October 29, 2014

Family and Economic Prosperity

Prosperity and economic prosperity are frequent topics at Growls. You can confirm that by using the search facility in the lower right-hand column.

So when the title of a new report from the American Enterprise Institute (AEI) appeared in a headline today at Hot Air, it caught my attention. The report, by W. Bradford Wilcox and Robert I. Lerman, is entitled, "For richer, for poorer: How family structures economic success in America." Following is the report's executive summary:

"This study documents five key findings about the relationships between family patterns and economic well-being in America.

  1. The retreat from marriage—a retreat that has been concentrated among lower-income Americans—plays a key role in the changing economic fortunes of American family life. We estimate that the growth in median income of families with children would be 44 percent higher if the United States enjoyed 1980 levels of married parenthood today. Further, at least 32 percent of the growth in family-income inequality since 1979 among families with children and 37 percent of the decline in men’s employment rates during that time can be linked to the decreasing number of Americans who form and maintain stable, married families.
  2. Growing up with both parents (in an intact family) is strongly associated with more education, work, and income among today’s young men and women. Young men and women from intact families enjoy an annual “intact-family premium” that amounts to $6,500 and $4,700, respectively, over the incomes of their peers from single-parent families.
  3. Men obtain a substantial “marriage premium” and women bear no marriage penalty in their individual incomes, and both men and women enjoy substantially higher family incomes, compared to peers with otherwise similar characteristics. For instance, men enjoy a marriage premium of at least $15,900 per year in their individual income compared to their single peers.
  4. These two trends reinforce each other. Growing up with both parents increases your odds of becoming highly educated, which in turn leads to higher odds of being married as an adult. Both the added education and marriage result in higher income levels. Indeed, men and women who were raised with both parents present and then go on to marry enjoy an especially high income as adults. Men and women who are currently married and were raised in an intact family enjoy an annual “family premium” in their household income that exceeds that of their unmarried peers who were raised in nonintact families by at least $42,000.
  5. The advantages of growing up in an intact family and being married extend across the population. They apply about as much to blacks and Hispanics as they do to whites. For instance, black men enjoy a marriage premium of at least $12,500 in their individual income compared to their single peers. The advantages also apply, for the most part, to men and women who are less educated. For instance, men with a high-school degree or less enjoy a marriage premium of at least $17,000 compared to their single peers.

"Given the economic importance of strong and stable families, policy makers, business executives and owners, and civic leaders should experiment with a range of public and private policies to strengthen and stabilize marriage and family life in the United States. Such efforts should focus on poor and working-class Americans, who have been most affected by the nation’s retreat from marriage. Specifically:

  1. Public policy should “do no harm” when it comes to marriage. Accordingly, policymakers should eliminate or reduce marriage penalties embedded in many of the nation’s tax and transfer policies designed to serve lower-income Americans and their families.
  2. Federal and state policy should strengthen the economic foundations of middle- and lower-income family life in three ways: (a) increase the child credit to $3,000 and extend it to both income and payroll taxes; (b) expand the maximum earned income tax credit for single, childless adults to $1,000, increasing their marriageability; and (c) expand and improve vocational education and apprenticeship programs that would strengthen the job prospects of less-educated young adults.
  3. Civic institutions—joined by a range of private and public partners, from businesses to state governments to public schools—should launch a national campaign around a “success sequence” that would encourage young adults to sequence schooling, work, marriage, and then parenthood. This campaign would stress the ways children are more likely to flourish when they are born to married parents with a secure economic foundation."

The entire report is 58-pages, which you can access here. The report was released today at an AEI event, which included discussions by two panels. You can watch the two panel discussions here, which last just under three hours.

The following chart from the report provides a policy pathway.

Kudos to the two authors of the study and to the American Enterprise Institute (AEI).

October 28, 2014

Virginia's Business Tax Climate Continues to Erode

The Tax Foundation released its state business tax climate index today. According to  the study's executive summary:

"The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems, and provides a road-map to improving these structures.

"The 10 best states in this year’s Index are:

1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. Montana
7. New Hampshire
8. Indiana
9. Utah
10. Texas

"The absence of a major tax is a common factor among many of the top ten states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax. Wyoming, Nevada, and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.

"But this does not mean that a state cannot rank in the top ten while still levying all the major taxes. Indiana and Utah, for example, have all the major tax types, but levy them with low rates on broad bases.

"The 10 lowest ranked, or worst, states in this year’s Index are:

41. Iowa
42. Connecticut
43. Wisconsin
44. Ohio
45. Rhode Island
46. Vermont
47. Minnesota
48. California
49. New York
50. New Jersey

"The states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates. New Jersey, for example, suffers from some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance and an estate tax, and maintains some of the worst structured individual income taxes in the country."

The following map of the United States shows the 10 best states (green) and 10 worst states (pumpkin):

Virginia's overall rank has eroded over the past four years, going from #23 in 2012, to #24 in 2013, to #26 in 2014, and settling in to #27 for 2015.

Figure 1 of the study, in addition to reflecting an overall ranking of #27 for 2015, also shows Virginia with a corporate tax ranking of #6, an individual tax ranking of #39, a sales  tax ranking of #6, an unemployment tax ranking of #37, and a property tax ranking of #26.

Today's Wall Street Journal commented on the study on its editorial pages ($ -- behind its paywall), saying:

"The annual ranking measures the impact of policies in place as of July 1 on five types of taxes on business activities, mainly considering the amount a state takes from its citizens but also the weight of its compliance burden . . . ."

In conclusion, the Journal said:

"Tax climate isn’t the only determinant of state prosperity. Regulation also matters, as do human capital and natural resources like Wyoming’s oil and gas. But the latter are more likely to reach their potential in states with low tax rates."

Readers of Growls who are concerned that Virginia's business tax climate has eroded from #23 just four years ago to #27 for 2015 are urged to contact Governor Terry McAuliffe and Senators and Delegates who represent Arlington County in the General Assembly.

  • Contac6 information for members of the General Assembly can be found here (using one of the "quick links").

We growled about Virginia's 2014 business tax climate here.

Kudos to Scott Drenkard and Joseph Henchman of the Tax Foundation for their work producing the 2015 state business tax climate index and to the Tax Foundation.

October 27, 2014

A Thought about Liberty and Equality

"The irony is that free people usually create far more wealth than the coerced, which makes the lower echelons better off, a fact that reminds “equality” is usually about empowering progressive elites rather than materially helping the poor. Moreover, in a free society, there are all sorts of forces — religion, constantly improving and ever cheaper technology, family pressures, honor, shame, philanthropy — that redistribute wealth either naturally or through the consent of the giver, and far more effectively than creating a huge government equalocracy that seeks power to bully others and exempt itself.

~ Victor Davis Hanson

Source: His January 14, 2014 column, posted at National Review Online.

October 23, 2014

A Thought on an Optimum Tax Rate

Note: there will likely be little if any growling until the middle of next week.

                              - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

"Back in 1971, a Scottish economist by the name of James A. Mirrlees wrote a groundbreaking paper, in which he attempted to answer the question of what an optimum income-tax regime would look like if one desired to reduce inequalities while at the same time not discouraging work and economic growth. Up to the time of Mr. Mirrlees‘ work, no one had been able to figure out the optimum trade-off between equality and. Mr. Mirrlees was awarded the Nobel Prize in economics in 1996 for his work, and was knighted in 1998.

"Mr. Mirrlees had been an adviser to the British Labor Party, which supported the high tax rates in effect at that time. He did a careful analysis of the variation of people’s skills and the effect tax rates had on their incentives to earn. Much to his surprise, he found the optimum tax rate on high earners was about 20 percent, not the 83 percent in effect at that time. He also determined that 20 percent should be the optimum rate for everyone, thus giving rise to the idea of the flat tax (which now has been adopted by several-dozen countries). In his 1971 paper, Mr. Mirrlees concluded, “I must confess that I had expected the rigorous analysis of income taxation in the utilitarian manner to provide an argument for high tax rates. It has not done so.” *emphasis added)

< snip>

"In the United States, there has been almost no relation between maximum individual tax rates and tax revenues as a percentage of gross domestic product (GDP). For example, individual-tax revenues have averaged about 7.9 percent of GDP for the past half-century, whether the maximum rate was 28 percent (after Ronald Reagan’s reform in the late 1980s), 70 percent (during the Jimmy Carter era in 1978), or 39.6 percent (when Bill Clinton was president in 1995, and also in 2013 under President Obama). All of this only goes to show that higher maximum individual income-tax rates (despite the conventional wisdom and the endless faulty estimates from the government tax-revenue forecasters) are no more likely to produce greater revenue as a share of GDP than lower rates. High rates do, however, have the clear disadvantage of causing more tax evasion, lower job creation and slower economic growth."

~ Richard W. Rahn, Senior Fellow, Cato Institute, and Chairman, Global Economic Growth

SOURCE: His October 21, 2014 column, entitled "The optimum income taxation," posted at the Washington Times.

October 2014
      1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31  

The ACTA Watchdog

Latest Issue of The ACTA Watchdog




October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
April 2004
March 2004
February 2004
January 2004
December 2003
October 2003
September 2003
August 2003
July 2003
June 2003
May 2003
April 2003
March 2003
February 2003
Creative Commons License
This weblog is licensed under a Creative Commons License.

Items in Growls are written by individual ACTA members and do not necessarily represent the views of the Arlington County Taxpayers Association, Inc. Please send comments about Growls to The Growl Meister