Krugman: Three Charts on Secular Stagnation

[ProSense]

10. Interesting

Last edited Wed May 7, 2014, 03:13 PM - Edit history (1)

"1) raise the tax rate on investment income to the same level as that on labor"

Raising the tax on investment income will increase the revenue stream. That's a good thing. After all, there are a lot of underfunded programs that would benefit. For example, the health care law did just that as part of its financing. It increased the payroll tax for high income earners and taxed investment income.

Net Investment Income Tax

A new Net Investment Income Tax goes into effect starting in 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. The IRS and the Treasury Department have issued proposed regulations on the Net Investment Income Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers.

Additional Medicare Tax

A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Department of the Treasury have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers.

http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

http://www.democraticunderground.com/10024391415

"2) Reduce the work week to 32 hours and/or raise the overtime premium to 2x rather than 1.5x."

Altering the work week would be a major change, and I agree Realistically, I don't see it happening in the near future. Addressing "overtime" is possible.

President Obama just expanded the eligibility criteria via executive order.

How Obama's Reforms To Overtime Law Will Change People's Lives
http://www.democraticunderground.com/10024660707

" 3) Halve the number of student visas then halve the number of H1B visas four years later. The STEM classes will be filled by citizens who will then have the training to do those jobs. "

Agree. Anything that will help to increase the labor force is a good thing. Of course, creating more jobs will also help. There was some good news related to wages and H-2B visas earlier this year.

The U.S. Court of Appeals for the Third Circuit ruled yesterday that the Department of Labor’s H-2B visa wage methodology regulation is valid, handing a defeat to a coalition of employers who want to keep wages low for employees in forestry, seafood, hospitality, landscaping and other physically demanding jobs. In Louisiana Forestry Association v. Secretary, U.S. Department of Labor, the court held that the Immigration and Nationality Act gives the Department of Homeland Security the authority to rely on the Labor Department’s decisions about whether U.S. workers are available for jobs that employers want to offer to foreign workers, and whether U.S. workers will be adversely affected if foreign workers are admitted to the U.S. to do particular jobs.

http://www.democraticunderground.com/10024450902


Wages have been falling because the size of the workforce is growing (creating a labor surplus). In 1970, few women and people over 65 were in the workforce. The gains in women's wages can't entirely mitigate for the drop among men. This is also one of the reasons for the big demand for college... because of the surplus of labor, there's nothing else for 18 year olds to do.

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Raising the minimum wage is good because it improves the lives of people at the bottom end of the labor ladder, but I don't see it as a panacea for the economy generally.

Again, these are structural things that aren't going to impact wage growth. There need to be jobs, and increasing the minimum wage will begin to reverse the gap in wages created over the last few decades.