The Magnitude Of The Problem

[MSimon]

Re: viewtopic.php?p=97875#p97875

Government spending helps if the economic multiplier is above one. If it is below one it creates losses. You aren't one of those innumerate Democrats are you? And FYI I'm no Republican. I have a head and a heart.

http://en.wikipedia.org/wiki/Fiscal_multiplier

Now one thing the article leaves out is debt service. And it does not discuss consumption vs production. i.e. if added debt pays mostly for consumption the debt eventually becomes unserviceable. The same is true of production debt that does not produce a sufficient surplus.

A better explanation here:

http://online.wsj.com/article/SB123258618204604599.html

Here is a different view:

http://www.businessinsider.com/infrastr ... er-2012-11

But that is on infrastructure. Generally things that improve communications or transportation. Other than private investment in moving more bits there has not been much infrastructure spending by government.

BTW the surplus should accrue to those generating it. They are most likely to generate more.

And note: business doesn't pay taxes. Its customers pay the taxes. Business taxes are a way for government to hide the true tax rate.

Re: your last comment. I don't give a shit.

[MSimon]

Now if you really want to impose a form of sales tax to fund government then there is indeed a way to go about it. I just happen to live in a country that does just that and the way they do it is sneaky as hell, the rich don't even know their being taxed.

First and foremost you must define what is necessary to survive and be a productive member of society. The products in this category do not have a sales tax imposed on them. Here in SK this is done by the cost of a product. It's a form of progressive sales tax on goods sold though sellers are prohibited from displaying it on the sales receipt. Buying food from a local market is cheap as that food has no tax on it. Buying imported food is expensive as that tax has been applied to that food. Same with clothing, buying a pair of locally made jeans is ~$20 USD. Buying a pair of Levi's 550 at the department store is approx ~$250 USD (their $50 on amazon). Buying a cheap Matiz, Pride or other domestic economy car is $10,000 to $15,000. Buying a domestic luxury car is $50,000 or more. Buying a foreign luxury car is nearly double the cost, $80,000 for a BWM 3 series ($40,000~$50,000 USD in the states). Property tax on a small two bedroom apartment / home is non-existent, property tax on a four bedroom is noticeable and anything larger gets quite expensive. Utilities are even metered this way with multiple tiers of usage. The first tier is cheap, priced at cost or slightly under. After you passed that mark the next tier's cost is doubled, after you pass into the third tier the cost is doubled again and eventually it doubles again.

All this combined creates a very low cost of living if you live small, if you live large and flashy your paying out the nose for that privilege. If your living in between then your only paying big for your luxuries, you always have the option of scaling down your life style and Korean's often do exactly this.

Of course the rich won't ever support this system in the USA, they want to pay less then the mere common man. And because the wealthy and connected won't get behind it the politicians won't support it and thus it'll never happen.

Ah. So the government channels spending where it thinks it will do the most good. You are aware that economic planning has a very bad record aren't you? Just look to the North. And farther to the North. And those farther North folks have proved that less planning promotes better results.

I generally believe that individuals risking their own money make better economic decisions than governments risking other people money.

Taxation is theft. Some is required. It should be minimized. And every one should pay taxes. Two reasons:

Skin in the game
Keep the rich from owning government totally

And government should be very small. It keeps those who own government from interfering too much in the lives of the people.

Test case: Japan's planned economy hit a wall because planning has its limits. China is starting to reach that limit.

[MSimon]

America a decade or two ago imposed a 10% luxury tax on yachts. Who needs yachts? Only the rich.

Net result? It destroyed the yacht building industry in America. It went to Europe.

http://www.nytimes.com/1992/02/07/busin ... achts.html

This discusses the tax and its repeal:

http://watchingamerica.com/News/94396/u ... l-failure/

[Teahive]

The "Fairtax" is just an idea for the wealthy to pay even less on taxes then they do now. Of course so many people were duped into following it. It's extremely regressive on higher income people, especially those making more then $1,000,000 USD a year of surplus. Mostly because it's a flat rate with no exceptions for cost of living, thus it taxes the poor the hardest while taxing the rich the lightest. And while the rich spend more as a flat number, as a percentage of income they spend far less then middle class and poor. The working poor spend the most as a percentage of income, nearly 100%. So a 30% flat tax on spending would be a 30% tax on poor, 20~25% tax on middle class and 5~10% tax on wealthy and 1~2% tax on super wealthy. Might as well just declare those making seven figures of surplus a year "tax free" while your at it.

You seem to have missed the prebate part which means that the effective tax rate for the very poor is negative.

And while it is true that the effective income tax rate of the rich would be lower than that of the middle class due to a higher savings rate, I don't think that's reason enough to dismiss the idea. It's still consistent with "All this combined creates a very low cost of living if you live small, if you live large and flashy your paying out the nose for that privilege." as the amount of taxes paid depends on your spending level.

I do believe that excessive wealth inequality is a big problem, but neither an income tax nor a consumption tax can fix it. It requires a change in attitude.

Increasing the price of all consumer goods hurts those barely making it by.

It does, if it happens in isolation. But while the FairTax adds 30% at the point of sale it also gives everyone a prebate and eliminates other taxes. Thus take-home pay would increase and pre-tax prices of domestic goods would drop. And shifting the balance towards domestic production has far-ranging effects on employment and wages, especially in low-paid jobs, as demand for workers increases.

Unemployment in China might go up, though.

[palladin9479]

Teahive your deliberately missing the "all products" part. An across the board sales tax would result in higher taxes to the poor and middle class while lower taxes to the wealthy. It has nothing to do with "saving", the rich don't save, they invest or they hide their money in offshore accounts. "Saving" is just lending your money to banks for a fraction of the interest their making on it from profits. Why put your money in a bank and get a sliver of the profit when you can own the bank and get the whole pie.

Anyhow it's simple. A 30% flat sales tax on a person living on borderline poverty will push them into poverty by raising the costs of goods to a level above what their capable of paying. This is because the poor person is spending 100% or near 100% of their income just to survive, they don't have much of any disposable income. As their spending 100% of their income your now taking all 100% at a 30% rate.

A middle class person is spending 70~80% of their income to survive and using the rest to save / education / kids / ect. Your now taxing that 70~80% at a 30% rate.

An economically successful person (not super rich) is spending 20% of their income or less to "survive" (their form of survival involves a big house and a car or three) while spending another 10 ~ 20% on luxuries. Your now taxing that 30~40% at a 30% rate.

A wealthy person is spending 5~6% or less of their income to "survive" and spending maybe another 5~10% or less on luxuries. In all honestly most of their wealth is investment gains and corporate wealth so most is locked away safely. Your taxing that 5~11% at a 30% rate.

You see the problem, the poor and middle class are getting the snot taxed out of them, some are being pushed into poverty while the wealthy aren't even noticing the difference. It's a rounding error to them.

Flat universal sales taxes are extremely regressive to the poor, their incredibly oppressive as the UK is now finding out.

[palladin9479]

And note: business doesn't pay taxes. Its customers pay the taxes. Business taxes are a way for government to hide the true tax rate.

Biggest line of bullsh!t posted yet. Demand determines the price they sell their products. All taxes do is raise the minimum price required to create a profit, taxes on profit do absolutely nothing to the minimum price and instead simply reduce the net profit by a percentage. A tax on net profit CAN NOT put a business into a nonprofitable status, if their nonprofitable then their not paying taxes.

When a business has it's profits taxed it does not raise prices, it merely accepts less profit. Raising prices would just lower demand and they would make even less profit then before the tax was imposed.

The misconception on the effects of net profit taxes on business is one of the biggest lies told by the conservatives since the Reagan era. Economies are not drive by supply their driven by demand. Markets are created when a demand exists for a service or product. You can create 1,000,000 widgets and sell them for 1 penny each, would not make anything unless a demand for those widgets already existed. For this reason demand will determine the price of something on an open market not the cost of producing it. The production cost merely determines the minimum demand price required before a profitable market will emerge.

You want a bigger more robust economy? Put more money into the hands of the bottom level consumers, namely the middle class and working poor. The wealth already consume at maximum, giving them more money does not generate more economic activity. Investment into supply does not generate economic activity, instead investments into demand (the consumers) do this.

[MSimon]

I do believe that excessive wealth inequality is a big problem, but neither an income tax nor a consumption tax can fix it. It requires a change in attitude.

How about a campaign? "Stamp out ambition. It leads to inequality."

With some secondary campaigns.

"Steve Jobs was an economic criminal"
"Bill Gates is a thief"

BTW from what I know the USSR had a pretty good program for stamping out ambition. It seemed to do wonders for reducing inequality.

[MSimon]

And note: business doesn't pay taxes. Its customers pay the taxes. Business taxes are a way for government to hide the true tax rate.

Biggest line of bullsh!t posted yet. Demand determines the price they sell their products. All taxes do is raise the minimum price required to create a profit, taxes on profit do absolutely nothing to the minimum price and instead simply reduce the net profit by a percentage. A tax on net profit CAN NOT put a business into a nonprofitable status, if their nonprofitable then their not paying taxes.

When a business has it's profits taxed it does not raise prices, it merely accepts less profit. Raising prices would just lower demand and they would make even less profit then before the tax was imposed.

The misconception on the effects of net profit taxes on business is one of the biggest lies told by the conservatives since the Reagan era. Economies are not drive by supply their driven by demand. Markets are created when a demand exists for a service or product. You can create 1,000,000 widgets and sell them for 1 penny each, would not make anything unless a demand for those widgets already existed. For this reason demand will determine the price of something on an open market not the cost of producing it. The production cost merely determines the minimum demand price required before a profitable market will emerge.

You want a bigger more robust economy? Put more money into the hands of the bottom level consumers, namely the middle class and working poor. The wealth already consume at maximum, giving them more money does not generate more economic activity. Investment into supply does not generate economic activity, instead investments into demand (the consumers) do this.

So the customers don't pay the tax? Who does?

The business.

And where does the business get the money?

From the customers.

=====

By your analysis even, taxes price some goods off the market or lower the quantity produced.

So we will be better off with lower production?

====

BTW I'm no right winger. I'm a libertarian. Do you know what that means in America?

====

Note: I encourage what ever country you reside in to follow your policies to the bitter end. As long as the country is not America. We could use the help right now.

[palladin9479]

So the customers don't pay the tax? Who does?

The business.

And where does the business get the money?

From the customers.

No stop right there. You have little understanding of free market economics.

Business's do not walk up to customers and knife them if they don't pay. Consumers purchase something at a price the consumer desires, the seller sells at a price they believe the consumer will purchase at. It's a mass auction that's constantly happening without people even noticing. The only thing taxes do is raise the minimum price required for a product to be profitable. Yet there is the catch, if a product is not profitable then there is no tax on it as the tax is only applied to profit. As the tax is only applied to the net profits the tax will at no time lower a business into non-profitability and thus will never prevent a market from forming. That's also why I chose a specific value of 25% of net profits. 25% of net will not force a company under, it doesn't lower reinvestment of profits as those happen prior to net profit being realized. The only effect is has is on share prices and the amount of money investors make from the business. It doesn't raise prices as raising the price would only lower demand and thus lowing profits. No company does that, its economically stupid.

That is the part your forcibly ignoring with all your will power.

As for what I've stated, these are the simplest most direct methods to return the USA into a balanced economy. Right now we're on a crash course due to the massive amounts of capital that have been siphoned off over the past few decades. There simply is no more money in the middle class and working poor to fuel consumption at previous rates. Cutting social services in a "I have mine now go die" method won't work because those people won't just quietly go die, they will come crashing through your door, killing you and anyone near you and take what you have. People are like that when they become desperate enough. There are many more of them then there are of you, you won't win.

I do believe that excessive wealth inequality is a big problem, but neither an income tax nor a consumption tax can fix it. It requires a change in attitude.

I couldn't care less about the wealthy having more money. They gamed the system in the past but we let them, so they get to keep it. I'm not suggesting taking anything away nor forced wealth redistribution via socialist revolution. My concern is preventing further gaming of the system by closing the methods that were used and limiting the potential to create new ones. Everyone pays their share so ensure the country remains prosperous. Currently this is not happening, the wealthy are getting over BIG TIME and have been for a very long time. They've been manipulating the government into ensuring they continue to get over. It then falls to the middle class and working poor to ensure the country remains prosperous, unfortunately we were living on borrowed time for the past decade and it just caught up to everyone. The middle class and working poor can no longer carry that burden, its now time for the most prosperous to start pulling the load too.

Simons's method is to just dump the load entirely, unfortunately this simply isn't realistic. To do so would require hit squads to go around and "expire" anyone not working enough. This is the end result of the conservative position, it's unavoidable. Conversely the socialist / liberal position produces of the state taking care of everyone produces Greece which is also unrealistic. That is why there needs to be a middle ground where the state ensures the "unfortunates" don't get out of control while also creating a mechanism for those with drive to escalate their position in life. This requires money and that money must come from somewhere.

I have yet to see a conservative produce a viable plan. This fact actually deeply worries me, the conservatives are supposed to be the reality check to the liberal idealists.

Libertarianism is about limited government involvement in private matters. Unfortunately like many things it has LONG since been hijacked and now serves merely as a political tool. I find myself aligned with the libertarian cause more often then not. Like everything else taken to the extreme it falls apart and becomes unrealistic. Pure libertarianism is the law of the jungle where it's just me and my own skills fighting everyone else for whatever resources I can. The moment you create a central set of agreed upon rules you've violated the tenants of pure libertarianism. That in and of itself is a long debate. Personally toilet paper has more use to me then either political or religious beliefs.

[JLawson]

America a decade or two ago imposed a 10% luxury tax on yachts.

Darn near killed off the light aircraft market, too. Cessna, Piper - they almost folded.

And things aren't so hot now, with the price of avgas running from $4.50 a gallon on up. General Aviation's having a rough time. But that's okay - it's only the 'rich' who play with such toys.

And those who want to be commercial pilots, but can't get into the military to accumulate hours... or those who just want to fly.

But I'm sure it'll all work out. Put a few more layers of taxes on the planes and the gas, and everything will be just fine!

[Teahive]

I do believe that excessive wealth inequality is a big problem, but neither an income tax nor a consumption tax can fix it. It requires a change in attitude.

How about a campaign? "Stamp out ambition. It leads to inequality."

That made me chuckle. Although it might worry me that my position can be utterly misunderstood so easily.

If anything, I'd like to see more ambition. But ambition does not end with wanting to be the richest guy in the graveyard. When it comes to that I see a rather widespread lack of imagination even among those who are considered great thinkers and creative minds.

As a campaign slogan I kinda like "Live your Dream." But that's (too) hard to understand. For those that don't get it, maybe "Join the Giving Pledge" is the best you can do.

[Jccarlton]

No stop right there. You have little understanding of free market economics.

Business's do not walk up to customers and knife them if they don't pay. Consumers purchase something at a price the consumer desires, the seller sells at a price they believe the consumer will purchase at. It's a mass auction that's constantly happening without people even noticing. The only thing taxes do is raise the minimum price required for a product to be profitable. Yet there is the catch, if a product is not profitable then there is no tax on it as the tax is only applied to profit. As the tax is only applied to the net profits the tax will at no time lower a business into non-profitability and thus will never prevent a market from forming. That's also why I chose a specific value of 25% of net profits. 25% of net will not force a company under, it doesn't lower reinvestment of profits as those happen prior to net profit being realized. The only effect is has is on share prices and the amount of money investors make from the business. It doesn't raise prices as raising the price would only lower demand and thus lowing profits. No company does that, its economically stupid.

I haven't seen one bit of evidence that you have the slightest clue about economics in general, let alone how the free market works. All I've seen is rampant Progessive Keynesism at it's worst.

As for what I've stated, these are the simplest most direct methods to return the USA into a balanced economy. Right now we're on a crash course due to the massive amounts of capital that have been siphoned off over the past few decades. There simply is no more money in the middle class and working poor to fuel consumption at previous rates. Cutting social services in a "I have mine now go die" method won't work because those people won't just quietly go die, they will come crashing through your door, killing you and anyone near you and take what you have. People are like that when they become desperate enough. There are many more of them then there are of you, you won't win.

I couldn't care less about the wealthy having more money. They gamed the system in the past but we let them, so they get to keep it. I'm not suggesting taking anything away nor forced wealth redistribution via socialist revolution. My concern is preventing further gaming of the system by closing the methods that were used and limiting the potential to create new ones. Everyone pays their share so ensure the country remains prosperous. Currently this is not happening, the wealthy are getting over BIG TIME and have been for a very long time. They've been manipulating the government into ensuring they continue to get over. It then falls to the middle class and working poor to ensure the country remains prosperous, unfortunately we were living on borrowed time for the past decade and it just caught up to everyone. The middle class and working poor can no longer carry that burden, its now time for the most prosperous to start pulling the load too.

[/quote]
Who's this "we" that you Progressives keep talking about. I've done a lot of study of the industrial revolution and how wealth is created and there was no "we" commanding everybody to give those guys the money. They created the wealth and as such they got to keep a chunk of it. Frankly on the other side, the push seems to be from the people who want something for nothing. somebody builds a railroad, and soon enough, shippers are complaining that the rates are too high. Ot they complain that they aren't getting the same deal with their one carload a month that the guy that ships 1000 carloads a month. Never mind the fact that the shippers don't have to take the risks involved in bulding the railroad in the first place. Over and over again, I've seen the same kind of whining every time there is something successful. a bunch of people want it for nothing.
As for the wealty pulling their load, a look at the tax satatistics says that they are already paying far more than the share they should be paying.
http://www.ntu.org/tax-basics/who-pays- ... taxes.html
But that's never enough for Progressives. They are always wanting more for their expensive programs and transfer payments. They represent that "we" you were talking about and they think that everybody should be under their control. they want control of everything and everybody, for our own good of course.

[JLawson]

But that's never enough for Progressives. They are always wanting more for their expensive programs and transfer payments. They represent that "we" you were talking about and they think that everybody should be under their control. they want control of everything and everybody, for our own good of course.

Their attitude seems to be that everything was just lying there, waiting to be picked up and put to use. Ford apparently found his factories already built and ready to go - but it was only his greed that made his workers subsist on $5 a day. (Why, that's not enough to get a fast food lunch at the 7/11!) (Never mind it was a VERY good wage for the time - Progressives aren't so hot on actual history that doesn't justify - or might even contradict - their beliefs.) If it hadn't been for his greed, there'd be free cars for everyone!

The railroads depended on tracks that had existed since the dawn of time, and it was only the evil greed of the Railroad Barons that kept them from being a free resource for all.

Progressives are very shallow, superficial thinkers who are convinced of their own superiority - and don't believe in the Law of Unintended Consequences. Nothing BAD will ever happen from their ideas - everything will always work just as they think it will.

And if not - then you just have to remove certain groups who are holding up the progress because their ideas aren't to blame. If the idea's not to blame, then there's someone, somewhere, who's keeping the idea from being implemented. And if you can't find that person or group - blame one anyway and punish them, and the ones who ARE causing the problem will get the idea and stop it.

And if not - it'll make everyone left work harder to overcome the problems. But if the problems DON'T disappear, then that's justification for more investigations and purges of the non-cooperative workers. The idea is good. You just have to implement it more... firmly.

Oh, it's regrettable, to be sure - but you know that ol' saying about omelets and eggs, right? And really, individual people outside the Progressive controllers have no intrinsic value anyway so you can justify pretty much any action to get the blockage out of the way. The Progressive Utopia awaits!

(Darn shame the road to it is covered in millions upon millions of bleeding, broken bodies.)

[hanelyp]

My understanding of the "Fair Tax" proposal is that sale of used goods isn't taxed. Given that lower income people frequently buy used, when practical, that reduces their effective tax rate even more. On top of the prebate covering the tax of spending "poverty rate" income.

[JLawson]

My understanding of the "Fair Tax" proposal is that sale of used goods isn't taxed. Given that lower income people frequently buy used, when practical, that reduces their effective tax rate even more. On top of the prebate covering the tax of spending "poverty rate" income.

Hard to buy used food, though - aside from gardening purposes... and with a feeling of more money to spend, they'll likely not worry much about buying the occasional new item.

Here's the FairTax.Org take on used goods.

Does the FairTax tax used items?

The FairTax does not tax "used" goods but it is important to note that HR25 has a legal definition of the term "used". This is necessary to ensure that items are taxed only once and to prevent tax cheating.

Under the FairTax, for an item to be considered "used" it must be:

(1) purchased before the FairTax is enacted, or

(2) the FairTax on the item must have been previously paid.

Let's look at (1) above. Assume that Joe bought a new car in January of 2012. Let's further assume that the FairTax went into effect on Jan. 1, 2013. Since Joe owned the car before the enactment of the FairTax, it is considered a "used" car. It has the taxes from the existing tax system embedded in its price. Therefore, when Joe sells that car to Bill, Bill will not owe tax on the transaction.

Now, let's consider (2) above. The most common example is that Joe buys a new car for personal use and pays the FairTax on it. If Joe then sells his car to Bill, there would be no tax on it because the tax had already been paid. Let's look at another example. Assume that Joe owns a flower shop business and buys a van to use when making deliveries to his customers. No tax is charged on purchases for business purposes so that the FairTax on goods sold to consumers does not double tax, or put a tax on a tax.

If Joe decides to sell the van to his friend Bill (who is not in business) for use as his personal vehicle, then it would be a taxable sale to Bill. Why? Because Joe did not pay tax when he bought the van for his flower shop. Since no FairTax has been previously paid on that van, it is not considered used and the sale to Bill would be taxable.

If later, Bill decided he did not like driving a van and sold it to someone else, it would not be a taxable sale. Why? Because the tax had been previously paid (when Bill bought it from Joe) making the item "used"; and not subject to tax.

FairTax.Org FAQ


What I find funny is the concept by some that because it won't 'hurt the rich' it's not good enough. Jeebus - do they want revenue or not?

What we've got is broke - badly. Something needs to change.