Monday, July 23, 2012

Taxes, Transfers, and Progressivity

This showed up on Harvard economics professor Greg Mankiw’s blog. He took data from the non-partisan Congressional Budget Office that showed incomes, Federal taxes, and state and Federal transfer payments for different income segments of the population. Transfer payments are cash outlays from the government that benefit an individual. Social security checks are transfer payments. So are Earned Income Credits, food stamps, and Medicaid payments. The most recent data provided was for 2009.


Since transfer payments are like a negative tax, what Mankiw did was combined tax payments and transfer payments, divided by market incomes from earnings and savings. These are the results he got:

Bottom quintile: -301 percent

Second quintile: -42%

Third quintile: -5%

Fourth quintile: 10%

Top quintile: 22%

Top 1%: 28%

This means that for households in the lowest 20% of income, they receive $3 in federal money for every dollar that they earn. For people in the top 1%, for every $1 they make, 28 cents ends up back in the hands of the Feds.

Two points on this spring to mind.

First, notice that the middle 20%, the third quintile, has a negative percentage. That means the middle is drawing more from the government than they are paying in. Not by much, but the majority of households are benefiting from government largesse. We have reached a tipping point.

Secondly, this speaks to the level of progressivity in the tax system. Much of the policy debate coming out of the Obama administration concerns raising taxes on the top earners, making them pay their “fair share.” When 60% are taking out more than they put in, I don’t see how you can make a claim that the wealthy have a duty to put in a higher percentage of their income.

Friday, July 20, 2012

Yahoo's New CEO

Yahoo has a new CEO coming on board. Marisa Mayer, currently a senior executive at Google, has been picked as the fifth CEO of the troubled Internet portal company in five years. Almost simultaneous with the announcement of her selection, word came out that she was pregnant. The prospective CEO has declared her intention to be in the office right up until her due date, and continue working remotely during the few weeks she will be off after her delivery.


Reaction to Ms Mayer news has been mixed. Some commentators are jubilant over the prospect that such a high profile executive will show that women can fill the highest positions and still have children. Others have expressed concern the Ms. Mayer will raise the expectation that every woman should take minimal leave, and come right back to work. Still others have raised the point that her resources dwarf those of the average working woman, making any comparison moot. As a wealthy woman (employee #20 at Google), she can not only afford a live-in nanny, she could bring in her own wet nurse if she so chose.

Now, maybe she can skip right over the normal fuss and bother associated with bringing a new human into the world. She might be just that good. Yahoo’s Board of Directors clearly thought so. But one of the things I’ve observed about having children, particularly for the first time, is that it is an unpredictable process. Maybe she’ll be able to do a videoconference in the delivery room, and send emails between pushes. Maybe there will be no postpartum depression, and the child will be perfectly healthy. And maybe not.

Yahoo is a company in crisis. They are losing market share in the Internet search market, their stock price is in the tank, and they’ve had five years of failed strategic shifts and management turnover. A corporate turnaround like Yahoo’s is one of the riskiest business propositions around, and now the Board of Directors have added a whole new level of risk to the equation.

Any candidate could have health problems arise after being hired. Nothing is certain in this world. But pregnancy is known to be a significant risk, and the Board appears to have ignored it, based on the statements of a woman who doesn’t know what she is talking about, because she has never gone through childbirth before.

Based on her track record, I sure wouldn’t bet against Ms. Mayer. But I wouldn’t bet on her either. Yahoo looks like a really dicey proposition to me. I am going to hold off on buying Yahoo stock.

Yeah, like I’ve got money lying around to buy stock with.

Thursday, July 12, 2012

There Oughta Be A Law

One of the myriad of ways in which people can be divided into two groups is that some people hear the phrase “there ought to be a law” with regard to a situation, and think “yes, there really should be a law.” Then they begin to think about how that law should be structured. Other people hear “there ought to be a law,” and consider it with an ironic appreciation.
These tendencies cut across the political spectrum. Consider the ill starred Defense of Valor Act, passed by the Republican-led Congress. This law would have made it a crime to claim that you had received military honors and medals which you had, in fact, not received. Congress, in its wisdom, had decided to outlaw braggadocio, a characteristic of human nature that has been with us from time immemorial. Thankfully, the Supreme Court struck down the Act as a violation of free speech rights. Guys trying to chat up girls in bars all over this country breathed a sigh of relief at this sign that the Supreme Court remains a bulwark of their liberties.
Then there is Obamacare, legislation that is a darling of the Democrats. Someone cried out that there ought to be a law requiring everyone to buy health insurance. Others took up the rallying cry, and lo, 2000 pages of densely worded legalese was transformed into the law of the land. The Supremes, in their wisdom, pretty much let that one stand.
Lately, it seems to me as if the number of people who believe that there ought to be a law in all seriousness is on the increase, while the numbers of those who think there are enough ordinances on the books is waning. Personally, I come down on the side that hears the phrase “there ought to be a law” as a comment on the need for patience when dealing with the foibles of society, and a wistful desire for honesty and tolerance in others dealings with us.
Except for the clown who cut me off in traffic the other day. There really ought to be a law against that sort of thing.