Paul L. Caron

Friday, June 19, 2020

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews COVID-19 And The American Safety Net

This week, Mirit Eyal-Cohen (Alabama) reviews Andrew Hammond (Florida), Ariel Jurow Kleiman (San Diego) & Gabriel Scheffler (Miami), How the COVID-19 Pandemic Has and Should Reshape the American Safety Net (2020):

Mirit-Cohen (2018)

Amidst the online pandemic and the strain it is putting on the ability of Americans to meet basic needs, and our government’s capacity to assist them, this important and timely Essay aims to accomplish four goals:  a) identifying the ways in which the pandemic feeds on and exacerbates both racial and economic inequality in America, b) analyzing the government response, c) considering which changes should outlast the current crisis, and d) how government should design social welfare programs to better meet the needs of all Americans in the coming years.  

The authors begin by highlighting the two upshots of the pandemic, that is the epidemiological and the economic crises and their effects on low-income households and communities of color. The latter are at higher risk of contracting COVID-19 and of enduring worse health consequences because low-pay individuals are more likely to live in overcrowded housing conditions, to utilize public transportation, to work in occupations that require close-contact interactions, to be uninsured with limited access to health services, and to suffer from preexisting conditions like diabetes and COPD that puts them at higher risk of COVID-19 complications. Although data on racial disparities in this pandemic is limited, existing studies supports similar premises.

For similar reasons, impoverished minorities are also more susceptible to exacerbated outcomes from the economic downturn that accompanies the current pandemic. The authors identify two main features of inequality in the U.S. that are magnified during this economic crisis: minimum wage jobs without benefits like sick pay, family leave, or health insurance prevent financial security for low income individuals that assist in sheltering economic shocks like the present one. In addition, these low-wage workers are mostly employed in the retail, food service, janitorial, and care work industries that are highly susceptible to closures like those recently enforced to minimize public exposure to COVID-19. These types of jobs cannot be done from home. While the government reacted quickly in providing pandemic-related assistance, undocumented individuals, jobless or childless individuals cannot tap into this aid because it is distributed through existing transfer programs from which they are excluded. And even if eligible, these programs are complex, onerous, and require technology access and acumen. Existing systemic racism and racial inequities continue to play a role in this pandemic as well, and worsen the distributive gap of government loan-programs against impoverished, Blacks, and Latinx individuals and business owners.  

The authors thereafter provide two types of observations, short-run and long-run perspectives on inequalities toward the most vulnerable groups stemming from existing COVID-19 legislation. As part of a short-term solution, the CARES Act prescribed the IRS to send “recovery rebate” checks structured as a refundable credit and calculated based on taxpayers’ 2019 income. The authors expressed concern about the neediest households’ ability to receive such rebates if they have not filed a recent tax return being below the filing threshold. The IRS may not have contact information on a large group of poor families with children, long-term unemployed, and childless adults. Moreover, many Medicaid programs haven’t been expanded to cover this population, leaving over 2 million Americans without access to health insurance and many more projected to lose access to employer-sponsored insurance.

As a long-term solution the authors suggest building a sustained support for low income Americans. They review the temporary measures taken to improve social welfare during the current health and economic crises and point to those that should be continued past the crisis on a permanent basis. For example, the authors propose to revise the current SNAP monthly benefits by increasing  their maximum by 15% (in a similar manner done in response to the 2008 crisis) because current benefits do not adequately cover families’ food budget who redeem 80% of SNAP benefits within the first two weeks of receiving them. They also suggest Congress should reject the administration’s intent to pause SNAP for Able-Bodied Adults Without Dependents (ABAWD) recipients and extend the timeframe and scope of the U.S. Department of Agriculture emergency appropriations for the WIC and TEFAP nutrition programs.  A rule about permitting SNAP recipients to use their benefits for online groceries shopping is recommended nationwide as well.

As for medical assistance, the authors urge Congress to increase Federal Medical Assistance Percentage (FMAP) past the 6.2 percentage point and beyond the end of the public health emergency to better offset the state budget shortfalls that would result from unemployment and rise in Medicaid enrollment.  Allowing out-of-state health care providers to deliver health care in-state without obtaining a separate state license should also be made permanent in the authors’ view.

Rather than returning to the old, flawed unemployment insurance system once the crisis is over, the authors purpose to seize this opportunity to reform and adjust it to protect also part-time, temporary, nonemployee, freelance, or self-employed workers on a permanent basis. The paid leave policies should be extended beyond the current crisis so that low-wage workers would not be forced to choose between paying their bills and caring for themselves and their dependents or to come to work while sick.

In the last part of the essay the authors call on policymakers to reform safety net programs in order to address not only anti-poverty measures during the current health and economic crises but also ways to dismantle racism embedded in American social policy. Their first suggestion is to provide universal health insurance coverage affordable and open to everyone. They point to recent proposals such as Medicare-for-all, “public option” proposals etc.. They blame the current employer-based health insurance coverage as being flawed and susceptible to economic downturn and causes millions of Americans to lose their health insurance coverage especially those that are financially vulnerable. Medicaid or subsidized coverage on the ACA exchanges are not offered to everyone and even those who have insurance coverage may be unable to pay the out-of-pocket costs during these tough times.

The authors prescribe that Congress should permanently enhance government programs that provide safety net to respond to future crises. Joint processing with Medicaid, simplified reporting, and longer certification periods for the elderly and people with disabilities are some suggestions the authors are making to streamline these programs and make them available to American territories as well. Instead of awaiting Congress specific approval the authors suggest to automatically raise the maximum SNAP benefit and increase federal funding to Medicaid, CHIP, and Unemployment Insurance programs any time a state’s unemployment rate exceeds a threshold level to prevent states from making harmful cuts in health and social benefits and act quickly to counter economic downturns. In addition, the authors suggest a permanent Universal Child Allowance similar in concept to a universal basic income to replace the current earned income tax credit (EITC), child tax credit, and Temporary Aid to Needy Families (TANF) only offered to working families. A flat benefit to all families with children would alleviate concerns about work disincentives and benefit gaps for the poorest families and would be administratively much simpler than both means-tested and income-based programs.

The authors conclude their analysis blaming American policymakers by repeatedly excluding African Americans, Americans who are members of tribes or live in overseas territories, and immigrants from government welfare and safety net programs. Here, the authors could solidify this point by including helpful data to exemplify the magnitude of the exclusion. To what extend does the data support the claim that current Medicaid, SNAP, Unemployment Insurance etc. discriminate against people of color and other minorities? Critical tax theorists such as Dorothy Brown, Anthony C. Infanti, Bridget J. Crawford and others provided various helpful data points that seem missing from this essay. The assumption that reducing discretion and differences in benefit levels and access could solve the problem altogether seem oversimplified and should be expanded. In the last line of the paper the authors admit that sustained mobilization will create true change but end it there. The authors could improve their proposal overall by complementing it with ways to better design employment and education opportunities as well as improving family stability to allow minorities and low-income American to recover not only their safety net but their opportunity to mobilize socially, accumulate assets, achieve domestic security, and build a hope for better future.

Here's the rest of this week's SSRN Tax Roundup:

Scholarship, Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink