The Rich are Getting Richer

Data from the IRS shows that the average income of the 400 wealthiest US taxpayers was $173.9 million in 2000. On average they paid 22.4% of their income in taxes.
With recent tax changes, their average tax burden is likely to be even smaller.
According to the Times, “[h]ad President Bush’s latest tax cuts been in effect in 2000, the average tax bill for the top 400 would have been about $30.4 million — a savings of $8.3 million, or more than a fifth, according to an analysis of the I.R.S. data by The New York Times. That would have resulted in an average tax rate of 17.5 percent.”
Can I be rich too? Please?
Click for:
Data on the top 400
Data on the returns with income over $200,000

Very Richest’s Share of Income Grew Even Bigger, Data Show
The 400 wealthiest taxpayers accounted for more than 1 percent of all the income in the United States in the year 2000, more than double their share just eight years earlier, according to new data from the Internal Revenue Service. But their tax burden plummeted over the period.
The data, in a report that the I.R.S. released last night, shows that the average income of the 400 wealthiest taxpayers was almost $174 million in 2000. That was nearly quadruple the $46.8 million average in 1992. The minimum income to qualify for the list was $86.8 million in 2000, more than triple the minimum income of $24.4 million of the 400 wealthiest taxpayers in 1992.
While the sharp growth in incomes over that period coincided with the stock market bubble, other factors appear to account for much of the increase. A cut in capital gains tax rates in 1997 to 20 percent from 28 percent encouraged long-term holders of assets, like privately owned businesses, to sell them, and big increases in executive compensation thrust corporate chiefs into the ranks of the nation’s aristocracy.
This year’s tax cut reduced the capital gains rate further, to 15 percent.

Filed under: Data, Economics, Fiscal Policy

Economy Gets a Monetary Boost

Will the 2003 tax cuts boost the economy? Alan Greenspan doesn’t seem to think so. Today the Fed cut interest rates by 0.25 percentage points to a 45-year low.

Fed cuts interest rates a quarter point
The Federal Reserve Wednesday cut a key interest rate by a quarter-percentage point to a 45-year low in what was seen as a final bid to ensure the sluggish economy at last kicks into higher gear.

Filed under: Economics, Economy, Monetary Policy, Policy

No Excuse

There is no excuse for this Republican delay.

Low-Income Child Tax Credit Must Wait, Republicans Say
Senate Republican leaders said today that because of the press of Medicare legislation, there would be no agreement with the House this month to increase the child tax credit for 6.5 million low-income families.
The announcement means that a final compromise on the credits, if one is reached, may not come until after the government begins sending checks of $400 a child to middle-class families.
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The checks, to be sent to about 25 million families, will be mailed starting the week of July 25. Because the House and Senate have been unable to reach agreement on how to proceed with the credits for low-income families, which were left out of the tax bill signed by President Bush last month, the checks for those families could not go out until mid-September at the earliest, Treasury officials have said.

Filed under: Economics, Fiscal Policy, Policy, Politics

NBER Breaks its Silence

The National Bureau of Economic Research’s business cycle dating committee has broken it’s months of silence to say….
…nothing – except “we need more time…”

The NBER
According to the most recent data, the U.S. economy continues to experience growth in income and output but employment continues to decline. Because of the divergent behavior of various indicators, the NBER’s Business Cycle Dating Committee believes that additional time is needed before interpreting the movements of the economy over the past two years.

Filed under: Economics, Economy, Recession

Bill Gates and the Estate Tax

I just got back from a press conference sponsored by United for a Fair Economy and Americans for a Fair Estate tax. Bill Gates (Sr.) made a very compelling case for keeping the estate tax arguing that one important reason that the super-wealthy have been able to make/keep vast sums of money is that they are fortunate enough to live in America. And, as good Americans, they owe some of their wealth to the country that made it possible for them to become so wealthy.
FYI – only 2 percent of estates owe any tax, and the first $1 million for individuals, or $2 million per married couple, is tax-free. So, if you leave $1,000,001 to your heir (after deductions for charity), your heir is responsible for only 18 cents in taxes.
The House of Representatives is scheduled to vote on repealing the estate tax tomorrow. The repeal would cost around $162 billion over the next decade, and $1 trillion over the next 20 years.

Americans for a Fair Estate Tax
Americans for a Fair Estate Tax (AFET) is a broad-based non-partisan coalition of nonprofit groups, including civic, labor, social justice, faith-based, and environmental organizations, as well as organizations providing human services. AFET advocates that instead of repealing the tax on multi-million-dollar estates, Congress should reform the estate tax to ensure that family farms and small businesses are not unfairly taxed while keeping 98 percent of taxpayers exempt and safeguarding Medicare, Social Security, education, charities and other key national priorities that would be threatened by a complete repeal.
We are working together to prevent repeal of the estate tax because the estate tax has helped to:
* Build fairness into the tax system, so that the wealthiest taxpayers pay their just share to the public good and insure large accumulations of wealth do not become concentrated;
* Stimulate charitable giving; and,
* Provide federal and state revenues that are used to provide community services, including those for low-income and vulnerable families.
The estate tax has been a part of our tax structure since the founding of the country and since 1916 in its current form. Opponents of the estate tax have spent millions of dollars on ads and a lobby campaign that often contain inaccurate information that leads one to conclude that the estate tax should be repealed.

Filed under: Economics, Economy, Fiscal Policy, Policy, Politics

Major Computer Problems

Virus? Monkey Pox for computers? Well, something ate a good amount of my data. I have just re-installed windows and am trying so see what I have backed up. It looks like a good chunk of my old stuff is gone…
Note to self:
1) Find a good (and cheap) on-line backup company – AND USE IT!
2) Buy a USB memory keychain for taking stuff to/from work and for backing up most recent stuff.
3) Buy more extensive security software.
4) Get a tablet-pc for backup and other use. (Well, I can’t really afford this, but I’ve been wanting one since even before they were invented.)
Feeling generous? Go get me one of the above (or other fun stuff) from my Amazon.com wishlist.

Filed under: Website, Monkey Pox for computers?

Budget Situation Worsens

More bad news on the deficit front. The CBO is projecting a $400 billion deficit (about 4% of GDP) for 2003.
This is the largest nominal deficit on record, and the largest percentage of GDP since 1992. (See historical budget data. )

Monthly Budget Review
CBO now projects that the federal government is likely to end fiscal year 2003 with a deficit of more than $400 billion, or close to 4 percent of gross domestic product. The deterioration in the short-term budget outlook stems from
continued weakness in revenue collections and from enactment of the Jobs and Growth Tax Relief Reconciliation Act of 2003, which will add an estimated $61 billion to this year’s deficit in the form of tax cuts, refundable credits, and
aid to states.

Filed under: Economics, Economy, Fiscal Policy, Policy

Interest Rates at Recod Lows

Key interest rates have hit record lows, going below 1%. I almost wish I had a mortgage so that I could refinince…

Virus Targeting Banks (washingtonpost.com)
T-bill rates fell. The discount rate on three-month Treasury bills auctioned yesterday fell to 1.005 percent, the lowest level since July 28, 1958, from 1.11 percent last week. Rates on six-month bills fell to 0.98 percent, the lowest level since the government began selling these bills on a regular basis in 1958, from 1.095 percent.

Filed under: Data, Economics, Economy, Monetary Policy

Moving on…

As many of you know, for the past year I have been on sabbatical leave from my assistant professor position in the economics department at Amherst College. I have been spending my time down in the DC area getting some reading and writing done, running ArgMax, and hanging out with my new fiance, Jessica.
I have recently decided to resign from Amherst College and stay down in the DC area on a permanent basis. I highly recommend the economics department at Amherst both to economists on the job market as well as potential Amherst students. The faculty and staff at Amherst were a pleasure to work with.
Most importantly, the outstanding students at Amherst made it a pleasure to teach. For those that have not taught at the undergraduate level, bright economics students – especially at the introductory level – are very good at keeping you on your toes. They tend to question every assumption and force you to truly understand the material you teach. I think I might have learned as much economics as I taught in most of my courses.
So, what am I up to now? I have recently started a new job at a DC Policy organization called OMB Watch, which is a well-respected nonprofit research, educational, and advocacy organization here in DC that focuses on budget issues, regulatory policy, nonprofit advocacy, access to government information, and other issues involving the Office of Management and Budget (OMB). If you’re in the DC area you might spot me with a pair of binoculars “watching” OMB.
Officially, my title is: “Senior Economic Research and Policy Analyst; and staff Economist.” (Pretty fancy, eh?) I will be working with the budget group analysing federal budget and tax issues, advocating responsible economic policy, as well as bringing an economist’s perspective to some of the other work done here.
I’ve been called crazy for giving up a cushy tenure-track faculty position, but I feel that this is the right move for me right now. So far, it’s been a huge, and welcome, change in pace from the academic lifestyle (hey, isn’t summer supposed to be a vacation?); but I am very much looking forward to take a more active role in policy debates and policy advocacy.
Anyway, despite the fact that I now have an honest 9 to 5 job, I will continue to follow the economy and update ArgMax as time permits. You can probably expect even more macroeconomic policy (especially fiscal) as that will be what I am working on everyday.

Filed under: Other

2003 Tax Cuts: Distribution

So, here is the graph of who benefited from the 2003 tax cut. [Click for a larger view.]

Source: Tax Policy Center | A Project of the Urban Institute & the Brookings Institution

Filed under: Economics, Economy, Fiscal Policy, Policy, Politics