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

Integral and Indispensable to the regular duties, Your govenment says this defines if you get paid

Update below.

From a Salon interview with  Catherine Ruckelshaus, general counsel and program director for the National Employment Law Project comes this case being argued today in the Supreme’s Court: Integrity Staffing Solutions, Inc. v. Busk

We tend not to hear much about Supreme Court cases until there’s an imminent ruling, much less before oral arguments have begun. So could you give me a quick overview of the case?

Sure. This is a case that’s been brought by Amazon warehouse workers who were working in a warehouse in Nevada and who at the end of their shift every day were required to go through an anti-theft screening in the warehouse that took workers as much as 25 or more minutes to get through.

So the workers brought a lawsuit against the staffing company that Amazon has [contracted] to recruit and hire the workers, it’s called Integrity Staffing [Solutions], and sued to try to get paid for the time they stood in line at the end of their shifts The [United States Court of Appeals for the Ninth Circuit] said the workers should get paid for that time, and the employer appealed and the Supreme Court has now taken the case.

The argument for the workers seems pretty intuitive to me; if you’re doing something because of your employer’s demand, you should, within reason, be compensated for your time. What’s Integrity’s argument in response?

The employer and, surprisingly, the government are saying that because the duties are not “integral and indispensable” to the regular duties that the workers are performing, the work isn’t compensable. So they’re trying to carve out of any duties that workers would perform whether or not it’s at the direction of the employer — or for the benefit of the employer — if they’re not “integral and indispensable” then you don’t have to get paid for it.

Are you getting this?  Do you get this line of argument?  This is a perfect, dictionary ready example of just what is wrong with our legal system.  That anyone can possibly look at the employer/employee relationship and consider a line of reasoning that parses out that relationship such that the legal concept of the “common man” understanding is no longer a valid legal principle just shows how little if there is any regard for the concept of the rule of law is present today.

But worse is that We the People, or at least those who are acting as stand ins for us have decided that the proper position, the one We the People would choose if voted on is the one that states an employer can pay you or not depending on just how close to the assembly line you are for the present activity you are doing.

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Explaining Class Warfare

Last month one hundred and fourteen thousand unemployed moochers…suddenly yank the government teat out of their mouths, get off the couch for forty hours a week? Why?
I say follow the money; cause I found out, that right around the time those people got those jobs…they started getting paid!
And just where does that money come from? Right out of the pockets of the job creators. How’s that for your socialist redistribution of wealth? Folks, it’s called class warfare.
Mr Colbert has created a new party that will issue a certificate to sooth the hurt of the job creators. The Certificate of Richness issued by:
Protecting Industry Titans and Yachtsman party. The P.I.T.Y. party.
And right on cue:
If President Obama is re-elected and raises taxes, Westgate Resort’s David Siegel says he will have to lay off workers and downsize his company — or even shut it down.

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Wages driven down, now relative to market you’re over paid!

Update: spelling corrected in title.

I heard and then went to look see that Caterpillar is working hard to control it’s costs.

“Despite earning a record $4.9 billion profit last year and projecting even better results for 2012, the company is insisting on a six-year wage freeze and a pension freeze for most of the 780 production workers at its factory here. Caterpillar says it needs to keep its labor costs down to ensure its future competitiveness.” 

It has purchased 17 other business since 2008, 9 were non US companies. Two companies were purchased in 2011. Here’s the thing, a 6 year freeze? I guess there will be no inflation? I mean like zero. Though economist are saying inflation is needed as part of the solution to our slow economy. Of course, Obama having frozen government wages, I guess Caterpillar is just being patriotic. Nothing like We the People blazing the trail for how we want the private sector to treat We the People.

Caterpillar made $4.9 billion profit. If they raised these people’s pay $10,000 each, your only talking $7.8 million. It is 0.159% (0.00159)of Caterpillar’s profit. Inflation has averaged since 2008 about 2.075%.  Giving the worker $10,000 more per year does not equal the inflation rate as a share of the profit. If the worker were getting their due based on inflation they would get a piece of $101,675,000. This would be $130,352.56 each for the 780 workers. Caterpillar would still have $4,798,325,000.00 profit. Imagine what that $130,352.56 would do for the economy in Joliet! I’ll bet Caterpillar equipment sales would rise do to demand for construction.

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Define Rich V: Looking at the historical labor economy

We are taking a little side trip inthis series of defining rich based on the prior tax rate schedulesbut, this post is keeping with the process of looking at history formarkers as to the definition of rich. For any new readers, I believeas a society we knew and had definite boundaries as to what definedrich. I believe we knew how to say the word “when” as the incomeand wealth was pouring into one’s glass These boundaries producedspecific public policy that resulted in a more equal and justsociety.
In our local city there is anothertextile mill going to the grave. We have lost a couple of huge millsto fire in the last decade.  The local paper did an article on thismill known as the French Worsted Mill. It was built in two stages,1906 and then 1906. It was part of the revival of the mill industryvia specific targeting of French industrialists, post water power forthe city. A local person who was eventually governor of the state iscredited with bring $6,000,000 of foreign investment into the cityearly turn of the century. At one point they had a Uniroyal rubberplant that made soles for shoes The last pair of Keds (sneakers) went out thedoor in 1970. Nine hundred and fifty people out of work due to “FarEaster Producers”.  (See the article: Pressure growsrapidly for Congress to to clamp tariffs on foreign goods, 5/19/1970)  This was a city as industrial asanything Detroit or Pittsburgh were. This was a cultural center forthe region with 6 theaters and I don’t mean just movies. We aretalking blue collar all the way. We’re talking jobs that we considerthrow away jobs to the far east today. We’re talking jobs that are notconsidered “good” jobs anymore.
So, now that you have the picture, hereis what this mill and the jobs within it were able to do for theworkers. I think this bit of history also adds to my position thatwe have continually pushed the cost of the American Dream up theincome line such that the middle class can not afford it…even with2 college educated people in one house. This is the sub-context tothe discussion regarding the decline of the middle class or the lossof the middle class. When people say the middle class does notexist, what is being stated is that the American Dream is no longerfinancially possible for this groups of citizens. The Dream is notdead or gone, it is over priced relative to the income of the middleclass. It is just as we are not drowning in debt, we are dehydratingfrom lack of income.

The article in the paper talked about aMr. Bacon. He worked in the mill in 1956 along with 700 to 800 otherresidents. The job was not as a machine tool maker (the mill as mosthad their own machine shop) or a special machine operator thatrequired special skill. He was a laborer. The tasks mentioned werestuffing waste wool into burlap sacks or “picking up the yarn” orfetching parts from the machine shop. We’re talking menial labortasks. Starter jobs.
For this work Mr. Bacon was paid $1.80per hour. The minimum wage was $1.00 per hour. At some point he wasearning $80 per week for 40 hours work. This is $4160 per year. With this income Mr. Bacon was able to put himself through collegeand became a teacher in the local school system. It was not just anyold college he went to. It was Providence College with a tuition of$500 per year. Yes, a private college that cost only 1/8thof his annual income.
Mr. Bacon’s story is the story that notonly are the Republican presidential candidates promoting as to whatwe need to “get back” to, but the democrats are saying we needto go forward to. Mr. Bacon’s story with this mill is the proof thatthe 2 parties are not talking about a fantasy time in our history. It did exist.
Here’s the problem though with both of their directions. I’m justgoing to list them.
  1. $40,000 is the annual tuition at Providence College today.
  2. $1.80 per hour is equivalent to the following: $14.40/hour standard of living, $17.80 real value, $18.20 unskilled labor and $22.00/hour production labor.
  3. Tuition of $500 is equivalent to the following: $4010.00 standard of living, $4960 real value, $5050 unskilled labor and $6120.00 production labor
Are you seeing the problem here? It’snot just the difference of tuition going up 80 times. It’s that the wage equivalent today for what amounts to stacking shelves in Walmartis not being paid at Walmart. Not only is this Walmart job notpaying such wages, this is what the current autoworker is earning. The autoworker was one of the best compensated citizens we had. Lookup the definition of  middle class in the dictionary, and you would have seen anautoworker!
How bad is this? Considered
Thelow-wage benchmark set by the UAW has already set off a competitivestruggle in the global auto industry, with Fiat-Chrysler boss SergioMarchionne telling Italian workers they must accept American-styleconcessions or he will move production to North America for cheaperlabor.
I have read that the German automakersare here in the US for the same reason. We are now the stop for outsourcing.
Here is the other more important aspectof the story of the French Worsted Mill and it’s relationship to theAmerican Dream. All those candidates, all those legislators, allthose governors proposing programs they say will encourage people toget off welfare and join the “productive” class, programs thatwill spur job creation, programs that will grow the economy such thatwe can cut taxes JUST LIKE THE GOOD OLD DAYS have no answer for thelack of pay of $14.00 per hour for the Walmart shelf stocker. Theyhave no answer as to how they are going to return the ratio betweenthe hourly wage and the cost of college education to that of the1950’s such that an individual can accomplish what Mr. Bacon andothers from the same mill accomplished. Not only do they have noanswer, they don’t even want to consider this aspect of theirsolution.
Mr. Bacon’s story is also telling uswhy we think the public sector is so over paid. If a Walmart shelfstocker should be earning $14.00 hour comparatively but are not, ifan autoworker earning $14.00 per hour is underpaid comparatively,then certainly the higher hourly wages of the public sector lookexcessive. Everyone used to know that the public sector was alwayspaid less compared to the private sector. They did not have morebenefits than the autoworker, but they do now. The slowdeterioration of the autoworkers and all the other laborers pay andbenefits has hidden the reality of the finger pointing at the publicsector. It’s not that they are paid so much, and thus look “rich”by comparison, it’s that the autoworker has lost so much over such along time that the loss is not recognized as a loss. Instead, thepublic sector’s economic position is looked at as an unjust gain. Not only is this presented as an unjust gain, it is an injusticeperpetrated via taxation. And the stage is now set for all thearguments such as those we hear coming from governors such as Walkerand Kasich.
This is where the Keds hit the road. We, and I have to say “We” because We voted in those who made thepolicy changes, have decided that a good job is not one which allowsthe experience of Mr. Bacon or the autoworker. We upped it to be onethat required academic education. No longer would trade education orapprenticeship education be of such value that it would define themiddle class. Unfortunately, as I had suggested in 2007, evenacademic education is being defined down as to not resulting in a “goodjob”.
“The dream seems to now only be adefinite with a 2 person, college educated and working household. That combination is not far from being in the 10% group. Thus, wehave raised the dream to something beyond which a large portion ofthe population will not reach considering only 28% have a 4 yeardegree even though 64% of high school students are entering college. It looks even worse with people suggesting that you need an IQ of 110to succeed in college. I mean, can we push the dream any further outor be anymore aristocratic in our arguments? “

In 2003, the homeownership rate for upper-income families withchildren was 90.8 percent, while the rate for their low- tomoderate-income counterparts was significantly lower at 59.6 percent– yet in 1978 some 62.5 percent of low-to moderate-income workingfamilies with children owned their homes. Ultimately, had the 1978homeownership rates for working families with children prevailed in2003, an additional 2.3 million children would now be living inowner-occupied homes.

How’s this little bit of history change your ideas about what toblame for the current housing/mortgage mess? I suppose if you areall for a future that is less than what was accomplished in the pastthen blaming government for promoting housing and people for spendingbeyond there means is all right by you.

No one in the middle class of yore was rich by any means. But,what they had was a life much freer of risk than today. What theylived in was an environment that provided the means to manage therisk of life and living. When we are told by those running for or inoffice that Americans need to be more…(fill in the blank) they aresuggesting such from within their own experience of having grown upin a socially constructed via government environment that was devoidof certain risks of living based on one’s income. In other words,you would not be told that the requirement for food stamps would meanyou had to have less than $2000 in savings.

The removal of these risks allowed one to take what theypersonally had (natural ability and otherwise) and grow it into alife where economically more of life’s risks could be taken onindividually.   It was an environment which removed the concept ofluck from the social justice equation.

This environment was not all welfare. It was an environment thatassured a person of common acuity could live a life free from therisk of weather, malnourishment, illness and aging. It was anenvironment that produced an economy such that the vast majority ofthe 72% without a college education were living this minimal risklife. We had an environment which supported the economic life journeyof the autoworker, simultaneously supporting the economic life journey of Mr.Bacon’s experience, simultaneous supporting the economic life journey of anindividual such as President Obama.

It was an economic environment which produced a directrelationship between income/wealth and risk absorption. As incomeand wealth went up, so did the absorption of risk and vice versa. Today we

have a system that is completely theopposite such that we have arrived at place where the relationship iscompletely reversed. We spare those who as a group can purchase agovernment which insulates them from any risk while pushing all therisks of living on to those who can not afford any risk and then tellthose people “oh well”. The bank bailouts and theausterity plan is the realization of the reversal of the risk/income-wealth relationship.

Our past economic environment also produced a direct relationshipbetween income-wealth and luck. Again, as income-wealth increased,your success was more dependent on luck and vice versa. This too hasbeen reversed as we see with the Washington revolving door and evergreater capture of the nations wealth as one’s income-wealthincreases. The environment produces an ever stronger assurance thatincome and wealth will increase as they both increase. This isunlike the experience of the middle class including all the highly educatedpeople who find themselves under employed or unemployed do to theshear luck of having chosen wrong. Today the closer you are to zeroon the line of income-wealth, the luckier you need to be.

I’ll leave you with this, the class warfare. There is classwarfare. It has always been with us, since the writing of theConstitution. However, I believe the current theater is the mostdevious the vast majority of the US population has ever faced. Thisis because of the two parties in this seemingly perpetual human quest,one has successfully cloaked themselves in the costume worn of athird party observer effectively immunizing themselves from the pain of the fight via camouflageof a messenger.  I even suspect some aregaining a wee bit of entertainment in their ability to manipulate theircounterparts into fighting among themselves. I speak of the laborclass successfully being divided such that those who labor in theprivate sector of the economy accuses those who labor in the publicsector of the economy for their poor economic position and the publicsector laborer does not recognizing themselves in the private laborworld. I tell you, the false messenger is recognized in that theirlabor is money. It is not in their mind or body. Warren Buffet maywant to be taxed more, but Warren Buffet is not working his money asthe Kock Brothers are working theirs…and Warren Buffet isbenefiting from the productivity of the Kock’s Brother’s money.

Next up is 1936’s tax table.

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I resemble those remarks!

By Daniel Becker (DOLB)

Following up on Robert’s post which at it’s core is discussing the article: Economic Enlightenment in Relations to College-going….

I find it interesting (not alarming at all, at least not regarding the data) that the following combination is the ultimate economically enlightened member of society if you are:

very likely to vote next time, voted for McCain, libertarian, white, not Hispanic/Latino, a suburbanite, atheist/realist/humanist, born again, attend church multi times/ week, non union, married, consider America you residence, are military (or family in military), NASCAR fan, think your in the investor class, shop every week at Walmart, earn over $100K/yr, male.

One more thing based on their figure 2 chart: high school education or less. That group of educated had the highest economic enlightenment score.  That group of educated had the highest economic enlightenment score. There is a bit of concern with this data piece considering two of their sited points:

The caveat that we see as most significant as pertains to the education variable is that the survey procedure likely tended to discourage low-IQ individuals from participation, thus artificially raising the observed economic enlightenment scores of the less educated groups…


Meanwhile, Caplan and Miller (2006)…find that “the estimated effect of education sharply falls after controlling for IQ. In fact, education is driven down to second place, and IQ replaces it at the top of the list of variables that make people ‘think like economists.’”

Do I dare suggest that they are finding that the most economically enlightened are the smartest people who never finished high school? You know, when I asked 2 years ago if we could try a different school of economic’s I did not realize the one we needed was the non-schooled school.

Interestingly enough, you are most unenlightened if you are

progressive and college educated along with being: not likely to vote, voted green party, identify Green, African American, Hispanic/Latino, large city dweller, no religious affiliation, not born again and never attend church, union, civil union/domestic partner, consider your home the planet earth (no other planet offered), not military, not a fan of NASCAR (should have asked about horse racing), not of the investor class, never shop at Walmart (guess the other big boxes don’t count), $25K or less/yr (and they don’t shop at Walmart?), female.

This is an amazing study. It managed to show that there are two groups of people in this nation whose thinking regarding money is totally reflective of the common cliche’s heard during the political season (which is a season with no ends) and are often applied slanderously. They have proven that the cliche’s are true!  But, then why would I expect anything else from this considering the following commentary from their “scholarly” piece of work:

At least since the days of Frédéric Bastiat, many have said that people of the left often trail behind in incorporating basic economic insight into their aesthetics, morals, and politics. We put much stock in Hayek’s theory (Hayek 1978, 1979, 1988) that the social-democratic ethos is an atavistic reassertion of the ethos and mentality of the primordial paleolithic band, a mentality resistant to ideas of spontaneous order and disjointed knowledge. Our findings support such a claim,

Ok, this economic ignoramus needs to go to his flower shop now. God help me if it goes under. I should have never gone to college. It’s my mom’s fault too.

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Would Have Been Hoisted from Comments Elsewhere

But Steve Randy Waldman already did the heavy lifting:

several of the other officers had been stationed at the height of the housing bubble at facilities located near D.C. in Northern Virginia. They lived in very modest homes which were removed from their workplaces by substantial driving distances, but these homes were nevertheless particularly pricey for someone with a family and on a military salary. The humble homes ate significant chunks out of those salaries as the commutes did to the (already scarce) time these men had to spend with their families….

While we were away, about halfway through our deployment, the crash began and something mysterious had gone horribly wrong with the machinery of America. The small equity positions these men has invested in their respective residences were wiped out in a matter of months. By the time they were close to returning to these homes the men were all badly underwater by over one hundred thousand dollars and, what was worse, the Army had reassigned them….

Their instinct was that if they had borrowed money from a friend or a neighbor they would feel a deep, almost sacred, obligation to make good on their debt and pay it off in full plus interest as soon as they could manage it….That was, after all, the “right thing to do” as they had been taught by their parents and grandparents.

But then the bailouts with taxpayer money started. The “too big to fail” talk began, and then the wave of foreclosures and layoffs and emerging scandals of the unjust excesses of the financial industry, and so on. And these men began to feel that from the personal scale of their little world, their family was also perhaps “too big to fail” by the forfeit of their hard-won life’s savings.

They also started to question how the bailouts could make sense without some of the benefits flowing to innocent and responsible men such as themselves….

Go Read the Whole Thing.

Note:I mentioned this near the end of my last post, but it really deserves to be seen and read by more than the six people who might read to the end of that one.

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Overcoming Classism, a four-minute lesson

Ken Houghton

Consider this a bright, cheerful post, as opposed to my next one.

As long as TAPPED is talking about “classism,” let’s recall that the easy solution was Common Knowledge by the early 1980s:

When I was in school I ran with kid down the street
But I watched him burn himself up on bourbon and speed
But I was smarter than most and I could choose
Learned to talk like the man on the six o’clock news

Always keep in mind, of course, that a thick accent comes in handy, especially if you’re trying to be underestimated. But that’s not generally in the first round.

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Class War; Appropriateness of the Wealthy’s strategy

A research review by: Divorced one like Bush

Introduction: This review was initiated after reading the report linked at the 25 indicators post. A review of the data regarding accepted economic performance indicators for business cycle peaks of year 2000 and 2008 is presented along with a discussion of the relevance to the strategy of the Wealthy in winning the War of Class. In short, the Wealthy are irrational in their strategy in fighting the War of Class and are in fact losing the war for everyone.

The data:

The growth rate in median family income, however, was slower between the business-cycle peaks of 2000 and 2007 (0.1 percent per year) than it had been between the two earlier peaks in 1989 and 2000 (0.9 percent per year).
Labor productivity, meanwhile, grew more rapidly in the 2000s business cycle (2.5 percent) than it did in the preceding cycle (2.0 percent).
Economic growth was faster over the 1990s business-cycle (3.1 percent per year) than it was over the 2000s cycle (2.3 percent).
…but the 1990s cycle still produced a higher personal savings rate (5.6 percent of disposable personal income) than the 2000s cycle (1.8 percent of disposable personal income).

Another way to view the data is to align each point with the year of origin.
Early years: 2% productivity growth with 0.9% income growth, 5.6 savings, 3.5%economic growth
Versus Bush years: 2.5% productivity growth, .01% income growth, 1.8% savings, 2.3% economic growth.

Analysis: Going forward I will refer to two groups fighting in the Class War. The subject of this study will be called the Wealthy. The Wealthy survive by making money from money. That is the accepted opinion. Though this report suggests that even the top 1% were earning more from wages each year until it reverses in 2000. Quote:

The lower end of this group is not seeing an increase of income from wages. But look at the change in the top 1% and the top 0.1%. They have the greatest increase of their income coming from wages. The entire top 5% sees this, but it is the very top that is seeing a doubling (32 to 63% for the top 1%) and tripling (18.1 to 58.2 for the top 0.1%) of the percentage from wages. (see chart)

The group the Wealthy are fighting will be called the Enemy. The Enemy survive by making money from selling their labor which is tied to productivity.

For all the people who are fighting a class war, looking at the means by which both sides make money and thinking that both want to win it for the long haul, it appears that each side has been losing under the Wealthy’s strategy and tactics used for winning the war. For the Wealthy who make money from money, I assume a higher annual average economic growth would be more beneficial as it means more wealth being created over time, but they have produced lower growth. They appear to have won when the Enemy was able to sell their labor for a higher share of productivity. In fact, it appears that the important factor to the Wealthy winning the war is how much of the productivity gains go to the Enemy instead of how much more work the Wealthy can get out of the Enemy. There appears to be an inverse relationship of income and productivity to the success of the Wealthy in the war. As the share of productivity going to income of the Enemy goes down, economic activity declines. That is, as the Wealthy take more of the productivity gains as a means to win the war, they are in actuality hurting their war efforts. A decline of the economic activity is a war losing results for the Wealthy.

Conclusion: The Wealthy are closer to winning what they want when they let the Enemy win. That they have continued the same strategy during declining indicators and have seen similar battle results in the past (the battle known as the Roaring 20’s comes to mind) suggests that they are not being rational. For the Enemy of the Wealthy, well I guess there is some solace in the thought that the Wealthy are ultimately beating themselves in that they are driving down economic growth. I am reminded of the great wisdom of the infamous class warrior Billy Ray Valentine:

“You know, it occurs to me that the best way you hurt rich people is by turning them into poor people.”

Of course unexpected events can change the momentum and ultimately the strength of either side. For example, a banking crisis. (An event for which I can find no research that supports one has ever been caused by the tactics of the armies of the Immigrant or Indigent. ) Such an event changes the emphasis of the theater of the war from the broader, larger operation of the market place which requires an understanding of the rules of economic theory and historical economic data to the limited and smaller theater of the halls of government with the need to understand the rules of political theory and historical political data. For either side, the most successful campaign would take into consideration the results of the market place war front when fighting in the halls of government war front.

There is a paradox to the Wealthy winning any battle in the halls of government theater. That they do not heed the historical record of battles within both theaters leads to poor tactics. The Wealthy institute tactics based on non-rational analysis moving them further from their desired goal. Thus, a possible strategy for the Wealthy’s Enemy could be to focus on the Wealthy’s lack of rational analysis. It might be possible for the Enemy to make the Wealthy aware of their self defeating results. Showing the Wealthy that they were more successful when the Enemy received approximately 50% of the productivity gains could be a basis for a treaty. There is data available to the Enemy that suggests when they received gains equal to the rise of productivity, the growth of economic activity was even greater than the period of this study.

To summarize: The Wealthy are poor Class War strategists. They are self defeating in such a way that they remove all ability for either side to win the Class War. The Wealthy must let the Enemy win the war in order for the Wealthy to win. I would caution that any approach toward a treaty by the Enemy to the Wealthy must be taken with care. It is not certain as to whether the Wealthy have the strength of character to accept that they are failures. By evidence of their tactics in the face of the data, forming a treaty with the Wealthy who act irrationally will be met with great frustration by the Enemy.

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Dep’t of Man Bites Dog: Tax Foundation Working Paper is More Honest than Tax Foundation News Release

In honor of Economy Day at the DNC, the Tax Foundation sent me an e-mail trying to convince me that the corporate income tax is terribly unfair to average Americans. The pitch is based on a tax incidence study that claims that in the lower quintile of cash incomes, personal income taxes averaged $171 in 2004, whereas the effective bite of corporate income taxes was $271. Including payroll and excise taxes, they figure that the bottom 20 percent paid on average $1,684. All other figures in the post are from the Tax Foundation.

As an aside, at least the estate tax burden for the bottom quintile was estimated to be $0. For the second quintile, the estate tax burden was $0. At the median, the burden was $0. In the fourth quintile (i.e. up to the 80th income percentile), the average estate tax burden, according to the Tax Foundation, was $0. By advanced mathematics, the maximum estate tax burden for the bottom 80% of the U.S. income distribution was — you guessed it — $0. That goes to show the power of marketing.

Before you start wringing your hands about the corporate income tax shafting the poor, a working paper [PDF] that serves as the source of the statistics is honest enough to note that the net fiscal incidence is the difference between government spending and tax payments. The news item only gives the payment side, but the paper actually provides the benefits and allows calculation of the net incidence.

It turns out that by the Tax Foundation economists’ calculations, that diabolical tax system took that $1,684 only to return $24,860 in spending to bottom-quintile earners, including expenditures on what the authors tally as public goods. Average net benefits don’t turn negative until the fourth income quintile, and the top quintile, with the largest net “burden,” faced an effective total (average) tax rate of 34.55 percent (24.25% federal). That includes income, payroll, excise, property, and estate taxes at all levels, again in the account the Tax Foundation is peddling.

Some of you may think that’s unconscionable confiscation, but I prefer to think of the working well-to-do and the rich as having a glass that’s right around 2/3 full. And even without being anywhere close to the nosebleed sections of the distribution, I can tell you that if you take the pessimistic view of the tax incidence on the well-to-do and aren’t in the top fifth, I’m not trading places to free myself of that “burden.” Just saying.

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A Brilliant Comment that Deserves a Larger Audience

In the grand tradition of “pulled from comments,” I’m pulling this one—from Brad DeLong’s blog, in response to this post:

…Manzi does not seem to have a consistent view of the concavity of instantaneous indirect utility functions. He argues that it would be absurd to consume the proceeds of the IPO of a successful startup yet he argues that higher taxation of said proceeds will have a large effect on the required minimum probability of success. If he can come up with a utility function which has both of these properties, he might convince someone who cares about economic theory (not typing at the moment). If he further finds a utility function consistent with the data on risk premia and intertemporal substitution he might convince more than one such person. If he can get the sign of the effect the one he wants without ignoring the benefit for people who tried and failed to be entrepreneurs of middle class tax cuts he will convince many.

If he assumes that expected wealth calculations are OK when evaluating whether people will start companies but just idiotic when deciding how quickly they will consume the proceeds, he isn’t an economic theorist (not that I mean that as a criticism).

The source of the comment is, for those who did not follow the link, Robert Waldmann.

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