Thursday, December 20, 2012

Taxpayers To Lose 61 Percent, $15 Billion, On GM Bailout, At Current Prices

Posted by Milton Recht:

From "GM Bailout Will Cost Taxpayers Billions" by Investor's Business Daily:
...GM on Wednesday said it will buy back the 200 million share government stake for $5.5 billion, or $27.50 a share.

The break-even point on the government's total holdings was $53 a share. But now, with $20.9 billion in taxpayer funds left to pay off from 300 million shares, the break-even point has risen to $69.72 a share.

In other words, at current prices, taxpayers are sitting with a loss of 61%, or nearly $15 billion, on their investment.

Banning Insurance Companies And Employers From Considering Health Status Leads To Unhealthier Lifestyles: Lowers Incentives To Lead Healthier Lives

Posted by Milton Recht:

From "Analyzing the Effects of Insuring Health Risks: On the Trade-Off between Short Run Insurance Benefits vs. Long Run Incentive Costs" by Harold L. Cole, University of Pennsylvania, Soojin Kim, University of Pennsylvania and Dirk Krueger, University of Pennsylvania, November 2012, NBER Working Paper No. w18572:
This paper constructs a dynamic model of health insurance to evaluate the short- and long run effects of policies that prevent firms from conditioning wages on health conditions of their workers, and that prevent health insurance companies from charging individuals with adverse health conditions higher insurance premia. Our study is motivated by recent US legislation that has tightened regulations on wage discrimination against workers with poorer health status (Americans with Disability Act of 2009, ADA, and ADA Amendments Act of 2008, ADAAA) and that will prohibit health insurance companies from charging different premiums for workers of different health status starting in 2014 (Patient Protection and Affordable Care Act, PPACA). is suboptimal to introduce both policies jointly since such policy innovation induces a more rapid deterioration of the cohort health distribution over time. This is due to the fact that combination of both laws severely undermines the incentives to lead healthier lives. The resulting negative effects on health outcomes in society more than offset the static gains from better consumption insurance so that expected discounted lifetime utility is lower under both policies, relative to only implementing wage nondiscrimination legislation.

Monday, December 17, 2012

Connecticut Ranked As Having 4th Toughest State Gun Laws: Summary Of Connecticut Gun Laws

Posted by Milton Recht:

From The Law Center To Prevent Gun Violence, "Connecticut State Law Summary:"
[T]he Law Center [To Prevent Gun Violence] ranked each state based on a review of state laws in 29 different firearms-related policy areas. Connecticut ranked 4th out of 50 – having enacted some of the strongest gun violence prevention laws. Among other things, Connecticut:
Connecticut does not, however,

Source: Law Center To Prevent Gun Violence

Raising Federal Income Tax Rates Without Limiting Tax Deductions Benefits Liberal Democrats More Than Republicans

Posted by Milton Recht:

Liberal Democrats tend to live in the higher tax states and they take bigger federal income tax deductions for state and local taxes. Raising federal tax rates makes the deduction for state and local taxes more valuable. The higher federal tax rates lowers the burden of high state taxes to high income earners, while raising the federal tax burden of low state tax residents.

The increase loss of federal income tax revenues from the deductions under higher income tax rates is borne by residents in low tax states, mostly Republicans, who take smaller deductions for state and local taxes. The net effect is that low tax state residents will pay a bigger part of the high tax state government employee salaries, benefits and pensions.

By not limiting deductions, while raising federal tax rates, Obama will unfairly increase the federal tax burden of low tax state residents for the higher spending of high tax states.

Raising the tax rates on the rich is not fair unless income tax deductions for state and local taxes are also limited.

From The Wall Street Journal, "Of Liberals and Loopholes: The current tax code favors high-tax states:"
Source: The Wall Street Journal
Since the affluent tend to itemize their deductions more than do average taxpayers, and since the affluent pay higher marginal tax rates, they tend to benefit more from deductions. Ergo, limit deductions and you raise the effective tax rate (not the marginal rate) of the affluent. (The effective tax rate is the share of total income paid in taxes, while the marginal rate is the tax on the next dollar earned.) Such a reform would help tax efficiency and equity, and the economy would benefit from fewer investment distortions.

But suddenly liberals are having second thoughts, and our guess is that this is because residents of high-tax Democratic-run states are about twice as likely to take advantage of tax loopholes as taxpayers in low-tax states. For example, 44% of Connecticut filers itemize their deductions, but only some 21% of North and South Dakota residents do.

Need To Install Wind Turbines Covering An Area The Size Of North Carolina Every Year Just To Keep Up With The Annual Growth In Electricity Demand: Need More If Want To Replace Existing Fossil Fuel Electricity With Wind

Posted by Milton Recht:

From The Wall Street Journal, "Harvard Needs Remedial Energy Math: Wind and solar power cannot possibly meet the world's growing need for more electricity." by Robert Bryce:
The International Energy Agency expects global electricity use to continue growing by about 450 terawatt-hours per year through 2035.

Here's where the math becomes college-freshman obvious: In 2011, the world had 240,000 megawatts of wind-generation capacity. That fleet of turbines produced 437 terawatt-hours of electricity. Therefore, just keeping up with the growth in global electricity demand—while not displacing any of the existing need for coal, oil and natural gas—would require the countries of the world to install about as much wind-generation capacity as now exists, and they'd have to do so every year.

Put another way, just to keep pace with demand growth, the wind industry will need to cover a land area of some 48,000 square miles with wind turbines per year, an area about the size of North Carolina.

Saturday, December 15, 2012

States Without An Income Tax Have Better Private Sector Economic Growth

Posted by Milton Recht:

From The Wall Street Journal, "States that Spend Less, Tax Less—and Grow More: States with an income tax spent 42% more per resident in 2011 than the nine states without an income tax." by Dave Trabert and Todd Davidson:
States that allow taxpayers and employers to keep more of their earnings are reaping the benefits. States without an income tax have significantly better growth in private sector GDP (59% versus 42%) over the last 10 years. They increased the number of jobs by 4.9% while jobs in the rest of the states declined by 2.6%. States without an income tax gained population (+5.5%) from domestic migration (U.S. residents moving in and out of states) while all other states as a whole lost 1.3% of population between 2000 and 2009.

Millions More Taxpayers Affected By An Increase In Top Marginal Income Tax Rates Now Than 1950s Rate Of 91 Percent: Increase In Top Rates Will Have Greater Negative Economic Impact Today Than In The Past

Posted by Milton Recht:

From Tax Foundation, "CRS, at odds with Academic Studies, Continues to Claim No Harm in Raising Top Earners Tax Rates" by William McBride:
The top rate in the late 1950s was 91 percent, but it only applied to income of $3 million or more, in inflation adjusted terms. As Peter Schiff at the Wall Street Journal points out, the top rate applied to no more than a couple hundred taxpayers (in 1958, 236 of 45.6 million taxpayers paid at a rate of 81 percent or more). Today, the top rates are much more broadly applicable. Raising the top two rates of 33 and 35 percent, as the President proposes, would affect 3.9 million taxpayers, out of about 140 million.

Friday, December 14, 2012

Spending, Spending, Spending And Not Revenue!

Posted by Milton Recht:

From AEIdeas, "What do we make of this chart?" by :

Source: AEIdeas

Bottom Two-Thirds Of Federal Income Taxpayers' Share Of Taxes Paid Fell From 29 Percent To 6.7 Percent, A 77 Percent Decrease, From 1958 To 2010

Posted by Milton Recht:
From The Wall Street Journal, "Peter Schiff: The Fantasy of a 91% Top Income Tax Rate: A liberal article of faith that confiscatory taxes fed the postwar boom turns out to be an Edsel of an economic idea." by Peter Schiff:
In 1958, approximately two million filers (4.4% of all taxpayers) earned the $12,000 or more for married couples needed to face marginal rates as high as 30%. These Americans paid about 35% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes.

In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period. In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes. By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically—to 6.7%. The 77% decline represents the single biggest difference in the way the tax burden is shared in this country since the late 1950s.

College Grads Most Likely To Moonlight And Hold Two Or More Jobs: Unchanged Over Last Ten Years

Posted by Milton Recht:
From Federal Reserve Bank Of Cleveland, Economic Trends, "Moonlighting" by Jonathan James:
For some workers, one job isn’t enough. In any week, more than 5 percent of workers hold more than one job (about 7.2 million people in October 2012). While most multiple jobholders work only two jobs, a significant share, about 10 percent, work three or four jobs.
Perhaps less well known is that the rate of multiple job holding varies significantly by education level. Those with some college or a college degree are almost twice as likely to hold multiple jobs as those with just a high school degree.

Source: Federal Reserve Bank of Cleveland
Finally, unlike many other features of the labor market, for example unemployment and hours worked, the rate of multiple job holding has changed very little over the last 10 years. While the unemployment rate has close to doubled during the recent economic downturn, the overall incidence of moonlighting has changed only about 15 percent from a pre-recession high of 5.78 percent in 2004 to its current low in 2012 of five percent.

Source: Federal Reserve Bank of Cleveland

Thursday, December 13, 2012

$168 Per Day Is The Cash Equivalent Of Benefits To Poverty Households

Posted by Milton Recht:

From The Weekly Standard Blog, "Welfare Spending Equates to $168 Per Day for Every Household in Poverty" by Daniel Halper:
The amount of money spent on welfare programs equals, when converted to cash payments, about "$168 per day for every household in poverty," the minority side of the Senate Budget Committee finds. Here's a chart detailing the committee's findings:

Source: The Weekly Standard Blog

According to the Republican side of the Senate Budget Committee, welfare spending per day per household in poverty is $168, which is higher than the $137 median income per day. When broken down per hour, welfare spending per hour per household in poverty is $30.60, which is higher than the $25.03 median income per hour.

From 2003 To 2011, Employer Health Insurance Premiums Rose 62 Percent, Employee Premiums Rose 74 Percent And Deductibles Rose 117 Percent

Posted by Milton Recht:

From "Employer health insurance premiums rose 62% from 2003-11" in ScienceBlog:
Average premiums for employer-sponsored family health insurance plans rose 62 percent between 2003 and 2011, from $9,249 to $15,022 per year, according to a new Commonwealth Fund report.

The report, which tracks state trends in employer health insurance coverage, finds that health insurance costs rose far faster than incomes in all states. Workers are also paying more out-of-pocket as employee payments for their share of health insurance premiums rose by 74 percent on average and deductibles more than doubled, up 117 percent between 2003 and 2011.

Poorly Performing Hedge Funds Do Not Report Results To Commercial Databases Leading To An Appearance Of Higher Average Investment Returns By Hedge Funds

Posted by Milton Recht:

From The Review Of Financial Studies, "Out of the Dark: Hedge Fund Reporting Biases and Commercial Databases" by Adam L. Aiken, Quinnipiac University, Christopher P. Clifford, University of Kentucky and Jesse Ellis, University of Alabama:

We examine the potential for selection bias in voluntarily reported hedge fund performance data. We construct a set of hedge fund returns that have never been reported to a commercial hedge fund database. These returns allow a direct comparison of performance between funds that choose to report to commercial databases and funds that do not. We find that funds that report their performance to commercial databases significantly outperform nonreporting funds. Our results suggest that the voluntarily reported performance in commercial databases suffers from a selection bias that may exaggerate the average skill of the universe of hedge fund managers.

Wednesday, December 12, 2012

By 2060, Hispanics US Population Share Will Double To 1 Out Of 3

Posted by Milton Recht:
From The Wall Street Journal, "Hispanics to Nearly Double Share of U.S. by 2060" by Laura Meckler:
By 2060, Hispanics will account for one in three people living in the United States, nearly double the Hispanic share of the population today, the Census Bureau reported Wednesday, a shift with significant political and cultural implications.

The bureau estimates that by 2043, U.S. whites will lose their majority race status for the first time, with no one race representing more than half of the country. The white population is projected to peak in 2024 at nearly 200 million and then begin to fall, as older whites die at a faster pace than new white babies are born.

By 2060, non-Hispanic white people will represent 43% of the country, down from 63% today.

AARP's Appearance Of A Conflict Of Interest: It's Lobbying Efforts For Seniors Also Protect Its Royalty Revenues: In Whose Best Interests Is It Speaking?

From The Washington Post, "AARP lobbies against Medicare changes that could hurt its bottom line" by Jerry Markon:
AARP, the highly influential lobby for older Americans, is fiercely opposing any Medicare or Social Security cuts and emphasizes that it is fighting for the good of its members. But the proposals for changing Medicare also could affect AARP’s bottom line.

AARP has long played a dual role. It advocates for the interests of seniors, and it makes money allowing its name to be used in selling them private insurance, including coverage known as ­Medigap, which supplements government-provided Medicare. The group gets a 4.95 percent royalty each time someone buys Medigap insurance with the AARP brand. The Medigap insurance policies bring in hundreds of millions of dollars a year and are among an array of AARP-endorsed products that generate slightly more than half of the group’s $1.4 billion in revenue, according to tax records and people familiar with the group’s operations.
By making them pay for more of their health care, policymakers seek to curb unnecessary medical visits and tests. These changes would probably reduce Medigap premiums, similar to how premiums for auto insurance tend to be lower if customers pay higher deductibles.

The smaller Medigap premiums could reduce AARP’s revenue by shrinking its royalties. A report released in September by Sen. Jim DeMint (R-S.C.) estimated that the group could lose $1.8 billion over 10 years. AARP officials said they do not understand how that number was calculated and declined to comment further.

AARP says it opposes the proposed change to Medigap because it would harm older Americans, even though they may pay lower premiums.
More recently, GOP lawmakers have called for raising the eligibility age as part of a deal to avert the fiscal cliff. AARP objects to the idea.

Health-care experts and former AARP executives said raising the eligibility age for Medicare would hit the group’s revenue because Medigap is available only to individuals who qualify for Medicare. Under the proposal, 65- and 66-year-olds would no longer be able to buy Medigap coverage, and AARP’s royalties could fall.

Commercial 3-D Printing Is Mainstream

From Forbes "Inside The World's Biggest Consumer 3D Printing Factory (Video)" by Andy Greenberg:

In October, 3D-printing startup Shapeways opened its New York production facility in Long Island City, Queens, the biggest consumer-focused 3D printing factory in the world. When I visited the site last week–at the height of its holiday frenzy–the startup had already installed nine industrial-sized 3D printers turning digital blueprints into solid physical objects at its fastest rate ever: In 2012 it printed more than a million items, well over its total for all prior years combined since the company launched in 2008. And by the holiday season of 2013 it hopes to have more than 50 printers filling its 25,000 feet of floor space.

High Tax Rates Reduce Worked Hours And GDP Per Capita

From the Wall Street Journal, "Prescott and Ohanian: Taxes Are Much Higher Than You Think" by Edward Prescott and Lee Ohanian:
High tax rates—on both labor income and consumption—reduce the incentive to work by making consumption more expensive relative to leisure, for example. The incentive to produce goods for the market is particularly depressed when tax revenue is returned to households either as government transfers or transfers-in-kind—such as public schooling, police and fire protection, food stamps, and health care—that substitute for private consumption.

In the 1950s, when European tax rates were low, many Western Europeans, including the French and the Germans, worked more hours per capita than did Americans. Over time, tax rates that affect earnings and consumption rose substantially in much of Western Europe. Over the decades, these have accounted for much of the nearly 30% decline in work hours in several European countries—to 1,000 hours per adult per year today from around 1,400 in the 1950s.

Changes in tax rates are also important in accounting for the increase in the number of hours worked in the Netherlands in the late 1980s, following the enactment of lower marginal income-tax rates.

In Japan, the tax rate on earnings and consumption is about the same as it is in the U.S., and the average Japanese worker in 2007 (the last nonrecession year) worked 1,363 hours—or about the same as the 1,336 worked by the average American.

Monday, December 10, 2012

14.5 Percent Decline In EU Private Investment

From McKinsey Global Institute, "Investing in growth: Europe's next challenge" by Charles Roxburgh, Eric Labaye, Fraser Thompson, Tilman Tacke and Duncan Kauffman:
Although the decline in Europe’s level of private investment from 2007 to 2011 is rarely highlighted as a feature of the region’s financial crisis, it was unprecedented. In fact, during that period, private investment in the European Union’s 27 member states (the EU-27) plunged by a combined total of €354 billion....
Source: McKinsey

Private investment is necessary for long term economic growth, employment growth, productivity and wage growth. The lack of private investment in the US is also responsible for the current slow economic growth in the US.

High tax rates along with legal uncertainties for investors, such as created by the Chrysler and GM bankruptcies, deter private investment.

Saturday, December 8, 2012

The Labor Force Continues To Decline

From The Wall Street Journal, "The Case of the Missing Workers" in Opinion:
Yet even as payrolls are rising, albeit slowly, the overall labor participation rate has continued to fall. In November, the share of the available labor force that is working fell to 63.6%, which is down from 65.7% when the recession ended in June 2009.

Mull that one over: Three years into an economic expansion, the labor participation rate has fallen two full percentage points and three times this year (including November) it has reached the lowest level since 1981. This means that about three million more workers were working or looking for work in 2009 than in November. In the last year alone, the number of working age nonworkers grew to 89.2 million from 86.8 million.
Possible causes are early retirement of baby boomers and/or increased government benefits for not working, such as extended unemployment insurance and higher income eligibility levels for food stamps.

Friday, December 7, 2012

US Would Have 15 Million More Jobs If It Had Recovered To Historical Job Trends

From AEIdeas, "The Jobs Gap | Missing: 15 million jobs from the private sector" by James Pethokoukis:
Source: AEIdeas

Not only do we need another 4 million private sector jobs to get back to the pre-Great Recession level, but we need a lot more to get private sector jobs back to the pre-Great Recession trend (as the above chart reflects).

A whole lot more. If the US economy had been generating jobs at its usual pace since 2007 until the present, the US would have roughly 15 million more private sector jobs right now. (Other folks calculate it a bit differently, but basically the range is between 13 million and 16 million.)

Share Of Income Taxes Paid By Top 10 Percent And Bottom 50 Percent: 2001-2010 Chart

From The American, "The Left’s Flip-Flop on the Bush Tax Cuts" by Steve Conover:
Figure 1.
Source: The American Enterprise Institute

Presumably we want the rich to shoulder more of the tax burden. The Clinton-era top rate of 39.6 percent applied to income taxes; the Bush policy lowered this rate to 35 percent. But Figure 1 shows that, even though the top income tax rate went down, the top 10 percent of taxpayers ended up paying a higher share of income taxes after the Bush "tax cuts."
First: is it wise to assume that a feel-good increase in the top tax rate will really extract a higher share of the total taxes from the top earners? If so, by all means, let’s proceed — but we should at least understand that recent history doesn’t necessarily support our case. Second: just what is a “fair share”? The top 10 percent of income tax payers paid 64 percent of the burden when Clinton left office, and they are paying significantly more of the burden today — so if they’re not paying their "fair share" yet, they were even further away from paying their "fair share" under Clinton.

Wednesday, December 5, 2012

Rich Reinvest More: Taxing The Rich Lowers The Amount Of Funds Available For Economic Growth: A Small Decrease In Economic Growth Has a Big Difference On Future US Standard of Living: Our Children And Grandchildren Will Feel The Brunt Of Today's Higher Taxes On The Rich

The rich save and invest a very large portion (40 percent or more) of their income. The middle income and poor spend all or almost all of their income and save very little, if any, of their income.

Economic growth comes from:
  1. investing in new businesses,
  2. funding expansions of profitable and growing businesses, and
  3. investing in new equipment, technology and other processes to increase productivity, reduce the cost of production, and lower the selling price.
A higher capital gains tax, dividend tax and a higher tax rate on the rich, the major investors in US businesses and the US economy, will decrease future private investments, decrease productivity growth, decrease GDP growth, decrease new business start-ups, decrease innovation and new technology, slow the growth in the US standard of living and slow employment growth.

Additionally, higher capital gains and dividend taxes creates a "lock-in effect." Investors delay selling investments with poor growth prospects that have historical gains to avoid paying the capital gains tax. The natural tendency to defer paying capital gains taxes, delays the freeing of funds that could be used to finance new business opportunities. Slowing the pace of new investments will slow the growth of the US economy.

Higher taxes will not eliminate all private investment, but over time, a slight difference in private investment and per capita GDP growth rates will have a big difference on the average US family's standard of living.

If per capita GDP grows by 1 percent, after 70 years, a lifetime, the average family's standard of living, their per capita GDP, will be twice as high as now. If per capita GDP grows by 2 percent instead of 1 percent, after 70 years, the average family's standard of living will be four times as high as now. Three percent would lead to a eight times as high standard of living as now. Of course, if there is no economic growth, as is possible with higher taxes in our current slow growth economy, there will be no improvement in the standard of living.

Taxing the rich today, slows the improvement in the standard of living of our children and grandchildren. Inequality matters. It is necessity for a growing economy. Inequality is a necessity for a country that wants to help its underprivileged because the rich reinvest more and enable the standard of living of everyone in the US to improve.

From Bloomberg, "Warren Buffett Is Wrong About Taxes" by Edward Conard:
Federal Reserve surveys show the top 5 percent of households save and invest 40 percent of their income. Median- income households save very little, whereas the Buffett household probably invests 99 percent of its income.

If we tax, redistribute and consume income that otherwise would have been invested, the investable pool of savings declines.

Government Employees Work Fewer Hours Than Private Sector Employees

From The Wall Street Journal, "Biggs and Richwine: The Underworked Public Employee: The cliché is true: Government workers do tend to take it easier than their private counterparts." by Andrew G Biggs and Jason Richwine:
[O]verstaffing is a serious problem in government, and the best evidence is a simple empirical fact: Government employees don't work as much as private employees. If public-sector employees just worked as many hours as their private counterparts, governments at all levels could save more than $100 billion in annual labor costs
What we found was that during a typical workweek, private-sector employees work about 41.4 hours. Federal workers, by contrast, put in 38.7 hours, and state and local government employees work 38.1 hours. In a calendar year, private-sector employees work the equivalent of 3.8 more 40-hour workweeks than federal employees and 4.7 more weeks than state and local government workers. Put another way, private employees spend around an extra month working each year compared with public employees. If the public sector worked that additional month, governments could theoretically save around $130 billion in annual labor costs without reducing services.
But could public-private differences in work time be due to other occupational differences between the sectors? Large differences in work hours actually persist even when comparing workers with similar jobs and similar skills in each sector.

Saturday, December 1, 2012

California Has Highest Poverty Rate: US Census

From LAWEEKLY Blogs, "California Is America's Poorest State?" By Dennis Romero:
California has a whopping poverty rate of 23.5 percent, meaning that nearly one in every four of us is straight up poor.

The Golden State ranks number one in poverty, then, beating out all comers (Washington, D.C. came close with a 23.2 percent rate); Florida ranked second among states.
Census officials explain, they're taking into account geographic differences, including cost of living. You see, it's a lot more expensive to live in California than just about anywhere else, so even a fulltime job can put you in the poorhouse here.

The Charitable Tax Deduction Is A Disincentive To Community And Social Responsibility

Comment I posted on askblog, "The Tax Deduction for Charitable Contributions" by Arnold Kling:
A problem with charitable deductions is that it is focused on organizational structure and not actions. If I invite and feed a poor person in my house on Thanksgiving, the tax deduction is not available. If I donate food or money to a food bank or church that feeds the same person on Thanksgiving, I get a deduction.

I get a deduction for giving money to the Red Cross, but do not get a deduction for donating blood to the Red Cross.

If I grocery shop or cook a meal for a needy, ill senior in my neighborhood, no deduction, If I donate to a community organization that has volunteers who do the same thing, I get a deduction.

Charitable deductions are a disincentive to community and social responsibility.

When there is suffering, such as the Haiti earthquake, do we need a tax deduction to motivate us to send money, food, and other items? Of course not.

Let's eliminate the charitable deduction. If the government takes too much money from us so that we cannot donate as much as we would like to charities, let's fight for lower taxes and not more deductions.