Wednesday, November 22, 2017

More on Taxes

I like numbers and so tax policy can be quite an interesting subject for analysis. While my primary focus is on immigration and "national question" issues, taxes can be a bit of a respite for me.

This data (ExCel file) provides a starting point for determining how tax rate changes would affect government revenues. It's the filing data for the 2016 filing season (i.e. 2015 taxes) at week 47 (about November).

In particular, it shows that there are at least 431,335 filers (counting joint filers as one filer) with incomes of over $1,000,000 (numbers are likely a bit higher, assuming some tax returns were received more than 47 weeks into 2016.

The overall adjusted gross income (AGI) for these people is about $1.377 trillion ($944 billion in non-capital gains), which would be more than $945 billion if you exempt the first million from the count ($513 billion in non-capital gains if you simply take the average AGI and subtract the percentage that is capital gains before subtracting the million - this is not quite a precise way of measuring this, as the exact distribution of capital gains among people of an income class will affect the results, but it's a good working estimate). This means that even if we make conservative assumptions on growth, over the next ten years these people would make at least $10 trillion ($5 trillion non-capital gains) even if we do not count the first million each makes.

In other words, every 1% tax on income over $1 million would make $100 billion over that time, assuming static scoring (I think that's the right term, I mean assuming that the tax does not change the economy or behavior in a way that alters revenue).

So a 44% tax rate over $1 million (accompanied with a 24.4% capital gains rate for income over $1 million) would make $440 billion (44% being 4.4% higher than 39.6%). Even if you did not tax capital gains higher, it would bring in a little more than half as much - say $240 billion.

There are 44,416 people making over $5 million. Total adjusted gross income is $668 billion ($372 billion non-cap gains), $446 billion of which remains given an exemption of $5 million ($150 billion non-cap gains). (

This would mean that a similar rate levied on incomes over $5 million would yield a little less than half as much - $210 billion, perhaps. If you only taxed regular income, it would be about a third as much - say about $70 billion.

Obviously, there is a lot of wiggle room to use here if one wanted to shift taxes. I am all for moving taxes from corporate to high-income personal.

That is all.

Wednesday, November 15, 2017

Thoughts on Tax Plan

I am trying to figure out how I would change the GOP tax plan if I could.

A few ideas (numbers based on bill as shown on Congressman Sam Johnson's website:

First, I think it would be better at this point not to end personal exemptions. Ending them largely undoes the effects of increasing the standard deduction, and might increase taxes on those that itemize. Unfortunately, that would increase the "cost" of the tax plan by $1,562.1 billion dollars over ten years, so it would have to be made up for to keep the total "cost" at the level that the reconciliation rules require. (Note: I don't know whether costs are calculated as if each proposal were done alone against the current system, or how that proposal would do if measured against the rest of the tax bill being passed without it, or what. However, I am fairly certain that you can't just add the numbers up to get the total cost as each section will have some effect on the other sections, but I'll pretend that the parts do not effect each other for purposes of estimating the effect of these policy changes).

I would make up for that in part by increasing the standard deduction only by 50%. I'll assume that this would approximately half the cost of the increase, which would give the government $460.7 billion more than the current House GOP plan.

Second, I would keep the estate tax, and keep the personal alternative minimum tax as it currently is. The former would get the government $172.2 billion and the latter $695.5 billion.

Third, I would ease up on the tax rate simplification. I would combine the two lower brackets into one 12% bracket, but leave leave the other brackets where they are (projected brackets for 2018), except that I would eliminate the 35% bracket, and set the threshold from the 33% to the 39.6% bracket at $425,000 for singles, $437,500 for heads of households, and $450,000 for married ($225,000 for married filing separately). This would mean that everyone would pay somewhat lower taxes, even after the exemptions phased out at higher incomes, and even if they itemized deductions, except for people who itemize deductions and have an income under $15,875.00 ($22,666.67 for heads of household and 31,750.00 for couples,). This would be resolved by giving singles/heads of households/couples who itemize deductions a tax credit of $2 for every $100 of taxable income up to $10,000/$15,000/$20,000 and then taking away $2 for every $100 up to $20,000/$30,000/$40,000.

I'm not certain how this would change costs, but with the current GOP plan reducing revenues by $961.2 billion, if it only reduced revenues by half as much, it would still add $480.6 billion compared to the current plan.

Overall, these changes (assuming the rate change has half the cost of the GOP plan) would add up to $1,809 billion, more than enough to keep the exemptions.

In addition, I would probably limit the amount of "pass-through" income treated as business income (page 3-4 of the tax plan) to some amount at or under a million dollars to allow this provision to be used mainly for small businesses. This would add to revenues compared to the current bill being proposed, although I am not certain how much.

Now, for things I would like to do if I could find the money in the plan: Keep the deductions for medical expenses.

I would keep the deduction for state and local taxes but limit it to somewhere between $25,000 and $35,000 for all state and local taxes combined.

If I could find the money, I would like to see some change in the alternative minimum tax the neighborhood of changing the rates from 26% and 28% to 24% and 30%, and changing the exemption phase out from 1/4 to 1/6 (i.e. you lose $100 exemption for every $600 of income over the threshold instead of $150). That would keep the highest effective marginal AMT rate at 35% (28% + 7% to 30% + 5%), and weight the tax away from lower earners to higher earners.

Extra money in the plan beyond this could be used to increase the standard deduction by as much as we could afford.

(There are other provisions in the tax bill that I am, in effect, leaving in place at this time. Maybe some of them should be changed; any of them that would have a significant cost to change would obviously have to be paid for somewhere, but I think this would be a better base to work from than the current plan). That is all.

Monday, October 02, 2017

Tell the White House to Stick to its Principles on Immigration

The White House is planning over the next few days to release a set of "immigration principles" that it wants Congress to act on. A leak of the talking points is very hopeful for restrictionists.

May I suggest that everyone contacts the President using the online form at WhiteHouse.Gov and encourage him to stick to his principles?

Here is the message I sent, feel free to alter it to personalize it:

Dear President Trump:

I very much appreciated your speech to the United Nations where you pointed out the inefficiency of a refugee program dedicated to resettling people in wealthy countries as opposed to helping them closer to home. You are a voice of sanity in a world where there are very few.

While I was hoping for a smaller number, I am still pleased that your refugee limit for Fiscal Year 2018 has decreased (compared to previous years) to 45,000. I hope that, as in most years, the number actually admitted is much smaller.

I am also pleased to see what is in the leaked version of your “set of immigration principles.” Mandatory E-Verify (as in the Legal Workforce Act) and the limits of the RAISE Act are both needed very badly, and I hope that these remain in the final version of your framework. I also hope that you insist on getting votes on these prior to debating any considerations for DACA recipients.

Finally, I am pleased to hear of the massive fine imposed on Asplundh Tree Experts for hiring illegal aliens. These types of fines are what are needed to stop the jobs magnet, and provide a great answer to those who mock immigration restrictionists on the basis that we supposedly are giving the employers of illegal aliens a pass. Asplundh is proof that your administration does target unscrupulous employers and is therefore truly serious about addressing illegal immigration from all angles, including the demand angle.

Please continue to fight for the RAISE Act, for mandatory E-Verify, and for funding for a real, physical wall over as much of the southern border as is physically feasible.


[Your Name]

That is all.

Sunday, September 24, 2017

Email or call Rush Limbaugh to Come Out Swinging Against DREAM Act/DACA

While it may not be his intention, this statement by Rush Limbaugh could be seen as pooh-poohing the idea that Trump voters are opposed to any form of being sold out on the immigration issue.

May I suggest that you mail him, email him (, or call his show and impress upon him how wrong that is?

For more details of how to get in touch, here is the Contact Page

Here is a pre-written message (or make your own):

Dear Mr. Limbaugh:

Please beware of any polls that suggest that Trump supporters are okay with Trump passing amnesty legislation for the so-called "DREAMers."

Almost all of the polls are deliberately skewed, as this Breitbart piece shows:

If you are merely saying that people don't think he really means it with a deal, and is simply playing a game in order to get Chuck and Nancy where he wants them, that's one thing. But please stop implying that an amnesty sell-out would be okay with us!


[Your name]

That is all.

Wednesday, September 13, 2017

Are DREAMers Net Contributors?

People often claim that "DREAMers," aka DACA recipients, are a boost to the economy. The Center for American Progress (CAP) says that deporting DACA recipients will cost $433.4 billion over ten years, and CATO says $283 billion.

The problem, however, is the lack of context. What does this actually mean per capita? Well, let's do some back-of-the-envelope calculations.

According to Trading Economics, U.S. GDP in 2016 was $18,569.1 billion dollars. We will assume a modest 3% growth rate in the future.
I say this is modest because the average annual growth from 2009 to 2016 was 3.68%. I calculated this by taking the overall growth over 7 years (18569.10 divided by 14418.74 equals 1.2878 or 28.78% growth over 7 years) and taking the 7th root (1.2878^(1/7) = 1.0368 or 3.68% growth per year).

Under this assumption, the GDPs for 2017 will be $19126.17 billion and the GDPs for the next ten years will be:
2018 19699.96
2019 20290.96
2020 20899.69
2021 21526.68
2022 22172.48
2023 22837.65
2024 23522.78
2025 24228.46
2026 24955.32
2027 25703.98
The total GDP for the decade 2018 to 2027 will be $225,837.94 billion, or approximately $226 trillion.

According to Wikipedia, the U.S. Population in 2017 is estimated at 325,365,189. Assuming a growth rate similar to that of 2000-2010, let's say the the population will be 10% bigger in 2027. That would bring it to about 358 million. This includes everyone, children, the elderly, the unemployed.

The number of DACA recipients is estimated at 800,000. The CAP study is based on 741,546 people leaving (645,145 of whom are workers). The Cato study is based on an estimate of 750,000 people. That comes out to between .207 and .2095 percent of the U.S. population. Using the lower number, .207 per cent of the GDP for 2018-2027 is $467.8 billion.

In other words, unless the contributions of DACA recipients are more than $467.8 billion over ten years, they are actually reducing per capita GDP. And remember, this is using the population figure for the end of the period and assuming modest economic growth, both of which would tend to make the per capita GDP smaller and therefore make the DACA recipients' contributions look bigger in comparison. And of course, this is not counting how much collateral population growth letting DACA recipients stay versus deporting them will create - if half of DACA recipients have one kid (who won't be contributing economically at all for at least about fifteen years), that would mean that DREAMers would have to make $701.7 billion to keep per capita GDP flat.

The point is, getting rid of the DACA recipients would reduce the size of the overall U.S. economic pie, but it would reduce the number of people eating the pie by a greater percentage. Most of the discussions of the "economic benefits" or immigration tend to act as if the immigrants simply produce value for the native population without consuming anything.

Now this analysis does not conclusively show that there is no economic benefit to Americans from DACA recipients - that would depend on how much of the recipients' productivity is consumed by the recipients themselves. However, they would have to consume less than the average American for there to be any surplus at all, and perhaps significantly less if the CATO rather than the CAP study is correct. Then there is the issue of how the surplus is distributed, and whether there are winners and losers in the system. And all of this is assuming that economics is the only measure here.

In short, the benefits of allowing DACA recipients to stay are greatly exaggerated and may not exist at all. Don't let economists use half-calculated figures and incomplete statistics to trick you.

That is all.

Sunday, September 03, 2017

Friday, July 28, 2017

A Thought on How to Deal with Pre-Existing Conditions in the Individual Markets

It occurred to me, if the big issue with health care is how to deal with people with pre-existing conditions, would it not make more sense to develop a subsidy system for insurance and to let insurers do more actuarial pricing?

Note: This is about how to deal with the biggest Obamacare problem, the individual markets that are encountering a huge rise in prices, and is not an attempt to solve other issues that have arisen.
Essentially, what we have now is partial community rating. In real terms, that's like putting a head tax on insurance for healthy people. If we are going to subsidize health insurance for people who are too expensive to insure on the market, would it not make more sense to do it out of income tax revenue?

Put another way, why not subsidize insurance prices at varying rates as percentage of income? For example, you have to pay your premiums up to the first 12% of your income (I choose that figure because it amounts to 1% of annual income a month, the actual numbers could be different), then get, say, a 50% subsidy for the next 12%, an 80% subsidy for the next 12%, 90% for the next 12%, 99% for the next 12%, and 99.9% beyond that?

For someone making an adjusted gross income of $50,000 a year, this is what they would pay out for various monthly premiums:

$ 500.00.......$500.00

For someone making an adjusted gross income of $100,000 a year, this is what they would pay out for various monthly premiums:

$ 500.00........$500.00

We could avoid the issue of mandated coverage raising prices by allowing insurance companies to set rates actuarially, because then if you truly did not need coverage you would pay very little for it; i.e. a 55-year-old childless woman would still have to get pediatric dental, but due to the fact that very few 55-year-old women would need it, it would only add 25 cents a month to her bill. Without community rating, much of the "coverage I don't need" issue would become moot.

We could also avoid the issue of companies trying to make money off of the subsidies by overcharging (hey, the customer will pay $1000 more a month if he gets $999 back) by giving the full subsidy only to the cheapest plan (if you get a more expensive plan you have to pay, e.g., the greater of your basic subsidy, or your basic subsidy for the cheapest plan plus 20% of the difference between plans. This would encourage price competition.

This could be paid for in a variety or ways, either using existing tax revenue, raising income taxes, or putting on a special income tax (like we have for Medicare).

The advantages are that we would not be taxing health, and the subsidies would be less for those who could most afford not to have them, as opposed to the current system where a person making, say, 5 times the poverty level (i.e. not eligible for official subsidies) could easily be subsidizing a sicker person who is making 10 or 20 times the poverty level. We would get better risk pools if we were able to charge healthy people less.

That is all.
There was an error in this gadget