Income & energy use

Tweet from The Abundance Institute.

Large earnings disparities to be the primary source of US wealth concentration

By Bariş Kaymak, David Leung & Markus Poschke. From American Economic Journal: Macroeconomics.

"Abstract

We assess the empirical relevance of different macroeconomic modeling approaches to wealth concentration, using the joint distribution of earnings, capital income and net worth in combination with an OLG model of household heterogeneity. We find large earnings disparities to be the primary source of US wealth concentration. This reflects the fact that labor income, from salaries but also from entrepreneurship, is a major income source for top income and wealth groups in the data. Bequests and differences in rates of return on capital together explain about half the holdings of the wealthiest of households."

The Supreme Court Gives Permission to Build Under NEPA

The Justices issue a unanimous ruling against 3,600-page environmental reviews and endless litigation

WSJ editorial. Excerpts:

"the 1970 National Environmental Policy Act. But NEPA is supposed to let federal regulators “weigh environmental consequences as the agency reasonably sees fit,” Justice Brett Kavanaugh writes for the Court in Seven County Infrastructure Coalition v. Eagle County. “NEPA is a procedural cross-check, not a substantive roadblock. The goal of the law is to inform agency decisionmaking, not to paralyze it.”"

"The federal Surface Transportation Board approved the rail line in 2021, after a lengthy environmental review"

"“The central principle of judicial review in NEPA cases is deference,” Justice Kavanaugh says. “Under NEPA, an agency’s only obligation is to prepare an adequate report.” The regulators overseeing the proposed project, he adds, are “better equipped to assess what facts are relevant to the agency’s own decision than a court is.”"

"nothing in NEPA requires the Surface Transportation Board to study “upstream or downstream projects separate in time or place from the 88-mile railroad line’s construction and operation.”"

"agencies don’t need to “analyze the effects of projects over which they do not exercise regulatory authority.”"

"the Utah rail review was 3,600 pages"

President Trump Isn’t a Tariff King

A sweeping trade court ruling puts the executive in his proper constitutional place

WSJ editorial. Excerpts:

"1977 International Emergency Economic Powers Act (IEEPA) to impose tariffs willy-nilly. That law gives the President broad authority in a national emergency to “deal with any unusual and extraordinary threat” including to “regulate” the “importation” of foreign property."

"After declaring fentanyl an emergency, the President in February slapped tariffs on Mexico, Canada and China. Then in April he deemed the U.S. trade deficit an emergency and imposed tariffs of varying rates on the world."

"No other President has used IEEPA to impose tariffs."

"Richard Nixon used the law’s precursor, the Trading With the Enemy Act, in 1971 to impose 10% tariffs for a short period to address a balance of payments problem. The Justice Department said Mr. Trump’s tariffs are no different."

"Nixon tariffs were upheld by an appeals court because they were a “limited surcharge” and “temporary measure calculated to help meet a particular national emergency, which is quite different from imposing whatever tariff rates he deems desirable.”"

"The legislative history surrounding IEEPA confirms that the words ‘regulate . . . importation’ have a narrower meaning than the power to impose any tariffs whatsoever"

Federal Prosecutions for Antisemitic Rioters

A 1968 law prohibits violence against those partaking of federally financed projects

By Nathan Lewin. He is a Washington lawyer with a Supreme Court and litigation practice. He served as a deputy assistant attorney general in the Justice Department’s Civil Rights Division, 1968-69.

Excerpt:

"Section 245(b)(1)(E) of the U.S. Code, enacted in 1968, defines as a criminal anyone who, “whether or not acting under color of law, by force or threat of force willfully injures, intimidates or interferes with . . . any person because he is or has been . . . participating in or enjoying the benefits of any program or activity receiving Federal financial assistance.”

Jewish students at Columbia and Brooklyn College were participating and enjoying federally financed educational programs at their institutions. The vandalism at Columbia’s Butler Library was “force” and “threat of force” that injured and intimidated students and university employees. An offender found guilty under this law may be imprisoned for one year, and 10 years if “bodily injury results” or if “a dangerous weapon” is used or threatened."

California’s Five-Alarm Pension Fire

Sacramento wants to roll back Jerry Brown’s 2013 reforms

WSJ editorial. Excerpts:

"Before the reforms, public-safety workers could retire at age 50 and receive a pension credit of 3% of their final salary for every year they worked."

"The 2013 reforms reduced the maximum pension credit for new hires to 2.7% and required them to work until 57 to receive it."

"Workers are also required to contribute half of the actuarial “normal cost” of their pensions"

"For every $10,000 that a state firefighter earns in compensation, the state pays $5,000 into the state pension fund."  

"Local governments are raising taxes to pay for ballooning pension costs."

[there is new] "legislation to roll back the 2013 reforms by letting public-safety workers retire earlier with bigger pension credits."

[which would] "also let unions collectively bargain with local governments to reduce worker pension contributions"

"Los Angeles firefighters make $213,600 on average. About a dozen last year made more than $300,000 in overtime alone. One battalion chief made more than $928,000 including overtime and benefits."

How SALT Pits the Rich vs. Poor in New York

The big, beautiful tax bill sets back tax policy by a decade, and it facilitates the continuation of reverse tax redistribution

Letter to The WSJ. 

"In your editorial “The GOP’s SALT Deal Folly” (May 22), you rightly criticize House Republicans from New York for securing an increase in the state-and-local tax deduction. The giveaway, you note, will subsidize “profligate Democratic-run states.” But SALT isn’t merely a red vs. blue issue; it also pits the poor against the rich. New York is a perfect example.

Internal Revenue Service data for 2022 shows that New York is home to five of the top 50 congressional districts with the most taxpayers affected by SALT. Rep. Mike Lawler’s district ranks 29th, and Rep. Nick LaLota’s 39th. But New York also has four poor districts that have among the fewest taxpayers affected by SALT. Ranking 422nd is Rep. Ritchie Torres’s district in the Bronx, which had an average income of $36,265 in 2022. The average income in Mr. Lawler’s district was $144,270.

Since virtually all taxpayers in such poor districts claim the standard deduction, they are effectively paying full freight for their state and local taxes. This is in contrast to the wealthy taxpayers in suburban districts who would now be able to shift up to $40,000 of their local property taxes and state income taxes to Uncle Sam—up from the current $10,000.

Matthew S. Johnson and Gladriel Shobe illustrate this sort of reverse subsidization in a new study, “Geographic Inequality and the SALT Deduction.” They find that wealthy enclaves can use high property taxes and the SALT deduction to discourage demographic groups from moving into their neighborhoods, and they can afford more expensive amenities—e.g., better schools and parks—because part of the cost is written off on their 1040 tax returns.

The big, beautiful tax bill sets back tax policy by a decade, and it facilitates the continuation of reverse tax redistribution from the poor to the rich. The Senate should correct this folly and set the SALT deduction where it belongs: zero.

Scott Hodge

Arnold Ventures

Washington"