GAO Analyzes Lack of Tax Liability Among Corporations

Source: Government Accountability Office, GAO-08-957, July 2008

The Government Accountability Office (GAO) issued a report earlier this week comparing the tax liability of foreign-controlled corporations operating in the United States with U.S.-controlled corporations between 1998 and 2005. It compares tax liability in a number of ways, including the percentage with no tax liability, the number of years with no tax liability, and tax liability as a percentage of gross receipts or assets… The study was requested by Senators Carl Levin (D-MI) and Byron Dorgan (D-ND), out of concern that foreign-controlled corporations are able to manipulate transfer pricing to avoid U.S. taxes… A 2004 study from Citizens for Tax Justice examined tax liability for a period of years (2001-2003) contained within the window covered by the GAO report. CTJ’s report found that the average effective tax rate for these corporations had fallen to less than half the statutory rate of 35 percent. The average rate fell from 21.4 percent in 2001 to 17.2 percent in 2002-2003. Nearly a third of the corporations paid no taxes in at least one of the three years.

Security Risk

Source: Michael Fielding, Public Works Magazine, Vol. 139 no. 9, August 1, 2008

Focusing on service in a cynical world.

Although the average citizen thinks public safety employees face the most danger in serving the community, the editors of PUBLIC WORKS suspected that public works employees are equally vulnerable–if not more so. To confirm our belief, we asked readers if they’d ever felt threatened, whether the situation was resolved to the satisfaction of both parties, and how department operations may have changed as a result.

How Successful Have Trade Unions Been? A Utility-Based Indicator of Union Well-Being

Source: John Pencavel, IZA Discussion Paper, DP3660, August 2008

Can conventional economic analysis help in defining and measuring the success of labor unions? In this paper, a general indicator of union welfare is proposed and particular expressions for the wage and employment objectives of unions are rearranged to derive measures of union success or welfare. These indicators combine two measures: union density and the relative union-nonunion wage gap. The indicators are applied to describe the movement of union welfare in the United States over the past eighty years, the differences in union success among groups of U.S. workers, and the variation in union well-being across countries.

Votes or Money? Theory and Evidence from the US Congress

Source: Matilde Bombardini and Francesco Trebbi, Chicago Graduate School of Business, Research Paper No. 08-10, July 1, 2008

From the abstract:
This paper investigates the relationship between the size of interest groups in terms of voter representation and the interest group’s campaign contributions to politicians. We uncover a robust hump-shaped relationship between the voting share of an interest group and its contributions to a legislator. This pattern is rationalized in a simultaneous bilateral bargaining model where the larger size of an interest group affects the amount of surplus to be split with the politician (thereby increasing contributions), but is also correlated with the strength of direct voter support the group can offer instead of monetary funds (thereby decreasing contributions). The model yields simple structural equations that we estimate at the district level employing data on individual and PAC donations and local employment by sector. This procedure yields estimates of electoral uncertainty and politicians effectiveness as perceived by the interest groups. Our approach also implicitly delivers a novel method for estimating the impact of campaign spending on election outcomes: we find that an additional vote costs a politician between 100 and 400 dollars depending on the district.

Does Globalisation Make Sense?

Source: Miroslav N. Jovanovic, United Nations – Economic Commission for Europe, Economia Internazionale/International Economics, Vol. 61, No. 1, pp. 47-80, February 2008

From the abstract:
Globalisation is one of the great economic and political stories of our times. There is a lot of confusion and disagreement in discussions since the process of globalisation means different things to different people. If globalisation is the outcome of the behaviour of transnational corporations, then this process is made possible by new technologies that permit fragmentation of production and reduction in the cost of transport and communications. The power of firms is increased to the detriment of the power of the state. Even so, governments supported by the general public and non-governmental organisations are able to cap the globalisation process. Globalisation brings many amenities to society. There were once hopes that globalisation would benefit everyone. As time passes, globalisation’s downside becomes more and more apparent. If the goal of globalisation is to introduce and force the same standards everywhere and for everyone (including in the way in which people think), then it does not differ from neo-communism in the final objective.

Copy Massachusetts’ Health Reform? Not So Fast, Researchers Say

Source: Steffie Woolhandler, Benjamin Day, and David U. Himmelstein, International Journal of Health Services, Volume 38, Number 3, 2008

From the press release:
Citing the failure of seven state-based health reforms over the past two decades – initiatives that bear a strong resemblance to the Massachusetts health reform of 2006 – a group of Massachusetts-based researchers cautions that early declarations of the latter’s success may be premature.

In an article titled “State Heath Reform Flatlines,” published in the most recent issue of the International Journal of Health Services, three researchers, two of whom teach at Harvard Medical School, examine the experiences of earlier reforms in Massachusetts, Oregon, Minnesota, Tennessee, Vermont, Washington state and Maine. The plans were enacted from 1988 through 2003.

All seven reforms, which when launched were widely trumpeted by political leaders and leading newspapers as breakthroughs in providing universal health care, were based on the expansion of private insurance coverage, the authors say. But in each case the plan had little impact on the state’s number of uninsured persons and produced no sustained improvements in delivering care.

Caution: The Tax Foundation’s State and Local Tax Rankings Are Unreliable

Source: Nicholas Johnson, Center on Budget and Policy Priorities, August 13, 2008

From the summary:
As it has annually for several years, the Tax Foundation has attempted to measure the current impact of state and local taxation on the residents of each of the 50 states. And once again, the results are very different from the Tax Foundation’s own previous attempts to do this calculation. The Tax Foundations figures — both the national aggregates and the rankings for individual states — differ markedly from the estimates released in 2007, which in turn were very different from the estimates in previous years. The fact that the Tax Foundation revises its results with such frequency calls into question how robust its methodology is — and how seriously the estimates should be taken.

Medicaid Reform: Beneficiaries Earn Enhanced Benefits Credits But Spend Only a Small Proportion

Source: Florida Legislature, Office of Program Policy Analysis and Government Accountability, Report No. 08-45, July 2008

The Medicaid Reform enhanced benefits account program rewards beneficiaries for participating in activities that can improve their health. Beneficiaries can earn credits up to $125 per year which are maintained in individual enhanced benefits accounts. Beneficiaries can earn these credits in a variety of ways including keeping doctor appointments, taking preventive measures such as mammograms and immunizations, and participating in disease management or other activities to improve their health such as smoking cessation and weight-loss programs. Beneficiaries can redeem their credits at participating Medicaid pharmacies to purchase health-related products. From September 2006 through April 2008, beneficiaries had earned credits totaling nearly $13.8 million and had redeemed about $1.6 million (11.4%) of this amount for health-related products.

Stakeholders are concerned that some Reform beneficiaries are unaware of the program or may find it difficult to redeem earned credits. In addition, the program design may not adequately support long-term change in healthy behaviors. While the Agency for Health Care Administration has taken steps to improve beneficiaries’ awareness, additional operational and program design challenges remain.

New Report Debunks Conventional Wisdom on the Cost of Retirement Plans

Source: National Institute on Retirement Security, August 2008

A new report by the National Institute on Retirement Security found that defined benefit (DB) pension plans are more cost-efficient for employees and employers than Defined Contribution (DC) accounts. The study, “A Better Bang for the Buck: The Economic Efficiencies of Defined Benefit Pension Plans,” was published on Thursday by the National Institute on Retirement Security, a new pension defense group. According to the report, DB plans can provide the same retirement income at nearly half the cost of individual 401(k)-type Defined Contribution (DC) accounts – 46 percent less. DB plans are designed to provide employees with a predictable monthly benefit in retirement. With a DC plan, however, determining whether it will be sufficient to cover a retiree’s needs depends on factors such as employee and employer contributions and the level of returns on assets. While DC plans are important to the retirement security equation, they were not designed to stand on their own. Certain built-in features make DB plans the most fiscally efficient way to provide retirement income: they avoid over-saving, are ageless, and achieve higher investment returns. The report concludes that DB plans should remain a centerpiece of retirement income policy and practice, especially in light of current fiscal and economic constraints facing corporate and government retirement plan sponsors.