Latest news with #MarthaGimbel
Time of India
02-06-2025
- Business
- Time of India
Trump's tax plan may cost poor Americans $1,500 a year—while tipping the rich $104,000
U.S. President Donald Trump's proposed tax break on tips might sound like a win for working-class Americans, but analysts say it offers limited benefits for low-income earners—and could, in fact, leave them worse off overall. The "no tax on tips " idea is one of several elements in a sweeping tax and spending bill currently before Congress. While it targets service workers like bartenders and hairdressers, experts say most won't benefit much. In fact, broader cuts to healthcare and food assistance programs could erase any gains. 'If you're thinking about things that could help low-income workers, 'no taxes on tips' would not be high up on my list,' said Martha Gimbel, director of the Budget Lab at Yale University. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like If You Eat Ginger Everyday for 1 Month This is What Happens Tips and Tricks A Shift in Wealth According to multiple independent analyses, the bill would effectively redistribute wealth—from the poor to the rich. The Penn Wharton Budget Model estimates that families earning less than $22,000 per year would lose $1,500 in after-tax income. Meanwhile, those making more than $5.2 million could see an annual windfall of $104,000. Live Events The Congressional Budget Office (CBO) supports these findings, also highlighting large gains for the wealthiest Americans. Limited Reach for Tipped Workers Despite the popularity of the 'tax-free tips' idea—especially in hospitality-heavy swing states like Nevada—it would benefit only a small portion of workers. Tipped employees make up just 2.5% of the U.S. workforce, and 37% of them earn too little to owe any income tax at all, meaning the deduction wouldn't apply to them. The bill passed in the House would allow workers earning up to $160,000 a year to deduct their tips from gross income until 2029. However, the income would still be subject to Social Security and Medicare taxes. House Republicans claim the bill would provide an average $1,300 tax cut per family, and that business tax breaks will lead to better wages. Jason Smith, Chairman of the House Ways and Means Committee, said the plan helps workers afford housing, food, and save for the future. Benefits for the Wealthy, Barriers for the Poor But critics argue the benefits are tilted toward higher earners. Tax breaks on tips, overtime, and auto loan interest only help people who already owe income tax—excluding many low-wage earners. 'All of those will only benefit someone if they have enough income that they are paying a positive tax liability,' said Brandon DeBot, policy director at NYU's Tax Law Center. Worse, other changes in the bill would restrict access to key support programs: Up to 8.7 million lower-income Americans could lose health coverage due to Medicaid and ACA cuts, according to the CBO. New restrictions on the Child Tax Credit would exclude 4.5 million eligible children by requiring a Social Security number for qualification. The Earned Income Tax Credit, which reached 23 million tax filers in 2022, would impose stricter eligibility standards. Reduced IRS funding could make it harder for low-income families to navigate the new tax code. Long-Term Costs for the Poor The bill is also projected to add $3.8 trillion to the national debt by 2035, pushing the total to over $36 trillion. That burden, economists say, will fall disproportionately on the poor. Penn Wharton found that low-income households could see a lifetime loss of $8,500 due to a weaker safety net and higher debt service costs. Wealthier households, on the other hand, could gain $17,800 over their lifetime. 'You're inheriting this higher debt, this higher burden. Somebody has to pay for it,' said Kent Smetters, director of the Penn Wharton Budget Model. With agency inputs
Reuters
02-06-2025
- Business
- Reuters
Trump tax bill poses limited benefits, higher costs for lower-income Americans
WASHINGTON, June 2 (Reuters) - U.S. President Donald Trump's signature tax break on tips promises relatively few upsides for low-income Americans, who face a net loss of income under his massive tax and spending bill in Congress, analysts say. The new tax break is one of several aimed at helping working-class Americans who are a key bloc in Trump's political coalition. But experts say it would reach only a fraction of the bartenders, hairdressers and other workers who rely on tips. And those who benefit could see gains outweighed by cuts to healthcare and food assistance. "If you're thinking about things that could help low-income workers, 'no taxes on tips' would not be high up on my list," said Martha Gimbel, director of the Budget Lab at Yale University. Several independent analyses conclude that the bill now before the Senate would effectively transfer money from poor Americans to the rich. The Penn Wharton Budget Model, for example, found it would reduce after-tax income by $1,500 for families earning less than $22,000 per year, and boost income by $104,000 for those earning more than $5.2 million. The nonpartisan Congressional Budget Office reached a similar conclusion. Still, the idea of making tipped income tax-free has drawn wide support since Trump first floated it last year at a campaign stop in Nevada, a swing state with a large hospitality industry. The bill that passed the House of Representatives last month allows workers earning up to $160,000 a year to deduct tips from their gross income until 2029, though tips would remain subject to Social Security and Medicare taxes. House Republicans say the bill would provide the typical family with a $1,300 tax cut and that business tax breaks would lead to higher wages for workers. "Permanently lower tax rates and a doubled standard deduction, combined with President Trump's no tax on tips, overtime, and auto loan interest, will help workers afford the roof over their head, food for their families, and help build their financial security and wealth,' House Ways and Means Committee Chairman Jason Smith, a Republican, said in a recent statement. Senate Republicans are likely to seek considerable changes to the bill, which also would make Trump's 2017 tax cuts permanent and implement other top priorities, like a crackdown on immigration. But the deduction for tip income would not help the 37% of tipped workers who already earn too little to pay any income tax, according to the Yale Budget Lab. Tipped employees account for only about 2.5% of all U.S. workers. The tax break would cost the U.S. government nearly $40 billion in lost revenue through 2028, according to the congressional Joint Tax Committee. Other benefits for working families face similar limits, including deductions on overtime pay and interest on auto loans. In each case, the greatest benefits accrue to people with higher incomes. "All of those will only benefit someone if they have enough income that they are paying a positive tax liability," said Brandon DeBot, policy director at New York University's Tax Law Center. The new tax breaks would be outweighed by higher costs from cuts to social safety-net programs and rising debt levels. At least 8.7 million lower-income Americans would lose health insurance coverage from new restrictions to Medicaid and the Affordable Care Act, according to CBO. Republicans have also added new restrictions to two bulwarks of support for low-income families: the child tax credit and the earned income tax credit. The legislation would temporarily increase the $2,000 child tax credit to $2,500 through 2028 and adjust it for inflation after that. But it contains a new requirement that parents provide Social Security numbers to qualify. That would exclude 4.5 million eligible children, according to the nonpartisan Center for Migration Studies. Families would also have to meet tighter standards to qualify for the earned income tax credit, a major anti-poverty program that reached 23 million tax filers in 2022. And analysts warn that cuts to Internal Revenue Service funding and staff would leave the tax agency less able to help lower-income people navigate the new restrictions. The legislation would add $3.8 trillion to the national debt, which now stands at $36.2 trillion, according to CBO. Ultimately, the cost would weigh most heavily on poor Americans, according to the Penn Wharton Budget Model, which estimated that low-income households in the future would see a lifetime loss of $8,500 due to a weaker safety net and higher debt service. The model found that some high-income households would see a lifetime gain of $17,800. "You're inheriting this higher debt, this higher burden. Somebody has to pay for it," said the budget model's director, Kent Smetters.
Yahoo
21-05-2025
- Business
- Yahoo
As Musk steps back, experts say Doge cuts have harmed government services
As Elon Musk steps back from his role heading the so-called 'department of government efficiency' (Doge), many experts on government operations complain that Doge has done nothing to improve the quality of services the government provides to the American people. 'Doge is not offering any solid claims that it has improved services in any way,' said Donald Moynihan, a professor of public policy at the University of Michigan. 'Rather, it has made the quality of some government services worse.' Musk, the world's richest man, was appointed to run the government efficiency drive by Donald Trump in January and as a 'special government employee' was barred from working for more than 180 days for the administration. He also has his own business woes to attend to. Related: Mass resignations at labor department threaten workers in US and overseas, warn staff – as more cuts loom But on his way out of the White House, Musk has boasted that Doge has achieved $150bn in savings, although many budget experts question the accuracy of that figure. Musk has repeatedly made exaggerated and erroneous claims about savings, which are a fraction of Musk's goal of $1tn in cuts. Moynihan and other public policy experts said it was unfortunate that Musk and Doge took the hard-charging focus of profit-maximizing business executives – of aggressively seeking to cut jobs and payroll – instead of adopting a broader focus aimed at making government more efficient while improving services. Martha Gimbel, the executive director of the Yale Budget Lab, said Musk evidently has little interest in making services better. 'They were the 'department of government slash and burn',' Gimbel said. 'There doesn't seem to be an approach to dig in on places where government services could really be improved. Any improvement in government services takes time. You have to invest. You have to build it out. You have to figure out how to fix it.' There has clearly been a degeneration of government services Martha Gimbel of the Yale Budget Lab Asked whether Musk and Doge had improved any government services, Gimbel burst out in laughter. 'No,' she said. 'There has clearly been a degeneration of government services.' Public policy experts and members of the public have pointed to numerous ways that government services have deteriorated due to Doge's cuts. There have been longer waiting times to get appointments at veterans' hospitals, longer waits when people call the Internal Revenue Service, longer lines at social security offices. The departure of many highly experienced social security employees has led to workers with far less training giving advice on benefits. At a White House news conference on 1 May, Musk defended Doge's accomplishments. 'In the grand scheme of things, I think we've been effective. Not as effective as I'd like. I think we could be more effective,' Musk said. 'But we've made progress.' Related: Federal workers in limbo amid whiplash White House firings and court-ordered rehirings Musk acknowledged that his $1tn goal had been far harder to reach than he had anticipated. 'It's sort of, how much pain is the cabinet and the Congress willing to take?' he said. 'It can be done, but it requires dealing with a lot of complaints.' The White House did not respond to the Guardian's questions about the deterioration of some government services or to the Guardian's request for any examples of how Doge has improved services. Gimbel said that Americans don't realize that many government services will get worse in coming months as the tens of thousands of Doge-ordered job cuts play out. 'Things will definitely get worse,' she said. For instance, the administration has far to go in carrying out its plan to cut 80,000 employees in the Department of Veterans Affairs. While many public policy experts say Trump and Musk wildly exaggerate in their claims that there is huge waste, fraud and abuse in government, Gimbel said there is of course waste in government. 'There is waste, and you can go after it,' she said. 'People who have been in government know where those places are. There is a ton of tech that needs modernizing. Doge doesn't seem interested in that. There's a lot of Medicare and Medicaid overbilling. Doge doesn't seem interested in that either. What you have is a relatively expensive exercise in slash-and-burn that sometime in the future will cost a lot to fix.' It's hard to offer any rational basis for the decisions that are being made. There certainly aren't any improvements that the American public will see Max Stier of the Partnership for Public Service Max Stier, the president of the Partnership for Public Service, a non-profit research group, said that many business executives – including Jack Welch, the former General Electric CEO famed for cost-cutting and increasing profits – would be unhappy with Musk's quick and brutal cuts. Stier complained that Musk and his team of twentysomething tech whizzes made steep cuts while knowing little about an agency's operations or about the qualifications and responsibilities of the people they fired or pushed out. 'Jack Welch would be appalled by the approach that Doge has taken,' Stier said. 'It's not actually about cost-cutting. It's about capability destroyed. Jack Welch would never, ever have fired people without having a real understanding about the way the organization worked and about the qualities of people who were being fired. This is an arbitrary exercise that has moved out employees who are often by far the most qualified rather than the least qualified.' Stier noted that Trump has described Doge as an exercise in cost-cutting and organizational improvement. 'That's just not the case,' Stier said. 'It's hard to offer any rational basis for the decisions that are being made. There certainly aren't any improvements that the American public will see.' 'It's burning down government capability,' he continued. 'It's unquestionably clear that they are firing people willy-nilly and are disrupting government services without any understanding of the consequences or concern about the consequences. It's a break-it-is-to-fix-it mentality. It isn't a mentality that predominates in Silicon Valley. It's sheer reckless behavior in the public sector because real people get hurt.' Musk's claim of $150bn in savings is a vast overestimate because it fails to include the considerable costs of Doge's moves, said Stier. Stier's group estimates that as a result of firings, rehirings, severance pay, paid leave and lost productivity involving more than 100,000 workers, Doge's maneuvers will cost taxpayers $135bn this fiscal year. And several public policy experts said the increased wait times and hassles the public will face due to Doge's cuts should also be subtracted from the $150bn. Moynihan said Musk has precisely the wrong vision for someone tasked with making government more efficient. 'His vision is that there is no way that government employees can produce anything of value,' Moynihan said. 'So the idea of tools that makes government services better is completely alien to the Musk mindset. 'I think he believes that nothing public employees do has any real value, that they are not capable employees and therefore cutting them will do no harm,' Moynihan added. 'It's a vision that doesn't understand what public services are, why they exist and how they benefit people.' Moynihan faulted Musk for gutting one of the government's main efforts to use technology to improve services and efficiency. He also criticized Musk for helping kill Direct File, a free and user-friendly way for people to report and file their taxes. Related: Move fast and destroy things: 100 chaotic days of Elon Musk in the White House Liz Shuler, the president of the AFL-CIO, the main US union federation, said Doge's cuts will hurt workers. She pointed to the sharp cuts at the National Institute for Occupational Safety and Health, saying that that agency, for instance, does important research to ensure that firefighters' personal protective equipment is safe as possible. 'There's this notion that Doge is just cutting line items on a spreadsheet. It's hurting real lives and real people,' Shuler said. 'They've treated federal workers with blatant disregard and have been nothing short of dehumanizing and insulting toward them.' Gimbel of the Yale Budget Lab warned of another downside to Doge's cuts. 'Part of what government does is mitigate risk,' she said. 'Take food safety. Government inspectors decrease the risk that you will get listeria or salmonella. But when they reduce the number of food inspectors, will you get listeria or salmonella tomorrow? No. Will it probably increase the chances of people getting listeria and salmonella over the next five years? Yes.'
Vox
10-04-2025
- Business
- Vox
Trump just made it harder to have a kid in America
is a senior correspondent for Vox, where she covers American family life, work, and education. Previously, she was an editor and writer at the New York Times. She is also the author of three novels, including the New York Times bestseller Outlawed. This story originally appeared in Kids Today, Vox's newsletter about kids, for everyone. Sign up here for future editions. Having a baby is expensive. You need a car seat. A stroller. A high chair. You need the baby shampoo and then the different baby shampoo for when your baby is allergic to the baby shampoo (maybe just me?). All told, it costs about $20,000 to care for a baby for a year in the US, according to BabyCenter. And thanks to the slate of new tariffs announced on April 2 by the Trump administration and imposed in recent days, it's about to get a lot more expensive. Trump reversed some tariffs on Wednesday after markets plunged, but went on to increase tariffs on China to 125 percent, while maintaining a 10 percent baseline tariff on goods from nearly all other countries. The tariffs will affect a wide variety of goods, but experts and advocates have voiced special concern about baby items like cribs and strollers, many of which are manufactured overseas, often in China. These items aren't optional: 'The baby has to sleep somewhere,' Martha Gimbel, executive director and co-founder of the Budget Lab at Yale, told me. Even after Trump's partial reversal, parents could have to contend with myriad price increases for smaller items, from onesies to blueberries. The Budget Lab, which analyzes the impact of federal policy proposals, has estimated the tariffs announced as of April 2 could cost an average household $3,800 per year, or $73 per week, a cost that could hit families especially hard during the early years of parenthood, already a time of enormous financial upheaval. 'The Trump administration maintains regular contact with business leaders, industry groups, and everyday Americans, especially about major policy decisions like President Trump's reciprocal tariff action,' White House deputy press secretary Kush Desai wrote in an email in response to my question about tariffs and costs. 'The only special interest guiding President Trump's decision-making, however, is the best interest of the American people — such as addressing the national emergency posed by our country running chronic trade deficits.' Related Trump threw the economy into chaos because of a bizarre misinterpretation of one statistic Trump's concern with trade deficits is at odds with some of his other stated priorities. He has said 'we want more babies' in America, and advisers and members of his administration have repeatedly advocated for boosting birth rates. But Trump's tariff policies risk making it harder for Americans to have children and forcing families to make difficult choices that could affect kids' quality of life. 'You're taking money away that parents can spend on their children,' Gimbel said. 'It means that parents can invest less in their kids.' Which baby necessities will be most affected by tariffs? Last week, on what he called 'Liberation Day,' Trump announced tariffs of at least 10 percent on all imported goods, with items from some countries, like China, subject to rates of 34 percent or more. He had previously announced (and in some cases walked back) tariffs on products made in China, Canada, and Mexico; steel; cars, and more. On Wednesday, hours after the 'Liberation Day' tariffs went into effect, the White House backed down on some of the highest rates but actually increased the tariff on China. Trump's trade policy remains rife with uncertainties and could certainly change yet again. However, some lawmakers were worried about the impact of tariffs on families even before 'Liberation Day.' On April 1, Rep. Kelly Morrison (D-MN) and 44 other members of Congress sent a letter to Commerce Secretary Howard Lutnick, warning that the proposed tariffs (then just on Canada, Mexico, and China) would 'raise the cost of goods necessary to care for young children, such as car seats, high chairs, strollers, and cribs.' A lot of these items, including popular brands like Chicco and UppaBaby, are manufactured overseas, according to Consumer Reports. They're already expensive, often costing hundreds of dollars; a stroller and car seat are often the most costly items parents buy for a new baby. 'Car seats are not optional; they are mandated by law.' — Dipanjan Chatterjee, vice president and principal analyst at the research firm Forrester It's difficult to know exactly how much tariffs will raise prices, because businesses could respond to higher costs in different ways (and because it's unclear how long the tariffs will stay in place, or whether their size will change). But just to give a sense of what the current tariffs look like in raw numbers, one fairly standard model of Chicco car seat, made in China, retailed for $209.99 at Amazon on Wednesday morning; adding a 125 percent tariff to that would bring the total to $472.48, or about a $262 difference. Even Trump's original proposal of a 34 percent tariff would hike the cost by about $71. Many parents will have no choice but to pay the higher prices, because items like car seats are needs rather than wants. 'If the price of avocados increases, most people will likely buy less — they may skip them entirely, swap queso for guacamole, or invite fewer friends so they have to make less guacamole,' Dipanjan Chatterjee, vice president and principal analyst at the research firm Forrester, told me in an email. 'However, car seats are not optional; they are mandated by law.' Most hospitals require a car seat to even discharge a baby after birth. While the big stuff like strollers and car seats may be the most visible, tariffs could impact a host of smaller items as well. Babies and young kids famously grow out of (and poop all over) their clothes incredibly quickly, necessitating constant replacement. With clothing prices expected to rise, 'the financial burden on parents is significant, and it is one they will have to contend with over and over again,' Chatterjee said. Diapers and formula — two more huge line items in family budgets — are often made in the US, but not always. During our interview, Gimbel discovered that her 9-month-old's diapers were made in Canada and hastily took steps to order more. Then there's food, likely one of the first categories to show price increases due to tariffs, according to Gimbel. Fresh fruit, in particular, is often imported, and tariffs could drive up families' already considerable berry budgets. Families may be able to switch to cheaper options, but young kids are less flexible around food than adults are, and grocery bills were straining many parents' finances even before tariff talk began. High prices will hit families with kids especially hard Higher prices on items like strollers and car seats could push more parents toward Buy Nothing groups and other secondhand solutions, already popular in many urban areas. But that won't work for everything — car seats, for example, have expiration dates after which they're no longer considered safe, and some experts recommend against getting them secondhand. Also, 'you cannot get secondhand diapers,' Gimbel said. Finding a used alternative for other items is also an additional task for overstretched parents. Tariffs will force them to pay more either in money or in time spent sourcing cheaper options, Gimbel said. New parents are also ill-placed to afford sudden price hikes. They tend to have lower incomes than the average American, in part because they're simply earlier in their careers, Gimbel said. Families with babies and young kids also often see their household income drop because one parent takes unpaid time off to care for a child (the US remains the only wealthy country without nationwide paid parental leave). Those most affected by tariffs will be working-class and poor families, because any price increase represents a larger percentage of their income. A $262 price hike on a car seat (or even a $71 hike), for example, is going to hurt a lot more if you make $30,000 a year than if you make $100,000. Lower-income families will have to make more difficult sacrifices if prices rise, said Kimberly Clausing, an economist at UCLA. That could mean skimping on basic necessities like heat, food, or medical care. Low-income families are also more vulnerable if tariffs lead to a recession, something many experts predicted after Liberation Day. 'It's not just 'pay more at the store,' it's the fact that you might lose your job and your livelihood altogether,' Clausing said. Related America may be headed for this rare type of economic crisis And while parents will surely do their best to shield their kids from the impact of higher prices and economic turmoil, suddenly having less money in the house has an effect on kids too. Policies that put money into parents' pockets, like publicly funded child care and child tax credits, can improve outcomes for children, improving high school graduation rates and even boosting future earnings. A policy that takes money away from parents could have the opposite effect, Gimbel said, disadvantaging kids down the road. Supporters of Trump's tariffs have argued that Americans are too accustomed to 'cheap goods.' But the impact for families won't just be about making do with a smaller TV. It could mean sending your kid to school in shoes that hurt, or stopping contributions to a college fund, or foregoing therapy for a child with a disability because you can no longer manage the cost. 'Having more money to be able to spend on and invest in your kid makes a difference to you, and it makes a difference to your kid,' Gimbel said. Having less money will make a difference, too. What I'm reading The Trump administration has gotten rid of an office responsible for overseeing child care centers in federal buildings, which could lead to higher costs and center closures. A second child has died as the measles outbreak that began in Texas continues to spread. In better news: About two weeks ago, a mother and three children — a third-grader, a 10th-grader, and an 11th-grader — were taken into immigration custody in Sackets Harbor, New York, the small town where Trump 'border czar' Tom Homan lives. But after hundreds protested and the principal of the children's school wrote a letter emphasizing 'how long every hour feels for a third grader in a detention center,' the family was reportedly released this week. My older kid and I have been reading The Legend of Brightblade, a graphic novel about a society rebuilding itself after a period known as 'the dark years.' From my inbox I've been thinking a lot about young kids and the future recently, and how talking to them can force us to step outside the confines of our current moment and consider how different the world could look in 10 or 20 years. In the coming weeks, I'm planning a newsletter on kids' hopes and dreams, and I'd love to hear from you: What do the kids in your life want to be when they grow up? What do they want to do in the world? Let me know at
New York Times
04-04-2025
- Business
- New York Times
To Trump, U.S. Economy Is a ‘Sick Patient' and Tariffs Are the Cure
In the weeks leading up to his expansive global tariffs, President Trump and his top aides tried to prime the public for economic pain. They warned that while there would be fallout from their aggressive trade strategy, it would prove short-lived and benefit the economy in the long run. Investors, businesses and others made clear on Thursday that the U.S. economy was not ready to accept that approach. Global markets tumbled, economists warned of a possible recession and consumers braced for price increases on cars, food, clothing and more. The early tumult underscored the high stakes of Mr. Trump's agenda, which the president has framed as a painful medical procedure to rescue an economy he likened to a 'sick patient.' In the eyes of Mr. Trump, the United States is going to 'boom' once his tariffs have had time to reset the nation's trade relationships, raise revenue and boost domestic production. But those tariffs are expected to send prices skyrocketing in the interim, an unwelcome development for Americans already struggling with years of elevated prices. Several economists have increased the odds of a recession in their forecasts as they projected a slowdown in consumer spending, business investment and economic growth. A new analysis from the Yale Budget Lab found that Mr. Trump's overall tariffs could cause price levels to rise 2.3 percent in the short term. That would translate into an average loss of $3,800 in purchasing power per household based on 2024 dollars. 'Prices are going to go up, period,' said Martha Gimbel, executive director of the Yale Budget Lab, adding that companies were going to feel the immediate pinch. 'These are really big tariffs. These are not things we can expect companies to just absorb.' Want all of The Times? Subscribe.
