In today's episode, I take the normal look at the financial markets, with stock falling primarily from brewing trade war with China.
But the big news today was the Texas Comptroller Glenn Hegar revising the Certification Revenue Estimate substantially up for the current 2018-19 budget period, such that instead of a $94 million surplus at the end of FY 2019 there is now an expected $2.67 billion surplus. This is one of the many benefits of the Texas Legislature passing conservative budgets to keep taxes lower than otherwise during the last 2 sessions resulting in faster economic growth and even more tax revenue. While many people will want to spend this additional taxpayer money, and there will likely be a need for a supplemental bill to fund expenditures above appropriations from last session for the $1.8 billion delayed funding to the State Highway Fund and some amount for Medicaid, the focus should be on sustaining a conservative budget and prioritizing extra dollars for tax relief. Options could be to buy down the school M&O property tax over time until it is eliminated or even cutting the business margins tax until elimination.
More money in the hands of Texans in the productive private sector is how people become more prosperous while government simply functions to preserve liberty.
The Military Order of the World Wars approached the Texas Public Policy Foundation in 2014 about having someone present on the benefits of a free enterprise system at their Southwest Youth Leadership Conference aboard the U.S.S. Lexington in Corpus Christi. I have presented to many top-notch, high school students from across Texas each summer since then to discuss the importance of the free enterprise system, especially how it relates to the labor market with the use of a minimum wage game (spreadsheet for the game here).
Watch the video above of the presentation in 2016, which provides further explanation of the game and shows the wage negotiations between students.
The game has been expanded upon over time since first created with Dr. Mark Frank while we both taught at Sam Houston State University. The game is composed of multiple sessions where some of the students are employers and others are workers.
Students learn how a labor market works through negotiations between employers and workers in a free enterprise system and in a system with a government-mandated minimum wage. The game shows that although there’s a higher average wage in a system with a minimum wage, there is also higher unemployment, especially for low-skilled workers that the government is trying to help. Students learn how workers are best able to demand a higher wage with less unemployment by increasing their productivity through education, technical skills, and on-the-job training, which access can be limited when there is a minimum wage.
Ultimately, the game helps students to start thinking like an economist when considering how the free enterprise system works and how government intervention will distort those outcomes. It’s fantastic to see the light bulbs start turning on throughout the game as students realize the costs of a minimum wage.
For the last three years, I've worked with SMU's O’Neil Center for Global Markets and Freedom to present my unit in their series “Teaching Free Enterprise in Texas” that teaches high school teachers in Texas about key economic principles. This series of publications are compliant with Texas' TEKS (state standards) and include the benefits of the free enterprise system with regards to international trade, fiscal policy, and other important areas. My unit on “Labor Market Economics” includes the minimum wage game that I've presented to hundreds of public school teachers statewide.
The best path to prosperity is through free enterprise, individual liberty, and personal responsibility—the pillars of improving everyone’s well-being that we promote at the Texas Public Policy Foundation. Unfortunately, these are concepts that many students never learn. With the Foundation’s outreach to high school students on these important principles, there’s a better chance that many will think like an economist and help provide a brighter future for all.
While some say that if we have a trade deficit we win or if we have a trade surplus we lose, that's the wrong way to think about trade when everyone benefits from the exchanges that result in higher productivity and lower prices. Watch to learn more. Read my paper when you have a chance as well.
Let People Prosper Episode 10: Stocks Up in Q2, Higher GDP Forecasts, Price Inflation at 6 Year High, & What Is Economics?
Please sign-up for my channel Vance Ginn Economics to watch this full episode and more.
In today's episode, I discuss how stocks look to end Q2 2018 up after a rocky quarter, projected economic growth rates continue to go up, price inflation reaches a 6-year high, and economics is the study of how people act and interact to satisfy their desires within institutions given scarce resources. Enjoy!
The result of taxing something is that you will get less of it. That's simple, correct? But the details of how to best collect taxpayer dollars to fund limited roles for government gets complicated. I try to break this down simply at the video above.
According to the Texas Comptroller, property taxes and sales taxes are both regressive. Any time you have a flat tax rate, higher income people will pay a lower share of their income on taxes than lower income people. But the costs of property taxes are substantial, with businesses and individuals each paying about half for school M&O property taxes. Sales taxes, on the other hand, allow people the freedom to decide how to spend their money, don not have to tax real estate (capital formation and accumulation--keys to wealth of nations), and are transparent. Individuals pay about 60% of sales taxes collected while businesses submit about 40%, but we know that businesses don't ultimately pay taxes because they just pass those costs along to consumers (us) in the form of higher prices, lower wages, and fewer jobs available over time.
As noted in Episode 8, I have long supported the elimination of property taxes in Texas. There are multiple ways to do so by possibly swapping them (sales tax rates are lower now because of expanded economic growth since these rates were calculated) with a reformed sales tax and/or buying them down over time. The key is to limit government spending so that the burden of government can be reduced.
We know that sin taxes (e.g. carbon tax or cigarette tax) or tariffs are poor forms of taxation. Income taxes are also a terrible form of taxation. Check out the table below that provides information for the 9 states without a personal income tax and the 9 states with the highest personal income tax rates. Those states without a personal income tax blow the others out of the water regarding multiple economic indicators.
Of course, the key is limiting spending. Let's move to a tax system with just a sales tax for more economic prosperity.
I talk about the increased trade uncertainty by the Trump administration influencing the stock market today, TPPF's daily newsletter called The Cannon (sign up here), and the vastly different costs of living in each state leading to different state poverty rates and the question of whether there should be a federal minimum wage (Answer: NO).
Stay tuned for the next episode!
Congress and state legislatures shouldn't shackle prosperity with a carbon tax because it's based on flawed assumptions and results in costly economic and environmental effects.
You can read my work on this at TPPF research paper here, TribTalk op-ed with Bob Murphy here, and Real Clear Energy op-ed with Jonathan Williams here.
Stay tuned for the next episode!
In this episode, I talk about the concept of opportunity costs and how we must sacrifice things to satisfy our desires. We work to consume, but an artificial minimum wage set by government distorts the labor market and hurts low-skilled workers the most.
Find the article on DC here and the average tipped wages from BLS here.
In each episode, I will discuss how we act to satisfy our desires given scarce resources around us withing a number of institutions. This episode is on how trade between people, whether domestically or abroad, supports prosperity and how barriers to trade, such as tariffs, reduce prosperity.
Review my paper on the topic here.
You can find each of these at my YouTube channel: Vance Ginn Economics. Please subscribe.
In each episode, I will discuss how we act to satisfy our desires given scarce resources around us withing a number of institutions. This episode is on the Texas labor market and how it compares with other states. The Texas model of limited government works.
Review my presentation on the topic here.
Ph.D. Economist at the Texas Public Policy Foundation. Blog posts are publications by the author.