Tag: "tax"

The Laffer Curve, Again

President Obama and others are demanding higher taxes on the “rich,” and two recent academic papers that have gotten a lot of attention claim to show there will be no ill effects if we do.

The first paper, by Peter Diamond of MIT and Emmanuel Saez of the University of California, Berkeley, appeared in the Journal of Economic Perspectives last August. The second , by Mr. Saez, along with Thomas Piketty of the Paris School of Economics and Stefanie Stantcheva of MIT, was published by the National Bureau of Economic Research three months later. Both suggested that federal tax revenues would not decline even if the rate on the top 1% of earners were raised to 73%-83%.

The authors arrive at their conclusion [by ignoring] …the empirical literature on the … elasticity (responsiveness) of taxable income to changes in marginal tax rates. … A midpoint between the estimates would be an elasticity for gross income of 1.3 for the top 1%. This implies that the revenue-maximizing top marginal rate would be 33.9% for all taxes, and below 27% for the federal income tax.

More from Alan Reynolds in today’s Wall Street Journal.

May 08, 2012 | 5 comments | by

The Disability Ponzi Scheme

[D]isability insurance payments, which account for almost $1 out of every $5 spent by Social Security, are growing out of control….

The trustees reported Monday that the government made $128.9 billion in insurance payments to 10.6 million disabled workers and their family members last year, 25 percent more than it received from payroll taxes.

More on disability insurance by Eduardo Porter in the NYT.

May 04, 2012 | 4 comments | by

Trickle-Down Taxation

The Alternative Minimum Tax was imposed in 1969 because 115 households investing in municipal bonds reportedly paid little or no federal income tax… On Jan. 1, 2013, it is set to hit 27 million more—raising an estimated $120 billion, according to the Obama 2013 budget. In 40 years, a tax on 115 households will have grown to threaten 31 million.

The personal income tax… began in 1913 with a top rate of 7% and hit only those with a taxable income of $500,000 or more. (According to the Bureau of Labor Statistics inflation calculator, that would be $11.5 million now.) Today, roughly half of American families pay the personal income tax.

More on this taxation controversy in The Wall Street Journal.

May 03, 2012 | 3 comments | by

ObamaCare Health Insurance Tax applies to Medicaid!

36 states contract with private managed-care companies to run their Medicaid programs. These Medicaid programs will be subject to the ObamaCare premium tax. A study from Milliman, the actuarial and consulting firm, estimates that the tax will increase Medicaid premiums by 1.5 to 1.6 percent nationwide, which in turn will cost state and federal governments between $36.5 and $41.9 billion over ten years. (The tax will raise an additional $100 billion or so from the private sector.)

See entire article by Avik Roy in the Forbes.

May 01, 2012 | 4 comments | by

For the bottom 1%: Prison Release or Factories Behind Bars

David Henderson’s post:

In our prisons today are 2,200,000 people… and their wages are typically about 23 cents an hour. They are, essentially, the bottom 1%. Many of them are there for violent crimes, theft, fraud, and other such things. But hundreds of thousands of them are there for buying, selling, or producing illegal drugs. The drug war has put them there. And we taxpayers are paying $30,000 a year and more to keep them there….

We hear the occupy people advocate taxing the top 1% more. I’ve got a better idea: let’s tax the top 1% less – they’re already paying a disproportionately high share of taxes – and let a few hundred thousand of the bottom 1% percent out of prison and out of their grinding poverty in prison.

And my comment:

And for those who are kept in prison, let’s allow factories behind bars, so that they earn more than 23 cents an hour. Here is the principle: just because a person is imprisoned does not mean he should lose his right to work. In fact, prisoners should be able to work for any employer at any task, consistent with the prison’s need for order and security.

Apr 30, 2012 | 7 comments | by

Obama’s High Spending Levels, and Other Links

Maintaining the president’s higher spending levels will require raising taxes for all Americans, including an 11% increase on those earning less than $200,000.

Violence “ages” children’s DNA, the equivalent of seven to 10 years of premature aging.

Woman consumed two gallons of Coca-Cola per day. She’s dead at age 30.

Woman tries to live on sunlight; dies.

Apr 27, 2012 | 5 comments | by

Making Flexible Spending Accounts Better

This is from my post at the Health Affairs Blog. More on this next week.

There is something rather simple the Obama administration could do that would have a very large impact on health care spending. Apparently, this is something that can be done administratively, without Congressional action. The simple step: Allow deposits to Flexible Spending Accounts  (FSAs) to roll over at year end and grow tax-free.

Currently, there are about 25 million people with an HSA or HRA account (roughly evenly split) and another 35 million people with FSAs. That means that over half the people with a health account have an incentive to spend rather than to save. If FSAs could roll over and become use-it-or-save-it accounts:

  • There would be a huge immediate impact on the incentives of the 35 million current account holders; instead of end-of-year wasteful spending, they would be tempted to save for more valuable future health care spending.
  • Employers across the country would consider integrating these accounts into their health plans, making employer contributions to them and experimenting with new health plan designs.

Moreover, employers and their employees would have a vehicle much better than any option currently available to them to control health care spending:

  • FSAs could be combined with high deductibles, allowing employees to directly control, say, the first $2,500 of spending without all of the pointless restrictions that hamper the usefulness of HSAs.
  • FSAs could be created to allow employees control of whole areas of spending, say, all preventive care and all diagnostic tests — services for which individual discretion is both possible and desirable.
  • FSAs could be created for the chronically ill  — allowing, say, diabetics or asthmatics to manage their own health care dollars, much as home-bound, disabled Medicaid patients manage their own budgets in the Cash and Counseling programs.
  • FSAs could be combined with value-based purchasing insurance plans — where the insurer only pays, say, for certain drugs, doctors and hospitals, but allows patients to add money out-of-pocket and make other choices — thus allowing the development of a real market for more expensive health care services.

Apr 24, 2012 | 4 comments | by

CBO: President’s Budget Will Reduce GDP

By CBO’s estimate, under the President’s proposals, the nation’s real output during the 2013–2017 period would be, on average, between 0.2 percent lower than the amount under current law and 1.4 percent higher than under current law. For the 2018–2022 period, CBO estimates that the President’s proposals would reduce real output, on average, by between 0.5 percent and 2.2 percent compared with what would occur under current law.

Full Greg Mankiw post on the President’s budgetary proposals’ effect on the nation’s real output worth reading.

Apr 24, 2012 | 3 comments | by

How Big is the Federal Government?

The ten largest tax expenditures in terms of 2012–16 budgetary costs (revenue losses plus outlays for refundable credits) identified by OMB (2011) will cost $4 trillion between 2012 and 2016—about 65 percent of the cost of all tax expenditures over that period (table 1). We classify six of them as spending substitutes: the exclusion of employer contributions for medical insurance and medical care, deductibility of mortgage interest on owner-occupied homes, exclusion of net imputed rental income on owner-occupied homes, deductibility of nonbusiness state and local taxes other than on owner-occupied homes, the earned income tax credit, and deductibility of charitable contributions other than education and health….

When we add in about $230 billion in user charges, finally, effective federal spending rises to 25.4 percent of GDP. By this metric, federal spending was more than one-quarter of economic activity in 2007, almost 30 percent more than officially reported.

From a Tax Policy Center paper by Donald Marron and Eric Toder.  HT: Ezra Klein.

Apr 23, 2012 | 5 comments | by

Obama Official: We’re Double-Counting

About 65 percent of the cost of the Obama health care law is supposed to be met by Medicare expense reductions and tax increases totaling roughly $1 trillion over 10 years. The deficiency with this plan is that it amounts to double-counting, using urgently needed Medicare economies to finance the new law…The government’s accounting practice — counting $748 billion of cost savings and $259 billion of revenue increases toward both Medicare and the cost of the Obama plan — is particularly troubling…The truth is that the law will either be fully paid for or it will begin to address the Medicare problem — but not both.

This is Steven Rattner, former counselor to the Treasury secretary in the Obama administration, writing in the New York Times.

Apr 17, 2012 | 4 comments | by
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