The Economy Today: Taxing Times

A roundup of national and regional economic headlines

As a proposed surtax on top earners becomes the latest political football of the health care debate, The Wall Street Journal reports today on how growing income inequality is actually weakening revenues for one of the government’s core entitlement programs. “Executives and other highly compensated employees now receive more than one-third of all pay in the U.S,” the paper reports, and their pay is increasing faster than the salaries of other Americans. But because income taxed for Social Security is capped at slightly more than $100,000 per individual, the shift lowers that program’s effective total tax rate. “Compensation that isn’t subject to the portion of payroll tax that funds old-age benefits now represents foregone revenue of $115 billion a year,” according to the WSJ.

The New York Times, meanwhile, reports on how the recession has hammered American manufacturers. Industrial production has fallen 17 percent, and manufacturing now accounts for less than 14 percent of total economic activity. The fate of an Illinois factory owner who recently closed up shop is used to illustrate the theme, and the story gives ample space to his explanation for his company’s failure—he believes the Chinese government’s manipulation of its currency did him in, and wants the Obama administration to respond with a tariff on Chinese goods—but doesn’t really subject it to scrutiny.

The NYT also notes that retail vacancies are on the rise in New York, even in some of Manhattan’s toniest shopping districts.

On the West Coast, the Los Angeles Times reports that California lawmakers have finally reached a budget deal, and while the Governator is smiling, the results aren’t pretty. “[T]he proposal would reshape some aspects of government in California, significantly scaling back many services that have been offered to resident—particularly the elderly and the poor—for years,” the paper reports. The news comes on the same day that the state’s public pension fund is expected to report an annual loss of nearly $57 billion, or almost one-quarter of its portfolio.

Regional papers continue to track the flow of stimulus dollars, and to take part in the debate about its success. The Tennesseean, which reported over the weekend that the federal program has done little to stimulate job creation in its home state, editorializes today that it’s too early to pass judgment. In Indiana, television station WAVE reports on its Web site that $164 million in stimulus funds will help fund affordable housing, with the cash substituting for tax credits due to tight credit markets. In Wyandot County, Ohio, stimulus money will help pay for the first-ever sewer system in the community of Wharton, according to The Progressor Times. And in Kansas, students at Pittsburg State University will pay $50 less in tuition than they otherwise would have, according to an AP report published by the Kansas City Star.

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Greg Marx is an associate editor at CJR. Follow him on Twitter @gregamarx.