Tag Archives: incomes

Globalization took hits in 2016; Will 2017 lead to more?

Globalization, the path that the world economy has largely followed for decades, took some hefty blows in 2016.

The election of Donald Trump as U.S. president and Britain’s decision to leave the European Union have raised questions over the future of tariff-free trade and companies’ freedom to move production to lower-cost countries.

Borders are back in vogue. Economic nationalism is paying political dividends.

“We want our country back” was the rallying cry of those backing Brexit, a sound bite that had echoes in Trump’s “Make America great again.”

The rise of Trump and the triumph of Brexit had their roots in the global financial crisis of 2008.

Eight years later, the world economy has still not yet fully gotten past that shock to its confidence — people are nervous, some are angry, and many are seeking novel solutions to their problems. Next year, there’s scope for more uncertainty with elections in France and Germany.

Here’s a look at the year’s top business stories for 2016:


In what was a sign of things to come, Britain voted to leave the EU in a referendum in June. The decision came as a surprise — certainly to bookmakers and many pollsters who had consistently given the “remain” side the edge — and means Britain has to redefine itself after 43 years of EU membership. David Cameron resigned as prime minister after the vote and the new Conservative government led by Theresa May is planning to trigger the formal process by which Britain exits the EU early next year. There are many shades of potential Brexit, from an outright divorce that could put up tariffs on goods and services, to a more amicable parting that sees many of the current trading arrangements kept in place. The pound’s fall to a 31-year low below $1.20 at one point is testament to that uncertainty.



Pollsters and bookmakers got it wrong again a few months later when Trump defeated Hillary Clinton in the U.S. presidential election. Whether he translates his “America First” platform into action following his inauguration in January will help shape the global economy for the next four years at least. Trump has railed against long-standing trading agreements, including the North American Free Trade Agreement, and vowed to punish China for the way it devalues its currency against the dollar and to tax U.S. firms that move jobs overseas. He has also laid out plans to bring America’s creaking infrastructure up to 21st-century standards, a new spending pitch that has the potential to boost jobs — but which could also lay the seeds of higher inflation.


Trump’s victory did not cause the bottom to fall out of the stock market rally that’s been largely in place since 2009, when the world economy started to first claw out of its deepest recession since World War II.

In fact, both the Dow and the S&P 500 rallied to hit a series of record highs. Stocks have also benefited from a raft of big corporate deals this year — executives are seeing takeovers as a fast way to generate growth in what is otherwise a low-growth global economy disrupted by non-stop technological innovations.

Notable deals in 2016 included the announcement of an $85 billion merger of Time Warner and AT&T and the $57 billion takeover of Monsanto by Germany medicine and farm-chemical maker Bayer. The $100 billion takeover of SABMiller by Budweiser maker Anheuser-Busch InBev was also completed.


During his campaign, Trump criticized Federal Reserve Chair Janet Yellen, saying she should be “ashamed” of the way she’s run policy since taking the helm in 2014. A year ago, the Fed appeared set to follow up its first interest rate hike in nearly a decade with three or four more in 2016. But there was no move until Dec. 14, when the U.S. central bank raised its main interest rate to a range between 0.5 percent and 0.75 percent. Many factors explained its hesitation to raise rates, including unease over the global impact of China’s economic slowdown and uncertainty surrounding the U.S. election. But with the U.S. economy continuing to do better than most developed countries — with unemployment below 5 percent and inflation on the way up — the Fed finally delivered another hike. The markets are predicting another three or four increases next year. Those expectations have helped the dollar rally, especially as other major central banks persevere with super-loose monetary policies to breathe life into their economies.


As the world’s second-largest economy, China is playing a bigger role in the functioning of the global economy. Nowhere was that more evident than in the early months of 2016, when jitters over the scale of the slowdown in China caused wild swings in financial markets. Stocks took a pounding while commodities tanked, with oil skidding to 13-year lows, as traders factored in lower demand from resource-hungry China. The slump in commodities weighed heavily on economies like Australia that are big exporters of raw materials. China’s economy is ending the year in relatively good health as authorities try to pivot the economy’s focus from manufacturing to more consumer spending. But Trump’s promises to take a tough stance in trade will be of concern to Beijing.


For the first time since December 2008, at the height of the financial crisis, the Organization of Petroleum Exporting Countries cut its production levels in 2016. November’s cut, soon followed by more cuts by non-OPEC countries like Russia, helped push oil prices sharply higher. At over $50 a barrel, benchmark New York crude is markedly higher than the near 13-year lows around $30 recorded at the start of 2016, when investors focused on high supply and concerns over an economic slowdown. The oil slump helped put several crude-producing countries into severe recessions, including Brazil and Venezuela, and even saw wealthy Saudi Arabia cut back on spending. The question for 2017 is whether OPEC — and non-OPEC — countries can deliver on their production promises. If they do and higher oil prices stick, that will push up inflation in the global economy.


One of the major reasons why popular sentiment has turned against governments has been a growing distrust of elites. Perhaps nothing illustrated the issue more than the “Panama Papers,” a leaked trove of data on thousands of offshore accounts that helped the wealthy, the powerful and celebrities shelter their cash from the taxman, often without breaking the law. Critics say these tax schemes are the core of a system that gives an unfair advantage to big corporations and the wealthy. Outrage grew in the U.S. when it was revealed that Wells Fargo employees opened up to 2 million bank and credit card accounts fraudulently to meet sales goals. Bank employees also allegedly moved money between those accounts and created fake email addresses to sign customers up for online banking.

It just grates.

Sanders welcomes Clinton’s college affordability proposal

U.S. Sen. Bernie Sanders on July 6 welcomed a proposal by Hillary Clinton that combines the best features of plans Clinton and Sanders brought forth to make college affordable for all and substantially reduce student debt.

The following is Sanders’ statement on Clinton’s announcement today:

As I’ve traveled throughout the country during this campaign, I have heard over and over again from young people and their parents what the high cost of college and student debt is doing to their lives. For some, it means not being able to go to college at all, and that’s the case for hundreds of thousands of high school graduates.

These are young people who will find it harder to make it into the middle class and fulfill their dreams. For others, it means graduating school deeply in debt, and being forced to pay off that debt year after year after year. And that may mean not being able to buy a home, get married or have kids.

I want to take this opportunity to applaud Secretary Clinton for the very bold initiative she has just brought forth today for the financing of higher education. This proposal combines some of the strongest ideas she fought for during the campaign with some of the principles that I fought for. The final product is a result of the work of both campaigns.

Let me be very clear. This proposal, when implemented, will revolutionize the funding of higher education in America, improve the economic future of our country and make life immediately better for tens of millions of people stuck with high levels of student debt.

This proposed legislation will provide free tuition at public colleges and universities for all families in America earning $125,000 a year or less – 83 percent of our families.

In other words, the dream of higher education in America will become a reality for all, regardless of the income of one’s family. This proposal will also provide very substantial relief for students and families carrying student debt.

In the year 2016, we should be encouraging our people to get the best education they can, not punishing them.

Our goal should be to have the best educated country in the world. In a highly-competitive global economy, it is insane that hundreds of thousands of bright young people are unable to afford the high cost of college and millions more leave school deeply in debt.

I thank Secretary Clinton for introducing this proposal which, in my view, will have a profound impact on the future of our country.

Census data: Wisconsin incomes fell between 2009 and 2014

New data from the U.S. Census Bureau shows the median household income fell in two-thirds of Wisconsin counties between 2009 and 2014.

Census data released in early December shows incomes fell by at least 10 percent in 10 counties. Vilas County saw the steepest decline at 13.3 percent.

Milwaukee County saw a 10.3 percent drop and Dane County saw a 5.2 percent drop. Incomes rose in Adams and Florence and held relatively steady in 23 counties.

The declines in Wisconsin mirror the United States as a whole. Median income fell by 7.5 percent in the U.S. after adjusting for inflation.

Tim Smeeding, professor of public affairs and economics at the University of Wisconsin-Madison, said the drop in income figures in Wisconsin show the effect of the recession on the state’s manufacturing sector. Smeeding, who authors the annual Wisconsin Poverty Report, said the data also show the middle class is struggling.

“The people who got hurt were the people who could walk out of high school and earn a middle-class living,” Smeeding said. “Now, all that’s disappeared.”

Wells Fargo Funds Management strategist Brian Jacobsen said the figures aren’t surprising given the nation’s slow economic recovery.

“It’s been such a weak economic recovery,” said Jacobsen, who also teaches financial planning at Wisconsin Lutheran College. “Up to this point, it seemed like median incomes were at best keeping up with inflation.”

The statewide median income did rise from $51,598 in 2010 to $52,738 in 2014. Incomes in Vilas, Milwaukee and Dane counties rose over that four-year span, too.

Minimum wage debate pits cities against states

Dominique Mayfield makes $8.25 an hour washing dishes and busing tables at a Syracuse brewpub. Shantel Walker makes $8.50 an hour at her pizzeria in New York City, where the rent is more than double what it is in Syracuse. Two very different cities, but nearly the same wage.

The economic differences between America’s big cities and elsewhere have prompted leaders in Seattle, New York City, Chicago, San Francisco, Oklahoma City and other cities to push to raise the minimum wage within their borders.

The efforts are running into opposition from state lawmakers from both parties and business groups who say a patchwork of minimum wages could lead to a confusing and unequal business climate in which labor costs would vary dramatically from city to city.

The minimum wage has emerged as perhaps the top issue of a newly emboldened, urban liberal movement that in many places is led not by governors or state lawmakers, but by local leaders backed by organized fast-food workers. After years of grappling with state and federal budget cuts, mayors and city councils are pushing back against state and federal officials who they say don’t understand the income inequality of 21st-century American cities.

“So many people have been pushed out of this city,” said Seattle City Councilman Nick Licata, who successfully pushed to raise the city’s wage to $15, more than $5 higher than the state wage. “Local politicians don’t have the luxury of not doing something. The state and federal governments, they’ve been AWOL. They haven’t been engaged.”

The fight to raise minimum wages has lawmakers in many states on the defensive, arguing that higher wages will lead to reductions in hours and jobs for low-income workers – and retail price increases that are likely to hit them hardest. The business-backed American Legislative Exchange Council argues that local minimum wages could lead to a race to the bottom, where businesses locate in whatever city within a region has the lowest starting wage.

“This is a debate that’s happening around the country, and although it’s well intended, it’s misguided,” said Cara Sullivan, a minimum wage policy expert at ALEC. “In Seattle they raised it to $15, and right across the city line it’s $5 less. It increases the cost of doing business for businesses in that city. You’re creating chaos from one business to the next.”

Members of the city council in Providence, Rhode Island, considered raising the minimum wage from $8 to $15, but only for workers in the city’s large hotels. In response, the Democratic leaders of the Rhode Island General Assembly have moved to block the proposal by taking away cities’ authority to set local minimums.

Oklahoma Gov. Mary Fallin, a Republican, signed legislation in April that prohibits cities from setting their own wage after organized labor groups suggested that Oklahoma City raise its wage from $7.25 an hour – the federal minimum – to $10.10.

B.J. Marsh, a single mother in a suburb of Oklahoma City, says the $7.25 she makes requires her to choose between eating or getting to work. Marsh said her 7-year-old son began living with her father to save on expenses and allow her to work.

“I don’t eat because I have to have gas in my car,” she said.

But supporters of Oklahoma’s new law said higher local minimum wages were likely to hurt the very low-income workers they were proposed to help by raising food prices and reducing employment.

“We have seen businesses flee from cities that have tried this in other states,” said Republican House Speaker Jeff Hickman. “Artificially inflating the minimum wage raises the price of everything from housing and rental costs to a loaf of bread, and causes the loss of jobs which means fewer opportunities for those working to feed their families.”

In 2011 and 2012, four states passed laws keeping state minimum wages from being higher than the federal wage. This year, 14 such bills have been introduced, according to the National Conference of State Legislatures.

In New York City, Mayor Bill de Blasio and members of the City Council are seeking authority to raise the local minimum wage to $15 – nearly double the state’s $8 minimum. State law doesn’t currently permit cities to set their own minimums, and while Democratic Gov. Andrew Cuomo first warned the idea would lead to a “chaotic” business environment, he now supports a proposal to raise the wage to $10.10 and let cities impose a minimum up to 30 percent higher.

Restaurant owners and business groups have opposed the plan, and on Thursday it appeared state lawmakers would adjourn without voting on the measure. The state’s minimum wage is already set to increase to $8.75 at the end of this year and to $9 at the end of 2015.

For Shantel Walker, the pizzeria worker in Brooklyn, the proposal would mean nearly $5 more per hour. Walker went to Albany last month to rally for a higher minimum wage outside a McDonald’s at the Capitol. She said it makes no sense that fast food workers in New York City are held to the same minimum wage as those upstate.

“If we have to do this every week, that’s what we’re going to do,” she said. “We have to fight the powers that be.”

What are chances of IRS audit? A look at the numbers

The Internal Revenue Service audited less than 1 percent of the income tax returns filed last year. But your odds of getting audited vary greatly, depending on income.


146 million returns.

Audited: 1.4 million.

Audit rate: 0.96 percent.

Income under $200,000

141 million returns.

Audited: 1.2 million.

Audit rate: 0.88 percent.

Income $200,000 and above

5.3 million returns.

Audited: 172,000.

Audit rate: 3.3 percent.

Income $1 million and above

363,000 returns.

Audited: 39,000.

Audit rate: 11 percent.

Business returns

10 million returns.

Audited: 61,000

Audit rate: 0.61 percent.

Small corporations (assets under $10 million)

1.8 million returns

Audited: 17,600.

Audit rate: 0.95 percent.

Large corporations (assets over $10 million)

62,300 returns.

Audited: 9,900.

Audit rate: 16 percent.

Report: Unionization yields better pay, benefits for women workers

Women in unions see a substantial boost in pay and benefits relative to non-union counterparts, according to a new report from the Center for Economic and Policy Research.

“Women Workers and Unions” shows that unionized women workers on average make 12.9 percent more than their non-union counterparts.

The research, released on Dec. 9, also shows that 36.8 of unionized women workers are more likely to have employer-provided health insurance and 53.4 percent more likely to have participated in an employer-sponsored retirement plan.

The research shows that unionization benefits women at every education level, but the largest effect is for women who have less formal education.

For a woman with a high school degree, joining a union is more likely to lead to her securing employee health care insurance or retirement benefits than earning a four-year college degree.

“Women are on track to become the majority of the union workforce in 10 years, but their rate of unionization is dropping, along with that of men,” said Nicole Woo, who co-wrote the paper for the center. “Considering the great boost to pay and benefits that unions bring, it’s important that anyone who cares about the well-being of women also care about unions.”

The release of the report coincided with the 50th anniversary of the release of “American Women: Report of the Commission on the Status of Women.” The commission was chaired by Eleanor Roosevelt and was tasked with “developing recommendations for overcoming discriminations in government and private employment on the basis of sex.”

Federal marriage benefits? Not always all they’re cracked up to be

Like other married couples, same-sex couples are about to learn that federal benefits for being married might not be all they’re cracked up to be.

Social Security benefits for spouses can be generous, but only for couples with big disparities in their incomes. Taxes are a decidedly mixed bag, and there are still a lot of unanswered questions for the Internal Revenue Service.

Many middle-income couples should get welcome tax breaks now that they can change their filing status from “single” to “married filing jointly.” The biggest benefits will go to couples in which one spouse makes more money than the other.

But those at the top and bottom of the income scale could face significant tax increases.

High-income taxpayers could feel the pinch because the tax code still contains substantial marriage penalties for couples with higher incomes. Low-income taxpayers could lose benefits that target the working poor, such as the earned income tax credit, if they get married and their spouse’s income disqualifies them.

Low-income parents also could lose other government benefits such as Medicaid, the health insurance program for the poor, if they get married and their spouse’s income pushes them above certain limits.

“The poor gay couples, particularly if they’re raising children, are going to face the same huge penalty structure that’s now faced by low-income households in general,” said Eugene Steuerle, a former Treasury official who is now a fellow at the Urban Institute.

“In that case, they may have won the court battle but are still stuck in a social structure where the government basically tells them, do not marry or you’re going to lose a lot of money,” Steuerle said.

The Supreme Court last week struck down parts of a federal law that denied government benefits to same-sex couples, even if they were married in states that recognize same-sex marriages.

In 2004, the nonpartisan Congressional Budget Office found 1,138 provisions in federal law in which marriage was a factor. Some were obscure, like being eligible to represent your spouse in negotiations over surface mine leases with the Interior Department.

Among the biggest were spousal and survivor benefits for Social Security. Social Security was designed to protect workers and their spouses even if the spouse didn’t work. Under the program, if one spouse works and the other doesn’t, the nonworking spouse can get retirement benefits simply by being married to the worker.

And if the worker dies first, the nonworking spouse gets 100 percent of the worker’s retirement benefits.

Nearly 7 million spouses and surviving spouses get Social Security benefits, according to agency data. Those benefits should soon be available to same-sex married couples.

Social Security was designed “at a time when they had this very stereotypical view of the family,” Steuerle said. “They wanted the spouse to have the same benefit as the worker, if the worker died.”

The benefits disappear, however, if both spouses work and earn about the same amount of money over their lifetimes. In this case, both spouses simply get the benefits they earned by working and paying into the system.

The Congressional Budget Office tried to estimate the effect on the federal budget of legalizing same-sex marriage in every state. On balance, the study said benefits and penalties would come close to equaling out and have relatively little effect on the federal budget.

Tax revenues would actually increase, but not by much – less than one-tenth of 1 percent.

For same-sex couples, like all couples, how marriage affects your tax bill depends on a lot of factors.

Consider an unmarried couple with no children. One partner makes $70,000 and the other makes $30,000. They would pay a total of $13,483 in federal income taxes if they each take the standard deduction and file as single adults, according to an analysis by The Tax Institute at H&R Block.

If that same couple were married, with the same combined income of $100,000, their federal income tax bill would decrease by $1,625.

That’s because joint filers combine their incomes, allowing higher-paid spouses to shift some of their income into lower tax brackets, said Jackie Perlman, principal research analyst at The Tax Institute.

But those benefits disappear as taxpayers make more money because of the way the income tax brackets are structured, Perlman said.

For example, give that same unmarried couple a hefty raise. Now, one partner makes $225,000 and the other makes $75,000. Their combined tax bill, if they file as single adults: $71,861.

If they were married and filed a joint return, with the same $300,000 in combined income, their tax bill would jump by $5,714, according to the H&R Block analysis.

Some of the biggest tax savings will go to same-sex couples in which one partner relies on the other for employer-provided health insurance,

By law, employer-provided health insurance is tax-free for the vast majority of workers, married spouses and dependent children. But if a worker’s unmarried partner is covered, those benefits, which can be worth thousands of dollars a year, are taxed.

Some wealthy same-sex couples could do well, too, if one spouse inherits a lot of money from the other. That was the central issue in the Supreme Court case that struck down the federal Defense of Marriage Act, or DOMA.

But the case that doomed DOMA was uncommon. Only the very rich pay federal estate taxes – less than two-tenths of 1 percent of all estates, according to the Tax Policy Center. That’s because estates of less than $5 million are exempt, and married couples can exempt estates as large as $10 million.

In the Supreme Court case, Edith Windsor of New York sued to challenge a $363,000 federal estate tax bill after her partner of 44 years died in 2009. Under federal law, married couples can inherit unlimited amounts of money from their spouses, tax-free.

In 2009, Windsor had to pay federal taxes on the portion of the estate above $3.5 million – an exemption that has since grown to more than $5 million – because the federal government didn’t recognize her marriage. Because of the court’s ruling, she now gets the entire inheritance, free of federal estate taxes.

The court’s decision, however, left many questions unanswered. For example, taxpayers can generally go back three years to amend federal tax returns. If same-sex couples have been legally married for three years, can they amend past returns and get refunds?

“That is a great question, and it’s one that is being asked all over the country,” Perlman said.

Also, what if you were married in a state that recognizes same-sex marriages but now live in a state that does not? Do you file your federal taxes as a married couple and your state taxes as single individuals?

Stay tuned, says the IRS.

“We are reviewing the important June 26 Supreme Court decision on the Defense of Marriage Act,” the agency said in a statement. “We will be working with the Department of Treasury and Department of Justice, and we will move swiftly to provide revised guidance in the near future.”