States Could Save $1.7 Billion Per Year with Federal Financing of Work Sharing

This issue brief looks at how work-sharing provisions signed into law by President Obama in February 2012 as part of the Middle Class Relief and Job Creation Act could help states reduce their unemployment rates and also save unemployment insurance (UI) costs for up to three years

The Incidence of Financial Transactions Taxes

As financial transactions taxes (FTT) have moved to be part of the mainstream debate on tax policy, there has been increased attention to the incidence of such taxes. This is an important aspect to the debate, since the merits of the tax will depend to a substantial extent on who will end up bearing the burden. There are three key issues in making this assessment:1) Which groups directly bear the burden in the sense of carrying through trades that will be subject to the tax;2) The extent to which tax payments will be offset by a reduction in trading volume, which lowers transaction costs; and3) The extent to which reduced trading will lead to a less efficient allocation of capital, and therefore reduce growth and output.The issues associated with the first point are straightforward, even if the data may not be as clear as would be desirable. The allocation of the tax will be in proportion to the volume of trading by each income group, however, there are not reliable data for trading by income group. As a first approximation, it can be assumed that trading is proportional to the financial assets held by each income group. These data are available from the Federal Reserve Board's Survey of Consumer Finances.The second issue depends on the elasticity of trading volume with respect to the cost of trading. If trading is very responsive to changes in transactions costs, then reductions in trading volume can offset much or even all of the tax. Investors may have to pay the tax on trades they conduct, but they will save money on other transactions costs because they do less trading. There is research that provides evidence on trading elasticity, although it does leave a wide range of uncertainty.The third issue is the most important one. If the high current volume of trading is somehow leading to a better allocation of capital, then reducing trading volume will lead to a less efficient allocation of capital. In this case, FTTs will lead to slower growth and less output. Here, the incidence of the tax depends on the apportionment of this lower level of output. Insofar as it means lower returns to capital, households will lose if they own capital. Insofar as it means lower returns to labor (i.e. lower wages) households will lose if they have workers relying on labor income.This paper discusses these issues in further detail, assessing what the evidence shows on each issue

Women Workers and Unions

This issue brief looks at the most recent national data available to examine the impact that being in or represented by a union has on the wages and benefits of women in the paid workforce. Even after controlling for factors such as age, race, industry, educational attainment and state of residence, the data show a substantial boost in pay and benefits for female workers in unions relative to their non-union counterparts. The effect is particularly strong for women with lower levels of formal education

Asian American and Pacific Islander Workers Today

This issue brief looks at the most recent U.S. Census Bureau data available to provide an overview of the demographics and economic status of the Asian American and Pacific Islander (AAPI) workforce in the United States. A key theme that runs throughout this analysis is that the AAPI workforce is exceptionally diverse, so much so that average statistics obscure many important facts about this population. There are about 8.9 million AAPI workers in the United States. This is about 20 times more than in 1960, when the Decennial census counted less than half a million AAPI workers. Of that total, about 8.5 million are Asian Americans and about 450,000 are Pacific Islanders. At 6.1 percent, AAPIs' share of the U.S. workforce is ten times larger than it was in 1960, when AAPIs comprised only about 0.6 percent of U.S. workers

The Chained CPI: A Painful Cut in Social Security Benefits and a Stealth Tax Hike

In the debate over federal budget deficits, several politicians have proposed to change the formulas that determine benefit levels for Social Security and other government programs as well as income tax brackets. Switching to a relatively new formula, the Chained CPI, would help the federal government save money by slowing increases in benefits and raising additional tax revenue. Proponents of this proposal argue that the Chained CPI is a more accurate formula and any impact on beneficiaries of the government programs affected would be mitigated by increased tax revenue from the wealthy. However, this issue brief effectively refutes those arguments by showing that switching to the Chained CPI would result in cuts to already modest Social Security benefits, that it is likely that the Chained CPI is not an accurate measure of the inflation rate seen by seniors and that the Chained CPI would lead to income tax increases for working Americans

Bringing Back Subprime? The Hazards of Restructuring the GSEs

There have been a number of proposals for replacing the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, with a system under which private financial institutions would issue mortgage-backed securities (MBS) that carry a government guarantee. This paper raises a number of questions about the merits of such a system. It points out that both the gains to low-income families seeking to become homeowners from such a system and interest rate savings are likely to be relatively modest, and that there are few obvious safeguards that would make this new system sounder than the system of privately-issued mortgage-backed securities in the bubble years

Who Would Pay More if the Social Security Payroll Tax Cap Were Raised or Scrapped?

On January 1, 2015, the maximum amount of annual earnings subject to the Social Security tax -- a.k.a. the payroll tax cap -- increased to $118,500. Every year, this cap is adjusted to keep up with inflation. However, many American workers are not aware that any wages above the cap are not taxed by Social Security.This issue brief analyzes Census Bureau data to determine how many workers would be affected if the Social Security payroll tax cap were raised or phased out. We find that the richest 6.1 percent of workers (less than 1 in 15) would pay more if the cap were scrapped. Only the top 1.5 percent (1 in 67) and 0.7 percent (1 in 140) would be affected if the tax were applied to earnings over$250,000 and $400,000, respectively.When we look at the wage earners according to gender, race or ethnicity, age, or state of residence, the share of workers who would be affected by increasing or phasing out the cap varies widely

Raising the Social Security Payroll Tax Cap: How Many Workers Would Pay More?

On January 1, the maximum amount of annual earnings subject to the Social Security tax -- a.k.a. the payroll tax cap -- increased to $113,700. Every year, this cap is adjusted to keep up with inflation. Many Americans are not aware that income above the cap is not taxed by Social Security. In other words, workers who make$113,700 or less per year pay a higher Social Security payroll tax rate than those who make more. To help alleviate Social Security's long-term budget shortfall, raising -- or even eliminating -- the cap has gotten some attention from policy makers. This paper finds that just 1 in 20 workers -- the wealthiest -- would be affected if the cap were eliminated entirely, and only 1 in 75 would be affected if the cap were applied to earnings over $250,000. In addition, the share of workers who would pay more varies greatly according to gender, race, state and age

Who's Above the Social Security Payroll Tax Cap?

When most workers look at their pay stubs, they can see that the Social Security payroll tax rate is 12.4 percent -- with the employee and employer each paying 6.2 percent. But many workers do not know that any annual wages above $106,800 are not taxed by Social Security. In other words, a worker who makes twice the Social Security wage cap --$213,600 per year -- pays Social Security tax on only half of his or her earnings, and one who makes just over a million dollars per year pays the tax on only about a tenth.Raising the Social Security cap -- which would make some or all earnings above $106,800 subject to the Social Security tax -- has gotten some attention as a way to help alleviate Social Security's long-term budget shortfall. U.S. Senator Bernie Sanders plans to introduce legislation to keep the current cap at$106,800, but to also apply the Social Security payroll tax to earnings over $250,000. It is similar to previous bills and echoes a proposal by then-Senator Obama on the campaign trail in 2008.While this would leave those making between the current cap of$106,800 and the proposed cap of $250,000 paying the lowest rates, it would help secure the solvency of the program and avoid an increase in taxes on the middle class. To help inform this policy debate, this paper examines Census Bureau data from the most recently available American Community Survey to determine how raising the cap would affect workers based on gender, race or ethnicity, age, and state of residence

Scrapping the Social Security Payroll Tax Cap: Who Would Pay More?

There is currently $2.7 trillion in the Social Security Trust Fund, held in Treasury bonds. Since the program is currently taking in more revenues (taxes on payroll and benefits as well as interest on the bonds) than it is paying out, the Trust Fund will continue to grow to about$2.9 trillion.The Trust Fund was set up to help pre-fund the retirement of the baby boomer generation. In about 2033, these funds will be drawn down, so after that point, if no changes are made, beneficiaries would receive about 75 percent of scheduled benefits. This gap between what the program would be able to pay and scheduled benefits is equivalent to about one percent of Gross Domestic Product over the next 75 years.To help avoid a reduction in payments and alleviate the program's budget shortfall, one option is raising -- or even abolishing -- the cap on the maximum amount of earnings that are subject to the Social Security payroll tax. In 2014, that cap is set at $117,000 per year (it is adjusted annually to keep up with inflation). This issue brief analyzes Census Bureau data from the most recently available American Community Survey to ascertain how many workers would be affected if the Social Security payroll tax cap were raised or phased out