Puerto Rico Paga + Taxes que 6 Estados

08/27/2013 | Filed under: Mala Administración PPD y Neo-Comunistas | Posted by:

The Economist

Puerto Rico Paga + Taxes que 6 Estados

America’s fiscal union

The red and the black

Aug 1st 2011, 16:16 by The Economist online

Where federal taxes are raised and spent
SOME American states receive more in federal spending than they pay in federal taxes; others receive less. Over twenty years these fiscal transfers can add up to a sizeable sum. From 1990 to 2009, the federal government spent $1.44 trillion in Virginia but collected less than $850 billion in taxes, a gap of over $590 billion. But relative to the size of its economy, Virginia derived a smaller benefit from America’s fiscal union than states like New Mexico, Mississippi and West Virginia, where the 20-year transfer exceeded 200% of their annual GDP. Transfers to Puerto Rico, which is a US territory not a fully incorporated state, exceeded 290%. Where did these transfers come from? New York transferred over $950 billion to the rest of America’s fiscal union from 1990 to 2009. But relative to the size of its economy, Delaware made the biggest contribution, equivalent to more than twice its 2009 GDP. These calculations are based on tax figures provided by the Internal Revenue Service (which used to bracket Washington, DC, with Maryland) and federal spending numbers provided by the Census Bureau, which ignores spending on international programmes and interest payments.
See the full data below:

 

Certainly it is no coincidence, but the question becomes why do these rich people and big businesses (who trend Republican) like to live in blue states? Of course, considering recent migration patterns for individuals and businesses towards red states, that question might need to be rephrased… Why, until recently, did the blue states have more of an economic growth advantage?
I think there are many reasons for this such as how many blue states historically are more prone to industry, were once the primary advocates for capitalism/free labor competition, had considerably less social strife between races (although quite a bit more ethnic issues due to population demographic differences) which all gave them advantages for business growth. But much of that has changed. Though the blue states have historically been the major performing centers of the economy, various factors and politics have stagnated their economic power while the red states are growing exponentially in comparison.
As many like to flaunt, the Republican Party and Democratic Party political map changed significantly in the 1960s when the Dems took a pro-Civil Rights stance and the Republican Party decided to feed off white resentment towards it. However, what we tend to ignore is that the Republican Party had dropped strong Civil Rights stances as Reconstruction came to a close nearly 100 years prior to this development. The alignment of the Republican Party with business had been in effect for quite a long time and had been forged by the economic ideologies which drove much early blue state success. When the red states embraced the Republican Party (perhaps for the less than honorable reasons, but embraced they did) the red states inherited that pro-business ideology as well. For the last few decades the red states have changed significantly both because of stabilizing racial/demographic relations and a new focus on being more pro-business. The alignment with the Republican Party is still in progress in some red states and certainly not all are alike. (Of course, since we tend to define red and blue states based on their favorite national politics rather than the actual percentage of Dems & Republicans in the state governments, I’m not going to get too terribly specific.)
Naturally, the Republican Party has been forced to adapt to certain values which made the red states happier and alter some of their policies, but just as much has remained the same when it comes to core free labor and glorifying strict capitalist policies. So, just as we’ve seen a realignment politically with the red states and the Republican Party, we have also seen businesses as well as migration patterns align with the red states shortly afterward; patterns which we once saw with the blue states.
This is all observed correlation, of course, and we should recognize that correlation does not necessarily equal causation, but I think it is worth noting that the strength and weakness of the Republican Party is that its core values from the 1870s (and arguably even during the 1850s-1860s) have not changed drastically. Perhaps that is working for them in terms of red states becoming the new targets of migration and business investment, but that will all be irrelevant if they do not learn to attune their social ideologies with the rest of the 21st century to be more inclusive of various demographics. That is also not to say Democrats are not just as capable of being financially successful and attracting businesses as well. Unfortunately, this theory is forced to make some generalizations and paint with a broad brush which looks primarily at blue vs. red state economic performance under their respective political alignments.
In other words, this theory, though certainly imperfect and laid out simplistically without expounding nearly enough on the highly complex transformations of our political maps, proposes that in reality much of the blue states’ financial success was due to former political/economic ideologies that the Republican Party was partially founded on. As the Republican Party has relocated itself into the red states, so too has the flow of economic growth. We have yet to see whether this trend, which has been building since the 1970s, will eventually lead to the red states either catching up with or potentially surpassing the blue states. Note that the migration changes began in the 1970s roughly around the same time as the Republican Party consolidated its power in the red states? Most likely not a coincidence.
But do bare in mind that just because something is not a coincidence, that does not necessarily mean it is a cause, either. The original post I responded to says it is not a coincidence more rich people are in blue states, but whether or not that is because of Democratic leadership or the lingering ruminants of when Republicans dominated those areas for over 150 years, is questionable.

Expand 1 more reply

6zwvsRzLZz Nov 3rd 2012, 04:56
The federal tax revenues by income group and the federal spending composition (transfer payments – socials security, veterans benefits, medicare, medicaid; infrastructure – roads,airports and waterways; defense spending; and agricultural subsidies) by state would be very interesting to compare. And it would be even more revealing to compare how states tax themselves and spend in the same areas.
Maybe the Economist could compile this deeper dive into the underlying data as most of the US media seem uninterested of more serious economic journalism. I suspect you would find that the states with the largest return on revenues paid in taxes to the federal government, tax themselves at very low rates and let other states pickup the tab for the difference. I also suspect that transfer payments would make up a large percentage of the federal revenues paid to states…especially those with small economies or GSP.
While you are at it…you might take a look at the stabilizer affect of these federal revenues both overall and for individual state economies. These payments soften the stress of financial down turns and economic shocks. State governments cannot deficit spend and therefore during economic shocks, their revenues and subsequent spending are reduced further adding to the stress of the economic shock.
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Puerto Rico Poised for Worst Year Since ’00 on ‘Spooked’ Buyers

By Michelle Kaske – Aug 29, 2013

Municipal debt from Puerto Rico is poised for its worst year since at least 2000 as demand for state and local securities wanes with yields at two-year highs.

Bonds of Puerto Rico and its localities have lost 14.9 percent this year through Aug. 28, about three times more than the rest of the $3.7 trillion municipal market, according to Standard & Poor’s data. The commonwealth’s borrowings haven’t had an annual loss this steep since at least 2000.

Investors demand 2.76 percentage points of additional yield to buy 30-year Puerto Rico general-obligation bonds rather than top-rated munis, the most since January, data compiled by Bloomberg show. The island’s general-obligation debt is rated one level above junk amid recurring budget deficits and a pension system that has a lower funding level than any U.S. state.

Individual investors, who own about 70 percent of the municipal market, are “spooked” by the drop in prices on Puerto Rico bonds and are selling, said Matt Dalton, who manages $1.6 billion of munis at Belle Haven Investments Inc. in White Plains, New York.

“Individuals are running scared on Puerto Rico right now,” he said. The commonwealth’s returns may worsen “before it really finds a bottom; There’s a good chance that it will be the underperformer for 2013.”

Puerto Rico’s population is 3.7 million. Its debt is tax-exempt in all U.S. states, which allows state-specific muni mutual funds to buy the securities. Investors have pulled $21.4 billion of cash from U.S. muni mutual funds in the 13 weeks through Aug. 21, the most since 2011, Lipper US Fund Flows data show.

Yields Climb

Puerto Rico general obligations maturing in July 2041 traded today at an average yield of 8.03 percent, the highest since they were sold in March 2012, Bloomberg data show.

As investors bet a growing economy will lead the Federal Reserve to curtail its bond buying, the muni market has lost 4.98 percent this year, according to S&P data.

Losses on Puerto Rico accelerated after Barron’s published an article in its Aug. 26 issue on the commonwealth’s fiscal challenges, saying the bonds may suffer. The island’s debt may drop even further as the commonwealth plans to borrow in the next couple of months, Dalton said.

The commonwealth is set to refinance $600 million of general obligations in September, and the Puerto Rico Highways & Transportation Authority will issue $750 million to $1 billion of revenue bonds within about 30 days of the general-obligation sale, Jose Pagan, interim president of the Government Development Bank for Puerto Rico, said last month.

The commonwealth had about $70 billion of public-sector debt as of June 30, according to the Development Bank, which handles the island’s capital-market transactions.

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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Para trabajar por la Estadidad: https://estado51prusa.com Seminarios-pnp.com https://twitter.com/EstadoPRUSA https://www.facebook.com/EstadoPRUSA/
Para trabajar por la Estadidad: https://estado51prusa.com Seminarios-pnp.com https://twitter.com/EstadoPRUSA https://www.facebook.com/EstadoPRUSA/