Archive for August, 2010

Government is Not the Problem. Bad Government is the Problem.

August 27th, 2010 4 comments

And the solution to bad government is … good government.

A lot of people — maybe even most Americans — think that making government smaller will make it better.

But that reminds of the time when I a little kid that I got in trouble for pouring water out of a glass down a heat register in our house.

Why down a heat register? I can only say that it seemed like a good idea at the time.

Why was I pouring water out of a glass? Because the water was warm, and I wanted cold water. I figured I could pour the hot part out. What can I say? The logic of children.

With the experience, wisdom, and sagacity of age, I’ve realized why that wouldn’t work. It’s like blood-letting, right? If you drain off the bad blood, you’ll get better!

For the last thirty years, the Republicans have been engaged in the political (and intellectual) equivalent of blood-letting.

Contrary to what the sainted President Reagan said, government is not the problem. Bad government is the problem.

The solution to bad government is not small government, but good government.

Pass it on.

Must. Make. Gubmint. Smaller.

August 27th, 2010 4 comments

State Taxes and Prosperity, Revisited

August 16th, 2010 3 comments

Iyer asked in the comments to a recent post on state taxes and prosperity whether the picture would change if we looked at a different period (1996-2006), because 2007/08 was so anomalous.

For many data series, it’s very easy (as demonstrated here) to cherry-pick periods that seem to “prove” a given thesis. Far better to look at a whole bunch of periods of different lengths and see if there’s any pattern.

In this case, there doesn’t seem to be:

Correlation between states’ income tax burdens as a % of state income (2008) and states’ change in median income, for the period:
Ending Years
Starting Years
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
1984 29% 41% 26% 26% 9% 15% 12% 14% 18% 17% 30% 11%
1986 28% -5% -5% -19% -9% -11% -8% -7% -9% 9% -16%
1988 -31% -28% -34% -24% -23% -23% -23% -25% -11% -29%
1990 -1% -17% -7% -8% -6% -4% -7% 13% -12%
1992 -19% -5% -6% -5% -2% -6% 13% -12%
1994 9% 6% 9% 11% 9% 28% 2%
1996 -4% -2% 1% -2% 13% -6%
1998 3% 7% 3% 19% -3%
2000 4% 1% 20% -5%
2002 -3% 20% -8%
2004 27% -7%
2006 -30%

Think of each number representing a scatter plot with a trend line, like the graph in the previous post. Negative correlations mean higher taxes/slower growth; positive correlations are the opposite.) I’ve used percentage here because I think they’re easier to grasp at a glance. 20%, for instance, means a correlation usually represented by .20.

All periods: -.18%
Periods >9 years: -2%
Periods >19 years: 4%

Averaging may not be terribly valid, but it is a quick way to do what you were doing anyway: looking at the chart and trying to eyeball the average.

These are vanishingly small correlations; don’t even need to calculate a p function to know they’re deep within the range of randomness, chance.

All periods: 42% of 78 periods show positive correlation.
Periods >9 years: 42% of 36 periods show positive correlation.
Periods >19 years: 66% of 6 periods show positive correlation.

Draw your own conclusions.

Washington 1098: Will the Wealthy Leave the State?

August 13th, 2010 19 comments

Update: It turns out, millionaires don’t care about income taxes.

You’re a Washington business owner making $500,000 a year.

You have millions, maybe tens of millions, in the bank.

You live in a big, gorgeous house on the water on Mercer Island, with sunset views and your sailboat and powerboat out front.

You and your family are actively involved in the community — arts, sports, non-profits, civic groups, and assorted commercial ventures.

Quite possibly, most of your family is here, and maybe has lived here for generations.

You have a large circle of long-time friends here that you love.

If you have school-age kids, they’re in schools that they love. (If the public schools don’t cut it where you are, they’re in great private schools.)

You have everything you want.

So…you’re obviously going to move your family to to Alaska or Wyoming to save $5,000 a year in taxes — for you, mere pocket change. (Note: if you’re only making a measly $400,001 a year, your extra taxes would be … five cents. And that’s not even considering the $4,000 a year your business[es] will save in B&O taxes.)

Yes, you could pretend that your legal residence is elsewhere. But if you’re like most of the people described above — I know, have known, lots of them, so I’m here to tell you — you’re also not willing to lie and cheat to save $5,000 a year.

While you’re thinking about it, check out Sightline Daily’s takedown of The Seattle Timesdeceptive math.

On That New York Mosque

August 6th, 2010 Comments off

Michael Bloomberg:

The simple fact is, this building is private property, and the owners have a right to use the building as a house of worship, and the government has no right whatsoever to deny that right. And if it were tried, the courts would almost certainly strike it down as a violation of the U.S. Constitution.

Should government attempt to deny private citizens the right to build a house of worship on private property based on their particular religion? That may happen in other countries, but we should never allow it to happen here.

I would add:

1. The moderate muslim community, which uniformly disowns and decries terrorism in the name of Islam as despicable and contrary to their religion, is the most powerful voice there is against those terrorists. There are few more effective things we can do that empower, embrace, and encourage that voice.

2. The voices against the mosque are raised not in prospect of any future good, but in angry reaction to past evils. Vengeance, revenge, should never serve as the spur to our actions, because the urge for vengeance — no matter how innate and irresistible it is to the human character — is always about looking backward, never forward.

Retribution — rooted in cold, clear, calculated reasoning and intended to prevent future evils — is often essential and inescapable. But vengeance-driven actions are almost inevitably counterproductive.

That’s what I think, anyway.

Do Lower-Taxing States Grow Faster? No.

August 5th, 2010 4 comments

Following up on yesterday’s post comparing state tax rates and prosperity (answer: higher-taxing states are more prosperous [or vice versa. <g>]), I wondered about the same comparison with prosperity growth.

Again I used median household income, because it’s a good measure of widespread prosperity, a.k.a. The American Dream.

Here’s the story:

In aggregate, there’s no discernible difference between growth rates for low- and high-taxing states, despite quite large differences in taxation levels. The correlation is -.03. That yields a two-tailed p value of .85, meaning that there’s 85-in-100 odds that the (tiny) correlation is just random chance.

As usual, this is just one slice of the data, analyzed in one way. It’s only worth paying attention to because it sings exactly the same song as dozens of other slices, analyzed dozens of other ways.

Update 8/16: To see the correlations for many more periods, click here.

Are Low-Taxing States More Prosperous? No. QTC.

August 4th, 2010 4 comments

Regular readers will remember my posts comparing prosperous countries — tax rates versus prosperity and prosperity growth — and will remember that they’re largely uncorrelated: lower taxes don’t correlate with faster economic growth. (See Related Links at the bottom of this post for much more.)

But what about states? Are low-taxing states more prosperous?

I decided to take a look at tax burdens compared to median (read: middle-class) household income. It’s a good measure of widespread prosperity, which is what The American Dream is all about. Here are the results:

Higher taxes, more (widespread) prosperity. The correlation is .22.

Is this statistically significant? The two-tailed p-value is .12, meaning there’s an 88% chance that something is causing this correlation. There’s only a 12% chance it would happen by chance.

Does this mean that higher taxes create greater prosperity? That would be quite a leap. But nothing here contradicts that possiblity.

We can say this, though: the numbers we’re looking at here give absolutely no evidence that lower taxes results in greater prosperity.

If anything, the opposite is true.

(While I’m here I can’t resist pointing out the one big outlier: Sarah Palin’s Socialist Utopia of Alaska up there in the northwest — thanks to its redistribution of oil revenues.)

median income:

taxes:, tab 2

Here’s the spreadsheet:

Stockman: How the GOP Destroyed the U.S. Economy | The Big Picture

August 3rd, 2010 1 comment

The headline speaks for itself. The author is one of the smartest financial bloggers in the game, author of Bailout Nation.

I can’t resist quoting this:

I suspect brain damaged partisans of the left suffer from somewhat different cognitive deficits than brain damaged partisans of the right.

I would add that the brain damaged partisans of the left (there are plenty of them) don’t control the Democratic party. Contrary to what the brain damaged partisans on the right might believe (you know: the whole Republican/tea party gang, top to bottom), they’re mostly prattling over at Daily Kos.

Stockman: How the GOP Destroyed the U.S. Economy | The Big Picture.
By Barry Ritholtz