Methodology for Massachusetts Economic Independence Index 2013

Transcription

1 Methodology for Massachusetts Economic Independence Index 2013 This report outlines the methodological approach, resources, and assumptions applied in calculating each budget item of the Massachusetts Economic Independence Index 2013 (Mass. Index). With the exception of taxes, which are rates as of January 2013, all other data is current as of November HOUSING: RENT AND UTILITIES Mass. Index rent expenses are 2012 U.S. Department of Housing and Urban Development (HUD) Fair Market Rents (FMR). FMRs are the 40 th percentile rent in each Massachusetts town or city. i FMRs are comprised of rent and utilities, which are displayed separately. FMRs are based on home size, defined by the number of bedrooms. Home size is based on family size, and the Mass. Index includes rent values for 1-, 2-, 3- and 4-bedroom apartments. The Mass. Index assumes that a single adult has his/her own bedroom, two adults share a bedroom and no more than two children share a bedroom. FOOD Mass. Index food expenses are U.S. Department of Agriculture Low-Cost Food Plan November 2012 expenses by family type. Food costs are adjusted to reflect local differences in costs, as much as 19%, using the ACCRA Cost of Living index. The U.S. Department of Agriculture Center for Nutrition Policy and Promotion produces four official Food Plans Thrifty, Low-Cost, Moderate-Cost, and Liberal which reflect current dietary recommendations, food consumption patterns and food prices. Costs included in the Thrifty Food Plan reflect a short-term, minimal standard of nutrition and are used by the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) to calculate assistance levels. The Low-Cost Food Plan is slightly less austere than the Thrifty Food Plan which is used to calculate SNAP benefits but still presents a no-frills diet consisting entirely of food prepared and eaten at home. TRANSPORTATION Mass. Index private transportation expense includes the fuel, maintenance, insurance, and license and registration fees associated with ownership and operation of a fully depreciated small sedan. ii Private vehicles are required by commuting workers in most of Massachusetts. Families with two working adults require two cars. Fuel and maintenance expenses are based on the expected number of miles driven by Massachusetts residents. Miles driven by one and two-parent families include trips to and from: work, child care, gasoline stations, medical appointments, and shopping destinations (one trip per week). Automobile insurance quotes are obtained at the zip code level through the Massachusetts Division of Insurance s Insurance Premium Comparison Tool. Automobiles carry a standard insurance policy consisting of: bodily injury ($100,000/$300,000); personal injury protection; uninsured motorist ($100,000/$300,000); property damage ($100,000); and collision and comprehensive ($500 deductible). Per-gallon fuel cost is the average cost of regular unleaded gasoline expenses in Massachusetts as of November Workers utilize public transportation where public transit is available and utilization rates are 7% or greater a threshold that suggests riders can rely on a transportation system to meet their basic needs. iii The 7% utilization threshold is exceeded only in the Boston metro area, and private transportation is utilized elsewhere in the state. The Mass. Index 1 P age

2 assumes public transportation use inside Boston, where the expense of public transportation is the cost of a monthly LinkPass ($70), which allows unlimited travel by Massachusetts Bay Transportation Authority (MBTA) subway and local bus, unless the cost of public transit exceeds the cost of owning a private vehicle. Families with two working adults living in Boston require two LinkPasses. Up to two children 11 years old and younger ride free on MBTA buses and trains with every paying adult. Additional children are charged the full adult fare. It is assumed that only adults will require a LinkPass as children can take school buses to and from school. CHILD CARE Mass. Index child care expenses are local, age-specific costs taken from the Massachusetts 2011 Child Care Market Price Survey and inflated to November 2012 using the Consumer Price Index. The Massachusetts 2011 Child Care Market Price Survey presents separate child care center or family child care (licensed care provided in a private home) costs for infants, toddlers, preschoolers and school age children. Infant values are combined, weighted costs for infants and toddlers; the infant category therefore includes children 0-33 months old. The Mass. Index uses local median family child care rates for infants. Median child care center rates are used for all other age categories. Care for school-age children includes before- and after-school care. PERSONAL AND HOUSEHOLD NEEDS Mass. Index personal and household needs expenses are equal to 23% of a family s housing, utilities, and food expenses. They constitute a conservative definition of necessary spending on personal care products, and household items. Clothing, housekeeping supplies, personal care products and telephone charges comprise nearly all of the personal and household needs expense. The personal and household needs expenses calculation is based on the U.S. Bureau of Labor Statistics Consumer Expenditure Survey, which records American consumers annual spending. The proportion used, 23%, is based on the average expenditures of renters, as all Mass. Index families assumed to be renters. HEALTH CARE Mass. Index health care expense consists of the insurance premium and out-of-pocket costs of Massachusetts residents with employer-sponsored health insurance (ESHI). ESHI premium data include costs of single, single-plus-one and family premiums. Out-of-pocket (OOP) expenses are average monthly expenses by Mass. Index age category for families in the Northeast region of the United States. According to the Massachusetts Division of Health Care Finance and Policy, more than 98% of Massachusetts residents were covered by health insurance in More than 95% of Massachusetts full-time employees worked at firms that offered health insurance, and 70.1% of those full-time employees participated in the insurance plans their employers offered. iv Among non-elderly adults with insurance, 78% were covered by employer-sponsored health insurance, 11.5% were covered by MassHealth (Medicaid), Commonwealth Care (state-subsidized insurance), or Commonwealth Choice plans, and 3.2% were covered by non-employer-sponsored health insurance purchased independently on the individual market. v In 2011, Massachusetts employers paid on average 75% of total insurance premiums for single employees and 74% of total insurance premiums for families. vi Nationwide, employers paid on average 79% of total insurance premiums for single employees and 74% of total insurance premiums for families. vii Massachusetts residents paid 12.7% more than the national average for family insurance premiums in viii Mass. Index expenses do not include the direct effects of public subsidies on average insurance premiums or out-ofpocket costs; as a result, Mass. Index calculations do not include the expenses of Medicare participants or those enrolled in the Commonwealth Care Health Insurance Program (Commonwealth Care), MassHealth (Medicaid) or other public 2 P age

3 health insurance. The Mass. Index includes insurance premiums and average OOP costs for Massachusetts residents in good health. Total health care costs are dependent on health status, with those in excellent health incurring just over half the average annual OOP costs of those in good health, and those in poor health incurring approximately two and one-half times the average annual OOP costs of those in good health. Employer-sponsored health insurance premiums and out-of-pocket expenses data are obtained from the U.S. Department of Health and Human Services Medical Expenditure Panel Survey (MEPS) and inflated to November 2012 using the Consumer Price Index. Table 7: Average Annual Out of Pocket Health Care Costs for Massachusetts Workers Participating in Private Health Insurance Plans, by Adult Health Status, 2012 Adult Adult Preschooler School age Child 2 Adults Preschooler School age Child Excellent $467 $1,117 $1,584 Good $799 $1,449 $2,249 Poor $2,069 $2,719 $4,788 Source: U.S. Department of Health and Human Services. Medical Expenditure Panel Survey (MEPS). Values inflated to 2012 using the Consumer Price Index. TAXES AND TAX CREDITS Mass. Index taxes consist of federal payroll taxes and federal and state income taxes. Rates are current 2013 rates as of January Mass. Index taxes are gross, pre-credit taxes. Tax credits, refundable and non-refundable, are presented separately, and include the federal earned income tax credit (EITC or EIC), federal child tax credit (CTC) and additional child tax credit (ACTC), federal child and dependent care credit (CDCC), Massachusetts limited income credit and the Massachusetts state EITC. While refundable credits those such as the EITC which are paid even if credits exceed owed taxes are normally received as lump sums in the spring, the Mass. Index expresses credits as monthly amounts. All Mass. Index families earn income and pay taxes, and all family income is earned income. Tax filers do not itemize deductions. As renters, families are eligible for the Massachusetts state income rental deduction. While many Mass. Index families earn incomes subject to the 25% federal tax bracket, deductions and credits greatly reduce Mass. Index families effective tax rates. ix Tax Credits The federal and Massachusetts Earned Income Tax Credits are refundable tax credits available to low- and moderate-income workers. Because the tax is refundable, tax filers need not owe taxes to receive the credits. For the 2012 tax year, the maximum federal credit is $5,891, and refunds are based on family size, filing status and household income. The Child and Dependent Care Credit is a non-refundable federal income tax credit which allows families to deduct a percentage of child or dependent care costs from the federal income taxes they would otherwise have to pay. The credit can equal as much as 35% of care expenses, depending on household income. For the 2012 tax year, the maximum claimable expenses are $3,000 for one child and $6,000 for two children. The Child Tax Credit is a non-refundable federal tax reduction for those with dependent children. The credit is equal to $1,000 per child. If the amount of the Child Tax Credit is greater than the amount of income tax owed, families may be able to claim the refundable Additional Child Tax Credit. 3 P age

4 Appendix: Massachusetts Economic Independence Index Data Sources Mass. Index Expense Data Component Source Rent and Utilities Rents U.S. Department of Housing and Urban Development. (2012). Schedule B FMR Tables. Utilities U.S. Department of Housing and Urban Development. FMR rentsto-utilities ratios by Federal Information Processing Standard (FIPS) code and cbsamet code. (unpublished) Food Food costs U.S. Department of Agriculture. (2012). Official USDA Food Plans: Cost of Food at Home at Four Levels, U.S. Average, November Home.htm. Cost of Living Index C2ER (The Council for Community and Economic Research). Cost of Living Index. Transportation Public transportation, utilization American Association of State Highway and Transportation Officials. (2000). Census Transportation Planning Package (CTPP 2000): Profiles for Massachusetts. Public transportation, fares Massachusetts Bay Transportation Authority. Automobile insurance premiums Massachusetts Division of Insurance. Auto Insurance Premium Comparisons. Travel distance U.S. Department of Transportation, Federal Highway Administration National Household Travel Survey. Automobile fixed costs, depreciation and maintenance American Automobile Association (AAA). Your Driving Expenses, 2012 Edition. Fuel U.S. Department of Energy. Retail Gasoline Historical Prices. November P age

5 Child Care Personal and Household Needs Health Care Taxes and Tax Credits Child care Personal and household needs Insurance premiums, employer-sponsored health insurance Out-of-pocket expenses Federal income taxes Massachusetts income taxes Massachusetts Department of Early Education and Care. Massachusetts Child Care Market Price Survey. arketpricesurvey.pdf. U.S. Bureau of Labor Statistics. Consumer Expenditure Survey, U.S. Department of Health and Human Resources. Medical Expenditure Panel Survey (MEPS). Table II: State of Massachusetts, private-sector data by firm size, &year=2011. U.S. Department of Health and Human Resources. Medical Expenditure Panel Survey (MEPS). Total Health Services-Median and Mean Expenses per Person With Expense and Distribution of Expenses by Source of Payment: United States, U.S. Department of the Treasury Internal Revenue Service. Rev. Proc Tax Policy Center. Urban Institute and Brookings Institution. Tax Provisions in the American Taxpayer Relief Act of 2012 (ATRA) Provisions-in-ATRA.pdf Massachusetts Department of Revenue Massachusetts Resident Income Tax Form 1 and Accompanying Schedules and 2011 Massachusetts Schedule HC. Copyright 2013 Crittenton Women s Union All rights reserved. i According to HUD, the 40 th percentile allows a decent housing standard as accessible to those with limited income, including participants in federal rental subsidy programs. ii A fully depreciated auto is defined herein as a car with a value essentially unaffected by additional miles driven. Fully depreciated small sedans such as the Ford Focus or Honda Civic, which are used as the basis for Mass. Index variable cost calculations, have market values of approximately $1,700. iii Porter, C. & Deakin, E. (1995). Socioeconomic and journey-to-work data: A compendium for the 35 largest U.S. metropolitan areas. Berkeley, CA: Institute of Urban and Regional Development, University of California. iv U.S. Department of Health and Human Services. "Table II: State of Massachusetts, Private Sector Data by Firm Size, 2011." Medical Expenditure Panel Survey In 2011, 83.6% of Massachusetts part-time employees worked at firms that offered health insurance. Only 31.7% of part-time employees were eligible to participate in employer plans, and only 13% of part-time employees were enrolled in employer-sponsored insurance. v Long, Sharon K. and Lokendra Phadera. Table A.2-1: Health Insurance Coverage in Massachusetts, by Age Groups, Health Insurance Coverage and Access to Care in Massachusetts: Detailed Tabulations Based on the 2010 Massachusetts Health Insurance Survey. Available online at vi U.S. Department of Health and Human Services. "Table II: State of Massachusetts, Private Sector Data by Firm Size, 2011." Medical Expenditure Panel Survey vii Ibid. viii Kaiser Family Foundation. Massachusetts: Average Family Premium per Enrolled Employee for Employer-Based Health Insurance, Statehealthfacts.org (accessed August 14, 2012). ix The Massachusetts tax code requires residents age 18 and over with incomes above 150% of the federal poverty level to have health insurance. Those lacking insurance for four consecutive months during 2012 are subject to monthly penalty amounts between $19 and $105. As Mass. Index families are enrolled in a health insurance plan for the entire year, they are not subject to tax penalties. 5 P age