Category Archives: political economy

Online Sales Taxes and State Revenues

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Governor Christine Gregoire (D, WA) and Sally Jewell, President and CEO of REI, have an op-ed in a recent Wall Street Journal.  In it, they claim a desire to “level the sales-tax playing field” by imposing a national requirement for online retailers to pay local state sales taxes.

Local retailers—who create jobs for our families, friends and neighbors—have long been required to collect and remit state sales taxes.  By contrast, online vendors that operate from out of state are under no such requirement, even though the taxes are still owed by the consumer in the 45 states that collect sales taxes.  This disparity undermines the competitiveness of the retail marketplace….

They claim a “cost:”

… diverts $23 billion from state and local treasuries every year.

And

For every supposedly tax-free sale, fewer dollars are available for schools, infrastructure, public-safety providers or (in flush times) tax reductions.

Never mind that online retailers also create jobs for “families, friends and neighbors.”  Those families, friends, and neighbors aren’t constituents of any concern.  Never mind the evident lack of tax reductions.  There’s always a good cause on which Democrats—and too many Republicans—should spend OPM.

A clue bat is here, in Gregoire’s and Jewell’s own words, but the bat swung and missed [emphasis added]:

Imagine a customer who walks into a sporting-goods store and asks for help in buying the coolest new running shoes.  An attentive salesperson spends half an hour with the customer to find the most comfortable fit, the best performance and the right price.  Just as the salesperson thinks she has found the ideal pair, the customer decides to make the $100 purchase via smartphone from an online competitor who doesn’t charge sales tax.

They omit another path to “leveling the playing field:” lower their in-state sales and other taxes levied on their brick and mortar businesses.  Watch the increase in economic activity from the suddenly lowered costs to the consumer/taxpayer, which increase will produce a net increase in revenues for the state government.  Besides which, the states (and I’m not just picking on Washington here) have not established they really need all that revenue, that they really are not doing things better left to the private sector.

Public pension systems have become famous for their bloat, for the overly optimistic assumptions state governments make concerning expected rates of return and state bureaucrat investment acumen.  Were these moved from defined benefit to defined contribution, the private sector would do a fine job of managing these public employee retirement programs, for instance.  As a first step in this transition, the state governments should publish widely the return on investment assumptions on which they base their pension benefit and taxpayer contribution requirements; alongside these, state governments should publish their empirically achieved return on investments.

Schools?  Get out of the way of school choice in the hands of the parents.  Pouring more money into the coffers of failing public schools only enriches the unions running those schools; it does nothing for the students damaged by those schools.

Infrastructure?  Stop paying union rates for the construction unless those rates win a truly competitive bid process.

And so on.

It’s for the several states to fix their own gaping potholes on America’s Main Streets.

Of Jobs Reports

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The latest Jobs report came out last week, and the unemployment rate fell to 7.7%.  We haven’t been this well off in years.  Or have we?  James Pethokoukis, writing for AEIDeas, took a closer look.

First, a graph that’s been run in several places before, repeated in Pethokoukis’ article, and here:

You remember this.  It compares President Barack Obama’s…claims…about the unemployment rate under his Recovery Plan vs his projection of unemployment absent his plan with the actual unemployment rate.  The data in the latest Jobs report add to this [emphasis in the original].

The two-tenths drop in the unemployment rate was because people gave up looking for work. The labor force participation rate fell to 63.6% from 63.8% in October.  If it had just held steady since then, the unemployment rate would be back over 8%.  Indeed, if the LFP rate was just where it was in November 2011, the unemployment rate would be 8.3%.  Some 542,000 Americans left the labor force just last month.

If labor force participation was at its January 2009 level, the unemployment rate would be a whopping 10.7%.  Now, some of the drop in the LFP is due to demographic reasons, primarily the aging of the US population.  But even taking that into account would give you a much higher unemployment rate than 7.7%.  If you go by the pre-recession CBO forecast of the 2012 LFP rate, the unemployment rate would be 10.4%.

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.63.  Over the past 12 months, average hourly earnings have risen by 1.7%.  Unfortunately, inflation—as measured by the consumer price index—has risen by 2.2% over the past year, meaning average hourly earnings have fallen by 0.5% in real terms.

And

The number of long-term unemployed remains at a sky-high 40.1%, the same as in August.

As the next graph illustrates.

Yet the Progressives in DC think this is proper.

Spending

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Here‘s an interesting table, from The Motley Fool.

A couple of notes.  Spending in 2012, the fourth year of the Age of Obama, relative to our nation’s total economic output, our GDP, is up 18%.  The government spends nearly a quarter of our total economic production, production that by the government’s usurpation we in the private sector cannot use for our own ends.

Defense spending is down more than 17% from its long term average.  Even so, President Barack Obama is bent on gutting our defense capability by another half-trillion dollars, starting next month.  Never mind that al-Qaeda is resurgent across northern Africa, the Middle East, and western Asia.  Never mind that Iran is on the verge of a nuclear breakout.  Never mind that Russia and the People’s Republic of China both are increasing their own military spending and that the PRC, especially, is becoming increasingly aggressive militarily with their growing capability.

Welfare spending is nearly 9% of our GDP, up nearly two-thirds from a skosh over 5%.  Yet Obama wants to increase welfare spending even further.  I’ve written here about the trap that is welfare; one can only speculate about Obama’s motives for this.

Gimme

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Collis P Huntington, President of the Southern Pacific Railroad (among others) is reputed to have said

Whatever is not nailed down is mine.  What I can pry loose is not nailed down.

Via Spirit of Enterprise comes this AEIDeas article of charts illustrating the attitude from a different perspective.  Below, some of those charts.

The rate of entitlement growth per capita has been nearly twice as fast as per capita income growth for the last fifty years

Note: Derived by author on the basis of data on official transfers, price changes, and population change. Sources: US Bureau of Economic Analysis, US Dept. of Labor, US Census International Data Base

And

In the 1960s, the federal government spent $2 on governing for each $1 it spent on entitlement transfers. Today that ratio has completely flipped:

Sources: Derived from: Federal government entitlement transfers: Bureau of Economic Analysis, Federal Budget Outlays: White House Fiscal Year 2012 Historical Tables

And

Here’s where the money goes:

Sources: Bureau of Economic Analysis, US Department of Labor, Bureau of Labor Statistics, consumer price index

And

As the Welfare State has expanded, Americans are working less.

Source: Bureau of Labor Statistics, One Screen database, Labor Force Statistics, Series “LNU01300001”, “LNS12300001”

And there’s this from The Daily Caller:

After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status.  State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.

Now it’s the culture of dependency which the Progressives have created that is making the demand.  And President Barack Obama is prying ever more loose, actively abetted by an increasingly pliant Republican Party.

RINO Surrender?

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Fox News reported over the weekend that Senator Bob Corker (R, TN) now is saying Republicans

should cave to President Barack Obama on [tax rate increases] in order to not only resolve the current crisis but move on and start negotiating spending cuts, which could result in more significant deficit reduction.

Never mind that excessive spending—and runaway entitlements—are part of the current crisis.  Furthermore, with Obama getting his tax increases, there’ll be no spending cuts and no entitlement reform.  Corker knows full well that Democrat promises of spending cuts tomorrow in return for tax rate increases today are worthless.  And he’s begging for surrender anyway.

Corker said this to rationalize his surrender recommendation:

The focus then shifts to entitlements, and maybe that puts us in a place where we actually can do something that really saves this nation[.]

This is…naïve.  If the Republicans surrender on the tax rate increases, why should President Obama believe they won’t surrender on the debt ceiling, on spending cuts, on entitlement reform?  Why should any of the rest of us?

Corker wants to surrender.  That’s his right.  But let him do so as a private citizen.  This RINO needs to be replaced at the next election.  Republican acquiescence with Progressives’ demands over the last 80 years are how we got into this mess in the first place.  And the magnitude of the destructiveness of their demands has been especially manifest these last four years.  Our nation can’t afford any more of those policies.