Explaining Southern California's economy

Are U.S. households really paying an 'Apple tax?'

FRANCE-TECHNOLOGY-COMPANY-APPLE

AFP/AFP/Getty Images

The Apple iPhone 5. Does getting one mean that you're paying the equivalent of a tax to Cupertino?

At Reuters, Chris Taylor argues that they most definitely are:

The analogy of an Apple tax might sound facetious, but think about it. Median U.S. household income was $50,054 in 2011, according to the Census Bureau. A sizable chunk of that is getting diverted to Apple headquarters in Cupertino.

Remember, this is not something that consumers are being forced to pay. They are dipping willingly into their own pockets, because they're essentially slaves to the devices.

Taylor quotes an analyst who expects Apple-related spending to rise to over $800 a year per American household by 2015. How does that compare with other taxes?

Well, if the median household has two parents filing joint tax returns, and two kids, it's paying about half the 2015 "Apple Tax" each month in federal income and Social Security tax: close to $450. So households may be spending a lot on the Apple ecosystem of products — from iPhones to iPads to iTunes — but a lot more of their money continues to go to the government. 

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Why we should worry less about income inequality and focus on consumption

Consumption U.S.

AEI

Per-capita real consumption for both the bottom and top income quintiles has been trending up. AEI economist argue that this is more important than income inequality.

I had another great conversation with Aparna Mathur of the American Enterprise Institute last week (we last talked about a worrying "labor mismatch" in the U.S.). AEI is generally regarded as a conservative think tank, but regardless of your politics, it's been putting out some interesting research lately, and Mathur is an excellent explainer when it comes to labor and tax issues.

With Kevin Hassett, also of AEI, she's authored a new paper, titled "A New Measure of Consumption Inequality." Here's a sample:

Economists have widely acknowledged that consumption is a better measure of economic welfare than income. In general, individuals are better able to smooth consumption rather than income over their lifetimes, making consumption a more informative indicator in the study of inequality. Unlike income, consumption remains relatively steady throughout life since individuals borrow during years with low income and save in high-income years. Using consumption as the relevant measure of inequality, most studies conclude that, contrary to popular belief,inequality has remained fairly steady over the past thirty years. Our study retains the focus on consumption inequality and arrives at a similar conclusion. 

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Storify: The Brown tax proposal — and the reaction!

I've been Storifying the euro crisis, so I thought I'd use the tool to capture some Twitter commentary in reaction to California Gov. Jerry Brown's new tax proposal. Were people surprised that Brown wants to dodge the Legislature, raise taxes, and go straight to voters via the ballot initiative process. They were not. The Twitterverse had additional insight, as well.

Follow Matthew DeBord and the DeBord Report on Twitter.

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Do the math: Find out if you're in the '1 percent'

Occupy LA

Eric Richardson / blogdowntown

Those participating in Occupy Los Angeles march toward City Hall.

Ah, the Wall Street Journal. It serves capitalism, but it's also a newspaper, so it wants to jump on trends. Add some nifty, number-crunching online technology to that and you get this calculator, which will swiftly tell you just where you fall in the U.S. income distribution

Give it a try! But don't get hung up on income! Remember that much of the top 1%'s wealth comes from capital gains, not wage income. So you might be looking pretty good as a household if you bring in $200,000 per year and rank in the 94th percentile. But remember that you're then taxed at the 28 percent IRS rate, while a true 1%er — which I define as a member of the U.S. financial elite, making money from money rather than from labor — is seeing their capital gains taxed at 15 percent.

There are plenty of people in the U.S. who think they're rich, but they aren't. And even if they're in the 1% as set by earnings ($506,000 annually), the gulf between you and a 1%er who makes the same off less heavily taxed investment and divident income is vast.

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Be thankful for expensive gas — and a gas tax?

Matt Yglesias makes a useful point about gas prices that I think applies to all of us in car-mad Southern California: 

It’s important to see that under present circumstances, anything that succeeds in promoting robust economic recovery would raise the price of gasoline….After all, unemployment’s 9.1 percent. If it fell to 7 percent, that would mean a large increase in the share of Americans who are commuting to work on a daily basis. And the United States of America is both a large country, and one in which commuters consume an unusually large quantity of gasoline as they go about their business. Consequently, 2.1 percent of the American workforce shifting from unemployed to employed means a meaningful increase in the consumption of gasoline.

The global oil markets are complex and don't always make sense at the pump. The price of oil falls, but the price of gas remains high. Or at least higher than we think it should be. I won't even get into the various issues involved, which range from refining capacity to OPEC production planning. There's a reason why some economists spend their entire careers looking at this single commodity. 

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