The NYC Aid Plan (Advanced Income Deployment)
New Yorkers are in crisis because of COVID-19--and they need immediate, serious financial assistance to get through. Unfortunately, much of the assistance that New Yorkers qualify for is significantly delayed because it is tied to federal and local tax credits that are paid out just once a year.
To get New Yorkers the money they need right now, Eric Adams proposes the NYC AID (Advanced Income Deployment) initiative to get struggling individuals and families their Earned Income Tax Credits (EITC) in advanced monthly payments, while also substantially increasing the amounts of the credits to deliver the high level of aid needed during our financial crisis.
Under Adams’ plan, a New York City family with two children on the edge of poverty earning $30,000 a year would receive approximately $3,000 annually, or about $250 a month from a boosted City EITC program. Currently, that same family would receive about $250 for the entire year from those same credits.
Credits would be paid out monthly as an advance by the City on qualifying New Yorkers’ past annual earnings. A safe harbor provision would also be added so that any increase in earnings over the year of monthly benefits would not affect pay out. A pilot in Chicago and a federal program that was in place from 1979 to 2010 both showed that this method of advanced payments were feasible, economical, and ultimately successful in reducing poverty and improving outcomes for recipients.
How Does It Work?
Adams would provide new substantial, dependable income by changing the current City tax credit system by: 1) Increasing the City’s EITC match from 5% of the federal credit to 60% for those New Yorkers and households earning $30,000 a year and less; 2) Increasing the City’s EITC match to 30% for those earning between $30,000 and $50,000; and 3) paying advance monthly checks to qualifying recipients based on their earnings from the previous tax year, not in lump sums at the end of the tax year.
While the AID program would provide the most significant support for lower-income New Yorkers who are in serious danger, Adams’ plan would also reach out to catch the large number of middle-income New Yorkers who are now suddenly on the edge, and could easily fall into poverty. That part of the plan is essential because the last 12 months of income for so many New Yorkers does not necessarily reflect their current financial circumstances.
For instance, a couple with one child may have depended on one source of income that put them in the “middle class” earning $50,000 a year, but now both adults are unemployed and facing eviction and debt as savings evaporate. That couple’s income for the last year looks adequate on paper, but it does not reflect their financial situation. This would allow AID to cover nearly 900,000 New Yorkers. The total amount advanced per household would reach up to $4,000 over 12 months for lower-income families with children.
Because the boosted EITC match would be based on an existing City program that is pegged to a federal program, it is also unlikely the increase in assistance would affect New Yorkers’ access to other government benefits.
How Is It Administered?
The NYC AID plan would also mandate payments be distributed via either direct deposit or a prepaid debit card so that predatory lenders and check-cashers do not take advantage of New Yorkers. To make this possible, Adams would also immediately initiate his local banking network proposal, working with small and large banks to set up free checking accounts for any New Yorker who needs one, giving them access to financial tools that can help them manage their money and build wealth.
And when eligible recipients are signed up for the AID program, they will immediately be connected with HRA case workers who will use their AID information to connect them to a much broader range of local, State and federal benefits to ensure our residents are getting every benefit they qualify for--and that the City is getting back every dollar it sends to Albany and Washington, D.C.
How Do We Pay For It?
Increasing these credits for struggling New Yorkers would cost approximately $1 billion. New costs for administrative fees would be low. Colorado estimated that the cost per participant in an advanced income program would be about $4.50.
But the cost of doing nothing is likely higher because so many New Yorkers are at risk of falling into poverty and so would require public assistance for much longer without immediate assistance. Studies show that some amount of dependable advanced income for struggling households -- that can be counted on monthly to keep finances afloat and afford childcare -- allows recipients more time to focus on finding a job, starting a new business, or learning skills that can help them become employed. The aid would also likely be immediately recirculated in the local economy, since recipients of advanced income tend to spend it on basic goods and services.
Even so, it would be irresponsible for any new City initiative with a price tag to come without a payment plan--especially when the City faces large out-year budget deficits. Adams has already proposed a three-part plan for closing the
projected City budget deficit, including 3-5% cuts across the board to City agencies, attrition of non-essential City workers, and a modest increase to the City income tax on ultra-millionaires.
Combined, those actions are projected to save or create $5-6.5 billion in the first year, increasing year-over year as headcount drops and further agency savings are found. Even with projected deficits and without depending on expected new stimulus from Washington, that savings and revenue will cover the gap and advanced increased credits payments to struggling New Yorkers.
Married with qualifying children - Earning up to $55,952
Married with no qualifying children - Earning up to $21,370
Single with qualifying children - Earning up to $50,162
Single with no qualifying children - Earning up to $15,570