Tag Archives: economics

Value of Your Tax Bill

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…if the money were left in your hands to put toward your own retirement.  WalletHub has looked at the differing state and local tax bites that they charge you for the privilege of living in their fair states.  Not surprisingly (to some of us) Red states take a sharply lower bite out of your money than do Blue states, as the figure below illustrates. 

But what does this mean in practical terms?  I looked at how the tax money could be used for an individual’s or family’s retirement program were the money left in the pockets of the earner.  Even though this study indicated that Wyoming’s state and local tax bite was the lowest, at $2,365, I used Texas’ more middling $5,193 take (middling because, even though Texas was rated as having the 7th lowest collection rate, the difference between Wyoming and Texas was $2,828, and adding that to Texas’ number got me to the neighborhood of DC’s $8,034, which was ranked 37th lowest) as my baseline because that’s where I live.

I also made a couple of heroic assumptions: working from WalletHub‘s assumption of a single filer, I fleshed that out to say he’s just turned 30 (yeah, he’s late to marriage), and he can afford to set aside the amounts identified below in his retirement program (actually, he chooses to afford, since he already can afford—he’s paying the taxes already).  Those amounts are the differences between the state and local taxes he’d pay in the state indicated in the table below and the taxes he’d pay in Texas.  I also assumed our young man can get a 3% return on investing his money, thereby roughly matching historical inflation.  As a 30-year old, he’ll work for 37 years before retiring.    Finally, this is a static analysis; it assumes no tax differential changes over those 37 years.

State, Local Taxes

Tax Difference from Texas

3% Investment Return

New York

$4,525

$172,300

California

$4,316

$164,400

New Jersey

$3,637

$138,500

DC

$2,841

$108,200

Even with that middling difference between Texas and DC, DC’s “state” and local tax bite is worth more than $100,000 over our man’s remaining working lifetime were he allowed to keep his money.  What does he get for that extra tax money taken?  A higher cost of living, and not much else.  More restrictions on individual freedom and responsibility—gun laws, for instance—and a denser population; although lots of folks like that part.

But think about what our man can do for himself with all that extra money—like visits to states with denser populations for all those attractions, while living more cheaply when he’s done with his vacation.  And more support for charities of his choice, through means of his choice, rather than those of government’s choices.

How Can We Trust This Program?

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ObamaMart’s back end has yet another “glitch,” this time one that impacts whether a potential Obamacare health welfare plan buyer gets the subsidy the Obama administration says is due him.

The Philadelphia Inquirer found this one in its own explorations for a story on the various income scenarios that would draw a Federal subsidy.

Incorrect poverty-level guidelines are automatically telling what could be tens of thousands of eligible people they do not qualify for subsidized insurance.

The error in the federal marketplace primarily affects households with incomes just above the poverty line in states like Pennsylvania that have not expanded Medicaid.  The mistake raises the price of their insurance by thousands of dollars, making insurance so unaffordable many may just give up and go without.

It appears, for now, to be a mistake limited to ObamaMart’s window shopping tool and not the part of the back end that calculates whether there will be a subsidy at all, and if so the subsidy actually to be paid a buyer who actually buys and pays the premium.  The error seems to be centered on the tool’s use of the 2014 Federal Poverty Guideline, rather than the Obamacare-mandated 2013 levels.

This particular error is easy to correct, but it shouldn’t have occurred at all—apparently nobody at CMS cared enough even to check the simple things, like this one, before they decided it would be a good idea to foist this Web site off onto the public.  And apparently nobody at CMS has cared enough to go look in the months since it’s become so embarrassingly well-known what a failure ObamaMart is (quite apart from the disaster that is the underlying Obamacare).

That it was discovered not by ObamaMart’s CMS developers or testers but by someone in the private sector is illustrative of the level of seriousness with which Obama, his HHS Secretary Kathleen Sebelius, or anyone else in HHS or Treasury or the IRS has (not) taken this program.

In the end, though, this “glitch” demonstrates a larger problem: no matter the good intentions, no matter the strength of the consensus that a program is a good idea, Government is simply no good at doing this sort of thing.  The tasks must be left to private enterprise operating in a free market economy.

Indeed, that’s where the needs will be best identified, and producers, sellers, and buyers will coalesce to provide the most efficient implementation.  Or not, if the market—us private citizens—don’t agree that the need exists at plausible prices.

Rookie Gaffe?

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That’s what Paul Edelstein of IHS Global Insight thinks, according to The Wall Street Journal.  In the Fed’s post-FOMC presser last Wednesday, Fed President Janet Yellen suggested that interest-rate increases might start beginning roughly six months after the Fed’s QEx (which is in the process of being…tapered) ends or as soon as this fall.  Edelstein had this to say as the stock market reacted negatively to Yellen’s remarks:

This could have been a rookie gaffe on Yellen’s part.  This was, after all, her first press conference.

Or, it’s possible that Yellen knew what she was doing, and she said what she said with carefully chosen words.

It’s also possible that Yellen knew another thing that Edelstein and his ilk seem to have conveniently forgotten: the Fed exists to stabilize the economy’s price behavior and to work toward full employment, however that’s defined.  In particular, the Fed does not at all exist to prop up stock prices for the benefit of investors like Edelstein, or me.  Our performance—work with me on this, it seems to be a lost concept for many—is on us; it’s a part of our personal responsibility.

And we had to know that QEx would end, we do know that is ending, and we should know that it’s on us to deal with the inflation that will result on OEx’s completion.  The Fed has no obligation—it cannot have this obligation in a free market economy—to inure us from the outcomes of our decisions.

Knowledge of Obamacare

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Seventy percent of uninsured Americans said they do not know about Obamacare tax credits, and 45% are unaware of the enrollment deadline.  So says a poll taken by Bankrate.com.

What might this mean, really, especially in the face of a Democratic Party that’s already demonstrated an impressive skill at getting its message out to all Americans?  Some thoughts come to mind.

  • We aren’t as plugged in to the Internet as we like to think we are.  While that might be true for rural America, the number of rural Americans cannot account for these numbers.
  • Nobody reads the newspapers or watches network news on television anymore.  Declining circulation and Nielson ratings do tend to support this.
  • It might also be strongly influenced by what we actually do when we’re online or reading the papers or watching TV.  Folks no longer read the “news” or watch it on TV—they’re reading the funny pages and sports sections, and they’re watching entertainment programming on TV.  And they’re doing largely the same thing as they surf the Internet.  The “news” items, no longer being unbiased reporting of the day’s events, are being increasingly disregarded altogether.
  • And it might be a simple case of whatever the Democratic, or Republican, Party says is becoming increasingly disregarded: from the fatigue induced by the constant bombardment by both parties (but by the Democrats especially) with political pronouncement, and duns for money which add to the general fatigue, as well as an irritation aspect.  And from a growing disdain for the routine and blatant mendacity of each party.

A Progressive Contradiction

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Don Boudreaux at Cafe Hayek cites Professor Todd Henderson, a University of Chicago law professor, who makes one Progressive contradiction explicit.

[R]eading all your [Boudreaux’] posts about the minimum wage and global warming this morning, I was struck by the paradox in the proposed remedies for these two problems by politicians.  The first problem is income inequality, and the remedy is to set minimum contract terms.  The second problem is externalities from carbon protection, and the remedy is to tax output levels.

Progressives correctly surmise that if the cost of carbon output is raised (for instance, by taxing it), we’ll get less output of carbon.

On what basis, then, do Progressives surmise that if the cost of labor is raised (for instance, by raising the legal minimum wage), we’ll not get less labor?