My appearance on "The Big Picture" with Thom Hartmann

Here is a link for my appearance on Thom Hartmann last night.

One of the things brought up was a new study by the Institute for Policy Studies and Campaign for America's Future showing that the CEOs behind "Fix the Debt" have benefited from tax breaks for executive compensation to the tune of about $1 billion in 2009-11, for just those companies. This tax break lets companies count pay using stock options -- which doesn't cost the companies anything -- as if it were cash pay and thus deduct it against corporate income. According to Citizens for Tax Justice (via Common Dreams and Huffington Post), the Fortune 500 saved $11.2 billion with this loophole in 2012. Apple alone profited by $3.2 billion from 2010 to 2012 from this tax break.

Appearing tonight on "The Big Picture" with Thom Hartmann

I will be talking austerity tonight with Thom Hartmann on his show, "The Big Picture." The program reaches 50 million homes in the United States, and you can look for a station here. Alternatively, you can watch it online here. The show starts at 7:00pm Eastern Daylight Time, and I am told my segment will begin about 7:15.

The European Union released its unemployment figures this week. Eurozone unemployment increased from 12.0% in February to 12.1% in March, up from 11.0% in March 2013. Greece reached 27.2% unemployment in January 2013 (most recent data available), while according to Eurostat's harmonized unemployment measure, Spain reached 26.7% in March.


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Tell me again why we want austerity here in the U.S.?

Bad Economic Development Ideas from Conservatives

Good Jobs First today released a new study debunking so-called “business climate indexes” and showing them to be cover for an ideological agenda of cutting taxes and cutting wages.

“Grading Places: What Do Business Climate Indexes Really Tell Us?” is written by University of Iowa emeritus professor Peter Fisher, a well-known expert on investment incentives and fiscal policy, with a preface by Good Jobs First director Greg LeRoy.

This is an ambitious study that analyzes six different indexes published by five different groups. Four are simple combinations of a wide variety of policy variables, each with its own idiosyncratic weighting systems, all of which are published by conservative organizations such as the Tax Foundation or the American Legislative Exchange Council (ALEC).

Two use “representative firm” models to attempt to calculate the tax burden on different types of companies in each state. One is sponsored by the Tax Foundation, the other by the Council on State Taxation.

Since Good Jobs First just knocked out the ALEC study in December, and because the Tax Foundation index is far more widely cited (at least 3 times as much, according to searches of the premium Nexis news database; subscription required), I am going to focus primarily on the critique of the Tax Foundation’s State Business Tax Climate Index (SBTCI).

The SBTCI measures 118 features (p. 49) of state tax law grouped in five categories (p. 50): personal income tax (33.1% of the index), sales tax (21.5%), corporate income tax (20.1%), property tax (14.0%), and unemployment insurance tax (11.4%). As the study shows, these weightings are the source of the most mischief. They are based on the variability of each factor among the states; that is, personal income tax varies the most, and so on.

However, a study by Ernst & Young for the Council on State Taxation determined the actual percentages that businesses pay in state and local taxes, based on analyzing tax returns. Counting the five taxes listed above, the costs are: property tax, 45.9%; sales tax, 30.8%; corporate income tax, 8.7%; unemployment insurance tax, 7.7%; and personal income tax, 6.7% (p. 51).

It won’t surprise you that using the Tax Foundation data with the Ernst & Young weights gives you a very different ranking of the states, with “six states’ ranking changing 20 or more positions, and another 11 states by 10 to 19 positions” (p. 51). In fact, there is essentially no correlation between the Tax Foundation’s ranking and the one constructed by Fisher (-.05, to be exact). In other words, the Tax Foundation’s tax ranking tells you literally nothing about business taxes paid as a percentage of gross state product.

If that is so, what is the whole point of the Tax Foundation exercise? Fisher does not mince words (p.51):

 But the TF sticks with its system because it enables the Foundation to heavily penalize states with more progressive tax systems above all, while concealing this objective in an arbitrary system of scaled and weighted numbers.

 As if this were not enough, the four simple indexes produce widely varying scores: Massachusetts ranks from best on the Beacon Hill Institute’s State Competitiveness Index, 22^nd on the Tax Foundation’s State Business Tax Climate Index, 26^th on ALEC’s Economic Outlook Ranking, and 38^th on the Small Business and Entrepreneurship Council’s U.S. Business Policy Index (p. 68).

In some ways, this could be considered a feature, and not a bug. As Peters explains (p. 68), “Conversely, those arguing for lower taxes could find, in 39 states, a measure that ranks them in the highest 15 states, and 27 could find a measure placing them in the highest 10.”

The bottom line is that, like the ALEC report analyzed in December, these indexes are designed to pressure state governments into  lowering taxes, even if that requires cutting spending that benefits business throughout the state (such as a university system); and putting downward pressure on wages, even though it is hard to see how you create a prosperous state based on low-wage jobs.

New Domain Name

I have moved the site to www.middleclasspoliticaleconomist.com. No more "blogspot" in the address. This should not affect how you view the site, nor the feed. Please let me know if you do experience problems, of course.

It does affect some of the statistics. For example, all the tweets recorded at the old domain no longer show up, and all the votes in the poll from before the changeover have disappeared. Hopefully, that will be the extent of it.

Thanks for your support!

Unemployment Hits New Highs in Spain and France

As if there were not already abundant proof of the failure of austerity in the eurozone, the BBC reports today that both Spain and France have hit new unemployment milestones.

In Spain, unemployment has jumped from February's 26.3% to a first-quarter rate of 27.2% (implying an even higher figure for March). In March 2012, it was "only" 24.1% (see source in table below).

In France, there are now 3.2 million unemployed, more than at any time since the country began keeping records in 1996. Complete EU unemployment data for March should be released in early May.

For a fuller picture of the continuing deterioration of the situation in the European Union and the eurozone, the unemployment rates tell a stark story.

Date     Eurozone     Spain     Greece     Portugal     Ireland     UK     USA   EU-27


3/2012   10.8%         24.1%    21.7%     15.3%      14.5%    8.2%  8.2%   10.2%
2/2013   12.0%         26.3%    26.4%     17.5%      14.2%    7.7%  7.7%   10.9%

Note: Greece and UK figures are for January 2012 and December 2012, rather than March 2012 and February 2013
Sources: Eurostat, 2 May 2012, for March 2012; Eurostat, 2 April 2013, for February 2013; Bureau of Labor Statistics for U.S.

Moreover, it is important to note that despite drastic budget-slashing, in none of the EU countries did debt come under control, even for Ireland and the UK, which have managed some slight growth over the 11-month period. Using this handy BBC interactive tool, we can see that Spain's debt/GDP ratio increased from 69.3% in 2011 to 84.2% in 2012 (Wait, that's under 90%! What's happening?), Greece declined from 170.3% to 156.9%, Portugal increased from 108.3% to 123.6%, Ireland increased from 106.4% to 117.6%, and the U.K. increased from 85.5% to 90%. In fact, just six short years earlier, Ireland had a debt/GDP ratio of just 24.6%. The Celtic Tiger, favorite of conservatives everywhere, has truly crashed and burned.

Given the Spanish and French figures, look for bad news for EU unemployment next week. Despite the continuing austerity fail, Republicans and some Democrats continue to push for deficit cutting here, and will maintain a steady drumbeat. But, like Reinhart and Rogoff, they all deserve the Colbert treatment.

Cross-posted at Angry Bear.

April Taxcast from Tax Justice Network

This month's Taxcast from the Tax Justice Network highlights the International Consortium of Investigative Journalists' major data dump from leaked documents, the agreement of the Group of 20 that automatic exchange of tax information should be the global standard, the imminent collapse of banking secrecy in Luxembourg (yes, you read that right!), and phantom foreign direct investment into India.

Enjoy the podcast!
 

Reinhart/Rogoff Gets the Colbert Treatment

Via Paul Krugman, Steven Colbert takes on Reinhart and Rogoff. Also be sure to check out his interview with Thomas Herndon.