How a key works

This is just cool (thanks, Jeff):

v

 

 

NC taxes and cognitive dissonance

So, Art Pope, NC’s very own version of the Koch brothers is now our state budget director.  Scary. But here’s the really scary part– apparently he’s the most sane in the room.  While the rest of the NC Republicans seem quite willing to create a massively regressive shift in taxes away from income tax towards more sales tax, Pope– of all people– has publicly come out saying this is a bad idea:

CHAPEL HILL — Gov. Pat McCrory’s budget director distanced the Republican chief executive from a proposal to eliminate income taxes in North Carolina and expressed his own “great concerns” with the concept being floated by leading GOP lawmakers.

Art Pope said the state’s current tax system is plagued by “holes and problems” – but the idea of abolishing personal and corporate income taxes by increasing the sales tax and levying the tax on dozens of duty-free services creates more concerns.

“Maybe if you were designing a tax code from scratch, you may want to look at a broad-based consumption tax,” Pope told a reporter roundtable at UNC-Chapel Hill’s journalism school Wednesday. “To go there from where we are now, I think, is very difficult to do and has lot of impracticalities.”

In particular, Pope cited a concern that the higher sales tax is “absolutely, no doubt” regressive, meaning it would hurt low-income taxpayers the hardest. He said it amounts to a gross income tax “without any regard to whether you are making any money.” And he worried about upsetting the current three-tier system of income, sales and properties taxes, calling it “fairly balanced.”

Wow!  Good for Pope.  If his goal is to make the heads of liberals across the state explode in massive cognitive dissonance, he’s onto something.   There’s probably no Republican in the state more vilified.

What’s especially interesting is that Pope’s very own Civitas Institute sponsored a report by the (laughable and discredited among mainstream economists) Arthur Laffer that argues essentially that all states should abandon their income tax.  Here’s its press release.  I actually went and briefly looked at the report itself and a couple of criticisms.  On a basic level it is just a horrid example of taking correlation to mean causation.  I mean horrid.  I would give it to undergrads in a methods course to tear apart.  All the inter-related factors involved in a state’s economic health and all we get is a series of bivariate tables.  Spurious correlation anyone?  Not to mention, plenty of liberal think-tanks have picked it apart and found all sorts of ways he is cherry-picking information.   I really liked this from the NC Budget and Tax Center:

The Civitas/Laffer plan is based on the flawed theory of supply-side economics and the Laffer Curve, which hold that reducing taxes actually increases revenue and boosts economic growth. The evidence is overwhelming that this theory does not yield the economic growth.

There is no evidence of a direct relationship between top tax rates and economic or job growth, according to a 2012 study by the Congressional Research Service.10 Moreover, states that Laffer himself has termed “high income tax states” turn out to have economic conditions comparable to, if not better than, states that do not have a personal income tax,
according to the Institute on Taxation and Economic Policy.11

In fact, states with low income tax rates actually have lower employment growth and lower median household income than Laffer’s designated high-tax states according to a recent study by Good Jobs First and the Iowa Policy Project.12 Furthermore, the industry composition in a state has a greater impact on a state’s economic performance. Similarly, an educated workforce, the presence of research centers like major universities and other knowledge factors boost per capita income growth. Accordingly, states will likely suffer in the long run because they lack the resources needed to invest in education and other building blocks of economic growth.

And even if it did unleash great economic growth– which is almost assuredly would not, you are still looking at a massive redistribution of wealth from poor to rich (from the same report):

 

Also a nice study linked on the AFL-CIO website highlighting Laffer’s flawed and highly questionable methodology.

Photo of the day

Sam B. was kind enough to send me a link to this very cool NPR visual story about the fracking boom in North Dakota and the visual impact on the night sky.  You wouldn’t think you’d see this much light in ND at night, but that’s what a giant fracking operation gets you:

Illustration by NPR/NASA

Lots more cool photos and videos at the link.

Mickelson and rich people being dumb about their money

Just because you are really rich does not mean you know anything about money.  Especially if you got really rich because you happen to be very good at hitting a golf ball.  In case you didn’t hear from Phil Mickelson, here’s Tomasky:

If he’s really paying a 63 percent tax rate, then all Phil Mickelson had better worry about is firing his accountant and hiring a new one. I mean, is he kidding?:

“If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent,” Mickelson said. “So I’ve got to make some decisions on what I’m going to do.”

Social Security? He pays that on the first $113,000 or so of his earnings. He made…ready…$47 million last year. He could lose what he pays in Soc Sec taxes in his golf bag. Even if he is actually paying 63 percent, then the poor fellow was living on a mere $17.4 million last year.

And if he did that, he and his financial advisors are pretty stupid. Barry Ritholz at The Big Picture blog explains why…

[Short version.  All sorts of tax free investments.]

Ah well. Now Lefty is changing his tune a bit:

So Mickelson, being the astute man that he is, quickly realized that the true “everyday man” would have a difficult time relating to someone earning $47.6 million in this difficult economy complaining about what amounts to a 9% increase in his tax rate (combining state, federal and payroll tax increases), only 3% of which came from the state of California…

Anyway, apparently feels he may need to move out of California to a state with a lower state income tax.  Because he’s really going to miss that $1.5 million so much out of 47, apparently.  My take…

I could be wrong, but I vaguely recall some research showing very little, if any, impact for differences in state personal income tax rates.  There’s a reason rich people live in NY, CT, and CA.  Not too many of them are just going to move to TX or Idaho or wherever for lower taxes.

Mickelson’s problem is that his crazy 63% figure showed an amazing ignorance of economic policy.  http://www.thedailybeast.com/articles/2013/01/22/phil-mickelson-employs-america-s-dumbest-accountant.html

If I made $47 million a years I would simply live where I wanted to live, damn it.  If I loved the Pacific ocean, Los Angeles, and Hollywood, I’d live in California even it it costs me $10 million more a year.  Do you really feel it when you make that much?  Or, if I loved Disney and the Atlantic and hanging with Lebron, I’d move to Florida.  As most residents of the Triangle know, location really does matter for quality of life.  If money is no object (which it shouldn’t be for a multi-millionaire) why in the world wouldn’t you just live in the place with the best (subjective) quality of life?!  Presumably, to this point Mickelson has decided that this place is California.  For a man in his financial position, it literally makes no sense to move somewhere else over 3% of his income.