Income Distribution, Tax Collected, Budget Deficit and Fiscal Cliffs

Sharing the Income Tax Burden in America

  By SURENDRA K. KAUSHIK

 

 A look at IRS aggregate data on individual income from 1991 to 2009 reveals that about 50 percent (44  percent of all tax returns to be exact) of individual tax payers paid 2 percent of the total individual income tax collected in 2004  and less than 1 percent in 2009 for which we have the latest data.  The per capita income in 2005 was $25,035 according to the 2005 Census so it is consistent that about half of Americans had that level of income reported on their tax returns. The distribution of adjusted gross income and tax collected from each income group is as follows.

Personal Income group           Percentage of AGI                  Percentage of Tax Collected 

                                                1991 1996 2001 2004 2009    1991 1996 2001 2004 2009

Less than $25,000                     21       16    11      17      9      10        5       3         2      1   

$25,000 to $50,000                   30       23    19      16     16      24      16     11         9      6

$50,000 to $100,000                 28       30    30      27     28      30      27     24       21    18

$100,000 to $500,000               15       21    27      26     34      24      30     36       38    45

$500,000 and above                    6       10    13      14     13     12      22     26       30    30

Total                                        100      100 100    100   100    100    100   100     100   100

Overtime the lowest income group has significantly reduced its burden from over 9 percent in 1991 to only 2 percent in 2004 and 1 percent in 2009. It has reduced its tax burden by 99 percent from 1991 to 2009. The income group from $25,000 to $50,000 has reduced its tax burden by 60 percent in 15 years and essentially to zero in 2009- the year for which IRS has latest data on its web site.

     The $50,000 to $100,000 group had their share of income and taxes remain stable with a slight decrease in taxes. The richer group in $100,000 to $500,000 bracket experienced a 60 percent increase in and the people in $500,000 and above had their taxes go up by 150 percent in fifteen years as their share of income increased by one hundred and thirty three percent

     It is clear that the normatively desired progressive nature of the US personal income tax system has been effective as personal incomes have grown in the aggregate and grown more for the higher income brackets. The average tax rates paid by people in the $100,000 and above groups approaches (or exceeds) the marginal tax rates in the system. 

     In recent years we have been collecting about 15 percent and spending about 24 percent of GDP – an impossible situation to continue.  How to bridge the gap? We collected 21 percent in 2004 so we could go back to that by raising taxes on income above$100,000 by setting a minimum percentage to be paid between $100, 000 to $500,000 (say 25 percent) and $500,000 and above (say 30 percent) and reduce unnecessary and inefficient spending wherever possible in the budget    This new system of taxing and spending could help us balance the budget in 2016-2017 and have surpluses beyond 2017.

   If growth picks up to 4% and higher and unemployment goes below 6 percent, the federal budget can be balanced in 2016-17 through a combination of additional revenues from growth of the economy, new taxes on higher incomes ($100,000 and above) and spending cuts when a new president assumes office in January 2017.

   If growth continues for the next forty years at four percent, the national debt in 2016-217 can be stabilized at $19 trillion (or less) and brought down to zero in 2054-2055 with an annual retirement of the debt by $500 billion on the average from 2017 to 2055.

 Surendra K. Kaushik is professor of finance at Pace University in New York and Westchester (skaushik@pace.edu)

The Hindu : Sci-Tech / Technology : India ranks No.2 in Google search queries for education

The Hindu : Sci-Tech / Technology : India ranks No.2 in Google search queries for education

Education Policy for India

Education Policy, Higher Education and Creation and Achievement of Economic Growth Potential in India

1.  Human Capital is the most important resource for economic growth and progress.

2.  Therefore India should invest sufficient amount of GDP in building human capital (education, knowledge, technology, skill building, manpower training, on-the-job training, etc.) to achieve the concrete goals of 10 % of the population with tertiary education level degrees, diplomas, certificates; 50 % higher secondary; 100% primary and literacy by 2040.

3.  The goal of at least 10% of the population with college degrees of their choice is consistent with the stock of human capital in the countries today called developed or industrialized.

4.  The current national policy of spending 8% of GDP on building the above mentioned level of human capital maybe sufficient as we look at this ratio around the world.

5.  Allocation of the national education budget should be 50%-25%-25% from primary to secondary to college.

6. India spent only 3 percent of GDP from 1950 t0 2000 and only about 11 to 13% on higher education. Therefore today India has only 5 percent of its population with college degrees. Their contribution is enormous. Thus, there is the need to double this number to 10 percent.

7.  The secondary and college level potions should be spent 50%-50% on general and technical and vocational education including engineering, vocational and professional training.

8.  The establishment of this educational infrastructure should be proportional to the population between rural and urban across all states and districts. This avoids the need for quotas, preferences, etc. based on social and political considerations.

9.  Leverage the educational system by creating partnerships with profit and nonprofit private sector investments in human capital in the country to befit from creativity and innovation, scaling effects and choice. Government, for profit private, government-aided institutions, and pure non-profits can serve the human capital market side by side.

10.  Special incentives can be created in the areas of more critical need for manpower in the short-term.

11. This system will allow India to have the needed human capital for better than 6% sustainable long term annual GDP growth to increase the average per capita income by 3 to 4 percent per year as the population continues to grow by about 2 percent.

12.  India has shown excellence in many of its institutions and their graduates from Indian universities and states. The expanded access to education throughout the country to all people will also increase excellence. 

13.  Expansion of a few highly successful institutions like IITs, IIMs and others is consistent with the short-term goal of increasing their output of smart graduates. So it is with the collaboration with foreign universities and allowing them to partner with Indian institutions as well as to offer their own programs in India.

14.  Creating institutions of excellence in rural India is a must for the long-term sustainability of higher growth rate and better distribution of GDP among the Indian people.

15.  Mrs. Helena Kaushik Women’s College will do its best to cooperate and partner with the government, educational institutions-domestic and foreign, NGOs, corporations  and international organizations  to expand higher education to rural women.

Biz Stone and the Power of Giving Back

Giving is great!
Read the Article at HuffingtonPost

Biz Stone and the Power of Giving Back

Giving is a great idea. Check out my blog on Giving at

http://sur­endrakaush­ik.blogspo­t.com/

and

http://kau­shikcolleg­eforwomen.­blogspot.c­om

Giving can help us cope with deficits and relieve us of tax burdens.
Read the Article at HuffingtonPost

Women’s Empowerment in India’s Parliament and Government in March 2011

Parliamentary democracies like India that practice one person one vote should ideally have people’s representatives in elected bodies such that the Parliament and the government reflect the gender composition of the population which is roughly 50-50. The International Women’s Day being celebrated on March 8 each year has prompted me to look into the facts which reveal that India has a big gap between the ideal and the reality on March 8, 2011. India’s Parliament has two houses: the Lower House (Lok Sabha) and the Upper House (Rajya Sabha).

Lok Sabha consists of 552 members of which 60 (almost 11 percent) are women; 59 represent 16 of the 28 states and 1 represents 1 of the 7 Union territories.

The state-wise distribution of the 60 seats is as follows:
State/Territory Seats Percentage
Uttar Pradesh 12 (20 percent)
West Bengal 7 (12 percent)
Madhya Pradesh 6 (10 percent)
Andhra 5 (8 percent)
Bihar 5 (8 percent)
Gujarat 4 (7 percent)
Punjab 4 (7 percent)
Chhattisgarh 3 (5 percent)
Maharashtra 3 (5 percent)
Rajasthan 3 (5 percent)
Assam 2 (3 percent)
Haryana 2 (3 percent)
Delhi 1 (2 percent)
Karnataka 1 (2 percent))
Meghalaya 1 (2 percent)
Tamil Nadu 1 (2 percent)
Total 60 (100 percent)

Political party affiliation of the 60 women parliamentarians in Lok Sabha is as follows:
Political Party Seats Percentage
Indian National Congress 24 (40 percent)
Bharatiya Janata Party 13 (22 percent)
All IndiaTrinamool Congress 4 (7 percent)
Bahujan Samaj Party 4 (7 percent)
Samajwadi Party 3 (5 percent)
Janata Dal (United) 2 (3 percent)
Nationalist Congress Party 2 (3 percent)
Shiromani Akali Dal 2 (3 percent)
Communist Party of India (Marxist) 1 (2 percent)
Dravida Munnetra Kazhagam 1 (2 percent)
Independent 1 (2 percent)
Rastriya Lok Dal 1 (2 percent)
Shiv Sena 1 (2 percent)
Telangana Rashtra Samithi 1 (2 percent)
Total 60 (100percent)

The state-wise representation by a total of 26 women from 15 of the 35 states and union territories in the Rajya Sabha is as follows:
State/Territory Seats Percentage
Madhya Pradesh 3 (12 percent)
Tamil Nadu 3 (12 percent)
Andhra Pradesh 2 (8 percent)
Himachal Pradesh 2 (8 percent)
Orissa 2 (8 percent)
Assam 1 (4 percent)
Chhattisgarh 1 (4 percent)
Gujarat 1 (4 percent)
Jharkhand 1 (4 percent)
Kerala 1 (4 percent)
Punjab 1 (4 percent)
Rajasthan 1 (4 percent)
Tripura 1 (4 percent)
Uttar Pradesh 1 (4 percent)
West Bengal 1 (4 percent)
Nominated 4 (15 percent)
Total 26 (100)

Political party affiliation of 26 women members of Rajya Sabha is as follows:
Political Party Seats Percentage
Indian National Congress 11 (42 percent)
Bharatiya Janata Party 5 (19 percent)
Communist Party of India (Marxist) 3 (12 percent)
Dravida Munnetra Kazhagam 2 (8 percent)
Biju Janata Dal 1 (4 percent)
Telugu Desam Party 1 (4 percent)
Nominated by the President of India 3 (12 percent)
Total 26 (100 percent)

States and territories of (1) Andaman and Nicobar Islands, (2) Arunachal Pradesh, (3) Chandigarh, (4) Dadra and Nagar Haveli, (5) Daman and Diu, (6) Goa, (7) Jammu and Kashmir, (8) Lakshadweep, (9) Manipur, (10) Mizoram, (11) Nagaland, (12) Puducherry, (13) Sikkim, (14) Uttarakhand do not have any women member in India’ Parliament.

It is estimated that some 11 percent of all corporate chiefs India are women.

Clearly women’s representation at the top of the governing structures is low with 10 percent of seats compared with 90 percent representation made by men. Indian National Congress and Bharatiya Janata Party dominate women parliamentarians compared with other parties. The states of Madhya Pradesh, Uttar Pradesh and West Bengal stand out among the states with more women members of Parliament.

Many questions come to mind foremost among them being why there is such a low percentage of seats held by women, how it can be improved and comparison of India with other countries in terms of percentage of women in top authority and decision making positions in society. These questions will be addressed in future blogs.

It is noteworthy that India’s President, Speaker of Lok Sabha, Leader of Opposition in Lok Sabha and president of the Indian National Congress party are all women. There are 3 women in a Union Cabinet of 35 Ministers, 1 of 6 Ministers with Independent Charge, 3 of 37 Ministers of State in Prime Minister Dr. Manmohan Singh’s government. There are no Supreme Court judges. There are 3 Governors/Lt. Governors/Administrators of 35 states and territories, and 2 Chief Ministers of 29 states and territories. Overall women occupy about 10 percent of all top political positions in India. It is a long march towards 50 percent.

The entire process has to be streamlined and strengthened with financial support and training to develop leaders. The present quota system at the local level based on gender, caste, etc. is largely abused by men.

School curriculum, colleges, and MLAs, MPs not connected to men leaders have to be developed through genuine education and skills with scholarships, training programs and centers of study, research, degrees like Bachelor and Master of Public Admin, Leadership, etc.

Institutions and programs are needed but men leaders like the PM also have to give a chance to women and put them on top! 10 percent is too low. It will take much longer to have up stream flow of women leaders from grassroots to the top. Even many of the present district level women leaders, MLAs and MPs are relatives of men leaders. It is much easier and faster to put shining examples in the cabinet, ministers, commission members, Vice Chancellors, some professors, civil leaders at district levels, etc.

There are only about 10 most popular women leaders today as examples to 600 million women in India- Pratibha Patil, Sonia Gandhi, Mamata Banerjee, Girija Vyas, Jayalalithaa, Mayawati, Sushma Swaraj, Meira Kumar, Najma Heptulla, Kiran Bedi, Shabna Azmi, Hema Malini, and Brinda Karat, along with a handful of another 50 or so at the national level. Majority of these are there because of their father, husband or another relative.

It is a waste of potential national resource not to have more women leaders and a pipeline of future leaders in business, government, politics, and science. On this International Women’s Day, best wishes to women in the next year and all the years to follow.

Interactive Discussion of India's Budget for 2011-2012

Interactive Discussion on Union Budget 2011-12

Interactive Discussion on Union Budget 2011-12
The Consulate General of India, New York organised an interactive panel discussion on the Indian Union Budget on 28th February 2011, at the Consulate Ballroom. Representatives of financial institutions, academicians from various universities, company executives, media persons, and community members attended the lively interactive discussion.
Dr. A.M. Gondane, Deputy Consul General, welcoming the guests introduced broad outlines of the Budget and the Economic Survey. He stated that the Indian economy had come out of the sluggishness consequent to the global financial crisis in 2007 and was on the path of recovery with achievement of 8.6% growth during the current financial year and is projected to grow at slightly over 9% in the year 2011-12. He said that India’s GDP during the current year is estimated to be Rs.7877947 crore (US$ 1.75 trillion) at current market price. He stated that the Budget aimed at consolidation of the fiscal position of the Government bringing the deficit to 4.6% in 2011-12 and 3.5% in year 2013-14, encompassed inclusiveness with increased social spending on education, health and rural development, and would impart developmental orientation by way of increased spending on infrastructure, Bharat Nirman and the other vital sector of the economy.
Dr. Rajiv Sobti, MD, Chief Investment Officer, Nomura office at the World Trade Center, New York stated that the Budget was balanced with several vital sectors focused for growth. He stated that some explicit measures for developing the secondary market in derivatives would give a fillip to investments by financial institutions and funds from abroad. He appreciated the opening of investments in mutual fund by foreigners. He stated that bond and debt market opening was imperative for increased flow of funds from abroad to meet the gap between investments desired and domestic resources. He emphasized that real interest rates in India were low hence long term capital was not coming into India.
Prof. Surendra K. Kaushik, Professor of Finance, Lubin School of Business, Pace University stated that though the outlays on social sectors – health and education had been increased substantially, yet, the expenditure was not enough to meet the growing needs of the young demographics in India. Increased allocation amounting to 48.5% of total plan allocation for infrastructure was indicative of the focus of Government on development of infrastructure. He said that the taxation rate in India was rather low as compared to the United States and Indian tax collection was less than 10% of the GDP. He appreciated the exemption given to senior citizens over 60 years and another category of senior citizens over 80 years which was anticipating the future reality. Prof. Kaushik appreciated tax reforms underway including Goods and Services Tax (GST) and the Direct Tax Code (DTC) which were under discussion with several stakeholders including the State Governments and the intention of the Finance Minister to bring a Constitutional Amendment Bill to facilitate this was a very welcome step.
Mr. Sarav Periasami, President and CEO of PERI Software Solutions Inc. emphasized the importance of education and the necessity to bring about clarity for inviting foreign investment in education sector in India. He appreciated the increased allocation of funds by 24% over last year. He said that financial resources were not the only constraints but clarity in regulation would create a favorable climate for developing this very vital sector. He said that increase in Minimum Alternate Tax (MAT) by 0.5% will affect business sentiment. He also said that levying service tax on other services or bringing in more items under the excise would also be a dampener for business sentiments.
All panelists felt that though growth was an imperative for raising the level of living standards, control of inflation was also very important. Inflation was detrimental to fixed income and lower income groups and supply constraints should be progressively removed.
In the lively question-answer session, comments about current account deficit, declining FDI, comparison of growth in China and India, encouragement to innovation, contribution of non-resident or persons of Indian origin abroad, etc. were responded to by the panelists.
The lively interactive discussion was followed by dinner.
Event From Date : Feb-28,2011 Event To Date : Feb-28,2011