Taxation, the Economy, Equality, and Fiscal Policy

Discussion in 'Archive: The Senate Floor' started by Blithe, Jul 13, 2009.

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  1. Blithe Force Ghost

    Member Since:
    Jun 24, 2003
    star 4
    Everyone has their own ideas about taxes and economic growth in terms of fiscal responsibility and income and wealth equality. As a start, let's keep it simple and pose a few questions:

    1) In the face of today's economic crisis, do you think taxes on upper income individuals, including Capital Gains and Dividends Taxes, need to be higher? Why? Should they continue to be higher if or when the crisis has abated?

    2) If raising certain tax rates produced less government revenue, would you still support rasing them for the purposes of fairness? Why?

    3) Do you feel that the lower income groups in the U.S. pay their "fair share" of taxes. In rarer cases, some feel they do not carry enough of the burden.

    4) Lastly, what income tax alternatives would you support, if any? (e.g Fair Tax, Flat Tax, etc.)
  2. JediSmuggler Force Ghost

    Member Since:
    Jun 5, 1999
    star 5
    If we had differing tax rates based on race, sex, or religion, it would be tossed out as unconstitutional without much argument.

    But merely because someone earns more than someone else, it is okay to treat them more harshly for what? Succeeding in life?

    It is very easy to buy a bunch of votes by promising to take from a few wealthy people. It's the famous adage about democracy being four wolves and a lamb voting on what it for dinner.

    Why should someone who has succeeded in life have less of a right to keep his own property (to wit, the fruits of his labor) and to pass them on to his/her heirs than others?

    Is the goal of a tax code to raise revenue, or is it to engage in social engineering? The former is legitimate. The latter only creates an injustice.

  3. anakin_girl Jedi Grand Master

    Member Since:
    Oct 8, 2000
    star 6
    Disclaimer: my worst grades in college were in economics. I made a B in micro and a C+ in macro. And I took both in 1991, so the entire field has probably changed since then.

    That being said, I believe in economic policies that foster a strong middle class. I believe that any economic policy that widens the gap between the rich and the poor, causes nothing but problems. For one thing, such a policy helps ensure that the majority of the wealth ends up in the hands of a few people or a few businesses. If we're talking about businesses, we end up with businesses that are "too big to fail," and thus need a bailout by the federal government. If we're talking about people or families, we end up with a country ruled by an oligarchy of a few aristocratic families--which is exactly what we left England to avoid. We are not a true democracy, but we are a republic, and we are supposed to be a government "by the people", which does not mean a government by a handful of wealthy people.

    The death tax: I understand why it was created; the reason being to keep a family aristocracy from forming, to keep a few of the "old money" families from running the country, a la the old European aristocracies. That being said, however, I'm not sure it's fair to tax one's earnings twice.

    Capital gains tax: Should really only be raised if we want to discourage people from investing for some reason.

    Back to this later.
  4. anakin_girl Jedi Grand Master

    Member Since:
    Oct 8, 2000
    star 6
    Since you don't believe in democracy, even the representative republic that the United States has(since you don't seem to believe that the "wolves" should get a vote), I'm curious--what form of government do you believe we should have?

    Also, you've stated your case against a progressive income tax, but haven't said what form of tax system you do believe in. A flat tax? No income tax at all?
  5. JediSmuggler Force Ghost

    Member Since:
    Jun 5, 1999
    star 5
    Even democracy has limits - or at least that was what was said during the whole Prop 8 debate. Of course, back then it was PC to make that claim. Not so PC now, I suppose. Or is this just you trying to have it both ways - crying about equal protection when it suits you - and discarding it when it is inconvenient to your desire to redistribute wealth.

    I support a flat-rate income tax. It is the fairest way to raise revenue. Or do you want to discard equal protection?
  6. KnightWriter Administrator Emeritus

    Member Since:
    Nov 6, 2001
    star 8
    If you have a lot, you should pay a lot. That's my philosophy in a very small nutshell.

    I'd gladly pay half of what I make if it meant that I had excellent public transportation, univeral health care and other good social services in my area and state.
  7. Blithe Force Ghost

    Member Since:
    Jun 24, 2003
    star 4
    Some people already pay very close to half of what they make and we still do not have those things. Would you be willing to pay more if tax rates had to go higher in order to provide those things? And what about tax compliance? We can never be too sure on what part of the laffer curve we're on at any given point in time, but it is well accepted that if taxes get too awfully high, compliance will go down, and government revenue gains from higher rates progressivley lose their marginal benefit, if not decrease altogether.
  8. Lowbacca_1977 Force Ghost

    Member Since:
    Jun 28, 2006
    star 6
    Jedi Smuggler, yet I thought you disagreed with that argument against prop 8 having passed? You can't argue against the concept while also trying to use it to your advantage at the same time, since that destroys any power of your argument.

    Is there anything stopping you, legally speaking, from overpaying on your taxes?
  9. KnightWriter Administrator Emeritus

    Member Since:
    Nov 6, 2001
    star 8
    Blithe, the Laffer Curve was discredited a very long time ago. I can't believe you'd even mention it. That particular restaurant napkin has long since been recycled.

    The IRS loses hundreds of billions a year due to tax evasion and the rich not paying nearly as much as they should. If you're making a million dollars, you should be paying at least a hundred thousand in taxes. And that's just ten percent right there. A lot of millionaires pay a pittance of that.

    but it is well accepted that if taxes get too awfully high, compliance will go down

    So enforce it. Harshly. Also, do other countries have that problem?
  10. Blithe Force Ghost

    Member Since:
    Jun 24, 2003
    star 4
    Knightwriter, the laffer curve was NOT discredited; the Reagan era interpretation of what it suggested for the current tax structure was discredited. The laffer curve is an accept economic concept, and was long before it got its nickname.

    I can bring it up because its in every bloody economics textbook I've had to use or bought on the cheap at the libray sale.

    Let's try not to have knee jerk reactions to things because trickle-down sucked. Reagan (and Laffer) tried to sale the trickle-down theory to the public by citing the laffer curve as evidence; the problem was that we never really know for sure where we are at on the curve. (Edit) That is to say, "Are taxes so high at X% that compliance has actually gone down, and the government is losing revenue or can they go higher?" The major difference between what the Reagan crew wanted, and what the "Laffer" curve suggests, is that they assumed, without any real solid basis, that tax rates were too high. Many people in government and econmics felt that way, but no one could really pin the evidence down. A lot of the supply-siders then pointed to the trickle-down effect in the textbooks, and said that lowering taxes for the rich would lead to benefits for the poor. Based on that idea, Dave Stockman coined the term in an interview at some point.

    I can't believe you didn't know the difference.
  11. KnightWriter Administrator Emeritus

    Member Since:
    Nov 6, 2001
    star 8
    Everything I read about it suggests that it has always been shaky at best, but I appreciate the extra information about it.
  12. Blithe Force Ghost

    Member Since:
    Jun 24, 2003
    star 4
    The Laffer curve is only shaky in the sense that it is next to impossible to know where a country is at on the curve. We know for certain that if tax rates were at 0%, there would be no government revenue. If tax rates were at 100%, there would be no incentive to work, and once again, no revenue.

    Following that, there must be a point on the curve where tax rates are too low to support the general welfare. Just the same, there must be tipping point in which compliance begins to fall faster and faster, making the opportunity cost of collecting additional revenue higher and higher as incentives are destroyed. At some point, the government is certain to experience an actual decline in receipts. So the proper tax rate is somewhere in between. Where at is something only God probably knows. . .

    We see some of this in the Capital Gains Tax. Lowering this key rate under Clinton and Bush produced more government revenue; hence, the tax rate was assumed to have been too high previously. In other cases, such as the Federal Income Tax, the Supply-side theory has seen almost zero results.
  13. DarthIktomi Jedi Master

    Member Since:
    May 11, 2009
    star 4
    Eh? We get taxed two or three times. I mean, I pay federal and state income taxes. In addition, I pay taxes on my property, and on any investments or gambling revenue.

    The inheritance tax only applies if you have $2 million or more. And there are exceptions for farmers.

    We should really call it the Paris Hilton tax.
  14. Lord_Hydronium Manager Emeritus

    Member Since:
    Jun 11, 2002
    star 5
    The problem with the Laffer curve is that if we actually tried to figure it out in reality, it would look more like this. Something with as complex a relation as productivity to tax rate isn't going to order itself into a nice continuous function with a single maximum. People don't decide how much they're going to work just based on how much of that paycheck they collect; where it goes, what benefits they get from it, and a host of other connected matters affect their decision. Even at the far right end of the curve, there's still going to be those who work just for personal satisfaction, because they enjoy their job or think it's necessary, or those who collect some sort of benefit or perk from employment.
  15. Ghost Chosen One

    Member Since:
    Oct 13, 2003
    star 6
    Let's look at the U.S. federal government's budget:

    Spending (2009 budget):
    [image=http://upload.wikimedia.org/wikipedia/en/d/d4/Fy2009spendingbycategory2.png]

    Projected debts and deficit levels for next decade:
    [image=http://upload.wikimedia.org/wikipedia/en/3/3b/2010_Budget_-_Deficit_and_Debt_Increases.png]

    Debt proportionate to GDP:
    [image=http://upload.wikimedia.org/wikipedia/en/8/80/Debt_and_Debt_%25_to_GDP_-_2010_Budget.png]

    How we got into this mess:
    [image=http://upload.wikimedia.org/wikipedia/en/a/a5/CBO_Forecast_Changes_for_2009-2012.png]




    Estimated receipts for fiscal year 2010 are $2.381 trillion, an increase of 8.9%.

    $1.061 trillion - Individual income taxes
    $940 billion - Social Security and other payroll tax
    $222 billion - Corporation income taxes
    $77 billion - Excise taxes
    $23 billion - Customs duties
    $20 billion - Estate and gift taxes
    $22 billion - Deposits of earnings
    $16 billion - Other



    The President's budget for 2010 totals $3.55 trillion. Percentages in parentheses indicate percentage change compared to 2009. This budget request is broken down by the following expenditures:


    Mandatory spending: $2.184 trillion (-17.9%)

    $695 billion (+4.9%) - Social Security
    $453 billion (+6.6%) - Medicare
    $290 billion (+12.0%) - Medicaid
    $0 billion (-100%) - Troubled Asset Relief Program (TARP)
    $0 billion (-100%) - Financial stabilization efforts
    $11 billion (+275%) - Potential disaster costs
    $571 billion (-15.2%) - Other mandatory programs
    $164 billion (+18.0%) - Interest on National Debt


    Discretionary spending: $1.368 trillion (+7.0%)

    $663.7 billion (+12.7%) - Department of Defense (including Overseas Contingency Operations)
    $78.7 billion (-1.7%) - Department of Health and Human Services
    $72.5 billion (+2.8%) - Department of Transportation
    $52.5 billion (+10.3%) - Department of Veterans Affairs
    $51.7 billion (+40.9%) - Department of State and Other International Programs
    $47.5 billion (+18.5%) - Department of Housing and Urban Development
    $46.7 billion (+12.8%) - Department of Education
    $42.7 billion (+1.2%) - Department of Homeland Security
    $26.3 billion (-0.4%) - Department of Energy
    $26.0 billion (+8.8%) - Department of Agriculture
    $23.9 billion (-6.3%) - Department of Justice
    $18.7 billion (+5.1%) - National Aeronautics and Space Administration
    $13.8 billion (+48.4%) - Department of Commerce
    $13.3 billion (+4.7%) - Department of Labor
    $13.3 billion (+4.7%) - Department of the Treasury
    $12.0 billion (+6.2%) - Department of the Interior
    $10.5 billion (+34.6%) - Environmental Protection Agency
    $9.7 billion (+10.2%) - Social Security Administration
    $7.0 billion (+1.4%) - National Science Foundation
    $5.1 billion (-3.8%) - Corps of Engineers
    $5.0 billion (+100%) - National Infrastructure Bank
    $1.1 billion (+22.2%) - Corporation for National and Community Service
    $0.7 billion (0.0%) - Small Business Administration
    $0.6 billion (-14.3%) - General Services Administration
    $19.8 billion (+3.7%) - Other Agencies
    $105 billion - Other



    The total deficit for fiscal year 2009 is forecast to be $1.75 trillion, a $1.29 trillion increase from the 2008 deficit. The deficit is forecast to decline to $1.17 trillion in 2010 and $533 billion by 2013.

    The 2009 deficit includes the cost of:
    The Troubled Asset Relief Program ($247 billion in 2009)
    The American Recovery and Reinvestment Act of 2009 ($202 billion in 2009, $353 billion in 2010, and $232 billion in 2011 forward)
    The 2009 Omnibus spending bill ($410 billion)
    --and changes due to President Obama's policy proposals.

    The 2009 budget deficit would represent 12.3% of gross domestic product.




    The U.S. budget situation has deteriorated significantly since 2001, when the Congressional Budget Office (CBO) forecast average annual surpluses of approximately $850 billion from 2009-2012.
  16. Kimball_Kinnison Force Ghost

    Member Since:
    Oct 28, 2001
    star 6
    Except, how do you define "a lot"? As a percentage of income? As a total amount of money paid?

    A lot of people tend to look only at tax rates when deciding that someone isn't paying "enough", without really considering the actual amount that they are paying. With a flat tax of 10%, for example, a person making $20k would pay $2k in taxes, while a person making $20m would pay $2m. Would that not be a case of the person making a lot still paying a lot?

    There are several ways that you can define the idea of a "fair" tax. At its core, the idea of "fairness" is that you treat everyone the same, but there are many ways you can do that.

    One idea would be that it would be fair if everyone paid the same amount (i.e. a $100 tax per person). However, that does place a larger burden on those who do not make a lot of money (not to mention the question of what to do with people who don't even make enough to pay the tax). I think we can all agree that this sort of tax isn't very workable in the long run.

    Another way to define "fair" would be for everyone to pay at the same rate (a flat tax). This way, everyone pays a set amount per dollar that they make.

    However, I don't see any way that you can possibly define "fair" to cover our current tax system. It doesn't treat everyone the same, because when someone makes more money, they don't just charge more in proportion to the extra money, they charge a higher rate. That's not a matter of treating everyone the same.

    Kimball Kinnison
  17. KnightWriter Administrator Emeritus

    Member Since:
    Nov 6, 2001
    star 8
    People shouldn't be treated the same. If you're making a million dollars a year, you're living a much different life than someone making 20K a year.
  18. LostOnHoth Chosen One

    Member Since:
    Feb 15, 2000
    star 5
    My personal view, not necessarily an educated opinion nor representative of conventional wisdom, is that taxation is a contribution to the state to ensure that the institutions of society and commerce which provide the opportunities for the people to create wealth can be maintained. Those that are able exploit those opportunities to create great wealth for themselves nevertheless owe that ability to create that wealth to the institutions of society to which they belong. On this basis, those that accumulate wealth for themselves should repay a higher proportion of that wealth back to the state in the form of taxes than those who are in a less fortunate position, even if those that create wealth do so because of personal sacrifice, discipline and hard work. Those attributes mean nothing without the means for those attributions to be converted into the opportunities to create wealth and the state provides those necessary means.
  19. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    Yes, this is my position, only expressed less cynically than I'm capable of stating it as usual. Progressive taxes for successful people are like a high rental on premium retail property. The United States government helps provide a stable environment wherein it's possible to make plenty of money. Starbucks might not do as well in Somalia or Rwanda or in other places without a functioning, relatively uncorrupt government, a plentiful population of consumers, etc.

    The tax rate and the level of welfare state are what I've described elsewhere as the "pitchfork level." What is the level of welfare state necessary to placate the masses and prevent civil/social/political unrest from undermining the business environment? Your palace doesn't mean much when the pitchfork and torch-wielding peasant masses show up at the gates in the middle of the night.

    The smartest rich people understand this and support a progressive tax structure.
  20. Kimball_Kinnison Force Ghost

    Member Since:
    Oct 28, 2001
    star 6
    So what if someone is living a different life than someone else? As long as they aren't violating the law, what business is it of the government's?

    What legal basis do you have to claim that people shouldn't be treated the same? Last I checked, the Constitution called for "equal protection of the laws". Let's do a little digging for some definitions here (taken from Dictionary.com:
    fair - 1. free from bias, dishonesty, or injustice: a fair decision; a fair judge. Synonyms: Fair, impartial, disinterested, unprejudiced refer to lack of bias in opinions, judgments, etc. Fair implies the treating of all sides alike, justly and equitably: a fair compromise. Impartial, like fair, implies showing no more favor to one side than another, but suggests particularly a judicial consideration of a case: an impartial judge. Disinterested implies a fairness arising particularly from lack of desire to obtain a selfish advantage: The motives of her guardian were entirely disinterested. Unprejudiced means not influenced or swayed by bias, or by prejudice caused by irrelevant considerations: an unprejudiced decision.

    equal - 1. as great as; the same as (often fol. by to or with): The velocity of sound is not equal to that of light.
    2. like or alike in quantity, degree, value, etc.; of the same rank, ability, merit, etc.: two students of equal brilliance.
    3. evenly proportioned or balanced: an equal contest.
    4. uniform in operation or effect: equal laws.

    equitable - 1. characterized by equity or fairness; just and right; fair; reasonable: equitable treatment of all citizens.

    just - 1. guided by truth, reason, justice, and fairness: We hope to be just in our understanding of such difficult situations.
    2. done or made according to principle; equitable; proper: a just reply.
    3. based on right; rightful; lawful: a just claim.
    How, then, are your ideas in any way fair, equal, equitable, or just? The very concept of fairness relies on "the treating of all sides alike", and you outright reject that. If you reject fairness in taxation, then how can that taxation be equitable ("characterized by fairness") or just ("guided by fairness")? If you reject treating people the same, then how can your treatment be equal ("uniform in operation or effect")?

    If you are using different definitions of any of these words, then please rpovide them (as well as any sources that support using those definitions). Otherwise, how can you defend your position as acceptable considering the requirement for equal protection and in accordance with principles of justice and equality?

    Kimball Kinnison
  21. Blithe Force Ghost

    Member Since:
    Jun 24, 2003
    star 4
    The problems in our entitlements programs are without a doubt the biggest danger to our future. Total unfunded liabilities for programs such as a social security and medicare now total 107 trillion dollars according to the latest reports.

    The U.S. effectively owes more than all of the combined GDPs of the entire world.

    What changes can be made in order to deal with this impending insolvency? Social Security and Medicare, to put it simply, are screwed. Current Social Securitiy taxes will not be suficient to pay out what the government owes by 2016. The flood of Baby Boomers who begin to tap into the programs en masse around 2015-2016 will cause the spending trend to become completely unsustainable.

    [image=http://perotcharts.com/images/challenges/challenges31-640.png]

    The term tipping point can be applied to a process in which, beyond a certain point, the rate at which the process continues will increase dramatically. The budget of the United States has reached its tipping point. A recent event could have, in fact, marked the point in time. The first Baby Boomer?born January 1, 1946?has applied for early retirement at age 62 and received her first Social Security check. On the chart, an upturn in the Medicare growth rate can be detected in 2011 when the first Baby Boomers turn 65. Thereafter, the number of retirees continues to increase while the number of workers per retiree continues to decrease. The pyramid scheme has collapsed. - Perotcharts.com

    What's even more worrisome is the prospect that if the Federal Government cannot find any meaningful way to reform or raise the appropriate revenue through a new, improved tax structure, the U.S. will default, print the money, and hyperinflate their way out of the problem.

    Interestingly enough, that disasterous solution is exactly what Laurence J. Kotlikoff, professor of economics for Boston University predicts in his paper "Is the U.S. Bankrupt?", for the St. Louis Federal Reserve Review. He claims the most likely scenario is, in fact, a Latin American-style solution: Print money. Lots of money.
  22. JediSmuggler Force Ghost

    Member Since:
    Jun 5, 1999
    star 5
    They have been equally willing to claim democracy on the issue of taxation as I was vis-a-vis Prop 8. If my argument is weakened, then so are theirs over Prop 8.

    There is another difference, of course. With gay marriage and Prop 8, there are religious freedom issues as well - a right clearly protected under the First Amendment. So there are competing rights that need to be worked out.

    If they want to pay more taxes, or pay more than they owe, nothing stops them. But I get the sense that they'd prefer to pay for their social spending with other people's money.
  23. ShaneP Ex-Mod Officio

    Member Since:
    Mar 26, 2001
    star 6
    I am all for the Inheritance Tax. The basic idea that we try and keep massive concentrations of wealth from developing is a good thing for our republic. That we try and keep dynasties and multi-generational wealth at a minimum is a healthy thing.

    I agree with that basic notion. I'm not sure I agree with the minimum to be taxed, but I agree with the basic idea behind it.

    Blithe

    Onto your questions:

    1) In the face of today's economic crisis, do you think taxes on upper income individuals, including Capital Gains and Dividends Taxes, need to be higher? Why? Should they continue to be higher if or when the crisis has abated?

    No, I think the rates need to be lowered on cap gains. That will spur investment. I think cap gains should be indexed for inflation.

    2) If raising certain tax rates produced less government revenue, would you still support raising them for the purposes of fairness? Why?

    No because less revenue would mean there would be less money to spend on government obligations.

    3) Do you feel that the lower income groups in the U.S. pay their "fair share" of taxes. In rarer cases, some feel they do not carry enough of the burden.

    Most people in the lower income groups don't pay ANY federal incometax. That is a problem. I believe that all but the poorest of the poor should pay some form of income taxes to the national government, or provide some form of service. I believe more people should be interested in the common, universal good of our nation.

    4) Lastly, what income tax alternatives would you support, if any? (e.g Fair Tax, Flat Tax, etc.)

    National Sales Tax replacing the National income tax.



  24. DarthLowBudget Force Ghost

    Member Since:
    Jan 17, 2004
    star 5
  25. ShaneP Ex-Mod Officio

    Member Since:
    Mar 26, 2001
    star 6
    I hate those jingoistic terms they use.

    I'm wondering when they'll have a

    "The most amazing thing in the whole world that will change your life for the better" act.
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