Some tax cuts for families! Average tax rates on married couple with one income, 2 kids in USA, UK, Australia and New Zealand since 2000

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Source: OECD StatExtract.

More evidence of mass kidnappings of #occupywallstreet activists

Marginal tax rates of New Zealand average households since 2000

In 2000 in New Zealand, the marginal tax rates of single earners, married couples and dual income couples were 21%.

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Sources: OECD StatExtract.and OECD Taxing Wages.

Net personal marginal income tax rates increased:

  • to 51% for one earner couples with two children in 2001 and stayed up above 50% until 2014; and
  • to 33% for single earners with no children in 2004 because income growth pushed them into the next tax rate bracket which then dropped down to 30% in 2011.

image

Sources: OECD StatExtract.and OECD Taxing Wages.

Net personal marginal income tax rates increased:

  • to 33% in 2004 for two earner couples with the second earner earning 33% of average earnings and then increased to 53% in 2006 and stayed high thereafter;
  • to 33% in 2004 for a two earner couple with the second earner earning 67% of average earnings and then increased further to 53% in 2006 and stayed high until 2014 when their marginal income tax rate dropped to 30%; and

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Sources: OECD StatExtract.and OECD Taxing Wages.

These large increases in marginal tax rates on single earners and families coincided with a slowing of the economy in about 2005. The economy started to pick up again when there were tax cuts introduced by the incoming National Party Government. Is that more than a coincidence?

image

Sources: Computed from OECD StatExtract and The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/.

A flat line in the above figure is growth at the trend growth rate of 1.9% of the USA in the 20th century. A rising line is above trend growth for that year while a falling lined is below trend rate in GDP per working age person.

In the lost decades of New Zealand growth between 1974 In 1992, New Zealand lost 34% against trend growth which was never recovered. There was about 13 years of sustained growth at about the trend rate or slightly above that between 1992 and 2005. The entire income gap between Australia and New Zealand open up during these lost decades of growth between 1974 and 1992.

image

Sources: Computed from OECD StatExtract and The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/.

Australia grew pretty much in its trend rate of growth since the 1950s. The so-called resources boom is not visible such as showing up as above trend rate growth.

No tax cuts for you? Net personal average tax rate of single American, British, Australian and New Zealander on average earnings, no children, since 2000

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Source: OECD StatExtract.

Trends in congressional political polarisation

Over-qualification rates in jobs in the USA, UK and Canada

In the UK, foreign-born are much more likely to be over qualified than native born highly educated not in education with less difference between men and women. More men than women are overqualified for their jobs in the UK. Over qualification is less of a problem in the UK than in the USA and Canada.

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Source: OECD (2015) Indicators of Immigrant Integration 2015: Settling In.

In the USA and Canada, there are few differences between native and foreign born men in over-qualification rates. Foreign-born women tend to be more over-qualified than native born women in the USA  and more so in Canada. Many more workers are overqualified for their jobs in the USA and Canada as compared to the UK.

There are large differences in the percentage of people with tertiary degrees and the education premium between these three countries that are outside the scope of this blog post. These trends may explain differences in the degree of educational mismatch.

It goes without saying that the concept of over-qualification and over-education based mismatch in the labour market is ambiguous, if not misleading and a false construct.

To begin with, under human capital theories of labour market and job matching, what appears to be over-schooling substitutes for other components of human capital, such as training, experience and innate ability. Not surprisingly,  over-schooling is more prominent among younger workers because they substitute schooling for on-the-job training. A younger worker of greater ability may start in a job below his ability level  because he or she  expects a higher probability to be promoted because of greater natural abilities. Sicherman and Galor (1990) found that:

overeducated workers are more likely to move to a higher-level occupation than workers with the required level of schooling

Investment in education is a form of signalling. Workers invest so much education that they appear to be overqualified  in the eyes of officious bureaucrats. The reason for this apparent overinvestment  is signalling superior quality as a candidate. Signalling seems to be an efficient way of sorting and sifting among candidates of different ability. The fact that signalling survives in market competition suggests that alternative measure ways of measuring candidate quality  that a more reliable net of costs are yet to be discovered.

Highly educated workers, like any other worker, must search for suitable job matches. Not surprisingly, the first 5 to 10 years in the workforce are spent in half a dozen jobs as people seek out the most suitable match in terms of occupation, industry and employer. Some of these job seekers who are highly educated will take less suitable jobs while they search on-the-job for better matches. Nothing is free or instantly available in life including a good job match.

A more obvious reason for over qualification is some people like attending university and other forms of education for the sheer pleasure of it.

Anyone who encounters the words over-qualified and over-educated should immediately recall concepts such as the pretence to knowledge, the fatal conceit, and bureaucratic busybodies. As Edwin Leuven and Hessel Oosterbeek said recently:

The over-education/mismatch literature has for too long led a separate life of modern labour economics and the economics of education.

We conclude that the conceptional measurement of over-education has not been resolved, omitted variable bias and measurement error are too serious to be ignored, and that substantive economic questions have not been rigorously addressed.

The track record on banking on solar energy innovation becoming cost competitive

John F. Kennedy’s speech in Berlin

Life expectancy by age and sex in New Zealand’s, 1990 to 2013

LE by Age in New Zealand males

LE by Age in New Zealand

via Life Expectancy by Age in selected Country from 1990 to 2013 | Health Intelligence.

..

The Canadians are coming! The Canadians are buying up our land! What has @NZGreens to say about that?

Canada was the largest source of foreign investment during the period, as its pension fund bought 18 properties in a portfolio from AMP and increased its stake in Kaingaroa Forest.

Only American political junkies remember the early poll leaders from previous presidential primaries season

The benefits and costs of the @NZSuperFund since its inception

The New Zealand Superannuation Fund, the sovereign wealth fund part funding New Zealand’s old-age pension from 2029/2030 onwards, has been a bit of a wild ride. Sometimes the earnings of the Fund were well below and sometimes earning well above the long-term bond rate.

image_thumb[3]

Source: New Zealand Superannuation Fund Annual Report 2014.

Since its inception, the Fund earned an average annual return of 9.78%, which was 5.06% above the long-term bond rate, and 1.03% above its reference portfolio.

No information was given in the annual report of the New Zealand Superannuation Fund on the marginal dead weight cost of the taxes raised to fund the New Zealand Superannuation Fund to see whether there is any net benefit to taxpayers from its establishment and continued operation.

image

The New Zealand Government has contributed $14.88 billion to the fund from prior its inception in 2001 to the suspension of contributions in 2009 by the incoming National Party Government.

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Source: New Zealand Treasury.

Over the nine years in which contributions were made, the company tax rate of 28% could have easily been up to 10 percentage points lower.

The New Zealand Treasury estimates that a one percentage point cut in the company tax costs about $220 million in forgone revenue if there are no other changes to the tax system. These are static estimates that do not include any feedback from  greater investment and higher growth.

The New Zealand Superannuation Fund must beat the market every single year to make up for the deadweight cost of its funding, a premium for the investment risk added to the Crown’s portfolio and the cost to New Zealand’s growth rate of higher than otherwise taxes on income, entrepreneurship and investment.

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Source: Abolish the Corporate Income Tax – The New York Times.

Do immigrants bring their politics with them?

Sanders, Trump and the median voter theorem

UK has the lowest company tax rate in the G20

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