Fraser: Lower-income Hoosiers don’t benefit enough

Would the Trump tax plan be good for Hoosiers?

The answer is more complicated than a simple yes or no. Why? Because not all Hoosiers are going to benefit, and those that do aren’t going to benefit equally.

At the Indiana Institute for Working Families, we help Hoosiers achieve economic self-sufficiency. We believe that every Hoosier should be rewarded for hard work with good jobs that have pathways for advancement.

We know that helping the 2.1 million Hoosiers who lack self-sufficiency will stimulate the economy. Low-to-moderate income citizens are a forgotten source of economic growth: They must spend any money they get in order to meet basic needs, creating greater demand for goods and services.

So how does the tax plan affect low-income Hoosiers? The Tax Policy Center’s preliminary analysis finds that while all income groups will experience a decrease in taxes, these decreases are modest for those in the lower-income quintiles. The lowest quintile will average a tax cut of $90—not even enough to pay a month’s heating bill. At the same time, about 12 percent of all taxpayers will see an increase.

We also shouldn’t be trying to emulate Indiana’s tax cuts. A recent analysis by researchers at the Institute for Taxation and Economic Policy showed that tax cuts in Indiana provided only modest benefits to moderate-income Hoosiers; meanwhile, our cumulative income growth tracked right alongside that of our neighbors and the nation.

And these cuts shouldn’t be contemplated in a vacuum. The Senate’s budget resolution plans to reduce non-defense discretionary spending by $632 billion over 10 years—that’s Head Start, housing support and energy assistance, among others. These reductions are ancillary to any cuts that might be necessary if the tax plan fails to pay for itself. Citizens who are in a zero tax bracket will receive nothing from reform and stand to lose needed services. When tax reform happens it must be revenue neutral. The safety net has already endured more cuts than it can stand and still be called a safety net.

Given that many Hoosiers have not recovered from the recession, I argue that we need better jobs, not skewed tax cuts. Indiana’s poverty rate is 14.1 percent, well above the 12.3 percent we had in 2007. And median household income is still less than that of 2007’s income. Most of the income growth since the recession has happened at the top quintile, which accounts for nearly 49 percent of aggregate household incomes in Indiana.

And we are experiencing a labor shortage, with low unemployment and nearly 75 percent of Hoosiers ages 16-64 in the labor force. We don’t need more jobs: We need better ones, jobs that pay family-sustaining wages, allowing folks to spend more and balance work and family without dropping out of the workforce. If we focus on job quality, then we will improve the living and working conditions of our fellow Hoosiers and create the kind of demand for goods and services that leads to more sustainable economic growth and to truly shared prosperity.•

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Fraser is director of the Institute for Working Families, a project of the Indiana Community Action Association. Send comments to ibjedit@ibj.com.