Latest on Bush's Tax Cuts For The "Rich"
 

Bush's unfair tax cuts for the wealthiest Americans, or so they say, has actually increased the tax burden on the highest income earners. The latest reports show that not only have the total tax revenues collected by the federal government gone up, but so has the percentage of taxes paid by the top wage earners in the country. The next time you hear Obama talk about his tax plan of rolling back Bush's tax cuts on the "rich" and lowering taxes for everyone else, perhaps people will start to ask him some pointed questions rather than fainting.

As usual, this comes from one of my favorite publications, the WSJ. The data was in an editorial - but if you doubt the data, feel free to go to the original source.

Their Fair Share - WSJ.com



Also, keep in mind the point in the last paragraph I included. "New wealth" is income based, people going from nothing to being "rich" have high incomes and pay high taxes. These are the people really carrying the burden. "Old wealth" is asset based, people (I.e. - Kennedy's) can manipulate their capital to minimize their tax burden and can basically pay what they want, like Warren Buffet. In effect, Obama and Democrats have tax policies that protect "old wealth" and make it more difficult for people starting with nothing to accumulate wealth. Perhaps this in part explains why existing rich people and people with no interest in accumulating wealth are generally Democrats.

Given the latest data when are we going to start to see a shift in the empty rhetoric from Democrats on this important issue?

You'll never see a change in rhetoric from the Dem's, it's how they pander to their base. Much akin to the guff republicans catch for their hawkish "us vs. them" mentality, one of the tenets of the democratic party is pushing this notion of class warfare.

Stats based on percentages can be very misleading. I didn't check any of the opinion pieces numbers but his argument is a bit silly.... At the end he says if you tax them at a higher percentage they will just use more loopholes to avoid the taxes. However, they are going to use these loopholes anyway....

If you were ever wondering who is better for the economy check out this blog:

The Liscio Report: Presidential economics: Do parties matter?

GDP:
http://tlrii.typepad.com/thelisciore.../07/07/gdp.gif

Employment:
http://tlrii.typepad.com/thelisciore...employment.gif

Unemployment:
http://tlrii.typepad.com/thelisciore...employment.gif

CPI:
http://tlrii.typepad.com/thelisciore.../07/07/cpi.gif

Fiscal shift:
http://tlrii.typepad.com/thelisciore...iscalshift.gif


Stock:
http://tlrii.typepad.com/thelisciore.../07/stocks.gif

Inequality:
http://tlrii.typepad.com/thelisciore...07/07/gini.gif

Dems are better for employment, GDP, stock market, inequality exchange, unemployment, and inflation. Republicans have bonds.

If you need more proof then explain why we are going into a recession with Bush in power for the last 8 years. His policies have almost destroyed our economy and may still yet. It is going to take a long time to climb out of the hole he dug us into.

It seems to me that graph is a little misleading when you note that the top three are CLinton, whose economy grew behind a republican congress but failed miserably helping lead to our current situation with the dot com crash; then you got Truman who inherited an economy that came out of a different and had the whole war thing working for it, same for Dwight. Kennedy and Johnson seem straight enough, I just think it's worthy of noting in a thread about tax distribution that LBJ is a strong reason for this mess with his "great society".

There's a flip side to this, Ace. If those below the median contribute so little, why would anyone have a problem with them getting a bit of a tax cut?

I suggest a simple flat tax for all would be the best solution and end all these petty arguments.

A flat tax?! Really?! Now who would that benefit, and how would that be fair?

You're going to need to suggest widespread government spending cuts as well. I suggest starting with the military.

Sure, a little fat trimming never hurt anyone. I think it would be good for us too. An audit is in order too. The accounting needs to be....accountable. Military spending is a big piece. Reducing spending is only one element. Smarter, fiscally responsible spending would be better.

Most flat tax proposals I have seen are inherently regressive and would not only require significant spending offsets, but significant exemptions for the lowest wage earners in order to come anywhere close to approaching "fairness."

Unless the flat rate is high, you're going to need to cut by slashing and burning to make up for the major redistribution of tax collection. Set it too high and you make your poor even poorer.

And you do realize that most countries that currently use the flat-tax system are former Soviet and socialist republics, right? (Including two of the "-stans".) I haven't checked recently, but the last I've heard, a lot of them aren't doing so hot (still).

I guess what I'm trying to get at is that flat-tax systems are (were) often employed in communist-type systems. In former communist states, they still work because there isn't as much of a disparity between rich and poor.

It wouldn't really work in free-market industrialized nations.

Hong Kong has a flat tax system. Flat tax is ideal because everyone only pays a percentage. 5-10% sounds about right to me.

I actually think we do need to "slash and burn" as it were. Time to go on a diet. That deficit needs to start going down. It hurts at first but we will be better for it in the long run. We will have to learn to budget better, not spend so freely, and not waste. We need to hold our politicians accountable and responsible. More taxes only hurts us.

I can't tolerate anymore taxes. I am being squeezed to death here. When over 33% of my income goes to taxes, plus all the sales taxes etc, it really is too much.

Hong Kong's personal taxes go as high as 15%, and as much as 90% of its GDP is in services. Hardly a test market for the U.S.

Though I cannot argue against sound fiscal policy.

But I don't see the U.S. having such any time soon.

jorgelito...there is really not that much discretionary, non-defense spending to cut...certainly not enough to make a big difference....and it would take a flat tax of far more than 5-10% and/or a significant increase in state and local taxes.

The most recent proposal was Huckabee's "fair tax" which eliminated the federal income tax and replaced it with an effective 30% national sales tax. The fallacies are laid out here.

The deficit was not only reduced in the late 90s...we had several years of budget surpluses....based on a simple "pay as you go" principle that was abandoned in 2001.
-----Added 21/7/2008 at 11 : 34 : 41-----
9/11 and the tech bubble burst contributed to the exploding deficit and national debt..but by most objective measures, so did Bush's tax cuts and war funding.

I would like to see how many Americans would be for a 60%-70% flat tax in order to fund every program (including national healthcare). How about a flat tax of 15% on workers income (up to any amount), but 60%-70% on investment profits and 40% on business profits, and 90% for an estate tax...

The flat tax people are fine with it at 15% or 20% for everything if they are making lots of money, but we would still have a national debt and financial problems in a few years with SS and Medicare. Which they don't seem to care about.

Actually Baraka, it is now at 16% or so. The 5-10% I quoted is the ideal I would like to see. I don't see why it couldn't work in the US. C'mon people, let's not be so pessimistic here. Positive attitudes all around now :)
-----Added 22/7/2008 at 12 : 56 : 04-----
I agree. I remember the healthy surpluses we had back in the 90s. I remember thinking we should have paid down the deficit. I can't recall but I think George used it for a tax refund (which isn't necessarily a horrible idea in of itself).

But the airline bailout and war funding really killed it. To me it's more than just numbers of positive and negative. There's waste there to be sure. Egregious waste I bet. Tightening the belt is a good start and having each gov't agency held fiscally responsible and accountable would be good too. There's too much shenanigans involved in the bidding and contracting process. I would like to see that rectified. And seriously, no more pork.

Odd, please check the link I had above for more images. I posted a bunch more but they aren't appearing. Is there a limit of 1 image per post or something?


(FIXED). Please check out the photos above. I fixed the links and all of them are there now.

The image links I was using seem to break the board. I'll report it as a bug.

This is not correct. Think about your behavior. If your marginal tax rate was 100%, how much effort would you put into tax avoidance? Or, would you simply not putting any effort into making an additional dollar? Either way taxes collected from you might be less than if your marginal tax rate was 50%, 25%, 10%, at a lower rate you may put little or no effort into avoiding taxes or you may work X times harder to make X times more dollars which would be taxed.
-----Added 22/7/2008 at 11 : 12 : 19-----
I have no objection to people getting tax cuts. My preference is to not tax the fruits a man labor at all. I think we should tax consumption. Tax the rich guy who has his corporation buy a $10 million dollar jet that he uses for business and can be used as a corporate tax deductible expense. Don't tax the savings account interest income from a disabled blue collar guy who save his entire life and now needs the money to live.
-----Added 22/7/2008 at 11 : 15 : 38-----
Tax policy is not petty. It impacts every person, and the future of this nation. If we don't fix Medicare and social security tax related issues our nation will be "bankrupt" (or currency will be made almost worthless). Either the Dems have it right, or they don't. Given their rhetoric on the subject isn't it fair to point out discrepancies?
-----Added 22/7/2008 at 11 : 19 : 33-----
There is another thread I suggest looking at: You can't soak the rich. Our current system protects the existing "rich", retired, and the "poor", but the burden is squarely on middle class upwardly mobile wage earners. Our current system is also putting a bigger and bigger burden on our children.
-----Added 22/7/2008 at 11 : 27 : 27-----
No system is perfect and has flaws. Our current system allows a man like Warren Buffet to increase his net worth by $10 billion in a year and pay no tax on it (and he will pay no tax on it upon his death), but as he says his secretary pays a higher percent of her income than he does. Buffet does not live the lifestyle of a typical billionaire but his tax avoidance strategies are typical. In my view the first step in developing a "fair" system is to agree on the underlying principles. do we want to tax work, savings and investment or do we want to tax consumption or the goods and services actually used by people?

i hear this used a lot... but how many rich people do you know who are actually doing their own taxes? i doubt many. if you're paying someone to do your taxes, you want them to squeeze every last cent they can, make it so you pay as little as possible.


so what you're saying is we should get rid of loopholes allowing investments and capital gains to avoid taxation? if we don't fix the loopholes that the wealth holders use, then lowering the tax rate for lower income earners doesn't really do much to change the problem. get rid of loopholes that favor the rich, then drop the taxes for the poor and middle class. but you'd be acting foolishly to cut your income without knowing it's replaced (when you're already spending more than you actually make).

There is the cost of tax planning and then there is the cost of tax avoidance execution. Again, what would you do? If your tax burden is projected to be $100 how much effort do you put into your tax situation? If your tax burden is projected to be $1,000,000 how much effort do you put into your tax situation? In the first situation, you would not even go to your local H&R Block office. In the second, you hire an "A" team of tax and financial professionals, there is a cost to that and therefore a break even point. Then they recommend you do certain things, I.e. set up trusts, corporations, re-title assets, invest in tax efficient instruments, etc, etc., there is a cost to that, setting another break even point. Then there are the opportunity costs. If you invest in tax free municipals, that means you are not investing in corporate bonds, are you giving up some potential ROI for tax free income efficiency? So, you have to constantly look at the trade-offs and the points where it is cost effective to do something and when it is not.

Even look at the current housing crisis. If a person earned enough income to be in, let's say a 30% marginal tax bracket, and they could buy a home, no money down, with a payment of 1,000 per month (assume it was all deductible for simplicity), but it cost $850 to rent the same home, what did most people do? They bought the home and after taxes the cost was $700 all other things being equal. The tax code modified behavior. The tax code caused people to take risks or do things in home ownership that they may have ordinarily avoided. Is this the purpose of our tax code?

Minimizing current taxes paid may not always be the way people will go, but the point is that "rich" people have options, others do not have. However, if taxation was based on consumption, then everyone would have options, the playing field would be even, the tax code would be "fair" in my opinion.


I say it is unfair to tax investments and capital gains. First you earn money, it is taxed ( the gov takes their share first). Then you save or invest, after your personal expenses. Then you earn interest or dividend income, it is taxed. If you have a capital gain it is taxed. You die, and you may face more taxes. However, if you spend all your money, go into debt you have no further tax obligation. People wonder why the national savings rate is negative??? But, on the other hand people with asset based wealth, will earn income, then deduct expenses and pay tax on what is left over. The "loop holes" are really a "loop hole". Taxation based on income (income earners carry the burden), versus people with asset based wealth, or "rich" people who manage their tax burden, paying what they want.

Fairness to me says if you spend like a millionaire get taxed like one, regardless of how you get the money to spend.


The only way to close the "loop holes", as you perhaps see them, is to simplify the tax code. The reason the tax code is so complicated is because Washington wants to serve special interests and modify behavior. The real goal simply should be to make sure everyone pays their "fair" share.

What about those who spend overseas or who don't spend at all? The last time I was out of the country, I spent thousands of dollars. Baring an emergency, I never plan to have my bank account dip below my yearly salary. If I ever get to the salary I desire (between $125k and $250k) that means a lot of untaxed money.

I can appreciate where you're coming from, but maybe I should ask you this: why just tax what we spend? Shouldn't everyone pay their fare share? Why not, then, just tax income?

ace your examples are so extrem that they are irrelevant. No one is taxed at 100% and the gap in taxing of a single person between bush tax cuts and non-tax cuts is not $100 and $1,000,000.

Your argument seems to be don't tax the rich because they will just avoid the tax anyway.... which is very bad logic. Should we do the same about drugs? prostitution? election tampering? Terrorism?

How does this sound, don't make terrorism illegal because the terrorists will do terrorism anyway.....

On the other side of the coin people who visit here will pay a tax on what they consume.

The money you save in a bank, in normal circumstances will be recirculated back into the economy. Given fractional reserves, a portion of your savings will be lent to others to buy homes, start business and grow the economy. The money spent will be taxed.

I think in some ways we already have systems to tax based on usage. For example people pay a fee to use national parks. People pay a federal gas tax for roads. Theoretically social security taxes are based on a return of that person's contributions. What I find unfair for example, is why should the guy who does not go to college have some of his tax money go to subsidize the education of people who do? I know the argument "every one benefits" but the reality is that not only is that subsidized college student getting the subsidy, they get a higher real life time income and will probably be a snob to the guy who gets his hand dirty for a living. What a deal. :shakehead:
-----Added 22/7/2008 at 04 : 38 : 07-----
Sorry if you don't see the concepts. I don't think the examples are extreme. Just, this year. People qualified for stimulus checks, however many of these people were at an income level where they did not need to ordinarily file a income tax return, however for the stimulus check they needed to for 2007. These people normally put no effort into tax planning, but this year they had to. I helped my 90 year old aunt fill out a tax form for this very purpose.

In 2004 President Bush paid about $227,000 in taxes. I think it safe to say that there are people who could face a $1,000,000 tax burden. What do you think Alex Rodriguez's potential tax burden is?

Also, if you have access to tax prep software, run some examples. You will find that there are points in our current tax code where an additional dollar earned could result in a addition dollar in taxes, especially through the loss of tax credits and factoring in FICA/state/local taxes.

You miss the point. I say the best way to tax the rich is to do it based on what they spend. Our current system certainly taxes people with high incomes, but there are people with large amounts of wealth that go untaxed relatively speaking. I simply don't think that is fair. The question I ask is why do super wealthy people support such a convoluted tax system? Have you ever given that any thought, if so, why do you think they do?


Drug usage for adults should not be illegal. And taxed.
Prostitution involving consenting adults should not be illegal. And taxed
Election tampering should be a felony.
Terrorism should be in a special class of criminal offenses. When a person commits a crime with the intent to terrorize a community or a nation they should never see another free day - in my opinion.

{added}

I just looked it up - Tiger Woods made $127,902,706 in income last year. $1,000,000 would be 0.78% of his income.

and he would have only paid $100 in taxes under the dems?

No.

But I used this example in the thread - You Can't Soak the Rich, post #28.

Tiger Wood's generates income, that is taxed. Warren Buffet generates wealth, that is not taxed. Tiger Wood's wealth is currently income based. Warren Buffet's wealth is asset based. At some point Tiger Wood's will stop accumulating wealth based on income and start accumulating wealth based on assets, when he makes the transition his lifestyle won't change but his tax burden will. Actually, I bet the odds are that Tiger Wood's has already structured some of the income from endorsement deals in such a manner that greatly reduces his reportable taxable income from those deals.

Are you saying that you don't see the problem with our current system of taxation? The real impact of Bush's tax cuts is that "rich" people have less of an incentive to employ tax avoidance strategies given the lower marginal rates, do you still believe that rolling back Bush's tax cuts will actually cause rich people to pay more if it is not in their financial interests to do it?

But he gives lots of money to Charities. In my view giving money to a charity is pretty much equivalent to being taxed, just you are picking what you want done with your money. His business still gets taxed. Also how does he avoid the estate tax? Maybe I don't understand that tax well enough but when he dies all of his assets will be transfered to his beneficiaries and each of them will be taxed for the value of those assets no?

Sounding like a Republican. :thumbsup:


His plan is to give his money to charities. He can do this through trusts without paying taxes upon his death. If Buffet thought giving money to the government was the best use of his wealth, I think he would do that.

ace...revenues from personal income taxes have decreased as a result of the Bush tax cuts of 01 and 03 that were heavily weighed to the top rates....very few credible economists dispute that fact.

Here is a fact check:
Beyond that, I have seen nothing to support your contention that the top wage earners would not pay more if the 01 and 03 tax cuts sunset in 2010 as was planned and agreed to in both bills by Bush and the Republicans in Congress.

How quickly some forget (McCain for one) that both bills were enacted as short term economic stimulus packages...not permanent changes to the tax code.

I looked at your link, here is a chart from it:

http://www.factcheck.org/demos/factc...20chart(1).jpg

And here is a quote from the link you provided:

There is no doubt that tax policy has an impact on economic behavior. There are many other factors that have an impact on economic behavior. When an economist or anyone attempts to tell us the impact of tax policy, they have to make certain assumptions, just as Viard does here (on one level he has to make assumptions on the timing of the impact of the tax cuts and to the degree the recession had an impact on taxes collected) . If you would like we can look at some of the fact check items you list in more detail looking at the assumptions and understanding the real findings. I have no problem with that approach. The reality is taxes collected are up, the percentages paid by the top wage earners are up and we have empirical information on how people would behave given certain tax conditions. So, on it face, I think my position is correct until proven wrong. To do that we need to do a detailed analysis.

Also, I am not really clear on the issue you are responding to. My main point here is that regardless of what many have said, the Bush tax cuts for the "rich" has not resulted
in them paying less. The data you give seem to be regarding the "supply side" argument.

ace....the CBO, the Congressional Joint Committee on Taxation, Bush's Council of Economic Advisers all report that the Bush tax cuts resulted in less revenue...they cant "prove" but attribute it primarily to the fact the cuts were heavily weighed towards the "rich" and the "rich" payed less than they would otherwise have paid. (ie what they paid pre-2001).
-----Added 23/7/2008 at 12 : 50 : 44-----
The bonus of the "fact check" is that it also debunks the supply side myth.

I did a GOOGLE search using "CBO tax cuts less revenue". Here is the third item that came up:

Washington Wire - WSJ.com : CBO: Tax Cuts' Impact Has Faded

This individual seems to say that the impact of the cuts has worn off and the supply side impact small at best. He then says the cuts added to the deficit and gives a range of an increase of $3 billion to a loss of $14 billion dollars depending on the assumptions used. He also has the position that government deficit spending has a negative impact on economic growth. Not very precise is it?

If you recall Hauser's law taxes collected are a factor of GDP growth not marginal tax rates. So, in order for the above to be correct, meaning Bush's tax cuts lead to less taxes collected, you have to make assumptions about the impact the recession had on taxes collected.

I certainly agree that a dividend tax cut will have an initial big short-term impact and then that impact would fade to a baseline level. I also agree that a rebate check would have a big short-term impact and then fade. On the other hand how does the CBO factor the increased cost of gas for the average working man (exports or money out of our economy and the pockets of Americans) with the on-going lower tax rates. Which had a bigger impact on the economy, and to what degree? We need the methodology before buying into the conclusions.

ace...I am still trying to understand a core issue that you stated above (and in other threads)
Can you point to any data or any evdience that "rich" people are using tax avoidance strategies less now than pre-2001? or, if the rates revert to the previous level in 2010 as envisioned in the law, that they will pay less than they did when those rates were in effect pre-2001?

IMO, your argument on this issue is baseless unless you have something factual to suggest otherwise.

dc-dux, don't you think the flat curve showing the percentage of taxes actually paid irrespective of nominal tax rates is evidence that people tend to pay at low rates and strategize to avoid payment at high rates? The graph was posted in this forum a little while ago, and you and others turned mental somersaults to avoid drawing the obvious conclusion.

nope...I didnt find that compelling at all.

You and ace are gonna have to do better than that with data or factual evidence that those in the top bracket are using "tax avoidance strategies" less now than pre-2001....or conversely, that they would ulitize such stratgies more than at present, if/when the rates are rolled back in 2010 as currently required by law.
-----Added 23/7/2008 at 05 : 23 : 28-----
I guess you guys dont accept the report from the Joint Committee on Taxation cited in the fact check above:

The Joint Committee on Taxation estimated that the 2001 tax legislation (the Economic Growth and Tax Relief Reconciliation Act) would cause government revenues to be 107.7 billion less than they would have been in the absence of the legislation in 2004, 107.4 billion less in 2005 and 135.2 billion less in 2006. The committee's estimates for the effect of the Jobs and Growth Tax Relief Reconciliation Act of 2003 were that it would reduce otherwise projected revenues by 148.7 billion in 2004, 82.2 billion in 2005 and 20.7 billion in 2006. The JCT makes its comparisons against the Congressional Budget Office's receipts baselines.

My position remains that a tax cut focused on the middle class and working poor rather than the top wage earners would not only cost less but would also benefit far more people.

If you buy into the supply side argument, then we will obviously continue to disagree.

Before I put any additional effort into your question, I need to ask you a question to see if we are even in the same ballpark.

Do you think federal tax policy impacts the behavior of tax payers, if so how?
-----Added 24/7/2008 at 10 : 52 : 15-----
DC,

The above is like having some people sit around a table and look into a crystal ball trying to speculate what might have been. I think before doing that look at real data.

The real data says taxes collected are up. The real data shows we were in a recession and may be in one right now, either way GDP growth was slow or negative prior to the tax cuts and now GDP growth is slow or negative. Historically this would indicate taxes collected would go down, they have not. The data also shows "rich" people are paying a higher percentage of taxes collected. You could argue that Bush's tax cuts put us in our current economic status, but no reasonable person is suggesting that.

So, you are correct I do not accept the report that you cite. I know the normal reaction is that if scholarly types in Washington say something we are all supposed to accept it without question, but I am not normal in that way. Heck, the scholarly types in Washington don't even know what our real CPI is.

Is Obama's carrot to small business and indication that on some level even he acknowledges supply side economics can have a stimulative affect on the economy?

Obama's Small Business Conundrum - Forbes.com

Obama promised to help small businesses in his campaign. Why act surprised?

No.

Long Answer:

A) Supply side economics never, ever meant offering tax breaks to small businesses. It meant increasing overall supply through incentives to produce, usually achieved by lowering taxes. Right now, we don't live in a world with a supply deficit - we live in a world with almost no demand. What Obama's talking about now has literally nothing to do with supply side economics, it has to do with employment.

B) Tax expenditures are extremely commonplace. That Obama is offering some to small businesses - after he campaigned on a platform of helping small businesses - has nothing to do with the supply side economics.

C) We're in the midst of a serious recession. One of the worst results is that unemployment hovers at above 10%. Furthermore, poor unemployment numbers will kill Democrats at the ballot box. So Obama is proposing a large number of measures to increase employment. Some of these measures include tax breaks to small businesses with the hope that they will use their extra expected savings to expand (and thus hire new employees), or not fire current employees because of the poor economy, or even just not close down.

I question how effective these measures will be (studies on the multiplier effects of various stimulative proposals have shown that tax expenditures are amongst the least effective) but I am hard-pressed to see how one can view Obama's actions as supply side. I think you might be misinterpreting the term to mean any government action taken on the corporate sector that involves cutting taxes. But it really doesn't. Especially in a world with minimal demand.

I am not surprised that tax cuts to the "rich" will have a stimulative effect on the economy, I am just surprised by the silence from the left. If a republican administration offered any type of tax cut or incentive to what they consider the "rich" they would have pitched a fit. At the end of the day it appears all the "stimulus" in the areas of bailouts and public works projects is not doing what the administration intended. What we are going to find is that the people who create jobs are the people who create wealth, or the "rich".

---------- Post added at 04:29 PM ---------- Previous post was at 04:05 PM ----------

Offering tax breaks to small business does fit under the broad definition of supply side economics in my understanding of the concept. Ideally, tax breaks or tax cuts would not be targeted to a segment of the economy but be broad based. And, I see it more as the elimination of disincentives rather than giving incentives by the government.

When we look at different components of the economy we find some supply surpluses and some supply deficits. For example, for small business owners with growth plans there is currently a shortage of capital for investment. Tax cuts or incentives will increase the available supply of capital. Over the course of the recession business has been reducing available inventories to free capital and to regain pricing strength. we have also seen productivity gains. On a forward looking basis we are closer to supply shortages and the need to ramp up production than the back looking indicators suggest. The incentive to earn more will trigger continued health growth. So if the economy is at or near bottom we do not want to see equilibrium at theses levels especially with unemployment at 10%

Perhaps not in his mind. The problem is in his targeted plan rather than a broad based approach. The creation of a relatively complex plan lends itself to the system being gamed, lessening the impact. Reagan's approach or Bush's approach was better. Tax simplification and braod based tax rate cuts.

Time will tell regarding Obama's plan.

When you say "world with limited demand", I disagree. When we look at different ways to measure domestic or global demand we find that consumption is close to historic levels. What has happened is that there was a period of negative growth. simplistically if we give demand a base of 100, and it grows to 200, then goes down to 190, we still had growth of 90 and demand near record levels. What we need is to reverse the negative trend and to see what economist expect as healthy growth rates. It is all relative.

returning to the original point, they are called "tax cuts for the rich" because, well, they benefited mostly the rich. The reason the share of taxes paid by the top earners increases is because they are really the only ones who saw increases in income:

http://www.frbsf.org/publications/ec...el2006-33a.gif

http://upload.wikimedia.org/wikipedi...7-2007.svg.png

basically, this past decade only the incomes of the 20 percent richest households increased, measured either by wage or by household income.

Those are interesting charts and graphs, but...

One of the points of a progressive tax policy is to social engineer. One of the unintended consequences is that low wage earners have major disincentives to earn more because of large marginal tax rates. If a person has the opportunity to earn an additional $5,000 but would face the lost of a tax credit or be put in a higher tax bracket that costs him $3,000 would he do it? Depends right? But the point is don't we need to look at after tax income trends or neutral, adjusted for taxes, income trends?

Another problem is that the people in the percentiles is not stagnant. Generally average people start in a low percetile and reach their personal highest percentile in their 50's or early 60's and then they go down. So a person who is 18 and dropped out of H.S. is hurt the most. But the 18 year-old who goes to college gets a minimum wage job while in school, then goes to grad school while working an entry level job, and then gets a Phd. may hit the top percentile in their 40's and only stay their until retirement.

So what does the above graphic information really tell us? Not much.

What we do know is that when Bush cut taxes, the tax dollars collected by the federal government went up, not down. what does that tell us? And who benefited from that?

That there is mobility doesn't negate the fact that the rich fared better under Bush than anyone else. And in any case, mobility is extremely slow. Most mobility happens over the course of a generation, so the vast majority in each quintile in those graphs were in the same quintiles in the 1990s.

And we also know that tax dollars collected by the federal government went up because of an increase in receipts from social security taxes, not from personal income taxes.

Historical Amount of Revenue by Source

So if anything the Bush tax cuts were even more regressive than suggested, given how the taxes on capital gains (which favor disproportionately the rich) were cut, but not those on social security (which affect mostly wage earners).

Or, to illustrate it even better:

http://graphics8.nytimes.com/images/...axgr/popup.jpg

dippin, there are lots of ways to massage those numbers. Try looking at how much of each person's tax burden was cut. You'll see the graph turned roughly upside down. If you want to talk about marginal utility of the cuts, it's much greater at the bottom.

But look, progressivity of tax burden raises lots of other issues. The only thing it's really good at is biting the people at the top. It's less thanc lear how much it helps those at the bottom.

That is only true when you consider individual income taxes exclusively. But as I have stated previously, a lot of the tax cuts came through capital gains tax cuts, and the tax cuts excluded things like payroll and social security taxes. Looking at the total federal taxes:

Effective Federal Tax Rates Under Current Law, 2001 to 2014

Sure, that's true, but it always comes back to what sorts of activities one wants to tax and at what levels. And then you have to have a theory about why capital gains should be treated the same as income, and you'd need to account for the fact that changing the capital gains rules affects how much tax gets paid because the asset owners have ways to avoid recognizing the gains, most easily by refusing to sell.

I suppose we could just mindlessly cap everyone's income from any source, and tax away everything above a certain level. That might satisfy some urge of yours that you choose (erroneously) to call "fairness," but it also would be highly destructive and economically insane.

The "cap everyone's income" argument is an absurd situation that at no point recognizes the actual argument being made.

The fact is that taxes were significantly more progressive during most of the 20th century in the USA, and remain significantly more progressive in other developed countries with none of the so called destructive effects people like to talk so much about.

That's simply not true. Tax rates were nominally more progressive, but the actual rates paid at the top were not very much different from what they are now, because the tax code was riddled with exemptions, shelters and other such things. That in itself created unproductive activity (tax-saving-oriented planning and investment instead of productive planning and investment), which means that the economy likely would have been even better with a sane tax structure. But you're confusing nominal rates with actual rates, and the two have only a tenuous relationship to one another. The fact is that taxes actually paid are more progressive today than they have ever been in history. The bottom half of the income scale pays something like 3% of the income taxes. The top 1% pays something like 40%. I believe the top 5% pays something like 70%. You claim not to want to cap or confiscate, but how much more progressive do you think you can make the tax system than it is right now? You can make it saner and simpler but it can't get very much more progressive. The tax system has many things wrong with it, but lack of progressivity isn't one of them.

is Ace using "the rich" and "small business owners" interchangeably?

No, really, actually it was more progressive. From just two decades ago:

http://i46.tinypic.com/28mfscg.jpg

That is the effective tax rate.

And if you look at tax share of income:

http://i47.tinypic.com/2q02ikp.jpg

So as you can see, the difference between the top and the bottoms has reduced by quite a lot.


In fact, the current system, when take all taxes into account, is barely progressive. The whole thing about the top paying the vast majority of taxes happens because the top has the vast majority of income:

http://lanekenworthy.files.wordpress...1-version2.png



It is specially not progressive when compared to other nations (considering taxes and transfers):
http://lanekenworthy.files.wordpress...2-version2.png


If you want to really go at this, this paper really addresses all of this:

http://elsa.berkeley.edu/~saez/piket...P07taxprog.pdf

And if you don't want to read all of that, here's the bottom line:

http://www.visualizingeconomics.com/...axes_graph.gif

these are the effective total tax rates, so your whole bit about nominal vs effective is actually false.



So yes, the American tax system was significantly more progressive in the past. And it was so when you look at individual income taxes, but even more so when you look at the total share of income paid in taxes by each group. That is specially so because taxation has shifted significantly from capital to labor.

Serious question:

What does a "rich" man receive from the federal government that a "poor" man does not receive?

Assuming that this "rich" person lives among other "rich" people (and not among the "poor"), his taxes buy him better roads, better hospitals, more police protection, better hospitals, better schools, etc. You could say that they are "buying" those things with their tax money

I am still waiting for someone to explain to me how, if it is wrong and immoral and illegal for me (an individual) to rob someone at gunpoint (even if I give him some of his money back or buy him a drink afterwards), it is right, moral, and legal for the Government (a mob, a group of individuals) to do so. Every time I ask, the only response I seem to get is "oh not again.*"

Seriously; if it is immoral for an individual to do Thing X, why is it moral for a group of individuals to do Thing X? Because it's popular? Because enough people say so? I've already been informed by one individual here that yes, that's exactly what it is: "political consensus is all that's required." If that's -really- all it takes for an immoral act to become a moral one, what exactly did the Nazis do wrong, or the Soviets, or the Red Guards?



*There, Derwood, now you can save your Snide for someone else.

Wait... did you just Godwin taxes?

...

Okay, I'll take a crack at that one.

Imagine that you and your buddies all got together and formed a club. Maybe you decided that you all like top hats and wanted a Top Hat Appreciation Society. Whatever.

Your club grows until you have, say, 100 members. You're getting tired of the guys coming around every Wednesday, messing up your basement and drinking all your beer. So you decide to take a vote. The vote passes -- you'll rent a club house. The kitchen will be full of snacks, the fridge always stocked. Hell, go all out. Get one with a bar and keep your favourite brew on tap.

But all of those things cost money, and that's a problem. So you decide that you'll take up a collection. Maybe you decide that everyone chips in the same amount, or maybe Joe rakes in the bank as a lawyer and Fred barely makes ends meet as a high school janitor, so Joe agrees to pay some of Fred's share. The details don't really matter; the important part is that you work out a system where the bills all get paid and everyone agrees that it's fair.

And then there's Pete.

Pete comes by the club house every week. He drinks the beer and eats the food, he watches the big screen high def tv, he uses the internet, and generally enjoys everything the club has to offer. But when it comes time to pony up the dough, Pete decides he's not going to pay his share. So what do you do?

Well, the logical answer is to kick Pete out of the club. But maybe there's a clause in the club's charter that once a member is vetted, they stay a member for life. You can try to amend the charter, or you can just change the locks so that Pete's club house key doesn't work anymore and he can't abuse the place that everyone has worked so hard to make great.

...

A democratic nation when viewed at the most basic level could be considered an agreement between a collection of people. Those people generally live within a geographically contiguous area, and sometimes people get confused and think it's the geography that makes the nation, but it's not. The people agree to work together for their collective betterment, and as part of that agreement they all chip in to pay the costs of services they agree are essential.

You could make the argument that you didn't choose to be a citizen of your nation, and that would be fair. Unless you immigrated, that status was granted automatically and irrevocably when you were born. However, you choose to remain a citizen; you choose to continue to live where you are, and take advantages of the services offered. If you really have a problem with taxes, you should optimally cease to do so. Go live out in the wilderness, eat what you catch, make your own clothes, etc. If you don't choose to do that, you're Pete. Don't be surprised when the other members of the club tell you to pay up or get out.

maybe you keep getting "oh not again" everytime you say that because people are tired of an overly simplistic, inaccurate analogy?

the government isn't robbing you at gunpoint. there is a cost to living in an ordered, organized society. you may not like everything your tax money goes to, but as long as you choose to live within the boundaries of any modern society, expect to have to follow the social contract and pay the costs associated with having the services and benefits of society available to you (paved roads, police, fire fighters, etc).

don't expect to get all the benefits of living amongst the rest of us without having to pay your fair share (although, what one's fair share is open to debate).

It's also not the only thing that is different between the government and civilian law; if I shoot a Muslim in my neighborhood, I'm a murderer. If I shoot one in Afghanistan, I'm a Marine.

Martian: A good analogy, except that this is a "club" which one is not permitted to leave. The US is one of fewer than half a dozen nations which tax income earned outside of its' borders, and expatriating from the US in order not to support imperial wars of aggression (for instance) is a Felony, even if the expat in question has renounced their US Citizenship.

Harry; permit me to respond to your post in detail.

Am I given a choice? No. Is this lack of choice backed up by the threat of potentially lethal violence? Yes. Ask anybody who's ever been on the receiving end of an IRS CID SWAT team, say Ed and Elaine Brown. Pay up, or we'll take what you "owe," lock you up, and kill you if you resist. Sounds an awful lot like robbery at gunpoint to me.

There is no such contract. Contracts are agreements, negotiated between two informed and consenting parties, and subject to re-negotiation only upon mutual consent. The so-called "Social Contract" is a fraud, a lie, and complete bullshit. It is not negotiated (obey or you'll be imprisoned or shot), it does not take place between two informed and consenting parties (obey or you'll be imprisoned or shot), and it is renegotiated on a near-constant basis by Party A, with legally and socially-legitimated force to back those "re-negotiations" up at will, while Party B is not allowed to renegotiate on any terms, for any reason, at any time. Even attempting to simply leave, to remove onesself from the alleged contract which has been forced upon one and is continually "re-negotiated" in the worst possible faith, is treated as a "crime" despite the lack of an individual human victim.

Which is bullshit; murder is murder. To return to Voltaire; "Murder is wrong, and so murderers must be punished...unless, of course, they do their murders in large groups to the sound of trumpets."

Good job derailing another thread, by the way

really? try refusing to pay.

and when one side doesn't abide by that social contract?

...and he pays more for them than the poor person. Also, virtually everything you listed is a state or county service, not a federal one. So, let's try again:

What does the federal government provide to a rich man that it does not provide to a poor man?

There are several things that the federal government provides that benefit the rich more than the poor.

For starters, national security. The rich have more to be protected than the poor.

There is also diplomacy and foreign military actions to protect American "interests," which involve large multinational corporations, and therefore its shareholders, mostly rich.

There is also "corporate welfare."

We also have the FDIC, the FED and other agencies that protect financial assets (and the rich have more to be protected than the poor) and establish financial stability even if at the cost of employment (this at least since the 70s, thus helping capital over labor).

And let's not forget subsidized cutting edge medical research, most of which, though developed with public funds, take decades to be made affordable to the average person.


Oh, and while many of the things Derwood said are indeed local and state level services, a significant chunk of them are subsidized by the federal government .

And finally you have the subsidies. You have the farm subsidies and tariffs, for example, which are, more than anything else, an almost direct redistribution of income from the poor (since food is a bigger item in their budget) to farmers. Obama tried to limit the subsidies to farms which make less than 500,000 dollars a year and was soundly defeated.



But I digress. This whole discussion about the state has been so historically decontextualized that it is hard to make the discussion serious enough.

If you look at how the state came about, and how things would be right now if the state was completely abolished, it is impossible to adopt this "poor rich man" routine.

Dippin, your graphs are beside the point. I dind't say the rich are paying higher marginal rates now, I said that the progressivity of the taxes actually paid is higher now than at any time in history. and it's absolutely the case that more of the total tax burden is borne by the rich today than ever was the case in history. That's progressivity. Increasing the share of taxes paid by the rich will aggravate a situation in which you have a citizenry divided into those who benefit from govt without paying much if anything for it, and those who do pay. It's not healthy for society to create a class of moochers and then expect others to pay for it. That'll work to some extent if the tax burden isn't that big, but watch what happens when you raise it.

Your complaint is that the rich have more money to begin with. Well, yes, that's a tautology. It's also why they'd pay more taxes even with a flat tax. But that has nothing to do with progressivity.

I think that the source of your confusion is that you have a mistaken idea about progressive taxation is.

Progressive taxation is not the rich paying more. It is the rich paying more in proportion to their income. And what all those graphs show is precisely that.

The share of their income the rich pay in taxes is at its lowest point in over half a century.

The fact that the rich pay a higher share of the total taxes right now is explained by the fact that they have a much higher share of income. Even with linear taxation that would be the same.

Edit: And I think you read the graphs wrong. Only the first one is the effective tax rate. The rest are the share of income paid in taxes.

Progressivity means that marginal income is taxed marginally more. It looks at the rate on each additional dollar of income.

But your point appears to be that high earners (however defined - definition is an issue, too) tend to find ways to keep their total income tax down. Yeah, they do. They do it mainly by time-shifting and because much of their income is in capital gains. If you take out the capital gains piece, I would bet that the graph would show a huge amount of progressivity by your definition. is your complaint that capital gains have differential treatment? Or is your complaint that it's not right for people to make a lot of money?

You do realize that the best way to avoid paying tax on capital gains is not to sell, don't you? Introducing illiquidity by constricting the number of sellers and buyers has consequences. You might be willing to pay those consequences, but please show that you considered any of this stuff beyond simply stamping your feet about the fact that some people are doing better than you.

---------- Post added at 04:20 AM ---------- Previous post was at 04:14 AM ----------

Oh, and I should add that increasing marginal rates at the top means (ceteris parabus) more of the tax burden gets borne there. You might like that result, but again, there are tradeoffs. And one of them is that there tends to be less income at that level. The compensation tends to get diverted to untaxed, lower-taxed or deferred-taxed activities.

No. My point was very simple:

that taxes were more significantly more progressive before and there weren't any of the destructive effects you seemed to proclaim.

And taxes were significantly more progressive before by any standard you'd like to measure, be them the effective tax rates, nominal tax rates, or tax as a share of individual income, etc.

No, dippin, they weren't. Federal income taxes consistently have come in at a rate of between about 18.5 and 21.5% of GDP, and have been for years. And they have stayed there no matter what the rates were. (Ace posted the graph on this a while ago, but it's no big secret.) People who can figure out ways to save taxes do so. My tax partner would be out of business otherwise. You'd be amazed at the things people do (legally) to avoid being taxed. They defer income, they lock up funds in illiquid investments, they invest in cockeyed schemes, they hold assets that economically they should sell, etc etc etc. The tax system is massively distortive, and if you think raising rates cures the distortion you're sadly mistaken.

What we do know about capital gains taxes is that cutting them tends to stimulate gain-taking. That's been borne out by every cut in history.

Plus, dippin, what your'e claiming is massively counterintuitive. Let me ask you something: if you were being taxed at 25%, and the next year you were told that if you keep doing exactly the same thing you'd be taxed at 40%, what would you do? If you're like any other person with a particle of sense you'd figure out ways not to do the same thing and try to set things up so that you don't have to fork over more of your income. This is simple common sense. This idea you seem to have that people in a different income bracket than you would react differently to incentives than you would is very curious. If anything, the fact they're more successful seems to indicate they have incentives figured out better than you do.

Either you have not read my posts or you don't have a clue what they mean. I mean, the data I posted is in this very page.

Saying something isn't so doesn't actually make it so. Other than that, I have no clue what to say other than it is pretty well established that the rich paid a greater share of their income in taxes before than they do now.

By the way, federal income taxes have not consistently come in at 18 to 21 % of GDP. That is actually TOTAL federal taxes, which also include payroll and excise taxes. But how that relates to how progressive taxes are is beyond me.

Dippin, if total tax burden is consistent across time, irrespective of variations in rates across time, that tells you that overall payment of taxes is resistant to more than marginal attempts to increase them.

And you really serious think that people don't respond to tax incentives? Is that really your position: that taxes can be raised without affecting the behavior of the people who are taxed? If it is, well, wow.............

The problem with your argument in general is the counterfactual: what would the economy have looked like in the 1950s, say, with lower tax rates? What we do know, however, is that when JFK slashed rates the economy boomed. JFK did the first supply side tax cut and it was massively successful. It also raised much more tax money than before. You can look it up.

You also might want to look at the history of tax shelters. I'm not making this stuff up, I've seen it come and go through my career in dealing with clients who are businesses. (i.e. I have real life experience with this stuff, not graphs out of a book that other people put together to grind political axes with).

But it tells you nothing, absolutely nothing, about how much, in proportion to their income, people in different income levels pay. And that is what progressive taxation refers to. Taxes can be extremely low and be progressive or extremely high and be flat. From the start I talked about progressive taxes, not how much total taxes people pay. So whatever overall "resistance" to taxes there might be, the fact is that a generation ago the top 1% paid more their income in taxes, and now that number is much smaller.

Oh, and whatever stability there seems to be in total federal revenues, that leaves out state and local taxes, where the number fluctuates a lot more, but is still completely beside the point related to how progressive taxes are.



And I would love to see where I said that taxes do not affect the behavior of the people taxed. You seem to be having a conversation where parts of it take place entirely within your head. All I've said is that taxes were significantly more progressive in the past without any of the disastrous effects you claimed there would be.

We can agree on the above, but I think for different reasons. If you measure "better" in terms of monetary measures ( as opposed to other measures - i.e. my grandmother lived in a 3 room house in rural Arkansas without an indoor bathroom until 1966, but was the happiest person I have ever known - I visited her in that house as a kid and loved every minute of it with the exception of the mosquitoes at night, they really seem to enjoy "city" blood ) "rich" people will have the biggest improvements in absolute terms when the economy grows. But they are also the biggest losers in absolute terms when the economy shrinks. So, in a weird way you can pretend you support economic growth and pretend that you want everyone to participate equally, but that is pure fantasy. What I want, and what I think you fail to understand, is for poor people to have the opportunity to get "rich", or at least have the financial security to own things like their home, be able to pay for their children's education, retire without a drop in living standard, and to leave a little something for their heirs after paying for the funeral, all without having to worry about government programs.

The Bush tax cuts did more for giving poor and middle class the opportunity to get "rich" than you seem to be willing to acknowledge. In order for a poor or middle class person to get rich they have to be able to keep more of the money they earn and then put that money to work through investments. Very few, percentage wise, get rich solely through the wages they earn from working for others. The "system" works against a person getting "rich" through the normal 9-5, corporate, wage earner routine.

---------- Post added at 07:25 PM ---------- Previous post was at 07:10 PM ----------

No.

However, "rich" are generally people who own resources that generate income or capital appreciation. They usually file something more than the 1040EZ.

There are "rich" politicians and "rich" activists, you know like Jessie Jackson or Ralph Nader. I won't put my speculations in writing on how they got "rich", but I acknowledge they are not "small business owners". People like Paris Hilton and descendants of Joe Kennedy are not small business owners either but are "rich". And then we have people like, oh, everyone who plays for the Yankees, are not small business owners.

---------- Post added at 07:34 PM ---------- Previous post was at 07:25 PM ----------

I lived in California for a period of time and now I live in North Carolina. When I look at the demographic statistics where I lived in California had a much higher average household income than where I live now, but in North Carolina the schools are much better, roads better, hospitals better, and it is safer, the police and fire response times are lower, crime rates are lower, air is cleaner, utilities cheaper, taxes lower, etc, etc, etc. On the basis of your point the "rich" in California are getting screwed. I have some neighbors from New York who would agree with me regarding New York compared to North Carolina.

P.s. - We are not accepting anymore people from California or New York in North Carolina.:thumbsup:

Actually, the rich did better under Bush in in proportional terms as well. Median income remained virtually unchanged.

Everybody thinks that the gov't should come up with a system whereby THEY pay less taxes, but the other guy pays more (his fair share) in order to make up the gap.

Funny how that works.

Again, if you narrowly measure "better" there is no doubt you can be 100% correct. However, just to use an extreme example to illustrate a point (I understand the value of the example, so there is no need to comment on my intellect or lack of intellect), if Bill Gates' net worth of $58 billion doubles to $116 billion, he is doing "better", but I imagine after the first billion or two, the idea of "better" starts to have no meaning.

If a guy making $100,000 nearly doubles his income to $195,000, on an absolute basis and a proportional basis he did not do as well as Bill Gates but somehow I think the guy at $100,000 would actually "feel" the value in his increase in income, some on some subjective level I could argue that he did "better".

Our progressive income tax system actually hurts the guy at $100,000, but has no impact on a guy like Bill Gates. This concept forms the basis of my view on tax policy. Our tax policy does not affect people with great wealth, it impacts people trying to earn income, the income needed to get "rich". The difference is perhaps subtle, but there is a difference. Our income tax system also hurts the single mom getting the earned income tax credit as well, if she has the opportunity to earn a little more income she could face a large marginal tax increase - her biggest incentive is to stay poor, unless she pulls something off like winning the lottery.

---------- Post added at 10:11 PM ---------- Previous post was at 10:00 PM ----------

I would be happy with a flat tax or a consumption tax. Don't tax labor, savings, investment, tax consumption! Let people who live like millionaires pay taxes like it.

Bill Gates could zero out his "income" ( income as defined by the IRS, not capital gains - and actually Bill Gate could take loans on the value of his assets and never have to realize taxable capital gains) but still live like a billionaire for the rest of his life and the lives of all of his descendants based on our tax system.

consumption tax would unfairly burden the poor as well

The funny thing about proponents of a flat tax or even of consumption tax is that most of them believe that they would pay less taxes if that system was approved. Even just to maintain current revenue levels (which still leave behind a huge deficit), everyone except the richest 5% or so would see a very large increase in how much they pay in taxes.

It depends on how you structure the tax. For example, we could exclude taxation on a family's first $25,000 of consumption. We could exclude taxation on food, shelter, day care, clothing, medicine.

With our current tax structure they get so creative that it takes experts to fully understand the tax code (and those experts really know how to exploit the tax code - without breaking the law), I would argue for simplicity but we could apply some creativity to not overly burden poor people. And I would really love for the folks in the "underground" economy pay their fair share.

---------- Post added at 05:19 PM ---------- Previous post was at 05:02 PM ----------

I don't have a problem with paying taxes. I just want to do it in a manner that makes sense, and in a manner that is simple and predictable.

For example, and I don't know if it is still true, but at one point if you purchased a vehicle with a weight of over 6,000 pounds (big SUV's, trucks, etc.) used for business you could take a deduction for the value of the vehicle in a single year, but you could not do that for a fuel efficient car. So, back in the 90's when everyone was buying big SUV's, many did so simply because of the tax advantages. In my view if you use a vehicle for business they all should be treated the same way. Our current tax code is loaded with this kind of stuff, the "rich" take advantage of it, most everyone else can not.

Another example involves year-end tax planning that most of us have to do: Did you use the money in your pretax medical account? Did you put in the correct amount in your IRA/401(k)? Do you need to defer income to avoid the loss of a tax credit? Do you need to buy tools to hit the minimum for your misc. deduction? Do you get divorced before the end of the year or wait until next year? Do you induce labor on New Years eve, or wait? It gets crazy.:)

which gets right back to the anger about "poor people don't pay taxes" and "there is no incentive for poor people to better themselves" nonsense

actually, no. If everyone benefitted from the consumption exemption, there's no issue.

Not that I'm a huge fan of consumption taxes. I would set up a system that has diff tax schemes, including income, consumption and excise, but keep the rates in all of them low enough not to distort anyone's economic decisionmaking.

the only way to have an exemption on a consumption tax is via rebates/prebates, which is a huge can of worms

Derwood, how about if groceries, clothing items under $200 and rent werent' taxed? That would fix the problem, wouldnt it?

I'm sure there would be ways to figure it out. The only published plan I've read is Neal Boortz's "Fair Tax" plan, which is full of holes

the best taxes are the ones that don't require a tax-enforcement gestapo.

Are you at a point where you would even consider a consumption tax or are you throwing this point into the mix thinking it will dismiss the idea of a consumption tax? If you are serious we can seriously address the issues.

But being serious, in my opinion, would require some acknowledgment that there are problems with our current system of taxation. If you think there are problems with our current system of taxation what do you think those problems are? Is it simply that the "rich" are not being taxed enough?

my problems with the current tax system have more to do with the way the tax money is wasted and less to do with how it's collected. shifting from an income tax model to a consumption tax model wouldn't change the waste. It also wouldn't balance anything out, as the wealthy people who job the system now would figure out how to job the new system, leaving the middle and lower class holding the bag (as usual)

The best way to set up a tax system is one that is nondistortionary, that doesn't excessively affect incentives, is minimally intrusive on people's daily lives and thus their freedom, provides a fair amount of certainty of collection, is broadly based and transparent.

To get there would require a combination of a number of relatively low-rate imposts on diverse things - part income, part consumption, part gains, part transations. It'll never be accepted.

If it's necessary to explain that the stock and real estate markets under Clinton were a house of cards (which began to crumble BEFORE Bush), that the Dems blocked reform of Fannie and Freddie, and that the economy was fine during the SIX years the Republicans controlled Congress, there's no point in further discussion.

Of course, the "fine" economy of those 6 years was merely the bubble that eventually burst. I'm not assigning blame to any party here, especially because in terms of economic policy they've been very similar over the last 3 decades, but it seems to me that there must be some pretty heavy cognitive dissonance going on to treat the bubble burst as a completely unrelated matter to the creation of the bubble itself, especially when you point out that a similar situation under Clinton was also part of a speculative bubble.

Obama and his supporters are a bunch of drama queens. In order for Obama to come across as the savior, he had to make it appear as if we were near the biggest economic catastrophe in the history of the nation. "Bubbles" form and burst all the time, there are economic winners and losers all the time, for everyone who paid too much for a house another person got an economic windfall. Real money and real wealth just doesn't disappear. Our economy goes through cycles, it is natural, and what we are learning is that government can not "manage" our economy.

Talk about cliches.

Yeah, what's up with that?

Wall Street bonuses are in the news today. As I listen to the "talking heads" on the subject I can not help but be amazed about why so many "smart" people ignore the obvious.

The bonuses being paid clearly gives evidence that the financial sector was not on the brink of catastrophe.

The bailouts simply gave the financial sector an easy way out of a difficult situation and allowed them to profit from it. Rather than the financial sector going to the private market to enhance their capital at private market rates, they got "free" money from the government. Rather than the financial sector selling assets at "fire sale" prices, the government stepped in and saved them from that cost. The speed in which the bailout money was returned indicates the money may not have been needed.

Bad firms who made bad decisions should have been allowed to fail.