All Economics Are Local

November 8, 2009

The old saw goes that “All politics are local.”  Likewise, all economics is local.  You need to look at communities to get a sense of how bad things really are.

In addition to the usual national unemployment rate data (UR), and your state, & county that your local news media report, the Bureau of Labor Statistics also reports UR data for “Cities and towns above 25,000 population.” (There are also a few other ways they slice the data.)

I culled through the preliminary, not seasonally adjusted, Sept. 2009 data for the 10 states with the highest UR. In each of these states, pulled out the town or city with the highest UR. In Michigan, two communities tied for first place with a UR of 35.2%

http://www.bls.gov/data/
On This Page: Unemployment
Local Area Unemployment Statistics (LAUS)
Area Type: Cities and towns above 25,000 population

State (%UR) / Highest UR Town or City (%UR)
Michigan (15.3) / Highland Park & Pontiac (35.2)
Nevada (13.3) / North Las Vegas (15.5)
Rhode Island (13.0) / Woonsocket (15.1)
California (12.2) / Delano (34.1)
South Carolina (11.6) / Anderson (27.9)
Oregon (11.5) / Springfield (13.9)
District of Columbia (11.4) / Washington (11.7)
Florida (11.0) / Fort Pierce (20.1)
Kentucky (10.9) / Hopkinsville (13.0)
North Carolina (10.8) / Kinston (12.9)

JK

What Is Your Fiscal Priority: Taxes, Government Services, Job Creation, or Business Growth?

October 30, 2009

To a large degree, taxes, government programs, paychecks, and business revenues all originate from the same place: your wallet.  The first step to address these issues is to prioritize them.

Below are some priority setting worksheets you can download.  They resemble the mileage charts on a road map, where you compare each item to every other item and vote between each pairing.  After completing the worksheet, you simply count up the votes.  The item with the most votes is the highest priority.

https://paycheckeconomics.files.wordpress.com/2009/10/fiscal_pizza-priority-execise.pdf

As a warm up example, imagine you are in a group that must vote on  its favorite ice cream from the following flavors:
V = Vanilla
C = Chocolate
S = Strawberry
N = Neopolitan

Here is a completed worksheet that displays the ice cream flavor preferences of my kids.

Ice cream priority worksheet - completed
Here is a blank ice cream preference worksheet.

Ice cream priority worksheet - blank
Now to the task at hand.  How do you rank the following fiscal issues?:
G = Maintaining Government services – budget funding
T = Lowering Taxes or not raising Taxes
J = Job Creation
B = Business Growth

(To compare Job Creation to Business Growth: You can create jobs by hiring 10 guys with shovels to dig a ditch.  Or, you can grow business revenues by investing in a backhoe, training one guy to operate it, and firing the other 9.)

Fiscal priority worksheet - blank

What are your fiscal priorities?

An Approach to Lowering the United States Unemployment Rate 1% (on about $20/week)

October 18, 2009

IT IS NOT THE JOB THAT IS IMPORTANT TO THE ECONOMY!!

IT IS THE PAYCHECK!!

Can 200 people do enough local shopping and generate enough local economic activity to create one more job?  If so, then you have the potential to lower the unemployment rate 1%.   Click on the link below to find an analysis that demonstrates this.

United States 1% Unemployment Rate Reduction Analysis

For example, if you want to create jobs that pay $12/hour or $480/week, this factors out to about $2.00 weekly, on a per capita basis, depending on the ratio of local population to labor force.  With a retail program where 10% of the sales price of some goods or services went to locally originated, paycheck creation fund, it would require that the average person spend about $20 weekly at local businesses.

In the United States, that would create approximately 1.5 million jobs.

With this type of paycheck creation program, you can create fewer or more jobs depending on the wage you pay people.  You could actually control the number of jobs you create, within local economic parameters.

To make this happen, you would need:

  • a transaction system
  • a reporting system
  • businesses willing to participate by offering some goods and services for this paycheck creation program
  • incentives for businesses to participate
  • people who are willing to shop locally
  • incentives to motivate people to shop locally and create paychecks

JK

The Taxpayer Should be the Funding Source of Last Resort

October 3, 2009

The Taxpayer Should be the Funding Source of Last Resort. (This statement probably makes me the most fiscally conservative person in America.)

Consider that government collects taxes for the purpose of paying for resources required to support public services.  These resources might be considered as follows:

Personnel – the cost to employ people

Procurement of goods – the cost to purchase goods

Procurement of service – the cost to employ a person who is not an employee

Especially for procured resources, if a business, organization, or person in the community has budgeted or purchased a resource, and is offered an incentive to provide that resource for public service, and is willing to do so, then the taxpayer does not need to buy it.

In other words, the taxpayer is the funding source of last resort.

JK

Adopt Responsibility Based Budgeting To Balance the Budget

September 29, 2009

The first thing that needs to be done when crafting a government budget is to decide exactly who is actually responsible for paying for the specific resources (personnel, purchased goods, purchased services) that government spends tax money on.  Basing a budget upon assigned responsibility for funding is called Responsibility Based Budgeting.

The problem with a sales tax is that no one is obligated to purchase anything that is subject to sales tax.  When the item goes on sale, it is taxed less.  Since your name is not on the cash register receipt, this means that government services that are funded by the sales tax are effectively funded by anonymous donors.

In this depressed economy, we all simply spend less and pay less taxes. We are witnessing the defunding and destabilization of public services as a result.  Especially in schools, stability is the most important thing.  Unfortunately, for some children, the school environment is the only stable environment they have.  Changing the budget changes the scope of school activities and programs.  This results in an environment that is a less stable influence in the lives of  these children.

So, who is actually responsible for paying for public programs and resources such as public school, fire trucks, bridges, drug sniffing dogs, and child protective services?   To say the “taxpayers” are responsible is simply too vague.  Specific types of taxpayers need to be identified.

Responsibility is assigned with an assessment – a tax bill with someone’s name on it.  Assessed taxpayers include property owners, wage earners, licensed drivers, licensed businesses  etc.

The budget funding responsibility should be determined with Responsibility Based Budgeting.

And then, you offer people and businesses Tax Payment Choice in order to provide them with the best suited means to meet their tax obligations, and in a way that lowers their tax burden.

JK

Schematic Diagrams Showing How to Balance the Budget with Tax Payment Choice

September 27, 2009

It seems to me that at some point in the year, we should be able to just quit paying taxes for a period of time, and declare a tax holiday every year.  If you consider the Taxpayer to be the funding source last resort and offer Tax Payment Choice, you can.   Below is a schematic representation of how to do that.

Diagram #1 – The Status Quo.

Schematic representation of comparing budgeted revenues to budgeted expenditures.  We now have a deficit.

Schematic diagram of current government budget funding model

The Status Quo - Schematic diagram of current government budget funding model

Diagram #2 – Effectively Accelerated Revenue Collections.

Schematic representation showing Tax Payment Choice, or a variety of options for taxpayers to meet their tax obligations.

Proposed accelerated government budget funding model that will result in the stabilization of public services and allow for an annual tax holiday.

Proposed accelerated government budget funding model that will result in the stabilization of public services and allow for an annual tax holiday.

Option #1.  Government/community collaboration.

Government borrows the resources.   An example of this is the Volunteer Fire Dept. where government borrows the labor (e.g., fire fighters) to put out fires.  Another example is the Adopt-A-Highway program where government save taxpayers  $million by utilizing volunteers or prisoners to pick up roadside trash.  This reduces of eliminates the expenditure of tax money, along with the need to collect tax money.

Option #2.  Supplemental revenues from business/government partnerships.

Businesses can be charitable & generous all year long if they can make a profit from their charitable generosity.

Businesses sell goods and services, with a percentage of the proceeds applied to the budget as revenues.  An example of this is the fundraising in schools, where school children compete with local businesses because many school programs are not fully funded in the school budget, thereby undercutting the local businesses tax base.

The problem is that school programs are only partially “funded” in the budget.  Therefore, children are employed to peddle stuff to raise additional money and we call it “fundraising.”  (It all comes out of your wallet, so what is the difference?)

Since businesses have shelves full of merchandise they need to move, government should partner with their local businesses so that these businesses can make a profit.  Instead of sending tax money directly to the taxing authority, give taxpayers a choice of routing their tax payments through local businesses, with a percentage of the purchase price of goods and services being transacted to that taxpayer’s personal or business tax assessments.

Option #3.  Sponsorships.

Resources are donated to government.   If a business, organization, or person has already budgeted or purchased a resource that is suitable for public service, and is offered an incentive to provide it for public service, then tax money does not need to be spent for that resource.  In other words, the taxpayer is the funding source of last resort.

Option #4.  Status Quo

Taxpayers have the option to just keep sending their tax money to the government.

With Options 1, 2, & 3 you effectively accelerate the collection of tax revenues and achieve a budget surplus at some point in the year.  Having met budget revenue targets, government should  QUIT COLLECTING TAXES and just declare a tax holiday for the rest of the year.

Downloadable .pdf

https://paycheckeconomics.files.wordpress.com/2009/09/government-budget-funding-model_r2-09252009.pdf

JK

An Approach to Lowering the Michigan Unemployment Rate 1% (on about $20/week)

September 13, 2009

IT IS NOT THE JOB THAT IS IMPORTANT TO THE ECONOMY!!

IT IS THE PAYCHECK!!

In the state of Michigan, can 200 people do enough local shopping and generate enough local economic activity to create one more job?  If so, then Michigan has the potential to lower its unemployment rate 1%…..by shopping locally.   Below is an analysis of mostly graphs that demonstrates this.

https://paycheckeconomics.files.wordpress.com/2009/09/michigan-1-unemployment-rate-reduction-06-09_r0.pdf

For example, if you want to create jobs that pay $12/hour or $480/week, that factors out to $1.50 to $2,50 weekly, on a per capita basis, depending on the county in Michigan.  With a retail program where 10% of the sales price of some goods or services went to locally originated, paycheck creation fund, it would require that the average person spend $15 to $25 weekly at local businesses.

In Michigan, that would create approximately 50,000 jobs.

With this type of paycheck creation program, you can actually control the numbers of paychecks and jobs you create, depending on the wage you pay people.

MICHIGAN PER CAPITA SPENDING JOB CREATION This graphs depicts how many jobs can be created in Michigan from the sale of goods and services, on a per capital basis

To make this happen, you would need:

  • a transaction system
  • a reporting system
  • incentives for businesses to participate
  • incentives to motivate people to shop locally and create paychecks
  • businesses willing to participate by offering some goods and services for this paycheck creation program

And, most importantly…….

  • people who are willing to shop locally

Because, if people are note willing to shop locally, how do you create paycheck and jobs for the people who will spend them?

JK

RILOT…BILOT….AILOT… or in other words, SSILOT as a means of “Tax Payment Choice”

September 4, 2009

Swapping Spit with the Government

A lot of noise is made over the issue of school “choice.”   If you want to really reduce the tax burden on people and businesses, and help stabilize the funding of government services, then offer “Tax Payment Choice.”  (Given a choice, would you rather pay more or less?)

When government purchases goods and services, that is an exercise in swapping spit.  Government takes tax money from its Citizens. Government then uses that tax money to purchase goods or services from a business, and subsequently pays the business.  Then, government turns right around and taxes that money back in the form of taxes.

Since an exchange of goods, services, and taxes occurs between Government and Business, the Taxpayer could just keep their money and go shopping with it.   For some goods and services, that exchange could remain strictly between Government and that supplying Business, without collecting tax money from the Taxpayer.

What is your definition of a “tax”?

Consider a “tax” to be a “resource” that government takes from the community in order to provide a “resource” to the community.  A “resource” can be money, goods, or services.

So, why not make an allowance for the taken (tax) resource and the provided resource be one and the same?  Allow businesses and citizens to pay RILOT/BILOT/AILOT as a means of satisfying their tax burden by providing Stuff-and-Services-in-lieu of Taxes (SSILOT.)

RILOT – Resources-in-lieu of Taxes

BILOT – Barter in-lieu of Taxes

AILOT – Assets in-lieu of Taxes

Retail  Value Business Tax Credits @ Wholesale Business Cost

For example, a local government agency budgets for a computer.  The budgeted expense is $1000.   Allow a local computer business to provide that computer directly to the govt. agency and receive the budgeted, $1000 tax credit that can be applied to their business tax assessment, or business fee or license.

To earn this retail value tax credit of $1000, the computer store pays the $600 wholesale value for the computer.  The $400 difference is profit that is preserved by the business.

By paying Computer-in-lieu of Taxes, the business has provided the budget resource to the government agency for use in providing public services. Therefore, Government can eliminate that expenditure from the budget, and does not need to collect tax money from every taxpayer to finance that resource.

Another example of Tax Payment Choice might be Jury-Duty-in-lieu of Taxes.  Instead of sending a Citizen a $10 dollar check as compensation for a day of jury duty, offer that Citizen the following choices:

Choice #1 – Government sends the Citizen the $10 jury duty check as usual.  Citizen cashed the check.

Choice #2 – Citizen signs the jury duty check and sends it back to Government for that $10 to be credited to the Citizen’s personal (e.g., motor vehicle or property) tax assessment.

Choice #3 – Government credits that $10 jury duty compensation directly to the Citizen’s personal (e.g., motor vehicle or property) tax assessment.

With Tax Payment Choice, Government is not spending tax money, the Citizen has provided a needed service by performing jury duty, and every taxpayer in the community does not have to pay for it.

As a Taxpayer, if you are given a choice, would you rather pay more or less?

An Approach to Lowering the South Carolina Unemployment Rate 1% (on about $20/week)

August 26, 2009

IT IS NOT THE JOB THAT IS IMPORTANT TO THE ECONOMY!!

IT IS THE PAYCHECK!!

Can 200 people do enough local shopping and generate enough local economic activity to create one more job?  If so, then you have the potential to lower the unemployment rate 1%.   Below is an analysis of mostly graphs that demonstrates this.

For example, if you want to create jobs that pay $12/hour or $480/week, that factors out to $1.50 to $2.50 weekly, on a per capita basis, depending on the county in South Carolina.  With a retail program where 10% of the sales price of some goods or services went to locally originated, paycheck creation fund, it would require that the average person spend $15 to $25 weekly at local businesses.

In South Carolina, that would create more than 20,000 jobs.

With this type of paycheck creation program, you can create fewer or more jobs depending on the wage you pay people.  You could actually control the number of jobs you create.

https://paycheckeconomics.files.wordpress.com/2009/08/south-carolina-1-unemployment-rate-reduction-03-09_r1.pdf

To make this happen, you would need:

  • a transaction system
  • a reporting system
  • businesses willing to participate by offering some goods and services for this paycheck creation program
  • incentives for businesses to participate
  • people who are willing to shop locally
  • incentives to motivate people to shop locally and create paychecks

JK

It All Starts With the Paycheck.

August 21, 2009

Chicken or Egg Question:

Q: When you attempt to improve the “economy” , where do you start?

A: You start with the paycheck.

The local economy is basically the same group of people recycling the same money among themselves.  When you look at things such jobs, business revenues, taxes, and government services that exist in the local economy, you are basically talking about the same money just moving around in different ways.

JK