Tuesday, November 24, 2009

Are progressive income taxes a stable source of revenue?

RealClearMarkets - State Taxes Produce Wild Revenue Swings
More surprising, but ultimately logical, are the results from states with flat income taxes. The usual expectation is that flat taxes will produce more stable revenues than progressive income taxes that rely disproportionately on high earners. This is because high income people tend to have volatile incomes that move sharply with overall economic performance.

However, five of the seven states with flat taxes saw income tax revenue drops above the 11.4% national average. While Pennsylvania and Utah outperformed most states with drops under 9%, Indiana's flat tax saw a 20.3% drop in collections, and the four others ranged from 11.7% to 14.3%. Meanwhile, New York and New Jersey (which have graduated income taxes that rely heavily on high-income taxpayers) saw revenue drops under 9%.

Progressives will point to these results as evidence that graduated taxes do not promote revenue instability. They are wrong. What has happened is that states with flat income taxes have resisted political impulses to raise income taxes. Meanwhile, states with sharply graduated taxes have tended to impose (often sharp) income tax hikes for the current fiscal year. If states like New York and New Jersey hadn't raised taxes, their revenue performance would be among the worst in the country.

No state with a flat tax raised its income tax this year. However, eight states with graduated income taxes raised rates: Connecticut, California, Delaware, Hawaii, New Jersey, New York, Oregon and Wisconsin. Most of these personal income tax increases were in the form of new or increased "Millionaire's Taxes", which contrary to the name may be imposed on incomes as low as $125,000. The sole exception is California, which raised tax rates across the board including in its millionaire bracket.

Thursday, November 19, 2009

In New Hampshire: 'A real win for the principle of fair and open competition '

Bid process marked by PLA stopped:
MANCHESTER -- Dick Anagnost went to bed Thursday night believing the nine years he invested in bringing a new Job Corps Center to the city was coming close to fruition.

He woke up yesterday not so sure.

That's when he learned the U.S. Department of Labor canceled the bid process for the 160,000-square-foot center planned off Dunbarton Road. The estimated cost of the project is $35 million.

"It'll be a terrible blow if this thing goes away," said Anagnost, chairman of the New Hampshire Job Corps Task Force.

Anagnost said he spent most of yesterday trying to find out when or if the bid process would restart. He also said he called on the help of the state's four legislators in Washington, D.C.

The Labor Department's decision came a day short of one month after North Branch Construction of Concord filed a protest with the Government Accountability Office. North Branch decried the Labor Department's requirement for a Project Labor Agreement (PLA) that the contractor contends mandates following union rules and paying into union benefit funds as a condition for bidding on the project.

The Associated Builders and Contractors, which represents 25,000 merit shop construction and construction-related firms that employ more than 2 million people, is supporting North Branch in its legal battle.

"This is a real win for the principle of fair and open competition in government procurement," said North Branch attorney Maurice Baskin of Venable LLC. "It is no coincidence that the Department of Labor canceled its unlawful PLA mandate the day before the agency was required to file a response to our bid protest. We demonstrated that there was no justification for imposing a PLA on this project and that the PLA mandate violated the Competition in Contracting Act and other long-standing federal procurement requirements."

North Branch filed the protest contending that most contractors in the state are non-union and the PLA would prevent them from working on the project.

"We are not anti-union," Ken Holmes, president of North Branch Construction in Concord, said in a statement at the time the protest was filed. "We work with union and non-union contractors, but the preponderance of contractors in New Hampshire are non-union. This knocks all of them out of the ball game.
The Beacon Hill Institute has published several extensive studies undermining the claims that Project Labor Agreements save taxpayers money. The latest can be found here.

Latest economic news in Massachusetts

The unemployment rate dips slightly to 8.9%

Holiday sales are expected to fall 3%.

Even Hollywood thinks state tax credits for movie-makers or subsidies for mega-stars are a bit dubious.

And of course the latest horror stimulus horror story; missing the mark. Globe: “People are scratching their heads because some of this doesn’t make sense. Studying pollen during the Viking Age isn’t going to create a lot of jobs and help the economy."

Wednesday, November 18, 2009

The dead hand on your television

It, of course, was only a matter of time. APNEWS: California targets TVs to lower electricity demand.
SACRAMENTO, Calif. (AP) - The most power-hungry television sets could soon be banned from store shelves in California as state energy regulators on Wednesday consider a first-in-the nation mandate intended to lower electricity demand.

If adopted, the regulations will require televisions sold in California to be more energy efficient beginning in 2011. The requirement would be tougher in 2013, with only one-quarter of the TVs on the market currently meeting that standard.

Energy commissioners say TVs account for about 10 percent of a home's electricity use. The concern is that the energy draw will rise by as much as 8 percent a year as consumers buy larger televisions, add more to their homes and watch them longer.

Some manufacturers say implementing a power standard will cripple innovation, limit consumer choice and harm California retailers because consumers could simply buy TVs out of state or order them online.

The standards would apply to all TVs up to 58 inches, allowing increasing power use for larger TVs.

For example, all new 42-inch television sets must use less than 183 watts by 2011 and less than 116 watts by 2013. That's considerably more efficient than flat-screen TVs placed on the market in recent years.

A 42-inch Hitachi plasma TV sold in 2007 uses 313 watts while a 42-inch Sharp Liquid-crystal display, or LCD, TV draws 232 watts, according to Energy Commission research. LCDs now account for about 90 percent of the 4 million TVs sold in California annually.

Industry representatives have said the standards would force manufacturers to make televisions that have poorer picture quality and fewer features than those sold elsewhere in the U.S.

California has previously led the nation in setting efficiency requirements for dishwashers, washing machines and other household appliances as a way to address the state's growing electricity demand.
So goes California, so goes the nation.

Tuesday, November 17, 2009

Where is the inflation?

It's there lurking according to this sketch by Veronique de Rugy:
Besides placing undue faith in the Fed’s ability to time perfectly any necessary anti-inflationary measures, the consensus suggests that the nation’s central bank now has the heretofore undiscovered ability to increase the money supply without creating inflation. If true, this would be an important new development, since inflation has long been rightly vilified for destroying entrepreneurship and long-term economic growth. But if false, this conceit could prove dangerous indeed. And it’s probably false.

Monday, November 16, 2009

Treasurer Cahill to address BHI's Competiveness Event

State Competitiveness Report
Keynote Speaker
Timothy Cahill,
Treasurer and Receiver General of the Commonwealth of Massachusetts

Wednesday, December 16, 2009 - 9:00 a.m

Sargent Hall
First Floor Function Hall, Suffolk University Law School
120 Tremont Street
Boston, MA 02108
RVSP - phone: 617-573-8750;
e-mail: compete@beaconhill.org


Sponsored by:
THE BEACON HILL INSTITUTE &
THE DEPARTMENT OF ECONOMICS at SUFFOLK UNIVERSITY

A jobless recovery?

Federal Reserve Bank of Philadelphia: Economy to grow but job growth will lag.

"The U.S. economy will grow over each of the next five quarters, according to 41 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters see real GDP growing at an annual rate of 2.7 percent this quarter. On an annual-average over annual-average basis, forecasters see real GDP falling 2.5 percent in 2009 before rebounding in each of the following three years. Real GDP will grow 2.4 percent in 2010, 3.1 percent in 2011, and 3.3 percent in 2012. As the table below shows, these estimates are a bit higher than those the forecasters projected in last quarter's survey.

The labor market looks weaker now than it did three months ago. Unemployment is now seen at an annual average of 9.3 percent in 2009 and 10 percent in 2010, before falling to 9.2 percent in 2011 and 8.3 percent in 2012. These estimates mark upward revisions from the forecasters' previous projection. Likewise, growth in jobs looks weaker. The forecasters see nonfarm payroll employment falling at a rate of 160,000 jobs per month this quarter and 35,000 jobs per month next quarter. Both estimates mark downward revisions from the previous survey. The forecasters see jobs beginning to grow in the second quarter of 2010. Over the second half of the year, jobs will grow at a rate of 150,000 per month. The forecasters' projections for the annual average level of nonfarm payroll employment suggest job losses at a monthly rate of 427,000 in 2009 and a further loss of 70,000 per month in 2010.

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