U.S. Budget and Economy

In about September 2005, the IRS released statistics on income drawn from tax returns through 2003 (an updated version of the statistics can be found at http://www.irs.gov/pub/irs-soi/05in05tr.xls ). In October 2003, Rush Limbaugh posted an article on his website titled "The Top 50% pay 96.54% of All Income Taxes" which addressed these statistics. This was an update of an article titled "Only the Rich Pay Taxes" which dates back to at least 2002. Rush begins the article as follows: This is the data for calendar year 2003 just released in October 2005 by the Internal Revenue Service. The share of total income taxes paid by the top 1% of wage earners rose to 34.27% from 33.71% in 2002. Their income share (not just wages) rose from 16.12% to 16.77%. However, their average tax rate actually dropped from 27.25% down to 24.31% Think of it this way: less than 3-1/2 dollars out of every $100 paid in income taxes in the United States is paid by someone in the bottom 50% of...

Note: The following blog entry has been updated at this link : A March 16th New York Times editorial titled Through Bush-Colored Glasses alleged that Bush painted a false picture of the economy in a recent speech. Following is an excerpt: Mr. Bush boasted about 52 consecutive months of job growth during his presidency. What matters is the magnitude of growth, not ticks on a calendar. The economic expansion under Mr. Bush — which it is safe to assume is now over — produced job growth of 4.2 percent. That is the worst performance over a business cycle since the government started keeping track in 1945. I haven't calculated the job growth per business cycle but I have looked at the growth in employment over every presidential term since 1949. The following table shows the monthly average change in population, the labor force, employment according to the Household Survey, total nonfarm employment, and total private employment over every presidential term since 1949, along with the u...

As mentioned in my post of March 10, the February employment figures from the Household Survey are 152 thousand below where they were last March. However, one needs to be very careful in comparing changes in employment using the Household Survey. One reason is that the Household Survey, involving just 60,000 households, is subject to a relatively large sampling error. Another reason is because population control adjustments are periodically made to the survey data but past data is not revised. This can cause a sudden jump or drop in the data such as the large jump in the year 2000 in the graph in the March 10 post. The following table from page 12 of the BLS summary of recent trends in both surveys shows the effects of population control adjustments made from 2000 to 2007: Effect on household survey employment from population control adjustments, 2000-07 (In thousands) -------------------- January 2000 +1,555 January 2003 +576 January 2004 -409 January 2005 -45 January...

As reported on March 7th , employers cut 63,000 jobs in February but the unemployment rate dropped slightly from 4.9 percent to 4.8 percent. How could the unemployment rate drop at the same time that jobs are cut? The AP story gives the following explanation: The unemployment rate actually dipped slightly from 4.9 percent to 4.8 percent, as 450,000 people left the labor force for any number of reasons. Economists thought many people probably gave up looking for work. Another reason that the employment numbers and unemployment rate sometimes seem at odds is that they come from different surveys. The commonly referenced employment numbers are for nonfarm employment and come from the Payroll Survey whereas the labor force numbers and the unemployment rate come from the Household Survey. The Bureau of Labor Statistics give the following explanation for why there are two surveys on page 5 of the Employment Situation report : The household survey and establishment survey both produce sa...

There have been three major tax cuts under Bush. Briefly, the 2001 tax cut created a new 10% individual tax rate and phased in the lowering of individual tax rates. It also phased in an increase in the child tax credit, marriage penalty relief provisions, an increase of the estate tax exemption, an increase in the IRA contribution limit, and the repeal of limits on itemized deductions and personal exemptions. The 2002 tax cut was chiefly aimed at business, creating 30% expensing for certain capital asset purchases, extending the exception under Subpart F for active financing income, and increasing the carryback of net operating losses to 5 years. Finally, the 2003 tax cut lowered the top individual income tax rate on dividends and capital gains and accelerated most of the phased-in provisions of the 2001 tax cut. For a more complete description of the tax cuts, see page 14 of Revenue Effects of Major Tax Bills . Enough time has now passed that it's possible to take a look at t...