Archive forTaxes

The rising U.S. debt crisis is real problem.

You may have heard in the news about  the “fiscal cliff” that the United States is appraoching. This is most certainly something to pay attention to. The fiscal cliff refers to the expected drop in the U.S. defecit in the first days of 2013 by roughly half, the (bi-partisan by law) Congressional Budget Office predicts that will lead to a recession in the begining of 2013. This is obviously not a good thing, and taxes most likely be raised in 2013 in order to combat this and will add %19.3 in tax revenue. However (not surprisingly with Obama in office), there only a .25% reduction in spending from 2012 to 2013. This doesnt not take into account the astronomical amount of debt we are accumulating. What the article attatched to this post reminds us of is: that the defecit is not the real problem. We currently have $86 TRILLION in unfunded debt and liabilites, and that number is still climbing, in fact its growing 21 times faster than the economy. THAT IS SCARY.

http://www.moneyweek.com/news-and-charts/economics/us/bill-bonner-starve-the-beast-61700

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New Taxes to Fund Health Care Law

This article discusses an increase in the pay roll tax on wages and a tax on investment income, including interest, dividends and capital gains. Since more affluent people are more likely to have health insurance than those not as well off, these people will essentially be paying the gap for insurance. This new law will require workers to pay an  additional tax equal to 0.9 percent of any wages over $200,000 for single taxpayers and $250,000 for married couples filing jointly. This can see increases in taxes of more than $6,000. They said that this tax would bear the most weight on the most affluent people of society.

 

 

http://www.nytimes.com/2012/12/09/us/politics/new-taxes-to-take-effect-to-fund-health-care-law.html?hp

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An example of the “Small Business Fallacy” that Frank discusses

http://www.cbsnews.com/8301-18563_162-57556315/how-taxing-the-wealthy-affects-small-businesses/

This shows two opposing sides to what Frank discusses as to whether a small business will hire employees or not. The news clip shows that more or less Frank is correct that business owner make decisions based not on tax rates but on if by hiring an additional person they cover the salary of the person or not.

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A new Cap may lead to more money raised

http://money.cnn.com/2012/11/30/news/economy/fiscal-cliff-tax-rich/index.html?iid=SF_E_Lead

According to the Committee of Responsible federal budget, lawmakers could begin limiting the after-tax value with a cap on itemized decuctions, which would raise more money over the course of 10 years.

 

Caroline Blank

 

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“Law and Disorder” -The Economist

http://www.economist.com/node/21564565

This article is relevant to the material we are currently working on of public goods, institutions, and social welfare. The author states that the abundance of overlapping and simultaneously independent groups/committees/organizations that prosecute financial institutions is leading to inefficiency in our government. Aside from the SEC, Department of Justice, and the CFTC, there are countless others that can take one firm to trial for essentially the same offense. Particularly alarming, these institutions – founded to increase social welfare by making wrongdoers responsible for their actions – are in fierce competition with each other to be the first to attack a firm. This is because the main course of action is to settle with the company, and whoever gets there first can get the largest amount of money. Many SEC cases recently were settled on the very same day that the complaint was filed. The person responsible for making such a deal in the governmental institution has a lot to gain monetarily and in prestige. Therefore, the personal incentives no longer line up with the social welfare; a SEC official is seeking out a high profile case to put him further in his career, not bringing justice to a financial firm.
Furthermore, there is the issue of transparency that makes this plethora of institutions damaging to social welfare. Being litigated by so many different groups means that most firms find the law confusing and abstract, the only solution when a problem arises being to throw money into a settlement. I believe that the tangled and overlapping administrations highlighted in this article are indicative of a major issue plaguing all of our institutions in the U.S.

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One Reason Big Business Cares About the Deficit

http://blogs.wsj.com/corporate-intelligence/2012/10/25/heres-one-reason-big-business-cares-about-the-deficit/
A coalition of more than 100 big company CEOs have signed onto the “Campaign to Fix the Debt”. The CEO’s represented companies from many different sectors of bushiness with different political interests and presidential candidates that they fund. The companies may have their differences but they all agree on one thing: the U.S. business tax code needs to change. The tax allows for the government to tax corporate profits at a top rate of 35 percent to domestic and overseas profits.  Not every corporation pays this high tax but the income brought in to the government by the tax accounts for 10 percent of the total federal revenues. The mission of the “Fix the Debt” coalition is to have the total levy on corporations to remain flat even if a revamped business tax regime means certain companies will pay more than they use to with the current text and some will pay less. According to the CEO’s, the deficit will not decrease without an increase in total tax revenues.

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Watching Behavior Before Writing the Rules

http://www.nytimes.com/2012/07/08/business/behavioral-science-can-help-guide-policy-economic-view.html?ref=economics&_r=0

Physiology is present in most science fields and economics is no exception.  Behavior economics is still in its infancy but because of work done by the British government.  A small branch of government was formed called the Behavioral Insights Team and has been responsible for creating successful government projects such as improving tax collection rate by adding an incentive into their reminder letter.  The article is written by one of the economists who is a part of this small branch of government and thus has a great inside view into how successful these new policies can be.

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The Fiscal Cliff and Taxes

This article focuses on the looming expiration of Bush-era tax cuts and the impending increase in federal tax rates that will hit Americans come January if Congress does not act to stop it.  A combination of the expiration of the payroll tax holiday and Bush-era tax cuts on income, as well as new taxes on investment incomes (a part of the Affordable Care Act), puts 9 out of 10 Americans at risk for a tax increase, with an average increase of anywhere from $2,000 to $3,500.  This connects interestingly with our reading for Chapter 6, which highlights deadweight loss and revenue increase as results of increasing taxes.  This will be an interesting issue to watch going forward, as both sides of the aisle will likely come up with very different plans to remedy the impending situation dubbed “taxmageddon” on The Hill.

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Making Nepal More Competitive

Here’s an article on barriers that prevent Nepal benefiting from productivity growth and trade: http://nepalitimes.com/issue/2012/08/17/ItsTheEconomy/19551#.UEYAPsFlRD0

It is written by Chandan Sapkota, a very active and successful Dickinson Economics graduate.

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Is the UK airport tax too high?

A letter from the CEO of British Airways seeking support for a petition against the UK’s Air Passenger Duty leads me to ask whether it is an efficient tax.

Here’s the case that it’s not a fair tax: http://www.afairtaxonflying.org/

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