Tweet from Christopher Clarke.
1. More billionaires are associated with less poverty.
2. Increasing billionaires per capita by ten fold lowers poverty by 43 percentage points.
3. Sweden has more billionaires per 10M people than the U.S. (34 vs 30)
4. Correlation is fairly strong (R-squared of 0.6 for two variable cross-section data)
He does mention "the graph is only a correlation."
Freddie Mac has paused new loans, and Fannie Mae is baking in the cost of the rent freeze, making it difficult for landlords to get financing, multiple real estate sources told The City Reporter.
By Greg David of The City Reporter. Excerpts:
"The nation’s two most important buyers of mortgage loans have imposed new rules for New York City’s rent-regulated buildings in the wake of Mayor Zohran Mamdani’s rent freeze that are making it impossible or extremely difficult for landlords to get financing.
Government-backed Fannie Mae, which has become the lender of last resort for private rent-regulated buildings, has toughened its underwriting standards since the rent freeze passed in June. Freddie Mac, the other government-backed lender, has instituted a “pause” on new loans while it assesses the impact of the freeze.
The decision will have severe consequences for two groups of buildings. Older, almost entirely rent-regulated buildings that are already under severe financial distress will struggle to refinance their mortgages and face foreclosure. They could be taken over by their lenders or sold for a fraction of their value. Buildings composed of all affordable units built with city help whose finances are also deteriorating will need ever larger city subsidies to find financing.
“I don’t think the new underwriting standard should be a surprise or controversial to anybody, because underwriting anything other than operating in a rent-freeze environment wouldn’t really be factually accurate,” said Rafael Cestero, CEO of the Community Preservation Corp.
Cestero says that because the rent freeze will exacerbate financial pressures on nonprofit affordable housing projects, his organization will make 50% fewer loans in New York City to all-affordable projects than it did two years ago.
Fannie Mae’s new requirements assume that rents will not increase on rent-stabilized units for four to eight years, covering Mamdani’s current term and a potential second term.
Fannie Mae and lenders like Community Preservation Corp. are also assuming that expenses increase each year by at least 5%, which means the operating margin for buildings will decline by at least that amount each year.
Numerous landlords, advocates and nonprofit housing executives, some with direct knowledge of the current terms, confirmed the changes in the loan standards."
"Lenders have also increased the expected shortfall in collections, anticipating that more tenants do not pay their rent. Cestero’s group, for example, has doubled the expected loss to 10%.
The combination of increasing operating expenses and shortfalls on rent collection means that the amount that will be loaned for any property will be less. Even so, lenders are also lending a smaller percentage of the value of the property, requiring more equity to be put up.""Loans for rent-regulated buildings, which are usually for five or 10 years, were plentiful before the 2019 rent law changes made it uneconomic for landlords to renovate rent-regulated units as they became vacant and collect a much higher rent. Many buildings were purchased before 2019 because of the possibility of raising rents and because interest rates were at historic lows.
But as the impact of the 2019 law took hold, major lender Signature Bank collapsed, in part because its loan portfolio was concentrated in rent-regulated mortgages that were expected to become distressed.
Another major lender, New York Community Bank, was acquired and exited the business. Other small lenders have also been acquired and no longer are making these kinds of loans.
Fannie and Freddie thus became the lender of last resort for brokers who continued to arrange loans.
“I don’t know of any one [who] is making loans on private rent-regulated buildings,” Cestero said."
Education is widely recognized as the primary driver of human capital accumulation. However, policies designed to promote educational attainment often overlook students’ endogenous responses. This paper provides empirical evidence of the causal impact of relaxed academic standards on student effort and achievement. We find that academic leniency results in mechanical GPA increases, but significant reductions in effort among lower ability students based on lower attendance and lower numerical grades. These heterogeneous effects compound and exacerbate gaps in engagement and achievement throughout high school, ultimately worsening deficits in human capital accumulation as measured by ACT scores.
That is from a newly published paper, in AEJ: Economic Policy, by A. Brooks Bowden, Viviana Rodriguez, and Zach Weingarten.
See 50 Common Fallacies About American Health Care by Richard E. Ralston. Excerpt:
"Following are some of the most common arguments with suggested responses that apply the principles discussed above.
1. “The quality of health care in America is ranked lower than 36 other countries.”
When you hear this, always ask, “Ranked by whom and how?” In 2000 United Nations bureaucrats at the World Health Organization sent a survey to “officials and experts” selected by the U.N. Why should we be surprised to learn that government “officials and experts” in France thought that their government-run health care system was the best in the world? The scoring of these surveys also made them meaningless. For example, 25 percent of the scoring was weighted based on the assessment of how “fair” the financing was in each country. For “fair,” read socialist—the list was largely a ranking of how socialist each country’s system is.
2. “Medicare and Medicaid are far more efficient and less wasteful than private insurance, spending only three percent on administrative overhead.”
When you hear this, always ask, “Why is the administrative cost always given as a percentage?” One reason is that, due to the age of covered patients, the average Medicare and Medicaid reimbursements are higher than those of private insurance—and administrative costs are therefore a lower percentage of the larger amount paid. Another reason is that the huge cost of contending with 130,000 pages of Medicare regulations is pushed onto the providers. The cost of the more than 100,000 employees of the Internal Revenue Service who collect Medicare taxes are also omitted from Medicare’s “administrative overhead.” But the biggest reason is that the government programs make no effort to minimize expense or fraud. Fraud counts for about $50 billion in Medicaid expenses every year—as high as $18 billion in New York alone. Total spending has been going through the roof for more than 40 years, but the government’s administrative cost of burning money is quite low. That does not prove that the government is efficient or prudent. Private insurance companies, on the other hand, need to keep fraud and expenses down or go out of business.
3. “Government or universities develop most new medications and then just hand them over to pharmaceutical companies to manufacture and make all the profits.”
When you hear this, mention that the National Institutes of Health (a government agency) reports that the pharmaceutical companies—who spend about $60 billion each year on research—develop more than 90 percent of new drugs.
4. “Advertising of drugs is bad because it increases the price of medications.”
When you hear this, ask, “Why does any business advertise any product? Because they just want to add to their costs and increase the price?” Manufacturers of computers and other technological products who spend a lot on research need to find their market. A pharmaceutical company, spending an average of $800 million to develop a major new drug, has a few years of patent protection to bring the drug to the attention of physicians and patients who need it. This allows them to spread research costs over a much larger customer base and reduce unit cost—which lowers the price.
5. “Private corporations are wasteful and bloated bureaucracies. Government-provided health care is lean and efficient.”
When you hear this, you might want to laugh. Then ask, “So you think that the 20th Century proved that communism and fascism work?” Is the Department of Motor Vehicles or the purchasing practices of the Defense Department our best models of administrative efficiency?
6. “People live longer in some countries because of their socialist health care systems.”
When you hear this, ask if the people in those countries didn’t live longer before they nationalized their health care systems. Ask how many people in those countries died on their highways, were killed in combat, shot by criminals, addicted to drugs, were severely overweight or in poor health when they arrived as illegal immigrants."
If a 5-percent levy chases billionaires out of Cali, the long-term income tax gap (not to mention litigation costs) will swallow any wealth-tax windfall.
"California voters will decide on Proposition 40, a proposal for “a one-time 5-percent tax on the worldwide net worth of individuals exceeding $1 billion,” this November.
The measure’s obligation reaches backward to January 1, 2026, so any billionaire who was a California resident this year could owe a tax on the value of covered assets on December 31, 2026. Californians are essentially being asked to approve a tax whose residency trigger has already passed, and whose tax base doesn’t exist yet.
A cadre of Nobel Prize winners justify support of Proposition 40 as “modest relative to the gains made by billionaires, yet large enough to offset the federal cuts to Medicaid.” Supporters of the proposition claim that the wealth tax can bring in $100 billion. A recent paper from Benjamin Jaros and Joshua Rauh, however, estimates what the tax could collect about $30 billion, with a range of $28 billion to $26 billion, after accounting for taxpayer departures and litigation risk. That estimate excludes lost future income tax revenue. If that lost revenue is included, Jaros and Rauh estimate a net fiscal loss of $38.9 billion in present value. That includes a “litigation survival discount” on the portion of taxpayers who stay to fight, and is validated by the wealth tax base elasticity literature. They note that the permanent loss of annual income tax revenues would offset the one-time wealth tax revenue.
Jaros and Rauh’s analysis received a response from economist Gabriel Zucman, attempting to claim that Jaros and Rauh’s assumption of tax flight was unfounded. Jaros, Rauh, and others responded. Zucman wrote:
Why would billionaires permanently leave California in response to a one-time tax owed if they lived there on January 1, 2026? It would only make sense for them to leave if the tax becomes annual. But if the tax becomes annual, it would also generate revenue annually — by virtue of, well, being annual.
Mr. Zucman is missing that the billionaires facing the wealth tax are strategic planners who can afford excellent advice. They will not wait around to see if Sacramento’s appetite grows.
What is Wealth? Can it Be Taxed?
A wealth tax applies a tax rate to an individual’s net wealth (the market value of total owned assets minus liabilities) and is applied to net wealth above a certain threshold. While appearing straightforward, however, those eager to enact a wealth tax will find that it can be difficult to define wealth, let alone measure it accurately.
A wealth tax requires lawmakers to decide which resources count as wealth, who owns them, and how to put a dollar value on them. The IRS defines “net worth” as total assets minus debts and mortgages (“mortgages, liens, and other debts of the individual”). The complications begin once a law must specify what belongs on each side of the calculation.
While some assets (such as real estate and personal property) can be reasonably appraised, other forms of wealth can prove more difficult. Determining the value of bank accounts or financial assets heavily depends on when the valuation takes place, because their value fluctuates over time. Other assets such as fine art, wine, or jewelry do not have a readily available market value because there is often not a liquid market that can be referenced for valuation purposes. Any attempt to value these kinds of assets involves a degree of subjectivity.
Proposition 40 runs into similar difficulties. It proposes taxing worldwide assets of taxpayers and their spouses (the spouse’s residency does not matter), minus permitted debts. Directly owned real estate, somewhat unexpectedly, would be excluded from the wealth tabulation, but property held through a corporation would be reflected in the value of its shares. The tax treatment of a building depends on how the owner holds it.
Proposition 40 attempts to value private businesses by adding the company’s book value to 7.5 times its average annual accounting profits and then multiplying that sum by the taxpayer’s presumed ownership share. Those calculations, however, might differ from what buyers would actually pay for the business based on expected future earnings and risks.
The proposition’s attempts to determine ownership further complicate matters. The Revenue and Taxation code states that when a non-publicly traded business interest carries voting or other direct control rights, the taxpayer’s ownership percentage is presumed to be “no less than” the taxpayer’s share of the entity’s overall voting or direct control rights.
Suppose that formula values a private company at $2 billion. Its founder holds 10 percent of the economic interest but controls 60 percent of the votes. If the founder’s stake were valued strictly according to the 10 percent economic ownership, the calculation would be $200 million. If the founder’s stake were valued using the proposal’s voting rights presumption, it would be valued according to the 60 percent share of the votes, or $1.2 billion. The same company could produce a sixfold difference in the founder’s presumed taxable interest depending on whether the calculation follows economic ownership or voting control. If slammed with a tax, the taxpayer or the state’s Franchise Tax Board must produce a certified appraisal to overturn the tax calculation.
The measure also instructs appraisers to disregard forced-sale prices (which often fall below normal market prices) despite the fact that the imposed wealth tax may well force an owner to sell assets or borrow against them.
Wealthy taxpayers are left facing a tough choice. Exemptions can treat comparable assets differently, while valuation formulas can produce assessments that owners dispute. Some may be able to challenge the tax through an appraisal, with additional work and money fronted by the state. Before officials can collect a wealth tax, they must settle disagreements over what’s being taxed and what it’s worth.
A One-Time Windfall?
In the proposal for Proposition 40, Jasper Boll, Emmanuel Saez, and Gabriel Zucman estimate that Proposition 40 could collect roughly $100 billion. In their paper this month, Jaros and Rauh estimate wealth tax collections to be closer to $30 billion, but the overall fiscal effect is negative. The Legislative Analyst’s Office, California’s nonpartisan fiscal adviser, estimates a similar tradeoff between temporary receipts and recurring revenue losses. Specifically, the wealth tax would collect tens of billions of dollars over several years as well as ongoing income tax losses of “less than $1 billion per year” and administrative costs of “tens of millions of dollars per year for several years.”
In a Substack post, Jaros, Rauh, and others respond to criticisms recently raised by Gabriel Zucman on X (formerly Twitter). Many billionaires have already left California, with some citing the potential wealth tax as the reason. Even if the wealth tax survives legal challenges (specifically the legality of a retroactive valuation), Rauh and Jaros note that billionaires leaving California will result in massive income tax revenue losses of $3.3 to $5.8 billion annually and growing.
The exodus of (especially high-net-worth) taxpayers will place greater strain on the already strained California budget. In September, Governor Gavin Newsom vetoed a bill that would increase post-retirement benefits for police and firefighters, citing a pension crisis and budgeting woes. Additionally, Medi-Cal, the California Medicaid Program, takes up 35.1 percent of California’s total expenditures, making it the single largest line item in the state budget.
Research from Rauh and others also finds that Medi-Cal spending nearly tripled after 2011 and that most anticipated federal reductions would occur after 2030, long after the wealth tax was collected. Meanwhile, California continues to face recurring budget deficits despite recent revenue booms. A one-time wealth tax may, at best, postpone some difficult budget cuts, but it will not permanently reconcile recurring spending with recurring revenue.
The Politics of “Just This Once”
Jaros and Rauh state in Section 6 of the paper, “If the state of California votes to enact this tax, and if it is sustained by the courts, the constitutional barrier to future wealth taxation is removed, and the state’s ability to commit to not enacting additional wealth taxes is substantially diminished.” Once lawmakers and interest groups develop a taste for wealth taxes, they will predictably try for more in the future.
These concerns are not unfounded. Saez and Zucman have explicitly called for “a permanent wealth tax down the road.” Additionally, the use of the wealth tax revenue on Medicaid, a recurring budget commitment, makes future wealth taxes all the more tempting, especially when the federal cuts to Medicaid do not begin until 2030.
Interest groups would also be prepared to mobilize and advocate for future wealth taxes. The SEIU-United Healthcare Workers West sponsored Proposition 40, and health care programs would receive 90 percent of its proceeds. An organized constituency has serious motivation to campaign for something that clearly benefits them while dispersing the costs among Californians.
California’s income tax changes provide a cautionary tale. In 2012, voters approved Proposition 30, an increase on the existing 9.3 percent personal income tax rates on higher incomes through the end of 2018. These temporary increases were then extended through 2030, when voters approved Proposition 55 in 2016. Once government spending has been promised, it is tempting for policymakers to turn “one time” into “one more time.”
Wealth Is Mobile — and It Moves
Mark Zuckerberg, CEO and founder of Meta Platforms, recently struck a deal with the company after expressing an intention to leave California for Florida over the possibility of Proposition 40. Meta gave Zuckerberg non-voting shares that he can sell to foot the wealth tax should Proposition 40 pass, in exchange for a promise to reside in California, near Meta headquarters, for eight years.
Wealth tax advocates who point to this episode as an example of billionaires being able to “pay their fair share” are missing the bigger picture. People can only be paid to stick around for so long. California’s spending obligations are still massive and thousands of Californians of all incomes have taken notice and left the state.
The Golden State exodus will likely continue until Sacramento revises its tactics. The more people, companies, and investments leave the state, the more California will struggle to meet its obligations. If the tax encourages high-income residents to leave, the state could sacrifice future income-tax revenue for a short-term infusion of funds. California still thinks it can tax and spend its way out of its budget woes, but wealth doesn’t stick around where it’s under attack."
New research raises questions about federal conservation spending
By Jane Shaw Stroup of The Independent Institute.
"The Department of Agriculture (USDA) is a giant agency with a $481 billion budget, 65 percent of which goes to the food stamp program. As the 2026 farm bill nears passage this autumn, the public is watching a bitter partisan debate over food stamps. But few people—other than insiders—are scrutinizing the rest of the bill. Yet other agriculture programs, although minuscule compared to food stamp benefits, deserve attention, too. The USDA pays $5.3 billion a year for its conservation programs. Two recent studies raise questions about their effectiveness and appropriateness.
Woody Encroachment
Let’s start with woody encroachment. This is the unplanned intrusion of trees and shrubs into croplands and grasslands. Such vegetation reduces the amount of land that can be used for raising crops or grazing cattle, thus reducing production.
In 2019, the Natural Resources Conservation Service (NRCS, an agency of the USDA) started the Kansas Great Plains Grassland Initiative (KGPGI). Its goal was to end, or at least slow, woody encroachment in Kansas. Two researchers from Kansas State University studied this problem carefully.
Between 2017 and 2024, the USDA spent only $24 million addressing woody encroachment in Kansas, while the problem was causing landowners $30 million in forage losses each year (and even more in Oklahoma and Texas). Surveying landowners of Kansas cropland, the researchers found that between 41 and 61 percent of the landowners saw this encroachment as a major problem. Yet relatively few were participating in the government’s Environmental Quality Incentives Program, which provides payments for addressing environmental issues such as this.
So why the low participation? The researchers, Jackson Lindamood and Gabriel S. Sampson, found “high [tree and shrub] control costs, labor constraints, and difficulties prioritizing treatment areas,” as well as landowners’ “limited awareness, uncertainty about eligibility, and program complexity.”
The authors then began an economic study to calculate the impact of woody encroachment on land values, knowing there might be benefits as well as losses. They selected more than 12,000 parcels for which they had land sale prices and environmental data from 1990 to 2024.
Very simply, they found that woody encroachment increased land values. “The value of a one percentage point increase in woody cover on the parcel is associated with increased per-acre value ranging from $9 to $27 depending on model specification,” they wrote. This new vegetation was providing habitat for wildlife, which encouraged recreation, especially hunting—a service that was more valuable at the margin than raising crops or grass alone.
They called their findings “somewhat of a management and policy paradox: landowners face high costs to control woody encroachment on grassland, yet the land market places a land value premium on woody cover.”
So perhaps woody encroachment is a good thing and should be left alone? It’s not clear whether the researchers saw it that way. “This suggests a clear role for policy interventions that substantially lower the costs of control, have clear eligibility guidelines, and are easy to navigate for producers or landowners,” they wrote.
CRP and Land Values
There is something amusing about the upside-down effect of woody encroachment, but to me, there is something disturbing about a recent study of the Conservation Reserve Program (CRP). Unlike the woody encroachment program, the CRP—the USDA’s largest conservation program—pays farmers to reduce their usable acreage by setting aside marginal or erodible land. Started formally in 1985, it has two goals: increasing natural habitat and, by reducing farmland, keeping up crop prices.
This year, the environmental research organization Resources for the Future (RFF) produced a comprehensive working paper by Matthew Wibbenmeyer et al. on the effect of the CRP on nearby property values.
The paper begins: “Conservation is often perceived to be at odds with economic activity.” Specifically, the government’s “payments for eco-system-services” under the CRP has caused anxiety that its “spillover effects” may be harming rural communities. This could happen “by reducing outputs, employment, and demand for support services from agriculture, forestry, or other land-based industries.”
On the other hand, they continue, there are also benefits, such as “improved environmental quality, recreational amenities, and landscape resilience to erosion, extreme weather, and ecological disturbances.”
The RFF used CRP data and residential property values to find out if CRP land affects the value of nearby homes. And it does. They write: “a 10-hectare [2.47-acre] increase in CRP enrollment [by landowners] results in an approximately 4 and 1.6 percent increase in the value of homes within 500 and 1,000 m[eters], respectively.” Nationally, this adds up to an increase in residential property values by $775 to $900 million per year.
So a government payment program to keep up prices and protect the environment raises the value of nearby land. That’s nice, but should taxpayers pay money to raise the land values of what may be well-heeled homeowners who aren’t, as far as we know, doing anything special to protect the environment? Whatever the answer, the question is largely irrelevant. The paper seems to be a strategic effort to boost the CRP.
Over the years, the CRP has not shown environmental benefits that are dramatically greater than costs. In fact, in 2007, Leroy Hansen, an economist at the USDA’s Economic Research Service, wrote that: “Nationally, the CRP is estimated to provide $1.3 billion in annual benefits, which represents 75 to 80 percent of the program’s cost.” In other words, by cost-benefit standards, it is a net loss. This study by RFF gives support to the benefit side.
These two cases suggest that members of the public should take a closer look at the USDA’s conservation programs."
