Can low wages be taxed in poverty? – NBC 6 South Florida
After months and months of ongoing debate over the various plans and proposals being considered in Washington DC, it is rare to see a new argument emerge.
But during an October 30, 2021 appearance on MSNBC, U.S. Representative Gwen Moore, D-Milwaukee, pleaded for support for President Joe Biden’s Build Back Better plan.
“The framework is more than a social safety net program,” Moore said on “Velshi,” an MSNBC program hosted by author and financial correspondent Ali Velshi. “I think these programs contribute as much to the growth of our economy as anything else. What good is growth if we force our workers into poverty?
Moore went on to say, “If you are a low-wage worker, single and have no children, we are literally pushing you into poverty.”
Is Moore right?
Do the math
When asked to provide a backup for the statement, Moore’s office directed PolitiFact Wisconsin to a July 2020 report from the Liberal Center on Budget and Policy Priorities.
The report focused on a provision of the plan that would temporarily extend the earned income tax credit to around 17 million low-wage workers. The report says, in part:
“The federal tax code currently taxes about 5.8 million low-wage workers aged 19 to 65 or older in poverty, as the payroll and (in some cases) federal income taxes they pay exceed any EITC they receive. “
This is generally relevant, but does not cover the “unique” and “no children” aspect of Moore’s claim. We therefore contacted other experts on the subject.
Let’s start with the terms involved and some basic data.
The Bureau of Labor Statistics, part of the US Department of Labor, does not use the term “low-wage worker”. However, the agency does publish an annual report and data on workers earning an hourly wage at or below the current federal minimum wage.
According to the BLS report from February 2021:
In 2020, 73.3 million workers aged 16 and over were paid by the hour, or about 55.5% of all workers. About 1.1 million of them, or 1.5 percent, were paid at or below the federal minimum wage of $ 7.25 an hour.
In addition, according to the report, among workers paid by the hour, those who were single were more likely than married workers to earn the federal minimum wage or less.
And about 60 percent of those in the hourly wage category worked in the hospitality industry – that is, bars, restaurants, and food services. Low wages are common in these fields, in part because workers typically supplement their wages with tips.
When asked about Moore’s claim, Christopher Wimer, senior researcher at Columbia University’s Center for Poverty and Social Policy, told us that he would need more precise definitions for “low pay,” “hardworking,” and even “single without children”.
Since Moore’s statement did not address these details, Wimer, who conducts research on measuring poverty and disadvantage as well as historical trends in poverty, constructed his own measure. He chose 2017 to 2019 because 2020 was an unusual year with COVID-19 related job losses, stimulus payments and more.
He defined low wages as being in the bottom quartile – that is, the bottom 25% – of annual income from wage income (among those who have at least one wage income, hence a “worker”). Then he selected adults who lived with no other family member (including children, therefore single without children).
The result: “For these people, their poverty rate is indeed higher after using after-tax income.”
That is, about 49% fall below the after-tax poverty rate, but if you remove federal, state, and payroll taxes the figure would instead be 41%.
Elaine Maag, senior research associate at the Urban Institute’s Urban-Brookings Tax Policy Center, said Moore’s comment “is not only plausible, but in limited contexts – true.”
Maag pointed out that in 2020, the official poverty line for a single person under age 65 with no children at home was $ 13,465. (For a married couple under 65 without children, the threshold was $ 17,331.)
“If I select a household whose income is just above that threshold, you can see that after tax their income will be less than $ 13,465,” Maag said.
Moore said, “If you are a low-wage worker, single and have no children, we are literally pushing you into poverty. “
Moore, in her statement, did not define the terms she was using, but the experts we spoke to were able to create plausible scenarios and found that, in at least limited scenarios, she was on the right path.
For a statement that is accurate but requires clarification or additional information, our assessment is mostly true.