Keep the Comments Coming!

I received a very thoughtful, extensive comment to the blog last night, in which Victoria Campbell mentioned that “this experiment doesn't take into account the numerous federal, state, and private charity resources available to low-income people.” Many of the points she raised were also considered by my family and those in my office. However, we did not want to convolute the issue and instead tried to bring in only a couple of the major subsidies that would be readily available to us. Nonetheless, I should address some of the points brought up in the comment in the event that others have similar questions concerning the project.

“First of all, your earned income of $1056 over 3 weeks is the equivalent of one person working 40 hours per week at $8.80 per hour. That means one spouse works, and the other spouse stays home with your child, i.e. no childcare costs. Even if you were only making federal minimum wage of $6.55 per hour and your wife were also working to bring in additional money, you wouldn't need to incur $487 in childcare costs unless she worked full-time. If you and your wife both worked full time at minimum wage, your household would be bringing in $1572 over 3 weeks, instead of $1056. That extra $500 would make a huge difference.”

To begin with, we decided to simplify our approach to this project. We determined that we would roughly calculate our wages using the current minimum wage (which is $6.55; it will be increasing to $7.25 this year) at 72 hours per week. This total, minus taxes (Social Security of $1,462, Medicare of $342, Federal Tax of $219, and State Tax of $52), puts us closer to the minimum wage. We are still over the line, but for the purposes of this project we decided to round down to “100 percent of the federal poverty line.”

To counter this discrepancy we gave ourselves a childcare subsidy that we would not be eligible at this point. I’ll explain that below.

“But more likely, you'd be working for $8.80 per hour and your wife would stay home with your daughter. So you won't receive $268 for childcare subsidy, but you won't pay $487 in childcare costs either. So that means an extra $219 spending money for your household.”

We are only taking 32 hours of childcare subsidy because my wife and my jobs only overlap 32 hours per week. As many people experiencing poverty are single parent households, the childcare subsidy could be increased to 40 worked hours per week. But unfortunately such a childcare subsidy increase would not make up for the lost hourly wages of a two-wage earner family.

One of the areas where we gave ourselves much more benefit than we would actually be receiving is with the childcare subsidy. Why? One of the problems with many of the services and programs available to assist low-income populations is that you have to have to pass income and asset tests. My family could pass some of the income tests only after being poverty for a minimum of a few months. My family would have to sell our house to past the asset test. Many people would have to sell their car or cars.

The way we understand the childcare subsidy is that it would only be available to us if we showed low-income pay stubs for three months. However, we gave ourselves this childcare subsidy anyway because without it we would not have been able to participate in the project. I suppose it would have been more realistic to just bump up are income level to, say, 110 or 120 percent of poverty. Though, again, we felt that this would complicate the issue. Nonetheless we may consider this approach if we try the exercise again next year.

This next point was the one that I was going to address in today’s blog:

“Next, you are eligible to receive the Earned Income Tax Credit (EITC). At your income of $18,310 per year for a family of 3, you'll receive about $2388 per year. EITC is a federal refundable tax credit. Your employer can add EITC right into your paycheck, or you can receive a lump sum after you file your taxes each April. EITC doesn't count as income when calculating the ‘poverty level.’ If you're getting it added into your regular paychecks, that's an extra $138 over 3 weeks.”

In practice, getting an employer to add the EITC right back into the employee’s paycheck (which is called the Advanced EITC) is not currently used on a widespread basis. There are several reasons for this that I will not go into here. There is an organization in the state that is working on spreading the usage of the Advance EITC. Regardless, a big EITC check at tax time would be a great help to our family ($2,145!!!) though that would not arrive until next February.

If you have any questions about EITC you can call Paul or Kori from my office (they help run much of the free tax help in the state which aids in the expansion of EITC usage); their number is 801.433.3025. EITC is not fully utilized, which is why my office is involved. It is estimated that over $60,000,000 goes unclaimed in Utah alone each year.

My office also works to spread the usage of the child tax credit.

“And don't forget your refundable child tax credit of $1000 per year, which (if you didn't spend it all at once) gives you an extra $57 over 3 weeks.”

There are many good tax and subsidy programs available. Child tax credits are two of these. The Child Tax Credit (which is non-refundable) would wipe out the federal tax of $219. The Additional Child Tax Credit (which is refundable) would bring our savings to exactly $1000. This certainly would help us if we were in such a situation. However, like the EITC, we would not receive that money until next February.

“You are also eligible for Section 8 housing, federal subsidized housing for low income people. With Section 8, you pay one-third of your income to rent, and the government pays your landlord the difference, up to fair market rate. So during the experiment period, you won't pay $636 toward rent. You'll pay one-third of $1056, which is $352. So put an extra $284 in your pocket.”

Section 8 housing certainly is a good program. And we would be eligible after selling our house (one problem that could come into play here is if we were upside-down on our mortgage, meaning that we owed more than it was worth). The only really problem with getting a Section 8 voucher is that we would likely need to wait a couple years to work our way up the waiting list. The current Section 8 waiting list for the Housing Authority of Salt Lake County is nearly 3000 households long and the list for the Salt Lake City Housing Authority is 8000 households long. There is also Section 8 project based housing Public Housing available. The waiting lists for these are just as long, particularly since the latter are fast disappearing for lack of federal funding.

If we try this experiment next year, we will consider laying out the methodology more clearly, and we may present all of the possible subsidies and their availability in more detail.

Ms. Campbell has a wealth of knowledge about these programs and would navigate the system very well. How many other people know about any of these programs? Where to get enrolled? What is offered? Most people do not. But that is what Community Action Agencies are there to help with. They can help people in need learn about and navigate the system. They can help people become self-sufficient before it is too late. That is also what 2-1-1 is all about. A 2-1-1 call can point people in the right direction.

The people I see that are living in poverty are those at the Road Home (the local homeless shelter) that is directly across from my office. The people I see are those living in my neighborhood that struggle to get by. Again, my wife and I do not think that we are experiencing real poverty through this project. But it seems to me that if we did have to actually live in a poverty situation such as the one that we are financially simulating, and if we did not know about any of the social services out there and did not know how to navigate them, our first three weeks would be much bumpier than our project has been.

Thank you again Ms. Campbell for your comments. Your viewpoint will certainly be useful going forward.

Shawn