Tag Archives: economics

Interactive Graphs of Recession Trends

The Russell Sage Foundation and the Stanford Center on Poverty and Inequality have put together Recession Trends, an interactive website that lets you create graphs about issues related to the recession. It takes a couple of steps to get to the database (you have to agree to the terms before entering), but once you’re there, you can choose data about a variety of topics — crime, housing, immigration, income, political attitudes, family life, and a lot more. It’s a great way to quickly get an overview of many aspects of life in the U.S.

I looked at the ratio of median family income between African American and White families. Between the early 1970s and 2010, we’ve seen a consistent gap in earnings, with Black median household income hovering between about 52 and 60% that of Whites:

The graph of the mean net worth of the individuals on Forbes’s list of the 400 richest people in the U.S. shows that while they certainly saw their wealth take a tumble during the recession — it fell to a mere $3.3 billion or so — they’re recovering well:

Unsurprisingly, the number of job seekers per job opening went up sharply after 2007; it’s finally starting to drop off slightly, though we still have about 5 people looking for every 1 job that’s available:

You can add more than one dataset for many topics. Here’s the growth in the prison population since 1980, by gender:

There’s lots, lots more. Whatever topic you’re particularly interested in, there’s a good chance there’s something there that’ll grab your attention for a bit.

Gwen Sharp is an associate professor of sociology at Nevada State College. You can follow her on Twitter at @gwensharpnv.

The Case For Raising Taxes

Cross-posted at Reports from the Economic Front.

Presidential candidate Mitt Romney’s low federal tax rate — 14.1% — has called attention to the fact that our tax code favors people who make their money from investments rather than labor.  According to the conventional wisdom, this is as it should be.  It encourages people, like our job creators, to invest their money, thereby boosting growth and the well-being of all working people.  Sounds plausible, but the facts don’t support the policy.

BusinessWeek lays out the background and political context for our current low taxation rates on investment income as follows:

Since 1950 capital gains have generally been taxed at a lower rate than income, to spur investment. The rate under President George W. Bush went from 20 percent to 15 — the lowest ever — and was billed as a way to stimulate the economy. (If nothing’s done by Jan. 1 to change tax and budget provisions already passed by Congress, the rate will snap back to 20 percent, a scenario both parties hope to avoid.) Mitt Romney wants to ditch capital gains tax altogether for people earning less than $250,000. President Barack Obama, in his Affordable Care Act, increased the rate by 3.8 percent for high earners beginning in 2013, and has proposed the so-called Buffett Rule, which would among other things end an accounting interpretation that allows private equity and hedge fund managers (and Romney) to save money by paying tax on their earnings at the capital gains rate. Neither candidate, though, contests the Bush administration’s basic logic: that a lower capital gains rate encourages investment, which creates jobs and helps the economy grow. That doesn’t mean they’re right.

Leonard E. Burman, a tax expert, took on this issue in recent testimony before the House Committee on Ways and Means and the Senate Committee on Finance.   A good place to start is with who benefits from lower capital gains taxes.

Not surprisingly, as the figure below (which is taken from Burman’s testimony) shows, the benefits are extremely concentrated.  As Burman noted:

In 2010, the highest-income 20 percent realized more than 90 percent of long-term capital gains according to the TaxPolicyCenter.  The top 1 percent realized almost 70 percent of gains and the richest 1 in 1,000 households accrued about 47 percent. It is hard to think of another form of income that is more concentrated by income.

Moreover, as the next figure shows, the concentration of capital gains has grown over time.  Given that the rich fund political campaigns, this certainly helps to explain why both political parties are so determined to keep the rate low.

But, to the main question — do lower capital gains taxes actually boost growth? This is what Burman had to say in his testimony:

The heated rhetoric notwithstanding, there is no obvious relationship between tax rates on capital gains and economic growth. Figure 4 [below] shows top tax rates on long-term capital gains and real economic growth (measured as the percentage change in real GDP) from 1950 to 2011. If low capital gains tax rates catalyzed economic growth, we’d expect to see a negative relationship — high gains rates, low growth, and vice versa — but there is no apparent relationship between the two time series. The correlation is 0.12, the opposite sign from what capital gains tax cut advocates would expect, and not statistically different from zero. Although not shown, I’ve tried lags up to five years and using moving averages, but there is never a larger or statistically significant relationship.

Burman notes that he posted this figure on his blog and offered the data to anyone interested, challenging readers to find support for lower rates.  “A half dozen or so people, including at least one outspoken critic of taxing capital gains, took me up on the offer, but nobody to my knowledge has been able to tease a meaningful relationship between capital gains tax rates and the GDP out of the data.”

As reported in a previous post, Thomes L. Hungerford, writing for the Congressional Research Service, came to the same conclusion about the lack of any relationship between the capital gains tax and GDP.  In fact, he concluded raising the top income and capital gains tax rates would likely reduce income inequality without causing harm to the economy.

So, if we are really concerned with the budget deficit, rather than slashing spending on social programs lets raise the top tax rates.  Wonder if this will come up during our presidential debates?

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Martin Hart-Landsberg is a professor of Economics and Director of the Political Economy Program at Lewis and Clark College.  You can follow him at Reports from the Economic Front.

Interactive Map of Median Income by County

The Census Bureau has created an interactive map that lets you see median household income by county. Median household income for the entire U.S. is $51,914, but of course there is enormous variety around the country. The map lets you select an amount and see which counties have medians below that level.

Three counties — Owsley and Breathitt in Kentucky and Brooks in south Texas — have median household incomes below $20,000 a year (the white spot in Louisiana is water):

So half of households in those areas are living on less than $20,000 a year.

If we go up to $30,000 a year, we see a clear pattern. The counties are particularly concentrated in the South, especially along the Mississippi River, in Appalachia, in southern Texas, a few areas of New Mexico, and several counties in South Dakota that include Native American reservations:

If we look at the $52,000 mark — right at the overall U.S. median — we see, unsurprisingly, a lot of counties on the coasts or that have at least mid-sized cities in them, though there are certainly some counties that don’t fit that pattern:

On the upper end, there are six counties where the median household income is above $100,000 — Hunterdon, in New Jersey; Howard, in Maryland; Los Alamos, New Mexico; and three Virginia counties, Fairfax, Falls Church, and Loudoun:

You can see the Census Bureau’s table of median household income in every county in the U.S. here.

Assisted-Living Prison Cells? On Aging Prisoners

“Today,” Mother Jones‘s James Ridgeway reports, “roughly 1 in 12 state and federal prison inmates is 55 or older.”  Prisoners sentenced to life without parole will die in prison, so that means they’ll convalesce there too.  In other words, prisons are part nursing home.

Photographer Tim Gruber captured these images of “the golden years” in the Kentucky State Reformatory:

According to a report from the ACLU, the number of elderly prisoners is expected to skyrocket:


Imprisonment is already expensive, but aging patients cost twice what a younger prisoner costs.  Today, we spent $16 billion a year to house elderly prisoners,  Soon we’ll have to start renovating our prisons.

Unless states start releasing them, [former warden Bob] Hood says, we will need to “retrofit every prison in America to put assisted living-units in it, wheelchair accessibility, handicapped toilets, grab bars — the whole nine yards.”

Prisons increasingly feature assisted-living cells and hospice units.

Some argue for “compassionate release.”  After all, elderly prisoners have a very low recidivism rate.  But the ACLU cautions us to remember that release shouldn’t mean abdicating responsibility.  “For many elderly prisoners,” the director of the ACLU’s National Prison Project explains, “particularly those with serious medical needs, simply pushing them out the prison door will be tantamount to a death sentence.”

Lisa Wade is a professor of sociology at Occidental College and the co-author of Gender: Ideas, Interactions, Institutions. You can follow her on Twitter and Facebook.

North Korea: An Ad-Free Utopia?

This post is an updated version of one originally published in 2010.

Skipping through a set of images of North Korea by photographers David Guttenfelder and Vincent Yu, I was reminded that the city is almost entirely devoid of advertising.  There is political propaganda everywhere, of course, but there is an overwhelming absence of the marketing for products characteristic of capitalist societies.  All of the print and electronic media is under state control, and the state administers and controls the economy as well.  Accordingly… there is almost no advertising.  The images in the slide show give us a peak into this world without ads:

Images from a 2010 LIFE slide show after the jump:

(more…)

Lisa Wade is a professor of sociology at Occidental College and the co-author of Gender: Ideas, Interactions, Institutions. You can follow her on Twitter and Facebook.

Taxes & the Wealthy: Effects of Raising Top Tax Rates

Cross-posted at Reports from the Economic Front.

There are those that argue that lowering the top marginal tax rates on “ordinary” income (from wages or salary) and capital gains will stimulate economic growth.  Thomas L. Hungerford, in a Congressional Research Report, tests and rejects this claim.

He finds no statistical relationship between changes in either of these top tax rates and private savings, investment, productivity, or real per capita GDP growth.  However, he does find a strong statistical relationship between changes in these tax rates and income inequality.  More specifically, raising top tax rates can be expected to promote greater income equality without causing harm to the economy.

Tax Trends

There are two main tax concepts: the marginal tax rate, which is the tax paid on the last dollar of income received, and the average tax rate, which is the proportion of all income that is paid in taxes.  How much a person pays on the last dollar received depends on whether it is classified as ordinary income or capital gains.

Most importantly, as the chart below shows, the very top tax payers have enjoyed a steady decline in their average tax rate.

The next chart shows trends in top marginal tax rates on ordinary income and capital gains.  The top marginal tax rate on ordinary income has clearly been on the decline: from 91% in the 1950s, 70% in the 1960s and 1970s, to a low of 28% in 1986.  It now stands at 35%.  The top marginal capital gains tax rate has not changed as much.  It was 25% in the 1950s and 1960s, 35% in the 1970s, and is now 15%.

The Tests

Hungerford used econometric methods to test whether changes in top marginal tax rates affect private savings, investment, productivity, and/or per capita GDP growth.  Simply plotting the movement of top tax rates and each of these variables suggests that a decline in top tax rates is associated with a positive movement in each of these economic variables.

However, as Hungerford correctly states, correlation is not the same as causation.  Using regression analysis, he found that the relationships were only coincidental or spurious; there was no statistically significant connection between changes in the top tax rates and movements in any of the variables.

Hungerford also tested to see if changes in top marginal tax rates had any effect on the distribution of income.  The first chart below shows the scatter plot of top tax rates and the share of income going to the top 0.1% for the years 1945-2010.  The second shows the same with the top 0.01% of income earners.

As we can see the fitted lines suggest a very strong relationship between the variables.  As before, Hungerford used regression analysis to determine whether the relationships were statistically significant.  This time his answer was yes in both cases; changes in top marginal tax rates do affect income concentration.  In other words, lowering the top rates increases income inequality, raising them reduces it.

It is time for us to start agitating for raising the top tax rates.

Economic Lessons from the NFL Referee Strike

The NFL referees have been on strike.  In their place the league has hired replacements in order to keep the season underway.  Word on the street is that the replacements are doing a distinctly terrible job. Writes Ed at Gin and Tacos:

Since professional and amateur football have different rules — in some cases very different — the results have been predictably disastrous. From their failure to do basic things like spot the ball and operate the game clock to major rules of which they appear to be totally ignorant, they have proven thus far that there is nothing they can’t botch.

Others, too, are finding humor in their ineptitude:

Ed wonders if NFL fans are internalizing the economic lesson in this debacle:

In a surplus labor market you can always find someone willing to do a job for less, but they’re probably not going to do it well. Even the type of person who blames the work stoppage on the union… can’t deny that the end result is the replacement of trained, experienced professionals with a clown car load of knuckleheads who act like they’ve never seen a football before.

He concludes, suggestively: “maybe all human capital is not interchangeable …and maybe there are some noticeable downsides to a market in which whoever will work for the least gets the job.”

The NFL, being entertainment and all, isn’t the best example, but when we apply the same logic to occupations like school teachers and air traffic controllers, we should sit up and notice.  Maybe at this moment, when something so beloved is at stake, it’ll raise America’s consciousness just a little bit.  Ed, for what it’s worth, isn’t optimistic.

Lisa Wade is a professor of sociology at Occidental College and the co-author of Gender: Ideas, Interactions, Institutions. You can follow her on Twitter and Facebook.

Mitt Romney and the 47% Meme

Cross-posted at Caroline Heldman’s Blog.

On Monday, Mother Jones released a video recorded in May of presidential candidate Mitt Romney speaking at a $50,000-a-plate fundraiser in the Boca Raton home of “private equity party boy” and “sexy party” host, Marc Leder. A hidden camera caught controversial remarks about IsraelIran, and a joke about being more electable if his parents had been born in Mexico, but the topic of this post is Romney’s use of the 47% Meme.

The 47% Meme is the idea that half of Americans take from rather than contribute to tax coffers. It sometimes surfaces in the form of the “takers vs. makers” frame. I have encountered this “argument” for years on Fox News, so it is surprising to see it gaining national attention now. Romney did a superb job articulating the 47% Meme in response to a question of how he might win in November:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them.

Many myths start with a kernel of truth. The 47% Meme is loosely based on the statistic that 47% of Americans pay no income tax (down to 46% in 2011). This meme is wildly dishonest since people pay a host of other federal, state, and local taxes. It’s about as honest as saying a person doesn’t eat vegetables because she only eats carrots, celery, bell peppers, cucumbers, and cabbage, but not broccoli.

So who is paying taxes, and what taxes are they paying?

 

Federal Income Tax

The Tax Policy Center finds that two main groups comprise the 46% who do not pay federal income tax: (1) The poor whose subsistence-level income is not taxable, and (2) those who receive tax expenditures. This chart shows that the lion’s share of tax expenditures goes to senior citizens, children, and the working poor, with the notable exception of 7,000 millionaires who paid no income tax in 2011.

 

Other Federal Taxes

But enough about income tax since this narrow focus only serves to further the misleading 47% Meme. The chart below shows a more accurate picture of who pays federal taxes. If we don’t count retirees, only 8% of Americans pay no income or payroll taxes.

Americans also pay federal excise tax on gas, liquor, cigarettes, airline tickets, and a long list of other products, so virtually every American pays federal taxes in some form. And contrary to the 47% Meme, poor and middle-class Americans actually pay a greater percentage of their income in federal payroll and excise taxes than wealthier Americans.

State and Local Taxes

When it comes to state and local taxes, the Institute on Taxation and Economic Policy finds that the poor pay more in state and local taxes in every state except Vermont. As the chart below indicates, state and local taxes are regressive, meaning that those who can least afford to pay, pay more.

Romney has apologized for the inelegance of his statements, but stands by their substance, despite ample data debunking the dependency (above) and entitlement bases for the 47% Meme. I don’t believe that Romney believes that half of the people in the U.S. are pathetically entitled “victims.” He is a smart person, and this is a ludicrous line of reasoning. But what does it say about our bitterly partisan nation that heaping unmitigated scorn on the poor brings in big bucks from the base?