Relevant and even prescient commentary on news, politics and the economy.

Terrorism, UK Today, France Yesterday

From a story in Daily Mail:

Terror suspects including jihadis returning from fighting in Syria are to be offered taxpayer-funded homes, counselling and help finding jobs to stop them carrying out attacks in Britain.

The top-secret Government strategy, codenamed Operation Constrain, could even allow fanatics to jump to the top of council house waiting lists.

Official documents seen by The Mail on Sunday reveal that up to 20,000 extremists previously investigated by MI5 will be targeted with what critics last night described as ‘bribes’ aimed at turning them away from extremism.

The highly contentious nationwide programme is due to start next year, with police and cash-strapped councils hoping the Home Office will pay for it out of its £900 million counter-terrorism budget.

The article goes on:

The move comes amid growing concern at the huge number of radical Islamists living in Britain who the security services are unable to track effectively.

Fanatics who had been under surveillance by MI5 in the past were among the perpetrators of the two terror attacks in London and one in Manchester this year that left 35 people dead.

The intelligence agencies fear as many as 20,000 former ‘subjects of interest’ – people who had been monitored but later dropped off the radar – could be plotting fresh atrocities. It is this group that will be targeted by the new scheme.

A bit more:

A fierce debate has also raged about how to deal with the estimated 360 battle-hardened jihadis who have returned to Britain after fighting with Islamic State in Syria and Iraq and the ones who may come back now after the fall of the so-called caliphate.

Bear in mind an awful lot of these battle-hardened jihadis ended up that way because they were attracted by the propaganda about how they were going to get to treat the, well, call them infidels.  If the Daily Mail story is anything close to true, I imagine “bang for the buck” is going to be an element in a very bad pun for the British taxpayer.

Now here is an article about France in Deutsche Welle  (Deutsche Welle is Germany’s equivalent to the BBC International Service or Voice of America) from a few weeks ago:

France is about to pass a new anti-terror law as it eases its way out of the state of emergency. But civil rights campaigners say it will put citizens under general suspicion. Lisa Louis reports from Paris.

The state of emergency was declared in the immediate aftermath of the November 2015 terror attacks, in which 130 people were killed. France has since been hit by various other attacks and martial law has been renewed several times. It will now expire in early November, just like President Emmanuel Macron had promised during his election campaign.

But first, parts of it will be enshrined in general law.
“The terror threat level is still very high and we can’t just lift emergency rule without adapting our law accordingly,” said MP Yaël Braun-Pivet from the government party La Republique en Marche (LREM). She heads the National Assembly’s Law Commission that has drawn up the new anti-terror legislation.

To summarize… measures that in the past were so extraordinary they were meant to deal with insurrection and other threats to the nation are going to become everyday law under a President who just half a year ago campaigned as the Great Left Hope.  I am not an attorney, but effectively, it seems to me to be the equivalent of the US having and lifting martial law, though not before taking some of the provisions of martial law and moving them into our civil and criminal codes.

French authorities also make a case that sometimes there is an overlap between those who commit petty crimes and those who commit terrorist acts.

I think most people would prefer to live in a world with less terrorism (and less petty crime) on the one hand, and fewer police powers on the other hand.  But scaling back the cops isn’t going to prevent the next terrorist attack, much less the one after that.  So there is a trade-off.

Obviously, working backward, none of this would have happened without an assortment of terrorist attacks, some spectacular and some mundane. If you had the ability to tweak one thing in the past, what is the smallest change in French history that would have prevented France from having all these terrorist attacks?  Are there any lessons in this for Britain?  What about for the US?

 

Update, 5:11 AM PST, 10/31/2017…  a couple of minor grammatical corrections were made.

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A NAWRU proposal

A NAWRU proposal
Marco Fioramanti and I have strongly criticized the European Commission DG EcFin Output Gap working Group estimates of output gaps.
I have also written a lot here at angrybearblog

This topic is very important, because the output gaps are used to calculate cyclically corrected budget balances which are regulated by the Stability and Growth Pact. The calculations determine dictates for fiscal policy of Euro bloc member states.
Having criticized the current consensus approach, I have tried to make constructive suggestions. I discussed two alternative approaches here

I will now report progress on implementing one those proposals: to estimate NAWRU with a Kalman filter based on a Phillips curve model as the Output Gap Working Group currently does. However, assume that the NAWRU is a random walk without drift not a second order random walk (that is a random walk whose drift is itself a random walk).

I think that Marco Fioramanti and I already made a very strong case for at least that change in the filter. I briefly repeat the arguments after the jump.

Problems with the current official NAWRU series have been recognized by DG EcFin staff.
pdf warning Julia Lendvai, Matteo Salto and Anna Thum-Thysen (2015) discuss the possiblity of using the estimate of structural unemployment to calculate output gaps. They note that this implies quite different assessments of fiscal stances.

Recently (pdf warning) Atanas Hristov, Christophe Planas, Werner Roeger and Alessandro Rossi (2017) have proposed an approach to reconciling the estimation of NAWRU with the Kalman filter and the forecasts based on the assumption that NAWRU will converge to the most recent estimate of structural unemployment. Their approach is to include that assumption when calculating the conditional mean NAWRU for each period (the filtered NAWRU). This is mathematically equivalent to assuming that future NAWRU is actually measured and treating it as a datum. They call the newly calculated series “anchored NAWRU”

Notably, they do not use the assumption that future NAWRU will converge to the most recent estimate of structural unemployment when estimating the parameters of the model by maximum likelihood. This is important, because the assumption would reduce the likelihood of positive variance of changes in the drift. Importantly, the assumption that NAWRU will take some value in a given year (say 2026) does not imply the long term forecasts actually made by DG EcFin. The forecasts are based on the assumption that it will remain at that value, at least in expected value, from that year on. This means that, when forecasting, it is assumed that the NAWRU is either has a fixed mean or is a nonstationary process without drift. The model used to filter the data and calculate anchored NAWRU remains inconsistent with the model used to forecast.

Notably, the differences between unanchored and anchored NAWRU are small for most countries (Greece is an exception). Also they are tiny except for recent years. The huge (and mathematically impressive) effort to calculate anchored NAWRU doesn’t make very much difference. In particular, although the aim was to reduce the cyclicality of filtered NAWRU, the anchored NAWRU series remains extremely procylical.

These aspects of the filtered series are the results of the assumption that NAWRU is a second order random walk. As noted above, this assumption implies a gigantic variance of future NAWRU conditional on available data (and not conditional on assumptions about future NAWRU). This huge variance implies small corrections due to assumptions about future NAWRU. Basically, the model (including calculations of filtered NAWRU) says pretty much any NAWRU is about equally likely a few years in the future. This means that even if future NAWRU were actually observed, it would provide almost no information about current NAWRU. The same problem which makes it absurd to attempt to forecast based on the time series model used to calculate NAWRU also guarantees small changes from imposing the more reasonable assumptions used when forecasting (on one period and that period only).

However, Discussion Paper 069 suggests a solution to this problem. Hristov et al assume that the expected value of future NAWRU is a known constant. This implies that they assume that it is constant — that is that NAWRU either has a constant mean or is a non stationary process with zero drift. To remain as close as possible to the current methodology, it is tempting to assume that it is a random walk without drift. That happens to be the proposal I made about one month before Discussion Paper 069 was published.

The assumption that NAWRU is a random walk with drift implies radically different estimates than the assumption that it is a second order random walk (that is that the drift is itself a random walk). For most countries, the filtered series are much less cyclical. Sometimes, the estimated variance of the disturbance to NAWRU is zero, so the filtered series is a constant.
Discussion Paper 069 implies a natural approach to assessing the two models of NAWRU. It is assumed that the likelihood of the NAWRU series (treating filtered NAWRU as a series of estimates of a random parameter) is the product of the within sample likelihood and the likelihood that, in 8 years, NAWRU will be equal to the estimate of current structural unemployment. In practice this means that Hristov et al assume that it would be good for the NAWRU series to be close to the structural unemployment series.

I consider the cases of the 15 countries which were in the EU in 1997. For some reason, there doesn’t seem to be an anchor calculated for Ireland. This leaves 14 countries. Also for mysterious reasons, the most recent data set I can find is nairudata.xls dated February 9 2016. This file includes data and univariate forecasts for 2015, 2016 and 2017. The univariate forecasts are treated as data by the program.

For 12 of the 14 countries, my estimate of NAWRU in 2017 is closer to the anchor than the official estimate is. The exceptions are the UK (where the two estimates are very similar) and Germany (see Table 1).

My estimate of NAWRU for 2017 is also my forecast of NAWRU in 2025, because I assume that NAWRU is a random walk without drift. In contrast, the DG EcFin assumptions imply a non zero estimate of the drift in NAWRU as of 2017. This means that forecasts of NAWRU for 2025 can be quite extreme — for Germany the forecast is 2.1796 % and for Greece it is 29.0646 %. Again, my model performs better according to the criterion chosen by DG EcFin. For 11 of 14 countries my forecast of NAWRU in 2025 is closer to their anchor than their forecast is. The three exceptions are Belgium, Portugal, and Sweden for which the forecasts are very similar. (again see Table 1)

2017 nawru my nawru anchor NAWRU_2025

AT 6.1373 __ 5.6276 ___ 4.857178 ___ 7.7460
BE 6.2292M_ 6.8979 __ 8.230426 ___7.0711
DE 4.4600 __ 3.5965 __ 5.737078 ___ 2.1756
DK 6.0404 __ 5.7777 __ 4.607711 ___ 6.1252
EL 23.0171 __ 9.6774 _ 12.05144 ___ 29.0646
ES 19.8840 _ 15.2215 _ 15.44594 ___ 20.2009
FI 9.2566 ___ 8.5237 _ 7.556312 ___ 10.4474
FR 10.4753 _ 10.2194 _ 8.680219 ___ 11.0925
IT 11.0515 __ 9.1486 __ 9.717258 ___ 13.3583
LU 5.9337 __ 5.8268 __ 5.01865 ____ 7.2467
NL 6.5100 __ 4.2894 __ 4.524969 ___ 8.0404
PT 11.9014 ___ 7.4360 _ 9.148998 ___ 7.6632
SE 4.1951 __ 6.1472 ___ 5.73956 ____ 5.7181
UK 5.5120 __ 5.5018 __ 6.232115 ____ 4.6396

Table 1 suggests that those who think it is reasonable to anchor NAWRU estimates should consider it more sensible to model NAWRU as a random walk without drift than as a second order random walk. The same logic logic motivates the two choices, and forecasts of the 2025 NAWRU are similar.

There are other very marked differences between the currently official NAWRU estimates and alternative NAWRU estimates (that is estimates calculated assuming NAWRU is a random walk without drift). For most countries, the alternative NAWRU series does not track headline unemployment — alternative NAWRU is much less cyclical than official NAWRU. In fact, for many countries, the maximum likelihood estimate of the variance of the disturbance to alternative NAWRU is zero, so the filtered series is a constant.

It is reasonably clear that the output gap working group will never accept such an alternative estimate of NAWRU as a constant. I guess that, even if they accepted the random walk without drift assumption, they would impose a lower bound on the variance of the disturbance to the NAWRU. Also, for a few countries, the maximum likelihood estimate of the variance of the disturbance to cyclical unemployment is very low. I guess a lower bound would be imposed on this variance too. Even with these limits imposed a priori, the approach would still be very different from the current approach. The limits can be the same for all countries and never changed. I have estimated models assuming NAWRU is a random walk without drift, cyclical unemployment is an AR(2) and both have disturbances with variance at least 0.1.

Estimating the NAWRU assuming it is random walk without drift has striking advantages: the resulting series is not markedly procyclical, it does not reach implausibly high values for any countries, and the most recent value of the unanchored filtered series is close to the estimate of structural unemployment. It is very hard to think of arguments against modelling the NAWRU as a random walk without drift. It seems that it would be reasonable to model the NAWRU as a random walk without drift.

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Gimme shelter: the real cost of renting vs. homeownership

Gimme shelter: the real cost of renting vs. homeownership

What is the real cost of shelter?
Over the last decade there has been lots of discussion of housing prices in isolation. Sometimes that discussion includes an inflation adjustment — which is problematic, since housing constitutes nearly 40% of the entire consumer price index, so in essence housing is being deflated largely by the cost of housing itself! From time to time there has also been a little — but not much — discussion of rental prices.

But I have never seen a discussion of the relationship between the relative cost of homeownership vs. renting, particularly as a function of the household budget.

That is a curious void. For the choice (or ability) to live in the residence one desires isn’t a matter of its cost by itself, but also the relative cost of the type of residence.  What is the cost of a house compared with the cost of an apartment? How expensive are each of them compared with a household’s income?  If both are too expensive, maybe the choice is made to live with mom and dad as an extended family.

The purpose of  this post is to fill that void. Herein I compare the cost of home ownership — in terms of the down payment, but also in terms of the monthly mortgage payment — with the cost of renting, and further, compare each to the median household income (since by definition, the people renting the apartment or living in the house are a household!).

Let’s start with the “real” cost of a down payment on a house. The first choice of most people is to reside in a single family house.  Most people who follow economics are familiar with the housing bubble, bust, and recovery in the past 15 years.  Here’s what the median house price looks like measured in comparison with median household income:

In the above graph I’ve divided house prices by 10, to measure the share of annual household income needed for a 10% down payment.  The graph would look exactly the same, just with different nominal values, assuming a different percentage of down payment.

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Similar to “Alexander – Murray,” CMS Proposal Gives States Authority to Redefine ACA Minimum Benefits

I have been getting quite a few alerts on proposed changes happening behind the scenes with the ACA. I also found a couple of new places with some intelligent writers who have explained things in greater depth than what I knew. The CMS is proposing a rule allowing states greater authority in defining the ACA. This comes in addition to Trump’s EO. The new rule would give states greater flexibility in:

– Defining the ACA’s minimum essential benefits to increase affordability of coverage,

– a larger role in the certification of qualified health plans offered on the federal insurance exchange,

– and more leeway in setting medical loss ratios for individual-market plans.

If a state redefines the minimum benefits in the ACA, what we can expect to see is emerging trash plans or mini-plans, which were sold by McDonalds and other companies and are useless in many cases. Granting states a larger role in qualifying healthcare plans on the healthcare exchanges gets back to what I have pointed out before; states failed miserably in defining healthcare requirements and in providing healthcare to citizenry in many cases. Before the ACA, healthcare was the ER due to a lack of insured coverage. Patients were paying Chargemaster rates and often times paid little of the bill due to extremely high bills or low income.

Does the CMS proposal force states to adequately protect the vulnerable as called out in Section 1332 of the ACA? The same as the Senate Bill Alexander-Murray; without a change in Section 1332 of the ACA, underfunded states will have to provide similar coverage. Under Section 1332 States can:

“propose a change or eliminate almost all core ACA features, the individual and employer mandates, plan design including the Essential Health Benefits, and the subsidy basis and schedule. For a waiver to be allowed; however, the state must demonstrate that it will cover as many people, with coverage as affordable and comprehensive as the default structure and must not increase the deficit.”

In other words, the state can get a waiver to the ACA requirements as long as the state can show it covers the same numbers of people with just as affordable and comprehensive state coverage as the ACA while not increasing the deficit (to be redundant in stating such in all three cases). I do not see the CMS getting past this part of the ACA law and Alexander-Murray Republican-Democrat alliance proposes to change Section 1332 and the subsequent 2015 guidance.

In 2015, HHS had issued guidance on Section 1332 of the ACA stating a wavier:

Shall not disadvantage “vulnerable (low income, elderly, disabled), etc. residents.”

“Assessment of whether the proposal covers a comparable number of individuals also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. Reducing coverage for these types of vulnerable groups would cause a waiver application to fail this requirement, even if the waiver would provide coverage to a comparable number of residents overall.”

Shall not disadvantage residents by affordability.

(The CSR subsidies President Trump stopped with his Executive order will cause increased 2018 healthcare insurance premiums which will be picked up by premium subsidies for anyone who was eligible for a CSR subsidy. What makes it interesting is how the states apply this increase and their application of it could favorably impact all people who are on the healthcare exchanges [more on this later] ).

“Waivers are evaluated not only based on how they affect affordability on average, but also on how they affect the number of individuals with large health care spending burdens relative to their incomes. Increasing the number of state residents with large health care spending burdens would cause a waiver to fail the affordability requirement, even if the waiver would increase affordability for many other state residents. Assessment of whether the proposal meets the affordability requirement also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. Reducing affordability for these types of vulnerable groups would cause a waiver to fail this requirement, even if the waiver maintained affordability in the aggregate.”

The Alexander-Murray bill removes both guiding regulations and substitutes a much weaker one for affordability. Both the Alexander-Murray bill and the CMS proposals surrender control of providing healthcare to states with less federal funding and the same attitude of providing healthcare as experienced in the past. It leaves those who are uninsured or under insured vulnerable to state politics and includes the low-income individuals, elderly individuals, those with serious health issues, and those who have a greater risk of developing serious health issues now protected by the ACA.

While not Medicare-for-all, single payer, or something mimicking European healthcare; the ACA was still a huge step forward in comparison to what existed before it. It eliminated an attitude as expressed by Michigan State Senator Joseph Hune’s upon the passage of the Medicaid expansion; “I am sick to my stomach with the expansion of Medicaid.” An embarrassment of the same magnitude as Trump’s in his public comments and ignorance.

Alexander-Murray also calls for the HHS to issue guidance by providing examples of model state plans that meet the requirements for approval or what has been called cookie-cutter waivers. When asked by one blogger whether Alexander-Murray whether the amendment to Section 1332 effectively protects the vulnerable now protected in the ACA Timothy Jost had this to say:

“If administered by the Obama administration probably yes; if administered by the Trump administration, who knows? (sounds like a “no” to me) I think the intent of the provision is clear, that affordability not be decreased for vulnerable populations; but, the repeal of the guidance and of the procedural rule are to me, the most troubling parts of the bill.”

Given the attitude displayed by this administration now and in many state legislatures pre-ACA, it is hard to believe either would take an approach to protect the vulnerable over providing tax incentives to the 1% of the population making >$500,000 annually and their own re-election in 2018. It is pretty clear what the political priorities are today.

Both Michigan Senators Peters and Stabenow have come out in support of the Alexander-Murray bill repealing the 2015 HHS guidance including the detailed regulations governing waiver submission and assessment issued in 2012. An exception is being made for affordability if approved. I believe it is critical the ACA not be tampered with beyond taking it to the next level of healthcare which might be a form of European and a two tiered system. At this point in time with a lunatic as the president, I have no reason to support a legislature bent on cutting taxes for the 1% of the housholds making >$500,000 annually. That revenue to support such a tax cut will partially come from healthcare cuts.

I have emailed both Senators asking them to withdraw their support of the Alexander-Murray bill with no reply. It is time to go to pen and paper.

Does the Alexander-Murray bill adequately protect vulnerable groups?” Andrew Sprung, xpostfactoid blog

CMS to allow states to define essential health benefits” Harris Meyer , Shelby Livingston and Virgil Dickson; Modern Healthcare

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Everything Is Going Great, So Let’s Change It

Everything Is Going Great, So Let’s Change It

Well, the actual headline on the front page of the Washington Post below the fold today reads, “Economy shows strong growth, could provide GOP momentum.”  The strong growth is the 3.0% annual growth rate of GDP in the third quarter (supported by a strong stock market), with the momentum not being the obvious point that this might lead to general popular electoral support in the future for the GOP, but more specifically that this somehow might aid the GOP in Congress to change the current apparently successful fiscal and monetary policies inherited from Barack Obama.  Everything is going great, so let’s change it.

On fiscal policy, of course, this refers to the still not clearly formulated tax change (“reform” in the words of the GOP).  As we know cutting taxes for the rich is the one thing that seems to unite the party, so gosh darn it, they will probably do it, even if it takes a lot of effort.  As expected all those loud fiscal hawks from the Obama period are now fine with adding at least $1.5 trillion to the national debt, which will probably end up being more as some of the revenue increasing parts of the possible plan look like they may not pass.  After all, while Trump says the middle class will gain, indeed everybody, is going to get the hugest tax cut ever and it will pay for itself somehow.  But estimates have 80% of the cuts going to the top 1 or 2%, given the emphasis on cutting corporate taxes.  Anyway, here we have a pretty good growth performance that supposedly justifies a move to change the tax policy and system that has existed while this good performance happened.  Frankly, I do not know what the effect on growth will be as a result of whatever they pass, as they will pass something, although I doubt it will be all that big one way or the other on aggregate growth.

The more amusing part of this is the argument apparently been given by Treasury Secretary Mnuchin and others in the last few days that is decidedly ironic.  It is that the stock market increase we have seen has at least partly been fueled by the expectation of a nice big corporate tax cut that will boost profits, along with all the deregulation that has been going on .  So, the argument goes, if the tax plan (or some tax plan, heck, anything) is not passed, well folks, that nice stock market increase might be threatened.  No tax plan passed, well, maybe a sharp decline of the stock market!  I find this hilarious, although it might be true.  The stock market has begun to look a bit elevated, near the boundary of getting into bubble territory by some measures, so, you had better watch out!

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A Serious Misreading of Coase

A Serious Misreading of Coase

Corey Robin is very insightful about a lot of things.  I think his take on conservatism, that the thread running through it is opposition to attempts to demolish pre-existing hierarchies, explains ideological twists and turns that would otherwise remain mysterious.  Don’t take this post as an expression of anti-Robinism.

But CR seriously misreads economic texts that abut political theory.  I felt this way about his analysis of Hayek, which simply ignores the centrality of his lifelong revulsion at Vienna-school-style positivism, with its echoes in a certain style of economic formalism.  (Yeah, Hayek bought into a lot of the elitism of the right, but so did nearly every other conservative; that’s not what made him consequential.)  And now he gives us a terrible interpretation of Coase.

According to CR, “Coase divides the economic world into two modes of action: deal-making, which happens between firms, and giving orders, which happens within firms.”  He then goes on to paint Trump as an über-Coasian, at least in his own self-presentation, since these are the only types of action he recognizes.  I won’t dispute the portrait of Trump, but Coase?  Not a chance.

Coase is proposing a theory of the make-or-buy decision which faces every firm.  (This is the case even for firms in a socialist economy, assuming they can transact in some way with other enterprises.)  What goods does a firm produce internally, and what do they acquire from the outside?  Do you hire your own accountant, or do you buy the services of some accounting firm?  Does Toyota make its own seat cushions for its cars, or does it get them from a supplier (or group of suppliers)?

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Marxism-Leninism In China Update

Marxism-Leninism In China Update

The once-every five years Chinese Communist Party conference is now over.  It appears that Xi Jinping has not identified an heir to himself as his two predecessors did at the time of this equivalent meeting during their presidencies.  Furthermore, unlike either of them, Xi has joined Mao and Deng Xiaoping in having his work identified in the Chinese constitution as being an official part of Chinese ideology.  Most observers consider this a sign that even if Xi gives up one or maybe even two of his official positions, he is likely to continue to be the Paramount Leader in practice beyond the next five years.  A key part of his thought is the superior role of the Communist Party and its foundation on Marxist principles, even if a mixed economy is to be followed, “socialism with Chinese characteristics.”  So, the assertion of Marxism-Leninism in China by Xi apparently means a justification for him to remain in power in China for the indefinite future.

The obvious way that Xi could pull off staying in power without changing the constitution would be to hang on to being Party Secretary as well as Chair of the Central Military Commission.  The job that has a two term limit is President, with him just starting his second five year term as that.  In five years he could easily select somebody who  is willing to obey him to replace him as President while he hangs on to the other two positions, which have no term limits to them.  The one rule he will have to break, although apparently it is not in the constitution and merely a recently accepted policy, is the upper age limit of 68.  That is apparently for all positions.  In five years he will be 69, so that would have to go as a rule, at least for him.

Barkley Rosser

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Top Marginal Tax Rates and Economic Growth

Top marginal taxation and economic growth by Santo Milasi and Robert Waldmann has (finally) been published
here in Applied Economics

ABSTRACT
The article explores the relationship between top marginal tax rates on personal income and economic growth. Using a data set of consistently measured top marginal tax rates for a panel of 18 OECD countries over the period 1965–2009, this article finds evidence in favour of a quadratic top tax–growth relationship. This represents the first reported evidence of a nonmonotonic significant relationship between top marginal income tax rates and economic growth. The point estimates of the regressions suggest that the marginal effect of higher top tax rates becomes negative above a growth-maximizing tax rate in the order of 60%. As top marginal tax rates observed after 1980 are below the estimated growth-maximizing level in most of the countries considered, a positive linear relationship between top marginal tax rates and GDP growth is found over the sub-period 1980–2009. Overall, results show that raising top marginal tax rates which are below their growth maximizing has the largest positive impact on growth when the related additional revenues are used to finance productive public expenditure, reduce budget deficits or reduce some other form of distortionary taxation.

Update: Also US States say Carl Davis and Nick Buffie at T€he Institute On Taxation and Public Policy. “States without personal income taxes lag behind states with the highest top tax rates”

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House Passes Senate Tax Reform Budget Resolution and Creates 2018 Budget

Everyone is reporting a 2018 Budget has been passed. Tucked away inside the 2018 Budget is a Tax Reform Resolution which allows the House to write the bill.

The House has passed the Senate Tax Reform Budget Resolution creating a $1.5 trillion deficit with a 216-212 vote. What this means in the Senate is a majority vote is only necessary to pass the Tax Reform bill which Trump has been campaigning and tweeting silly comments. Unless the House and Senate can provide the necessary revenue generation in the Tax Reform bill at 10 years out, it will be subject to a sunset the same as the Bush’s 2001-2003 tax breaks were. The key to this budget is the resolution for tax reform which will be looking at state income and property tax deductions on federal income tax returns, 401k tax exemptions, capping 401k contributions, Medicare and Medicaid cuts, and the old standby cuts to the ACA.

Tax reductions for the 1% of tax paying households making >$500,000 annually as funded by everyone else.

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