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Millions of America’s working poor may lose out on key anti-poverty tax credit because of the pandemic

Millions of America’s working poor may lose out on key anti-poverty tax credit because of the pandemic

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Demand for food aid has soared during the pandemic. Joe Raedle/Getty Images

The pandemic is driving American families to the edge, with tens of millions at risk of losing their homes and over 1 in 10 U.S. adults reporting their households didn’t have enough to eat in the previous week.

While Congress debates extending unemployment benefits that expired on July 31 and other additional aid, there’s an important program that already exists that could help struggling Americans get through the crisis however long it lasts. Known as the earned income tax credit, or EITC, it provides aid primarily to the working poor. In a typical year, it lifts more than 8.5 million people out of poverty, while improving the health and well-being of parents and children.

Since the credit depends on earned income, many families may be at risk of losing all or some of the benefit because so many were laid off as economies in many states shut down. Even as restaurants and other businesses reopen, it’s likely that many of those who lost their jobs will remain unemployed or underemployed for many months or longer.

Our own research shows changes to the structure of the U.S. economy, with the sharp growth of low-wage and unstable jobs, is weakening the EITC’s effectiveness at fighting poverty.

Some lawmakers are trying to reform the EITC as part of the next coronavirus bailout to ensure it helps more Americans and make it more like a basic income guarantee. We believe doing so would not only ensure low-income Americans continue to have access to this vital tax credit during the pandemic, additional changes could also strengthen the program for years to come.

The EITC success story

The earned income tax credit, which supplements earnings for many low- and moderate-income workers, has helped buffer economic hardship for single parents and other recipients since it was created in 1975.

Eligible taxpayers receive the credit after they file their taxes. And unlike a deduction, even those who didn’t pay any income tax can receive the credit, which they’ll get as part of their refund. Twenty-eight states and the District of Columbia also offer their own EITCs, typically based on the federal credit.

In 2019, taxpayers received about US$63 billion in credits through the federal EITC, making it the government’s largest cash safety net program for working families with children. Recipients qualify for the credit based on how much money they earn and depending on their marital status and number of children. The benefit rises with each dollar earned until reaching a peak and then phasing out.

For example, in 2019, a single person earning $13,545 a year received $392, while a typical family of four with an annual income of $22,261 received roughly $2,951 – which comes out to an extra $250 a month.

Put another way, a family with one child receives an average credit of 34 cents for every dollar of earned income, which rises to 40 cents for two and 45 cents for three or more children.

The tax credit has been tremendously successful. In 2018, the latest data available, the EITC lifted about 10.6 million people out of poverty and reduced its severity for another 17.5 million. And since its inception, it has reduced child poverty by 25%.

But the benefits extend well beyond providing struggling families with more income. Research shows the credit has helped improve the mental and physical health of mothers, improves perinatal health of mothers and their children, improves child development, reduces incidents of low birth weight among infants and improves children’s cognitive function.

It also enjoys strong bipartisan support because of its focus on encouraging and supporting working.

But the EITC only helps individuals able to find work, which becomes a bigger challenge in a pandemic or severe recession.

Our unpublished calculations from a national representative survey showed that about a fifth of the 25 million EITC beneficiaries in 2019 lost their jobs from March to April and over 16% remained unemployed in June, the latest data we have available. That means over 4 million working families could lose a large portion of their benefits in 2021, depending on a variety of factors.

Reforming the EITC

While these problems are most obvious in a recession, they’ve worsened over the past four decades as the labor market has changed.

The share of workers doing low-skill, low-wage work has jumped from 42% in 1980 to about 54% in 2016. And an increasing number of these jobs are in the precarious gig economy that doesn’t provide stable incomes. That means workers are less likely to see a steady aid from the EITC because the maximum benefits are gained when working full time at minimum wage.

The EITC’s also provides very little support to those without children. A nonpartisan think tank estimates that about 5.8 million adult workers without any children as dependents are taxed into poverty – or impoverished further – each year because their EITC is too small to offset their federal income and payroll taxes.

House Democrats are pushing to reform the EITC in the next coronavirus relief bill. Specifically, they’d like to tweak the credit’s phase-in so that workers receive more benefits for fewer hours worked, allowing those who lost their jobs and remained unemployed for the remainder of 2020 to maintain benefits similar to last year. They also would lower the minimum age for receiving the credit to 18 from 25 for certain vulnerable groups like those experiencing homeless.

We’d suggest also increasing the benefit for tax filers without children and lowering the minimum age for everyone so that the millions of young people graduating from high school and college into an economic recession can get additional support.

These reforms would not only help now but could also deepen the impact of the EITC by creating an income floor for more people as the economy changes, essentially creating something very much like a basic income guarantee. A key difference, however, is that most universal basic income proposals don’t require recipients to work.

While we cannot fully predict how interactions between job losses and the tax and benefit system will play out, this moment presents an opportunity to test reforms that would benefit low-income working families for years and decades to come.

Rebecca Hasdell receives funding from the Canadian Institutes for Health Research.

Alice Milivinti et David Rehkopf ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur poste universitaire.

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide…

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide Black Lives Matter riots in the summer of 2020, some elite colleges and universities shredded testing requirements for admission. Several years later, the test-optional admission has yet to produce the promising results for racial and class-based equity that many woke academic institutions wished.

The failure of test-optional admission policies has forced Dartmouth College to reinstate standardized test scores for admission starting next year. This should never have been eliminated, as merit will always prevail. 

"Nearly four years later, having studied the role of testing in our admissions process as well as its value as a predictor of student success at Dartmouth, we are removing the extended pause and reactivating the standardized testing requirement for undergraduate admission, effective with the Class of 2029," Dartmouth wrote in a press release Monday morning. 

"For Dartmouth, the evidence supporting our reactivation of a required testing policy is clear. Our bottom line is simple: we believe a standardized testing requirement will improve—not detract from—our ability to bring the most promising and diverse students to our campus," the elite college said. 

Who would've thought eliminating standardized tests for admission because a fringe minority said they were instruments of racism and a biased system was ever a good idea? 

Also, it doesn't take a rocket scientist to figure this out. More from Dartmouth, who commissioned the research: 

They also found that test scores represent an especially valuable tool to identify high-achieving applicants from low and middle-income backgrounds; who are first-generation college-bound; as well as students from urban and rural backgrounds.

All the colleges and universities that quickly adopted test-optional admissions in 2020 experienced a surge in applications. Perhaps the push for test-optional was under the guise of woke equality but was nothing more than protecting the bottom line for these institutions. 

A glimpse of sanity returns to woke schools: Admit qualified kids. Next up is corporate America and all tiers of the US government. 

Tyler Durden Mon, 02/05/2024 - 17:20

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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…

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To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….

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Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 

 

About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. www.insilico.com 


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