The Districts Dime

DC’s Minimum Wage Increase Will Help Thousands of Residents Make Ends Meet

August 20th, 2014 | by Wes Rivers

The increase in the District’s minimum wage to $11.50 an hour will lift the incomes of thousands of DC residents, according to a new study by the Urban Institute. A significant share of the affected workers affected are at or near poverty, and most are major breadwinners for themselves or their families. This means that the minimum wage increase will help reduce income inequality in DC.  What’s more, the study may understate benefits that workers could experience given recent income tax reforms that will reduce taxes for low- and moderate-income households. 

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The study looks at the minimum wage’s impact on worker’s earnings and on disposable income – the net income gain after taking into account taxes and any reductions in government assistance programs resulting from the earnings increase. It finds that the new minimum wage will: 

Affect a large share of workers: 41,000 District residents – or one in eight working adults – will be affected by the new minimum wage. Two-thirds these residents work year round (48 weeks or more).

Help low-income residents: About 55 percent of those affected workers live in households with incomes below or near the poverty line. 

Provide significant increases in earnings and income: Half of these workers will see a $1,500 or larger increase in annual earnings. And the vast majority of workers will keep more than half of their earnings gains as disposable income, after taxes and reductions in government benefits are considered. For example, a single adult without children working full-time will see up to $4,000 increase in disposable income, from $15,700 to $19,700. 

The study noted that income increases will be modest for some families, either because they already are earning close to $11.50 or because they receive a number of public benefits that will phase down. But this does not negate the fact that many workers will see notable income gains. 

Moreover, the study may understate net benefits to workers. This is because it relies on income tax and public assistance rules from 2011, and, in particular, does not take into account a package of tax changes adopted in July that will cut income taxes significantly for low- and moderate-income residents. That means workers should be taking home much more of what they earn in 2016. These changes include raising of the standard deduction and the expansion of the Earned Income Tax Credit (EITC) for childless adults. The expansion of the DC EITC will be especially beneficial given that most minimum wage workers are single adults without children. 

Higher wages and lower taxes means low- and moderate-income families will have more disposable income to spend on essentials like food, school uniforms, or night classes. The benefits of the new minimum wage are exciting, and in combination with recent tax changes, will help make work pay for more District families.

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Back to Basics: Profiles of DC’s Key Health, Housing and Tax Assistance Programs

August 15th, 2014 | by Kathy Haines

Local taxpayer dollars support many important services that help DC residents with basics like healthcare, affordable housing and tax assistance. We at the DC Fiscal Policy Institute have used our summer to update easy-to-read summaries of the largest of these programs. We’ve included information on who is eligible, services that are provided and areas for future focus.  

Here is a snapshot from each updated brief. Click on the links below to read the complete summary of each program.

                         HEALTH CARE & HOUSING

Medicaid8.15.14 doctor

  • Provides:                     Health insurance
  • Impact:                        Assists 225,000 residents (roughly 1 in 3 DC residents)            
  • FY 2015 Budget:        $700 million local funds, $2.1 billion federal funds

Healthcare Alliance

  • Provides:                     Health insurance for those who don’t qualify for Medicaid
  • Impact:                        Assists 14,500 residents (primarily undocumented residents)
  • FY 2015 Budget:        $50 million in local funds

Housing Production Trust Fund (HPTF)8.15.14 apartment building

  • Provides:                     New or newly renovated affordable housing
  • Impact:                        Built or preserved an average of 400 units annually since 2009              
  • FY 2015 Budget:        $40 million in local funds

TAX ASSISTANCE

DC’s Earned Income Tax Credit (EITC)

  • Provides:                     Refundable tax credits to low-income working residents
  • Impact:                        56,000 families or individuals received the EITC in 20118.15.14 dollars
  • FY 2015 cost:              $55 million

DC’s Low-Income Property Tax Credit, also known as Schedule H                                    

  • Provides:                     Property tax assistance for renters and owners
  • Impact:                        8,300 tax filers received Schedule H in 2011
  • FY 2015 cost:              $19 million

Stay tuned to the District’s Dime for new and updated policy briefs from DCFPI on key programs that help DC’s low- and moderate-income residents. 

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Health Reform Means Big Changes for Medicaid Eligibility Rules and Processes

August 12th, 2014 | by Wes Rivers

The Affordable Care Act has allowed the District to improve access to health care through Medicaid, by making more residents eligible and by expanding Medicaid services. The ACA also changed the way many residents will apply for and renew their benefits starting this fall, in ways that should make it easier to get and keep health coverage. But the changes – particularly in how income is counted to determine Medicaid eligibility – may be confusing to some. 

We want to explain those changes today, doing our part to make the transition easier. 

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Changes in How Medicaid Will Count Income to Determine Eligibility 

The Affordable Care Act changed the way DC and the states collect income information from people applying for Medicaid, with the new format closely following how we report income on federal income tax forms. The new method is known as Modified Adjusted Gross Income (MAGI).

This makes sense because the same income rules and application are used to determine whether residents are eligible for tax credits and subsidies to help pay for health plans sold on DC Health Link. The tax credits and subsidies are for people with incomes that are moderate but too high to qualify for Medicaid. 

This means that residents who are not sure whether they are eligible for Medicaid or for the tax credits can apply for both using just one application. The new process will also make it easier for administrators to verify income and eligibility through federal data sources. 

How to Apply for and Renew Medicaid Benefits 

The creation of the DC Health Link – DC’s online, health insurance marketplace – and the new income-counting methods make it easy for DC residents to apply for Medicaid. And they should make it easier to renew their eligibility each year. 

Starting in November 2014, the District will send current Medicaid recipients a pre-populated renewal form to collect missing tax and income information. After filling out the form this one time, the renewal process for every year going forward is “passive” – meaning that residents may not have to do anything to maintain their eligibility. The District will match information provided on the form to federal and local data hubs to verify eligibility. The recipient will not have to complete renewal forms again unless the data hubs return inconclusive results. 

It should be noted that the application and renewal processes remain largely unchanged for people who are Medicaid-eligible due to age or disability status. Moreover, new Medicaid applicants who have applied since October 2013 will not have to fill out the renewal form. 

Any time systems change, there are technical glitches and consumer confusion, so providers and consumer representatives should familiarize themselves with the new processes before November. This presentation is a good resource that walks through the renewal form.

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How Did Funding for Affordable Housing And Taxes Change in Next Year’s Budget?

August 7th, 2014 | by Wes Rivers and Jenny Reed

The District’s Dime is back with more updates on the changes in next year’s budget!  Today we’ll cover two big topics in DC: affordable housing and taxes.  

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Affordable Housing in DC’s FY 2015 Budget

The District plans to spend $151 million in local revenues on affordable housing next year.  That’s 16 percent more than the initially approved budget for FY 2014, after adjusting for inflation.  But the Mayor and Council added $40 million in mid-2014 to the Housing Production Trust Fund.  Taking that into account, the FY 2015 budget is a 10 percent drop from the FY 2014 budget.  The FY2015 budget includes: 

  • Increases to rental assistance. About 500 more low-income households will get help from DC’s local rent supplement program, including some seniors who will be able to move out of nursing homes and homeless families. 
  • Funds to house chronically homeless veterans and families. The District will end chronic homelessness among veterans next year and provide permanent supportive housing to about 75 chronically homeless families.
  • A new locally funded low-income housing tax credit (LIHTC). The new credit, modeled on the federal LIHTC, will draw more private investment into the production of affordable housing.

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Tax Changes in DC’s FY 2015 Budget

Next year’s budget includes many tax changes by starting to implement many of the recommendations of the D.C.  Tax Revision Commission. These changes include: 

  • Income Tax Cuts for Virtually All Residents. Lower- income residents will benefit from an increase in the standard deduction and from an expansion of the Earned Income Tax Credit for childless workers. The budget also reduces the income tax rate on income between $40,000 and $60,000, which will help moderate and higher-income residents. The budget calls to further increase the standard deduction and further reduce the middle-income rate in future years if certain revenue triggers are met.
  • Business Tax Changes. These include a cut in the business income tax rate, a change in the way multistate companies determine DC profits, and a business income exemption to encourage investment firms to locate in DC. The business tax rate will be reduced further if triggers are met.
  • Property Tax Assistance for Seniors. The budget expands the Schedule H property tax credit for low- and moderate-income seniors and allows interest-free property tax deferrals for long-time senior homeowners. 
  • Sales tax changes. The budget raises taxes on non-cigarette tobacco products and expands the sales tax to a number of services. Both were recommended by the tax commission. 

Keep checking back in with the District’s Dime for more toolkit updates this summer!

To print a copy of today’s blog, click here.

 

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How Health Reform Can Help District Smokers

August 6th, 2014 | by Wes Rivers

The District has been a leader in using the Affordable Care Act (ACA) to expand health insurance to nearly all of its residents. But we should not stop there. The next step is to focus on providing services to address DC’s long-standing health disparities, including those caused by tobacco use.  The District has taken advantage of some – but not all – of the ACA options to enhance tobacco treatment. The District’s next wave in health reform should include aggressively attacking tobacco use in the city. 

About one in five District adults smoke, including nearly one in three African-American adults. Residents east of the river are more likely than others to be frequent smokers. This means that tobacco use worsens health disparities across the city. 

The District has already taken advantage of two Affordable Care Act provisions to provide tobacco prevention and cessation services, especially among residents who are Medicaid eligible. 

  1. Banning private health insurers from charging tobacco users more for their health plan. The ACA allows DC and the states to ban private insurers from charging smokers more than non-smokers for their health insurance premiums. DC chose to ban rate hikes for tobacco users, as the price increases could prevent lower income residents from accessing the care they need to quit. 
  2. Expanding Medicaid coverage to include face-to-face tobacco counseling and cessation medication for pregnant women. Tobacco use during pregnancy can have serious health effects on the fetus, so the ACA mandated coverage of counseling and cessation drugs for this population. The District amended its Medicaid State Plan this year to include these services. 

8-6-14-tobacco-blog-t1But the District is not doing enough to provide Medicaid coverage for FDA-approved cessation drugs or to cover tobacco counseling services. The ACA requires state Medicaid programs to cover all seven FDA approved cessation drugs (See Table 1) for all enrollees by January 2014. DC covers only three of these drugs (nicotine gum, patch, and lozenge), which means the city is out of compliance with ACA and missing the opportunity to greatly curb preventable disease. 

The District also has the option to fund the “tobacco quit-line” – its telephone counseling service – using Medicaid dollars. The District would need to conform the quit-line with proven practices, which could lead to a more effective program and a sustainable funding stream via Medicaid.  

Improving health outcomes is not only good for tobacco users and their family and friends. It also will reap long-term healthcare cost savings. A good example is Massachusetts — which implemented comprehensive Medicaid coverage for tobacco cessation services and medication and found that every dollar invested in the cessation program resulted in $3.12 in medical savings. 

To print a copy of today’s blog, click here.

 

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