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Plus: California reparations bills drop, the Biden administration continues the war on gas stoves, and D.C.'s rising crime rate.

"The reduction of the US credit rating is overdue in light of the long and enthusiastic abandonment of fiscal soundness in Washington DC, recently abetted by monetary policy authorities." ~ Peter C. Earle

Expanding federal housing tax credits would be the opposite of evidence‐​based policymaking.

The evidence does not support the view that credit card rewards are regressive.

Even if playing with house money that eventually
sunsets the program, Louisiana legislators should reject allowing the state's
Motion Picture Investors tax credit to bleed, even if reduced fashion, the state for another dozen years.

In this session, legislators have the option of
extending the life of the exception past its scheduled end-of-fiscal year 2025 sunset.
HB 562 by
Republican Speaker Clay Schexnayder
would give it another decade of life after that, and originally would have
freed it from a $150 million annual cap on issuance although the $180 million annual
cap on redemption would remain.

The credit allows for reimbursement of expenses in
film or television production anywhere from 25 to 55 percent of expenses from a
base amount of $50,000 to $300,000 on state income taxes; alternatively, these
may act as a refundable credit at 90 cents to the buck (minus two percent as a
transfer fee). Almost all monies paid out occur through this route, as according
to the latest
data nearly 97 percent goes to corporations, and overwhelmingly to out-of-state
entities that have minimal Louisiana income tax liability. Simply, it's taxpayer
dollars siphoned directly into the pockets of filmmakers, only some of which
makes it back into the state's economic stream.

And not very much at that. Data show Louisiana
taxpayers take a bath on this, even as supporters throw out figures about how
much revenues and jobs the industry generates. The fact is, it loses
77 cents (another estimate puts it closer to 95 cents) on the dollar, with
each job generated costing about $13,300 each (and the methodology suggests
this exaggerates the actual full-time employment, making each job cost to
taxpayers more like $25,000). Nonetheless, this vampire staggers on as special
interests jealously guard the transfer of taxpayer wealth to them and have mesmerized
a number of legislators who should know better to back them.

This was apparent at the April House Ways and Means
Committee hearing,
with dozens of beneficiaries of taxpayer largesse and their representatives in
attendance. Schexnayder testified for it and offered up minor amendments, most
prominently putting a FY 2035 sunset back on. It garnered unanimous
support, which appeared unusual particularly as one committee member in support,
GOP state Rep. Philip
DeVillier, had a bill cued that would have restricted the program and
extensively questioned testifiers, and another, Republican state Rep. Tanner Magee –
Speaker pro tem and a Schexnayder ally – mentioned he felt threatened by
intense industry lobbying but would vote for it.

But when the House dealt with the bill last week,
it seems something had been up. There, DeVillier offered amendments that would
scale back the transferability of the credit by 7.5 percent through the sunset
date, which now only can happen to the state as previous changes to the law
discontinued transfers between individuals and corporations after FY 2017. This
would allow for the backlog of claims that take years for application after
issuance to be turned in and paid off. (Even if terminated on schedule, paying
off will continue for years.)

In other words, DeVillier's amendment – which
could be seen percolating during his committee questioning – gradually ends the
cash rebate which constitutes nearly all of the credit's cost and makes it a
more defensible credit only on tax liability (which in the film business often
wouldn't be owed anyway because for films income generated from within state
boundaries less deductible expenses often is less than zero). Further, it
disallows banking credits for future use.

It is an inspired way to wring out its most
objectionable feature over time, yet still trigger the eventual neutering and
termination while placating a significant number of usually fiscally conservative
Republicans who throw out the window principles when the bright lights of
Hollywood shine in their eyes, by forcing them to acknowledge, as DeVillier
noted during floor debate, that the program was established on an intent to
wean itself from taxpayer assistance after industry establishment. Even more interesting,
Schexnayder apparently acquiesced to this arrangement, which only could happen
if a large portion of legislators – obviously Republicans as seldom ever has a
Democrat voted against this giveaway – signaled they wouldn't support the bill without
it.

The amendment
was added on without objection (despite some grumbling from economic illiterates
such as Democrat state Rep. Mandie Landry,
who alleged no business makes money without government subsidization and admitted
she couldn't understand the economic arguments against the bill), and the bill
passed with only 23 Republicans voting against. Several who voted against
also voted for an amendment, turned back by the body, that would have had
subsidized films list in their credits the amount of subsidy.

Things became still more interesting days later
when Magee offered an amendment during debate of HB 1, the
general appropriations bill, that would provide $51 million for early childhood
education, essentially to replace temporary federal funding going away, if repealing
the entire film tax credit. It was the only amendment to make it onto the bill
and hypocritically
opposed by almost every Democrat, who had caterwauled the absolute
necessity of replacing the federal money with state money yet voted against it to
allow state dollars to make more movies.

That loomed only symbolically, as no move is afoot
to repeal the credit immediately. However, HB 562 in its present form will have
a delayed but growing salutary fiscal effect and is another way to skin the cat.

Nonetheless, even if it puts the program in far
better shape than at present if passed, the bill still should be defeated. The industry
has known for years about the sunset in just over two years and has had three
decades to build itself to the point that it can attract makers of movies, and
if it hasn't done it by now, it's not likely ever to. Even as weaning has its
benefits, it's a stay of execution where its beneficiaries gain time to work in
the future to prevent its needed extinction and to restore refundability.

Any legislator who calls himself a "fiscal
conservative" or "fiscal hawk" should ask himself two questions on this issue:
if the benefits are so great should not the state remove the caps and sunset
and argue for unlimited 100 percent refundability, and if he truly believes that
government should subsidize the private sector in this fashion then should not
the state enact programs like this for every industry, vastly expanding
government and tax burdens, such as in manufacturing widgets? If unable to
answer the affirmative to both, ideological consistency and adherence to
principle demands a vote against.

Adam N. Michel and Vanessa Brown Calder


First introduced by Republicans as part of the Contract with America, the child tax credit (CTC) has won wide bipartisan support as an income‐​transfer program to fight poverty, a subsidy to middle‐​class families, and a tool to boost declining fertility, yet it is poorly suited to meet each of these goals.
Republicans doubled the CTC in their 2017 tax reform, and Democrats temporarily expanded it again in their 2021 COVID package, increasing the dollar value and removing the de facto work requirements. Republicans and Democrats agree that the CTC should be larger, the only disagreement is on how much the credit should be enhanced. There are bipartisan efforts in the House and the Senate to expand the CTC, while some states have moved forward with their own child tax credit programs.
The CTC is a costly transfer program for taxpayers with kids who do not need government handouts and who do not meaningfully change their fertility decisions in response to larger payments. As an anti‐​poverty program, the CTC is poorly targeted, and without income requirements, regular no‐​strings‐​attached payments from Washington are counterproductive for the most vulnerable families.
There are better ways to support families by reducing the regulations and other barriers that increase the costs of core child‐​related goods and services. Without substantial deregulation, increasing direct government payments to families will simply lead to higher prices rather than expanded supply.
By making payments through the tax code, the CTC allows Republicans to support spending they would otherwise oppose since tax credits operate outside the annual Congressional appropriations process. Democrats support the CTC because they recognize it for what it is, a subsidy program administered through the tax code. Congress should repeal the CTC and use the savings to lower tax rates for Americans broadly. It certainly should not be expanded.
History of the CTC
The child tax credit was first introduced in 1997 as part of the Taxpayer Relief Act. It quickly increased from $400 to $1,000 while lowering the earned income requirement from $10,000 to $3,000. The credit was further expanded in 2017 as part of the Tax Cuts and Jobs Act, which increased the credit to $2,000 per child, lowered the earned income threshold, and raised the beginning of the income phaseout from $110,000 to $400,000 for married taxpayers ($75,000 to $200,000, single). The 2017 reform also eliminated the child and dependent exemption, which was more than offset by the $1,000 increase in the CTC for a taxpayer at or below the 25 percent income tax bracket (about $150,000). Along with a majority of the other changes enacted in 2017, the CTC and additional exemptions return to their previous values in 2026.
In 2021, the American Rescue Plan Act temporarily increased the CTC for just one year to $3,600 for children under 6 years old and $3,000 for children under 18 years old. The full credit was also made temporarily fully refundable by removing the earned income requirements, and half of the credit was delivered as advance payments directly into taxpayers' bank accounts each month. Figure 1 shows the maximum CTC amount from its introduction through 2026 for 0–5‑year-olds, including the scheduled reduction under current law.











Is the Child Tax Credit an effective subsidy?
The CTC provides a large subsidy to families with children. Unlike the earned income tax credit (EITC), cash aid (TANF), food aid (WIC, SNAP), and public health care (Medicaid and the Children's Health Insurance Program), the CTC is primarily a subsidy for middle‐ and upper‐​income Americans. As currently designed, the CTC is not primarily an anti‐​poverty program. Only 19 percent of child tax credit expenditures are claimed by the lowest quintile of income earners. Jacob Goldin and Katherine Michelmore find that 87 percent of filers in the bottom income decile of AGI are completely ineligible for the CTC, and "the majority of filers in the bottom thirty percent of the distribution are only eligible for a partial credit."
Arguments for expanding the CTC usually assume that the cost of raising a child has increased and affordability has broadly declined. Relatedly, some proponents worry that U.S. fertility is below the replacement rate and believe that expanding government subsidies will meaningfully increase women's lifetime fertility. Still, others focus on how larger income transfers could reduce poverty. The CTC is poorly targeted to meet each of these goals.
Poverty
Because the CTC phases in for filers with income over $2,500 at a 15 percent rate, the credit creates an incentive to work by adding a 15‐​cent subsidy to each additional dollar earned, until the full credit is reached. As is the case with the EITC, the work incentives are often partly or fully offset by the "income effect," under which the subsidy allows a worker to meet his material needs with fewer hours worked.[1] Expanding the dollar value of the credit will have income effects that at least partially offset the work incentive.
To better target the lowest income families, others propose permanently increasing the credit and eliminating the earned income requirement, as was temporarily done in 2021 during the pandemic. Proponents claim that such a permanent change would reduce child poverty by more than 40 percent. Such estimates fail to account for how newly eligible families will change their behavior.
Taking behavioral effects into account, Kevin Corinth, Bruce Meyer, Matthew Stadnicki, and Derek Wu estimate that the larger CTC without income requirements would lead 1.5 million workers to stop working (83 percent of whom would be the sole earner in the household). The net effect of expanding the CTC would reduce overall child poverty by 22 percent and would not reduce deep poverty (50 percent of the poverty line). Results from the Joint Committee on Taxation found that the expanded CTC would result in similar reductions in labor supply.
Corinth and Meyer estimate that any reductions in poverty from a larger CTC that is targeted at families without market income would come at a fiscal cost that is almost double that of other programs, such as food stamps. The CTC is neither an efficient nor an effective policy tool to reduce child poverty.
Cost of raising a child
Although Americans frequently cite affordability concerns as an obstacle to fertility, analysis indicates that family costs have not outpaced incomes and that the cost of raising a child has fallen, not grown, over time.
For example, Angela Rachidi compares family incomes to family‐​related costs and finds that family incomes have grown steadily since the 1980s and costs have generally not outpaced them. Instead, Rachidi suggests that family's increasing expectations around—and consumption of—various goods and services (home size, vehicle ownership, clothing) drive perceptions of affordability decline. Moreover, various measures of social support and community support have declined in ways that may make it more difficult to raise a family.
Economist Jeremy Horpedahl similarly finds that the annual cost of raising a child in the United States has fallen from 21.8 percent of median family income in 1960 to 12.6 percent of median family income in 2020 for two‐​earner families, with the 2020 figure constituting the lowest cost yet (Figure 2). For single‐​earner families, the annual cost of raising a child in the United States fell from 27 percent of median family income in 1960 to 23.7 percent of median family income in 2020.[2]











Some proponents of the CTC argue that the presence of children reduces a family's ability to pay and thus deserves an offsetting subsidy, regardless of whether the cost of raising a child is increasing or decreasing. While children do come with additional costs, so do many other decisions individuals and families make, such as living in a high‐​cost area for economic or educational reasons.
Lastly, subsidies could be counterproductive as they will tend to be captured as higher prices of child‐​related services without supply‐​side reforms to expand access. Although evidence indicates that family affordability is not broadly in decline, the price of core child‐​related goods and services could certainly be lower with regulatory reforms.
Fertility
U.S. fertility is below‐​replacement level and converging with the low fertility rates of other countries. Subsidies for families with children, including the CTC, have been proposed as one way to mitigate this decline. Such financial transfers or cash benefits are especially ineffective at reducing fertility decline.
A review of studies with experimental or quasi‐​experimental designs finds that financial transfers result in a short‐​term increase in births while leaving the long‐​term total unaffected. A United Nations working paper finds that financial transfers' "impact on completed fertility is rather small… Furthermore, the effects of financial transfers usually have the biggest influence on fertility of the low educated, low‐​income, or jobless for whom public transfers are of higher value."
As stated elsewhere, these low‐​income households rarely qualify for the CTC's middle‐ and upper‐​income benefit. The CTC is thus doubly ineffective at increasing fertility: not only do financial transfers have a small or insignificant effect to begin with—altering fertility timing rather than total births—but the CTC does not target the demographic that would be most influenced to increase their fertility behaviors in the presence of financial benefits. Targeting low‐​income households comes with other costs to labor force participation and more fundamental questions about the prudence of governments' involvement in fertility decisions.
A better way?
Although the CTC fails at many objectives, there are numerous options for state, local, and federal policymakers interested in supporting families and making family life easier. To increase affordability, reforms to housing, food, formula, and childcare policy should be enacted. To reduce stress, increase opportunity, and reduce the cost associated with buying a home in the "right" neighborhood, further reforms to educational choice must be adopted.
Parents typically have limited financial resources, but just as importantly, limited time. Enacting reasonable independence laws and reforming home supervision laws would reduce the time cost of parenting while providing growth opportunities for school‐​age kids. Overly burdensome car seat requirements, with little associated safety benefit, should also be reconsidered.
Adopting these reforms would do much more for parents and children than expanding the CTC. On the other hand, expanding CTC spending without deregulating the goods and services that parents demand would be counterproductive and regressive. Ultimately, Congress should repeal the CTC entirely.


[1] Incentives depend on whether a person is not working or working to begin with, and whether the worker's earnings place them on the phase‐​in, plateau, or phase‐​out region of the benefit schedule. See here.


[2] Where single‐​earner families includes both single parent families and married couples where one parent is in the labor force.

The post Two Credit Certificate Course on International Criminal Law appeared first on Völkerrechtsblog.

Sens. Dick Durbin and J.D. Vance want to put the Federal Reserve in charge of credit card reward programs.

The lobbying has begun in earnest for Louisianans
to continue the equivalent of flushing their tax dollars down the toilet with
Republican Speaker Clay Schexnayder's
HB 562.

Not only would the bill allow the Motion Picture Investors
Tax Credit to continue past fiscal year 2025 it also would make it open-ended,
where it currently has a limit of $150 million issued a year (with $180 million
redeemable in a year). The credit allows for reimbursement of expenses in film
or television production anywhere from 25 to 55 percent of expenses from a base
amount of $50,000 to $300,000 on state income taxes; alternatively, these may act
as a refundable credit at 90 cents to the buck (which is how the vast majority
of the payout occurs given that few beneficiaries principally do business in
the state).

The law requires an analysis every couple of
years, and over the two decades of the credit's existence those have shown it
to be a black hole spending far more taxpayer dollars than what was returned to
state and local governments, costing the state well over a billion dollars. The
latest
returned the typical dismal numbers for fiscal years 2021-22: total tax dollars
collected were about an eleventh of what earnings were generated door, and the
return on investment for the former year was 35 cents and the latter 39 cents,
meaning for FY 2022 every dollar spent saw 61 cents evaporate.

These results largely mirrored another
state-sponsored study that requires fiscal review of sizeable negative-return
tax credits, thereby including this as it has the largest annual expenditures and
losses of the bunch. The law establishing this research had it go back several
years, grouping the results essentially into pre- and post-Wuhan coronavirus
pandemic periods.

In it, the film credit over the two periods
expanded the state economy (return on investment, using a different model) by
about 40 cents to the dollar while returning to the state treasury about a
sixteenth of the tax dollars spent. It did say at least for the roughly $180
million a year spent it generated about
$75 million more in economic activity.

The other report also noted figures that tried to
explain away the bonfire of taxpayer bucks. It claimed around 10,000 jobs were
created – or in the neighborhood of $13,300 per job net taxpayer expenditures –
and generated $1.15 billion to $1.2 billion in economic activity annually.

The latter is a particularly useless statistic. It
tells little because it doesn't investigate alternative uses of the apportioned
tax dollars, either in spending choices by government or by leaving this money
in the hands of people that earned it, that possibly could produce much larger
economic benefits. For example, it could be that a Widget Investors Tax Credit
subsidizing the production of widgets might create more jobs and activity.

Nonetheless, because that's all they have,
supporters repeat such data points ad naseum, and have manufactured
another talking point by surveying
residents about their perceptions of the tax credit. About two-thirds of
respondents say they favor such a credit and a seventh think, out of a list also
including health care, agriculture/seafood, "green" industry, petrochemical,
high tech, none, or oppose tax incentives, that film is the most deserving to
receive incentives.

Again, this is largely useless information from an
instrument designed to advocate rather than get a true sense of the public's
attitudes about the program (don't blame the pollster, who has to follow the
dictates of the funder), by deflecting from concrete reality and realistic
choices. Almost no respondents probably know the cost to taxpayers and 60
percent wastage proportion of the credits and likely would show a far lower
level of support if they did. Instead of asking "Do you favor or oppose tax
incentives to help develop the film industry in Louisiana?" changing the
wording to "Do you favor or oppose tax incentives, which cost $180 million a
year and return only 40 cents on the dollar, to help develop the film industry
in Louisiana?" or changing "When creating tax incentives, which industry in
Louisiana do you believe is most deserving of them?" to "Would you rather give
$180 million a year in tax incentives to filmmakers or health care … higher
education … farmers and fishermen … as a rebate to taxpayers …" etc., answers
to those kinds of questions would be far more revealing and informative.

Legislators must not let themselves distracted or
sweettalked by lobbyists away from the fact that the film tax credit is
corporate welfare blatantly picking a winning industry with the people's money
that could bring much greater benefits to Louisiana if left in people's wallets
and/or applied to pressing state needs far more urgent than making more movies.
Personifying the old adage that a stopped clock is right twice a day, this
squandering of tax dollars is so blatant that even
the Louisiana Budget Project can see through the waste promoted by the film tax
credit.

Nearly a quarter century is enough to have gotten
this industry off the ground without further need of taxpayer subsidies. Kill
HB 562 and let the unnatural life of these end in 2025.

A stroke of good luck for Louisiana taxpayers, the strike
by writers and actors of motion picture and television productions can be
leveraged even more for the state's citizens to avoid the bad consequences of
its poorly-conceived Motion Picture Investors Tax Credit.

First writers, then actors began the strike
starting over three months ago. This brought largely to a halt an already
slowing production of movies and series, whether shown in theaters, on broadcast
television, cable television, streaming over the Internet, or in podcast form,
although some films in progress actor members have been allowed to complete. Anticipation
of a strike as early as late last year had prompted ratcheting down production,
so as not to have things interrupted if a strike occurred. To work with a network
or major studio (which comprise most of the business; for example, the top ten
studios in movie box office receipts for last
year collected seven-eighths of all revenues), writers and actors must be a
member of their respective unions.

The main issue in both cases is revenue-sharing. The
rapid growth in streaming particularly has exposed that prior compensation
models didn't account for this, leading members to demand a greater share of
the pie from that. Both also want more control over the use of artificial intelligence
in story writing and actor likenesses. Writers additionally want retainer pay
for stretches that they don't work.

These fall under a much larger theme: an industry
used to centralization of economic control through cooperation of management
and labor has lost that control because, simply, the economics have changed so
that far more people at far reduced costs can create profitably content. Old
producers and unions have come to loggerheads because the decentralization trend
has more forcefully affected the fortunes of the latter.

But the unions involved – both extremely top heavy
with the vast majority of earnings going to a handful of members in each – also
by their actions have impacted other people who work in the industry and in
much greater numbers. Audio-visual content production requires a slew of
behind-the-scenes labor, almost exclusively contract in nature. Shutting down
production also shuts down at least part of the livelihood of many individuals,
as most work part-time, but for some its entirety.

That
has hit Louisiana disproportionately hard, given its generous taxpayer
subsidization of film and television production to the tune typically of $150
million annually which artificially has boosted this activity and created a kind
of workfare for people who want to work around the movie business. Nobody
should kid themselves that in absence of the credit that business would be no
more than a fraction of what it is, or that the credit is a net money-maker for
taxpayers, as study after study has shown (the latest,
most optimistic shows it returns 23 cents on the dollar while costing $13,300
for each job "created").

Thus, the slowdown will help Louisianans save
money, as fewer productions will occur and fewer credits dispensed. But the overall
theme that triggered the strike now has a chance to insert itself into policy-makers'
consciousness, which it apparently didn't this past legislative session when with
only some beneficial changes the tax credit foolishly was renewed.

And, the idea
to accomplish this reform to keep up with the times actually came years ago
from Republican Lt. Gov. Billy Nungesser,
running for reelection this fall. He suggested that part of any contract with
an entity qualifying for the credits contain a clause that, if the production
made a certain amount in revenues, the state take a cut.

This can be designed to capture streaming revenues,
and in a way to help local producers; the overwhelming majority of credit
dollars go to out-of-state entities. The law could be changed to charge gross
revenues to the parent corporation or other entity in a tiered system. For
example, there would be no tax reimbursement for a production that in a decade
after release doesn't collect $1 million, but then from there to $10 million one
percent is charged, two percent up to $20 million, and so on every $10 million
until reaching $100 million and beyond where it becomes a fixed 10 percent.
This shields smaller producers such as those in-state as an incentive to grow,
ensures that creative accounting doesn't hide revenues, and reasonably accounts
for present and future streaming.

As currently constructed, the film tax credit is nothing
more than a jobs program for a favored political constituency that wastes
taxpayer dollars and distorts the economy into a preferred direction picked by
government. Ironically, people in the spillover industries that have benefited
from this now suffer precisely because of it and its vulnerability to what
happens in Hollywood. Had the reimbursement idea been in place, it would have been
less buffeted by Hollywood developments because it would have helped stimulate
an indigenous film industry outside of the current labor dispute. The new
Legislature next year needs to make this modification.

The meteoric rise of private credit over the last decade has raised concerns among banks about unfair competition and among regulators about risks to financial stability.

Historically, regulated banks have provided most of the credit that finances businesses in the United States. However, since the 2008 financial crisis, banks have restricted their credit lines in response to new regulations. In their place has arisen private credit, which comprises direct (and mostly unregulated) lending, primarily from institutional investors. Estimates peg the current size of outstanding private credit loans in the U.S. at $1.7 trillion.

Private credit loans aren't traceable, and there are incentives to lend to riskier borrowers in the absence of regulation. This could lead to catastrophic spillover effects in the event of a financial shock. This week, Bethany and Luigi sit down with Jim Grant, a longtime market and banking industry analyst, writer, and publisher of Grant's Interest Rate Observer, a twice-monthly journal of financial markets published since 1983. Together, they try to answer if private credit is in the public interest.

Tax credits for every social and economic ill is a recipe for fiscal ruin and economic malaise.

Certain expansions of the CTC can reduce work incentives and have a negative impact on the labor supply. Although some have expressed concerns that this proposed expansion could halve work incentives, the proposal should not have a significant impact on the labor supply of parents.
The post Wyden-Smith's Child Tax Credit Expansion and Work Incentives appeared first on American Enterprise Institute - AEI.

At the height of the financial crisis a decade ago, economists and policymakers underestimated the depth and severity of the recession that would follow. I argue in a paper released today by the Brookings Papers on Economic Activity (BPEA) that remedying this failure demands a more thorough inclusion of credit-market factors in models and forecasts…

Last year, California implemented the Foster Youth Tax Credit in an effort to alleviate poverty among young adults with a connection to the foster care system. We examine how this credit is working so far.