Economic relief should target people who need it most

Governor Janet Mills has proposed using the majority of Maine’s historic $1.2 billion budget surplus to pay for economic relief checks to 800,000 Mainers. While the rising cost of living and COVID-related disruptions to the economy present a clear need for financial support to some Maine households, such a large sum of money spent on direct payments crowds out other investments which could have greater long-term impact. Lawmakers should carefully evaluate how much to send out in payments and to whom these payments are targeted. While inflation has increased costs for everyone, the hardships are not shared equally. Families with low income are most impacted and should be prioritized with direct payments.

Economic hardship has declined since last year, but remains high for Mainers with low income

The US Census Bureau’s Household Pulse Survey includes several questions that track economic hardship pertaining to food, housing, energy, job loss, and general difficulty paying for usual household expenses.

When asked about paying for usual household expenses, Mainers were generally less likely to report trouble in early 2022 compared to the same period last year (Figure 1). This is partly due to the improved economic situation, with more Mainers employed and wages rising over the past year. At the same time, this measure of hardship is still very high for Mainers with lower income. Nearly half of all households with incomes below $35,000 a year still struggle to make ends meet.

Detailed hardship measures show a clear gap between households with high and low income

Beyond the general question about spending on “usual household expenses,” the Household Pulse Survey asks a series of more detailed questions assessing financial hardship relating to housing, food, and energy. It also asks whether members of a respondent’s household have lost any job-related income recently (e.g., laid off or hours reduced).

Along most of these measures, the households in Maine with lower income reported significantly greater levels of economic hardship than households with upper income. Very few households with incomes above $75,000 a year reported suffering from any of the hardships measured by the Pulse Survey (Figure 2).

Since the survey was last conducted, energy prices have increased considerably and put further pressure on households with low income. According to the nationwide Consumer Expenditure Survey, households with lower income spend a greater proportion of their money on gas and utilities than households with higher income.

Governor Mills has suggested sending $850 checks to each non-dependent adult in households below an income threshold of $150,000 for married filers, $112,000 for head-of-household filers, and $75,000 for single filers. Data from the Pulse Survey shows this plan is not well-targeted. A more detailed look at household income by inferred filing status shows many of the proposed recipients with higher income levels are not currently experiencing financial difficulties (Figure 3). For example, only 9 percent of single tax filers with incomes between $50,000 and $75,000 had trouble meeting their usual household expenses. The same was true of just 8 percent of married filers with incomes between $100,000 and $150,000.

Lowering the income eligibility thresholds — for example, to $50,000 for a single filer and $100,000 for married filers — would substantially reduce the cost of the economic relief package. The savings could be used to provide more money to households with low income or strengthen programs and services that create long-term opportunities and improvements for all Mainers.

The Maine Center for Economic Policy urges lawmakers to better target economic relief to the workers, families, and communities with the greatest need.