TTR takes a look at what the government will do with your tax check, the challenges facing plug-in electric vehicles, a better way to tax corporations and the economic benefits of immigration reform.
- How the government spends our money. In honor of tax day, The Center on Budget and Policy Priorities has compiled a report, with accompanying pie chart, detailing where all our federal tax dollars end up. Last year the American government spent $3 trillion, of which more than $2.5 trillion was paid for by our tax dollars.
Three areas gobbled up a majority of the budget: Defense spending, including funding for the conflicts in Afghanistan and Iraq ($625 billion), Social Security benefits for retirees ($617 billion) and the Federal health insurance programs, Medicare, Medicaid, and the Children’s Health Insurance Program ($599 billion). Other large expenditures include safety net programs like unemployment insurance, food stamps, etc. ($313 billion) and service on the national debt ($253 billion). The remaining 19 percent of the budget is spent on, well, everything else, from environmental protection and infrastructure to research and education. The report's authors ask readers to look beyond reflexive accusations of "tax and spend" to whether the services the government provides are actually worth it. The Center mostly leaves the question to the reader's discretion, although they can't resist putting in the good word safety net programs which have "lifted more than 12 million Americans out of poverty in 2005 and reduced the depth of poverty for another 25 million people." -- JB - Plug-in, cash-out While many experts have anointed plug-in electric vehicles as the most promising sustainable short-term alternative to gas-fueled cars, obstacles remain before the auto industry can bring the technology to scale. In a book on PEVs published by the Brookings Institute, these economic barriers are identified in terms of risk versus reward. The cost of producing the right kind of electric batteries -- $10,000 for a 40 mile range -- raises the consumer price tag far above what most are willing to pay. Auto companies, then, can either cut quality to lower the wholesale value and make the vehicles more widely marketable, or they can retain a higher value and target a more exclusive demographic of consumers. Neither option will provide the market demand needed to make this technology profitable. In the absence of market-based incentives, Brookings recommends three policies. First, commit the federal government to set aside 30 percent of its annual vehicle procurement for PEVs. Second, the government should establish a "Federal Battery Guarantee Corporation" to underwrite insurance on battery life and alleviate the risk for both the auto firms and the consumer. Finally, encourage lawmakers to establish a guaranteed secondary market for used batteries, akin to the used-car market for traditional automobiles. Though used batteries can no longer power vehicles, they retain enough energy to be useful for other purposes. Brookings thinks these proposals would adequately incentivize scaled production of PEVs. -- JL
- Corporations: Do your duty. [PDF] The Center for Budget and Policy Priorities has a novel suggestion for states facing budget crunches: make all chartered corporations pay their proper share for the state services they depend on. Levies on sub-chapter S corporations (S-Corps, generally family-owned businesses) and Limited Liability Corporations (LLCs, generally larger shareholder-owned companies) in 19 states are minimal compared to those imposed on other businesses, and most states do not treat all firms equally at tax time. Largely the result of historical accident and the negligence of politicians leery of raising taxes, these inequities serve no public purpose. Most S-Corps and LLCs are larger enterprises, and exemptions can always be made to help small firms. It's only fair: all corporations benefit from state governments' services, including enforcing the rules of the road and educating their workforces. -- MK
- Immigration reform will grow the economy. The Immigration Policy Center takes the current argument against immigration reform -- that a recession is no time to add millions more to a tight labor market -- and flips it on its head. They argue that immigration reform and economic recovery go hand in hand for three reasons. First, immigration reform would generate revenue. The Congressional Budget Office found that the Senate's 2006 immigration reform bill would have raised $66 billion in taxes on the local, state, and federal level over ten years. The IPC found it would cost $206 billion over five years to deport every last undocumented immigrant. (The Department of Homeland Security's budget for 2008 was just $47 million.) Second, immigration reform could increase wages by forcing employers to pay immigrants at minimum wage, thus bringing up the baseline pay for all workers in an industry. Third, by eliminating an exploitable class, immigration reform would demand honest employers who pay a living wage. In IPC's teleconference for the report, Stanford Law Professor Dan Siciliano pointed out that documented residents and citizens are more confident consumers than undocumented immigrants. He also reminds us that the U.S. economy is not a zero-sum game, within which wages to immigrants mean less to non-immigrants; rather, the economy grows, especially when immigrants are added to it, bringing up wages and increasing consumer spending. To IPC, immigration reform is the "low-hanging fruit for Congress to pluck" in creating economic recovery. Under this guise, perhaps immigration reform will inch a little farther down the political line this year. -- CP
-- TAP Staff
