Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktI was thinking today about our discussion regarding what method the Feds should use to fund federal spending, and it suddenly occurred to me that we don’t actually need a single method. This is the beauty of a federal system. If we think of the nation as it was originally conceived, a collection of semi-sovereign states bound together through the Constitution and governed by a federal government, then it is easy to imagine a system in which the federal government simply tells member states how much they owe, and the states themselves figure out how to come up with the money. So if Californians like a a progressive income tax, they can have one, and if Texans prefer a consumption tax, they can have that too, and New York can have a transaction tax on all the evil Wall Street transactions , if that is how they prefer to raise the funds owed to the Feds.
The issue then becomes how to determine what the burden should be for each state. If a balanced budget is desirable, the states, combined, need to be charged whatever the Feds are going to spend. Since federal spending is generally measured as a percent of GDP, and since GDP is basically the sum total of either all income or all expenditures in the economy (depending on how you set out to measure it), making an individual state’s contributions a function of GDP makes sense and can be viewed as either a tax on income or consumption, depending on your preference. And, interestingly enough, we can and do measure each state’s share of GDP, called GSP (Gross State Product). So we have a ready and easy metric to determine what a given state’s share of the federal tax burden should be. If, say, federal spending is going to be set at roughly 20% of GDP annually, why not make each state’s contribution to the federal coffers be 20% of each individual state’s GSP? Again, individual states can determine for themselves how to actually raise the amount owed from its citizens. This would put an end to divisive national discussions about tax rate disparities, different “kinds” of income, and who is paying their “fair share”, and would create a system of competition among states for the most efficient and “fair” method of raising funds.
Thinking about this, I decided to check to see how such a methodology would compare to what individual states have actually been contributing to the federal coffers. The most recent year for which I could easily find both GSP figures and federal taxes paid broken out by state was 2007. Note that the federal taxes broken out by state include both income taxes and corporate taxes. It turns out that 2007 is actually a good year to use, because total revenues that year amounted to 19.5% of the sum of all state GSP’s, and the last time we actually had a balanced budget, federal spending was roughly 20% of GDP, so if we use that as a baseline for what spending “should” be, 2007 would have produced a balanced budget. The results were interesting.
In 2007, the top 5 states in terms of GSP were also the top 5 states in terms of taxes paid to the federal government (see chart below). Note that the positions of New York and Texas flip depending on whether the order is GSP or taxes paid, but otherwise the top 5 is in order either way. The rest of the states are also roughly in the same order, which is not that surprising since GSP is a measure of all income received in that state, and federal taxes are currently based on income. There were a couple of outliers, however, for example, Minnesota is number 9 in terms of taxes paid, but drops to 16 in terms of GSP, and Connecticut, which is 16 in taxes paid drops to 23 in GSP. But for the most part the order of states is pretty close.
Next I compared what states actually paid with what they would have paid had their “bill” to the federal government been determined by a “flat” tax of 19.5 percent of GSP which would result in total revenue equal to that which was actually collected. There were some interesting disparities. For example, California, which had the highest GSP and paid the highest taxes still only paid 17.42% of its GSP in taxes, more than 2% less than it would have paid under a “flat tax” of 19.5% on GSP. Another way of saying this: Californian’s share of GDP was 13.14% but it’s share of the federal tax burden was only 11.76%. On the other hand, Connecticut paid more than 22.5% of its GSP in taxes, 3% more than it would have paid with a flat 19.5%, and while it’s share of GDP was 1.55%, it paid over 2% of all tax revenue. See below for a list of all states (numbers in millions of $).
|
State |
Gross collections |
GSP |
% of GDP |
collection as % of GSP |
Collection at 19.5% |
| California |
$313,999 |
$1,801,762 |
13.14% |
17.43% |
$350,804 |
| Texas |
$225,391 |
$1,148,531 |
8.37% |
19.62% |
$223,619 |
| New York |
$244,673 |
$1,105,020 |
8.06% |
22.14% |
$215,148 |
| Florida |
$136,476 |
$741,861 |
5.41% |
18.40% |
$144,441 |
| Illinois |
$135,458 |
$617,409 |
4.50% |
21.94% |
$120,210 |
| Pennsylvania |
$112,368 |
$533,212 |
3.89% |
21.07% |
$103,817 |
| Ohio |
$105,773 |
$462,506 |
3.37% |
22.87% |
$90,050 |
| New Jersey |
$121,678 |
$461,295 |
3.36% |
26.38% |
$89,814 |
| Georgia |
$75,218 |
$391,241 |
2.85% |
19.23% |
$76,175 |
| North Carolina |
$75,904 |
$390,467 |
2.85% |
19.44% |
$76,024 |
| Virginia |
$61,990 |
$384,132 |
2.80% |
16.14% |
$74,791 |
| Michigan |
$69,924 |
$379,934 |
2.77% |
18.40% |
$73,973 |
| Massachusetts |
$74,782 |
$352,178 |
2.57% |
21.23% |
$68,569 |
| Washington |
$57,450 |
$310,279 |
2.26% |
18.52% |
$60,411 |
| Maryland |
$53,705 |
$264,426 |
1.93% |
20.31% |
$51,484 |
| Minnesota |
$78,697 |
$252,472 |
1.84% |
31.17% |
$49,156 |
| Indiana |
$42,668 |
$249,229 |
1.82% |
17.12% |
$48,525 |
| Arizona |
$35,485 |
$245,952 |
1.79% |
14.43% |
$47,887 |
| Tennessee |
$47,747 |
$245,162 |
1.79% |
19.48% |
$47,733 |
| Colorado |
$45,404 |
$235,848 |
1.72% |
19.25% |
$45,920 |
| Wisconsin |
$43,778 |
$233,406 |
1.70% |
18.76% |
$45,444 |
| Missouri |
$48,568 |
$229,027 |
1.67% |
21.21% |
$44,592 |
| Connecticut |
$54,236 |
$212,252 |
1.55% |
25.55% |
$41,326 |
| Louisiana |
$33,677 |
$207,407 |
1.51% |
16.24% |
$40,382 |
| Alabama |
$24,149 |
$164,524 |
1.20% |
14.68% |
$32,033 |
| Oregon |
$23,467 |
$158,268 |
1.15% |
14.83% |
$30,815 |
| Kentucky |
$23,151 |
$152,099 |
1.11% |
15.22% |
$29,614 |
| South Carolina |
$20,499 |
$151,703 |
1.11% |
13.51% |
$29,537 |
| Oklahoma |
$29,325 |
$136,374 |
0.99% |
21.50% |
$26,552 |
| Iowa |
$18,437 |
$129,911 |
0.95% |
14.19% |
$25,294 |
| Nevada |
$19,619 |
$129,314 |
0.94% |
15.17% |
$25,177 |
| Kansas |
$22,311 |
$116,986 |
0.85% |
19.07% |
$22,777 |
| Utah |
$15,064 |
$105,574 |
0.77% |
14.27% |
$20,555 |
| Arkansas |
$27,340 |
$95,116 |
0.69% |
28.74% |
$18,519 |
| DC |
$20,394 |
$92,516 |
0.67% |
22.04% |
$18,013 |
| Mississippi |
$10,869 |
$87,652 |
0.64% |
12.40% |
$17,066 |
| Nebraska |
$19,043 |
$80,360 |
0.59% |
23.70% |
$15,646 |
| New Mexico |
$8,346 |
$75,192 |
0.55% |
11.10% |
$14,640 |
| Hawaii |
$7,666 |
$62,019 |
0.45% |
12.36% |
$12,075 |
| Delaware |
$16,858 |
$61,545 |
0.45% |
27.39% |
$11,983 |
| West Virginia |
$6,522 |
$57,877 |
0.42% |
11.27% |
$11,269 |
| New Hampshire |
$9,304 |
$57,820 |
0.42% |
16.09% |
$11,258 |
| Idaho |
$9,025 |
$52,110 |
0.38% |
17.32% |
$10,146 |
| Maine |
$6,289 |
$48,021 |
0.35% |
13.10% |
$9,350 |
| Rhode Island |
$11,967 |
$46,699 |
0.34% |
25.63% |
$9,092 |
| Alaska |
$4,287 |
$44,887 |
0.33% |
9.55% |
$8,740 |
| South Dakota |
$4,766 |
$35,211 |
0.26% |
13.53% |
$6,856 |
| Montana |
$4,523 |
$34,266 |
0.25% |
13.20% |
$6,672 |
| Wyoming |
$4,725 |
$31,544 |
0.23% |
14.98% |
$6,142 |
| North Dakota |
$3,660 |
$28,518 |
0.21% |
12.83% |
$5,552 |
| Vermont |
$3,806 |
$24,627 |
0.18% |
15.46% |
$4,795 |
Then, just for fun, I decided to see what would happen if the Feds allocated a state’s share of the tax burden in the same way it currently allocates an individual’s share of the burden, ie progressively. So, for example, since the share of taxes paid by the top 1% of income earners is 36.7%, I looked at what it would take to make the share of the top 1% of GSP states be an equivalent 36.7%. And so on for the next 4% (22% share of taxes), 5-10% (11.8% share), 10-25% (16.8% share), 25-50% (10.4% share), and finally the bottom 50% (2.3% share).
It turns out that under a progressive tax on GSP, the top 10% of states are all paying less than their “fair share”, while the bottom 90% are all over paying more. Far and away the most egregious under-payer is California which, being the top 1% in terms of GSP, should be paying more than 3 times what it is currently paying. The biggest over-payer is Arkansas, which is paying almost 10 times what it would be paying under a “fairer”, progressive system. See chart below for what all states would pay, and their share of all taxes paid.
|
State |
Gross collections |
Collection at 19.5% of GSP |
progressive share |
Share of all taxes |
| California |
$313,999 |
$350,804 |
$980,059 |
36.70% |
| Texas |
$225,391 |
$223,619 |
$299,422 |
11.21% |
| New York |
$244,673 |
$215,148 |
$288,079 |
10.79% |
| Florida |
$136,476 |
$144,441 |
$171,983 |
6.44% |
| Illinois |
$135,458 |
$120,210 |
$143,131 |
5.36% |
| Pennsylvania |
$112,368 |
$103,817 |
$71,303 |
2.67% |
| Ohio |
$105,773 |
$90,050 |
$61,848 |
2.32% |
| New Jersey |
$121,678 |
$89,814 |
$61,686 |
2.31% |
| Georgia |
$75,218 |
$76,175 |
$52,318 |
1.96% |
| North Carolina |
$75,904 |
$76,024 |
$52,215 |
1.96% |
| Virginia |
$61,990 |
$74,791 |
$51,367 |
1.92% |
| Michigan |
$69,924 |
$73,973 |
$50,806 |
1.90% |
| Massachusetts |
$74,782 |
$68,569 |
$47,094 |
1.76% |
| Washington |
$57,450 |
$60,411 |
$30,236 |
1.13% |
| Maryland |
$53,705 |
$51,484 |
$25,768 |
0.96% |
| Minnesota |
$78,697 |
$49,156 |
$24,603 |
0.92% |
| Indiana |
$42,668 |
$48,525 |
$24,287 |
0.91% |
| Arizona |
$35,485 |
$47,887 |
$23,968 |
0.90% |
| Tennessee |
$47,747 |
$47,733 |
$23,891 |
0.89% |
| Colorado |
$45,404 |
$45,920 |
$22,983 |
0.86% |
| Wisconsin |
$43,778 |
$45,444 |
$22,745 |
0.85% |
| Missouri |
$48,568 |
$44,592 |
$22,318 |
0.84% |
| Connecticut |
$54,236 |
$41,326 |
$20,684 |
0.77% |
| Louisiana |
$33,677 |
$40,382 |
$20,212 |
0.76% |
| Alabama |
$24,149 |
$32,033 |
$16,033 |
0.60% |
| Oregon |
$23,467 |
$30,815 |
$4,637 |
0.17% |
| Kentucky |
$23,151 |
$29,614 |
$4,457 |
0.17% |
| South Carolina |
$20,499 |
$29,537 |
$4,445 |
0.17% |
| Oklahoma |
$29,325 |
$26,552 |
$3,996 |
0.15% |
| Iowa |
$18,437 |
$25,294 |
$3,806 |
0.14% |
| Nevada |
$19,619 |
$25,177 |
$3,789 |
0.14% |
| Kansas |
$22,311 |
$22,777 |
$3,428 |
0.13% |
| Utah |
$15,064 |
$20,555 |
$3,093 |
0.12% |
| Arkansas |
$27,340 |
$18,519 |
$2,787 |
0.10% |
| District of Columbia[1] |
$20,394 |
$18,013 |
$2,711 |
0.10% |
| Mississippi |
$10,869 |
$17,066 |
$2,568 |
0.10% |
| Nebraska |
$19,043 |
$15,646 |
$2,355 |
0.09% |
| New Mexico |
$8,346 |
$14,640 |
$2,203 |
0.08% |
| Hawaii |
$7,666 |
$12,075 |
$1,817 |
0.07% |
| Delaware |
$16,858 |
$11,983 |
$1,803 |
0.07% |
| West Virginia |
$6,522 |
$11,269 |
$1,696 |
0.06% |
| New Hampshire |
$9,304 |
$11,258 |
$1,694 |
0.06% |
| Idaho |
$9,025 |
$10,146 |
$1,527 |
0.06% |
| Maine |
$6,289 |
$9,350 |
$1,407 |
0.05% |
| Rhode Island |
$11,967 |
$9,092 |
$1,368 |
0.05% |
| Alaska |
$4,287 |
$8,740 |
$1,315 |
0.05% |
| South Dakota |
$4,766 |
$6,856 |
$1,032 |
0.04% |
| Montana |
$4,523 |
$6,672 |
$1,004 |
0.04% |
| Wyoming |
$4,725 |
$6,142 |
$924 |
0.03% |
| North Dakota |
$3,660 |
$5,552 |
$836 |
0.03% |
| Vermont |
$3,806 |
$4,795 |
$722 |
0.03% |
Come on California and Texas…start pulling your weight!!!!
Filed under: taxes |
All Things in Moderation 
Scott, I’m very much in favor of your proposal. One question I have though is do you use the states prior year data or some sort of rolling average? Also, how would you (or could you) keep the Federal legislature from ” gaming” the system? As in, giving a state a break on their contribution due to, say, a natural disaster?
Finally, is there a consensus on how much the Federal government should be spending and whether it should perpetually increase or fluctuate depending on the economy?
One more finally, is there any evidence that Keynesian stimulus actually works to revive an economy. Evidence based on empirical evidence versus economic modeling?
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McWing:
One question I have though is do you use the states prior year data or some sort of rolling average?
It’s a good question, and I’m not sure I have a strong preference. I imagine that individual GSP position relative to other states is fairly stable, and does not drastically jump up and down from year to year, so I would think that the previous year’s data would be reasonable enough to use.
Also, how would you (or could you) keep the Federal legislature from ” gaming” the system? As in, giving a state a break on their contribution due to, say, a natural disaster?
Ultimately I don’t think you can ensure that the feds won’t engage in favoritism, as our current tax code makes plain. They will do what they want to do. But I would make a state’s obligation a flat percentage of GSP, with no exceptions. If the feds want to give an advantage, they would have to vote to send money, not reduce what was owed.
Finally, is there a consensus on how much the Federal government should be spending and whether it should perpetually increase or fluctuate depending on the economy?
I don’t know if there is a consensus. My guess is that if there is, it is somewhere between 18% and 25% of GDP. My personal view is that the amount the fed spends should not be a function of GDP, but rather a function of the cost of the services it should be providing. Perhaps it would be capped at a certain % of GDP, but there is no reason to think that the cost of the services the fed should be providing necessarily grows in proportion to GDP, and in fact I would expect that as GDP grows, the cost of essential services relative to GDP would actually shrink. As one’s individual income grows, the amount one spends on essential goods like housing and food, relative to total income, tends to shrink, while the amount one spends on more non-essential goods and services grows. Federal expenditures should not go towards non-essential services. But if federal revenues are a function of GDP, then the fed will end up coming up with more and more ways to spend the money on things other than essential services. As, of course, we have seen.
One more finally, is there any evidence that Keynesian stimulus actually works to revive an economy. Evidence based on empirical evidence versus economic modeling?
Not that I am aware of.
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An entertaining idea, Scott. It is problematic in that it would make it a nightmare for individuals who earn income in multiple jurisdictions to calculate their taxes. I’d hate to be a professional athlete or entertainer in this system.
Your progressive GSP tax has a fatal flaw. California is, yes, a high income state. However, I suspect your numbers are ballooned because you didn’t normalize for per capita income. Taking a quick look at the numbers, you suggest that California should send 60% of its GSP to the federal government.
BB
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FB:
It is problematic in that it would make it a nightmare for individuals who earn income in multiple jurisdictions to calculate their taxes.
The difficulty in determining one’s individual taxes would depend entirely on the system chosen by the state in which one lived. If a given state shunned the income tax in favor of a different method of raising the funds, then he wouldn’t have to calculate his income taxes at all.
Your progressive GSP tax has a fatal flaw. However, I suspect your numbers are ballooned because you didn’t normalize for per capita income.
Are you suggesting, perhaps, that this kind of system wouldn’t be, er, fair to Californians? An interesting notion.
In any event, the income taxes that I currently pay are not “normalized” for per capita income either. I don’t get to divide my income by the number of people that live in the household it supports. I don’t even get to divide it by 2 to account for my wife, despite the fact that if we ever parted ways, she’d have the legal right to half of it (probably more, actually). So if you think this is a “fatal flaw” for my proposed progressive tax, you might want to think about the implications of that on our current tax system.
Taking a quick look at the numbers, you suggest that California should send 60% of its GSP to the federal government.
54.39% to be exact.
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” It is problematic in that it would make it a nightmare for individuals who earn income in multiple jurisdictions to calculate their taxes. I’d hate to be a professional athlete or entertainer in this system.”
They have to do that now. This actually would be an improvement for them in that they only have to do it for the states they work in, they would no longer have to do a Federal return!
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Scott (and all), I am not nearly experienced in all this as you all seem to be. Often times I feel like I’m just a kid here trying to learn more, even though I am an educated person. All that aside, I must say that this did all make sense to me and I appreciate a fresh, open minded methodolgy.
I know there are states where a lot of federal spending is done simply due to the size and number of citizens and needs, like California. And then there are states that don’t receive nearly as much, like Arkansas and my state, Oklahoma. (And I hope that statement does not mean I am way off on understanding your methodology, or maybe I’m just not saying it right- feel free to let me know). But those states also have a greater number of residents to reach out to for funding to help pay for those needs.
And then to see that there is a disparity in federal spending from state to state vs what is being collected from those states, is frustrating. I don’t mind helping anyone in this country, or their state, so they can function properly, but I personally would like to see those receiving, bare most of the burden of paying for it.
If anything at all is accomplished concerning spending, cuts in spending and raising federal funds, I only hope the resolution is a FAIR one, be it from state to state and individual to individual.
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Household size is handled by exemptions. Your “progressive” calculation is a wonderful example of reduction to absurdity. Congrats or something.
BB
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FB:
Household size is handled by exemptions.
Not really. A per capita ratio spreads all income across all people equally. The exemption doesn’t come anywhere close to doing the same thing. Plus, of course, exemptions gets phased out as income grows. Yet another instance of discrimination against “the rich”.
Your “progressive” calculation is a wonderful example of reduction to absurdity.
Well, the point was, of course, to demonstrate the absurd nature of progressive taxation. There are none so blind as those who just will not see.
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An absurdity that has existed from the very beginning of the income tax. You may want to revisit your definition of absurdity. You’re welcome to find one example of an income tax in the first world that is not absurd (or decamp to your favorite tax haven).
BB
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FB:
An absurdity that has existed from the very beginning of the income tax.
Lots of absurd injustices have a long and notable history.
(or decamp to your favorite tax haven).
Ah…America, love it or leave it, eh? I’m guessing you’ve never told someone who advocates for a more socialized health care system to decamp to their favorite European nation. Funny how that works.
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Taxation is theft. All theft should be done equally and fairly.
It seems the federal government tried to finance itself by assessing individual states at one time. I forget how that turned out.
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yello:
It seems the federal government tried to finance itself by assessing individual states at one time
In the same manner as proposed here?
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It didn’t matter since the states never paid their assessment anyways.
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yello:
It didn’t matter since the states never paid their assessment anyways.
Yes, and the fed (under the Articles of Confederation) had no enforcement powers vs the states, which was the problem. I’m not proposing that the fed simply request money from states and hope they comply. I am proposing that the fed tax states, and let the states figure out how to pay the tax themselves. If the states do not comply with the tax, the fed can employ the same enforcement powers it currently uses against individuals.
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Rather than make the state the unit of economic taxation (which would only result in a race to the bottom as they subdivide themselves to become smaller and smaller) the more modest proposal would be to make the dollar the fundamental economic unit. We already know they have First Amendment rights, why not give them full political rights? They could vote and protest and reproduce as they see fit.
It would be illegal to treat any one dollar differently than another dollar, so they would all get taxed the same. But then you run into the Merchant of Venice problem where taking a pound (or dollar or yen or euro) of flesh without damaging the citizen would be impossible.
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yello:
which would only result in a race to the bottom as they subdivide themselves to become smaller and smaller
Why do you think so?
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Not sure if this is behind the firewall,, but some interesting insights from Boehner on his “negotiations” with Obama.
What stunned House Speaker John Boehner more than anything else during his prolonged closed-door budget negotiations with Barack Obama was this revelation: “At one point several weeks ago,” Mr. Boehner says, “the president said to me, ‘We don’t have a spending problem.’ “
This does not bode well for upcoming negotiations over spending cuts.
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Why do you think so?
Why wouldn’t they? Follow the law of unintended consequences. If Texas could divide itself into 5 sub-states as lore has it, each substate’s ranking would be right around Michigan at 2% versus the 11% under your system. They would be crazy not to.
As for taxation being based on GDP, and progressively at that, the United Nations follows exactly that formula with a cap ostensibly to prevent dependence on any one nation. The United States is currently assessed (and the UN follows the Articles of Confederation model of voluntary compliance) 22% of the UN budget, far in excess of it’s proportion of the world’s population. The UN formula also has a per capita component so that Britain pays four times as much as Brazil despite having roughly comparable GDPs but with Britain only having one third the population of Brazil.
However, I doubt the existence of an actual implementation of a system similar to the one you proposed will be persuasive to you as to its reasonableness in principle.
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yello:
Why wouldn’t they?
Why don’t they do it already? (i guess we are playing the answer-a-question-with-a-question-game.) As it stands, the federal government taxes the smallest political unit possible, ie the individual. But larger political units still exist, so obviously people see some benefit in belonging to a larger political unit despite the “benefit” (in your mind) of being taxed individually.
It seems to me that whether or not subsections of a state would want to declare their independence and get taxed separately by the fed would depend entirely on a) the method of collection that the state chose to employ in order to raise the funds owed to the fed and b) the value of other perceived benefits of being a member of a larger political unit. It is not obvious at all to me that they would be “crazy” not to do it.
As for taxation being based on GDP, and progressively at that, the United Nations follows exactly that formula with a cap
So does the US government, without the cap. A given person’s income is essentially his own personal GDP…call it GPP.
However, I doubt the existence of an actual implementation of a system similar to the one you proposed will be persuasive to you as to its reasonableness in principle.
The progressive option is certainly not persuasive to me. I included it only to demonstrate that a progressive system screws certain tax paying entities, primarily California in my example. However, the idea of a flat tax on states’ GSPs, and allowing them to figure out how to raise the funds themselves is definitely persuasive to me and doesn’t seem at all unreasonable. It would result in approximately the same amount of money coming from each state as under the current system (at least at first), but would create competition amongst the states to create efficient and innovative ways of collecting the funds. And it would allow people with different notions of the just way of taxing the population to live under systems amenable to them.
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The president’s insistence that Washington doesn’t have a spending problem, Mr. Boehner says, is predicated on the belief that massive federal deficits stem from what Mr. Obama called “a health-care problem.”
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“We already know they have First Amendment rights, why not give them full political rights?”
We did at one point. Or at least we gave states a voice in the fed gov that was stripped away with the 17th amendment.
[update — this was the topic of Federalist 62 …which includes the line in reference: “No law or resolution can now be passed without the concurrence, first, of a majority of the people, and then, of a majority of the States.”
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lms (from the article):
The president’s insistence that Washington doesn’t have a spending problem, Mr. Boehner says, is predicated on the belief that massive federal deficits stem from what Mr. Obama called “a health-care problem.”
Which makes Obama’s plan to get the government to spend even more on health care completely inexplicable. Math is obviously not Obama’s strong suit.
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Which makes Obama’s plan to get the government to spend even more on health care completely inexplicable. Math is obviously not Obama’s strong suit.
This assumes that health care spending by the government is less efficient than health care spending in the private sector. If what costs $1T in the private sector could be done by the government for $0.5T, it would be a good bargain to raise taxes by $0.5T and let citizens ‘keep’ the other half trillion dollars themselves.
But then there are those who oppose all government spending no matter what efficiencies of scale could be achieved.
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yello:
This assumes that health care spending by the government is less efficient than health care spending in the private sector.
No, it doesn’t. When it is said that we have (or don’t have) a spending problem, we are referring to government spending, not private sector spending. The deficit is a function of how much the government spends, not how much the private sector spends. So to the extent that the deficit is a “heath care problem”, it must be the result of the amount the government spends on health care. You don’t fix such a problem by increasing the amount the government spends on health care, even if you believe that the government’s spending will for some reason be more efficient than private sector spending.
But then there are those who oppose all government spending no matter what efficiencies of scale could be achieved.
I don’t really know of anyone who opposes all government spending. I do know of lots of people, including me, who think that the government should only spend money on certain functions, and it should not spend money on other functions even if there is reason to believe that it would be more “efficient” in spending the money than its proper owners.
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nova:
Or at least we gave states a voice in the fed gov that was stripped away with the 17th amendment
Can you explain the what you mean by this? I’m not getting the relationship between political rights for dollars and direct election of Senators.
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I think I misread what yellow was saying. I thought he was talking about state power, not dollar. my mistake.
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I could be reading it wrong too. What were you talking about?
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I don’t know! hockey is back!
No, my comment makes zero sense in this context. I though (and i’m not sure why) he was talking about a lack of state representation — and that they needed stronger political rights.
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I thought he was talking about state power, not dollar. my mistake.
I was. I proposed that all voting be dollar-weighted. It it’s good enough for stock-based companies, it should be good enough for America.
As for the direct election of Senators, at least one of the reasons for doing so was to eliminate some of the inherent corruption that had leaked into the state legislature selection system. In a way dollars were being used as a selection mechanism.
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Hockey is back. I wore my Lightning shirt yesterday to celebrate (can’t find my Blackhawks shirt).
Did you see the US Juniors beat Canada (and Sweden)?
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“at least one of the reasons for doing so was to eliminate some of the inherent corruption that had leaked into the state legislature selection system”
I suppose corruption is more a matter of when and how much.
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(i guess we are playing the answer-a-question-with-a-question-game.)
No we’re not. I answered your question in full to which you rebutted.
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yello:
No we’re not.
I was commenting as much on my reply as yours. since we both began with a question. It wasn’t a knock, it was just what I thought was an amusing observation. Sorry if it sounded otherwise.
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“But then there are those who oppose all government spending no matter what efficiencies of scale could be achieved.”
sure. this reminds me of the debate in VA over closing the state run liquor stores. the hang up was over how to account for the revenue the state would lose by selling off the stores. to my mind, that’s entirely irrelevant. once you’ve determined the state has no business being in the liquor-supply business, how it handles the budgetary fallout is a different matter.
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Ah, mock outrage from Scott. Perfect for a Monday afternoon lagniappe. The decamping was metaphorical.
Calling something that is universal to be absurd is rather absurd in and of itself. Such wonderful circularity.
As for a spending problem, perhaps you should revise it to say When some say that we have (or don’t have) a spending problem, they are referring to government spending, not private sector spending. The U.S. has a serious spending problem on medical care (16% of GDP and rising). That’s private and public.
BB
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FB:
Ah, mock outrage from Scott.
Huh? What did you consider an expression of “outrage”, mock or otherwise?
As for a spending problem, perhaps you should revise it to say When some say that we have (or don’t have) a spending problem, they are referring to government spending, not private sector spending. The U.S. has a serious spending problem on medical care (16% of GDP and rising). That’s private and public.
Actually, within the context of negotiations between the Speaker and the President over government budgetary issues (federal taxing and spending policy), which is the context in which the phrase was brought up, I think it is pretty clear that a reference to a “spending problem” refers to government spending and not private sector spending.
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“The U.S. has a serious spending problem on medical care (16% of GDP and rising).”
we want the latest and greatest tech and treatments combined with low and/or deductibles and co-payments. we defer decisions to experts rather who are paid based on the number and type of interventions they provide.
and we demand to see the experts (aka specialists) instead of the lowest qualified practitioner. and even if we wanted to see an NPP, state law probably prohibits and/or severely restricts their scope of practice.
and we’re provided an incentive to do so. why see a NPP at the corner drug store for a upper respiratory infection and pay for my drugs out of pocket when i can take 4 hours off of work sit around an internist’s office — or even and get a script for free or $10.
we sacrifice quality for longevity. as long as those remain constant, I don’t think it makes any difference on how the model is structured.
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on 2013/01/07 at 1:07 pm NoVA wrote:
we want the latest and greatest tech and treatments combined with low and/or deductibles and co-payments. we defer decisions to experts rather who are paid based on the number and type of interventions they provide.
and we demand to see the experts (aka specialists) instead of the lowest qualified practitioner. and even if we wanted to see an NPP, state law probably prohibits and/or severely restricts their scope of practice.
and we’re provided an incentive to do so. why see a NPP at the corner drug store for a upper respiratory infection and pay for my drugs out of pocket when i can take 4 hours off of work sit around an internist’s office — or even and get a script for free or $10.
we sacrifice quality for longevity. as long as those remain constant, I don’t think it makes any difference on how the model is structured.
Time for NoVA to write a giant post on medical costs, again!
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Scott, this was an excellent exercise. I have always thought the “states as laboratories” view was one to be honored in the doing, not in the breach. I think it is an intriguing thought experiment.
Thanks.
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mark:
Thanks.
Using the GDP and taxes paid data that I linked to in the main post, I decided to see how states (and DC) ranked in taxes paid per capita relative to how they ranked in GSP per capita, and then rank the states based on the disparity between the two. The results were interesting.
The biggest negative disparity (GSP rank minus taxes paid rank) was Alaska, which ranked 3rd in GSP per capita, but only ranked 34th in terms of taxes paid per capita. The biggest positive disparity was Arkansas, which ranked only 45th in GSP, but 11th in taxes paid. Only 21 of the states had disparities less than +/- 5. I’ve been pondering what could cause such big disparities, ie why a state might have relatively high income but pay relatively low taxes, or vice-versa. I can think of three possible factors. One is disparity in tax rates on different kinds of income, ie corporate income taxes vs personal income taxes. A second is the effect of double taxation, ie corporate taxation and taxes on dividends. A third is the deduction for state income taxes, ie people in high income tax states pay relatively less of their earnings to the fed than people in low income tax states.
Anyone know what other causes there might be? (See full list of states below.)
state rev rank GSP rank diff
Alaska 34 3 -31
South Dakota 39 16 -23
Hawaii 40 18 -22
North Dakota 41 20 -21
Iowa 36 19 -17
Virginia 23 9 -14
Wyoming 17 5 -12
New Hampshire 31 22 -9
Washington 18 10 -8
Oregon 35 27 -8
Utah 42 34 -8
Maine 46 38 -8
California 19 12 -7
Vermont 37 30 -7
Nevada 29 23 -6
Louisiana 26 21 -5
Arizona 43 39 -4
Colorado 14 11 -3
Montana 47 44 -3
New Mexico 49 47 -2
West Virginia 51 49 -2
Massachusetts 7 6 -1
Kentucky 44 43 -1
DC 1 1 0
Delaware 2 2 0
South Carolina 48 48 0
Connecticut 3 4 1
New York 6 7 1
Maryland 12 13 1
Alabama 45 46 1
Mississippi 50 51 1
Wisconsin 27 29 2
New Jersey 5 8 3
Indiana 33 36 3
Kansas 24 28 4
Illinois 10 15 5
Nebraska 9 17 8
Pennsylvania 16 25 9
Minnesota 4 14 10
Oklahoma 22 32 10
Georgia 25 35 10
Florida 30 40 10
Michigan 32 42 10
Texas 13 24 11
North Carolina 20 31 11
Idaho 38 50 12
Tennessee 28 41 13
Missouri 21 37 16
Rhode Island 8 26 18
Ohio 15 33 18
Arkansas 11 45 34
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Scott, I have no answer to your question but I would begin an investigation by lumping the outliers [arbitrarily, for the exercise, plus or minus 11 or more].
The minuses:
Alaska 34 3 -31
South Dakota 39 16 -23
Hawaii 40 18 -22
North Dakota 41 20 -21
Iowa 36 19 -17
Virginia 23 9 -14
Wyoming 17 5 -12
What are their commonalities?
AK, SD, ND, and WY are low population states with big extraction industries. HI is a tourism and Ag state. IA is an Ag state with an industrial and shipping base. VA is a federal dependency. Of course, so is AK. Not too helpful.
The plusses:
Texas 13 24 11
North Carolina 20 31 11
Idaho 38 50 12
Tennessee 28 41 13
Missouri 21 37 16
Rhode Island 8 26 18
Ohio 15 33 18
Arkansas 11 45 34
What are their commonalities?
Cannot see them at all. Stymied by lack of information.
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mark:
Stymied by lack of information.
Yeah…I was stymied as well. I can’t think of what would cause this.
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Grist for the mill over our spending problem. Says that our increase occurred longer than that of the Europeans, but has grown (since the mid ”80’s) more slowly than they have.
http://www.thedailybeast.com/articles/2013/01/07/do-we-have-a-spending-problem-or-a-health-care-problem.html
There is only one way to reduce the impact of Federal healthcare spending, and hence, Federal healthcare spending; give medicare retiree’s cash to do as they see fit, healthcare or vacations or black 24 at the casino.
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McWing:
or black 24 at the casino.
22!
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I have always thought the “states as laboratories” view was one to be honored in the doing, not in the breach.
As far as taxation goes, we already have a rather broad range of concepts in place. From the corporatist state of Dupont, er, Delaware which has no sales tax to the liberal nanny state of Maryland which has both sales taxes and income taxes on top of both income taxes and property taxes at the local level to the soak-the-tourist mentality of income-tax free Florida, there are a lot of different structures out there.
Invariably they link to the goals and needs of the residents. I always know just by the road quality when I cross from Maryland to Pennsylvania that I have crossed from a high tax state to a low tax one.
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“Time for NoVA to write a giant post on medical costs, again!”
I’ll be at MedPAC on Thursday and Friday. I’ll share the prognosis.
But CMS just released its 2011 health expenditure data — I can do a post this afternoon.
“Health care spending totaled $2.7 trillion in 2011 and made up 17.9 percent of gross domestic product, the same percentage as in 2010 and 2009.”
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