Category Archives: Economy

Tax Cuts vs. Tax Reform

The Republicans have set themselves the goal of passing tax legislation by the end of the year.  They took a major step by passing a budget resolution this past week which authorized tax legislation as long as that legislation had a net cost of less than 1.5 TRILLION over the next decade.  As such, as long as the CBO scores any legislation as complying with that cap, it is exempt from a filibuster.

That cap reflects a significant part of the current debate inside the Republican party — do they want a tax cut (reducing the overall tax burden) or tax reform (a revenue-neutral rewrite of the tax law).  This debate will be significant because the Republican approach is that those who make the most money pay the most taxes and therefore should get the most relief.  Thus, their proposals will be very top heavy on who gets the relief and the deductions most at risk will be those that benefit the middle class.

First, some Taxes 101 to set the background.  Both at the corporate level and at the personal level, calculating taxes begins with defining income.  Then there are certain authorized deductions from income that lead to a smaller income that qualifies as “taxable income.”  There are then income brackets in which you pay x% for the first $Y amount of income, than pay a slightly higher rate on the additional income above that amount (and just that additional income).  (E.g., If the top tax bracket is 40% and kicks it at $500,000, the taxpayer is only paying 40% on the income above $500,000 — so on an income of $700,000 that 40% only applies to the last $200,000 of income and the first $500,000 is taxed at a lower rate. )  After taxes are computed, the taxes can be reduced by tax credits. Continue Reading...

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Deciphering the Federal Budget

Tonight 45 will speak about the budget plan his folks leaked out yesterday.  He’ll likely speak about other things, also, but that budget is all over the news and he’ll capitalize on that.  However, it’s rare that Congress actually passes a budget (the last time was in 2015, and that was the first time in six years) and rarer still that the presidential framework made it through the process.

So, let’s take a look at what was proposed, where it falls apart, and then what the process actually involves. Go get a cup of coffee, you’re going to need it.

First, the good news. Appropriations come from Congress, not from the Executive branch.  Per the Origination clause in the Constitution, all appropriations bills must start in the House, although the Senate may concur and/or offer amendments. In real life, normally this leads to negotiations between the Chambers prior to anything being enacted. Thus, nothing is happening quickly. That means there is time to lobby your reps for things that matter to you. Continue Reading...

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What Now?

As it all sinks in….at the polls yesterday, I heard from Democrats who were voting for Trump for a variety of reasons. I have looked at the preliminary exit poll data and the turnout numbers and think I have an idea of how this happened. The final cross tabs might change things but bottom line — people who NEVER vote came out in droves. And what they voted against was the same thing that gave Britain Brexit — their hatred of modernity.  So what do we do? While we organize (and re-read James Madison’s Federalist Paper #10) we wait somewhat quietly to see if in his first hundred days he DOES:

  • deport massive numbers of undocumented human beings,
  • ban Muslims,
  • repeal the Affordable Care Act,
  • add a Supreme who will vote to keep Citizen’s United, repeal gay marriage, ban all abortions even to save the life of the mother
  • cut taxes for only the weathly
  • leave NAFTA
  • et, al.

Because if he does, THEN we know the plan.

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Labor Day: Trade and Immigration

minersOne of the basic concepts of economics is that the production of goods and services are a product of both capital (equipment) and labor (the work to turn raw material into finished goods or to provide the services).  Some industries are what economists call “capital intensive” — meaning that relatively speaking it takes a lot of capital to purchase the equipment needed to operate (think the automobile industry).  A capital intensive industry is difficult for new competitors to enter.    Other industries are labor intensive — meaning that it takes little to capital to purchase the basic equipment and labor is the main input (think almost any profession).  The only restrictions on entering these industries is any licensing requirement for workers.   The degree to which an industry is capital intense (and how much skill the labor requires) in turn has an impact on the degree to which it is vulnerable to foreign trade and immigration poses a threat to existing workers.

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Messaging Economics: How to Win, How to Lose

Economy

(L – R) Felicia Wong, Joseph Stiglitz, Rana Foroohar, Stan Greenberg

While at the DNC, I attended an event hosted by the Roosevelt Institute, As they say on their site: “Inspired by the legacy of Franklin and Eleanor, the Roosevelt Institute reimagines America as it should be: a place where hard work is rewarded, everyone participates, and everyone enjoys a fair share of our collective prosperity. We believe that when the rules work against this vision, it’s our responsibility to recreate them.”

The panel discussion was between Joseph Stigliz and Stan Greenberg, moderated by Rana Foroohar. You can see their bios here.  The primary part of the discussion centered on looking at two economic messages put forth by Hillary Clinton and how the ideas polled relative to election outcomes. The two messages were not all that different, they just took two different approaches. Interestingly, one will win the election, and the other will lose. If one is implemented, it could potentially change the course of American economics.

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The Soda Tax

If you live in the Philadelphia media market, you’ve heard or seen the ads. Pretty ubiquitous. The ads talk about a “grocery tax”, which is not actually correct, in an effort to drum up support against the proposed Philadelphia soda tax of 3 cents per ounce. All sugar sweetened beverages would be assessed the tax if they are bought in the city of Philadelphia. A few numbers:

  • Liter bottle of soda – costs perhaps 99 cents on sale. The tax would add $ 1.01.
  • 6-pack of 12 ounce cans – tax of $2.16 (I have no idea what the raw product costs)

It’s a lot of money if you live on limited funds. The idea is health. From that slippery slope of ever increasing cigarette taxes, to alcohol taxes…the “sin” taxes. They are regressive taxes as they hurt the poor the most as a percentage of income. And yeah, sugar is bad for you. BUT…

Personally, I’m not a soda drinker, but when I throw parties, I buy several liter bottles of soda. From my perspective, if the cost doubled, it wouldn’t be that big a deal because the soda part of the full cost of the food and beverages is minimal. But there are a lot of people who like a soda. Perhaps they prefer it to an adult beverage, or want to use it as a mixer — that one drink to celebrate the end of the work week when they worked two jobs, have one day off and it all starts again. Likely, those people don’t have cars to drive out to the ‘burbs to spend less, and don’t have the time even if they had the car. If they’re making minimum wage (which is nowhere near $15/hour but I digress) that extra buck is a lot of money proportionally to their income. Continue Reading...

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Walmart is Closing 154 Stores. Here’s Why You Care

walmartIf you’re like me, you don’t set foot in Walmart. Ever. But I’m lucky. Within 6 miles of my house are two Wegman’s, one Trader Joe’s, one Whole Foods, numerous restaurants, and the largest mall in America. (See end note about that mall.) Oh yeah, and a Walmart to which I never go.

But the Walmarts that are closing ran the single grocery store out of town when they opened. Now tens of thousands of people will have no grocery store within 25 miles, or more.

It’s another blow to rural and small town America. It is indirectly related to the standoff in Oregon: the world is changing, and those who cling tenaciously to ranching and farming are left with fewer and fewer resources. Being unable to buy some fresh produce or pick-up a needed prescription makes life hard indeed. Continue Reading...

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