Governments are spending big to keep the world economy from getting dangerously sick

Vaguely related to class discussions on federal fiscalism and what types of expenditures should be handled at the federal, state or local level. Clearly, with the current pandemic federal governments have had to make unexpected decisions on spending to mitigate the effects of the outbreak. For reference, the US approved a $1 trillion fiscal package for as public-health response.

Tax our tech and we’ll blacklist your bubbly

It is accepted throughout the world that the treaty-based global corporate tax system needs updating. Yet how to do it has not yet been determined. France has recently implemented a 3% digital sales tax, as a way by which some tax revenue can be captured (as tax shelters and intangible trade pose a difficult taxation challenge). President Trump responded with a threat of a 100% tariff on French luxury goods like cheese and champagne. This relates to our class discussions surrounding tax shelters and the inability to simply close them. Alternative taxing methods such as this must be used. Yet, also as discussed in class, questions of inequity arise when transitioning to a consumption tax (such as this digital-sales tax).

St. Louis MLS group makes stadium progress, remains optimistic about port district

This is more of a personal one for me. I am a born and raised St. Louisan, and I played soccer for a long time. The MLS is coming to St. Louis and the new stadium will of course demand tax incentives – of the type we discussed in class. While the majority of the project will be privately financed, the legislation discussed in the article outlines public incentives available to the professional soccer franchise. They include partial tax abatement, sales tax exemption on construction materials, amusement tax abatement and special taxing districts that would impose a 1% sales tax. Interestingly, a “port district” is being proposed to expand the reach of the Port Authority to include the stadium area. This would allow for a 1% tax to be levied.

Why the road to universal health care in America looks rocky

The article discusses the current debate on the Democratic side of the Presidential race. It is generally agreed, on this side, that healthcare reform is needed. Many support a Medicare for all. Elizabeth Warren and Bernie Sanders support a single payer system similar to the National Health Service in the UK. Such systems in other developed countries are financed by payroll taxes (or a tax on labor). The estimates of funds needed in the first decade run from $32-$34 trillion. This is a large sum to finance. Warren wants the rich to bear the burden of the tax. It will be interesting to learn more on how specifically the rich would be taxed so that we can speculate on who will really bear the burden of any potential tax.

A study suggests that higher minimum wages hit poorer bosses’ pockets

The article touches upon the fact that some research shows in the US, Canada, and Europe that the minimum wage leads to reduced employment. In other studies, there is no effect on employment. It is not disputed that those who do remain employed make more when there is a minimum wage. The question the becomes: Where does that money come from? New research from Israel during 2006-2008 shows that firms employing 60-80% low-wage workers saw their profits cut nearly in half. While business owners of such companies are relatively well-off, the minimum wage can be said to be progressive (as these owners bear increased burden). However, it may be considered unfair as even richer business owners and well-off employees bear less of the burden. An alternative to the minimum wage is simply to implement higher taxes so that the effects are still progressive and relatively more fair (burden not most heavily bore by less wealthy business owners). To combat the unfairness, certain restrictions apply in the US to only apply minimum wage to higher earning companies. If the goal is to combat poverty these unintended consequences should be considered.

An Overhyped Tax Credit

This editorial is an interesting examination of the Earned Income Tax Credit, which is supported by both parties as a boost to employment benefits. A credit can be viewed as preferable to raising the minimum wage because it does not reduce the incentive to hire low-skilled workers. The article points out that there has been $69 billion worth of “improper” EITC credits issued and that government payments towards the credit is now greater than payments to welfare. Increases in the EITC have correlated with increases in employment but this new study argues that the results can be attributed to reduction in welfare and other such reforms rather than the EITC. EITC is useful to redistribute wealth but the article argues it should not be considered an incentive to work. As a reader, I want to know more on this topic.

The Great Treasuries Binge

The article discusses the current deficit and the potential for it to grow under what many speculate will be another round of tax cuts from President Donald Trump. The deficit is currently over a trillion dollars. Politically there is consensus on both sides of the aisle that large deficits are acceptable. This is a change from the Obama presidency when Republicans accused the president of profligacy. The article discusses the largest investors in American Treasuries, each of which is quite interesting for their own reasons. American companies are one such group. Corporate savings are high with American firms now as net suppliers of savings to the rest of the economy. A natural place for these savings is invested in Treasuries. Two other groups are motivated by the consequences of the Great Recession. Banks must now meet certain liquidity requirements. They seem to be meeting these standards through larger investments in Treasuries. American households have shown a 70% increase in savings over the past three years. Likely the effect of the recession is still present and motivating such behavior. International investors are faced potential trade wars and general uncertainty. The European Union’s investment in Treasuries has climbed significantly over the last ~5 years. Deficits and growing debt seem to be holding for now but this profligacy along with heavy global reliance on American Treasuries seem to be economically irresponsible in the long term.