Comments (3)

Incomes for poor and middle-class families in Oklahoma have stagnated since the late 1990s, with nearly all of the growth in income going to the wealthiest households, according to a new report by the Center on Budget and Policy Priorities and the Economic Policy Institute.

The report, Pulling Apart: A State-by-State Analysis of Income Trends, provides a troubling snapshot of how households at different income levels are doing in Oklahoma. Since the 1970s, inequality between the top and middle saw the third highest increase in the nation, behind only Connecticut and California. Over that time, average household incomes for the wealthiest fifth of Oklahomans grew 63.9 percent, compared to just 16.0 percent for the middle fifth and 5.3 percent for the poorest fifth. Today Oklahoma ranks eighth worst for the income gap between the top and the middle.

A common argument made by those who defend rising inequality is that the overall pie is increasing for everyone, even if the rich gain the most. The latest numbers show that isn’t true. During the most recent economic expansion [1998 to 2007], the incomes of the richest fifth of households grew by 7.7 percent while incomes for the middle fifth remained stagnant and incomes for the poorest fifth fell by 7.5 percent.

The report echoes recent Census numbers showing Oklahoma’s median income remained flat in 2011, despite the growth in total personal income. Some in Oklahoma are doing very well, but their wealth is not trickling down to average families.

The report finds that income gaps between the richest households and both the poorest and middle-income households have widened significantly in all states since the late 1970s. Inequality is rising for a range of reasons, including long periods of high unemployment, more intense competition from foreign firms, a shift from manufacturing to service jobs, and a minimum wage that has not kept up with price increases. 

Many of the reasons for growing income inequality are outside of the control of states.  However, Oklahoma policymakers can take a number of steps to make our economy work better for everyone. Recommendations include:

  • Make state tax systems less regressive. Good options for doing this in Oklahoma include exempting groceries from the sales tax and expanding the state Earned Income Tax Credit.
  • Strengthen supports for low-income workers. We can improve the health of low-income workers by joining the Medicaid expansion. We should also invest more in workforce training and other programs that help low-income adults gain entry to occupations that offer better wages, opportunities for advancement, and stable employment.
  • Raise the minimum wage and tie it to inflation so it keeps pace with rising costs. The purchasing power of the federal minimum wage is 13 percent lower than at the end of the 1970s. Its value falls well short of the amount necessary to meet a family’s basic needs.

The joint CBPP/EPI report, as well as a press release and state fact sheets, are available at http://www.cbpp.org/cms/index.cfm?fa=view&id=3860.

See an infographic with the Oklahoma data at http://www.cbpp.org/files/pullingapart2012/Oklahoma.pdf.

Guest Blog (Kathy Ruffing): Why is labor force participation shrinking?

by | September 17th, 2012 | Posted in Blog, Economy | Comments (0)

Kathy Ruffing is a Senior Fellow at the Center on Budget and Policy Priorities (CBPP), specializing in federal budget issues. A previous version of this post appeared on the CBPP’s Off the Charts blog.

With monthly jobs reports making the headlines, the Congressional Budget Office’s (CBO) recent budget and economic update provides important context for one closely watched  figure:  the labor force participation rate.

The percentage of people over age 16 who are working or actively seeking work has slipped fairly steadily for the past few years.  CBO says a big reason is “the economic downturn [and] weak growth in output during the recovery.”  In other words, the recession and lack of job opportunities have driven many people from the labor force.

But, in a finding that has attracted little attention, CBO says that roughly half of the recent drop in labor force participation has occurred simply because more and more baby boomers are hitting retirement age.

Labor market participation traditionally peaks between ages 25 and 54.  At those ages, roughly 80 percent or more of people are working or looking for work.  At younger or older ages, though, the percentage drops — tapering off to fewer than 10 percent of people 75 or older, as the graph shows.

The graph also shows changes in labor force participation since 2006 within narrow age groups.  While participation has dropped among young adults, it has held pretty steady for those aged 25 and up and has actually increased at the oldest ages.  But the sheer number of baby boomers (the generation born between 1946 and 1964) moving into their retirement years has dampened the overall rate, as CBO confirms.  Researchers at the Chicago Fed and the Kansas City Fed bear out CBO’s analysis.

Back in 2002, the Labor Department presented an alternative, age-adjusted measure of overall labor force participation.  We wish it would keep this series up to date and give it the same prominence as the overall rate.  That’d help policymakers and journalists understand the numbers.

As we’ve written, misguided concerns about near-term deficits are standing in the way of stimulus measures that could improve labor force participation by boosting job creation.  Getting Americans back to work would raise incomes, reduce poverty, enhance retirement security, and lessen pressures on disability insurance and a host of other programs.  But, given the aging of the population, we’re unlikely to get back to the high participation levels of the late 1990s even if the economic recovery grows much stronger.

The opinions stated above are not necessarily those of OK Policy, its staff, or its board. This blog is a venue to help promote the discussion of ideas from various points of view and we invite your comments and contributions. To see our guidelines for blog submissions, click here.

Oklahoma's per pupil spending has plummeted

by | September 4th, 2012 | Posted in Blog, Education | Comments (3)

Oklahoma’s economy has performed relatively well over the course of the Great Recession, compared to the nation as a whole. We’ve had lower unemployment numbers and decent income growth. Yet you wouldn’t know it to look at the state of school funding.

A new report by the Center on Budget and Policy Priorities shows that per pupil spending in Oklahoma has dropped more than 20 percent since FY 2008. This was the third largest percentage decrease in the nation, behind only Arizona and Alabama. In FY 2013, Oklahoma is spending $706 less per student in inflation-adjusted dollars than we did in FY 2008.

Total state appropriations for common education have fallen by $220 million since FY 2008. From 2009 to 2011, more than 4,000 jobs were lost from Oklahoma’s elementary and secondary schools, according the the Bureau of Labor Statistics. The result is larger class sizes, fewer course offerings, and less support from librarians, counselors, special education specialists, and others.

The recession has thankfully ended and the economy is growing again, but cuts to schools have not stopped. Because schools received flat funding with increasing enrollment, spending per student declined by 1.7 percent, or $49, from FY 2012 to FY 2013.

A strong education system is essential to creating and maintaining a thriving economy. Businesses need a well-educated workforce, and education cuts undermine the state’s ability to produce workers with the skills needed to compete in a global economy. Our economy is performing well today, but if we do not recommit ourselves to adequately fund education, we put our children and our future prosperity at risk.

Federal aid to Oklahoma under the ax in Ryan budget plan

by | August 8th, 2012 | Posted in Blog, Budget | Comments (0)

Without new revenue, federal deficit reduction efforts will lead to devastating cuts in federal support for education, transportation, law enforcement, the social safety net,  and other state and local programs, according to a new report from the  Center on Budget and Policy Priorities. Oklahoma faces a loss of $345 million in discretionary state and local aid in 2014 alone, and over $3 billion from 2013-2021 under the House-approved budget plan developed by Congressman Paul Ryan, which illustrates the kind of approach Congress likely would take if it rejects significant new revenues.  Cuts of this magnitude would lead to a significant reduction in the quality and reach of core public services in Oklahoma and would threaten the state’s economic recovery.

Under the Ryan plan, federal support for discretionary non-defense spending would be slashed by over 20 percent compared to 2012 levels, according to the Center’s estimates. That part of the federal budget funds grants to state and local governments to support services that states and localities provide, such as education, law enforcement, water treatment facilities, and disaster response.

continue reading Federal aid to Oklahoma under the ax in Ryan budget plan

Guest Post (Indivar Dutta-Gupta): EITC Even Better for Children than We Thought

by | July 19th, 2012 | Posted in Blog, Children and Families, Taxes | Comments (0)

Indivar Dutta-Gupta is a Policy Advisor for the Center on Budget and Policy Priorities (CBPP). This post originally appeared on the Off The Charts blog.

We previously showed that the Earned Income Tax Credit (EITC) for low-income workers lifts more children out of poverty than any other public program.  More recent research suggests that the income assistance it provides is even better for children — our nation’s future workforce — than we thought, helping them succeed both as students and, in adulthood, as workers.

Improving school performance. For children in low-income working families, research shows that earnings supplements like the EITC can be very beneficial in times of need.  As our recent paper explains, three separate teams of highly regarded researchers have found that young children in very low-income families do better in school if their families receive additional income from the EITC or (in some of the studies) similar work-based supports.

Boosting children’s work hours and earnings in adulthood. The benefits of the EITC and other income-boosting measures appear to carry over into young children’s adulthood. Two studies show that young children in low-income families that receive the type of income support that the EITC offers are likely to work more and earn more as adults.

continue reading Guest Post (Indivar Dutta-Gupta): EITC Even Better for Children than We Thought

Claims for Oklahoma tax cut not OK

by | May 17th, 2012 | Posted in Blog, Taxes | Comments (2)

This post was written by Nick Johnson, Vice President for State Fiscal Policy with the Center on Budget and Policy Priorities. This originally appeared on the Center’s Off the Charts blog and is reposted with permission.

Yesterday’s Wall Street Journal editorial supporting a proposal by Oklahoma governor Mary Fallin to phase out the state’s income tax contains a slew of incorrect or misleading statements.  For instance:

    • The editorial wrongly asserts that states without income taxes have had stronger economic growth than other states, echoing a claim from a recent report from economist Arthur Laffer and the American Legislative Exchange Council.  As we have explained:

A key flaw in the Laffer analysis is that all of its measures of “economic growth” are really just measures of population growth.  As a state’s population grows, you would expect its total number of jobs and its total economic output to grow with it.  But, that’s not the same thing as a state’s per-capita performance.

A study from the Institute on Taxation and Economic Policy shows that residents of states with relatively high income tax rates are doing as well, if not better, than residents of states lacking a personal income tax in terms of per-capita economic output and household income.

      • The editorial claims that states with relatively high income tax rates have faced the biggest budget shortfalls.  That’s simply not true.  Four of the nine states without an income tax — Nevada, New Hampshire, Texas, and Washington — have closed (or are closing) above-average shortfalls for the upcoming fiscal year, while some of the high-income-tax states that the editorial mentions, like Illinois and Maryland, had below-average shortfalls.Also, the editorial’s boast that no-income-tax states “manage to balance their budget nearly every year” makes little sense, since all states except Vermont are required to balance their budgets.
      • The editorial cites Governor Fallin’s warning that Oklahoma is about to become an “income tax sandwich” as neighboring states consider eliminating their income taxes.  It’s true that anti-tax activists have been promoting income tax repeal in Kansas and Missouri for years.  But they haven’t succeeded.   In fact, Governor Fallin’s proposal would make Oklahoma the only state ever besides oil-rich Alaska to repeal its income tax.

The editorial correctly notes that many of Oklahoma’s leading economists have challenged claims that eliminating the income tax would help the economy.  But it wrongly suggests that non-economists feel differently.  A recent survey found that Oklahomans oppose the tax cut by a 42-35 percent margin, partly because they overwhelmingly view an educated, well-trained workforce as more important than low taxes — and a state that lacks income tax revenue will find it harder to find the resources to educate its own people.

Guest Blog (Elizabeth McNichol): The "Texas model" is hard to follow and not all it seems

by | April 4th, 2012 | Posted in Blog, Economy, Taxes | Comments (4)

Elizabeth McNichol is a Senior Fellow at the Center on Budget and Policy Priorities specializing in state fiscal issues including methods of examining state budget processes and long-term structural reform of state budget and tax systems. This post originally appeared on the CBPP’s blog. See OK Policy’s animated video comparing the Oklahoma and Texas economies here.

The Governor of Oklahoma and policymakers in Kansas, Missouri, and other states have proposed income tax cuts that they say will boost economic growth. To make their case, they have cited the example of Texas, which has no income tax and where growth has been strong.

But in reality, Texas is not a helpful model for economic growth for the rest of the country. True, the number of people and jobs in Texas has been expanding. But, as we discuss in our recent paper, much of Texas’ growth results not from its policies but rather from factors that state officials cannot control and that other states cannot emulate.

  • Texas has unique geographic and demographic characteristics that have helped lift its economy in recent years. Its border location brings trade opportunities and encourages immigration that, together, help fuel population and job growth.
  • A combination of available land and lending regulations have kept housing prices comparatively low and helped Texas avoid the real estate depression that dragged down many other state economies.
  • Though Texas’ economy has diversified in recent decades, the state’s abundant oil and gas resources remain a valuable asset — especially when prices for those commodities are high — that most other states lack.

    continue reading Guest Blog (Elizabeth McNichol): The "Texas model" is hard to follow and not all it seems

Surprise! States without an income tax have higher sales and property taxes

by | March 22nd, 2012 | Posted in Blog, Taxes | Comments (3)

Photo by Martha Soukup used under a Creative Commons license.

States without an income tax rely on other taxes to fund government. Far from discovering magical, revenue boosting powers by not having an income tax, these states simply charge higher sales and property taxes.

A new report from the Center on Budget and Policy Priorities shows how much higher:

  • In fiscal year 2009, the nine states without an income tax had property taxes that were, on average, 12 percent higher per capita and 8 percent higher as a share of personal income than the national average.
  • Sales taxes in those nine states were 21 percent higher per capita and 18 percent higher as a share of personal income than the national average.

The property tax comparison is especially relevant for Oklahoma, since our income tax helps us to keep property taxes very low. In every state without an income tax, people pay much higher property taxes compared to Oklahoma. The average per capita property tax in no-income tax states is more than two-and-a-half times what we pay here.

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New measure provides insights into poverty and public programs

by | November 17th, 2011 | Posted in Blog, Poverty | Comments (1)

Source: The Working Poor Families Project

Earlier this fall, the Census Bureau released its annual report on poverty in the United States. In 2010, 15.1 percent of Americans, or 46.2 million persons, lived below the poverty level, which was $22,050 for a family of four. Among children the poverty rate was 22.0 percent, while for seniors, it was 9.0 percent. In Oklahoma, the poverty rate overall was 16.9 percent, with just under one in four children living in poverty (see our Oklahoma Poverty Profile fact sheet and this blog post).

As a measure of a household’s financial situation, the official poverty measure is deeply flawed. As we noted a year ago:

 Census Bureau numbers [are]  based on a measure that looks strictly at a household’s cash income and that is pegged to the cost of a 1950′s basic food diet, adjusted for inflation.  The measure has long been criticized as inadequate: among other limitations, it fails to reflect the real costs families face in meeting basic needs; it fails to adjust for regional differences in the cost of living; and it excludes non-cash income and benefits received by low-income families.

This year, the Census Bureau took a major step toward addressing some of the flaws with the official poverty measure by releasing the Supplemental Poverty Measure (SPM). Unlike the traditional poverty measure, the SPM determines poverty status by comparing a more expansive definition of family’s income with a more meaningful threshold designed to reflect the cost of meeting basic needs, like food, clothing, and shelter. The SPM counts tax credits, such as the Earned Income Tax Credit and Making Work Pay credit, and non-cash benefits, such as food assistance and housing vouchers, as income that help families afford basic needs. It also acknowledges the burden of work expenses, like child care, and out-of-pocket health expenses for many Americans. The Poverty and Policy blog provides a clear summary of the new measure’s assumptions and methodology.

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Stop Flying Blind: Three sensible reforms to help us chart a stable fiscal course

by | November 7th, 2011 | Posted in Blog, Budget | Comments (4)

Oklahoma is facing serious challenges when it comes to having the resources to provide the sorts of public services that help create jobs and build a strong economy.

Yet while the need to chart a sound, sustainable fiscal course is urgent, our policymakers too often are flying blind. Legislators routinely make spending and revenue decisions that will have long-term consequences without access to key information about the cost of funding existing obligations in the coming years.

Two recent reports from the Center on Budget and Policy Priorities (CBPP) suggest a pair of sensible budget management tools that Oklahoma should adopt .