During the 12 months ending in September 2006, the [Bureau of Labor Statistics] household survey reported 2.54 million new jobs. Going back 24 months shows 5.5 million new jobs, an annual average of 2.75 million. This exceeds the booming 1995-2000 average of 2.34 million new jobs per year. The household survey, in contrast with the establishment survey, has consistently signaled a resilient economy. And it continues. In the past two months, the household survey has expanded by 261,000 per month, while the establishment survey rose by an average of just 120,000.While it is a little wonkish, there are good reasons why economists typically do not use the household survey, but instead rely upon the indice known as the "Employment, Hours, and Earnings from the Current Employment Statistics survey (National)." Barry Ritholtz explains the reason that the household survey, unadjusted, was misleading. His conclusion:
Let's see who has the intellectually honesty to step up to the plate with a big mea culpa. You may assume any of the original advocates of this now totally untenable position [that the unadjusted household survey is more accurate] who adhere to it are little more than partisan hacks, and disregard them as appropriate.Just so the record is clear, here's the Employment, Hours, and Earnings from the Current Employment Statistics survey (National) on a monthly basis from January, 1992, through September, 2006:
(Click to enlarge.)Florida is one of numerous states to authorize a tax specific to telecasts of boxing. As these taxes are specific to a type of television programming, they should be held by courts to be content-based restrictions on speech. However, boxing and other sports have been denied the protections of the First Amendment because they are deemed to be non-expressive. An historical and literary analysis of boxing demonstrates that the sport satisfies the Spence test because boxers intend to express particularized messages which are understood by their audiences. When strict scrutiny is applied to taxes on boxing telecasts, the state's interest in raising revenue is outweighed by boxers'—and their promoters'—freedom of expression.Stein quotes Norman Mailer at length in an attempt to show that "[a]lthough the expression inherent in boxing cannot be neatly categorized, it is expressive conduct that conveys a specific message that has a substantial likelihood of being understood nonetheless."
The evidence against Kotula [one of the defendants] on the tax-evasion count is not overwhelming, either in absolute terms or compared to the conspiracy evidence against him. But it is sufficient to support his tax evasion conviction under the very deferential standard for reviewing jury verdicts.
In 1998, Kotula sold his own land to Ashtabula County, Ohio for $425,000. The sale contract recited that Kotula was selling the land to avoid eminent domain. Kotula made a $382,000 profit on the sale, on which he owed federal income tax of $82,000. The parties agree that Kotula did not list the profit on his 1998 federal income tax return.
The government charged that Kotula's failure to report the land-sale gain in that year constituted willful attempted evasion. Kotula's defense is that 26 U.S.C. § 1033 allows a taxpayer to defer gain from a sale made under threat of eminent domain if they use the proceeds to buy replacement property within a certain period of time. As Agent Fisher testified, if the taxpayer meets the requirements, he is not required to report the gain in the first year following the sale.
The government alleges that "several Ashtabula County officials" testified that the land-sale agreement's references to eminent domain were a "sham," but the government fails to point to particular testimony using that word. The government relies on the testimony of current and former county commissioners that the county never suggested that it was considering using eminent domain to take Kotula's land, that it was Kotula alone who insisted on inserting the eminent-domain language, that the commissioners knew eminent domain was unpopular and so would not use it lightly, and that the county had probably not used eminent domain in the twenty years prior to the county's purchase of Kotula's land.
On this record, a reasonable factfinder could find that it was not reasonable to fear eminent domain under the circumstances. With or without such a finding, the factfinder could conclude that Kotula did not actually have a good-faith belief (reasonable or otherwise) that his property was threatened by eminent domain so as to trigger the deferred-reporting provision of IRC §1033.Incredibly, as near as I can determine, Miller is running unopposed.
Immigrants and their U.S.-born offspring accounted for 55% of the increase in [U.S.] population [from 200 million to 300 million] since 1966-67. 3 Within this group of 55 million, Latino immigrants and their offspring were by far the largest, representing about 29 million persons, or 53% of the addition due to immigration . . . .Strikingly, Hispanics constituted only 4.25% of the U.S. population in 1966. In the last 40 years, that figure has grown to 14.9%. The percentage of Americans classified as "White" has fallen from 83.6% to 67% over the same period.
The documents reviewed by the Minority staff raise several issues with respect to [Americans for Tax Reform]’s compliance with current tax laws. As a threshold issue, many of the activities alleged in the e-mails reviewed by the Minority staff indicate that ATR may not be primarily operating to further social welfare purposes, which is a necessary condition of tax-exempt status as a section 501(c)(4) organization. In addition, the documents raise questions whether ATR should have reported income from some of its activities as taxable income. Finally, the e-mails raise questions as to whether insiders at ATR, including [Grover] Norquist, used ATR primarily for their own or Mr. Abramoff’s private benefit. Violations such as these could, under certain circumstances, result in penalties under current law, including excise taxes on officers of ATR, revocation of ATR’s exempt status, and even criminal tax fraud penalties.Where have we heard this before? Well, here, here, here, and here.
The [Act] states: "An alien who is a qualified alien (as defined in section 1641 of this title) and who enters the United States on or after August 22, 1996, is not eligible for any Federal means-tested public benefit for a period of 5 years beginning on the date of the alien's entry into the United States with a status within the meaning of the term 'qualified alien.'" 8 U.S.C. §1613(a). Among the provisions of the W elfare Reform Act was the elimination of all benefits for illegal immigrants and other "non-qualified aliens," with a few limited exceptions such as emergency medical care. 8 U.S.C. § 1613. In doing so, Congress divided the two qualified alien categories into two subcategories: (1) qualified aliens who have resided in the U.S. since a time prior to August 22, 1996. . . .Some states were required to provide funding to the first subcategory of qualified aliens. . . . However, a period of five years residency in the U.S. was required for the second subcategory. . . . Congress then authorized the States to enact any law after August 22, 1996, should they choose to compensate this newly designated class of ineligible aliens, provided they use only State funds.(Some internal citations omitted.)
It is impossible to tell from the IRS data the reasons why people leave or come to a state. However, the numbers for New Jersey would seem to suggest that the regional and national economic situation is an important force, especially in view of the fact that in most years outflow and inflow either rise together or fall together.Finally, the Ohio study also limited itself to the affect of income tax on migration and concluded that "migration does not appear to be linked to income tax policy. Policymakers seeking to prevent outward migration should look to policy other than income-tax policy to alter the trend."
But it is equally impossible to interpret the data as in any way showing that changes in New Jersey's income tax rate-up or down-have an impact on whether high income families-or any families-choose to come to the state or to leave it.
One could just as easily, and perhaps more plausibly, conclude that the tax driving people out of New Jersey is the local property tax, since this tax takes a higher percentage of the yearly income of low- and middle-income families than it takes from the wealthiest-so that an increase of even a few hundred dollars is more noticeable to those families than an income tax increase that amounts to a relatively smaller percentage of a wealthy family’s income.
Members of the Administration are touting the revised deficit estimate, and its cause, as a sign that tax cuts are working as intended. Excuse me, but that makes no sense. Without the tax cuts there would be little or no budget deficit. So we're supposed to cheer because the mess isn't quite as bad as it appeared to be? I'd be impressed if the revision showed a budget surplus, because THAT would demonstrate the validity of the "cut taxes, double revenue" nonsense spouted by the "I refuse to pay taxes because I'm special" crowd and the "I cannot pay taxes because I'm selfish" group.The CBO report explicitly notes that:
A closer look at the source of the increased tax revenue is most revealing. A significant chunk of it reflects increased corporate taxes, a natural consequence of the huge increase in corporate profits during the past half-year. Most of the rest reflects taxes on high-income taxpayers who have received bonuses. The Washington Post article goes into greater detail on these points. It also explains that taxes on wages are barely increasing, because wages are increasing only slightly. In other words, the tax revenue increases are consistent with the shift of income gains away from the middle class and toward the very top of the income and economic ladders. The rich get richer ....
Making the situation worse are the allegations that the Administration initially overestimated the deficit so that it could return and claim that it deserved kudos for reducing it. That's a ploy not unlike the child who says to a parent, "Would you be upset if I told you I broke the heirloom vase?" only to follow-up with the following comment to the rattled parent, "Well, I didn't. It's just that the picture window is broken." There's one word to describe this approach: manipulative.
Steady growth in corporate profits probably explains most of [the increase in tax revenues in September, 2006 from those in September, 2005], although some of it likely stems from settlements of past years’ taxes and a recent change in tax law that required large firms to accelerate some payments from 2007 into 2006.Paul Krugman also pinpoints a different cause for the growth in corporate profits (behind Times Select Paywall), than that offered by the WSJ:
[A]fter-tax corporate profits have more than doubled, because workers' productivity is up, but their wages aren’t — and because companies have dealt with rising health insurance premiums by denying insurance to ever more workers.This, of course, would also explain another "surprise" the WSJ editorial focuses on--the fact that the top 1% of all income earners account for 37% of revenue receipts from the individual income tax.
(Click to enlarge.)But look at the on-budget deficit for 2006. It shows a small improvement over 2005, and then the CBO projects the on-budget deficit to worsen in fiscal 2007.
But compare 2006 to the earlier CBO estimates - 2006 is a complete disaster. And the bad news is another bubble is bursting right now (the housing bubble), and IMO the CBO estimates are once again ignoring the budget implications of that bursting bubble.Well, the WSJ editorial board certainly does.
So when the Bush Administration touts their budget progress in the coming weeks, remember where we were just a few years ago. And remember where the budget deficit is likely to go. They call that progress?
[T]he names of the 11 British suspects recently accused of a plot to blow up airliners flying to the US were not included on the list.As Dr. Strangelove once pointed out, some things have to be made public in order to work:
Cathy Berrick, director of Homeland Security investigations for the General Accounting Office told CBS that this was due to concerns that the list could end up in the wrong hands.
"The government doesn't want that information outside the government," she said.
Yes, but the... whole point of the doomsday machine... is lost... if you keep it a secret! Why didn't you tell the world, eh?Thing are not nearly as bleak as they may first seem, however. I have obtained a photograph of one of the people on the list, Robert Johnson:
Be on the lookout!From the property rights perspective, large law firms are poorly suited to sustaining employment relationships because they have no enforceable means of controlling the firm's key knowledge asset—client relationships. The up-or-out partnership systems that have evolved over time in these firms offer an awkward but workable resolution to this problem. By restricting partnership size to maximize surplus per partner and by making senior attorneys residual claimants, law firms limit the opportunity for sub-groups of partners to grab and leave with the firm's clients. This action, however, creates additional demand for inexperienced associates who serve as (imperfect) substitutes for their more experienced counterparts. The result is that more associates are hired than can be promoted into a stable partnership. Those associates who do not succeed outgoing partners will be dismissed before they acquire sufficient client knowledge to themselves pose a threat of grabbing and leaving. That law firms find it worthwhile to commit to the costly practice of firing qualified attorneys in order to retain control over client relationships points to the general importance of control over assets in more conventional employment relationships.The authors study available data to determine whether the data can justify alternative theories, such as the "dual incentive" theory. "According to this [theory], law firms create incentives for associates to invest in firm specific skills by promising a valuable promotion to some or all of the associates who undertake the investments. It is difficult, however, for outsiders to monitor whether the associates have actually met the firm's requirements. This gives the employer an incentive to cheat the associate by denying promotion even when the associate has performed as the firm desires. Since the employees anticipate cheating by the firm, no investments in firm specific human capital are made."
[C]ourts, Treasury, and the IRS generally have not considered the purposes of partnership tax law in the more than 150 instances they have interpreted and applied the definition of tax partnership. As a result, those efforts have produced ten separate tests for defining tax partnership, perpetuating the definition's uncertainty. This Article identifies and evaluates each of those tests and recommends abandoning tests that do not incorporate the purposes of partnership tax law and consolidating the remaining tests. Based on that consolidation, the Article proposes a new definition of tax partnership. The proposed definition incorporates the purposes of partnership tax law, and, because partnership tax law was intended to govern substantive-law partnerships, it includes some aspects of the substantive-law definition. Nonetheless, by using tax-specific terminology and relying on the purposes of partnership tax law, the proposal clarifies the definition of tax partnership and moves away from the substantive-law definition.The simple definition:
A tax partnership is two or more persons, at least one of whom provides significant services, who have (or will have) common gross income.It probably comes as a great surprise to non-tax practitioners, but the question of whether an arrangement is or is not a partnership for tax purposes arises fairly often. While obviously borne in academe where Borden currently resides, the article provides useful guidance to work-a-day practitioners.
Republicans also deserve credit for financing the war, which is more than many Democrats say they'll do if they run Capitol Hill. The extension for two more years, through 2010, of the 15% rate on dividends and capital gains will also help sustain the economic growth that is throwing off record revenues to pay for the war even as the budget deficit declines.Let me get this straight: The Republicans financed the Iraq War by failing to finance the Iraq War?
"The key-word here is blackwhite. Like so many Newspeak words, this word has two mutually contradictory meanings. Applied to an opponent, it means the habit of impudently claiming that black is white, in contradiction of the plain facts."Hat Tip: Brendan Nyhan.
Some shifting of resources to older generations . . . can be justified on the basis of equity. To the extent that technological change leads to greater prosperity over time, future generations will have access to higher standards of living. To the extent that population growth increases the size of the economy, the burden of financing pay-as-you-go retirement systems is reduced. If some of those gains are shifted from younger to older generations, then incomes and levels of well-being would be more equal among generations. Furthermore, a fiscal policy that shifts some resources from younger to older generations can raise living standards of all following generations by transferring a portion of the benefits of future economic growth into the present.Or, perhaps not:
The possibility of raising standards of living by shifting resources from younger to older generations has its limits. The example above relies on the assumption that the policy continues indefinitely into the future. With a finite ending point this policy would be unsustainable because some young cohorts near that end point would be made worse off and would be unwilling to give up resources.On this point, the report's conclusion takes an "on the one hand, on the other hand" approach:
Despite the projected magnitude of these intergenerational transfers [Social Security and Medicare, particularly Part D], younger generations might not be worse off than their parents if economic grows at a sufficiently swift pace.However, when it comes to the question of permanent structural deficits, the report has only one arm:
These generational transfers are largely driven by the growth in the number of beneficiaries of entitlement programs relative to the work force, as well as by rapid increases in health care costs. The possibility that some future generation may eliminate fiscal policies that it perceives will lower its standard of living introduces political risk into social insurance programs funded by a pay-as-you-go mechanism. If a generation anticipates that a younger generation will stop contributing to a pay-as-you-go social insurance program, then it may decide to end the program itself. A generation whose descendants are unwilling to finance its benefits would have little to gain, apart from altruistic impulses, by continuing its contributions.
A government that runs deficits and is unwilling to raise taxes or cut spending faces three choices. First, domestic borrowing can be increased at the cost of crowding out domestic investment. Second, a government can borrow from foreign investors and governments. Borrowing from the rest of the world prevents deficits from crowding out investment. That is, foreign investors can provide financial resources now in exchange for future interest payments and profits. As foreign investors accumulate larger portfolios of stocks, bonds and other assets, the flow of interest payments, dividends and repatriated profits abroad increases as well. Third, a central government can print money to reduce the real value of debt denominated in domestic currency.(BTW, talk about samizdat. I had to call my Congressman's office for a copy of the report. It was faxed to me, which explains the poor reproduction quality. As soon as I get a better copy, I will scan it and replace the fax version.)
All three options have unpleasant consequences. Over time, each can seriously damage national economies. Simple supply and demand theory implies that a smaller supply of savings for private investment will lead to higher interest rates and lower growth in private capital stocks. Lower stocks of private capital threaten economic growth, and slower economic growth translates into lower average living standards in the future. Borrowing from the rest of the world permits higher levels of investment and faster growth at the cost of sending a higher fraction of earnings abroad. If foreigners lend capital by purchasing stocks and bonds rather than by building auto plants, for example, they may decide suddenly someday to take their investments elsewhere. This could strain domestic and international financial systems, thus constricting firms' and households' access to capital. Finally, inflation caused by printing money distorts the flow of information generated by the price system and disrupts financial markets. Investors, if they wish to avoid capital losses in real terms, demand higher interest rates when they see signs of inflation. A major reduction in the real value of the federal debt would require a significant acceleration in inflation. Few economists believe that the restrictive monetary policies needed to squeeze rapid inflation out of an economy would not require substantial economic disruption, at least in the short run.
On the other hand, reducing government deficits can improve economic performance in at least three ways. First, paying off government debt increases the supply of investment funds available for domestic investment. Second, paying off government debt held by foreign governments or investors reduces the amount of interest payments going abroad. Alternatively, paying off debt held by domestic investors gives them the opportunity to rebalance their portfolios by buying foreign assets, which offsets some of the flow of dividends and profits going abroad, or by buying domestic assets that otherwise would have been bought by foreign investors. Third, scaling down the federal debt decreases the temptation to reduce its real value by printing money, lessening the possibility of a major acceleration in inflation. Finally, most economists believe reducing government borrowing lowers interest rates, which in turn have positive effects on investment and growth.
