Posts Tagged ‘taxes’

Wimer

There are two different ways of reading the information in the chart above.*

One way is that the various programs associated with the War on Poverty have succeeded, at least to some extent. That success can be seen in the difference between the “market poverty” rate (technically, the pretax/pretransfer anchored supplemental poverty rate) of 28.7 percent in 2012 and the “poverty rate with government programs” (technically, the anchored supplemental poverty rate) of 16 percent. Many fewer people are living at or below the poverty line with government transfers and tax credits than if those programs had not existed.

But there’s a second way of reading the chart: capitalism in the United States produces poverty at just about the same rate today (at 28.7 percent) as it did back in 1967 (when 27 percent of the U.S. population lived at or below the market poverty rate)—which makes it all that much more difficult for government transfers and credits to “solve” the problem of poverty. Thus, the War on Poverty still leaves 16 percent of Americans in poverty.

The conclusion, if we combine the two readings, is that the publicly provided social safety net (which lowered the poverty rate by some 40 percent in 2012) is actually a subsidy to large corporations, which continue to pay very low wages to millions of American workers and thus to generate enormous profits they alone appropriate and decide how to use.

The real War on Poverty will only begin when we decide to change how the economy itself is organized.

*The chart is from a column by Thomas B. Edsall, based on data presented in a paper by Christopher Wimer et al. (pdf).

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Pensions

Illinois has the most underfunded retirement system of any state in the country and the largest pension burden relative to state revenue. It also has the highest number of public-pension funds close to insolvency, such as the one for Chicago’s police and firefighters.

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Like many states, the funding of the retirement system in Illinois suffered from the decline in asset values following on from the financial crash of 2007-08. But the situation is even more dire in Illinois because lawmakers have repeatedly failed to fix the state’s revenues, especially the single-rate income tax.* This has made a bad situation even worse, with growing inequality in the state. Illinois now has the nation’s ninth-highest level of income inequality.

The only solution to the funding problem, at least in the short term, will come from increased revenues based on a progressive income tax. But the new governor of the state, Republican Bruce Rauner, has other plans. He has decided to attack public-sector unions, by issuing an executive order that allows state employees not to pay “fair share” fees related to collective bargaining and contract negotiations.

 

*A constitutional amendment that would have enabled Illinois to impose different rates on different levels of income is now sine die.

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I didn’t attend the most recent American Economic Association/Allied Social Sciences Association meetings in Boston. But, according to Chuck Collins, several sessions focused on the sensation of French economist Thomas Piketty and his 2014 book on inequality, Capital in the Twenty-First Century.

As an outsider to academic economics, I was struck by just how compartmentalized and smug the field appears. At one point, [Gregory] Mankiw even put up a slide, “Is Wealth Inequality a Problem?” Any economist who ventures across the disciplinary ramparts will, of course, find a veritable genre of research on the dangerous impacts of extreme inequality.

We now have over two decades of powerful evidence that details how these inequalities are making us sick, undermining our democracy, slowing traditional measures of economic growth, and turning our political system into a plutocracy.

Mankiw, at another point in his presentation, had still more embarrassing comments to make. Piketty, he intoned, must “hate the rich.” Piketty’s financial success with his best-selling book, Mankiw added, just might lead to self-loathing.

These clearly well-rehearsed quips, aimed at knee-capping the humble French economist, fell flat. Mankiw’s presentation, entitled “R > G, so what?,” came across as little more than an apologia for concentrated wealth.

And Piketty’s response?

Piketty’s one poke back at the nitpickers came in response to their unanimous support for a progressive consumption tax as an alternative to any other progressive income or wealth tax. “We know something about billionaire consumption,” Piketty observed, “but it is hard to measure some of it. Some billionaires are consuming politicians, others consume reporters, and some consume academics.”