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Showing posts from January, 2016

SF Fed Report: Min Wage Increases Ineffective vs. Poverty

I'm not a huge fan of the minimum wage, but I also admit it isn't going away. It's a feel-good public policy that some nations embrace with complex brackets (Australia indexes for age of worker) and others simply don't have at all. There's little economic correlation between the minimum wage and job creation, because the wage tends to trail earned wages in skilled trades.

Which nations don't have legal minimum wages? How about Denmark, Iceland, Norway, Sweden, and Switzerland! Germany has regional minimums, handled by local governments, just as many states in the United States set their own minimums.

How can it be that social democracies don't have minimum wages? They have a history of employee ownership, through unions with board seats at companies. The United States lacks a similar history of corporate-union or even government-union cooperation. Our unions are more adversarial. (Maybe they should try another approach; it might increase wages and influe…

The ‘Hollowing’ of the Middle Class

The narrative is set, and as a rhetorician, I appreciate the value of a good story in shaping public debate.

The rich are getting richer, the poor are getting poorer, and many of the middle class are being pushed down into the lower-class. It's a sad story, a compelling story, and in some important ways it is a fiction.

Yes, the middle class is shrinking. That should concern us. But what if the shrinking middle class is as much a result of people moving into the upper class as it is a result of others moving down the social ladder? In fact, some research shows there are more people moving from the middle into the upper income brackets, leaving a smaller middle class — but not for the reasons being promoted by the media and politicians.

Exceptions in the media coverage exist, as they do in little tiny dimly lit sections of academia. Readers know I enjoy Robert Samuelson because he digs deeper into statistics than other newspaper columnists.
The 'hollowing' of the middle…

90% Tax Rate vs. Effective Rates

This campaign season in the United States is already producing some meme myths on social media. One I keep seeing is the "90% tax rate" myth. Often, the responses prove people don't understand the marginal rate system of the U.S. income tax. Another meme that does reflect marginal rates claims there was a 70 percent effective tax rate. That's not quite reality, either, though. (It is, and it isn't, as I'll try to explain.)

The most popular blog posts on Almost Classical remains The 90% Tax Rate Myth, in which I explain effective rates vs. top marginal rates and the relative stability of top rates excluding outliers of less than 10 tax filers. That’s necessary because some of the “top tax rates” would have applied to… ONE PERSON.

As I wrote in that old post:
As a result of deductions and exclusions, even the theoretical maximum Real Rate of taxation at 60% in 1944 overstates taxation dramatically. The reality? On earned income, the richest U.S. taxpayers paid …

Podcast Interview on iTunes

William Campbell was kind enough to include an interview with me in his podcast series, Challenging Opinions. To learn more about the series, visit:

https://itunes.apple.com/us/podcast/challenging-opinions/id1033974650?mt=2

Simplification isn't Helpful in Econ Discussions

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Economics is not a simple discipline to understand. Yet, all around us are people claiming that complex economic matters can be as clear as "Econ 101" when debating public policy. Sorry, but Econ 101 doesn't answer anything and the rhetorical shorthand does the discipline (and policy debates) a disservice.

When you take an introductory class in any topic, from physics to programming, the concepts are necessarily simplified. It is like teaching a child to read. You start with phonics in English and tell the child that letters make sounds. Oops. But it isn't really that simple, is it? Phonetic rules change and words in English have complex etymologies. Rules you learn as a new reader quickly vanish or have to be understood as a small part of a complex flowchart.

Economic principles like "supply and demand" or "externalities" seem simple enough in the language and models of Econ 101. And then you head into the bushes and discover there are more …

High Taxes = Wealthy Communities

One of the paradoxes progressives use to challenge libertarian ideals and conservative tax policies is that the wealthiest communities and cities have some of the highest local tax rates in the nation. Cities like New York and San Francisco are obvious examples, as are the suburban areas around Chicago, Los Angeles, and Washington, D.C. (also known for its concentration of Super Zips).

High local taxes usually correspond to school spending, which is funded in most states through property taxes. Local schools are almost private academies in many states and counties, particularly in areas without a history of private schools.

My wife and I are an example of this high-tax and wealth paradox, made worse by the natural sorting that occurs among classes. And, because wealth is generationally transmitted through culture, education, and property, this also contributes to racial sorting in most nations (as seen by studies of "egalitarian" Europe).

We live in a single-entrance, c…