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Tags: Tax | Revenue | Sets | Record | War on Poverty Waged War on Marriage | Lottery Proceeds Fall Short | Loss of Leisure Doomed RadioShack

Tax Revenue Sets Record; War on Poverty Waged War on Marriage; Lottery Proceeds Fall Short

By    |   Sunday, 15 February 2015 06:44 PM

Insider Report

Headlines (Scroll down for complete stories):
1. Federal Revenue Sets New Record — But Deficits Remain
2. WSJ: Loss of Leisure Doomed RadioShack
3. War on Poverty Waged War on Marriage
4. N.Y. Woman Barred From Kuwait Airways for Israeli Passport
5. State Lotteries Real Proceeds Disappointing
6. Illinois Now High in Cigarette Taxes — and Smuggling

1. Federal Revenue Sets New Record — But Deficits Remain

For the first time ever, federal tax revenues have topped $1 trillion for the first four months of a fiscal year.

From the beginning of October 2014 through January of this year, the federal government took in $1,046,224,000,000, according to the Monthly Treasury Statement.

But the government still managed to run a deficit in the first four months of fiscal 2015.

Each month, the Treasury publishes the federal government's "total receipts," including revenue from individual income taxes, which account for nearly half of all receipts, corporate income taxes, social insurance and retirement taxes (chiefly Social Security and Medicare taxes), unemployment insurance taxes, excise taxes, and customs duties.

The $1.046 trillion-plus collected through January breaks the record for the first four months of a fiscal year, which was $960 billion in the four-month period from October 2013 through January 2014.

Receipts so far in fiscal 2015 range from $191 billion in November to $335 billion in December, when the government actually ran a surplus of $1.86 billion.

The federal department with the largest outlays during the four months was Health and Human Services, whose $355 billion in spending included $113 billion in grants to states for Medicaid. The department's total outlays for the full fiscal year are projected to top $1 trillion.

The second highest outlay was by the Social Security Administration, $312 billion, followed by the Department of Defense, $195 billion.

The smallest amount went to the Department of Commerce, $2.77 billion.

Other outlays included $14.9 billion for the Department of Homeland Security, $57.7 billion for the Department of Veterans Affairs, and $3.3 billion for the Environmental Protection Agency.

Interest on Treasury debt securities amounted to $133 billion over the four months.

Despite the revenue bonanza so far in fiscal 2015, federal outlays over the four months totaled $1,240,433,000,000 so there was a deficit of about $194.2 billion.

According to the Treasury report, the federal government had to borrow $203 billion from the public to meet its obligations so far in fiscal 2015, and expects to borrow more than $654 billion over the full fiscal year.

Editor's Note:


2. WSJ: Loss of Leisure Doomed RadioShack

There's an interesting take on the recent bankruptcy filing by RadioShack — Americans over the decades lost the leisure time they needed to use the electronics company's products.

RadioShack began in a Boston storefront and was a 9-store chain in 1962 when it was acquired by Tandy Corporation, a Texas-based leather goods firm that was seeking to diversify.

Charles Tandy said at the time that the shorter workweek, increasing spare time, and "idle hands" offered opportunities in the electronics business.

"What Mr. Tandy couldn't know was that the real challenge his company would eventually face was the slow erosion of the very leisure time his company profited from by filling," Christopher Mims wrote in The Wall Street Journal.

The company's early success was based on citizens' band radio apparatus bought by hobbyists who had time to assemble and use the radios.

RadioShack gradually expanded into a retail giant selling a wide range of electronics equipment, including phonograph accessories, CD players, beepers, and mobile phones.

At one point in the 1970s, RadioShack was opening three stores a week and at its peak had 7,000 stores.

The expansion of Americans' leisure time began to end in the 1970s. In 1979, the average worker put in 1,687 hours a year, Mims noted. By 2007, that number was 1,868 hours — a difference of more than a month of extra work every year.

In the 1980s, RadioShack became a major player in the personal computer business. It was once the equal of Apple Computer, having released its TRS-80 in 1977, with an operating system written by a gentlemen named Bill Gates.

But RadioShack was gradually outpaced by other computer companies, and sales of parts to hobbyists continued to decline.

By the time the firm filed for bankruptcy protection on Feb. 5, RadioShack had about 4,000 company-owned U.S. stores, $1.2 billion in assets, and $1.38 billion in liabilities, according to Forbes, and listed between 50,000 and 100,000 creditors.

RadioShack was formerly "a hub of one of the many leisure-time activities Americans once enjoyed to a degree it's hard to fathom now, in a time when apps allow those of us with more money than time to outsource even the minutest details of our lives," Mims concluded.

"How did we arrive at a culture of disposable everything? The simplest answer is that we no longer have time for anything else."

Editor's Note:


3. War on Poverty Waged War on Marriage

The "War on Poverty" declared by President Lyndon Johnson in 1964 has had only a minor effect on poverty in America, but it has taken a major toll on marriage.

The so-called "Great Society" programs that grew out of the War on Poverty included food stamps, Medicare, Medicaid, Head Start, educational funding, housing assistance, and others.

"Ironically, the Great Society legislation seemed to simultaneously both ignore — and hinder — the most effective antipoverty program: marriage," Devon M. Herrick writes in a report from the National Center for Policy Analysis (NCPA).

"The War on Poverty and many of the Great Society programs that grew out of it created perverse incentives to forgo marriage among those who are already poor," because the tax penalties that accompany marriage take a bigger bite out of lower income couples' budgets.

Around 1970, about 84 percent of native-born 30-to-44-year-old Americans were married. By 2007, the percentage had dropped to 60 percent. For those without a college degree, it dropped to 56 percent, and for black women, to 33 percent.

Many of the Great Society programs are means-tested, and financial penalties kick in when couples get married.

Herrick cites the example of a young couple living together out of wedlock who each earn $23,340 a year, twice the poverty level for an individual. If they married, their combined income would rise from 200 percent to nearly 300 percent of the poverty level for a family of two.

This could have a profound effect on their eligibility for a range of benefits, including food stamps.

"As a result, this young couple who might otherwise marry may decide they cannot afford to," notes Herrick, a senior fellow with the NCPA.

If the couple had a child together and married, they would suffer an estimated penalty of $2,857 per year in higher taxes. But if the mother remained single and reported only her own income, she would qualify for $1,800 more in annual food stamp assistance than she could if she were married.

As to why marriage is an anti-poverty tool, Herrick cites a report from the National Marriage Project at the University of Virginia that states: "Marriage is a wealth-generating institution; married couples create more economic assets on average than do otherwise similar singles or cohabiting couples."

Herrick concludes that as a result of marriage penalties related to the War on Poverty programs, "many moderate-income — and middle-income — couples will decide marriage is a luxury they cannot afford."

FOOTNOTE: The proportion of Americans living in poverty today is about the same as it was in 1966, two years after the War on Poverty began.

Editor's Note:


4. N.Y. Woman Barred From Kuwait Airways for Israeli Passport

A New York woman has filed a discrimination lawsuit against Kuwait Airways after she was barred from boarding a flight because she has an Israeli passport.

Iris Eliazarov came to the United States when she was 11, has lived here for 15 years and has a Green Card, the Daily Forward reported.

Eliazarov and her husband David Nektalov, a U.S. citizen, bought tickets from a travel agent for a Nov. 1 Kuwait Airways flight from New York to London.

But when Eliazarov showed her Israeli passport at New York's John F. Kennedy Airport, she was not allowed to board the plane. A Kuwaiti law prohibits Israeli citizens from flying on Kuwait's flagship airline, the New York Daily News reported.

Nektalov was permitted to board the flight, but his wife, who is pregnant with her fifth child, had to buy a ticket on another airline.

"I take strength from the experience of Rosa Parks," Eliazarov said in a sworn statement related to her lawsuit.

"She became famous for her principled stand. This experience has awakened the nightmare of the experience of the Jewish people in Europe in the last century."

Her suit maintains that the airline's policy violates state and federal civil rights laws.

A lawyer representing the airline said the suit has no merit because the policy is based on citizenship, and a Muslim with an Israeli passport would also be barred from flying on Kuwait Airways.

"He then had the audacity to compare the policy of Kuwait — a country saved from Iraqi invasion by U.S. troops in 1991 — to the U.S. prohibition on doing business with companies in Iran," the Daily News observed.

Nektalov told the News: "I didn't think discrimination like this could exist in America, in New York City. If they want to operate here they have to obey our laws."

Editor's Note:


5. State Lotteries Real Proceeds Disappointing

America's state lotteries bring in more than $60 billion a year in sales, but only a third of that money actually goes to education and other programs they are designed to benefit.

Total sales were $62.3 billion in fiscal 2013, according to the latest U.S. Census figures.

But $38.7 billion was distributed in prizes, and $3.2 billion went to administrative costs, leaving just $20.3 to fund state programs.

Those programs differ from state to state. Florida and West Virginia are among the states that earmark lottery proceeds for education, while proceeds in Pennsylvania go to senior citizens and in Iowa to help veterans.

New York had the most lottery sales in 2013, more than $7.6 billion. Florida was second with $4.7 billion, but only $1.4 billion in proceeds were available to the state. Massachusetts was third with $4.5 billion, but the state gave away $3.5 billion in prizes, leaving just $947 million in proceeds.

California was fourth with $4.4 billion, followed by Texas with $4.1 billion.

Seven states have no state lottery: Alabama, Alaska, Hawaii, Mississippi, Nevada, Utah, and Wyoming.

Among states that do have a lottery, North Dakota had the least in revenue, $26 million, and just $8.2 million in proceeds.

State lotteries are regressive in the sense that poorer Americans are most likely to spend money on lottery tickets.

A study by the South Carolina Education Lottery found that households earning under $40,000 accounted for 28 percent of the state's population but 45 percent of frequent lottery players, while people without a high school diploma comprised 8 percent of the population and 21 percent of frequent players.

The Stop Predatory Gambling website pointed to a report showing that the poorest counties in North Carolina spend the most on the state lottery.

And a study several years ago disclosed that at that time, households earning less than $13,000 a year were spending 9 percent of their income on state lotteries.

Editor's Note:


6. Illinois Now High in Cigarette Taxes — and Smuggling

Illinois raised its tax on cigarettes by $1 to $1.98 a pack in the middle of 2012, and over the next year cigarette smuggling soared from 1.1 percent of all smokes consumed to 20.9 percent.

Cook County, home of Chicago, has also boosted its cigarette tax from $2 to $3 a pack, and the Chicago municipal rate rose from $0.68 to $1.18, meaning that since January 2014 taxes on cigarettes in Chicago totaled $6.16 a pack, the highest combined rate in the country.

The Tax Foundation each year issues a report on cigarette smuggling based on data from the Mackinac Center for Public Policy, a Michigan think tank. The latest report uses data from 2013, and shows that smuggling accounts for at least 20 percent of consumption in 15 states.

The highest state tax rate is in New York, $4.35 a pack, up 190 percent since 2006, and most cigarettes in the state, 58 percent, are smuggled, up from 35.8 percent in 2006. New York City imposes an additional $1.50 tax, bringing the total tax to $5.85 a pack.

"One consequence of high state cigarette tax rates has been increased smuggling as criminals procure discounted packs from low-tax states to sell in high-tax states," the Tax Foundation observed.

The second-highest percentage of smuggled cigarettes is in Arizona, as it was last year — 49.3 percent, down slightly from 51.5 percent in 2012.

Washington State, where the tax is $3.025, has moved up to third with a 46.4 percent smuggling rate, surpassing New Mexico at 46.1 percent. Next is Rhode Island, where the tax is $3.50 and the smuggling rate is 32 percent.

Several states have a negative smuggling rate, meaning a percentage of cigarettes sold there are sent to other states.

The highest outbound smuggling rate is in New Hampshire, -28.6 percent. The state has a $1.68 per pack tax, but neighboring Massachusetts has a $2.51 tax and in Vermont it's $2.63.

The lowest tax is in Missouri, $0.17, where the smuggling rate is -13.7 percent, and in Virginia, which has a $0.30 tax and the smuggling rate is -22.6 percent.

There is also a federal excise tax on cigarettes, while some municipalities impose a tax and most states charge a sales tax on top of the excise tax.

The report does not include smuggling data from Alaska, Hawaii, North Carolina, or the District of Columbia.

The Bureau of Alcohol, Tobacco, Firearms and Explosives estimates that some $10 billion in state and federal tax revenue is lost each year due to smuggling, showing that, as the Tax Foundation points out, "public policies often have unintended consequences that outweigh their benefits."

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Editor's Note:


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Insider ReportHeadlines (Scroll down for complete stories):1. Federal Revenue Sets New Record - But Deficits Remain 2. WSJ: Loss of Leisure Doomed RadioShack 3. War on Poverty Waged War on Marriage 4. N.Y. Woman Barred From Kuwait Airways for Israeli Passport 5. State...
Tax, Revenue, Sets, Record, War on Poverty Waged War on Marriage, Lottery Proceeds Fall Short, Loss of Leisure Doomed RadioShack, N.Y. Woman Barred From Kuwait Airways for Israeli Passport, Illinois Now High in Cigarette Taxes
Sunday, 15 February 2015 06:44 PM
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