The Importance of Property Rights in Zimbabwe

This link demonstrates the impact that property reform has had in Zimbabwe. (HT: Art Carden)

The Law of Unintended Consequences Revisited

An article by Ellen Schultz in the Wall Street Journal today points out that wages above the payroll tax threshold have increased faster than wages below the threshold that are subject to the full payroll tax. Well, of course this is the case. The payroll tax encourages this. For example, assume that an employer is choosing to give a raise to two employees. Worker A earns $90,000. Worker B earns $110,000 (the threshold as of 2009 is $106,800). For every $1 increase in salary of Worker A, it will cost the employer $1.062. For every $1 increase in the wage for Worker B, it will cost the employer $1. It is clearly cheaper to give Worker B raise. Of course, both will probably be able to get a raise, but the raise of the Worker B will be larger. The payroll tax is regressive plain and simple. Am I in favor of increasing the threshold? With a caveat. It has never made sense to me why the poorest must bear this tax and the richest must not. The argument is the rich are not likely to use social security in retirement and therefore should not be obligated to pay beyond the threshold. However, what happens is that those closest to the threshold--but not above it--subsidize social security for the poorest. Why does it make sense that someone making $100,000 should subsidize the poor more than someone making $120,000 should not? I propose extending the payroll tax to all income earners as long as it is packaged with marginal income tax rates on the wealthiest are brought below 30%. That way the marginal income tax for the wealthiest would not be affected and social security would be more sound. I realize this is not likely to happen. Of course, my preference would be to reform social security to a fully funded program with private accounts. This is even less likely to happen any time in the near future.

Top Economics Blogs

A list of the top economics blogs in Wall Street Journal yesterday. My personal favorites:

Division of Labour
Marginal Revolution
Cafe Hayek
Greg Mankiw

On Discrimination

For the most part, I agree with Art Carden in dealing with discrimination issues.