January 24, 2008 Reading Assignment as long as Tuesday, January 29 Extra Credit Event Outline as long as today Turn in your papers now!

January 24, 2008 Reading Assignment as long as Tuesday, January 29 Extra Credit Event Outline as long as today Turn in your papers now! www.phwiki.com

January 24, 2008 Reading Assignment as long as Tuesday, January 29 Extra Credit Event Outline as long as today Turn in your papers now!

Dinoffer, Joe, Contributing Editor has reference to this Academic Journal, PHwiki organized this Journal January 24, 2008 Reading Assignment as long as Tuesday, January 29 Rich Williams (SOC) in addition to Judy Fox (LAW)/Foreclosed in addition to Ab in addition to oned Houses in SB/ Changing Face of Inequality, available at: https://www3.nd.edu/~rwilliam/ndonly/rwpubs/SocialProblems2005.pdf; or http://www.nd.edu/~jwarlick/courses/html Extra Credit Event William Julius Wilson Lecture: Poverty in addition to Inequality in Urban America Sunday, Jan. 27th, 7:00 pm, 101 Debartolo Hall!!

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Outline as long as today Turn in papers Observations about our public opinion poll A quick quiz Questions about Professor Betson’s lecture A few more comments about Measuring poverty Ch. 1, What’s the point Taxes in addition to the poor, featuring the EITC Turn in your papers now! Pass to someone on the aisle. Quick Quiz 1. Indicate whether the following statement is true or false: “The U.S. is the only country to adopt an official (government authorized) poverty measure.” True False

Questions about Betson Lecture Mollie Orshansky’s obituary is posted on my web site http://www.nd.edu/~jwarlick Also see http://www.ssa.gov/history/orshansky.html Economists contribution: development of equivalence scales “a means to allow as long as the comparison of the poverty status of families of various sizes in addition to compositions” See: http://www.irp.wisc.edu/research/method/oakvos.htm Betson’s methods – microsimulation with cross-sectional surveys of American households A bit more about Measuring Poverty International Poverty Line, $1-per-day http://mdgs.un.org/unsd/mdg/Metadata.aspxIndicatorId=0&SeriesId=580 http://earthtrends.wri.org/features/view-feature.phpfid=58&theme=5 http://earthtrends.wri.org/images/pop-fea-dimofpov-fig4.jpg Alternatives to income-poverty: multidimensional indexes of poverty focused on capabilities Amartya Sen, Nobel Prize winner, 1998 Capability Deprivation In analyzing social justice, there is a strong case as long as judging individual advantage in terms of the capabilities that a person has, that is the substantive freedoms he or she has to lead the kind of life he or she has reason to value. In this perspective, poverty must be seem as the deprivation of basic capabilities rather than merely as lowness of incomes Amartya Sen, “Poverty as Capability Deprivation,” Development as Freedom (New York: Anchor Books, 1999).

World Bank definition of the dimensions of poverty Income poverty-material deprivation Health in addition to education Vunerability-exposure to risks Voicelessness in addition to powerlessness-exclusion from political processes http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:20194762~pagePK:148956~piPK:216618~theSitePK:336992,00.html Implications as long as Development Policies Development should not focus solely on raising incomes/consumption to reduce material deprivation, but also on enlarging people’s choices. Progress should not be measured in economic terms alone. Is it feasible to measure poverty using Sen’s definition Human Development Index http://hdr.undp.org/en/ http://en.wikipedia.org/wiki/Human-Development-Index Top-thirty-countries

What’s the point of Chapter 1 “Money in addition to Its Opposite” 2. Which of the following best expresses your answer to the question above: To show adults in working poor families behave unwisely To show that the choices available to the working poor are constrained relative to those with greater economic resources To emphasis that the working poor face higher prices in financial markets in addition to that these higher prices make it difficult as long as them to obtain basic necessities None of the above Your thoughts Taxes in addition to the Working Poor Presentation 5 January 24, 2008

Do the working poor pay taxes Payroll taxes Income taxes: Federal, State County, in addition to local Sales taxes: State in addition to Local 6% in Indiana Property taxes collected by the local county treasurers, based on assessments that are provided by the township in addition to county assessors Range from 2 to 3% in South Bend Payroll Tax Tax Base: Earnings (wages in addition to salaries) Tax individually paid by both employer in addition to employee: OASI Portion: 6.2% of first $94,200 of Earnings HI Portion: 1.45% of Earnings Payroll Taxes $94,200 OASI

Income Tax Income Income Preferences – Special Treatment of Certain Types of Income Adjustments to Income Adjusted Gross Income Deductions from Income St in addition to ard (single) $5,150 or (married) $10,300) Itemized Deductions: Medical in addition to Dental Spending Taxes Paid to other levels of Government Interest Paid (Homes in addition to Investments) Gifts to Charity Job Expenses, Thief Losses, Other Personal Exemptions ($3,300 per member) Taxable Income Gross Tax Liability + Tax Credits (EITC$$$$) Net Tax Liability Tax Credits Different kinds of tax credits Child- in addition to dependent-care credit Credit as long as the elderly or disabled Retirement savings contributions credit Adoption expenses credit Hope in addition to Lifetime Learning education credits Tax Credits, cont. Even better than deductions! Deductions reduce your amount of taxable income credits cut your actual tax bill, dollar- as long as -dollar

Tax Credits, cont. Non-refundable vs. Refundable credits Nonrefundable credits can take your tax down to nothing, but you can’t get money back from the government Refundable credits may eliminate any tax you owe in addition to provide you with a refund$$$ Earned Income Tax Credit is a refundable tax credit targeted at the working poor!!!!! Tax Rates Terms Marginal Tax Rate – if you earn one more dollar, what percent of that additional dollar do you pay in taxes Marginal Federal Tax Rates Lower Income Limit on Taxable Income: MRT Single Married 10% 0 0 15% $7,550 $15,100 25% $30,650 $61,300 28% $74,200 $123,700 33% $154,800 $188,450 35% $336,500 $336,500

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Tax Terms, cont. Average Tax Rate – what percent of their income do households at different income levels pay in taxes Average Federal Tax Rates of U.S. Households, 2001 in addition to 2004 Sources as long as Previous Slides Congressional Budget Office, Effective Federal Tax Rates under Current Law, 2001 to 2014 (Washington, D.C.: Congressional Budget Office, August 2004), table 2. U.S. Census Bureau, Income: Historical Income Tables-Households, Table H-1: Income Limits as long as Each Fifth in addition to Top 5 Percent of Households, All R aces, 1967 to 2006. Available at http://www.census.gov/hhes/www/income/histinc/h01ar.html

State in addition to Local Taxes as a Percentage of Income, by Income Category, 2002 Source: Institute as long as Taxation in addition to Economic Policy Tax Equity Terms Based on Average Tax Rates Regressive – Falling Average Tax Rate Examples: OASI payroll tax Sales taxes: As income rises, you spend less Proportional – Constant Average Tax Rate Example: HI payroll tax, property tax Progressive – Rising Average Tax Rate Example: Income Tax Do the poor households have higher average tax rates The structure of the federal tax system is progressive overall State in addition to local taxes are regressive All taxes considered, the US Tax system is progressive!!!

Will this popularity last- problems with the EITC Fraud Overpayments to eligibles Fraudulent claims from ineligibles Nonparticipation Marriage penalty encourages cohabitation A two earner, two-child couple making $35,000 (with a 60/40% earnings split) can save $3,923 a year in federal income taxes by avoiding marriage (EITC: $4,400 vs. $476). Will this popularity last- problems with the EITC, cont. High cumulative marginal tax rates When earnings are in the phase-out range, the combined marginal tax rates as long as the may create a substantial work disincentive Federal income taxes 15% Payroll tax 7% EITC phase-out 21% Add a State income tax (3 to 6%) to this 43% marginal tax rate if relevant. Add 24% phase-out rate as long as Food Stamps. Cumulatively the marginal tax rate face by low-income Americans is in the range of 43- 73% !

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