UNIVERSAL BASIC INVESTMENT:

11 Charts Showing Why You Should Invest Today: Why start investing now? Because the stock market rewards the faithful. (Coryanne Hicks, 8/26/24, US News)

An investor who put $15 a day into the stock market could grow their portfolio to more than $1.2 million in 40 years. If they kept investing $15 a day for 50 years, they could amass almost $2.5 million. It makes you realize how early frugality in life can really set yourself up for comfort in your later years.

Do it for people starting at birth.

TAX WHAT YOU DON’T WANT, DON’T SUBSIDIZE WHAT YOU THINK YOU DO:

The Case for a Carbon Tax: My Long-Read Q&A with Kyle & Shuting Pomerleau (James Pethokoukis | Kyle Pomerleau | Shuting Pomerleau, August 06, 2024, AEIdeas)

Why do economists get excited about the notion of a carbon tax? Why is that a policy that always comes up as an efficient policy if you’re concerned about climate change? What is the selling point, the elevator pitch, for a carbon tax, generally?

Shuting: That’s an excellent question, I think generally economists are very supportive of a carbon tax as a quote-unquote “stick approach,” as opposed to a carrot, like the expensive provisions, clean energy credits in the Inflation Reduction Act [IRA].

Right now we’re all carrot. We seem to be doing a lot of carrots.

Shuting: Yes, a lot of it, and I think one major reason that stands out is the efficiency argument, that it’s efficiently incentivizing consumers and businesses to find the most flexible and least-costly ways to decarbonize. You just have to determine the price per ton of emissions and you’re pricing emissions directly. It’s up to the businesses to find the easiest and least costly way to decarbonize, as opposed to the clean energy tax credits, in the Inflation Reduction Act. A lot of work needs to be done on the regulator side. It might need to be done sector by sector, the technology types that are used to requalify for certain tax credits, or to look at the performance standards that would incentivize businesses to improve their decarbonizaion efforts. So it’s much more direct than tax credits, than carrots. Also, it can move really fast economy-wide. Compared to the tax credits, you really have to do it sector by sector and be very prescriptive.

With the passage of the Inflation Reduction Act, a lot of time was spent figuring out which technologies, are they going to favor these technologies, is this tax credit going to be technology-neutral, which lends it to the criticism that, ultimately, you’re having legislators, and staffers, and bureaucrats figuring out which are the “good” technologies, which are the “bad” technologies, where, under this system, it’s “may the most efficient technological fix win.”

Shuting: You hit a really, really important point, Jim. The technology-neutral is a key part of why a lot of economists are so fond of a carbon tax, as opposed to tax credits, because when you’re pricing per ton of emissions directly, regardless of the way—it could be hydrogen, it could carbon capture, it could nuclear, as long as you get there, it makes sense for businesses’ long-term investment plan, you can do it; versus the tax credits, it’s basically regulators cherry picking winners and losers, deciding, “Oh, this technology, we think it’s more promising than the other ones.

ONLY TAX CONSUMPTION:

8 things that we could change about Tax Day forever (John Linder, 4/19/24, Fox News)

Every family that is legally resident in the U.S. would receive a monthly cash advance — a prebate — that would totally cover the tax costs of spending up to the poverty line for that family. Poverty level spending is defined each year by the government to be that spending necessary to buy essentials. The prebate for a family of four would cover the tax costs on spending of $40,880.

We want to encourage wealth creation and investment, yet we tax them?

TAX WHAT YOU DON’T WANT, NOT WHAT YOU DO:

It’s Time the US Abolished the Income Tax: Bring on the consumption tax. (John H. Cochrane, February 12, 2024, CBR)

Here there is an awkward truth of taxation. Unexpected, “just this once and we’ll never do it again” wealth taxes are economically efficient. The problem of taxation is disincentives. If you announce a wealth tax in the future, people respond by not accumulating wealth. They go on round-the-world private jet tours instead of investing and building companies. But if you tax existing wealth, and nobody knew it was coming, there is no disincentive.

This is, however, one of the most misused propositions in economics. That “just this once and never again” promise isn’t credible: if the government did it once, why not again? And it feels horribly unfair, doesn’t it, grabbing wealth willy-nilly? Unpredictability is not something responsive, rule-of-law democracies can or should do.

In any case, as with corporate income, taxing investment income also makes no sense. You earn money, pay taxes on it, and invest it. If you choose to consume later rather than now, why pay additional tax on it? One of the main don’t-distort-the-economy propositions is that we should give people the full incentive to save by refraining from taxing investment income.

So why do we tax investment income? Again, because once you tax income, you have to start plugging holes. Many people can shift labor income to investment income. If you run a business, don’t take a salary but pay yourself a dividend. If you’re a consultant, incorporate yourself and call it all business income. In the 1980s, even cab drivers incorporated to get lower tax rates.

The income tax is the original sin. Taxing income made no sense on an economic basis. The government only did it because it was easy to measure and grab, at least before people started inventing a century’s worth of clever schemes to redefine “income.” It has led inescapably to more sins, such as the corporate tax and the tax on investment income. And now the repatriation tax on accumulated foreign earnings.

What’s the solution? Well, duh. Tax consumption, not income or wealth. Get the rich down at the Porsche dealer. Leave alone any money reinvested in a company that is employing people and producing products. Now we can do it. And we can then throw out the income tax, corporate tax, and estate tax.

AMERICAN GENEROSITY:

How Progressive is the U.S. Tax System? (Thomas Coleman & David A. Weisbach, November 20, 2023, University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. #991)

Notwithstanding some headline results to the contrary, all three datasets show that the tax system has become more progressive and more redistributive over the last several decades, with much of that change occurring in recent years. This increase in redistribution is driven primarily by an increase in transfers to households in the bottom half of the income distribution which is missed by a focus on the top 1%.

THE SOLUTION TO POVERTY IS WEALTH:

$750 a month, no questions asked, improved the lives of homeless people (Doug Smith, Dec. 19, 2023, LA Times)

The results were so promising that the researchers decided to publish results after only six months. The answer: food, 36.6%; housing, 19.5%; transportation, 12.7%; clothing, 11.5%; and healthcare, 6.2%, leaving only 13.6% uncategorized.

Those who got the stipend were less likely to be unsheltered after six months and able to meet more of their basic needs than a control group that got no money, and half as likely as the control group to have an episode of being unsheltered.

“I felt there was enough interest and the initial findings were compelling enough that it was important to get those results out,” said Benjamin Henwood, director of the Center for Homelessness, Housing and Health Equity Research at the Dworak-Peck School, who led the study.

NOW MAKE IT 100%:

More Americans Than Ever Own Stocks (Hannah Miao, Dec. 18, 2023, WSJ)

About 58% of U.S. households owned stocks in 2022, according to the Federal Reserve’s survey of consumer finances released this fall. That is up from 53% in 2019 and marks the highest household stock-ownership rate recorded in the triennial survey. The cohort includes families holding individual shares directly and those owning stocks indirectly through funds, retirement accounts or other managed accounts.

The data provide the most comprehensive snapshot yet of how the Covid-era explosion in investing has reshaped Americans’ personal finances. Stuck at home during the pandemic with extra cash, millions jumped into the stock market for the first time. The elimination of commission fees on stock trading across U.S. brokerages made investing cheaper than ever.

“It created a whole generation of investors,” said Anthony Denier, chief executive of mobile brokerage Webull U.S.

IT’S 2023; TAX CONSUMPTION:

The Income Tax Paradox (John Cochrane, December 6, 2023, The Grumpy Economist)

So why does the government tax income? Because, circa 1913, income was easier to measure than sales, value added, consumption, or other economically better concepts. When money changes hands, it’s relatively for the government to see what’s there and take a share. Tariffs really start from the same concept. It’s relatively easy to see what’s going through the port and demand a share, Adam Smith, David Ricardo and free trade be damned. But the government wanted more money than tariffs could provide.

WHEN YOU DITCH IDENTITY:

Nikki Haley wants to reform Social Security and Medicare. Donors are paying attention (Fredreka Schouten, 12/05/23, CNN)

Haley has called for several changes to the nation’s safety net programs, including increasing the age at which today’s younger workers would become eligible for Social Security retirement benefits and limiting the growth of benefits the wealthy receive. […]

A March CNN/SSRS poll of Republicans and Republican-leaning independents, for instance, found that 59% said it was “essential” that the GOP nominee for president “pledges to maintain Social Security and Medicare as they are.”

And just 7% of Republicans surveyed in October in an AP/NORC poll said that the government was spending too much on Social Security.

It’s little wonder then that Trump has steadfastly advocated keeping the programs as they are – despite his past support for major changes, including raising the retirement age to 70 and privatizing Social Security.

DeSantis has distanced himself from his votes as a congressman for nonbinding resolutions that would have increased the threshold for seniors to collect Social Security benefits to age 70.

THE SOLUTION TO POVERTY IS WEALTH:

The first results from the world’s biggest basic income experiment: Money always helps, but for the very poor, one lump sum can last a long time (Dylan Matthews, Dec 1, 2023, Vox)

The latest research on the GiveDirectly pilot, done by MIT economists Tavneet Suri and Nobel Prize winner Abhijit Banerjee, compares three groups: short-term basic income recipients (who got the $20 payments for two years), long-term basic income recipients (who get the money for the full 12 years), and lump sum recipients, who got $500 all at once, or roughly the same amount as the short-term basic income group. The paper is still being finalized, but Suri and Banerjee shared some results on a call with reporters this week.

By almost every financial metric, the lump sum group did better than the monthly payment group. Suri and Banerjee found that the lump sum group earned more, started more businesses, and spent more on education than the monthly group. “You end up seeing a doubling of net revenues” — or profits from small businesses — in the lump sum group, Suri said. The effects were about half that for the short-term $20-a-month group.

The explanation they arrived at was that the big $500 all at once provided valuable startup capital for new businesses and farms, which the $20 a month group would need to very conscientiously save over time to replicate. “The lump sum group doesn’t have to save,” Suri explains. “They just have the money upfront and can invest it.”

Intriguingly, the results for the long-term monthly group, which will receive about $20 a month for 12 years rather than two, had results that looked more like the lump sum group. The reason, Suri and Banerjee find, is that they used rotating savings and credit associations (ROSCAs). These are institutions that sprout up in small communities, especially in the developing world, where members pay small amounts regularly into a common fund in exchange for the right to withdraw a larger amount every so often.

“It converts the small streams into lump sums,” Suri summarizes. “We see that the long-term arm is actually using ROSCAs. A lot of their UBI is going into ROSCAs to generate these lump sums they can use to invest.”