DFL Education Foundation

Things to Tax

Paul Krugman, NY Times

The supercommittee was a superdud — and we should be glad. Nonetheless, at some point we’ll have to rein in budget deficits. And when we do, here’s a thought: How about making increased revenue an important part of the deal?

And I don’t just mean a return to Clinton-era tax rates. Why should 1990s taxes be considered the outer limit of revenue collection? Think about it: The long-run budget outlook has darkened, which means that some hard choices must be made. Why should those choices only involve spending cuts? Why not also push some taxes above their levels in the 1990s?

Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions.

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Mean v. Median Income Growth

Comparing income growth per capita to median income growth is telling:

What Does ‘Economic Growth’ Mean for Americans?, by Uwe E. Reinhardt, Economix: ...The third chart, below, exhibits the growth path of real G.D.P. per capita in the United States over the period 1975-2009 and the corresponding path of real median household income. The data show that over the 34-year period, real G.D.P. per capita rose by an annual compound rate of 1.9 percent. ... [H]owever, median household income in the United States rose by less than 0.5 percent a year..., that 1.9 percent average economic growth does not mean much for the experience of the median household in the United States.

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Views: Governor Pawlenty's unallotment may be unconstitutional

Minnesota's legislative session ended with the governor refusing to sign the legislature's budget bills and swearing to use unilateral unallotment to balance the budget.  Law professor David Schulz think the governor's on precarious legal footing:

First, it is unlikely that the original intent of the Legislature was to give the governor this broad of a power to unallot. Its original passage was to give the governor power to address small budgetary shortfalls, not make cuts that amount to major programmatic changes. Second, there is a basic rule in law regarding statutory interpretation. One should interpret laws to avoid absurd results and avoid conflicts with other laws. Here, if one accepts the governor's reading of unallotment, it would mean he alone has the power to change fiscal priorities for the state or that he could use this power to negate laws establishing statutory authorized policies. One result is absurd; the other produces a conflict in the laws.

Read more at Minnpost.

Views: Pup-tent Republican

Wayne Cox of Minnesota Citizens for Tax Justice provides cutting commentary on the end of the Minnesota legislative session.  A taste:

[Sarah] Janacek and [Annette] Meeks say Pawlenty is on his way nationally now.  It may not be a moment too soon for the governor because last week's KSTP poll said 57 percent of Minnesotans do not want him to run for re-election...

Minnesota's black kids doing worse than southern ones

Academic achievement of minority students has been one of the lagging figures in Minnesota's otherwise noteworthy educational system. 

"On state assessments in reading, about 80 percent of your white fourth-graders meet the state standards. For black fourth-graders, it's more like 44 percent, for Latinos, about 33 percent, and somewhere in the mid-50s for both Asian and Native American students,'' Haycock said, according to a news release from the [Minneapolis] Foundation.

Read more of the article here, and check out what the DFL Education Foundation is doing about it, thank to its Achievement Gap Committee, led by former Minneapolis mayor and Congressman Don Fraser is doing here.

New Thinking on the Economy

Is a government program the only way to intervene in the economy?  No, says Dean Baker, noting that there are many ways government could act in the economy without using taxpayer dollars and instead using rules.  For example:

• Patent protections for prescription drugs cost Americans $300 billion a year
• CEO compensation could be changed from a game of mutual back scratching - you raise my salary, and I'll raise yours - to regular approval by shareholders in a vote where unreturned proxies do not count.

What other ways are there to change the rules to support the middle class and a sustainable economy?

Addressing the economic crisis: an interview with Ben Fayot of the Luxembourg Socialist Workers Party (LSAP)

Ben Fayot is the chair of the Luxembourg Socialist Workers Party (LSAP) caucus in the Luxembourg Parliament.  He served as LSAP president and has been a member of the European Parliament.  The LSAP is currently in a coalition government with the conservative Christian  Social People’s Party (CSV).  By profession, Mr. Fayot is a political historian specializing in the history of socialism in Luxembourg.  Mr. Fayot agreed to comment on the French influence on Luxembourg progressive politics, the financial crisis, and European expectations towards the Obama administration.  The interview was conducted in Luxembourg City and translated into English by Stephan Peter of Twin Cities DSA earlier this year.

With Pawlenty: MN a perpetual deficit machine

From Wayne Cox, in Minnpost:

A reporter brought up a symmetry at Gov. Tim Pawlenty's news conference Tuesday on the latest budget forecast: Pawlenty began as governor with a projected $4.5 billion deficit — the same level it is today. While the nation has yet to perfect a perpetual-motion machine, Minnesota seems to have found a perpetual-deficit machine in Pawlenty.

What Minnesota gets from the stimulus package

Courtesy of Minnpost:

• 66,000 jobs created or saved over the next two years. (Under previous versions, this number was estimated at 70,000.) The jobs breakdown by Congressional is 7,100 in District 1, 8,400 in District 2, 7,600 in District 3, 7,000 in District 4, 7,200 in District 5, 8,700 in District 6, 6,800 in District 7 and 7,400 in District 8. (If you're a math person, these numbers do not equal 66,000… still.)

• A tax cut of up to $800 for 2,120,000 workers. (The cut had been $1,000 in previous legislation.)

• Makes 41,000 families eligible for a new American Opportunity Tax Credit. The credit is designed to make college affordable by creating a $2,500 partially refundable tax credit for four years of college.

• Offers an additional $100 per month in unemployment benefits to 331,000 workers in Minnesota who have lost their jobs in the recession and provides extended unemployment benefits to an additional 52,000 laid-off workers.

• Provides funding to modernize at least 91 schools in Minnesota.

Economic stimulus: getting the biggest bang for the buck

We have great hopes that President Obama has the wisdom, courage and political savvy to persuade Congress to adopt a really effective American Reform and Recovery package.  It's no secret that some investments are more effective than others.  For a clear picture of what pays off and what does not, take a look at this graphic from Mother Jones: