When a Tax is levied on the DEMAND SIDE.

A new tax on home buyers in Vancouver. A speed bump or pothole?

The purpose of some types of targeted taxes is two fold.  One is to raise revenue and one is to change the behavior of markets participants from doing something that is perceived as a societal negative.

The provincial government of British Columbia ("BC") has decided that the Vancouver housing market is a proper tax target:

The foreign buyer tax leaves us with the wrong kind of speculator

""This week, the B.C. government announced a new 15-per-cent property transfer surtax to be applied to all foreign buyers of residential property in the Greater Vancouver Regional District, effective on transactions closing on or after Aug. 2, 2016. The objective of the tax is to curb foreign speculators from investing in residential real estate in the GVRD and help to cool the rise of prices.""

The focus of the article is to suggest that this tax will create wrong incentives for market participants and will make the market more volatile and higher-risk.  It is a very interesting point and one I encourage you to read about.

However, with this posting I just want to look at the simple supply and demand issues the tax will/may create in the housing market there.

My overall sense is that the tax may slow down the increase in prices of house, at best.  But because of things OTHER THAN the price of housing in Vancouver, such as economic growth and increasing jobs/income, the price of housing will simply continue to increase.

This is a supply issue for the most part (or all part).

Here are the slides with explanations.

See the amount of Federal Tax Refunds issued for the day and tell me this is not inefficient

Below is a small section of the US Treasury's daily report on various metrics.  It is a short document and has some pretty interesting numbers as they pertain to the operations of the Federal Government.  I urge you to check it out.

I was lead to it from this Wall Street Journal blog entry.

This section made me pause.  It shows on a daily, monthly and yearly basis the amount of refunds the Federal Govt sends back to businesses and individuals. Presumably this is because after filing tax forms these entities proved to the government they over-paid throughout the year in tax withholding.

You can see the numbers below.

Tax refunds issued for the day were $397 million; for the month-to-date is $5.474 billion; and for the year-to-date is $361.193 billion.

It is nice to get these checks, but wouldn't it be more efficient to not go in such a roundabout way to keep the money flowing in the first place?  Seems like a significant amount of Dead Weight Loss is created--all it is doing is moving money in a circle and creating significant transaction costs, i.e. time, tax preparation, bureaucracy to handle it, etc, ad nauseam.

A Consumption tax? A Flat Tax?  A Something Else Tax?  Just explicitly pay what you owe, no more and no less.

Maybe I am just having a bad day... :)

From US Teasury Daily Report.

Need a primer on "Tax Inversions"? Link to a nice one here.

Confused by the issue of "Tax Inversions" as brought to prominence by the Burger King/Tim Horton's merger?

This document HERE from the Congressional Research Service (HT: The Conversable Economist) is the best explanation, without the politics/inflammatory language, as I have seen.  I thought I understood the issue but this relatively short read pointed out MANY things I did not know.  Worth a read if you are interested in the topic.

Here is an excerpt:

The United States uses a system that taxes both the worldwide income of U.S. corporations and the income of foreign firms earned within U.S. borders. All income earned within U.S. borders is taxed the same—in the year earned and at statutory tax rates up to 35%.  

U.S. corporate income earned outside the United States is also subject to U.S. taxation, though not necessarily in the year earned. This occurs because U.S. corporations can defer U.S. tax on active income earned abroad in foreign subsidiaries until it is paid, or repatriated, to the U.S. parent company as a dividend. To mitigate double taxation, tax due on repatriated income is reduced by the amount of foreign taxes already paid. 

The second paragraph is the important one to get a grasp of the issue.  The US (apparently) is the only country that taxes a company on its foreign profits in addition to the domestic profits.

Because BK is based in the US, profits from its restaurants in Boise AND Beijing (Paris, London, Mexico City, on and on...) are subject to the US Federal income tax.

Now that the corporate headquarters is officially in Canada, BK will only have to pay US Federal taxes on profits in Boise (meaning all its US operations).

Do you see the incentive?

Burger King and King Sugar. One wants to pay less taxes and the other wants to receive more tax dollars. One is way worse than the other.

Ah, the arrogance of royalty.

The freak-out continues over Burger King moving to Canada because of the purchase of a MUCH larger company (Tim Horton's).  

Last year BK paid about $88 million in taxes to the US Federal government.  The US Treasury will "lose" this money (maybe more, maybe less depending on future profits) in tax revenues.

BK is labeled unpatriotic and subject to boycott.

Below is an excerpt from Bloomberg.  

"...Because of a plunge in U.S. sugar prices amid a hefty crop of sugar beets and cane, the Agriculture Department estimates that it may have to buy 400,000 tons of sugar from processors who might default on $862 million in government loans. Sugar producers have the option of repaying the loans either with cash or with their harvests if prices fall below a certain level. 

This is all part of a confection of federal price supports and subsidies for the industry. Last year, sugar processors took out loans when U.S. prices were about 25.5 cents a pound. Prices have since declined to 21 cents, just a hair above the trigger price that lets them repay their loans with raw sugar. 

The sugar, by law, would be sold to ethanol refiners, who would pay 10 cents a pound less than the government paid -- an inducement needed to get the ethanol industry to use the sugar. Aside from the ridiculousness of piling one ill-advised subsidy atop another, this would produce a loss of $80 million for the U.S. Treasury. Some industry analysts estimate the government may have to buy as much as 800,000 tons of sugar to restore balance to U.S. stockpiles, potentially doubling the loss..."---Bloomberg (Opinion piece)

Twisted, ain't it?

An equal (or greater) number of tax dollars are LOST to support raw sugar producers, who are a small in number but a politically potent group...And who cares?  I hear crickets.

Concentrated benefits, dispersed costs.  Crony-Capitalism.  Multiply this example 10's or 100's of times. Don't believe me? Read the Farm Bill.  Makes Burger Kings lost tax revenue look like the Dollar Menu.

And people call Burger King's move a "Whooper" of a mistake.

Comparing Apples to Burgers when it comes to taxes. One is a Whopper and one has a small worm hole--don't assume which is which...

It is possible to be a corporate "traitor" without leaving the country.

Last year Burger King paid a total of $88 million dollars in taxes (Yahoo Finance).

Apple AVOIDS paying roughly $17 million dollars PER DAY in taxes (Business Insider).

It took Apple less than a week to avoid paying what Burger King actually paid in taxes for a year.

We love Apple, but hate Burger King.

Not sure if I am comparing Apples to Apples here (forgive the pun), but American apples and Canadians apples pretty much look and taste the same, don't they?

Confession: I own an i-phone, i-pad AND I like Burger King.  Guess I am complicit in corporate traitorism.

Does it help my cause that I am a former Marine (me, the taller one)?

The Sales Tax Holiday for back to school shopping is nice, but the real money is in tariffs levied on imported back to school items. How about a "Tariff Holiday". See here how much that adds up to.

Here is a nice graphic showing common back to school items parents purchase and the tariffs, in percent, that are embedded in the price you pay for these items.

A tariff is the same thing as a tax and is levied on an item when it is imported into the US.  The over-all goal of a tariff is increase the price of the imported good in order to make it more comparable to the price of the same (or similar) domestically produced good.  The assumption is the price of the imported good is too low for domestic producers to match.

While the State you live in might give you a break during the Sales Tax Holiday, the Federal government keeps on charging you.  A "Tariff Holiday" would REALLY help low income parents buy what they need for their kids.  How about it, Congress?

It really adds up, doesn't it?

Source: The Foundry (Heritage Foundation)

Note: Tariffs are applied to the cost of the good at the time of import, not on the retail price.

Example: Tennis shoes.  If the import price of the shoes is $10 then the 20% tariff is applied on the $10 not, say, a $20 retail price at Payless Shoes.

My simple explanation of what a "Tax Expenditure" is---this is a term you WILL hear more about in the coming weeks as we approach ANOTHER budget crisis.

My take on the difference between a Tax Expenditure and a Government Expenditure.  This stuff tends to hurt most peoples brains BUT the distinction matters because it is a BIG topic of discussion with Congress and the President as they attempt to tackle our Federal budget problem(s).

(When I refer to "Government" below, I am referring to the Legislative and Executive branches because they determine taxing and spending policy)

You earn $1,000 in income.  Government taxes that income at 10%.  You pay $100 in taxes. Government then spends that $100 on a program to promote clean air.  You are taxed and the government spends it--- a straight up "Direct Government Expenditure" towards a policy goal).

Alternative scenario.

You earn $1,000 income. Government taxes that income at 10% and you owe $100 in taxes. Assume at this moment the Government has your $100.  Instead of spending it directly on a program to promote clean air, government returns it to you in the form of a $100 tax credit for buying a hybrid car to promote clean air.  You have your $100 back to spend on something specific.

This is referred to Government spending (to accomplish a goal they COULD do themselves with the tax revenue) through the Tax Code---or more simply, a "TAX EXPENDITURE" 

A Government Expenditure is when government taxes you and spends the money directly to achieve a policy goal.

A Tax Expenditure is when the government forgoes the tax revenue it WOULD HAVE collected from you and though tax credits and/or deductions allows you to spend it on a specific thing to achieve a policy goal.

Below is a list of the most expensive and popular Tax Expenditures.  The numbers to the right represent the amount of tax revenue forgone by the Federal government because of the granting of various tax deductions and tax credits to achieve various policy goals. (number is "billions of dollars")

Source: Business Insider

Interesting graphic showing how someone earning $69,000 or $29,000 ends up with the same income (cash and non-cash) after taxes/benefits/subsidies are factored in/out. Enlightening regardless of your politics.

This chart has been bouncing around various blogs. I tried to find something to counter the points made here but could not find anything substantial. I made some edits, just to highlight reference points to make it clearer.

The chart suggests that a single mother (with 2 children and lives in Pennsylvania) earning a gross income of  $69,000 in a year ("D") would have a net income (after taxes and adding in any cash and non-cash benefits) of $57,327 ("C").

IF a different mother earned a gross income of $29,000 ("A") in a year, she would have a net income (after taxes and adding in any cash and non-cash benefits) of $57,045 ("B"). 

Their after tax/after benefits (cash and non-cash) would just about equalize their income.  The mother with the $69,000 income would be a net "loser" of $11,673 and the mother with an income of $29,000 would be a net "gainer" of tax dollars/subsidies of $28,045.


Source: Here

This is interesting BUT there is more!  If this data is correct and this is the system people operate under, there is a GLARING unintentional consequence here.  Can you see it?

Look at the income level and benefit level at point "B", $29,000.  This this mother earns $1.00 more what happens to her level of benefits overall?  Yikes, they decrease by much more than the extra dollar she earned from, perhaps, a raise or a promotion.  This is a significant penalty for someone who is just getting by. 

So, what happens to the incentive to earn more, and by implication to be more productive? Notice the same thing happens to someone when they reach the $45,000 income level. The next dollar earned is VERY costly. 

People trying to get by and do the best they can are going to respond to the real-life, immediate, incentives put in front of them. 

This does not appear to be a system that promotes self-sufficiency as people climb the income ladder. 

Maybe I am looking at it wrong.  What do you think?  Tell me where I am going off the rails.



A Tax To Die For...Here I briefly explain another "Fiscal Cliff" tax issue: The Estate ("Death") Tax...

One of the least talked about aspects of the "fiscal cliff" is the Estate Tax, sometimes referred to as the "Death Tax".  It is the Federal Tax owed on the value of a what someone leaves behind to their heirs.  Here is how it works, in its simplest terms.

See the graphic below (the left hand potion of the graphic) for the tax rate as it is now, as it might be if the "Bush Tax Cuts" expire and what the President would like it to be. 

You can see the tax rates expressed as a percentage and the amount that is EXEMPT from the tax in BOLD.  Any estate with an assessed value UNDER these threshold amounts would not be subject to the estate tax at all.

Example: at the "Current Policy" if an estate is valued at $6.12 million the first $5.12 million is exempt from taxation, but the Estate Tax would claim 35% of the remaining $1 million---$350,000 tax due.

Under Obama's Policy $2.62M ($6.12M - $3.5M) would  be subjected to a 45% tax = $1.18M tax due.

If Bush Taxes Expire $5.12M ($6.12 - $1M) would be subjected to a 55% tax = $2.82M tax due.

Source: Wall Street Journal

The circles on the right show how much in potential revenue each of these policies my bring into the Federal coffers (color coded to the info on the left) over a 10 year period (divide by 10 to get yearly tax revenue). 

One of the difficulties with this tax is that it can place the heirs of the deceased in a awkward and potentially damaging financial situation.

Refer to the  example I used above.  Assume this was your grandparents situation but ALL of the estates value was tied up in land and a nice house that sits on that land. Assume in their last will and testament they bequeathed it to you because they wanted it to stay in the family. 

Because all of the value is in a "non-cash" asset, YOU would have to come up with the $350,000 (OR the tax under the other alternative measures) to pay the Estate tax. OUCH!  If you could not pay the tax, then you would be forced to sell the property to pay the tax (or borrow it, I suppose)

I tend to think most estates in the US are this way---values are tied up in non-cash physical assets like houses and land and heirs struggle to maintain what they have been bequeathed. 

Whether that is right  or wrong, well, I don't know and never will.  I don't have any rich people in my family so this is an issue I can only write about and not actually experience.  :)

One element of the Fiscal Cliff explained here. This one LIKELY will affect your paycheck in January. Ouch!

One element of the "fiscal cliff" that just about all wage earners, regardless of income, are affected by is the 2 percentage point DECREASE in the Social Security tax that workers have enjoyed since 2010.  (You didn't know you had a tax cut??) .  It is currently at 4.2% from its "normal" longstanding 6.2%.  The tax is applied on your gross pay (wage X hours worked. Or from your salary if you are a salaried worker).

This temporary reduction was implemented as part of a "fiscal stimulus" bill/law. It served as a quick and easy way to get money into the hands of people, and the assumption was that it would likely be spent in the economy and provide a needed jolt for the demand for goods and services.

This reduction seems small for each person, and it is, but in the aggregate it is roughly about $120 billion on an annual basis injected into the economy.

Because it amounts to so little per person the economic thinking is people wont notice it, hence will be more likely to spend it than to give it much thought about saving it.  This is not entirely true for all people, but it does seem a very likely outcome.

The trade-off from this particular tax cut is that the $120 billion is supposed to pay Social Security benefits for current recipients.  Those benefits are going to be paid regardless.  This will necessitate borrowing to compensate for the tax cut.

There is no such thing as a free lunch.

The consensus right now seems to be this tax cut will expire and go back to 6.2%.  But, as with all things political, we will have to wait and see.

Yesterday I showed you how someone with an income of $45,000 can pay NO Federal income tax (47%-er) . Today I use the same household and show you how they are a major tax PAYER. These things are never as easy as they appear...

Yesterday I wrote a blog entry on how a person or household with an income of $45,000 can end up paying no Federal Income tax on that income and can actually be a net recipient of tax dollars (.  See that HERE.

Today, I want to show that this same household DOES pay federal taxes, but not necessarily the Income Tax. The taxes they cannot escape paying are Payroll Taxes,---Social Security and Medicare taxes. These taxes are dedicated to paying benefits for retirees and other eligible recipients.

The Social Security tax is 6.2% of income and it is applied to income earned up to $110,100.  Any income OVER this amount is NOT subject to the Social Security tax.  So the MAXIMUM that can deducted from someones paycheck is $6,826.20 ($110,100 X 6.2%).  For our sample household, they would pay $2,790 ($45,000 X 6.2%) in Social Security taxes.

The Medicare tax is 1.45% of income and it has NO INCOME LIMIT! As with tax policy, it depends of the what the definition of "income" is. Capital gains and dividends are excluded from the Medicare tax (Social Security tax too), which are generally the province of "the wealthy".  So, our household pays $652.50 ($45,000 X 1.45%) in Medicare taxes.

Remember, these are MANDATORY TAXES. 

The total payroll taxes paid by our sample household is ($6,826.20 + $652.50) $7,478.70.

Federal Income taxes AND payroll taxes both go to the same place---the Federal Governments General Budget--the Big Pot o' Money that is spent on all things federally budgeted for. Social Security and Medicare taxes make a stop through their respective Trust Funds, but only for accounting purposes.

If we add this amount to the "negative" income tax  of  $637(refunded) mentioned at the top, then our sample household effectively has a tax rate of 15.2% ($7,478.70 minus $637.00  then divided by $45,000 X 100).

In this light, our household is certainly not a "47%-er" and net recipient/taker of tax dollars, but percent-wise, they are a major contributor. 

These federal taxes are not the only federal taxes paid by our household. There is the Federal gas tax, other excise taxes levied on a variety of goods we consume, and tariffs on imported goods. These other taxes are more difficult to see, but they should be considered in the over all discussion of tax policy, in my opinion.

See here how easy it is too have a pretty good paying job (teacher?) and be a member of the "47%" at the same time. Nice graphic and my explanation of why it is so...

It is rather easy, actually, given the aggregated tax policies enacted over time.

There are some basic deductions  that you are allowed to subtract from your total income. These deductions effectively reduce the amount of income that is actually subject to the income tax.  Deductions reduce your income subject to tax dollar for dollar.

Also...

There are some basic tax credits that you are allowed to subtract from your total tax bill.  Tax credits reduce your taxes owed dollar for dollar.  Notice the difference between a deduction and a tax credit.  This is important when discussing tax policy.

Both of these are dependent on whether you qualify for them. Some everybody is entitled to and some you get only if you meet certain criteria.

Deductions and tax credits are enacted to further some social, economic, or political goal. Individually,  they are supposed to serve as an incentive to bring about a desired outcome that benefits society.  Collectively, they could serve that purpose OR collectively create problems and/or inefficiencies. 

The following graphic illustrates how a person (or household in this case--a family of 4) earning $45,000 per year in income can owe no Federal Income Tax on that income by using the available income deductions and tax credits.

Source: The Economix

 This assumes the families total income from all sources (wages, interest earned on savings accounts, and "other") is $45,000.

This couples filing status is "Married, filing jointly" (I  assume) and includes both of their incomes combined OR it could be just one of them is the sole income earner.  It does not matter.

Right off the top, they are entitled to take a deduction of $11,900 for just being married. I will keep it at that and do another posting on how your tax bill will be affected by other potential filing statuses.  This deduction ("subsidy") serves to help reduce taxable income in an effort to help defray the cost of running a household with the goal of keeping families together and encourageing couples to stay married. That is/was the intent of the tax policy.

Next, the taxpayer can deduct from taxable income, $3,800 for each person in the household who is legally dependent on the taxpayer. Generally this means children, but it could be a parent, grandparent, or other dependent. You also INCLUDE yourself AND your spouse in the calculation.  This equals ($3,800 X 4)  $15,200.  See how you and your spouse were "double counted" in the calculation, first for being married then as a member of the household.  Assuming no other deductions you are allowed to take, the your income that is ACTUALLY subject to taxation is now ($45,000 - $11,900 - 15,200) $17,900.  This amount is called your "Taxable Income".  It is derived after taking all of your legally available income deductions.

The Federal Income tax owed on $17,900 is $1,813.  If we stopped right there this is how much the taxpayer would write a check to the IRS for ASSUMING they did NOT have any "Federal Withholding" from their paychecks throughout the year.  We will assume that for this exercise, but is likely they would have had some withheld.  Any withholding would off-set the amount of tax owed, either partially or totally.

This  taxpayer now finds they are entitled to a Child Tax Credit of $2,000 ($1,000 for each child). Taxpayers with an adjusted gross incomes of $110,000 or less are eligible for this credit, so this is not necessarily a "gift" to lower income people, however it benefits them a great deal.  Remember, tax credits reduce your taxes owed dollar for dollar.

Now, we subtract that $2,000 from our taxes owed of $1,813 and we now owe -$187.00 in taxes. Sweet!!  The Child Tax Credit is considered a "refundable tax credit" which means if the credit results in a negative number, the taxpayer owes $0.00 in taxes but they are entitled to the $187.00 too!

We are not done with our tax credits yet.  The next one is called the  "EITC", which stands for Earned Income Tax Credit.  This credit is targeted towards low income people--single, married, with or without children.  It is considered a significant anti-poverty policy and enjoys significant bi-partisan support in Congress and the Presidency.  The EITC is WAY TOO COMPLICATED to explain in a few sentences. Wikipedia has a pretty good summary of it here.

This family qualifies for this tax credit too, to the tune of $450.  Because this credit is 'refundable" as well, we subtract it from our tax bill, which currently is a negative $187.00.  So if you add this credit to the the total, this family will receive a tax REFUND check of $637.000. 

This family effectively pays no federal income tax on their $45,000 AND they get an extra $637 to consume or save.

This is certainly a form of income re-distribution BUT as I mentioned earlier, both of these tax credits in particular enjoy bi-partisan support, historically. 

So, now you know how someone earning $45,000 per year can have no tax liability and receive a refund check as well. 

This is a working person (could be a teacher with THAT salary) who would be considered a member of the 47%.  Working and has a good job,  but the net recipient of tax dollars.

Hope this helps with your understanding of the issue.

The baby needs new shoes! Do you want to pay 40% of the purchase price in taxes to do so? Probably not, but you DO. See here why...

Going to buy the baby some new shoes!!

Got this idea from Mark Perry.  Go HERE for more on the subject of Tariffs on imported shoes, which is the crux of this posting.

How much in taxes, that we can actually figure out, goes to purchase a $10.00 pair of basic rubber sole canvas sneakers for a child.  We HAVE to assume these are imported from China because there is NO domestic producer of this type of shoe.

Well, I have to earn the money first. So the first taxes I encounter of payroll taxes--Social Security, 6.2% of what I make and Medicare, 1.45% of what I make. So a total of  7.65% of my income.

I calculate I would (roughly) have to earn $10.85 before taxes.

Minus Payroll Taxes (Social Security (6.2%) and Medicare (1.45%) --Total = $.85 cents

I now have my $10.00 to purchase my babies shoes, right? Sort of. I assume I am driving to the store.  Assume I am going to need gas. Gotta pay gas taxes, State and Federal on each gallon of gas I buy.

In Texas the State Gas Tax assessed PER gallon (Texas it is $.20)
Federal Gas Tax assessed PER gallon (18.4 cents---round down to $.18)

Assume I need half a gallon of gas--Total Gas taxes would be =  $.19

Texas State Sales Tax---8% (give or take depending on your locality) =  $.80

Not done yet...Gotta back track a bit.

The shoe was imported.  Imported shoes of the type (cheap!) I want to purchase have a Tariff of 48% (unless it came from Mexico or Canada---NAFTA).  I am going to round to 50% to make the math a little easier.

Assume the shoe had an assessed value of $4.00 at the point of import at Customs.  The Federal Tariff would be $2.00 (50% of $4.00).  The importer of the shoe would now have that shoe for a total cost of $6.00.  They might add a dollar for good measure and sell it to the retailer you are purchasing it from for $7.00. They in turn sell it to you for $10.00.

So, how much in various taxes have you paid on your way to purchasing a $10.00 pair of shoes.

Tariff----$2.00
Payroll taxes--$.85
Gas Taxes--$.19
Sales Tax---$.80

Total: $3.84 in taxes that I had to encounter in order to get the shoes.  That is an effective tax rate of 38.4% on the $10.00 purchase.  I did not include any Federal Income Tax on the income.  The purchaser could subject to no income tax or a high tax. I just let that go. I also am missing other taxes embedded in the price of the good, other than the tariff, that the retailer pays too. Never ends, it seems.  The effective rate is probably higher.

I am not a math person. Tell me where I am going wrong. I am a willing learner.  Thanks!

The point of this posting is this tariff of nearly 50% is regressive and hurts the poor. There is no domestic industry to protect from foreign competition. Those are LONG gone, but the tariff remains.  If Congress and the President wanted to help the poor, this is easy pickings for repeal. 

Why don't they do it???

A proposed Soda Tax--- Is it a "Lump-Sum Tax" or a "Per Unit Tax" and how does it affect the market graph in Microeconomics...Nice real-life example here

Two cities in California are deciding whether or not to tax soft drinks of a particular sort. What will be interesting to teachers and students of Microeconomics is the type of tax and how it will affect a firms cost curves (full article is pasted below the fold). 

The operative paragraph is highlighted below.  It suggests that the tax will be a "lump-sum tax" and not a "per-unit tax".

""...The Richmond and El Monte levies are structured as business license fees imposed on merchants—not as taxes on each drink purchase—meaning it would be up to the sellers to decide how to pass along the added costs...."--WSJ

The question for students---how does this affect a firms Fixed Costs (FC), Average Fixed Costs (AFC), Variable Costs (VC), Average Variable Cost (AVC), Total Costs (TC), Average Total Cost (ATC), Marginal Costs (MC)?

MOST IMPORTANTLY: What will happen to the ATC Curve (if anything)? The MC curve (if anything)? The profit-maximizing level of output (if anything)?

This is a very important concept in AP Microeconomics and is almost always tested on the AP Microeconomics test in May.  Hope it helps.

UN calls for a billionaires tax to help the world's poor. Thought I would re-write the headline so it actually solves the problem...

Saw this headline on Yahoo!News: 

UN calls for 'billionaires tax' to help world's poor.

I thought this is what the headline should really be to actually produce some positive results:

"UN calls for 'billionaires tax'  government  reforms in under-developed countries to help world's poor become billionaires (or millionaires, thousand-aires, or whatever they would like to be)"

Just sayin'...

Nice chart showing gas taxes in various "rich" countries and an excellent graph showing the effect of these taxes on the quantity demanded for gasoline. Bet you can guess what the answer is.

One of the primary reasons for the differences in the retail price of gasoline in the "rich world" is the differences in the gas/fuel tax levied on each gallon of gasoline.

This first graph shows, in US dollars, the amount of tax various countries levy on gasoline and diesel fuels.  Quite a difference!

Source: Econbrowser

Here is a chart from a different source showing the pre and post tax price of gas and diesel in the coutries listed above and some others.  The blue line is pre-tax. You can see the price of fuel is basically the same in all areas

Source: HERE

The post-tax retail price of gasoline is going to be higher when the above taxes are added to the pre-tax price of gasoline, to state the obvious.

The Law of Demand in economics states that the price and quantity demanded of a good are INVERSELY related---price increases the quantity demanded decreases---price decreases the quantity demanded increases.  Makes sense, right?

The next graph illustrates this point explicitly.  Note the price on this graph is along the horizontal axis and the quantity demanded of fuel is on the vertical. This is the OPPOSITE of what is traditionally done in economics textbooks.  The inverse relationship between price and quantity demanded holds up rather well.

Source: Econbrowser

What are the implications?  If you want to seriously decrease the consumption of carbon-based fuels, the most effective way is through an increase in gas prices at the retail level.  Is this politically possible? Absolutely not.

To read more about this important topic go HERE for the source for this posting and/or go HERE for the original research paper that has more in detail. Worth a look if you are at all interested.

One of the Presidents proposals: Continue the Payroll Tax Cut---nice graphic here showing what that might mean to YOU!

Go here for my explanation of the payroll taxes (Social Security and Medicare) YOU pay on your wages. Currently you enjoy a 2-percentage point temporary cut in the Social Security tax, normally 6.2%.  The President has proposed this cut continue for at least another year. As a result, you get an additional $2.00 for every $100.00 you earn.

The graphic below shows how much in additional taxes wage earners would pay if the tax cut is not extended. This appears to be a dubious tax cut. If you divide the number to the right by 12 months, then by 4.3 weeks in a month, the amount is relatively small.

 At most this acts as a stabilizer ("saves/maintains jobs") and is not stimulative.  We shall see.

Source: Jared Bernstein

"The Rent is too Damn High!" Actually it is import taxes...Would YOU do this to your car to avoid paying the tax?

Ukrainians cut cars in half to reduce import tax at customs (HT: Carpe Diem)

""Today I received some tax saving wisdom from a taxi driver in Ukraine. He told me that people who import cars to Ukraine sometimes cut the car in two separate pieces and carry it through the customs this way. By doing this, they save a fortune on import tax. A car carried in two pieces is seen as spare parts and therefore is taxed at a much lower rate than a normal car.""

Source of photos HERE

Nice graphic showing how much of your pay each day goes to paying taxes and how long you have to work to pay those taxes. You won't look at each minute of the working day the same after this...

Click on the image to make larger or go HERE to the site to see it...How much of your working day and your wage goes to pay for various government programs. Puts it in a perspective even I can understand---my time. 



Source: HERE via Chartporn