News of the Day

57% of American Households Paid No Income Tax Last Year, Study Shows

More than half of U.S. households paid no federal income taxes in 2021, a temporary spike attributed to massive COVID-19 relief spending in the form of tax credits and stimulus payments.

A recent analysis from the nonpartisan Urban-Brookings Tax Policy Center estimated that 57% of Americans paid no taxes last year. While that’s down slightly from last year’s 60%, it marks a significant increase from the 44% recorded before the pandemic began.

The increase stems from the pandemic-driven surge in government spending, including three stimulus checks, expanded federal unemployment aid and the expanded child tax credit.

Because the stimulus checks were designed as refundable tax credits, they significantly reduced tax liability in both 2020 and 2021, the analysis said. And in some cases, the checks flipped some households from paying income tax to not doing so.

Essentially, no household making less than $28,000 paid federal income tax last year, nor will a majority – about 75% – of those making between $28,000 and $55,000. Among middle-income households, about 43% paid no federal income tax.

Still, while many households did not pay federal income tax, most Americans still owed payroll or state income taxes. The study shows that about four out of five individuals paid at least one of these taxes. Nearly everyone paid the government in another form, whether through state and local sales taxes, excise taxes, property taxes or state income taxes.

In Hot Housing Market, Real Estate Transfer Revenues Near All-Time High

The real estate transfer fee is imposed on the person selling or granting real estate and equals $3 for every $1,000 of the value of real estate property being transferred. The vast majority of these transfers are property sales. Certain transactions are exempt from the fee, such as those by units of government, property transferred as gifts, or between spouses. The fee is collected at the county level by the register of deeds, and revenue proceeds are split between the state’s general fund, which receives 80%, and the county, which receives 20%.

State and local revenues from fees on transfers of real estate in Wisconsin increased 37% in fiscal year 2021, the largest annual increase in nearly four decades. This was driven by robust increases in real estate sales and residential property values during the COVID-19 pandemic. The increase benefits state government at a time of fiscal strength, which may suggest consideration of options to share the wealth.

After rising rapidly during the real estate bubble of the mid 2000s, transfer fee revenues plunged sharply during the financial crisis and housing collapse of the Great Recession and slowly rebounded from 2011 to 2018 before plateauing the following two years. Department of Revenue data show the volume of real estate transfers and other information, such as the value of the properties, by calendar year from 2016 to 2021. At a statewide level, the number of transfers roughly held steady from calendar 2016 to 2018, ticked down slightly in 2019, then increased 5.5% in 2020 and 11% in 2021.

While the increased volumes of transfers certainly contributed to the sharp increase in fee revenues in 2021, soaring real estate values also played a key role. The growth was driven primarily by residential values, which showed strong growth throughout the five-year period from 2016 through 2021 – with a particularly pronounced uptick amid the pandemic in 2020-21.

The median value of single-family residential properties transferred in Wisconsin increased from $126,500 in 2016 to $170,000 in 2021, or 34.4%. More than half of the increase came in 2020 and 2021, the data show, with statewide increases of 7.7% and 7%, respectively.

 

U.S. Supreme Court Upholds Wisconsin’s Congressional Redistricting, Rejects Legislative Maps

The United States Supreme Court ruled March 23 that redistricting maps for the state legislature created by Governor Tony Evers under a Wisconsin Supreme Court-ordered “least change” requirement contain a racial gerrymander. The nation’s top court sent the maps back to the state’s top court, and ordered it to hold proceedings to fix these maps or approve different ones.

At the same time, the U.S. Supreme Court denied a request to overturn the “least change” congressional maps submitted by Evers and approved by a majority on the Wisconsin Supreme Court, meaning those new district boundaries will be in place for the fall 2022 election.

The issue at the heart of the legislative maps is whether it was lawful to expand the number of Milwaukee-area Assembly seats with a majority of Black voters. In the maps approved in 2011, there have been six districts with a majority of Black voters. The maps submitted by Evers would increase that number to seven districts, by adjusting the lines and lowering the percentage of Black voters in each district to just above the 50% mark.

After the Wisconsin Supreme Court approved the governor’s “least change” legislative maps, Republican lawmakers and a conservative legal group asked the U.S. Supreme Court to step in, saying the Evers maps illegally used race as a primary factor in drawing the district lines.

The issue of the legislative maps now returns to the Wisconsin Supreme Court, which may pursue a number of options.

“On remand, the court is free to take additional evidence if it prefers to reconsider the Governor’s maps rather than choose from among the other submissions,” stated the U.S. Supreme Court’s order.

Essentially, the Wisconsin high court can ask parties to submit a revised version of the Evers maps that would keep the number of majority Black districts at six, or it could reverse its earlier decision and choose the maps submitted by the Republicans in the state Legislature, which contained six black districts in Milwaukee.

U.S. Rolls Back Tariffs on U.K. Steel

The United States has agreed to ease Trump-era tariffs on United Kingdom steel and aluminum shipments. In exchange, the United Kingdom will suspend extra taxes it had put on United States products such as bourbon and Levi’s jeans.

Under the agreement, the US will replace the 25% tariffs on steel with a quota system. The policy will let United Kingdom metal imports into the country duty-free up to a certain level – the quota – before taxes kick in again.

The deal will go into effect June 1.

United States officials also welcomed the suspension of the UK retaliatory tariffs, which they said affected about $500m worth in annual trade.

The United States and the United Kingdom traded more than $260 billion worth of goods last year, of which the majority were exports from the United States such as metals, aircraft parts, oil and gas.

While America accounts for nearly one fifth of total United Kingdom trade, the United Kingdom market represents just 5% of United States exports.

White House Meets with Oil, Bank, Other Companies about Russia Invasion

President Biden and other administration officials on Monday met with executives from various industries including oil companies, clean energy firms and major banks about the ongoing conflict between Russia and Ukraine.

A White House readout of the meeting said that National Security Advisor Jake Sullivan, Senior Advisor Cedric Richmond, National Economic Council Director Brian Deese, Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo met with the CEOs of 16 major companies to discuss the latest developments of Russia’s invasion of Ukraine.

The readout said that officials “conveyed the Administration’s commitment to continue imposing heavy costs on [Russian President Vladimir] Putin to degrade Russia’s war machine and support the people of Ukraine, while taking concrete actions to mitigate the price increases on American consumers caused by Putin’s action”

It said they also discussed the need to “work together” on disruptions to global markets and supply chains, especially energy and agriculture, and identify alternative sources of key products. And it said they all committed to “close communication” going forward.

Existing Home Sales Fall in February

Homebuying activity faded in February.

Existing home sales declined 7.2% to a seasonally adjusted 6.02 million units in February from a month earlier, according to the National Association of Realtors (NAR). The number of sales was down 2.4% from the same month a year ago. January home sales figures were revised slightly down to 6.49 million from 6.5 million.

“The latest decline is of larger magnitude than normal,” said Lawrence Yun, chief economist at NAR, noting that anything above 5% is considered a big swing.

Sales in all four regions of the U.S. fell, with the Northeast and Midwest leading the declines by recording a 11.5% and 11.3% drop, respectively. Sales fell 5.1% in the South and 4.7% in the West.

The median existing-home price for all housing types in February rose 15% to $357,300, up 15.0% from February 2021, as prices grew in each region. This marks 120 consecutive months of year-over-year increases, the longest-running streak on record.

“After 10 consecutive years of home price increases, the current U.S. median home sales price is more than double the $155,600 median in February 2012 when home prices began their current streak,” said Realtor.com Chief Economist Danielle Hale in a press statement.

“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” said Yun. “Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate.”

Federal Appeals Court Revives Key Climate Measure

The 5th Circuit Court of Appeals on Wednesday stayed a district judge’s injunction against President Joe Biden’s social cost of carbon, reinstating the metric used to measure the climate impacts of rulemakings and projects.

The social cost of carbon, which is used by the federal government when issuing regulations, approving infrastructure projects or taking other actions, is an estimate of the present and future damages resulting from emitting one ton of the greenhouse gas into the atmosphere. Climate activists hope a higher estimate will significantly increase the value assigned to pollution reductions, which in turn will help justify stronger climate regulations.

The stay allows EPA, the Departments of the Interior, Energy and Transportation and other federal agencies to resume using the interim SCC figures in rulemakings and other decisions. At least one major rule, regarding emissions from heavy-duty trucks was published without quantifying its climate benefits because of the injunction.

The stay is pending a fuller appeal of the injunction, but the order issued on Wednesday indicates the appellate court is not amenable to Louisiana’s arguments.

 

Federal Reserve Bank Raises Interest Rates, Projects 6 More Hikes in 2022

The Federal Reserve said on Wednesday that it would raise interest rates for the first time in three years as policymakers look to cool red-hot inflation.

The widely anticipated move – that the Fed would raise rates by 25-basis points – brings to an end the ultra-easy monetary policy put in place two years ago to prop up the economy through the COVID-19 pandemic.

The rate liftoff, which puts the benchmark federal funds rate at a range between 0.25% and 0.5%, is likely just the start of a series of increases intended to curb runaway inflation.

New economic projections released after the meeting show that policymakers expected six more, similarly sized increases over the course of 2022 after consumer prices hit a 40-year-high. It marks a considerable shift from just six months ago, when half of the central bankers believed interest rate increases were not warranted until at least 2023. Fed officials also expect inflation to remain elevated, ending 2022 at 4.3% – far above the Fed’s annual target of 2.3%.

 

President Biden Urges Private Companies to Help Narrow Gender Pay Gap

President Joe Biden marked Equal Pay Day on Tuesday by spotlighting new steps aimed at closing the gender pay gap for federal workers and contractors. And he urged private companies to do likewise.

President Biden signed an Equal Pay Day executive order that encourages — but does not order — the government to consider banning federal contractors from seeking information about job applicants’ prior salary history. The Labor Department also issued a directive aimed at strengthening federal contractors’ obligations to audit payrolls to help guard against pay disparities based on gender, race or ethnicity.

“It’s my hope that it sets an example for all private companies to follow as well,” Biden said after signing the executive order. “Gender equality is not a women’s issue alone. It benefits everybody.”

The Office of Personnel Management was directed to consider a regulation to address the use of prior salary history in hiring and setting compensation for federal workers.

Wholesale Prices Soar 10% in February, Highest Level on Record

The Labor Department said Tuesday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, surged 10% in February from the year-ago period. On a monthly basis, prices grew by 0.8% – a slight slowdown from January, when the gauge spiked by 1.2%.

Core inflation at the wholesale level, which excludes the more volatile measurements of food and energy, increased 0.2% for the month, following a 0.8% increase in January. Over the past 12 months, core prices were up 6.6%.

Gasoline prices, which soared 14.8% in the month, accounted for nearly 40% of the February increase. Overall, prices for goods jumped 2.4% last month, while prices for services remained the same.

The eye-popping reading – which marked the ninth consecutive month the gauge has been above 5% – has ramped up pressure on the Federal Reserve to chart a more aggressive course in normalizing monetary policy. The central bank is almost certain to raise interest rates at the conclusion of its two-day, policy-setting meeting on Wednesday, with most economists penciling in a 25-basis-point hike as the start of a series of increases that could last for most of the year.

Fed Chairman Jerome Powell has left open the possibility of a rate hike at every meeting this year and has refused to rule out a more aggressive, half-percentage-point rate hike, but he said it’s important to be “humble and nimble.”