Analysis

How a Tax Break Meant for Low-Income Communities Became a Mini Tax Haven for the Rich

The Trump tax bill, signed into law last year, established the Opportunity Zone incentive program. It’s meant to spur growth in low-income neighborhoods by giving investors tax benefits for putting money into distressed areas and leaving it there for a few years.

The goal of boosting development in low-income areas is certainly laudable, but one major concern is that funds are going to be directed to places that are not really distressed: Take, for instance,  the area where Amazon’s HQ2 will land in Long Island City, the area around a Trump golf course, or the future home of the Las Vegas Raiders NFL franchise, all of which qualify for benefits. Ahead of a White House event on Wednesday about Opportunity Zones, reports emerged regarding how the Kushner family business stands to take advantage of the program, after Jared Kushner and Ivanka Trump pushed for its creation.

But high-profile, flashy examples of obvious Opportunity Zone boondoggles don’t highlight the full extent of the problem. For example, look at Rockville, Maryland.

The Rockville census tract below, outlined in dark green, fits within the definition of economically distressed for the Opportunity Zone program. For a census tract to be eligible, it must either have a poverty rate above 20 percent or median family income below 80 percent of the area median income.

A map of Census tract #24031700904, RockVille Maryland
Figure 1. Census tract #24031700904

While the Rockville tract has a poverty rate of 13 percent, well below the threshold, it is at 71.58 percent of area median family income. However, that is a reflection of the fact that Rockville is a suburb of Washington, D.C. that is well-off, with an overall median income of $100,436 in 2017, and that the median income of the tract in question is relatively smaller than that in the overall Rockville area.

It’s not that this census tract is distressed; it’s that it is relatively less well-off in a sea of wealth.

This census tract lies along a major highway, the Rockville Pike, which runs between the dark green and light green sections on the map. It is home to many strip malls. It is bordered to the west by the Woodmont Country Club, where the initiation fee is $80,000, and is also the location of new construction, especially around the Twinbrook Metro station, part of the D.C. subway system.

That’s not exactly the picture of a place that is going to have trouble attracting investment on its own. The Washington, D.C. region has the highest median income of any metropolitan area in the country, and while it certainly has pockets of deep poverty, this isn’t one where investment incentives are desperately needed.

Due to the Opportunity Zone program, tracts like this that are already experiencing growth will get big benefits and investors will be able to accrue significant tax savings for plopping their money there, while not achieving the core aim of the program. Investors will reap benefits for investments they might have made anyway, when the program is meant to entice them into areas they wouldn’t otherwise be. And there’s an opportunity cost at work: Funding that will come to this tract could have gone to other Opportunity Zones in places that are actually in need of capital.

Just looking at how the program is being touted in the investment community shows how far away from the mission it is in practice. In outlining the top 10 Opportunity Zones, Fundrise — an online real estate investing service — uses home value increases as the metric for investment. It is therefore not surprising that the top four are all located in large urban metropolitan neighborhoods in California.

Other fund managers are looking for an internal rate of return of 12 percent, but do not have similar metrics pertaining to the individuals within those communities. To fit within the mission of the program, funds should be tracking metrics like the number of startups created by individuals in the community, number of living jobs created, or the number of affordable housing units created.

If the goal is to revitalize low-income communities, the best way is to develop the already existing resources, namely the people who live there. If policy drives investment in individuals in these communities through the development of small businesses, it can spur further investment and uplift distressed communities. Instead, we’re stuck with a program that creates mini tax havens for the wealthy, while leaving low-income communities behind.

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Feature

Truckers Spend the Holidays Driving Too Much for Too Little Pay

Much of America will be engaged in a holiday gift-buying bonanza this month. And whether it’s via online order or plucking wares directly off store shelves, they have truck drivers to thank for the available goods.

“Black Friday, Cyber Monday, everything you shop for or order online is going to be brought by a truck. Many truck drivers opt to spend the holidays alone to deliver that freight and to make that little bit of extra money,” said Desiree Wood, a driver and president of REAL Women in Trucking, an organization that advocates for better work conditions for drivers. “It means you may be in some strange town you’ve never been in before, and isolated to where you can park, which is usually a truck stop where there isn’t any good food.”

A lack of good food options is just the beginning of the issues truck drivers face. Many make paltry amounts of money, even as they spend long hours in a tiny space a long way from home. The median income for America’s 1.8 million truck drivers is $42,000 annually, and those in the bottom 10 percent of earners make just $27,000.

It hasn’t always been this way. In the last 30 years, truck driver pay has plummeted. According to the National Transportation Institute, if wages in the industry had kept up with inflation since 1980, the average driver would be making $111,000 per year. Other estimates don’t show that dramatic of a drop, but even conservative ones calculate drivers should be making some $55,000 today.

The reason for the steep drop is a web of bad policies, but much of the problem stems from the way in which workers are compensated: By the mile, not the hour.

“You might work a 14-hour day and you only drove 150-200 miles. If you only get paid for the miles, you don’t make anything,” said Wood. “The money is so unpredictable. You could get $400 one week and $65 the next week. You just don’t know.”

If wages had kept up with inflation since 1980, the average driver would be making $111,000 per year.

Drivers aren’t paid for the time they wait for their truck to be loaded or offloaded, and traffic and other road conditions, as well as safety regulations that limit the number of hours they can be on the road in a given day, cut into their mileage totals. Every minute spent without the landscape whizzing by their windows is a minute that drivers are essentially working for free.

In October, a U.S. District Court judge in Arkansas ruled that Department of Labor wage regulations require companies to pay drivers for the parts of the workday during which they are on-duty, but not driving or sleeping. Other court rulings have also reprimanded companies for not paying their drivers the full minimum wage.

The industry as a whole, though, still clings to the model in which miles are the only thing that equals money. It also relies on recruitment of new drivers to keep wages low. While articles about trucker shortages have been a mainstay of media coverage in recent years — which in theory should result in pay increases due to competition for workers — companies tend to instead churn through inexperienced drivers who accept lower pay, despite potentially severe consequences.

“Routinely, they attract new drivers, take their money [as compensation for training them], train them hardly at all, put them on the road, and then they crash or die or kill people,” explained Anne Balay, author of Semi Queer: Inside the World of Gay, Trans, and Black Truck Drivers. Those who don’t leave the profession because of accidents often do so because the pay is so low, and then the cycle repeats itself.

“Basically, if you have a pulse you are going to get a job as a truck driver, and you are probably going to be able to get into some company-sponsored truck driving program,” said Wood. “But when you get out there, you realize you’re not making the money you thought you were going to make … You always have these students that are being churned through the system that make very little.”

And it’s even worse if you are a woman, LGBTQ person, or person of color, who often face harassment on the job in addition to the low pay and inadequate training. “If you take what is already a vulnerable labor structure and put these people in it, you have a fucked-up situation,” said Balay. “That sets them up for all the labor abuses you can imagine.”

Further undermining the ability of drivers to make a fair wage is that many are misclassified by their employers as independent contractors, meaning that though they work for just one company, they can be denied benefits and are responsible for many costs usually born by an employer, including the employer-paid side of the payroll tax and upkeep for their vehicles. It also means they can be abandoned at the slightest sign of adversity.

That’s what happened to Janet Steverson. She thought she was signing on for a full-time, in-house job with an Illinois shipping company, but was instead hired as an independent contractor. After she got in an accident (in which her fingers were so badly cut that one had to be amputated), she says the company severed the relationship and left her with nothing.

“I’ve lost my house, I lost everything,” she said. “I have no money, no income no nothing, and they’re also not paying my doctor’s bills.”

Steverson was labeled as a contractor even though she says everything she did was controlled by the company for which she drove. “I have to go where they tell me to go, I have to use their fuel card,” she said. “How can I be an independent contractor?”

A lawsuit involving one such misclassified driver, Dominic Oliveira, was heard by the Supreme Court in October. He is suing for back pay, and the case revolves around whether he is able to engage in a lawsuit or whether his case has to be heard in private arbitration, a venue in which businesses interests almost always win. Oliveira details instances in which he would drive 1,000 miles in a week and yet have to pay his employer at the end because of fuel costs and the costs of tools he claims the company required him to buy.

Companies have gotten very good at letting workers think that being an independent contractor will give them more control over their lives and more pay, when in reality it foists much of the business risk onto the individual worker.

It’s not uncommon for a driver to work 50 hours and earn zero dollars.

“These are workers who often times only have a few years at most in the industry and they do buy it. They get in these very coercive arrangements,” said Steve Viscelli, a sociologist and author of The Big Rig: Trucking and the Decline of the American Dream. “I’ve worked on cases in which every third payweek in which drivers worked, their pay is zero or negative … It’s not uncommon for a driver to work 50 hours and earn zero dollars.”

Why do trucking corporations get away with paying so little? In part, it’s because the government gave up regulating them nearly four decades ago, passing the Motor Carrier Act of 1980 as part of the bipartisan push that also deregulated airlines and other industries in the name of boosting business competition, and then undercut the unions that were helping to keep wages up.

“They broke up the unions and stopped regulating freight,” said Balay. “Instead of regulating companies and freight, the government started regulating the individual worker.”

All of this is occurring today under the specter of automation, with the widespread belief that within the next generation, if not sooner, most long-haul driving will be done by autonomous vehicles. When that occurs, it’s the best-paying trucking jobs that are most likely to disappear.

“All else equal, it’s going to be those better jobs that make more sense to automate from an economic perspective,” said Viscelli, because long highway routes will be easiest for robot trucks to navigate. He estimates that driverless trucks will result in the destruction of hundreds of thousands of high- and middle-wage trucking jobs, leaving mostly lower-wage jobs behind, such as those taking loads through cities and packages door to door.

This month, all of these problems will be ongoing as drivers blanket the country, ensuring that families everywhere have what they need and desire to celebrate the holidays, even if the people responsible earn very little in the process.

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Analysis

Michigan Is the Latest Example of the Restaurant Lobby Subverting Democracy

It’s been a bad week for democracy. While all eyes have been on a Republican power grab in Wisconsin, the Republican-controlled Michigan legislature quietly gutted its brand-new laws to increase the state’s minimum wage and provide residents with paid sick leave.

Lawmakers initially passed the popular policies in September, after it became clear that ballot initiatives to raise the minimum wage to $12 an hour by 2022, phase out the tipped minimum wage, and guarantee 72 hours of paid sick leave were likely to be approved if they were put to the state’s voters in November. Concerned that they’d be unable to overturn a ballot initiative, which would require a three-fourths supermajority, Republican legislators took the extraordinary step of passing the law themselves — so they could come back and dismantle it with a simple majority in the current lame duck session.

The new Republican bill delays the minimum wage increase by eight years, until the year 2030. Paid sick time is slashed in half, to just 36 hours per year. In addition, it maintains the tipped minimum wage, increasing it to just $4.58 by 2030, which earlier legislation would have phased out. The bill now heads to the desk of the outgoing Republican governor, Rick Snyder, who is expected to sign it into law.

Outright subversion of democracy to defeat minimum wage hikes isn’t new. A similar series of events played out in Washington, D.C., just this year, when the supposedly progressive D.C. council repealed a ballot initiative to eliminate the tipped minimum wage just four months after the voters passed it. In Maine, lawmakers reinstated the tipped minimum wage in 2017 after voters eliminated it the year before.

It seems that the same lobbying group may have been behind the repeal of all three bills.

The National Restaurant Association, or NRA, represents more than 500,000 restaurant businesses, making it the world’s largest food service trade association. Over the last 28 years, the NRA and its largest corporate members have spent more than $78 million on campaign contributions, spending $12 million just in the 2016 election cycle. And they have a powerful and dangerous playbook: prevent minimum wage increases at any cost.

All three of the most recent minimum wage hike reversals received significant backing from the National Restaurant Association. In Michigan, dozens of legislators received campaign contributions from the National Restaurant Association during this past election cycle, including the House majority leader.

The Michigan Restaurant and Lodging Association, the state-level partner of the NRA, openly bragged about the amount of control that this bought it over the state’s minimum wage fight, saying that it “worked tirelessly with the Michigan Legislature to prevent this onerous proposal from going to the ballot.”

Similarly, in Washington, D.C., the NRA contributed more than $236,000 in campaign funds to 13 of the city council’s 14 members. It helped fund an astroturf campaign designed to appear as if it was led by restaurant workers, which flooded public hearings with testimonies. In Maine, the Maine Restaurant Association vehemently lobbied the state legislature until the tipped minimum wage increase was overturned.

One in six restaurant workers, or 16.7 percent, live below the official poverty line.

In most of its campaigns, the National Restaurant Association claims that minimum wage increases will hurt businesses and eliminate tips that workers depend on. Even a cursory review of the research shows that neither claim is true. The growth of restaurants and restaurant employment is more robust in “equal treatment states,” where there is no tipped minimum wage, compared with states that use the federal minimum tipped wage of $2.13 per hour. And tipped workers in those states see 17 percent higher earnings on average, including tips.

According to the Economic Policy Institute, one in six restaurant workers, or 16.7 percent, live below the official poverty line — fully 10 percentage points higher than workers outside the restaurant industry. Abolishing the tipped minimum wage is particularly beneficial to women and people of color, both of whom receive significantly less in tips than their white, male counterparts.

Raising the minimum wage is among the most popular polices out there, across party lines. In fact, a study released earlier this week finds that in literally every single state in the U.S., the minimum wage is lower than residents want it to be. That’s why when minimum wage increases are on the ballot, they pass. So the National Restaurant Association is doing everything it can to keep voters from having a say, with dangerous consequences for low-wage workers — and for democracy writ large.

 

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First Person

U.S. Military Actions Help Create Poverty Overseas. Now Trump Is Blocking Poor Immigrants.

I am the proud Afro-Arab, disabled daughter of Sudanese immigrants. When I was a kid, my father would share stories of his experiences growing up during the tumultuous years of military rule in Sudan, the coup that put Omar Al-Bashir in power, and the two decades of economic sanctions imposed by the U.S. and its allies. He described the mass protests against former president Jaafar Numeiri during his youth, and shared the legacy of resistance borne by my foremothers that continues today.

My parents raised my sisters and me here in the U.S., with security and opportunity we could never have in Sudan. Yet, the cruel irony is that my parents would have loved nothing more than to see us grow up on our ancestral lands. Instead, compelled by economic and political unrest, they left their loved ones behind and immigrated to northern Virginia, a move that they never would have been able to make if a new Trump immigration rule had been in effect.

The new policy, which would expand the existing public charge rule, would require most immigrants seeking green cards to show they have a middle-class income and that they have not (and will never) receive government benefits, including Medicaid and Medicare Part D, the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), or housing assistance programs. It would radically rewrite our immigration system to explicitly favor white, wealthy, and non-disabled immigrant applicants.

Most abhorrent of all, it threatens immigrants’ livelihoods by punishing them for using the public benefits they need to survive, just as the U.S. contributed to the disruption of their livelihoods abroad through militarism and unchecked state violence.

In 1998, not long after my parents moved to the U.S., they had to watch their new country attack the homeland they were forced to leave only years before. The American military, under orders from President Bill Clinton, bombed the Al-Shifa pharmaceutical plant in Khartoum, Sudan, leveling the only factory in the country producing cheap medicine for tuberculosis or veterinary needs. (Sudan’s economy was primarily based on agriculture.)

The bombing of Al-Shifa, which represented at least 50 percent of total domestic pharmaceutical production, devastated the already strained Sudanese medical system. The Clinton administration justified the attack by claiming it had evidence showing the plant was being used by Al Qaeda to manufacture chemical weapons — evidence that later proved untrue.

Twenty years later, my extended family in Sudan is still managing electricity and water cut offs, gas shortages, and economic insecurity. The U.S. trade embargo, imposed after Sudan was designated as a state sponsor of terror, has served only to deepen wealth inequality in Sudan while empowering Al-Bashir’s brutally repressive military regime to hoard the nation’s wealth and operate with total impunity.

Since 2000, more than 360,000 Sudanese people have immigrated to the United States, like my parents did. Many people arriving at our borders today have been directly impacted by U.S. foreign policy.

Only a few years after the bombing of the Al-Shifa pharmaceutical plant, the administration of President George W. Bush launched the catastrophic “War on Terror.” In the years since 9/11, some half a million people have been killed as a consequence of U.S. wars in Afghanistan, Iraq, and Pakistan alone. Another 21 million people in Afghanistan, Iraq, Pakistan, and Syria have become displaced. Today, the U.S.-led “War on Terror” spans 76 countries.

“I can’t bring my family to a country that doesn’t want us.”

Iraq remains one of the top 10 countries of origin for permanent immigrants to the U.S. annually. In fact, seven of those 10 countries have been subject to violent foreign intervention by the U.S. or crushing economic blockades and sanctions, including Cuba, the Philippines, Vietnam, and El Salvador. Nevertheless, if the public charge rule is implemented in its current form, 60 percent of Central American immigrants and 34 percent of African immigrants would be at high risk of denial.

This is not an accident — it is part of the plan to base our immigration system on white supremacy. The president has made that explicit in his language, and in his broader immigration policies.

Consider what happened with Trump’s very first immigration policy. In January 2017, the administration issued its infamous Muslim Ban, temporarily banning entry of immigrants from my parents’ homeland of Sudan, along with six other majority-Muslim nations. Every country on that list had been subject to violent foreign intervention by the U.S., a fact first pointed out by Sen. Chris Murphy (D-CT).

Shortly after the ban went into effect, I hurried to Dulles International Airport to provide translation for those impacted. Within an hour, I was approached by a Sudanese father and his young family. I learned that they had been granted an opportunity to immigrate to the U.S. through the Diversity Visa Program, the same program my parents had used in the 1980s (and which the Trump administration has also tried to get rid of).

The father was afraid for his family and asked me to help him arrange their flight back. If they left, they would almost certainly never be able to return, so I pleaded with him to stay and seek legal support. But as he looked around at the chaotic scene unfolding in the airport, this young father of two remained unconvinced. He gripped his wife’s hand and left.

I never learned what became of him, but I still remember his parting words: “I can’t bring my family to a country that doesn’t want us.”

Immigration policy that ties admissibility solely to a person’s perceived economic and social worth is inherently violent. We cannot at once claim to be the world’s moral authority, while entrenching ableism and white supremacy through exclusionary policies at home and imperialist violence abroad. My family has carried the weight of these policies for decades, and millions more will be devastated if the Trump administration has its way.

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First Person

A Surge In Financial Aid Audits Is Trapping Low-Income College Students

It was 9 p.m. on an August night in southern California, and I was about to get my favorite burrito. I had spent the day with friends at  Shawe’s Cove, my go-to beach tucked beneath the mansions in Laguna Beach. The moment I took my first bite of Carne Asada, my friend asked: “Have you gotten your financial aid?” Confused, and a little upset she was bringing up financial aid when I hadn’t even had a chance to finish chewing, I hesitantly replied “Uhh, I’m not sure — have you?”

It turns out that for most UC-Riverside students, financial aid for the upcoming school year had been released a few days before. When I checked my bank account the next day, I had not received my reimbursement from my financial aid package.

As a senior who depends on financial aid, I’ve filled out the Free Application for Federal Student Aid, or FAFSA — the form required by the federal government in order to receive grants and loans for college — three times previously and never had a problem. But after digging through old emails, I found one I’d missed from my school’s financial aid office earlier in the summer stating “Financial Aid App Incomplete.” After logging into my school’s student web portal, I finally found the reason my aid was being withheld: I had been selected for verification.

Verification, or the auditing of student financial aid applications for additional review, is routine — even when the original information is correct. The Department of Education selects roughly 30 percent of financial aid recipients’ applications to verify, but the information they choose to review varies. I was audited for my dependency status, so over the course of the past couple of months, I have submitted my mother’s original tax returns to my financial aid office, resubmitted them with specific IRS documents after they were rejected, and then waited for weeks while they were reviewed by my school’s financial aid office. All told, the documents and late fees cost about $150

Unfortunately, my situation is far from unique. The 2018-2019 application cycle saw an unusually high number of verifications due to an algorithm adjustment from the Department of Education. The algorithm change, combined with the repeal of the 30 percent cap on audits — removed in anticipation of the new algorithm — has caused the number of verifications to skyrocket. At my own university, where more than half of students receive Pell Grants, a financial aid counselor reported that 8,000 students were selected for verification — more than double the 3,000 who went through the verification process last year.

Data show that 98 percent of students picked for verification are low-income.

Data show that 98 percent of students picked for verification are low-income, and that about half of students that are eligible for a federal Pell Grant are selected. About 95 percent of students that successfully make it through verification have no change in their aid, but many students do not make it through the process.  According to the National College Access Network, in the 2015-16 academic year — before the verification numbers spiked — 90,000 low-income students were not able to complete the verification process and receive aid.

Even students who make it through the process face delays that could be critical for those who are struggling to afford their rent, groceries, and school expenses. For me, going back to school involved taking a giant leap of faith. By the time I arrived in D.C. for the fall semester I was still without any financial aid. I spent my second day in D.C. calling my financial aid office, student business services, and the center where I would be staying. I was terrified that if my aid didn’t come through, I would be forced to drop the program.

After two hours of fighting my way through busy signals, I finally managed to find myself in queue. I was on hold for several more hours until someone told me that they had received my paperwork, but had not yet flagged it to be seen by an administrator.

This process took a total of nearly 10 weeks to complete. If it weren’t for working both during summer and the quarter, family support, and guidance from financial aid counselors at my school, I  would not have been able to make it to this point. As a first-generation college student whose family never left the town were they grew up, the 11 or so weeks I would spend more than 2,000 miles away from home might as well be 11 years.

But I am one of the lucky ones. For more than 90,000 other students like me, this all ended very different.

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