0
lawrocket

What are the US problems that need to fixed in the next four years?

Recommended Posts

Quote

Quote

Quote

There's that word again.

Those who make the most would pay the highest taxes in a flat tax environemnt. We have a sliding scale that ensures success is penalized at a greater rate than a flat tax would provide. You want to raise taxes on those who already pay the highest percentage and dollar amount. You describe that as 'fair'.

I'm not sure that penalizing success and calling it 'fair' is a good thing. Nope. Not sure at all...



Well, the logic behind it, and I'm sure you already know this, is that the higher your income, the more you can afford a higher tax rate, given what you still have left over after taxes. Take the difference between, say, a 10% flat tax on a family of 4 making $40K vs. one making $200K. You can buy a hell of a lot more with $180,000 left over than you can with $36K left over. But with a graduated tax, the $40K family getting taxed at 5% would have $38K left over; and to them, that extra $2K makes a big difference in paying for basic necessities. Taxing the $200K family at 20% still leaves them with $160K; for them, that might make the difference in what kind of 3rd or 4th car they can buy for the family, but it's unlikely to reduce their ability to pay for basic necessities.

(Also, as Wendy points out, we already have one form of flat tax, in the form of sales taxes which everyone pays at the same rate.)

A couple times you've expressed a dislike of massaging semantics to rationalize an agenda. OK; well, I get tired of affluent people claiming that their taxes are penalties on their success which get paid to poorer people to reward them for being lazy. Affluent people in the US (even those with only first-generation affluence like, say, doctor children of poor immigrant parents) are affluent not only due to the sweat of their brows, but also, in part, because because the particular nature of American society, resources, economy, etc. gave them the opportunity to become affluent in a manner that would be far less available to them in most other countries. So, paying taxes is one of the several ways (in addition to spending in the economy, creating jobs, etc.) they pay something back into the society that gave them the opportunity in the first place. It's not free payment to the poor and lazy, it's payment-back, and payment-forward, into society at large in exchange for the opportunity given by that society and benefited from.



Andy: You are adding things to my argument that I did not put there. I did not suggest anything was being given to anyone. I did not use any terms such as 'lazy'. I just said nobody has explained to me how a flat tax is unfair.

You make the argument that those who make more should pay more because they can. Please think that through. It suggests that government is entitled to anything we do not absolutely need to survive. It suggests that people are not entitled to the benefits of their hard / smart work. It also sounds very much like, "From each according to his ability and to each according to his need." That was tried. Didn't work too well.

I agree with your argument that those who benefit the most should pay the most. A flat tax does just that.

A sliding scale tax doesn't make those who make more just pay more. It increases the definition of 'more'. It attempts to remove any excess. The logical end-state to that idea is that anything you don't NEED to survive should go to the government for re-distribution.



You think I'm misinterpreting your words, and I think you're misinterpreting mine. Tell you what, let's just presume that neither of us intends that.

Quite simply: The idea, and the argument for the fairness of, a graduated tax rate is that it makes the burden equivalent for all people; in other words, the practical life-burden of a 5% tax rate on a $40K income-earner is roughly equivalent to the practical life-burden of a 20% tax rate on a $200K income-earner.

Raw percentage-equality is not fairness; that's just the "damned lie" fueled by the raw statistic. The true fairness, as a matter of policy, comes not from percentage-equality; rather, in practical reality, it comes from equivalence of burden.

Share this post


Link to post
Share on other sites
Quote

he practical life-burden of a 5% tax rate on a $40K income-earner is roughly equivalent to the practical life-burden of a 20% tax rate on a $200K income-earner.



What about a $40k earner - debt free without family - versus a $200k earner with $200k in student loans and kids?

This is the comparison game and value assignment, which is always arbitrary and subjective.

That's why I hate the use of the term "fair." There is nothing objectively fair or equitable, is there? Attempting to add "reason" to such things while ignoring the subjective is why the debate is so intense. There are people impacted by this in different ways and it is no less personal to a $200k earner than a $40k earner.


My wife is hotter than your wife.

Share this post


Link to post
Share on other sites
Quote

What about a $40k earner - debt free without family - versus a $200k earner with $200k in student loans and kids?



And that right there demonstrates why the "no deductions" scenario will never gain traction: because deductions, too, are needed to effect equivalence-of-burden.

Look, guys, the idea's a non-starter. Give it up.

Share this post


Link to post
Share on other sites
Quote

>, with the goal being matching revenue to expenditures.



I guess if you assume that every expenditure is absolutely necessary



how about a philosophy of matching expenditures to revenue?


talk about a subjective thread discussion.....:o

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

Share this post


Link to post
Share on other sites
Quote

That philosophy is based upon the notion that economic policy should have as its chief goal the maximizing of government revenues through taxation.

I challenge that notion.



Not at all...but it basically puts a ceiling on revenue. If your expenditures can exist under that ceiling, great, but you are going to run into a real problem if they cannot.

Share this post


Link to post
Share on other sites
Quote

it basically puts a ceiling on revenue



Which I think is a very good idea, actually. it certainly leaves the budgetary process far less susceptible to shocks. And - even better - it ensures that the government is disinterested in whether or not the economy rockets like it did in 2003-2007. There was never a better time to be a tax man.


My wife is hotter than your wife.

Share this post


Link to post
Share on other sites
>I guess if you assume that every expenditure is absolutely necessary

It should be. We shouldn't be spending money on things that aren't necessary. In my mind the process should be:

1) Decide what you need to spend money on
2) Make a budget, get it approved (by congress, president, popular vote, whatever)
3) set taxes accordingly.

This whole "well we'll pay for it in 20 years" philosophy is one of the problems, I think. Deciding what you need - then immediately raising (or lowering) taxes to pay for it - would do a lot to prevent that sort of thinking.

>how about a philosophy of matching expenditures to revenue?

So "get as much money as you can from people and that's what you can spend?" I find that politicians can always find a way to spend more money, so that could be dangerous.

Share this post


Link to post
Share on other sites
Quote

Quote

What about a $40k earner - debt free without family - versus a $200k earner with $200k in student loans and kids?



And that right there demonstrates why the "no deductions" scenario will never gain traction: because deductions, too, are needed to effect equivalence-of-burden.

Look, guys, the idea's a non-starter. Give it up.



Andy...tried to continue the discussion with you via PM, but you don't accept them. I value your opinions, so I am trying to understand your point. The problem is that the 'equivalent burden' argument is indefinite. It seems to me to be an emotional argument. Once a higher earner (presumed higher performer) has paid their percentage, why shouldn't they enjoy greater fruits? A straight percentage is rational. A sliding scale is arbitrary. What is the point of 'equivalent burden' if not a percentage of income?

I don't completely disagree with your comments on deductions. One of the arguments I found against a flat tax was that, if applied at the first dollar, it could drive lower earners under the poverty line. I can buy that argument. So, maybe there needs to be a household deduction somewhere above the poverty line and the tax kicks in thereafter. Some thought would have to be given to what a household is. I don't really care for subsidizing people who want large families by making it a per capita issue.

I have to reject your definitive statement that the idea is a non-starter. You base that on your premise that 'equivalent burden' is the standard. Since that term has no meaning, I can't accept it. Help me define what it means and you may very well persuade me.
I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

Share this post


Link to post
Share on other sites
>The problem is that the 'equivalent burden' argument is indefinite. It seems to me
>to be an emotional argument.

It's both an economic and an emotional one.

On the emotional side you have "we shouldn't tax those unfortunate poor people." A popular sentiment, especially since Christianity has a long history of trying to help (not hurt) the poor - and that sentiment gets expressed in law.

However the more important argument (IMO) is economic. From an economic sense, a burdensome tax is one that prevents a taxpayer from spending in other areas. For example, if a man making $20K a year is taxed at a rate of 15%, he is likely to reduce his spending in other areas to pay the tax. A man making $200K a year is less likely to reduce his spending in other areas to pay that same percentage of tax. Thus, overall, consumer spending (which drives our economy) is not hit as hard when the rich are taxed at a greater percentage rate than the poor.

Share this post


Link to post
Share on other sites
I'll give that some thought. But my first reaction is that human beings don't really work that way. What I have witnessed is that people tend to spend however much they have. While some saving and investing goes on, most people just buy more expensive stuff and end up living paycheck to paycheck regardless of the size of the paycheck. I'm not saying you don't have a point. I'm just not sure how big a factor it really is.
I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

Share this post


Link to post
Share on other sites
a man making 20K/year taxed at 15% has to find a way to pay that 3K in taxes


a man making 200K/year taxed at 15% has to find a way to pay that 30K in taxes


BillVon' example is silly - they both have to deal with taxes - the higher income earner under a flat tax also has to pay his taxes and take the money from somewhere - it doesn't magically appear.


"magically appear" under our complicated tax scheme's certainly the requirement for everyone to pay or not seems to magically be increased or decreased by favoritism in the law - that's clear 'unfair' by any means - whether it's the poor getting to pay nothing, or the rich getting a special lower rate because of the 'flavor' of the income

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

Share this post


Link to post
Share on other sites
> What I have witnessed is that people tend to spend however much they have.

Really? Do you? I did that only up until the point where I could cover my basic needs (and some frivolous ones) easily. Once I made enough to cover those things I started saving the rest. That seems to be true for most of the people I know.

From a recent study by the Consumer Federation of America:

==========
For those in these two highest income brackets, planners report saving a higher percentage of income and having built greater wealth than non-planners. For example, planners with incomes $50,000-$99,999 are more likely to report they save 10 percent or more of their income (57% vs. 39%) and to have accumulated at least $100,000 in investments (37% vs. 19%)
=============

Share this post


Link to post
Share on other sites
short answer, is it's none of our business what others do with their money - save or spend


best thing we could do is DRAMATICALLY cut spending (everywhere - no favorites)

DRAMATICALLY simplify the tax code (eliminate deductions, subsidies, etc etc etc, go to a flat tax, get rid of social experiments attempting to manipulate spending behavior, etc etc,)

(both those items are about smaller and less intrusive government - give the people confidence that they will be allowed to spend and invest how they want)

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

Share this post


Link to post
Share on other sites
Your example compares levels of discipline, not levels of income, but I accept that higher earners have greater opportunity to save. I accept that they are more likely to save. I just don't think we can see it as an 'if, then' thing. The human factor prevents that.

I have money cut out of my check and set aside before it reaches my bank account. I pretend I don't make as much as I do.

While discussing the human factor, I am reminded of an earlier argument that graduated taxes do not dissuade people from earning more. I accept that it is not all encompassing. But it does happen. In my situation, I was still practicing law on the side after I was mobilized by the Army. I realized too late that my additional earnings threw me into a higher tax bracket. The next year, I quit practicing law and providing the free legal services I had been providing. So, in that one case, the graduated tax had a stiffling effect. How often does this happen? Who knows?
I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

Share this post


Link to post
Share on other sites
Quote

> Placing a tax burden on an economic activity that is essential to economic health is a bad idea.

Every tax is a "burden on an economic activity that is essential to economic health." Income taxes? Burdens people who work (who form the backbone of our economy.) Property taxes? Burdens the real estate market, and as we've seen damaging that can easily lead to recessions. Sales tax? Burdens retail sales, which are also a very important part of our economy.

There is no tax (with the possible exception of inheritance tax) that is not a burden. We pay them because we need to to support the government, not because we want to shape society. The various strategies we use (progressive taxes) are used primarily because that's how we can tax people while impacting the economy the least.


Quote

>The problem is that the 'equivalent burden' argument is indefinite. It seems to me
>to be an emotional argument.

It's both an economic and an emotional one.

On the emotional side you have "we shouldn't tax those unfortunate poor people." A popular sentiment, especially since Christianity has a long history of trying to help (not hurt) the poor - and that sentiment gets expressed in law.

However the more important argument (IMO) is economic. From an economic sense, a burdensome tax is one that prevents a taxpayer from spending in other areas. For example, if a man making $20K a year is taxed at a rate of 15%, he is likely to reduce his spending in other areas to pay the tax. A man making $200K a year is less likely to reduce his spending in other areas to pay that same percentage of tax. Thus, overall, consumer spending (which drives our economy) is not hit as hard when the rich are taxed at a greater percentage rate than the poor.



Figured I'd gather these two posts together because they do a pretty good job of summing things up.

People argue here about the finer points of government scope a lot, but the concept of funding things and how we might go about doing that 'ought to be an easier landscape in which to find agreement. Anything you have the government do is going to have to piggy-back on the economy, and so distributing the burden in such a way as to have the least impact on economic activity (regardless of how much you do or take in to fund it) is going to be best for long-term sustainability. There's an important feedback loop there too; the government helps provide an environment where sustained economic activity is possible, and the government pays for itself by tapping off that activity.

Your comment about the inheritance tax not being an economic burden is an extension of a point I've brought up several times in this forum. It doesn't burden the economy because dying isn't an economic activity in the first place. The government doesn't actually do anything to promote it and so taxing it is inherently unsustainable. Similar activities which shouldn't be, and aren't, taxed are, "moving money from one of your bank accounts to another one of your bank accounts" or "Wednesdays."

Share this post


Link to post
Share on other sites
>I have money cut out of my check and set aside before it reaches my bank
>account. I pretend I don't make as much as I do.

Me too, but I do that because I can afford to do it. I couldn't have done it at my first job out of school.

> I realized too late that my additional earnings threw me into a higher tax bracket.
>The next year, I quit practicing law and providing the free legal services I had been
>providing. So, in that one case, the graduated tax had a stiffling effect.

Honestly I never understood that. In no case does making $1 more mean you pay $100 more or something. If, for example, you move from the 15% to the 25% tax bracket, you don't pay any more money on the money _below_ the tax bracket. Numbers below:

Single guy in the 15% tax bracket making $35,330 a year taxable:
Income on which 10% tax is imposed: $8700
Income on which 15% tax is imposed: $26649
Total tax to be paid: $4867.35
Total income remaining after taxes: $30,462.65


Single guy in the 25% tax bracket making $35,331 a year taxable:
Income on which 10% tax is imposed: $8700
Income on which 15% tax is imposed: $26649
Income on which 25% tax is imposed: $1
Total tax to be paid: $4867.60
Total income remaining after taxes: $30,463.40

Am I missing something here?

Share this post


Link to post
Share on other sites
Quote

I'll give that some thought. But my first reaction is that human beings don't really work that way. What I have witnessed is that people tend to spend however much they have. While some saving and investing goes on, most people just buy more expensive stuff and end up living paycheck to paycheck regardless of the size of the paycheck. I'm not saying you don't have a point. I'm just not sure how big a factor it really is.



Well, there are some that have enough surplus cash that they open bank accounts in the Cayman Islands or Switzerland.
...

The only sure way to survive a canopy collision is not to have one.

Share this post


Link to post
Share on other sites
But the disincentive of the taxes can rise to the point that someone considers it no longer in their best interests to earn more. That's where the IRS placed me. I didn't mind working half of my time for fee and half pro bono. When I realized the average rate was greatly lower due to taxes, I didn't care to continue.
I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

Share this post


Link to post
Share on other sites
>But the disincentive of the taxes can rise to the point that someone considers it
>no longer in their best interests to earn more. That's where the IRS placed me.

Going back to that example, if the guy making $35,330 a year gets a $1000 raise, he goes from an effective tax rate of 13.77% to 14.08% tax. That means of that $1000 raise, he gets $859. Before he got "put in a new tax bracket" he would have gotten $862 of that raise. (And that's worst case; that's going from no money in the 25% tax bracket to all your new money in the 25% tax bracket.) I guess I can't see that $3 less money a year being any serious disincentive to make another $850.

But everyone's different. And perhaps if the principle bothers you, it's worth it to make less money.

Share this post


Link to post
Share on other sites
Quote

>But the disincentive of the taxes can rise to the point that someone considers it
>no longer in their best interests to earn more. That's where the IRS placed me.

Going back to that example, if the guy making $35,330 a year gets a $1000 raise, he goes from an effective tax rate of 13.77% to 14.08% tax. That means of that $1000 raise, he gets $859. Before he got "put in a new tax bracket" he would have gotten $862 of that raise. (And that's worst case; that's going from no money in the 25% tax bracket to all your new money in the 25% tax bracket.) I guess I can't see that $3 less money a year being any serious disincentive to make another $850.

But everyone's different. And perhaps if the principle bothers you, it's worth it to make less money.



The expression "cutting one's nose to spite one's face" comes to mind.
...

The only sure way to survive a canopy collision is not to have one.

Share this post


Link to post
Share on other sites
Quote

short answer, is it's none of our business what others do with their money - save or spend



Except that is just isn't that simple. It is our business and it is the government's business. It greatly affects the economy of the country as a whole as well as indicates future government expenditures.

As a country you need people to save for their own retirement. What do you think would happen if nobody saved for retirement? You really think it wouldn't become "your business" very quickly?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

0