A tax analogy, who's really paying their fair share?

[tokeprep]

Rich people avoid the current tax like crazy, almost to the point of not paying much of it.

No, they pay almost all of the federal taxes. That's indisputable. The top 10% pay 70%+ of the federal income taxes. This is even with a high level of evasion, of course.

I wrote a high level paper on this subject, and I lost my sources, so I have not mentioned this, but going from memory, consider the following.

They did a survey of something like 500 companies, I think it was 2/3 said they would be very likely to relocate their headquarters and manufacturing to the united states.

The rich folks who keep money off shore may still decide to keep it over there. I'm just saying that any and all penalties would be removed from them deciding to bring it home. And since they could invest it tax free here, it only makes sense that they would.

There are lots of knee jerk reactions to this.

People hear about it and think, god, everything I buy is going to cost so much more, don't really think about anything else, and are opposed to it. Or they see how other states have sales taxes that are regressive to the poor, and don't like this.

They simply can't see the forest for the trees.

You get 100% of your pay check, no deductions.

The folks who supply everything you buy suddenly pay no taxes, so they can get the goods to market much cheaper. Competition drives the cost down.

The poor and low incomes are protected by an advanced tax rebate every month. A family of 4 gets several hundred dollars per month. This covers the tax they will pay on the goods and servies they buy.

Lots of questions answered here.

My main point is that I think you're contradicting yourself. You're telling us rich people who want to make more money are going to be put off by a 30% tax rate and not make investments they would have made with a 15% tax rate. At the same time, you're telling us that imposing a new 25% sales tax on everything at the retail point of purchase won't discourage rich people from buying things. This seems very peculiar to me. I am a rich person and I choose to forgo potentially making $100 million because I don't want to pay $30 million in tax, but I seem to have no problem paying an extra $25 million for my $100 million plane. In the first case I would be up $70 million but refuse to do it; in the second case I would be down $125 million in cash but have no problem with it.

The Joint Committee on Taxation, a nonpartisan body dominated by professional staff, estimated the national sales tax would have to be 36% to be revenue neutral. Add in state sales taxes and the rate approaches 50% in some states. I think this sky high rate would discourage the purchase of new goods, encouraging the purchase of the tax-advantaged goods you've mentioned multiple times. This means less revenue for the federal government and a hit to the economy, which is centered on the production and sale of new goods.

If the used car market explodes, for example, because people don't want to pay a 50% tax on a new car, what kind of impact does that have on the auto industry, which employs hundreds of thousands of people and has hundreds of billions of dollars in economic impact every year?

 

[tokeprep]

To your first set of points; if you tax their investments too heavily they stop. If they stop, then the economy crumbles. Investments drive the economy.

This is absolutely false. I'm going to found a company and sell it for $100 million. Let's pretend the tax rate is 15% in one world and 30% in another. Now let's imagine I'm in the 30% world. Do I want to found a company and sell it for $100 million if I have to pay $30 million in tax? Nope, I won't. I'll just do nothing.

That's totally unrealistic. The empirical evidence informs us that it is totally realistic. See here as just one example: http://taxvox.taxpolicycenter.org/2012/03/19/no-obvious-relationship-between-capital-gains-tax-rates-and-economic-growth/. No relationship.

What evidence do you have for your proposition?

Also, many middle class folks depend on their ira's 401k and mutual funds. This also hurts middle class folks.

Taxation of investments is bracketed just as the taxation of income is, so those middle class folks would be unaffected.

As to eliminating deductions for charitable giving, I'm fine with that. But the red cross sure would hate it.

At least we can agree on this.

You want to increase the death tax... I think it should be abolished. But fair enough. But this would also have a very burdensome impact on the middle class, the heirs of whom usually cannot afford the tax, and if it were higher might lose the family farm.

More mythology. A study by the Federal Reserve Bank of Cleveland concluded that only 8% of Americans get an inheritance of any kind. 92% get nothing. Most who inherit get less than $25,000; 2% of those inheriting receive $100,000+. The average inheritance is skewed by the passage of big wealth to look much, much larger than it actually is.

What burden on the middle class? Most of the 92% of Americans who inherit nothing are middle class or worse and they face no burden whatsoever.

To the second point; the fair tax has been deemed to be revenue neutral by multiple, diverse, independent entities. In other words, smart people who really study it hard have determined it would raise just as much revenue.

Consider, Florida, Texas, and Tennessee (and several other states) maintain comparable revenues to states with income taxes.

According to who?

 

[ginwilly]

According to who?

Besides Bortz and his clan who wrote the book, there is a former Fed Reserve writing for the NYtimes
http://www.nytimes.com/roomfordebate/2013/01/23/what-should-tax-reform-in-the-united-states-do/replace-the-income-tax-with-a-progressive-consumption-tax

Here's an article by AEI that shows how it can be progressive
http://www.aei.org/article/progressive-consumption-taxation/

Here's a Forbe's article that states that many economists are in favor of a consumption tax in spite of what Uncle Buck tells us.
http://www.forbes.com/sites/leonardburman/2012/06/04/a-progressive-consumption-tax/

Here's Krugman calling for VAT to pay for healthcare. He wants to do it on top of income tax, but he gives his reasons why a consumption tax is a positive. Of course, he models his opinion based on Scandinavian country's success. He's very non-committal, but that's because he was on the other side so loudly in the past.
http://krugman.blogs.nytimes.com/2010/11/17/why-im-soft-on-sales-taxes/ He's not arguing as a replacement though, he's worried like UB about the regressive rates.

He's Ezra Kline talking about why a replacement is a better option than just a VAT while lauding the PROGRESSIVE consumption tax.
http://voices.washingtonpost.com/ezra-klein/2010/04/a_better_consumption_tax.html

Here is yet another article calling for a progressive consumption tax:http://blog.impertinenteconomist.com/2012/06/progressive-consumption-tax.html
Notice the very first line
Economists have long been attracted to consumption taxes because, unlike an income tax, they do not penalize saving.

It's actually the opposite of what Buck claims, but that shouldn't come as a surprise. That's just the first page of a google search, if I thought more was needed I would provide more.

 

[tokeprep]

A libertarian think tank spent millions and millions of dollars researching this.

The fact that libertarians are the ones pushing it is the biggest clue for me. If this idea were so great--revenue neutral, awesome for the economy, perfect in every possible way--then a lot of other people in the mainstream would be behind it. They aren't because the claims come up short. You can't just whisper "Entrenched interests!" If the math looked so perfect and the assumptions were all very credible, there couldn't be much reasonable criticism or such a disparity in the calculation of tax rates.

I think the national sales tax is really just a scheme to deprive the federal government of money, starving it and forcing it to play less of a role in American life. The best way to make government smaller is to take its money away, and then at that point, when they ask for more money, people will say, "What? No! I'm paying a 25% national sales tax!" It's very convenient for their agenda.

 

[ginwilly]

The best way to make government smaller is to take its money away, and then at that point, when they ask for more money, people will say, "What? No! I'm paying a 25% national sales tax!" It's very convenient for their agenda.

In theory I agree with this statement, but in reality and in practice, I can't think of the last time a party in power cared about revenues when doing budgets. The only people who are against deficit spending is the minority power. There is presently no need to increase revenue to increase spending.

 

[tokeprep]

Besides Bortz and his clan who wrote the book, there is a former Fed Reserve writing for the NYtimes
http://www.nytimes.com/roomfordebate/2013/01/23/what-should-tax-reform-in-the-united-states-do/replace-the-income-tax-with-a-progressive-consumption-tax

Here's an article by AEI that shows how it can be progressive
http://www.aei.org/article/progressive-consumption-taxation/

Here's a Forbe's article that states that many economists are in favor of a consumption tax in spite of what Uncle Buck tells us.
http://www.forbes.com/sites/leonardburman/2012/06/04/a-progressive-consumption-tax/

Here's Krugman calling for VAT to pay for healthcare. He wants to do it on top of income tax, but he gives his reasons why a consumption tax is a positive. Of course, he models his opinion based on Scandinavian country's success. He's very non-committal, but that's because he was on the other side so loudly in the past.
http://krugman.blogs.nytimes.com/2010/11/17/why-im-soft-on-sales-taxes/ He's not arguing as a replacement though, he's worried like UB about the regressive rates.

He's Ezra Kline talking about why a replacement is a better option than just a VAT while lauding the PROGRESSIVE consumption tax.
http://voices.washingtonpost.com/ezra-klein/2010/04/a_better_consumption_tax.html

Here is yet another article calling for a progressive consumption tax:http://blog.impertinenteconomist.com/2012/06/progressive-consumption-tax.html
Notice the very first line
Economists have long been attracted to consumption taxes because, unlike an income tax, they do not penalize saving.

It's actually the opposite of what Buck claims, but that shouldn't come as a surprise. That's just the first page of a google search, if I thought more was needed I would provide more.

Maybe I should clarify that I was promised multiple diverse, independent sources agreed that the "Fair Tax" was revenue neutral at x%. That's the who I'm asking for.

 

[ginwilly]

Maybe I should clarify that I was promised multiple diverse, independent sources agreed that the "Fair Tax" was revenue neutral at x%. That's the who I'm asking for.

They are out there too but I'm not in the camp that says we can predict revenue, so I hold no stock in them. We can't even do it under our present system accurately. Once caveat that needs to occur to "prove" revenue neutrality is the ability to accurately and consistently predict human behavior. If this were possible we'd have trillionaires playing in the market.

So admittedly, I'm operating more on theory and ethics. Morally I can make a much stronger argument that penalizing productivity and saving is bad. The fact that even the progressive left wing economist agree mathematically, they just don't agree on the principle that the poor might have to pay something too, is telling.

 

[beenthere]

The fact that libertarians are the ones pushing it is the biggest clue for me. If this idea were so great--revenue neutral, awesome for the economy, perfect in every possible way--then a lot of other people in the mainstream would be behind it. They aren't because the claims come up short. You can't just whisper "Entrenched interests!" If the math looked so perfect and the assumptions were all very credible, there couldn't be much reasonable criticism or such a disparity in the calculation of tax rates.

I think the national sales tax is really just a scheme to deprive the federal government of money, starving it and forcing it to play less of a role in American life. The best way to make government smaller is to take its money away, and then at that point, when they ask for more money, people will say, "What? No! I'm paying a 25% national sales tax!" It's very convenient for their agenda.

With all due respect, you posted a graph that was from a known liberal think tank.
The tax policy center is a collaboration of the Brookings Institution and the Urban institute.
Both, full of left leaning economists.

 

[tokeprep]

They are out there too but I'm not in the camp that says we can predict revenue, so I hold no stock in them. We can't even do it under our present system accurately. Once caveat that needs to occur to "prove" revenue neutrality is the ability to accurately and consistently predict human behavior. If this were possible we'd have trillionaires playing in the market.

So admittedly, I'm operating more on theory and ethics. Morally I can make a much stronger argument that penalizing productivity and saving is bad. The fact that even the progressive left wing economist agree mathematically, they just don't agree on the principle that the poor might have to pay something too, is telling.

I think we can all agree on the math. How reality matches up to it and how much public policy should take account of it, as you suggest above, is an entirely different question.

 

[tokeprep]

With all due respect, you posted a graph that was from a known liberal think tank.
The tax policy center is a collaboration of the Brookings Institution and the Urban institute.
Both, full of left leaning economists.

So what? It's a graph. Is the graph meaningless because it came from Brookings? Absolutely not.

If you can tell me what's flawed about the graph and produce evidence that contradicts my conclusion, I would love to see that.

 

[ginwilly]

I think we can all agree on the math. How reality matches up to it and how much public policy should take account of it, as you suggest above, is an entirely different question.

A lot of it really is philosophical. Would you rather penalize production or consumption? Would you rather penalize or reward saving? Which one is better for long term health, encouraging saving or encouraging borrowing?

You can make the numbers work in any favor you decide. It's like the Bush tax cuts would "cost" us 300B when it actually increased revenue by over 600B. The CBO was off on the predictions of what the tax breaks would do by almost a trillion dollars. We've seen state tax increases decrease revenues and we've seen them increase revenues. Human behavior is a bitch to predict.

 

[tokeprep]

A lot of it really is philosophical. Would you rather penalize production or consumption? Would you rather penalize or reward saving? Which one is better for long term health, encouraging saving or encouraging borrowing?

You can make the numbers work in any favor you decide. It's like the Bush tax cuts would "cost" us 300B when it actually increased revenue by over 600B. The CBO was off on the predictions of what the tax breaks would do by almost a trillion dollars. We've seen state tax increases decrease revenues and we've seen them increase revenues. Human behavior is a bitch to predict.

I'm certainly not advocating for the present tax system. It's terrible. But I think there are better ways to fix it. For example, if we all agreed the government could have whatever we have after we die, that would be great. Paired with a small national consumption tax, it would give people total freedom over their money while alive.

 

[ginwilly]

I'm certainly not advocating for the present tax system. It's terrible. But I think there are better ways to fix it. For example, if we all agreed the government could have whatever we have after we die, that would be great. Paired with a small national consumption tax, it would give people total freedom over their money while alive.

Can you not see any unintended consequences of this? Instead of leaving something for my children, my new goal would be for the last check that I write to bounce. I would want to die in as much debt as possible to win that game. Again, you are advocating a policy that would discourage saving and encourage borrowing. Good short term, terrible long term.

Besides, would Lamont have to give up the Junk Yard after Fred dies? What about family farms?

 

[tokeprep]

Can you not see any unintended consequences of this? Instead of leaving something for my children, my new goal would be for the last check that I write to bounce. I would want to die in as much debt as possible to win that game. Again, you are advocating a policy that would discourage saving and encourage borrowing. Good short term, terrible long term.

Besides, would Lamont have to give up the Junk Yard after Fred dies? What about family farms?

The vast majority of people already leave nothing for their children, and fewer and fewer people are citing that as a goal (which I think is fantastic). As I just said, 92% of people get zilch. The explanation, presumably, is that they left behind credit card debt, mortgage debt, car debt, medical debt, etc., which exhausted the value of the estate to zero.

I don't think much really changes. Billionaires no longer get to escape taxation by leaving the money to charities and dynastic wealth is destroyed. There are limited situations that might warrant exceptions, such as family farms, but they affect relatively few people.

Make as much money as you want and do whatever you want with it while alive, with very minimal tax effect until the end when you won't care anymore anyway. If people spend all of their money, that stimulates the economy, so it's not a bad thing at all. They already do it.

 

[UncleBuck]

A credible economist is subjective and a Strawman.
You're really not to good at this, are you.

you cleary don't know what a strawman is.

 

[UncleBuck]

you can tailor a consumption tax to weigh heavily toward the rich paying more.

no, you can't it is mathematically impossible. the rich don't consume that much more for it to work.

 

[UncleBuck]

I'm operating more on theory

i've been saying all along, that's all you have. theory.

and when theory is untested and you can't name even ONE SINGLE example of your theory working in the real world, you don't have a theory. you have talking points.

and when those talking points are espoused seriously only by right wing blowhards on AM radio, then you have partisan talking points.

you are a failure in every possible, imaginable way.

take your neal boortz talking points that have no basis in or business with reality and march them up your ass where they belong.

 

[beenthere]

you cleary don't know what a strawman is.

LOL Then you clearly have no frikin clue what you are doing.

 

[ginwilly]

i've been saying all along, that's all you have. theory.

and when theory is untested and you can't name even ONE SINGLE example of your theory working in the real world, you don't have a theory. you have talking points.

and when those talking points are espoused seriously only by right wing blowhards on AM radio, then you have partisan talking points.

you are a failure in every possible, imaginable way.

take your neal boortz talking points that have no basis in or business with reality and march them up your ass where they belong.

Damn, you sure told me.

Which one happened on this topic? I posted links of both conservative and liberal economists advocating a consumption tax or you posting links of any conservative economists against it?

You really aren't very good at this honesty thing but you sure are good at insults and talking out of your ass. I guess that's why you stick with it, go with what you know, because it sure isn't economics.

Tell us more about aggregate demand daddy?

 

[ginwilly]

LOL Then you clearly have no frikin clue what you are doing.

I think that's obvious to everyone, even him.