income taxes posts
FeedPosted Nov 5th 2009 6:00PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Politics
The U.S. dollar continues to weaken, which has led to commodity price increases, including a higher-than-fundamentals-dictate oil price of
about $80 per barrel, and U.S. Treasury Department professionals are working long-and-hard to continue to refinance and rollover U.S. debt to finance the U.S. government's operations -- all because the budget deficit is high.
What could take pressure off all of the above? Well, in addition to letting the
2001 Bush income tax cut expire in 2011 as expected, Congress could pass a modest tax increase above the expiration amounts -- for example, increasing the top two income tax brackets by 2-4 percentage points.
Continue reading A little federal income tax hike would go a long way
Posted Jan 21st 2009 3:31PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession
In a recession, where the goal is to stimulate economic activity, it's almost impossible to raise income taxes: in many ways it is self-defeating.
Still, the counter argument to the above is -- with a likely current-year budget deficit of $1 trillion, and another around that total next year, fiscal 2010, how can one not think about raising income taxes?
It won't happen this year -- almost all
Obama administration and Congressional energy has to be dedicated toward fiscal stimulus and related programs to get the U.S. economy moving again -- but after GDP growth resumes, 'the great tax debate' will start.
Washington's tax chess board
The fault line: probably $100,000 per year -- even though the Obama administration has stated that their goal is a tax decrease for everyone except those earning more than $250,000 per year. (Selected tax increase exemptions would apply for certain small business owners above the $250k level.)
Continue reading Is a tax cut for higher income groups up ahead?
Posted Dec 8th 2008 11:28AM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession
Upper-income taxpayers rejoice: one thing the credit crunch and consequent U.S. recession guarantees is that there will not be a tax increase on upper income groups at the start of the
Obama Administration.
Now, inquiring investors may legitimately ask, how does one justify not increasing taxes with a U.S. budget deficit trending toward
$600 billion (pdf) this year, possibly on its way to an astounding $1 trillion?
Further, one high-profile campaign promise from President-elect Barack Obama, D-Illinois, was an income tax increase for those earning more than $250,000 -- with certain small business owners excluded.
Is Obama breaking a campaign promise? (Imagine, a politician breaking
a campaign promise -- not exactly a revelation). From one perspective, Obama is breaking a promise, at least temporarily, so says economist Richard Felson.
"The most important problem, indeed the problem that all correct thinking public officials must address, is the recession, and that problem will require all the economic stimulus we can muster," Felson said. "An income tax increase on any group would hurt consumer demand, and demand is what we really need. So high income taxpayers are off the hook, for now."
Continue reading An income tax reprieve for upper income groups, for now
Posted Oct 27th 2008 6:30PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Berkshire Hathaway (BRK.A), Politics, Financial Crisis
Want to sum up the United States' fiscal situation in a word?
Warren Buffett did, or did so in 16 words to be exact, in a chat with
The New York Times: "I'm paying the lowest tax rate that I've ever paid in my life," Buffet said
. "Now, that's crazy."
Further, Buffett, the world's richest person
as ranked by Forbes Magazine with wealth totaling $62 billion, also said the U.S. Government should increase taxes on the wealthy to help pay for the recently-passed bank rescue, which is designed to end the financial crisis.
Buffett's stance demonstrates that there is at least one person of high income and/or wealth (and probably many more) who believe upper-income groups should be paying more in federal taxes each year.
2001 tax cut generated large U.S. budget deficitsBuffett's view is also in stark contrast to the Bush Administration's philosophy and policy, which has prevailed for the decade and which argues that lower tax rates on upper-income groups will not only generate higher GDP growth, but also result in revenues high enough to close the federal budget deficit. It hasn't happened, said economist David H. Wang.
Continue reading Warren Buffett: I should be paying more in federal taxes
Posted Oct 15th 2008 7:32AM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Forecasts, Politics, Recession, Financial Crisis
As the United States, Europe and worlds other major economic powers
implement programs and policies to end a financial crisis that threatens to severely damage economies worldwide, a number of myths and misnomers -- some promoted by the current U.S. administration -- are being dispelled, and we'll review each in the months ahead.
BloggingStocks has asked economist David H. Wang, a colleague and friend of yours truly, to help dispel a few of these myths.
Wang approaches the economic scene from a unique perspective. Wang was born and raised in
Communist China for 22 years, before moving permanently to the United States in 1989 for graduate school, completing his Ph.D. in economics in 1995.
Myth: "The best thing government can do for business is get out of the way."Pretty thin argument here, Wang said. As the events of the last year demonstrate, government getting out of the way -- creating a no- / low- regulation banking sector and market -- can lead to very negative and in some cases disastrous results.
"Businesses in financial services and mortgage financing were permitted to have free rein over mortgages and mortgage finance," Wang said. "The market was the judge."
Continue reading The government should just get out of the way and other economic myths
Posted Sep 9th 2008 2:20PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Bad news, Economic data, Politics, Presidential elections
"A billion here, a billion there, and pretty soon you're talking about real money."
To paraphrase the late Senator Everett Dirksen (R-Illinois), if a couple billion is real money, what's $400 billion amount to? Fiscal trouble for the United States, says an economist.
The U.S. federal budget deficit will double this year, to $407 billion, from $161 billion last year, the Congressional Budget Office announced Tuesday, in its revised baseline projection report (pdf).
The CBO said a weakening economy, spending for the Iraq and Afghanistan Wars and the War on Terror, higher entitlement spending, and a slowing growth rate in federal receipts are among the factors that will push the deficit to 3% of GDP this fiscal year, which ends September 30.
The deficit will rise to $438 billion next year, fiscal 2009, remain roughly at that level, $431 billion, in fiscal 2010, before tapering to $325 billion in fiscal 2011.
The CBO also expects U.S. GDP to grow just 1.5% in 2008 and slow to 1.1% in 2009.
Economist Glen Langan said the multiple $400 billion deficits are bad enough, but they could rise considerably, if the U.S. Treasury's bailout of Fannie Mae and Freddie Mac does not go well. "If the housing market does not stabilize in the year ahead, Treasury could end up spending tens of billions more per year," Langan said. "Nearly all of that cost would be born by the taxpayer, which means the deficit will increase."
Continue reading CBO: U.S. budget deficit to exceed $400 billion thru 2010
Posted Sep 8th 2008 11:40AM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Economic data, Politics, Recession
Bloomberg columnist Caroline Baum gently reminds us that not every tax cut achieves its intended effect.
Case study: The 2001 Bush Administration federal income tax cut, which included a cut in the marginal tax rate to 35% from 39.6%. The Bush Administration touted it as a tax cut that would increase incentives to invest, save and work.
The result? The tax cut didn't work: saving and investment have been "anemic" during the Bush years,
Baum said, citing data provided by Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. Business investment is down, the savings rate is at a post-World War II low. Further, the labor participation rate has declined.
No guarantee tax cut would be invested in U.S.But why didn't cutting the top marginal rate do all of the good things the Bush Administration touted? Economist Peter Dawson said the reason is the tax cut's inherent flaw.
"The tax cut contained the mistaken belief that rich taxpayers would invest their money and invest in the right way, in the U.S., to increase GDP," Dawson said. "There was no guarantee that they would do that. Someone who is rich could invest the money in Brazil or India, with little benefit for the United States."
Continue reading The Bush Administration's tax cut didn't increase investment and savings
Posted Aug 29th 2008 3:23PM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Competitive strategy, China, Politics
New York Times columnist
Thomas Friedman, who perhaps most-accurately conceptualized the revolutionary production shifts implied by globalization in
The World Is Flat, has a 'radical' economic prescription for the United States, as it moves toward the second decade in what is quickly becoming the century of change.
Friedman suggests that the United States try nation-building....at home.
Moreover, Friedman makes the case for nation-building as good for U.S. business - - a much-needed shot-in-the-arm for the U.S. economy.
U.S.: inadequate infrastructures for a major powerFriedman's main concern: the U.S.'s inadequate infrastructure (electric grid, roads/bridges/rail network, air travel system, hospitals, among others), which is antiquated compared to the infrastructure of the U.S.'s chief economic rival, China. Friedman has just attended the 2008 Olympics in Beijing and its clear China's public investments - - better airports, roads, parks, to go along with the sports venues - - have impressed him.
It's also clear to Friedman that the U.S.'s period of underinvestment is holding the nation back economically, and that has to change if the U.S. expects to remain commercially competitive on the global stage. Economist David H. Wang told BloggingStocks he agrees, for the most part, with Friedman's analysis, but adds that the journey to a better infrastructure is not a strictly an economic equation.
Continue reading Is infrastructure investment good for the U.S. economy?
Posted Jun 2nd 2008 6:25PM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Other issues, Politics, Recession
The ever-incisive FT columnist
Martin Wolf reminds us that while globalization's prize is plus-sum (everyone gains), as opposed to zero-sum (Country A gains only if Country B loses), it is not perfect sum (there are costs) nor egalitarian sum (everyone gains equally).
The biggest advantage of globalization, in
Wolf's view? The spread of prosperity, including a wider distribution of innovation and bigger opportunities for profitable exchange/trade. Also valuable, although not guaranteed, Wolf says, is increased political stability in previously impoverished countries.
Globalization marches onFurther, in the globalization era's first decade, the United States can't do anything to halt the flow of ideas, and the diffusion of knowledge, skills, technology systems, and so forth, Wolf argues. Or at least the United States
can't do anything decent to stop globalization.
Continue reading Martin Wolf: Making the United States safe for globalization
Posted Feb 27th 2008 5:35PM by Joseph Lazzaro (RSS feed)
Filed under: Other issues, Consumer experience, Commodities, Oil
For Mac Murphy of New Rochelle, NY, a husband and father of two teen-age daughters in college, the rise in the price of gasoline is not an incidental expense.
"It's like an extra car payment, for crying out loud," Murphy said as he pumped $3.39 per gallon unleaded regular gasoline into his wife's car Tuesday.
Gas pump shock
Murphy pays for his daughters' gas bills while the two are studying at college. Each has a car. Up until about a year ago, the bills were about $20-$25 per month each. These days, they're sending back monthly bills that are routinely over $50 each, and those gasoline expenses combined with his and his wife Laura's gas purchases, means ..."about $300 dollars a month in gasoline expenses."
The family has done its best to limit gasoline expenses by carpooling and eliminating unnecessary trips, and next year the family will trade in one car for a substantially more-fuel-efficient vehicle. Still, given that he and his wife each commute by car to different locations, there's only so much they can do to reduce their gasoline costs. Further, Murphy says the expense "is only likely to increase this summer, when gas hits $4 per gallon."
When told by an inquirer that gasoline may actually approach $5 per gallon this summer in high-cost cites such as his metro New York region, Murphy was apoplectic.
Continue reading As gasoline price rises, so does clamor for gasoline tax credit
What's a high income in the United States? Right now, ask 10 Americans and you'll probably get 10 answers. 
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