What if a sales tax were the only tax?

Most everyone would agree that income and payroll taxes are a pain in the neck, but what would happen if that system of taxation were gone? What if the only taxes were sales taxes?It may sound like a good idea initially, but, how would our government function without the revenue that other taxes bring in?
John Linder, a Republican representative of Georgia, thinks that it would be a good idea to use sales tax as the government's only form of taxation. Unfortunately, the government collected about $ 1.7 trillion in individual payroll and income taxes. So, we the tax payers are going to have to pay that money in some other way. If the government taxed everything, we would pay a 12% tax to make up for the $1.7 trillion lost. No big deal. But clothes and food probably shouldn't be taxed because it would discriminate against the poor. So, they say we should raise sales tax to 18% excluding clothes and food. After you look at all the sales tax exemptions, is it really worth it? Would simply using sales tax make life easier?
We should also look at how such a high sales tax would affect Americans spending habits. If sales tax is going to be 20% or more, most people will change their spending habits and cut back on things that are not absolutely necessary for survival. The tax is going to be an economical burden on both the sellers and the buyers, so sellers will be equally unhappy because they will be collecting less "producer surplus."
If we switched to a sales tax only system, it would ultimately hurt our economy. Now you're probably thinking that this could never happen. However, Bush said that it is "the kind of interesting idea that we ought to explore seriously." Maybe this system of taxation is possible.

More flu shots will be available in January

A while back someone had posted a blog on there being a shortage of flu shots. Now there is going to be a new shipment of 2.6 million vaccines from Aventis-Pasteur coming in January. President Bush said he was working with state and local officials to make sure we that vaccines get distributed to those who need it. The Demand was so high that something had to be done. Even though more vaccines are supposed to come in there still is a high demand for more. There is still a request that those who are in the "high- risk" group have access to the vaccine. Even though there are going to be 2.6 million more vaccines there is still a shortage, but this is better than before.

MLB Banding for Broadcast

Ah, this post goes out to those in The Economics of Sports. I ran across this article today and found it too interesting not to post.

Check the link out here, but I'll give you the short of it. It's been rumored through the grapevine that is corporate culture today, that Major League Baseball and XM radio have entered into an agreement. This agreement, beginning next year, would allow XM Radio the broadcasts rights to all MLB games. These rights would amount to a cash total of 470 million after 8 years, and could be exteneded an extra 3 years at a hefty price of 60 million per year.

here's a good example of the teams forming a 'cartel' to gain a league-wide agreement. Also, this ups the anty for Sirrus Radio, XM's biggest competitor. What's next for Sirrus, a metting with the NFL?

Ebay

Have you ever tried to win something on ebay, but only to be out bid by another person by only a few cents? Well that has happened many times while i was bidding on ebay. If you notice ebay is somewhat of a free market. I've noticed that most of the bidding is done in the last few minutes and seconds of an auction. I was thinking about selling stuff on ebay and would like to know what some ideas as to what you think would sell for about 3/4 thier original price or better.

"Price War in DVD Rental Fees"

I was just looking through the October 18th edition of the New York Times when I found an article discussing the up-and-coming "price war" on DVD rental fees. It originally talks about Netflix announcing that they are planning on lowering their subscription fee from $21.99 a month to $17.99. This would be two dollars below Blockbuster's monthly fee; Blockbuster responded by proposing to lower their fee from $19.99 to $17.49. The article adds later that Wal*Mart offers a similar service and Amazon.com may be jumping into the market. With all of these new 'firms' joining into the DVD Rental industry, will prices continue to fall? With a supply/demand curve in mind, if there is an increase in supply then there will also be an increase in quantity as well as a decrease in price. So, if all works out correctly, it looks to be that we are going to be facing a new, less expensive way of renting movies... over the net!

Two Economists Debate Market

Today on the front page of the Wall Street Journal there is an article that talks about two economist one named Eugene Fama and Richard Thaler. Apparently these two economists have been arguing about two different theories one being Efficient markets which in the article calls Mr. Fama the "intellectual father of the theory known as the efficient-market hypothesis." Mr. Thaler is said to be a "behavorists" which suggests that "policy makers have a important role in guiding the market." the reason that the article was written is that Mr. Fama as apparently suggested in a paper that he wrote that says some bad investments by people could "lead the market astray" which people are suggesting that Mr. Fama is giving some ground to Mr. Thaler and the "behavorists". I thought this article was rather interesting since we have talked in class about market efficiency and here they have one of the leading economists on the subject giving some new suggestions to the idea of efficient markets. As well as showing two big points with which economists have been differing on.

High Concert Ticket Prices this Summer, Low Concert Turnout

In an article (subscription required) dated October 11, 2004 in the Wall Street Journal, the concert industry is blaming creeping prcies for the slow sales of concert tickets this past summer. Ticket prices were unrealistically high causing revenue to be off as much as 40% compared with 2003. Concert promoters jacked up ticket prices because artists and their representatives demand so much money up front. In turn, agents say they can hardly be blamed for accepting the ever higher bids promoters make for their services. Musicians, too have been partly to blame because eventually greed is the driving force behind the artists asking prices. Another aspect of this situation is the artists are paid guarantees no matter how poor tickets sales are. The artists really do not have any financial risk. Another factor in this situation is CD sales are on decline causing royalty checks to the artists to decline. The only way to make this up, is to go on tour and raising ticket prices. The consumers who purchase the concert tickets are not going for the higher ticket prices especially when they are getting a mediocre seat for a price of $70 to $80. This could be seen as receiving an inferior good and being charged a normal good price. Also, concert tickets could be seen as elastic demand due to the quantity demanded is relatively responsive to changes in price. Personally, I haven't been to a concert for some time but I would have to say if I had to pay $70-$80 or more for a ticket to see my favorite group or artist, I would have to think twice about it. If prices were lower and seating was better, I wouldn't have a problem paying the money for the ticket because my marginal benefit would increase. As the law of demand states, demand will increase as prices fall. Maybe promoters and the artists should take an economics class to determine what the best solution would be to this problem!

DC: The Right Place for the Expos?????

Some people in the DC area are opposed to a new team coming to their city. They belive that the money should be spent on schools and a hospital rather than a new waterfront stadium. Is this a good idea with opposition to bring the team to DC or should the MLB move them to another large market area? Could the city hope that the team makes them enough profits through the first few years and then start working on the schools and hospitals? What do you think?

The Presidential Debate: Health Care

While watching the presidential debate tonight, some comments by Presdient Bush on health care issues were reminiscent of topics discussed in class earlier this year. President Bush stated that the health care industry is behind in it's technology which is part of the cause of such high health care costs. If the United States were to introduce faster technology, there could be a 20% cut in the costs of health care. The introduction of increased technology reminded me of the Production Possibilities Curve. Increased technology would shift the curve outward and provide more health care resources for the United States.
A more controversial issue with health care is whether the government should become involved in providing health care for all citizens. I remember we discussed this in class, also. Government controls health care in many countries, such as Canada, however, the health care system is poorly run and minor operations have long waiting lists. Despite the advantage of everyone being provided with health care, government intervention in this area causes more problems and disrupts the economy more than helping it. The idea of government intervention has also come into play in our discussion of taxes, showing that when the government intervenes, the social welfare decreases. On the topic of health care, I think President Bush made a strong statement in the debate saying that health care decisions should be made by doctors and patients not government officials.

http://www.nationalcenter.org/WCT092404CanadianHealth.html

Increase or decrease the ticket price of the Museum?

I went to American Museum of Natural History during the Four Day Break, the price of which was about $200. If we would like to increase the revenue by changing the ticket price, what will we do? Increase or decrease the ticket price?
The answer depends on the elasticity. If the elasticity is smaller than 1, demand is considered inelastic so that increasing the ticket price will make the revenue rise. However, if the elasticity is greater than 1, demand is considered elastic so that revenue will go down in response to a price increase. In that case, we should reduce the ticket price to make more people come to the Museum and raise the revenue.
To get the elasticity, we need to ask experts on statistics because they have a lot of information about what happened in the past few years when the ticket price changed. Also, we should notice other factors, which may have effect on the number of people who would like to go to the Museum. For instance, the weather. Bad weather may keep some people home instead of paying for the ticket and go to the Museum so the number of people will decrease. We can get a presumption about the elasticity and then make a decision how to change the price to increase the revenue of the Museum.

Air Fares

I always have attentions on the air fares. In the winter of 2002, the air fare from United States (Columbus) to China (Beijing) was around $ 850 for round trip. Then, the next year, in the summer of 2003, because of the SARS situation in China; less people would fly to China at that time. As a result, the demand declined; but the supply did not change; the price fell. The air fare to Beijing in that summer was about $ 600 to $ 700 for round trip without advanced perchance, which mean-- due to the SARS was proliferated from Hong Kong to Mainland in the spring time, nobody knew that the situation would be that worse, so the air fares were not declined until the summer break began, in about may. For people who advanced perchance the tickets, their expenditures might be above $800, but for people who just decided to go to China in May or later, they got the tickets with the lower price and got on an almost empty airplane the next day. Right after the SARS has been gone; the air fares went back to high prices. For the winter 2003 and summer 2004, the air fares to China were more or less about $800 to $900 for round trip.

Recently, the increasing oil price is threatens for the gradual revovering air travel and Airlines. As a result, Airlines including British Airways, and American Airlines, etc. has responded by increasing the air fares. The oil price increased, which means that the expenditures would increase, they have to raise the price or some of them scaled back their short term growth forecasts, reflecting expectations of more muted demand. In addition, for United Airline, it would be even worse. Since it is struggling to emerge from bankruptcy, it has to cut its expenditures. What I found out was that their air fares to Beijing were a little bit higher than the other airlines, it was not surprising because it usually it was (it has none-stop flights from Chicago, L.A, etc. to Beijing) but for this winter break, the air fares to Beijing will be about around $1000 for round trip. I think they've raised their prices too.

Also, the United Airline reduced its domestic flights but increased the international flights. This plan will make the supply decline; as a result, the price probably will increase. They have to do that to keep the Corp. in competition.

Franchises Increasing in Value?

This post will ring true to heart for those of you who are in Economics of Sport. In class we were discussing about how, using Bill Veeck's method, sport teams could create a negative book profit. Why this is important is because, like is the case with the NHL right now, when players are lobbying for more money, the team owners can show the union the negative book profit that they are earning. The problem is, is this negative book profit a true look at the team's finances. The answer is probably not. By using a method first illustrated by Bill Veeck, teams can depreciate the cost of a player's salary over the course of 5 years, thusly showing a negative book profit and avoiding huge amounts in taxes.

Right now there's a bill sitting in Capitol Hill waiting to a decision. This bill would let teams depreciate the full value of their franchises over a period of 15 years. While some argue that the teams will end up paying more in taxes, especially in the course of the first few years, some argue against it, saying that at the same time the taxes being paid by the teams is decreasing, there will be a simultaneous increase in the value of the team.

Big teams, like the Yankees for example, with huge broadcast contracts will be able to write off the value of those contracts as well. In essence, a team that you buy for 600 million today could essentially be sold for 900 million in the future! Get your checkbooks ready!

New Stadiums -- Pro or Con?

The Dallas Cowboys are thinking of building a new stadium, but where should it go? In sport we've learned that newer staidums increase profit for teams because newer stadiums include more luxury boxes. The luxury box tickets can be priced low at the price of a regular ticket, and that profit will be shared with the other teams due to revenue sharing agreements. But, the real value of a luxury box seat is much higher than what the team states. Thus, this extra price hike turns into pure profits for the team, and the revenus from these tickets does not have to be shared with other teams, hence why teams want newer stadiums. Being a West Virginian, I attend many WVU games. Even this year, the field was, and still is under construction in Morgantown WV. What are they doing? Adding a section of luxury boxes to an end of the stadium. Even take a look at Pittsburgh, two brand new stadiums, PNC Park for the Pirated and Hinze Field for the Steelers.

It's the cities in question that have to allow new taxation rates in order to the new stadiums to be constructed, so with the hundreds of millions that go into new stadium construction, you know that the benefit that the stadiums create for the city and local merchants must far exceed the cost.

The question though is, do you locate directly in the heart of the city, such as the Steelers, Browns, Cowboys and most other teams, or do you go for a location in the suburbs such as the Washington Redskins did. Arguably the Redskins are the most valuable team in the NFL. They are not located in downtown D.C., but outside of the city in Prince George's County, MD. Some question whether the fans will be willing to drive an extra distance, from say Dallas to now Arlington TX to see the Cowboys play. Washington has proved that the fans will 'go the distance'. Hey, is the famous line not "If you build it, they will come" ? By building a stadium outside of the city, more business will probably flock to the same location. Local merchants, ie. restaurants, malls, gas stations, they all benefit from the thousands that pour into the stadiums for games.

So what is it to be for the Cowboys.... Dallas or Arlington? The Arlington Cowboys.... not sure how that's going to sound! Or will Dallas for out millions extra to keep the 'Boys' there?

And the winners are...

The 2004 Nobel Prize in Economics has been awarded to Finn Kydland (Carnegie-Mellon and the University of California, Santa Barbara) and Edward Prescott (Arizona State University and the Federal Reserve Bank of Minneapolis) "for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles." For a detailed explanation of their contribution, click here. Sorry, no one submitted either economist as their forecast for my bonus question.

Ohio State

Ohio state lost thier second straight games this weekend to wisconsin. This was the first time Jim Tressel has ever lost two straight games since he become the coach of Ohio State. There is also a chance Ohio State might take a huge drop in the rankings. Possibly out of the top 25 even. They were around 15-16 in most national polls. Thier schedule does not get any easier as the season goes on. If Ohio State has a losing season does this one bad year put a damper on one of the best traditions in college sports that this team has built over so many years?

The Drug War - To Legalize Marijuana or Not

I have to do an issue poster for one of my graphic design classes, and my issue of choice is the drug war. Basically, I am of the opinion that Marijuana should be legalized. While doing research for my poster I have stumbled across some very interesting information and I would like to see what everyone else in the class thinks.

According to the facts listed on drugwarfacts.org (actual link located in the title of this blog), the top three causes of death in the U.S. are tobacco, inactivity/poor diet, and alcohol. I find it interesting that the three biggest killers in the United States are all legal, yet marijuana, which by itself has never caused a single death, remains illegal. If one of the biggest arguments against legalization is the self-harm caused by marijuana, then why aren't alcohol, laziness, and cigarettes illegal as well?

Another point I find interesting is that in the state of Ohio, possession of marijuana paraphernalia (like a bowl or bong) is considered a misdemeanor and is worth a $750 fine, plus license suspension and 30 days in jail; however, possession of marijuana itself (100 grams or less) is only a civil citation and is worth a fine of $100. If pot is so bad, how come it is more illegal to have a smoking device than to have pot itself? Technically, the smoking device could be used for tobacco, but what legal uses are there the actual pot? (Information found on http://www.norml.org/index.cfm?wtm_view=&Group_ID=4557).

Just some food for thought. Let me know what you think.

Organ donation

Regarding the discussion question from the aplia assignment...

I think organ donation is so low because families that have just had a loved one die, don't see organ donation as a natural occurrence. Their main concern is with the grieving process and don't want to disrespect the person who has past by taking a part of them out of their body. Personally, I would like my organs donated but I would never donate the organs of a family member unless they asked me to and I would not especially if they died suddenly.

The world's freest economy?

This past summer I taught a couple of classes in Hong Kong---wow, what a city! Even though it has officially rejoined China after spending 99 years under British rule, Hong Kong remains one of the closest examples of a free market economy the world has--arguably more free than even the United States. The city is full of entrepreneurs of all types. Walking the streets of Hong Kong, I was approached by numerous salesmen offering copy watches, tailor services, and, shall I say, personal services of questionable morality. One sales pitch that I did succumb to was reflexology, aka, foot massage. Though it looks like I'm having a pleasant experience, the end result was actually a bit painful.

For more pictures of my trip to Hong Kong, click here.

Pricing Howard Stern

Howard Stern, a well known radio jockey, is pushing the limits again. He can be foul, rude, and down right trashy at times and because of this his job wit Viacom is at risk. His career has bounced like this since he started in the 1980's. Though Viacom wants to fire him, they hold off because he brings in so much money. He also brings in a large audience that Viacom does not want to lose. Though millions are brought in becaues of him, the fact is, he is making Viacom look bad by the topics and language he uses in his shows. So is it worth the money that he brings in to keep him around? Is his demand high enough to keep him there? Is the money he brings in a high enough price to keep him there? The article is quite interesting.

The Right to Life, Liberty, and Health Care

Next to terrorism the idea of a universal health care program, I think, is the most significant issue of this year's presidential election. John kerry and John Edwards have made national health care a part of their platform. They feel that every American has the "right" to health care, and have promised a health care package comparable to what congressmen themselves receive. The United States National Health Insurance Act was presented by Congressman John Conyers to the 108th Congress on February 4th, 2003. It states that national health care would be funded by imposing a 3.3% payroll tax on all employers, and having those in the top 5% tax bracket pay a higher share of the funding than those in all lower tax brackets. It claims that this will lower the high cost of health care, making it affordable for all income levels.
Now, I don't know about anyone else, but I don't see this as a good thing. If we can not solve the problems of Social Security, how would we keep national health care afloat. My thoughts are that people would use medical services more often, and the quality of medical care would go down. This does not paint a pretty scenario. Physicians and their choice of treatment would be controlled by government regulation, meaning that doctors and medical institutions would not receive the price they would get under a free market. Health care may become affordable for everyone, but it will not be the quality of treatment that everyone may need.