How Well Are We Faring?

Prosperity, Poverty, and the Impact of Policy Choices in Maryland

February 23, 2001

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How well are we faring? By many indicators, Marylanders are doing quite well:

Maryland had the highest median household income in the U.S. in 1998 and 1999, with the median household having annual income of nearly $52,000.

Using another measure of income-median income for a family of four-Maryland ranked second. In 1998, median income for a family of four was more than $71,000. This level was 27 percent higher than the U.S. median of $56,000.

Median income for a family of four has grown at a greater rate in Maryland than in other nearby states. Between 1979 and 1998, Maryland ranked second in annual growth rates among the 8 states in the South Census bureau region, plus nearby Pennsylvania, New Jersey, and the District of Columbia.

Income growth in the mid- and late-1990s allowed state revenues to continue to grow despite a cut in personal income taxes. In 1997, the Maryland General Assembly enacted a 10 percent cut in personal income taxes that was projected to cost $460 million when fully phased-in in 2002. However, revenue from personal income taxes grew from $3.8 billion in 1998 to a projected $4.9 billion in 2001.

Maryland's poverty rate is among the lowest in the U.S.

In addition to this impressive array of statistics, Maryland boasts the highest concentration of research and development facilities, the third highest concentration of biotech companies, and the highest concentration of scientists and engineers-all factors that contribute to the perception of Maryland as a prosperous state.

However, not all Marylanders are enjoying the prosperity that comes from a booming economy. Indeed, a substantial number of Marylanders are getting left behind. Instead of achieving new wealth as a product of a growing stock market and changes in technology, many Maryland families remain relatively poor, with slow or nonexistent income growth. This is coupled with a decline in access to public supports, such as health care and cash assistance.

Unfortunately, the good news about the economy has overshadowed the needs that remain. Many Marylanders, including government officials, are not aware of how widespread are the disparities in our economy.

For example:

From the late 1970s to the late 1990s, the richest 20 percent of Maryland families saw their annual incomes grow by nearly $43,000. At the same time, the poorest 20 percent of Maryland families experienced virtually no change in income.

Hourly wages among lower-income workers have stagnated in recent years. After adjusting for inflation, the hourly wage at the 20th percentile grew by just 12 cents per hour between 1989 and 1999.

The number of Marylanders without health insurance has been growing rapidly in recent years. From the late 1980s to that late 1990s, the number of Marylanders without health insurance approximately doubled.

State policies are not responsible for the disparity in economic conditions; these largely reflect national economic conditions and trends. However, state policies have exacerbated some of the problems identified in this report, and have not been used to the extent possible to address some of the needs that remain. Most notably:

The growth in the number of Marylanders without health insurance could be reversed by loosening stringent eligibility policies for publicly financed health care. Maryland's income eligibility limits for health insurance for working parents are more restrictive than those in the vast majority of states. In 2000, a parent with two kids and who makes $524 in a month, makes too much money to qualify for Medicaid. This amount ranks 41st highest among states for working parents who receive Medicaid. By comparison, twenty states allow a parent to earn more than twice the Maryland amount and still qualify for Medicaid.

In the early 1990s, Maryland eliminated its public health insurance program for adults without dependent children. As a result, low-income adults without kids have very limited access to health care.

Similar to the limitations in the Medicaid program, Maryland lags behind other states in access to cash assistance programs for working families. In 2000, a parent with two kids and who earns $524 in a month makes too much money to qualify for cash assistance. This earnings level ranks 36th highest among states.

The importance of tax policy is often overlooked as it relates to low-income Marylanders. A 1996 studied concluded that low-income Marylanders had a higher net tax burden than any other income group. While some tax changes have occurred in recent years that may reduce the relative tax burdens of some low-income Marylanders, tax breaks are often targeted to higher income Marylanders and business interests.

By shedding light on economic disparities and some of the unmet needs, this report seeks to stimulate interest in policy choices targeted to lower-income Marylanders.

Charts and Tables

Part 1: Marylanders are Rich

Chart 1: State Median Household Income, 1998-1999
Chart 2: State Median Income for a Family of Four, 1998
Chart 3: Change in Median Household Income, Maryland and U.S., 1988 to 1998
Chart 4: Average State Poverty Rates, 1997-1999

Part 2: Not Everyone is Sharing in the Prosperity

Chart 5: Changes in Real Incomes of Maryland Families, by Income Grouping, Late 1970s to Late 1990s
Chart 6: Changes in Real Incomes of Maryland Families, by Income Grouping, Late 1980s to Late 1990s
Chart 7: Dollar Change in Real Incomes of Maryland Families by Income Grouping, Late 1970s to Late 1990s
Chart 8: Wages at the 20th Percentile, Maryland and U.S, 1979 to 1999
Chart 9: Median Household Income by Local Jurisdiction, 1998
Chart 10: Poverty Rates by Local Jurisdiction, 1997 Updated 01/18/2001

Part 3: The Impact of State Policy Choices

Access to Health Insurance

Chart 11: The Risk of Being Uninsured by Income Level, 1998
Chart 12a: Medicaid Income Eligibility Levels by State for Applicants, July, 2000 Updated 01/24/2001
Chart 12b: Medicaid Income Eligibility Levels by State for Recipients, July, 2000 New 01/24/2001
Chart 13: Maryland Medicaid Income Eligibility Levels by Population Group
Chart 14: Uninsurance Rates Among Low-Income Working and Non-working Parents

Access to Welfare

Chart 15: Maximum Earnings for New Applicants by State, and Maximum Cash Benefits for a Family of Three by State
Chart 16: Maximum Earnings Before Recipients Lose Eligibility for Cash Assistance

Taxes

Chart 17: Who Pays Taxes? Net State and Local Tax Incidence by Income Group, 1995
Chart 18: The Maryland Refundable Earned Income Credit Updated 01/24/2001

Wages and the Minimum Wage

Chart 19: Minimum Wage Earnings Compared to the Poverty Level, 1955 to 1999
Chart 20: Nominal and Real Minimum Wage, 1955 to 1999
Chart 21: The Federal Poverty Guidelines, 2001 Updated 02/23/2001

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