U.S. Budget and Economy

Marketplace , a public radio program, has been covering Wealth and Poverty issues on its programs for several months. On July 26th, a segment titled "Arthur Laffer on income inequality, raising taxes" was broadcast. The audio can be downloaded from this link . Following is an excerpt from the transcript : Horwich: Many economists will say the data is extremely inconclusive in practice as to how marginal tax changes actually affect personal and business activity. What makes you so sure? Laffer: Because basically, these economists you talk about never worked in the real world. They're just looking at the econometrics and the data there. If you ever go and look at what's being recommended from the CPA firms, from financial planners. If you actually look at how they go through, do their tax returns -- believe me, they are more focused on their taxes than you and I are on their taxes. Horwich: But am I right that I just heard you criticize economists for actual...

On March 1st, the Senate Budget Committee held a hearing on tax reform to encourage growth, reduce the deficit, and promote fairness. Three expert witnesses testified. They were Dr. Leonard E. Burman, a professor at Maxwell School of Syracuse University, Dr. Diane Lim Rogers, the chief economist of the Concord Coalition, and Dr. Daniel J. Mitchell, a senior fellow at the Cato Institute. A video of the full hearing can be seen at this link . Senator Ron Johnson begins questioning the panel of witnesses at about minute 97 of the video (this portion of the hearing is also posted on Senator Johnson's website and on YouTube ). He began by having the following chart held up: According to Table 1.3 in the Historical Tables and Table S-1 of the Summary Tables from the most recent U.S. Budget, the 10-year outlays for these three periods are 15.936, 27.879 and 46.959 trillion dollars, respectively. Hence, the chart is technically correct. One of the panelists, Dr. Mitchell, posted thi...

On February 19th, the following conversation took place between interviewer Jake Tapper and Robert Gibbs on ABC's "This Week": TAPPER: The president got something of a political victory this week when the House and Senate came to an agreement on the payroll tax extension, but it's not paid for, the $100 billion, so that payroll tax money will not be paid into the Social Security Trust Fund. One member of the president's own party called this bill "a devil's deal" and went on the say this. (BEGIN VIDEO CLIP) HARKIN: I'm dismayed that Democrats, including a Democratic president and a Democratic vice president, have proposed this and are willing to sign off on a deal that could begin the unraveling of Social Security. (END VIDEO CLIP) TAPPER: That's quite an ad against the president's re-election campaign from Democratic Senator Tom Harkin. Is this the unraveling of Social Security? GIBBS: No, I strongly disagree with that characterization. ...

My prior post looked at the calculations behind Warren Buffett's claim that he paid a lower tax rate than any of the other people in his office. Specifically, Buffett claims that he paid about 17% of his taxable income in tax and his office staff paid percentages somewhere in the 30s. A number of articles disputed this claim, stating that, due to the double taxation of capital gains, Buffett actually paid a much higher rate. For example, a Wall Street Journal editorial titled "The Buffett Ruse" states the following: This is because wealthy tax filers make most of their income from investments. Such income is taxed once at the corporate rate of 35% and again when it is passed through to the individual as a capital gain or dividend at 15%, for a highest marginal tax rate of about 44.75%. This rate of 44.75 equals the top corporate tax rate of 35% plus 15% (the capital gains rate) of the remaining 65 percent. However, the 35% figure is the top statutory corporate tax r...

The January 23rd issue of Time Magazine features Warren Buffett on its cover and contains a story titled "Warren Buffett Is on a Radical Track" . Following is an excerpt: Buffett paid a tax rate of only 11% on adjusted gross income of $62,855,038 in 2010. (After deductions, most of which were for charitable contributions, he paid a still low 17% rate on his $39,814,784 of taxable income; his office staff, meanwhile, paid percentages somewhere in the 30s.) Buffett discussed this in an op-ed that he wrote titled "Stop Coddling the Super-Rich" that was published in the New York Times on August 14, 2011. He discusses the exact method by which he calculated these tax rates in a letter sent to Republican Representative Tim Huelskamp . In it, he states: I would guess that if you would take line 60 from your 1040, plus payroll taxes paid by you and on your behalf, as a percentage of line 43 - taxable income - your number would be in the 30s just like all of the people i...

On June 13th, Mitt Romney policy director Lanhee Chen posted a blog on the Romney web site titled "Taxed and Spent: American Workers Suffering Under Obama" . Following is the first paragraph: President Obama’s policies have failed the American people. And nowhere has this failure been more evident than in this Administration’s handling of our nation’s economy. In the month that President Obama was inaugurated, the unemployment rate was 7.8%, the national debt stood at $10.6 trillion, and the average price for a gallon of gas was $1.83. Today, in the third year of his presidency, unemployment has ballooned to 9.1%, the national debt tops $14 trillion, and Americans are paying double—$3.70 a gallon—for gas. Technically, the numbers appear to be correct. This page on the Federal Reserve web site shows that the employment rate was 7.8% on January 1st, 2009 and is 9.1% as of May 1st, 2011. However, note that the unemployment rate reached 9.4% in May, just 4 months after Oba...

The U.S. Budget for fiscal year 2012 was released on February 14, 2011. As in prior years, it included the Analytical Perspectives which contains a section on the long-run budget outlook. The following graph shows the outlook for federal receipts, outlays, and debt held by the public as projected by this section. The actual numbers and sources for this and the following graph can be found at this link . As can be seen, receipts are projected to rise and spending is projected to drop over the next 10 years, causing the deficit to narrow to 3.1 percent of GDP by 2020. However, outlays are then projected to begin a steady rise, causing the deficit to reach 12.3 percent of GDP by 2085. This is projected to cause the debt held by the public to rise to 239.9 percent of GDP. This is more than double the prior high of 108.7 percent of GDP reached in 1946, at the end of World War II. Still, this is a major improvement over the projections from the prior budget. The dashed lines in the a...