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local, state, and federal governments in the United States subsidize religion—to the tune of about $71 billion every year.
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religious institutions, if they were required to pay taxes the same as for-profit corporations do, would not have nearly as much money or influence as they enjoy in America today. In this article we estimate how much local, state, and federal governments subsidize religions.
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By suggesting that these groups should pay taxes, we are likely to be criticized by those who think that religions are largely charitable institutions engaged in beneficial service or charitable work and should therefore be exempt from taxes. This criticism requires responses at two levels, because there are two ways to think about religious “charity.” The first type of charity is the type that most people think of when they hear the phrase “serving people’s physical needs” (feeding and clothing the poor, building schools, and the like). The second type is different and involves addressing people’s “spiritual concerns.”
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competition among governments leads to better governance. In choosing where to live, people can compare public services and taxes. They are attracted to towns that use tax dollars wisely. Competition keeps town managers alert. It prevents governments from exerting substantial monopoly power over residents. If people feel that their taxes exceed the value of their public services, they can go elsewhere. They can, as economists put it, vote with their feet.
The argument applies not only to people but also to capital. Because capital is more mobile than labor, competition among governments significantly constrains how capital is taxed. Corporations benefit from various government services, including infrastructure, the protection of property rights and the enforcement of contracts. But if taxes vastly exceed these benefits, businesses can — and often do — move to places offering a better mix of taxes and services.
On average, wealthier countries spend roughly 11% of their GDP on health, with more than 80% publicly financed and only 14% of spending taking place on a fee-for-service basis. Public finance (or, in some cases, government-regulated cooperative insurance funds that amount to public financing) pays for most discretionary medical services, with private insurance supplementing only minimal extra services.
Most rich countries choose to finance their health care publicly for several reasons. First, free-market health care is usually inequitable and inefficient. Individual needs vary significantly, and private companies are often unwilling to insure the very people who need the most care (such as those who are already ill, or who have conditions like diabetes, which predispose them to other health problems). Moreover, those who buy care – insurers and patients – are unlikely to have the information necessary to choose the safest and most effective treatments.
At the same time, public spending acts as a brake on overall spending, and prevents the rapid cost escalation to which America’s private insurance companies contribute. The US spends 1% of its GDP annually simply to administer its complex, unwieldy insurance system. Without reform of the type now before the Supreme Court, total US health expenditures will rise from 16% of GDP today to 25% by 2025.
Gasoline is significantly undertaxed in the United States — in two senses. The federal 18.4 cent-per-gallon gas tax is the main source for the Federal Highway Trust Fund, but it hasn’t been raised in two decades, starving U.S. infrastructure. Also, the gas tax is set too low to offset the negative side effects for society — economists call them “externalities” — associated with gasoline consumption.
Since large taxes were imposed on the sale of these items, men hardly ever dove in search of them. However, a loophole in the law allowed women divers to sell these creatures of the sea, tax free. This gave way to a large number of female divers around the 1800s. Slowly, this occupation grew to become a major driving force in the economy of the country. The women divers began to call themselves the haenyo.
The growing presence of the haenyo had major cultural implications as well. Since the economy thrived under their tutelage, it naturally gave way to the formation of a matriarchal society – where women were held equal, if not superior, to men.
The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary mission has gradually become primary: maintaining the middle class from childhood through retirement. The share of benefits flowing to the least affluent households, the bottom fifth, has declined from 54 percent in 1979 to 36 percent in 2007, according to a Congressional Budget Office analysis published last year.
And as more middle-class families like the Gulbransons land in the safety net in Chisago and similar communities, anger at the government has increased alongside. Many people say they are angry because the government is wasting money and giving money to people who do not deserve it. But more than that, they say they want to reduce the role of government in their own lives. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it. They say they want less help for themselves; less help in caring for relatives; less assistance when they reach old age.
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Politicians have expanded the safety net without a commensurate increase in revenues, a primary reason for the government’s annual deficits and mushrooming debt. In 2000, federal and state governments spent about 37 cents on the safety net from every dollar they collected in revenue, according to a New York Times analysis. A decade later, after one Medicare expansion, two recessions and three rounds of tax cuts, spending on the safety net consumed nearly 66 cents of every dollar of revenue.
The recent recession increased dependence on government, and stronger economic growth would reduce demand for programs like unemployment benefits. But the long-term trend is clear. Over the next 25 years, as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights.
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the reality of life here is that Mr. Gulbranson and many of his neighbors continue to take as much help from the government as they can get. When pressed to choose between paying more and taking less, many people interviewed here hemmed and hawed and said they could not decide. Some were reduced to tears. It is much easier to promise future restraint than to deny present needs.
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“duh” science: research that appears to confirm what people regard as everyday knowledge.
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Senator Tom Coburn (R.-OK) is castigating studies funded by the National Science Foundation which seem silly or frivolous to outsiders to bolster his cred as an anti-waste, anti-tax crusader. He has repeated called for the elimination of the NSF altogether, although he has no idea where American scientists would get their funding if he did so.
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the problem with the whole issue of outsiders criticizing science funding: ignorance of scientific research and its context. Anyone who has had any real exposure to biology (as Palin obviously has not) knows that for over a century, the fruit fly has been the model organism of genetics, since it is easy to study and breed, and its genes work wonderfully for research. Fruit flies have taught us more about genetics and evolution than studies on just about any other animal. The same problem permeates all these debates: many areas of science seem obscure to the layman, and don’t seem worthwhile, but in the context of a particular research discipline, they are important or significant.
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Imagine that you are self-employed. Every year, you earn $100,000, pay 35% in taxes and have $65,000 left in your pocket. Now you form a corporation. $100,000 goes into the corporation. There is a corporate tax rate of 25%, so that leaves $75,000 which you pay to yourself as a dividend which are taxed at 15% which leaves you roughly $65,000. So sure, you could say that your tax rate was 15%, but that would be nonsensical. Nothing of significance has changed. What about if you get a partner and the corporation earns $200,000 paying $65,000 to each of you? Well, what changed? Nothing.
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The problem is that once again people are confusing tax incidence with tax collection. The difference is simple: If you make a gasoline company pay $1 for every gallon of gas they sell, the tax collection is a burden of $1 per gallon of gas on the gasoline company. But the tax incidence is very different since the gas company will raise their prices by some amount. So if they raise their prices by 90 cents, the tax incidence is 90 cents on consumers and 10 cents on producers. However, most people will stop at who wrote the check to the IRS. This is a basic mistake that people make all the time and teaching people about tax incidence is a job that every economist takes on when they talk about taxes.
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Isn’t it true that the burden of the corporate tax is born by both shareholders, vendors and consumers? Well of course, but we need to choose what we’re talking about and stick to it. If we talk about the incidence of the tax, we need to remember that the income tax paid by Buffett’s secretary creates a burden for both her and her employer. It’s quite obvious that Buffett and Obama are not talking about the burden of taxation. Otherwise, Mr Buffett could not get his numbers by glancing at his tax return and his secretary’s tax return. He has to perform a complicated analysis which is unlikely to be completed in his life time. So they must be talking about tax collection at which point it doesn’t make sense to talk about the burden of the corporate tax on consumers, employees and vendors.
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BERKELEY – Via a circuitous Internet chain – Paul Krugman of Princeton University quoting Mark Thoma of the University of Oregon reading the Journal of Economic Perspectives – I got a copy of an article written by Emmanuel Saez, whose office is 50 feet from mine, on the same corridor, and the Nobel laureate economist Peter Diamond. Saez and Diamond argue that the right marginal tax rate for North Atlantic societies to impose on their richest citizens is 70%.
It is an arresting assertion, given the tax-cut mania that has prevailed in these societies for the past 30 years, but Diamond and Saez’s logic is clear. The superrich command and control so many resources that they are effectively satiated: increasing or decreasing how much wealth they have has no effect on their happiness. So, no matter how large a weight we place on their happiness relative to the happiness of others – whether we regard them as praiseworthy captains of industry who merit their high positions, or as parasitic thieves – we simply cannot do anything to affect it by raising or lowering their tax rates.
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The utilitarian economic logic is clear. Yet more than half of us are likely to reject the conclusion reached by Diamond and Saez. We feel that there is something wrong with taxing our superrich until the pips squeak so much that further taxation reduces the number of pips.
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The first reason applies to the idle rich. According to Smith,
“A stranger to human nature, who saw the indifference of men about the misery of their inferiors, and the regret and indignation which they feel for the misfortunes and sufferings of those above them, would be apt to imagine, that pain must be more agonizing, and the convulsions of death more terrible to persons of higher rank, than to those of meaner stations...”
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Fairness is not an economic concept. If you want to talk fairness, you have to leave the department of economics and head over to philosophy.
Robert Reich was the U.S. Secretary of Labor under President Bill Clinton. He remains a powerful advocate for the middle class, and an influential economist. Here, he explains in just two minutes why our economy is in trouble — and has been for some time. In Reich’s view, the woes hark back to falling tax rates on the super rich and stagnant wages for everyone else, which has lead to income inequality levels that are nearly unprecedented in U.S. history. That inequality leads to budget shortfalls, social ills, and a host of other problems.
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As millions of procrastinators scramble to meet Monday's tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.
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The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.
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Back in 2008, I wondered whether the reason that the religious give more to charity than the non-religious might be that they get more out of it. They get an extra benefit from charity (an anticipated reward from their God) that atheists don't. When atheists want to redistribute money, they would prefer to do it via taxation (because that minimises the risk of free-riders - people who don't contribute their fair share).
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turns out that Ceyhun Elgin, at Bogazici University in Istanbul, and colleagues have been thinking along the same lines. They were wondering whether it might explain why religious countries tend to have higher income inequality than non-religious countries. Their analysis has just been released - you can download the working paper here.
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Obesity has costs, personal and social.
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