Tuesday, December 13, 2011

Politics vs Governance

http://www.usatoday.com/news/washington/story/2011-12-13/payroll-tax-cuts/51887278/1

Will be interesting to see how long this can be prolonged until negotiations actually begin to take place... reasonable discourse could really help move this along & benefit all.

Thursday, December 1, 2011

Data Driven Michigan - Tax Collections!

http://bridgemi.com/2011/11/what-was-shadow-tax-cut-in-your-town/#.Tth2bnO-ZWp

This site reveals interesting data on the state of Michigan's tax collection. The impact of drastic changes in tax collection over a two year period has had a massive impact on local government. An example of a struggling local government and inadequate revenue streams is my favorite little city: Ypsilanti. Between 2008-2010 Ypsi Township has experienced a -12.87% decrease in tax collection, while the City of Ypsi has been hit by a -15.72% decrease in collections. These numbers explain recent dramatic reductions in police and fire services, as well as street lighting and other vital public services. Meanwhile, less than half an hour away, Ann Arbor City has only experienced a -3.12% change in tax collections. This is interesting because the cities are not only so close, but also because they are both towns with large public universities. However, the industries and populations of each town are very different . Ann Arbor has much less of an industrial based economy; Ypsi relies more upon service and labor (also historically the auto industry). The change in tax revenue is evidence of the disproportionate hardship experienced in industrial towns as opposed to more diversified, academic based cities, caused by a downturn in the economy. Unfortunately, this results in massive cuts in social programs and government operations in areas that have a far greater need for such services (such as Ypsi).

Monday, November 28, 2011

Paul Krugman is right

http://www.nytimes.com/2011/11/28/opinion/krugman-things-to-tax.html

Krugman provides a compelling point that increasing taxes will make a significant impact on the deficit.
The increase in tax revenue would almost certianly prevent the potential downgrading of the United State's credit rating

http://www.usatoday.com/money/economy/story/2011-11-28/fitch-usa-credit-rating/51451590/1

Friday, November 18, 2011

Millionaires approach Congress for a tax raise

http://money.cnn.com/2011/11/16/news/economy/tax_millionaires/

Would be great if this works and Bush's tax cuts for the wealthy are allowed to expire. Hopefully even more will be accomplished from this.

Tuesday, November 15, 2011

Michigan raising taxes on the poor, cutting benefits

http://www.annarbor.com/news/study-michigan-among-states-raising-poors-taxes/

Cutting EITC from 20% to 6% of federal credit seems pretty significant. Not sure Michigan can afford to be cutting taxes on businesses while more and more people fall out of the margin into poverty.

Wednesday, November 9, 2011

Bill Clinton discusses tax rates

http://www.thedailyshow.com/watch/tue-november-8-2011/bill-clinton-pt--1?xrs=share_copy
Bill Clinton explains his view on tax policy, average tax rates and corporate tax deductions. Interesting points brought up about the cost of externalities as a factor in coal versus solar and alternative energy.

Saturday, November 5, 2011

NYC smoking tax and revenue

http://today.msnbc.msn.com/id/45152017/ns/business-us_business/#.TrV1f1ZZhWo

This is an example of a tax that could be causing people to turn to alternative options such as roll your own cigarettes or out of state purchases to avoid paying the additional cost of the tax. since cigarettes are a vice and a relatively inelastic demand for the product exists, the tax can be pretty high before people will change behaviors (resulting in deadweight loss). The tax could be past a point where revenue is maximized on the laugher curv, this has been acceptable because the change in behavior of quitting smoking is an externality that has positive consequences on health of society. But if the tax is high enough where people are turning to alternatives that still allow them to smoke, but for cheaper, then the tax is not maximizing revenue and is also not resulting in the externality of health benefits as people are abandoning the habit all together.

Sunday, October 16, 2011

" Foreign aid is seldom charity; it is an investment"

http://www.guardian.co.uk/commentisfree/cifamerica/2011/oct/14/aid-us-politics
Excellent points are made in this article discussing the proposal to increase foreign aid spending by 10%. Foreign aid is an easy cut for politicians to support without losing many supporters, as those directly seeing the effects of aid are not voting. This article points out that aid is rarely charity and is often of strategic importance, especially now that China is increasing foreign aid and presence in international development efforts. As resources become more scarce and economic globalisation continues, America would be wise to continue positive foreign relations efforts such as aid spending. Aside from all charitable connotations that follow foreign aid, aid dollars also are used to help secure areas, build and maintain roads, build infrastructure. All of these things contribute to the efficient movement of goods and increase access to potential new resource sites. Furthermore, political advantages of maintaining positive foreign relations allow for better working relationships for the military, and can contribute to global safety. Too often even the most educated Americans will agree to cutting foreign aid, not realizing that it accounts for less than 2% of the budget and is one of the most efficiently spent portions of the budget (in the sense that funds spent in countries in need of aid can often purchase a lot more and reach many more individuals than if the same money were to be spent domestically).

Thursday, October 13, 2011

Cain's Proposed 9-9-9 Tax Policy


http://www.csmonitor.com/USA/Elections/President/2011/0930/Herman-Cain-s-999-plan-long-overdue-tax-reform-or-job-killer/(page)/3


Republican presidential candidate hopeful Herman Cain proposes an example of regressive tax policy that is likely to shift the burden of paying taxes disproportionately to lower income individuals. Those with lower incomes are likely to have less cash assets that are be tax exempt under this plan, another benefit for the wealthy that are likely to save a greater percentage of their wages and therefore avoid taxes on that portion of their assets. This model seems to proposed for the sake of simplicity, to appear transparent to the public. However there does not seem to be much credibility or sound economic support to its ability to address the budget issues America is facing. Hopefully this candidate's proposal will be dismissed by the public for being a regressive and counter productive tax policy.

Monday, October 10, 2011

Problem Set 1 - Question 1

On the state level, education spending varies from under 1% to over 5% of GDP. My initial reaction was that states with a lower percentage must be investing less money in education than states with higher percentages. However, this does not seem accurate, it seems that the states with diverse economies are spending a smaller percent of GDP on education. Hawaii is spending a large percent of the states GDP on education, this is likely because Hawaii has a much less diverse economy, making education a more significant spending category.
Education as a % of GDP in 2010:
New York : 0.94%
Hawaii: 5.27%
DC: 0.84 %

Federal spending on education in 2010 was 1.08% of the GDP, for 2011 education spending will be slightly less significant, accounting for approximately 0.92% of America's GDP. Education spending is projected to decrease in percentage of the Nation's total GDP over the next few years. It is estimated that in 2015 education will account for 0.76% of GDP. This decrease in the significance of education spending at the federal level is interesting, the drop to 0.76% seems quite significant. This number is an estimate that could depend on increased levels and diversity of federal spending, not necessarily a reduction in funding of education programs. Local spending on education varies by state, local spending is generally higher than the state and federal percentages. Most states' local spending on education varies between 3-4%. Hawaii is an exception, spending 0% of GDP on local education, the state's entire education spending must come at the state level instead of any local spending. New York spends 4.48% of GDP on education at the local level, this is much more significant than the 0.94% state level spending. This indicates that states like New York have very localized authority of education budget expenditures. This makes sense due to the different needs of the New York City school system as opposed to more rural communities in the state of New York. Spending on education in New York state is localized below the state level. There is a general trend of states that have lower percentages of the GDP spent on education at the state level having higher percentages spent at the local level, and vice versa. New York and Hawaii are good examples of instances of this trend.

I find it interesting that programs such as defense and welfare account for a significantly higher percentage of the GDP in 2010. With defense spending at the federal level reaching 6.15% of the GDP and welfare at 3.88% of GDP. It seems that if more funds were to be invested in education then welfare may be able to be reduced over the course of a few years, as the educated population increases, the number of individuals reliant upon welfare may decrease over time.

Of the 3.88% of the GDP that welfare accounts for, 1.34% was spent on welfare/unemployment in 2010. This is interesting to me because it is higher than the federal amount spent on education in the same year. Since much of unemployment welfare spending involves job training/workforce development programs, it seems that this money would be better invested in the education system to produce a more prepared workforce from the beginning, and preventing at risk individuals from falling into poverty through early education programs.


Sources:
http://www.usgovernmentspending.com/united_states_total_spending_pie_chart
http://www.usgovernmentspending.com/compare_state_spending_2011p20a
http://www.usgovernmentspending.com/federal_budget_fy11ps12011n_11s1li1n_20#usgs302

Wednesday, September 14, 2011

Time Limits on Welfare - another blow to Detroit's recovery.

http://www.freep.com/article/20110825/NEWS06/108250536/Michigan-Legislature-caps-health-insurance-spending-puts-new-time-limits-welfare

$60 million saved, but how much will this cost the city of Detroit in the long run? Wayne County (Detroit) will be most effected by welfare cap and is least equipped to handle the change. Michigan needs to stop neglecting the urban poor and begin investing in urban centers to drive economic growth.

The cap on welfare and limitations on public employee health insurance will be felt severely in already struggling urban areas such as Detroit and Flint, where the public sector is overwhelmingly the largest source of employment. Rural and suburban areas that are not as reliant on the public sector for employment and do not have the same concentrated poverty affected communities relying on welfare will not suffer to the same degree as the urban centers, causing Detroit to continue falling behind the rest of the state & country.

Soaring Poverty Casts Spotlight on ‘Lost Decade’ -NY Times Article

http://www.nytimes.com/2011/09/14/us/14census.html?pagewanted=1&_r=2&hp

The figures stated in this article don't surprise me, but they are truly alarming indicators of the need for urgent reform. It is possible as the article suggests that these numbers will press political action on the issue of poverty allowing policy measures such as the jobs act to pass. However, it is likely that marginalized individuals and those who fell out of the margin, deeper into poverty, will feel further disenfranchised from the political/governing system and doubt any capability of government intervention on poverty. This is unfortunate because as the data in this article shows, more people are in poverty now than in the past 52 years, and that conditions of the middle class are showing signs of distress not seen since 1996. This information indicates that the decline of the middle class, the stagnated wage levels and rising cases of poverty are results of years of failed social policies and misdirected spending (including poorly designed tax structures) and not a simple result of the stimulus spending or other recent policy measures.
In the current political climate, petty politics are preventing the proper governance needed for effective economic investment to alleviate poverty.