Massive government relief passed in response to the COVID-19 pandemic moved millions of Americans out of poverty last year, even as the official poverty rate increased slightly, according to a Census Bureau report yesterday, the Associated Press reported. The official poverty measure rose 1 percentage point in 2020, with 11.4% of Americans living in poverty, or more than 37 million people. It was the first increase in poverty after five consecutive annual declines. But the Census Bureau’s supplemental measure of poverty, which takes into account government benefit programs and stimulus payments, showed that the share of people in poverty dropped significantly after the aid was factored in. The supplemental poverty measure was 2.6 percentage points lower than its pre-pandemic level in 2019. Stimulus payments moved 11.7 million people out of poverty, while expanded unemployment benefits kept 5.5 million from falling into poverty. Social Security continued to be the nation’s most effective anti-poverty program.
U.S. tax code changes sought by Democrats in the House of Representatives to help fund $3.5 trillion in domestic investments would cut annual tax bills for Americans earning less than $200,000 a year through 2025, a congressional estimate showed yesterday, Reuters reported. The bipartisan Joint Committee on Taxation estimated that expanded tax credits for children and earned income would mean people in lower-income brackets would pay far less in taxes in 2023 under the Democratic plan, which is being debated this week in the tax-writing House Ways and Means Committee. At the other end of the income scale, tax collections from those earning over $200,000 would rise slightly in 2023, escalating to a 10.6% increase for people earning $1 million and more, the committee said. By 2027, after an expanded Child Tax Credit expires, those earning between $30,000 and $200,000 would start to see slightly higher tax bills, according to the estimate. The joint committee, which estimates tax revenue and credit provisions of legislation, estimated that tax increase proposals now under debate in the House Ways and Means Committee would directly raise some $2.07 trillion over 10 years. The plan would raise the top individual income tax rate to its pre-2017 level of 39.6%, from 37% currently, on taxable income above $400,000 with a 3% surcharge on income above $5 million.
Nearly $10 billion in student loan debt has been wiped away since President Biden took office, the most sweeping attempt to fix badly broken parts of the federal student loan system in at least a decade, the New York Times reported. The beneficiaries include permanently disabled people, those who were defrauded by failed for-profit schools and soldiers deployed to war zones. More than 500,000 borrowers had their loans erased this year, largely through aid programs that all but stopped functioning during the Trump administration. While Mr. Biden has so far fended off calls for the kind of blanket debt cancellation that is a top priority of many progressive lawmakers, a parade of relatively modest eligibility and relief enhancements adds up to a significant expansion of support for beleaguered borrowers. And more may be coming: The Education Department said it was planning regulatory changes to programs aimed at helping public servants and those on income-driven repayment plans. “We’re at an inflection point,” said Seth Frotman, a former student loan ombudsman for the Consumer Financial Protection Bureau who now runs the nonprofit Student Borrower Protection Center. “If we continue to see progress and the Biden administration builds on this, the government can actually fulfill its promises to borrowers and ensure that payment plans don’t become long-term debt traps.” Read more.
In related news teachers returning to classrooms for another year of pandemic disruptions are facing additional stress in the U.S: overwhelming debt, Bloomberg News reported. Come February, an estimated one in four of the country’s 8.1 million educators will start making payments on their roughly $105 billion in outstanding student loans again after a moratorium ends. The burden is the heaviest for young teachers and Black teachers, who take on significantly more debt than other race groups. Add to that a federal loan forgiveness program rife with problems — only 2% of applicants were approved this year — and, in July, the news that the program’s only qualified loan servicer wouldn’t renew its contract. The stage is set for a grim start of 2022 for teachers trying to dig themselves out of a financial hole. “Setting aside the fact that some individuals might not be financially capable to return to repaying their loans, there’s big concerns that the administrative systems won’t be able to handle it,” said Lesley Turner, associate professor of economics at Vanderbilt University. The financial strife may accelerate turnover in an industry that was facing decreasing salaries and ballooning costs to get a degree even before COVID-19 brought crushing new pressures on the profession. Outstanding balances for teachers from pre-kindergarten to college education average $58,700, according to a July report from the National Education Association. (That’s close to the annual salary of the average teacher). More than one in eight owe more than $105,000, NEA data show, jeopardizing their ability to build up savings. Read more.
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The House Financial Services Committee will be holding a hearing at noon EDT today titled "Protecting Renters During the Pandemic: Reviewing Reforms to Expedite Emergency Rental Assistance." Committee members and witnesses will testify on H.R. 5196, the "Expediting Assistance to Renters and Landlords Act of 2021," and H.R. 3913, the "Renter Protection Act of 2021." For more information, including the full witness list and a link to the live webcast of the hearing, please click here.
Apartment rents were up in August from a year earlier in all the top 30 U.S. metro areas, the first time that’s happened since the start of the pandemic, according to a new report by Yardi, Bloomberg News reported. The national average rent in multi-family buildings rose 10.3% from a year earlier to $1,539 — the first double-digit rise in the dataset’s history — after a $25 increase in August, the real-estate firm said. Over the past 10 years, the average pace of growth has been 2%. This year’s surge in housing costs has added a new dimension to the debate over how long pandemic inflation will last, with signs that it’s picking up speed at a time other COVID-driven price spikes — like the one in used cars — may be topping out. Earlier in the crisis, the onset of work-from-home drove a flight from big cities like New York and San Francisco, pushing costs down. Rents in those two metro areas remain short of pre-pandemic levels, even though they’re now rising again on an annual basis. The spread of the delta variant of COVID-19, pushing back return-to-office-dates at some companies, may be one drag. Single-family homes that were built-to-rent saw even bigger increases, with prices up 13.9% from a year earlier. Those gains have triggered a surge in interest among institutional investors in housing as an asset class. Yardi said that’s likely to continue because “as Millennials reach home-buying age, the price of single-family homes continues to be out of reach for many.”
The House Financial Services Committee will be holding a hearing at noon EDT on Friday titled "Protecting Renters During the Pandemic: Reviewing Reforms to Expedite Emergency Rental Assistance." Committee members and witnesses will testify on H.R. 5196, the "Expediting Assistance to Renters and Landlords Act of 2021," and H.R. 3913, the "Renter Protection Act of 2021." For more information, including the full witness list and a link to the live webcast of the hearing, please click here.
The Consumer Financial Protection Bureau (CFPB) took action yesterday against an income share agreement (ISA) provider for misrepresenting its product and failing to comply with federal consumer financial law that governs private student loans, according to a CFPB press release. Better Future Forward, Inc., through its affiliated companies, provides students with money to finance their higher education, in the form of ISAs, under which students agree to pay a percentage of their income for a set period of time or until they reach a payment cap. Better Future Forward falsely represented that the ISAs are not loans, failed to provide disclosures required by federal law, and violated a prepayment penalty prohibition for private education loans. Under the CFPB’s order, Better Future Forward is required to provide disclosures that comply with federal consumer financial law, eliminate the prepayment penalties, and stop misleading borrowers.
New York lawmakers extended the state’s eviction and foreclosure freeze through Jan. 15, providing relief to renters, homeowners and small businesses that have struggled during the COVID-19 pandemic, Bloomberg News reported. Newly appointed Governor Kathy Hochul called the state legislature into a rare extraordinary session on Wednesday to renew the ban on residential and commercial evictions and foreclosures, which ended on Aug. 31. The legislation increases the amount of hardship funds available to tenants and landlords to $250 million from $100 million and creates a $25 million fund for legal services for renters facing evictions. The legislation also aims to get around a U.S. Supreme Court ruling last week that struck down a federal rent relief program that would have protected most New Yorkers who couldn’t pay their rent until at least October. The ruling cited “irreparable harm” suffered by landlords and the lack of authority afforded to the U.S. Centers for Disease Control and Prevention to impose a rental moratorium under a decades-old federal law. To comply with the ruling, New York’s legislation provides more relief funds for landlords and allows them to evict renters under certain circumstances.
