Results for “corporate tax” 187 found
Can this be true?
Here is a surprise:
So far there appears no evidence whatsoever of the “tax cut for the rich” charge. Changing regulations have reduced the burden of each income quintile except that at the very top. From the standpoint of all federal taxes, 2001 represents increased income progressivity as compared with the previous decades.
That’s Econopundit and here is the full post and data, thanks also to Bruce Bartlett for publicizing these results. The original source, I might add, is the non-partisan Congressional Budget Office. Note that the figures include the effects of excise, payroll, and corporate taxation, not just income taxes.
My take: We have to be careful how we interpret the figures. If “the rich are getting richer,” the top quintile can be paying more, in relative terms, even if the top marginal rates are falling. That being said, the top quintiles still appear to be carrying their share of the burden. Thanks to Brock Sides for a useful email.
Addendum: Here is some critical analysis, I am heading to my conference and don’t currently have time to evaluate it.
How free market is the Chilean miracle?
The major economic successes of Chile are commonly considered to be a free market miracle. To be sure, there is much truth to this characterization. The Pinochet regime engaged in extensive privatization and deregulation and moved to free trade. Agriculture, services, copper mining, and telecommunications all boomed. The Chilean economy has been the envy of Latin America for some time now. The country also has few problems with corruption.
The reality nonetheless is more complex than a simple market story may imply, read this thorough account. The Chilean state has grown stronger as the Chilean economy has prospered. In the 1990s, Chile has doubled corporate taxes, almost doubled its minimum wage, and more than doubled spending on health and education. Here is another account of how social spending has gone up during the 1990s. Chile also has maintained tight capital controls on foreign investment until 1999. The vaunted Chilean social security privatization in fact superimposed a system of private accounts on an already-existing governmental system, which did not disappear. Yet in the 1990s the country continued to prosper. Chile grew by an average of 5.9 percent a year.
The bottom line: The world has seen massive liberalizations over the last twenty-five years and all for the better. But with few exceptions these reforms have strengthened rather than overturned welfare states. New Zealand, for instance, also has not cut its welfare spending. Welfare states are, in part, the price we pay for public order, whether or not they always make economic sense. When it comes to economic development, the question is not state vs. market. Rather poorer countries need both stronger markets and stronger (as distinct from more tyrannical) states. Chile is generating strong institutions across the board, in both private and public realms. In contrast, look at Mexico, where government taxation takes only 12 percent of gdp. In Mexico the problem is not to cut the absolute size of government per se (although I can think of some obvious and good steps in this direction, such as introducing more electricity competition) as to reduce corruption and improve the quality of governance. Until market-oriented reformers understand this basic distinction, we will continue to give bad advice and generate only mixed results for market-oriented ideas.
Capitalism comes to Iraq
Most of the talk about the reconstruction of Iraq has been about US aid, a so-called “Marshall plan for Iraq.” But as Tyler pointed out the Marshall plan never did that much for Europe – what made the difference was economic liberalization (and recall that the key reform in Germany, Ludwig Erhard’s lifting of price controls, was done without the permission and against the wishes of the US administrators). It is heartening therefore that liberalization appears to be coming to Iraq. Here is the key information from The Economist (subscription required).
A shock programme of economic reforms signals a radical departure for Iraq. The changes, announced by the country’s provisional rulers at the annual World Bank/IMF jamboree in Dubai, could see its battered economy transformed abruptly into a virtual free-trade zone.
If carried through, the measures will represent the kind of wish-list that foreign investors and donor agencies dream of for developing markets. Investors in any field, except for all-important oil production and refining, would be allowed 100% ownership of Iraqi assets, full repatriation of profits, and equal legal standing with local firms. Foreign banks would be welcome to set up shop immediately, or buy into Iraqi ventures. Income and corporate taxes would be capped at 15%. Tariffs would be slashed to a universal 5% rate, with none imposed on food, drugs, books and other “humanitarian” imports.
Saturday assorted links
1. Liverpool man who inherited £100,000 lets 12 strangers give the money away.
2. Jonathan Eaton, RIP. And more on his work in trade economics.
3. ACX grants from Astral Codex. And new African School of Economics coming in Zanzibar.
4. The Monk and the Gun is a fun Bhutanese movie about the foundations of democracy (and markets).
5. Using AI to campaign and deliver your victory speech, while in jail.
6. Another 2014 post on Putin: “Putin is signaling to the Russian economy that it needs to get used to some fairly serious conditions of siege, and food is of course the most important of all commodities. Why initiate such a move now if you are expecting decades of peace and harmony?”
7. John Bruton, RIP (NYT, he negotiated peace with Northern Ireland and also set the corporate income tax rate low in Ireland and designed the referendum that overturned the country’s ban on divorce).
Modeling persistent storefront vacancies
Have you ever wondered why there are so many empty storefronts in Manhattan, and why they may stay empty for many months or even years? Erica Moszkowski and Daniel Stackman are working on this question:
Why do retail vacancies persist for more than a year in some of the world’s highest-rent retail districts? To explain why retail vacancies last so long (16 months on average), we construct and estimate a dynamic, two-sided model of storefront leasing in New York City. The model incorporates key features of the commercial real estate industry: tenant heterogeneity, long lease lengths, high move-in costs, search frictions, and aggregate uncertainty in downstream retail demand. Consistent with the market norm in New York City, we assume that landlords cannot evict tenants unilaterally before lease expiration. However, tenants can exit leases early at a low cost, and often do: nearly 55% of tenants with ten-year leases exit within five years. We estimate the model parameters using high-frequency data on storefront occupancy covering the near-universe of retail storefronts in Manhattan, combined with micro data on commercial leases. Move-in costs and heterogeneous tenant quality give rise to heterogeneity in match surplus, which generates option value for vacant landlords. Both features are necessary to explain longrun vacancy rates and the length of vacancy spells: in a counterfactual exercise, eliminating either move-in costs or tenant heterogeneity results in vacancy rates of close to zero. We then use the estimated model to quantify the impact of a retail vacancy tax on long-run vacancy rates, average rents, and social welfare. Vacancies would have to generate negative externalities of $29.68 per square foot per quarter (about half of average rents) to justify a 1% vacancy tax on assessed property values.
Erica is on the job market from Harvard, Daniel from NYU. And they have another paper relevant to the same set of questions:
We identify a little-known contracting feature between retail landlord and their bankers that generates vacancies in the downstream market for retail space. Specifically, widespread covenants in commercial mortgage agreements impose rent floors for any new leases landlords may sign with tenants, short-circuiting the price mechanism in times of low demand for retail space.
I am pleased to see people working on the questions that puzzle me.
From Ryan Petersen at Flexport
“I just couldn’t sit around watching this humanitarian crisis in Ukraine without doing anything about it. So Flexport is organizing a massive airlift of relief goods to refugee camps in Eastern Europe starting next week.
You can read more about the full operation below. It’s inspiring stuff.
We’re looking to raise money to pay for more flights—Flexport is covering the first full cargo plane full of relief goods, but we’re asking others to donate including potential corporate sponsors to help us pay for more flights.
Donations are open at Flexport.org/donate and fully tax-deductible through our 501c3 partners.”
Tuesday assorted links
1. More on the new antiviral pills.
2. Neurodiversity gets a corporate champion (FT).
3. Apply to be a Hoover fellow, five year contract (or more). And “We find that weather disasters over the last quarter century had insignificant or small effects on U.S. banks’ performance.” Ahem.
4. Ukraine as crypto capital? (NYT)
5. Why were the Trump tax cuts not more stimulative? Important job market paper by Francesco Furno of NYU.
What happened to the mandate, the third leg of the stool?
But Congress did ultimately chop off a leg when it repealed the mandate penalties in 2017 — and, despite these predictions, the Affordable Care Act still stands. New federal data and economic research show the law hasn’t collapsed or entered the “death spiral” that economists and health insurers projected.
Many experts now view the individual mandate as a policy that did little to increase health coverage — but did a lot to invite political backlash and legal challenges.
The newest evidence comes from census data released Tuesday, which shows health coverage in the United States held relatively steady in 2019, even though Congress’s repeal of the mandate penalties took effect that year.
“The stool might be a bit rocky, but you can get away with two legs,” said Evan Saltzman, a health economist at Emory University who studies the topic. “It’s like the table at the restaurant that is a little wobbly. You can still sit at it, even if it’s not quite as pleasant.”
That is from Sarah Kliff at the NYT, the whole piece is excellent and full of substance. And:
Mr. Saltzman went on to earn a doctorate in economics after his job at RAND, and focused his research on the mandate. He has found that the mandate isn’t a very effective tool for increasing enrollment. One recent paper of his estimated that eliminating the mandate penalties would reduce marketplace enrollment by 2 percent and increase premiums by 0.7 percent.
“My viewpoint on the mandate has changed,” he said. “Back in 2012, my sense was it was essential. The evidence indicates that the marketplaces are doing about the same as they were before the mandate was set to zero.”
Separately, in The New England Journal of Medicine last year, researchers concluded that “the individual mandate’s exemptions and penalties had little impact on coverage rates.”
To be clear, this surprises me too. Was it Ross Douthat who once said on Twitter that it was the Trump administration and the Republican courts that saved Obamacare? The Krugman line, pushed without qualification for over a decade (and with incessant moralizing), that all of the legs of the stool are necessary, seems…wrong. I would say be careful with this one, as sometimes elasticities don’t kick in for a long time (as maybe with the corporate income tax cuts as well?…let’s be consistent here…). Still, it seems that an update of priors is in order. As you will see in the piece, even Jonathan Gruber thinks so.
And here are useful comments from John Graves.
Should hiring schools coordinate on delaying their interviews?
The AEA emails me this (web version here):
The AEA suggests that employers wait to extend interview invitations until Monday, December 7, 2020 or later.
Rationale: the AEA will deliver signals from job candidates to employers on December 2. We suggest that employers wait and review those signals and incorporate them into their decision-making, before extending interview invitations.
…The AEA suggests that employers conduct initial interviews starting on Wednesday, January 6, 2021, and that all interviews take place virtually; i.e. either by phone or online (e.g. by Zoom). We also ask that all employers indicate on EconTrack when they have extended interview invitations (https://www.aeaweb.org/
econtrack). Rationale: In the past, interviews were conducted at the AEA/ASSA meetings. This promoted thickness of the market, because most candidates and employers were present at the in-person meetings, but had the disadvantage of precluding both job candidates and interviewers from fully participating in AEA/ASSA sessions. Since the 2021 AEA/ASSA meetings (which will take place Jan 3-5, 2021) will be entirely virtual, we suggest that interviews NOT take place during the AEA/ASSA meetings to allow job candidates and interviewers to participate in the conference.
Perhaps not surprisingly, they don’t offer much economic analysis of this recommendation. I have a few remarks, none of which are beyond the analytical acumen of the AEA itself:
1. This proposal could well be a tax on the more conscientious departments, which will abide by the stricture while the more rogue departments jump the gun, giving them a relative advantage in finding job candidates.
2. It is common practice for the very top departments to make phone calls to advisors early, well before Christmas, and in essence tie up their future hires before the rest of the market clears (even if the ink on the contract is not dry until later on). Whatever you might think of this practice, have any of those departments vowed to stop doing this? If not, is the new recommendation simply an exhortation that other departments ought not to copy them, thus giving them exclusive use of this practice? And did the AEA — which essentially is run by people from those top schools — ever complain about this practice?
3. In the more liquid market, as this proposal is designed to create, the better job candidates are likely to end up going to the more highly rated schools. That is the opposite of how the NBA draft works — this year the Minnesota Timberwolves (a very bad team) pick first. So maybe the more liquid market is best for the most highly rated schools — is that obviously a good thing?
4. Many job candidates don’t get any early offers at all, and this is likely to be all the more true with Covid-19 and tight state budgets. Aren’t they better off if the market clears sooner rather than later? Then they can either move on to other jobs searches, take jobs with community colleges, look for postdocs, or whatever. Why postpone those adjustments? Is their welfare being counted in this analysis? Aren’t some of them the very neediest and also most stressed people in the economics job market?
5. Let’s say instead the market is done sequentially, where first you “auction off” the candidates in highest demand, ensuring that say a department rated #17 does not tie up an offer (fruitlessly, at that) to one of the very top candidates. Won’t that #17 school then bid harder for the candidates one tier lower, thus making that part of the market more liquid? I know it doesn’t have to work out that way, but surely that is one plausible scenario?
6. In finance, there are some results that you get less “racing” behavior with batched rather than continuous trading auctions. Again, that doesn’t have to be true, but surely it is no accident that many high-frequency traders oppose the idea of periodic rather than continuous securities auctions? What exactly are the relevant conditions here?
7. Would many economists recommend that say the top tech firms not make any offers before a certain date, so as to keep that labor market “more liquid”? What exactly is the difference here?
8. Might it be possible that a permanent shift to non-coordinated interview dates, and less temporally coordinated Zoom interviews and fly-outs, would permanently lower the status and import of said AEA?
I do not wish to pretend those are the only relevant factors. But here is a simple question: does anyone connected with the AEA have the stones to actually write a cogent economic or game-theoretic analysis of this proposal? Or does the AEA not do economics any more?
How not to fight modern-day slavery
That is the topic of my latest Bloomberg column, here is one excerpt:
The Slave-Free Business Certification Act of 2020, introduced last week by Republican Senator Josh Hawley of Missouri, sounds unobjectionable, maybe even worthy. As the U.S. engages in a worthwhile and necessary reassessment of the role of slavery in its history, the bill would force large companies to investigate and report on forced labor in their supply chains.
In fact, the net effect of the bill — contrary to its stated intent — might be to increase slavery worldwide.
As a general principle, companies should cut off commercial relations with any known sources of slavery. Yet this law calls for mandatory corporate investigation and auditing, backed by CEO certification and with significant penalties for non-compliance. The investigatory process is supposed to include interviews of both workers and management in the supply chain.
Such a get-tough approach has a superficial appeal. Yet placing an investigative burden on companies may not lead to better outcomes.
Consider the hypothetical case of a U.S. retailer buying a shipment of seafood routed through Vietnam. It fears that some of the seafood may have come from Thailand, where there are credible reports of (temporary) slavery in the supply chain. How does it find out if those reports are true? Asking its Vietnamese business partner, who may not even know the truth and might be reluctant to say if it did, is unlikely to resolve matters.
It is unlikely that businesses, even larger and profitable ones, will be in a position to hire teams of investigative journalists for their international inputs. Either they will ignore the law, or they will stop dealing with poorer and less transparent countries. So rather than buying shrimp from Southeast Asia, that retailer might place an order for more salmon from Norway, where it is quite sure there is no slavery going on.
…for every instance of slavery today there are many more opaque supply chains that will be damaged and disrupted if the burden is on large companies to root out labor abuses.
Here are a few points of relevance:
1. The law penalizes opaque supply chains rather than slavery per se. That is unlikely to be an efficient target.
2. Judgments about slavery are put in the hands of businesses rather than the government. Why not just have the U.S. government issue sanctions against slavery-supporting countries when sanctions are appropriate and likely to be effective? What is the extra gain from taxing businesses in this way?
3. There are many forms of coerced and exploited labor, and it is not clear this legislation will target slavery as opposed to simply low wages and poor working conditions as might result from extreme poverty. You also don’t want the law to tax poor working conditions per se, since FDI, or purchasing flows from a supply chain, can help improve those working conditions. You might however wish to target employment instances where, due to the nature of the law, additional financial flows toward the product will never rebound to the benefit of foreign labor. This law (which I have read all of) does not seem to grasp that important distinction.
Friday assorted links
1. The excellent Ben Westhoff on Joe Rogan.
2. A Canadian pro experiences the world and management system of Russian hockey.
3. The Cato study on wealth inequality. And why did the UK Labour government abandon the wealth tax idea in the 1970s?
4. Kocherlakota argued in Econometrica that optimal wealth taxes should be zero on average.
5. David McCabe at NYT: “The debate can take on a heated and personal tone. At a conference this spring, the soft-spoken legal academic Tim Wu responded to doubts raised by Tyler Cowen, an economist, about whether America has dangerous levels of corporate concentration by saying it was like arguing with someone who believes the earth is flat.”
6. “An inmate claimed his life sentence ended when he died and was revived.”
7. Megan McArdle on the historical importance of the Church.
Friday assorted links
1. Idiosyncratic list of the ten great American novels of recent decades.
2. My podcast with Stephen Hsu.
3. Further results on corporate income tax incidence.
4. Qatar has begun to air-condition the outdoors.
5. An analytical look at the burnout of Carmelo Anthony.
Wednesday assorted links
Shopping While Black: Past, Present and Future?
The original Sears mail-order catalogue changed how African Americans in the South shopped:
…the catalogue format allowed for anonymity, ensuring that black and white customers would be treated the same way.
“This gives African Americans in the Southeast some degree of autonomy, some degree of secrecy,” unofficial Sears historian Jerry Hancock told the Stuff You Missed in History Class podcast in December 2016. “Now they can buy the same thing that anybody else can buy. And all they have to do is order it from this catalogue. They don’t have to deal with racist merchants in town and those types of things.”
More recently, Uber has alleviated many of the traditional difficulties that blacks have had hailing taxis.
In a heartfelt essay Ashlee Clark Thompson explains how the “grab and go” technologies now being tested at Amazon Go made her confront lessons learned from decades of shopping while black:
The idea of walking into a store, taking an item or several off the shelves and strolling right back out again boggled my mind. It ran counter to everything I had learned about being black and shopping.
…I grabbed one of the orange Amazon Go bags and began to make my way around the perimeter of the store. I was studying the various bottled waters and debating whether to get fizzy or still, or a bottle of kombucha, when I realized what I was really doing: I was stalling. The fear I had carried with me for decades reared its head as I stood in front of the refrigerated display. I was afraid to make a choice, remove it from a shelf and put it in my bag. I was afraid someone would pop out from behind a display of Amazon-branded merch and scream, “Get your hands off that!” And I was mad that this fear couldn’t even let me fully enjoy an experience that’s designed for everyone to grab and go, no questions asked.
Eff this, I thought. I’m getting some Vitamin Water.
Once the plastic bottle hit the bottom of my reusable bag, I glanced around to see if anyone noticed. The Amazon employees shuffled around the small store and restocked shelves. Tourists chatted in small groups as they pointed and looked for the sensors that were keeping track of our every move. One guy with his phone on a selfie stick recorded himself as he selected snacks. And then there were the folks for whom the novelty had worn off and just wanted a vegetarian banh mi sandwich.
No one cared what I was doing. Is this what it feels like to shop when you’re not black?
…Amazon Go isn’t going to fix implicit bias or remove the years of conditioning under which I’ve operated. But in the Amazon Go store, everyone is just a shopper, an opportunity for the retail giant to test technology, learn about our habits and make some money. Amazon sees green, and in its own capitalist way, this cashierless concept eased my burden a little bit.
The similarities in these cases are interesting but so are the differences. In the Sears case most of the effect of diminished discrimination was driven by greater competition in one-shop towns. In the one-shop town the owners sometimes took a share of their monopoly profits in invidious racism–this appears to explain why shop owners would prevent blacks from buying more expensive products (or perhaps the one-stop shop had to cater to racist customers who demanded invidious discrimination.)
In the Uber case my bet is that a large share of the reduction in discrimination was due to the fact that Uber drivers don’t carry cash and so are less worried about robbery and the app increases safety because it records in detail rider, driver and trip data. In other words, the Uber system reduced the value of statistical discrimination. It’s difficult to know for sure, however, because there was probably also some decline in invidious discrimination brought about by Uber hiding some rider information from drivers until trips are accepted.
The last case, the Amazon Go case, is in part a decline in the value of statistical discrimination since shoplifting is no longer a problem (in theory, assuming the technology works) but in this case the decline in statistical discrimination is driven by much finer discrimination. The moment a shopper enters the Amazon Go store, Amazon knows their name, address, entire shopping history, credit history and potentially much more. Moreover, a shopper’s every movement within the store is tracked to a level of detail that no store detective could ever hope to match. To the customer, especially the black customer, it may feel like they are no longer being watched but in fact they are watched more than ever before–the costs of technological monitoring, however, are mostly fixed which means that everyone is monitored equally. No need for statistical discrimination in the panopticon.
Addendum: A good dissertation might be to incorporates the cost of information, the value of statistical discrimination and the demand for invidious discrimination in a general theory that explains the various cases mentioned here and the effects of information bans such as ban the box.
Is it better to have more corporations?
A reduction in the corporate income tax burden encourages adoption of the C corporation legal form, which reduces capital constraints on firms. Improved capital reallocation increases overall productive efficiency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income tax cut can reduce the non-employment rate by up to 7 percent.
That is from the new AEJ: Macroeconomics, by Daphne Chen, Shi Qi, and Don Schlagenhauf.