More bad news for most of us this week, with a federal judge ruling that Detroit can go into bankruptcy and cut pensions, Illinois legislators voting on a bill to cut pensions there, another judge ruling that employers can force employees to arbitrate and not have an option of class action suits.
I have a deeply ambivalent relationship to public employee unions. While I believe very strongly in the right to form a union and collectively bargain, public employee unions have much better luck gaming the system by making contributions to the politicians who then determine how much money to give the union workers. In the private sector, an independent labor union can't game the system, at least not this way. In the private sector too often the interests of my representative are more aligned with the unions than the public purse.
But that said, the attack on benefits that were won in negotiations reflects a distressing tendency in public life these days, which is to solve your problems by making everyone else as miserable as you are. Your employer's dumped your pension in favor of some 401-K? Well, you can't get your 401-K back but you can cheer on as someone else's pension gets dumped too! Yay! Win!
Sorry, it's not.
If you think it is, you might enjoy reading this Rolling Stone article about how we're "saving" pensions by giving money to Wall Street.
So in Detroit, a lot of not very rich people, many of whom are still living in Detroit, are going to see their retirement income cut, which will reduce what they can spend, which will reduce the economy in Detroit, which is going to save Detroit. For the most part, these people aren't the people who made any of the decisions on what contract terms to agree to, on how to fund pensions, they're innocent bystanders who are going to be hurt.
While states and localities across the country are cutting back pensions left and right, they are engaged in madcap competitions to give Boeing hundreds of millions of dollars in tax breaks and other incentives to encourage them to locate an assembly line for a new version of the 777 in their state. Boeing makes billions of dollars, and it wasn't enough to have the State of Washington give billions of dollars in tax breaks if the unions for the skilled workers who build the planes didn't agree to share in the "sacrifice" of these billions of dollars in profits and tax breaks for the company by agreeing to givebacks.
Hunger Games: Catching Fire has taken in hundreds of millions of dollars in global box office and will make huge profits for Lionsgate. It filmed in Georgia to take advantage of tax breaks, and again, states and localities across the country are engaged in this race to give huge film companies that are part of major media conglomerates tax breaks to entice productions from one state to another.
Can people see the problem here? Even as we silently cheer or to too little to protest attacks on the working men and women of this country, we also cheer when our states take the money they're saving and give it to very rich companies in pursuit of a zero sum game of taking business from one state or locality to another.
I'm not even sure, at the end of the day, that these kinds of tax breaks do very much for the states and localities that give them. Oh, they can find statistics that say that the film tax breaks are worth their weight in gold, but you know what they say about statistics. Against that, there's this icky feeling that the only way you can get business is to bribe it to come your way. There's this icky feeling, or at least there should be, in supporting companies that don't really support you, that feel they're entitled to take government money, screw workers as much as they can, in pursuit of the almighty buck.
And as with too many policies supported by corporations, it's kind of short-sighted. Take Walmart. Walmart is kind of getting creamed by a lot of government policies. Food stamp cuts take money out of the hands of Walmart shoppers, and thus out of the hands of Walmart. If Walmart paid its employees more, a lot of money would come right back into Walmart stores. If this were to happen as a result of an increase in the minimum wage that would force Walmart competitors to pay more as well, it wouldn't disadvantage Walmart, because Target and even Amazon which still needs warehouse workers would face the same labor cost pressures as Walmart. But Walmart does everything it can to keep downtrodden employees downtrodden. It threatens to pick up its toys if cities talk about raising their minimum wage or passing living wage laws (some of those do target Walmart, but if Walmart would advocate for a global increase in the minimum wage it would face less targeted living wage legislation). Even as it downgrades its earnings forecast because people don't have money to spend, it won't help give people more spending money.
For a competing perspective, enjoy this article somebody tweeted out to us several weeks ago from investors.com, which rails against how we are becoming dependent on government largesse. 108M+ people on means-tested government welfare programs, 101M+ people with full-time jobs.
It ignores a few basic facts. Minimum wage is under $8. 8x35x52 -- that's under $15K for a full-time employee. When I grew up and looked behind the counter at Burger King, I saw a lot of people my age. That was over 30 years ago. Now, the people at Burger King and Walmart aren't teenagers working for gas money. They're people trying to support a family on $15K a year, unless they have two jobs or have two incomes or something like that. How can you possibly do that? How are you going to help these people by cutting food stamps? And did you know that over half of personal bankruptcies are caused by medical expenses? Most jobs that pay $8 an hour don't, pre Obama-care, come with good health insurance. You can't buy your own when you're making $15K a year. I'm lucky; I make enough money that I'm now seeing my take-home take a four-figure annual drop because of Affordable Care Act taxes. Unlike most people, I don't think my income benefits by making life worse for other people. My income benefits when people have money to buy books, when they have money to go to college and get educated because educated people buy more books, when they have time to spend with their kids talking to them and working with them on homework and reading too them rather than rushing from one bad job to another because a single minimum wage job isn't enough, not able to afford good child care and hoping the car doesn't break down and that everyone in the family stays super healthy.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Thursday, December 5, 2013
Friday, October 5, 2012
Redistribution
I didn't watch the debate because I was watching Indians, but if I understand this part of it correctly...
Mitt Romney said he doesn't have plans for a $5 Trillion tax cut because he intends to find that amount of money elsewhere in the budget so it doesn't raise the deficit, and this cannot be considered a tax cut.
He intends to have the government take five trillion dollars from some people to give five trillion dollars to other people
Isn't that redistribution??
Yes, Redistribution
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Now, from a Republicsn standpoint maybe not because money people don't pay in taxes is always your money that you get to keep so how can it be redistribution to just let you keep your five trillion dollars.
But, if you are one of the people who will lose a tax loophole and pay more of your money in taxes than you are now, won't that look like the government took Five Trillion to redistribute it elsewhere?
If you benefit from a government program whether it is having a job with Amtrak or on Sesame Street that will no longer exist, won't it look like redistribution.
If Governor Romeny's plan isn't an outright tax cut, it has to be a Five Trillion Dollar redistribution. Wouldn't you like him to let you know, now, if some of that five trillion he intends to redistribute is yours?
Mitt Romney said he doesn't have plans for a $5 Trillion tax cut because he intends to find that amount of money elsewhere in the budget so it doesn't raise the deficit, and this cannot be considered a tax cut.
He intends to have the government take five trillion dollars from some people to give five trillion dollars to other people
Isn't that redistribution??
Yes, Redistribution
R
E
D
I
S
T
R
I
B
U
T
I
O
N
Now, from a Republicsn standpoint maybe not because money people don't pay in taxes is always your money that you get to keep so how can it be redistribution to just let you keep your five trillion dollars.
But, if you are one of the people who will lose a tax loophole and pay more of your money in taxes than you are now, won't that look like the government took Five Trillion to redistribute it elsewhere?
If you benefit from a government program whether it is having a job with Amtrak or on Sesame Street that will no longer exist, won't it look like redistribution.
If Governor Romeny's plan isn't an outright tax cut, it has to be a Five Trillion Dollar redistribution. Wouldn't you like him to let you know, now, if some of that five trillion he intends to redistribute is yours?
Sunday, November 6, 2011
Flat Tax
So here's the thing with a flat tax, it doesn't actually make filing taxes all that much simpler.
Most people already have a pretty simply tax situation. They earn money from their job, which gets reported to the IRS. In fact, for a lot of people, your state and the IRS could just send you a bill based on the information that's given to them on your W2 and 1099 forms. Some states have even tried doing this. Of course, companies like H&R Block spend considerable lobbying dollars to stop this from happening broadly.
The complexity in the tax code, lots of it is someplace where it can't be so easily eliminated, which is in defining what income actually is for businesses or for people with more investments and wrinkles in their earning picture.
I have a relatively simple business to keep track of, I take money, I send most of it on to clients, but then there are still a lot of rules and will always be a lot of rules for just what amount of the rest of it is an expense. As an example, the government has decided that entertainment costs are only 50% deductible so that there is a disincentive to business owners to have the government subsidizing those famous three martinis at a three martini lunch. Health insurance is a fully deductible business expense, some people think it shouldn't be. If you spend a gazillion dollars buying assets that will last a gazillion years we have depreciation schedules and exceptions thereto. There isn't a great way for flat tax to just do away with all of these rules that we use to determine what the word "profit" means. For a lot of my clients, who are self-employed writers, a flat tax isn't going to be an easier tax, there will still need to be some form of Schedule C, you'll still need to save those receipts, deal with a home office deduction, maybe. And very few people who benefit from various of those things like a home office deduction will be eager to see those things eliminated in the interest of simplicity. Even if you might end up with less tax being paid in the end, all you'll see is that your little special deduction is going away, and you'll be opposed.
The first Sookie Stackhouse novel DEAD UNTIL DARK was published in 2001. The cover price was, I think $5.99 or $6.50. It's currently $7.99. Let us say hypothetically that Barnes & Noble ordered 2000 copies of the book in 2001, and that over the ten years since B&N has never had fewer than 500 copies sittling on its shelf. So which 500 copies are sitting on the shelf? Copies that were ordered in 2001 at $6.50, or copies ordered in 2011 at $7.99?
That's a complication in the tax code. If B&N can say for tax purposes that it has always had 500 copies purchased ten years ago for $6.50 sitting on its shelves, which is known as "last-in first-out" or "lifo" inventory, it gets to reduce its profit for tax purposes, because its cost for the books that are selling is based on a $7.99 price instead of a $6.50 price. That's approximately $.75 for each of those 500 books, or around $350, that B&N has made in the real world (there are not many or any first printing copies of Dead Until Dark sitting on bookstore shelves) that it hasn't made for tax purposes.
Tax complexity! Can you use "lifo," or do you use "fifo" where the goods you sell are always the goods purchased or made first, or do you use "dollar cost averaging" where you use the average price?
There are all kinds of decisions that businesses have to make that are like this, where you can do or say one thing or another and end up with a different tax bill.
The $375 profit B&N might be deferring on Dead Until Dark doesn't seem like much, but pretend you are an oil company with big tank farms that can hold huge amounts of gas, and you can say those are filled with old gas that you purchased for $23 a barrel or new gas that you purchased for $86 a barrel. I have no idea how big a huge gas tank in a tank farm is, but if you're talking 100,000 barrels with a $63 price difference, that's an awful lot of swing to your taxable income.
This is where the loopholes lurk in the tax code, where the unfairness comes in, not in the fact that it's too darned complicated to figure out how much tax you owe because you're paying 15% on the first few thousand dollars in income and 28% on the last few thousand.
Favor a flat tax, don't favor it, just don't do either because you think it's going to make the tax system simpler. A simpler tax system wouldn't come about from a flat tax, it would come about from the wholesale closing of tax loopholes. And if you like your mortgage interest deduction or college tuition credit, are you any more eager to give up that credit, than Exxon would be to give up the ability to let it decide that all the gas sitting in all its gas tanks today is gas it obtained for $23 a barrel at some point in the past?
Most people already have a pretty simply tax situation. They earn money from their job, which gets reported to the IRS. In fact, for a lot of people, your state and the IRS could just send you a bill based on the information that's given to them on your W2 and 1099 forms. Some states have even tried doing this. Of course, companies like H&R Block spend considerable lobbying dollars to stop this from happening broadly.
The complexity in the tax code, lots of it is someplace where it can't be so easily eliminated, which is in defining what income actually is for businesses or for people with more investments and wrinkles in their earning picture.
I have a relatively simple business to keep track of, I take money, I send most of it on to clients, but then there are still a lot of rules and will always be a lot of rules for just what amount of the rest of it is an expense. As an example, the government has decided that entertainment costs are only 50% deductible so that there is a disincentive to business owners to have the government subsidizing those famous three martinis at a three martini lunch. Health insurance is a fully deductible business expense, some people think it shouldn't be. If you spend a gazillion dollars buying assets that will last a gazillion years we have depreciation schedules and exceptions thereto. There isn't a great way for flat tax to just do away with all of these rules that we use to determine what the word "profit" means. For a lot of my clients, who are self-employed writers, a flat tax isn't going to be an easier tax, there will still need to be some form of Schedule C, you'll still need to save those receipts, deal with a home office deduction, maybe. And very few people who benefit from various of those things like a home office deduction will be eager to see those things eliminated in the interest of simplicity. Even if you might end up with less tax being paid in the end, all you'll see is that your little special deduction is going away, and you'll be opposed.
The first Sookie Stackhouse novel DEAD UNTIL DARK was published in 2001. The cover price was, I think $5.99 or $6.50. It's currently $7.99. Let us say hypothetically that Barnes & Noble ordered 2000 copies of the book in 2001, and that over the ten years since B&N has never had fewer than 500 copies sittling on its shelf. So which 500 copies are sitting on the shelf? Copies that were ordered in 2001 at $6.50, or copies ordered in 2011 at $7.99?
That's a complication in the tax code. If B&N can say for tax purposes that it has always had 500 copies purchased ten years ago for $6.50 sitting on its shelves, which is known as "last-in first-out" or "lifo" inventory, it gets to reduce its profit for tax purposes, because its cost for the books that are selling is based on a $7.99 price instead of a $6.50 price. That's approximately $.75 for each of those 500 books, or around $350, that B&N has made in the real world (there are not many or any first printing copies of Dead Until Dark sitting on bookstore shelves) that it hasn't made for tax purposes.
Tax complexity! Can you use "lifo," or do you use "fifo" where the goods you sell are always the goods purchased or made first, or do you use "dollar cost averaging" where you use the average price?
There are all kinds of decisions that businesses have to make that are like this, where you can do or say one thing or another and end up with a different tax bill.
The $375 profit B&N might be deferring on Dead Until Dark doesn't seem like much, but pretend you are an oil company with big tank farms that can hold huge amounts of gas, and you can say those are filled with old gas that you purchased for $23 a barrel or new gas that you purchased for $86 a barrel. I have no idea how big a huge gas tank in a tank farm is, but if you're talking 100,000 barrels with a $63 price difference, that's an awful lot of swing to your taxable income.
This is where the loopholes lurk in the tax code, where the unfairness comes in, not in the fact that it's too darned complicated to figure out how much tax you owe because you're paying 15% on the first few thousand dollars in income and 28% on the last few thousand.
Favor a flat tax, don't favor it, just don't do either because you think it's going to make the tax system simpler. A simpler tax system wouldn't come about from a flat tax, it would come about from the wholesale closing of tax loopholes. And if you like your mortgage interest deduction or college tuition credit, are you any more eager to give up that credit, than Exxon would be to give up the ability to let it decide that all the gas sitting in all its gas tanks today is gas it obtained for $23 a barrel at some point in the past?
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