New revenues play essential role in balanced approach to federal budget, reducing poverty
Poverty continues to impact 1 in 5 North Carolinians, according to 2012 Census Bureau Data released last week. The extent of poverty would be far greater without the safety net and work supports, however. This post is part of a blog series that will explain how the new poverty data demonstrates the important role public programs play and the need for continued support. Read the other posts in this series on SNAP, Social Security, Unemployment Insurance, and the EITC.
As poverty continues to grow across many of North Carolina’s communities, Congress should reject federal budget policies that ask our poorest and most vulnerable citizens to bear the greatest load in putting our nation’s fiscal house in order. Congress needs to chart a course away from asking poor children, hungry seniors, and working families to solve our nation’s budget challenges on their own—through spending cuts to key investments in food assistance, early childhood education, and healthcare—and instead, take a balanced approach to the federal budget, one that includes new revenues and does not increase poverty.
Unfortunately, recent Congressional action to cut food assistance and continue across-the-board sequestration spending cuts to domestic anti-poverty initiatives represent exactly the wrong type of approach. As we discussed earlier this week, SNAP is one of the most effective anti-poverty programs in American history, lifting millions of Americans out of poverty and ensuring that hungry people have enough food to eat. Yet the U.S. House voted last week to cut SNAP by $40 million, despite the dramatic rise in the number of hungry people in the wake of the Great Recession.
At the same time, many in Congress also wish to continue into 2014 the sequestration cuts that have been so devastating to poor children and seniors in North Carolina—despite the fact that these harmful cuts just aren’t necessary for addressing our nations’ budget challenges. Sequestration targets the smallest portion of the federal budget—the domestic discretionary initiatives (like Meals on Wheels) that strengthen our economic recovery, reduce poverty, and are not drivers of our short- or long-term deficits. As a result of all these cuts, spending on these programs is at the lowest point as a share of the economy since 1962—all while the country tries to grapple with the demands of 21st century economy.
Additional revenues are essential in order to protect these initiatives from further cuts—cuts that would not yield significant deficit reduction since they constitute such a small portion of the budget, but would only increase poverty and hardship for millions of North Carolinians.
Fortunately, the largest portion of the federal budget—the hidden spending that occurs through loopholes in the tax code—has yet to be tapped for budget savings. Reforming corporate and personal tax loopholes—an area of the budget that costs more than $1 trillion in foregone revenue every year and $10 trillion over ten years—is one of the best opportunities available to policymakers to find new revenues without increasing hardship and poverty. This cost surpasses every other major function of the budget, including Medicare, Social Security, and national defense, and is almost double the cost of domestic discretionary programs.
As a result, this “hidden tax code spending” represents a far better place to achieve balanced deficit savings than the domestic discretionary programs targeted by sequestration. While some of these tax expenditures represent tax breaks that are genuinely beneficial to working and middle class families and should be preserved, a significant portion constitute special tax loopholes, deductions, and credits available almost exclusively to corporations and the wealthiest Americans that are not effectively generating economic growth or promoting broadly shared prosperity.
North Carolina needs a balanced approach to deficit reduction that asks the wealthy and corporations to pay their fair share rather than asking low-income and working families to solve the nation’s budget challenges on their own.
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