Why when you tax the "Rich" you aren't really taxing the rich. - Tilted Forum Project Discussion Community

Phory · 08-23-2004, 08:45 PM

I have a small software and electronics business. I've been in business for about 5 years. I have 2 parners and 1 full-time employee as well as a few contractors I regularily hire. Our business is what you call an S-Corporation. Among other things, this means that the corporate taxes are payed out of my partners and my personal income tax. Over the past 5 years I've never had less than $100,000 as my income according to my tax return...but before you congratulate me on how-well I'm doing realize that that isn't money I get to spend. Most of that has to be saved for things like future investments (The nature of our business is that we develop a lot of projects with only a small percentage of which ever actually end up getting sold, so we always have to have money available for developing prototypes.) in product development and to buy inventory for the next year. In the past 5 years the actual income that I have payed myself out of our business has ranged from $24,000 to $70,000. For example the year my partners and myself payed ourselves 20k we all had over 100k dollars worth of income and payed taxes as if we were in that tax bracket (since technically we did make that money.) even though like I said that isn't money we got to spend on ourselves. Most of the "Rich" that Kerry wants to raise taxes on, aren't really rich. They are people like me who have S-Corporations. Even though my tax return says I make six figures I really don't. Most of my friends would probably be surprised to learn that I have a "six figure income". I live in an apartment not a house. I drive an ordinary car (subaru), etc...I'm not complaining. I love my life. I just want to point out that if Kerry raises taxes on the "rich" he is raising taxes on small business owners like me.

Here is a guy with a similar story to mine. He explains how it is much more eloquentlythan I do. Read it if you want to understand the real implications of raising taxes on the "rich".

The following was taken from [link]http://www.taemag.com/issues/articleID.18082/article_detail.asp[/link]

Quote:

Confessions of a "Rich" Businessman

John Kerry wants to repeal tax cuts for upper income Americans. Now there's a surprise: a Democratic Presidential candidate attacks the rich. But who are "the rich"? Well, as Democratic politicians define the "fortunate few at the top of society," my wife and I are, or close to it.

We're only recognized as rich quadrennially, of course--when campaigns are in full swing. But even if we make the cut solely during election times, it's fun being rich. Wintering in Aspen, summering in Nantucket, luxury cars, fancy prep schools and Ivy League colleges, hobnobbing with movie starlets and marrying heiresses, I'm living large. Oops! No, that's John Kerry's life. Come to think of it, I drive a Ford Taurus, my kids have all gone to public schools, and my vacations usually involve economy motels and breakfast at McDonald's.

Here are the straight facts on my rich household: My wife and I receive income from two small businesses that keep us working literally dawn to dusk, including many weekends. This is not unusual: 85 percent of small businesses pay their taxes on the individual tax return of their sole proprietor.

In 2002, we had a taxable income of $114,175, some $23,000 less than in 2001. Business reverses explain part of the decline; the rest is from increased depreciation allowances in the Bush tax cut. We paid $11,245 in income taxes in 2002, and $13,294 in Social Security and Medicare taxes.

If our Social Security taxes seem higher than you'd expect, that's because we pay at the self-employed rate, which is 12.4 percent until we reach the maximum taxable level. Howard Dean wanted to levy Social Security taxes on all income--which would have meant about a $5,000 tax increase for my family. The "I Have a Scream" speech was greatly appreciated at our house.

Because I received a substantial tax cut when President Bush's reforms went into effect, I must be rich. And John Kerry will certainly have to increase my taxes to fulfill his promises. Families earning over $200,000, whom Kerry has particularly targeted in his tax plan, make up just 1 percent of all taxpayers, and they already pay 43 percent of all income taxes. They simply cannot finance Kerry's entire budget, as much as he would like them to. Plus, well over half of the taxpayers Kerry has targeted for tax increases had business income. He'll be raising taxes on small businesspeople in particular, and that includes my wife and me.

The figures I've shared so far don't really even capture the effect that taxes have on our business, and our lives. In 2002, we deducted $77,214 in depreciation as a business expense; a figure greatly increased by some temporary provisions in the Bush tax cuts. But we spent some $120,368 on capital improvements. Our business is growing--we've just added family members to the enterprise, and will need to generate more sales as a result, so we're expanding. Plus our truck wore out.

These are not unusual situations for a small business. A recent survey found that one in six small businesses had invested at least $100,000 in its company in the last six months. And when a business is growing, as ours has been, it is quite normal for capital purchases to be larger than depreciation. So when business people report income for purposes of taxes, it is very often larger than their cash flow. Thus, because of the way our tax system works, the firms that make our economy grow and provide new jobs are almost always short of cash.

Think about what my depreciation and investment figures mean. Our capital investments require us to lay out hard cash. For tax purposes we get some credit on the other side via the depreciation of our existing equipment, but there is no actual flow of cash to us for that. The net effect, therefore, is that our cash flow--the actual money available to us to pay our bills--is some $43,154 less than our paper income for tax purposes. Our cash flow available for living expenses and taxes wasn't $114,175, but just over $71,000.

From that $71,000 of actual cash flow, subtract our federal tax payments of $24,539 and our state income taxes of around $4,000, and you find that our cash available for living expenses is actually around $43,000. Sufficient for our needs. But clearly a good deal short of true wealth.

I recently filed my W-2 forms, reporting wages on the 30 people who worked for us last year. Our business is seasonal, so most of our employees are part time, but we're one of the largest employers in our small town. Any tax system that encourages our business to grow will add to that payroll. To the extent I can afford to, I will increase both the number of employees and their wages. Our payroll has increased at a much faster rate than our profits. In the last four years, the dollar amount of my payroll has doubled, while our profits have remained essentially flat. That's another point somehow forgotten when tax cuts for the rich are discussed.

Liberals argue that equity demands the rich pay a larger share. Conservatives respond that the money people earn belongs to them, and that taxes drag down business growth. In a strange way, liberal politicians seem to have more faith in free markets than conservatives do--because they act as if we "milk cows" will keep on producing growth and tax revenues no matter what the rate or timing of taxes.

I suppose my wife and I do what we do because we like to. We must, because if you divide our $43,000 of spendable income last year by the 6,000 hours of labor, much of it manual, that the two of us put into our business (we kept track), our time works out to be compensated at around $7.50 an hour. Just the same, incentives do matter. And it is a concrete fact that cash alone fuels our growth. With more cash, our business will grow faster; we're a small player in a big industry, and the market is there for additional growth. We're constrained only by the availability of investment capital, and that has to be generated by our business.

My wife and I have a passion for our little enterprise. It's been our life for 20 years, demanding whatever creative abilities we have, consuming most of our waking moments, focusing our energies on producing the best products we can, and beckoning us to work seven days a week to ensure good service for our customers.

Then every four years the Democratic nominee for President informs us we don't pay enough taxes. We are called greedy and self-serving special interests. We're told that we are "rich," and that we have wealth only because we are lucky.

I have described my financial situation in some detail in the hope that this snapshot will help people understand who most of the top 5 percent of taxpayers really are, and how taxes affect the folks who make America work. I know I'm fortunate, but I certainly don't feel rich. I have fond hopes of some day becoming wealthy (a goal I share with most of my fellow citizens), and a tax policy that encourages my efforts toward that end would not only benefit me, but the rest of society as well. But the reality is that my wife and I have to work extremely hard every day just to hold our current position.

We've been managing our finances with care, investing in our business with the kind of concentration that comes from spending our own money, and providing jobs for dozens of our neighbors. I dare say that the country benefits from our stewardship--and that of hundreds of thousands of other "rich" people just like us--more than it would from any of John Kerry's plans for our money.

theusername · 08-23-2004, 09:08 PM

Most of the excessively rich find loopholes in the system. In the end it hurts the upper middle class who although live comfortably, they do not live like Kings. Raising taxes takes from the honest, leaves those who cheat the system alone, and gives to those who abuse the system. Pretty messed up.

Scipio · 08-23-2004, 09:25 PM

Quote:

Originally Posted by Phory

I have a small software and electronics business. I've been in business for about 5 years. I have 2 parners and 1 full-time employee as well as a few contractors I regularily hire. Our business is what you call an S-Corporation. Among other things, this means that the corporate taxes are payed out of my partners and my personal income tax. Over the past 5 years I've never had less than $100,000 as my income according to my tax return...but before you congratulate me on how-well I'm doing realize that that isn't money I get to spend. Most of that has to be saved for things like future investments (The nature of our business is that we develop a lot of projects with only a small percentage of which ever actually end up getting sold, so we always have to have money available for developing prototypes.) in product development and to buy inventory for the next year. In the past 5 years the actual income that I have payed myself out of our business has ranged from $24,000 to $70,000. For example the year my partners and myself payed ourselves 20k we all had over 100k dollars worth of income and payed taxes as if we were in that tax bracket (since technically we did make that money.) even though like I said that isn't money we got to spend on ourselves. Most of the "Rich" that Kerry wants to raise taxes on, aren't really rich. They are people like me who have S-Corporations. Even though my tax return says I make six figures I really don't. Most of my friends would probably be surprised to learn that I have a "six figure income". I live in an apartment not a house. I drive an ordinary car (subaru), etc...I'm not complaining. I love my life. I just want to point out that if Kerry raises taxes on the "rich" he is raising taxes on small business owners like me.

Here is a guy with a similar story to mine. He explains how it is much more eloquentlythan I do. Read it if you want to understand the real implications of raising taxes on the "rich".

The following was taken from [link]http://www.taemag.com/issues/articleID.18082/article_detail.asp[/link]

How sad. Your business makes money, and you have to pay taxes on it. Forgive me if I don't sound sympathetic. I'm sure raising the top end marginal rate a couple of percentage points will absolutely bury you.

http://www.savings-bonds-alert.com/us-tax-rates.html

If you make $100,000 annually, you don't even have to pay the 35% or even the 33% rate on any of the income you earn. Raising the top bracket from 35% to, say, 37% or 39% will do nothing to you. For what it's worth, John Kerry has never said anything about an across the board tax increase, or any tax increase at all.

Boo · 08-23-2004, 09:44 PM

I hope this doesn't turn into another one of those "tax the rich" because they can afford it threads. Paying the same percentage on a higher amount of income is fair enough. I don't agree with all the loopholes. I do believe that getting screwed over because you make more money than the masses is against the constitution. No wonder people look for loopholes. We should all pay the same flat tax, no loopholes, with a minimum tax requirement based on personal income. Hard work and sacrifice deserves reward.

It really sucks to think that when I get into 6 figures that everyone would believe that I was born with a silver spoon and deserve to pay a higher percent than they do. 37% is ludicrious!

hammer4all · 08-23-2004, 11:09 PM

When the top 20% in this country own 84% of the countries wealth and growing, I just can't feel sorry for rich people. You may think you pay a lot now, but the truth is, the tax burden has been shifting away from the super wealthy for years. This particularly informative report below explains exactly how and why this is happening.

Who Really Pays Taxes in America?

Quote:

Recent news articles about skyrocketing tax fraud and corporate tax dodging have prompted a high level of public concern about the overall fairness and effectiveness of our current tax system. AskQuestions.org – an online news site that addresses issues raised by public demand – released a report today on “Who Really Pays Taxes in America?”

Drawn primarily from government statistics, the report describes not only how the tax burden has shifted from corporations to private citizens over the past 20 years, but also a disturbing new twist: the richest American households pay about 30 percent less tax – which includes federal, state, and local taxes combined -- than middle-income households pay. And the public apparently understands what’s going on: an AP poll released Tuesday reports that 49 percent of Americans believe their taxes have gone up, not down, as a result of the Bush tax cuts, consider all the new local and state taxes imposed in response to withering Federal grants to the states. And new CNN/Money Magazine poll reports that, "60% of Americans said the Bush tax cut did not personally help them."

In his proposed budget for 2005, President Bush cuts another $6 billion in federal aide to states, even though 30 states already face shortfalls totaling about $40 billion next year and more cutbacks in state spending are inevitable, as well as more increases in local taxes. While there are no national statistics that add up the costs, anecdotal evidence is clear. One California couple received a $100 tax refund from President Bush for 2003, but paid $515 in new local taxes. A self-employed man living in Nassau County, NY got a $300 tax rebate last year, but his property taxes went up $2,250.

While honest taxpayers deal with their growing burden, the independent IRS Oversight Board reported that tax fraud is $311 billion dollars per year – more than federal spending on Medicare in 2003 and greater than the gross revenues of either Walmart or General Electric. The Board continually requests funding to strengthen resources for IRS enforcement, but because some of the biggest campaign contributors may be the country’s worst tax cheaters, the incentives for auditing tax cheats is nil. As a result, audits are focused on those at the bottom of the income scale.

Yesterday, David Cay Johnston reported in The New York Times that corporate audit rates have dropped by half in recent years, and noted that in 2003 the IRS conducted face-to-face audits with only seven out of 1000 corporations (compared to 29 per thousand in 1992).

“If we simply collected the taxes cheaters are withholding from the system, we would have enough money to pay the college fees of every student in America, or to provide health insurance for small business employees,” says the AskQuestions.org report.

The report: http://www.askquestions.org/articles/taxes/

08-24-2004, 01:16 AM

Thanks for the insight, you really have to read between the lines but its so blatantly obvious.... Do you really think that the "ruling elite" would allow themselves to take it in the ass? They got their monies safely tucked away out of reach of the tax man, such as investments in stocks or real estate. Yeah, they take a hit if/when it turned over, but if they hold on, it grows... another no-brainer. The ones who get hit hard by these "rich taxes" are the people who have the money coming in on paper, as income. They may be doing well for themselves, but who says you should be punished for hardwork?

onetime2 · 08-24-2004, 03:45 AM

These tax discussions always amuse me. I've met (or talked to via the internet) very few people who believe the government is particularly adept at controlling costs, tracking money, or spending wisely yet there are so many that are so willing to throw more into the system (of course it's usually people willing to put more of others' money into it rather than their own).

The government is inefficient. The only way to force the government to become more responsible is to shut the ever flowing spigot of rising taxes.

jb2000 · 08-24-2004, 06:17 AM

Quote:

Originally Posted by onetime2

These tax discussions always amuse me. I've met (or talked to via the internet) very few people who believe the government is particularly adept at controlling costs, tracking money, or spending wisely yet there are so many that are so willing to throw more into the system (of course it's usually people willing to put more of others' money into it rather than their own).

The government is inefficient. The only way to force the government to become more responsible is to shut the ever flowing spigot of rising taxes.

Unfortunately so are corporations and individuals. Inefficiency really isn't the issue. It all comes down to the cost versus the benefit versus an alternative.

Back to the matter of Phory's original post, what it highlights to me is not whether or not we should tax this bracket or that bracket, but that our tax system is simply to over-complicated. In too many cases it does not achieve what is intended, and in many times the opposite.

A simple progressive income tax without loop-holes, but yet low enough at the bottom end that no loop-holes are needed for people to live comfortably, is to me the right place to aim. Elimination of payroll taxes and lifting the burden of health-care provision off of corporations are key boons to businesses of all sizes, but especially smaller ones. Sales taxes are not the answer.

As for Phory's personal situation, I'm no tax attorney, but perhaps there are more tax-friendly ways to structure the business? My point is though one shouldn't have to structure their business with taxes in mind, but instead structure it with business in mind. A business should be an entity, and when income is provided to an individual from it, through salary, benefits, perks, whatever, then it is simply added to the income column and taxed as such. Thus if money is collected by the corporation and put towards development, taxes aren't paid on it unless it actually reaches the pockets of individuals.

filtherton · 08-24-2004, 06:32 AM

Quote:

Originally Posted by onetime2

The government is inefficient. The only way to force the government to become more responsible is to shut the ever flowing spigot of rising taxes.

When has that ever worked? Tax cuts don't actually make the government more efficient, they just cut the amount of benefits that actually make it to the citizen. You can't tell me that the goverment has been running any more efficiently since the bush tax cuts. It also seems like tax cuts generally bring with them an increasing deficit. You don't have to be an economist to see that record deficits are far from the most efficient of economic policies. You can ask our grandchildren how they feel about our "efficient" tax policies if you live long enough.

Back to the front:

I think the issue is that bush is hiding behind s-corporations. If he really wanted to write in exemptions for them into the tax code he could have a lackey do so. Cutting taxes for everyone in the highest bracket and claiming that he did it all for the s-corp nookie seems kind've like levelling an ant hill with a bull dozer.

Rekna · 08-24-2004, 09:29 AM

cut all the tax loopholes and the problem is solved

onetime2 · 08-24-2004, 09:54 AM

Quote:

Originally Posted by filtherton

When has that ever worked? Tax cuts don't actually make the government more efficient, they just cut the amount of benefits that actually make it to the citizen. You can't tell me that the goverment has been running any more efficiently since the bush tax cuts. It also seems like tax cuts generally bring with them an increasing deficit. You don't have to be an economist to see that record deficits are far from the most efficient of economic policies. You can ask our grandchildren how they feel about our "efficient" tax policies if you live long enough.

The reason it hasn't worked is that it's never been done. There have been some tax cuts over the years but the government has never committed to remaining within a budget or accounting for all the monies it receives. The current system is designed to reward those politicians who bring home the pork and the country be damned.

So, do you think the current system is working properly and that the government is efficient at using the funds it gets now? If the answer is no, then how do you propose that situation is addressed? Certainly taking more from citizens won't change it.

onetime2 · 08-24-2004, 09:58 AM

Quote:

Originally Posted by jb2000

Unfortunately so are corporations and individuals. Inefficiency really isn't the issue. It all comes down to the cost versus the benefit versus an alternative.

Inefficiency is absolutely the issue because no matter the form of tax generation the government will continue to spend everything it gets (or more likely beyond what it gets).

The government continually renews virtually every program it has started over the last several decades whether they are working or not. In most cases people can't even point to evidence that they are working. Instead they make claims about "cutting spending" while in reality all they're doing is cutting the rate of increased spending.

If you guys prefer to contribute more and more to the system with no push for improvement, more power to you. I prefer to push for value and efficiency in our government over the mentality of "just take more from the rich".

onetime2 · 08-24-2004, 10:00 AM

Quote:

Originally Posted by Rekna

cut all the tax loopholes and the problem is solved

This is a good start but the problem won't be solved. The government can always find places to spend more. Cutting all the loopholes and enforcing current laws is absolutely necessary but it will not sate the government's ever growing need to spend. Only voters or a lack of cash/credit will force efficiency.

jb2000 · 08-24-2004, 02:53 PM

Quote:

Originally Posted by onetime2

Inefficiency is absolutely the issue because no matter the form of tax generation the government will continue to spend everything it gets (or more likely beyond what it gets).

As do corporations and individuals.

Quote:

Originally Posted by onetime2

The government continually renews virtually every program it has started over the last several decades whether they are working or not. In most cases people can't even point to evidence that they are working. Instead they make claims about "cutting spending" while in reality all they're doing is cutting the rate of increased spending.

If you guys prefer to contribute more and more to the system with no push for improvement, more power to you. I prefer to push for value and efficiency in our government over the mentality of "just take more from the rich".

Value and efficiency don't come from cutting taxes. They come from electing and appointing responsible people to positions. Bush has demonstrated quite clearly how sheer incompetance plus huge tax cuts can equal skyrocketing spending.

Now obviously if one simply is opposed to any kind of taxes or government spending, then tax discussions aren't going to yield much. I don't know how you feel about the issue, but I find that down deep inside most people who harp on the government innefficiency point really are basically anti-tax, anti-government involvement, and use the innefficiency issue as merely a talking point. The simple point is that no matter how efficient or innefficient a program may be, it can never be efficient enough for them to support it.

Now, if you really are concerned about efficiency, which you term to be 'absolutely the issue', then I must ask a few questions of you:

1) How do you measure or quantify efficiency?

2) How do you determine whether or not something is 'efficient'?

3) Have you compared, using a relative yardstick (i.e. the same standards), government, corporate, and individual efficiency in solving a particular problem, or are you simply working off the premise that government is automatically least efficient because, afterall, it is government?

jb2000 · 08-24-2004, 03:13 PM

Quote:

Originally Posted by onetime2

Only voters or a lack of cash/credit will force efficiency.

I agree that voters are able to improve efficiency, but not the 'turn off the tap' approach.

The problem I have with that logic is two-fold. One, I don't see the historical record to back this up. Governments have not generally responded to a lack of resources with large-scale improvements in efficiency. Large-scale spending cuts, I can see, but efficiency is a factor of cost vs. benifit, not merely cost, so if benefits are reduced along with costs, efficiciency may even get worse. Governments do generally respond to a resource squeeze by becoming more active in their attempts to secure more resources. Take a local county government for example: you cut budgets for the county mounties, and so they spend more time writing up ticketable (and finable) offenses versus non-revenue duties so that they can keep their cash flow. Is the dept. more efficient? I don't think so, but I guess its debatable.

Two, I just can't follow how merely cutting funds improves efficiency. It may cut spending, but like I said before, spending and efficiency aren't proportionally inverse to each-other. Only when the ratio of spending to effect improves does efficiency improve.

So it boils down to two basic points against your theory that cutting taxes improves efficiency:

1) Cutting taxes won't necessarily cause spending reductions (loans are only one way to get around it). The current Administration demonstrates this.

2) Reductions in spending won't necessarily improve efficiency. Hamstringing programs by slashing budgets often results in the remaining funds being essentially a waste. I can rattle off a string of defense programs to demonstrate this.

jbuffett · 08-24-2004, 03:37 PM

Hmm, nice thought, but Kerry's plan calls for cutting the corporate tax rate by 5%. Kerry's not out to get you guy. Plus, at $100K in income, you're not in the top 2% of earners anyway, your taxes wouldn't go up one bit. Kerry'll get after the American corporations who benefit from our nation without being good taxpaying citizens. Take jobs overseas, lose tax breaks. Create jobs in the good old USA, get tax breaks.

scapegoat · 08-24-2004, 10:41 PM

Quote:

Originally Posted by Boo

I hope this doesn't turn into another one of those "tax the rich" because they can afford it threads. Paying the same percentage on a higher amount of income is fair enough. I don't agree with all the loopholes. I do believe that getting screwed over because you make more money than the masses is against the constitution. No wonder people look for loopholes. We should all pay the same flat tax, no loopholes, with a minimum tax requirement based on personal income. Hard work and sacrifice deserves reward.

It really sucks to think that when I get into 6 figures that everyone would believe that I was born with a silver spoon and deserve to pay a higher percent than they do. 37% is ludicrious!

It sounds good in theory, but when you put it into practice it doesnt work too well.

Think about it... just as an example lets say you have a flat tax of 20% . A low income working making 20,000 per year gets 4000 taken out, almost putting them into poverty, which a 100,000/year salary gets cut down by 20,000, still leaving them with a comfortable 80,000 a year to live on. Doesnt work too well.

The biggest problem is fiscal irresponsiblity. Cut the pork out and the burden is lowered.

BigGov · 08-24-2004, 11:49 PM

Quote:

Originally Posted by jbuffett

Hmm, nice thought, but Kerry's plan calls for cutting the corporate tax rate by 5%. Kerry's not out to get you guy. Plus, at $100K in income, you're not in the top 2% of earners anyway, your taxes wouldn't go up one bit. Kerry'll get after the American corporations who benefit from our nation without being good taxpaying citizens. Take jobs overseas, lose tax breaks. Create jobs in the good old USA, get tax breaks.

Then those tax breaks used as incentives will have to be MASSIVE because companies pay workers over seas less than 5% they have to pay citizens over here. We have turned into a service economy, those manufacturing jobs overseas will never come back until China, Panama, and those other countries raise their minimum wage to a wage similar to ours, and are actually able to enforce it.

Back on topic, I have an idea of how you are feeling. Living in my town I've seen a very surprising array of people, and I've seen people who have earned their title as rich, and I see people who have the title of being rich but have to work hard just to make a decent wage. That is where the problem of nailing down who is rich and who is not. Your income is just a number, and it doesn't factor in savings for a child's college education, saving for retirement, or money to have in case of a medical, or any emergency for that matter.

Good luck to you Phory, I hope it all works out for the best. And thanks for the article, I will find some space for it on my already cramped hard drive.

onetime2 · 08-25-2004, 03:57 AM

Quote:

Originally Posted by jb2000

As do corporations and individuals.

Value and efficiency don't come from cutting taxes. They come from electing and appointing responsible people to positions. Bush has demonstrated quite clearly how sheer incompetance plus huge tax cuts can equal skyrocketing spending.

Now obviously if one simply is opposed to any kind of taxes or government spending, then tax discussions aren't going to yield much. I don't know how you feel about the issue, but I find that down deep inside most people who harp on the government innefficiency point really are basically anti-tax, anti-government involvement, and use the innefficiency issue as merely a talking point. The simple point is that no matter how efficient or innefficient a program may be, it can never be efficient enough for them to support it.

Now, if you really are concerned about efficiency, which you term to be 'absolutely the issue', then I must ask a few questions of you:

1) How do you measure or quantify efficiency?

2) How do you determine whether or not something is 'efficient'?

3) Have you compared, using a relative yardstick (i.e. the same standards), government, corporate, and individual efficiency in solving a particular problem, or are you simply working off the premise that government is automatically least efficient because, afterall, it is government?

Your assesment of corporate versus government efficiency is pointless in this discussion. Corporations do not serve citizens they are designed to serve their owners.

You have a choice in whether to invest in a corporation you have no choice in paying taxes (well you can choose not to pay but then when you get caught you go to jail).

As far as quantifying efficiency while it would most certainly be a good exercise it is far from an exact science. As stated in my earlier posts, I have met virtually no one who believes the government is efficient at accounting for and spending the monies they receive. If you feel differently then please elaborate with examples why you believe it to be efficient as is.

In answer to your assertion that most people who feel the government is inefficient are anti tax, I say not true.

I am absolutely in favor of taxes. The government supplies a multitude of services that private companies or individuals could not. That being said, the government also has a history of continuing programs without justification, spending beyond their means, and sloppy accounting of receivables.

onetime2 · 08-25-2004, 03:59 AM

Quote:

Originally Posted by jb2000

I agree that voters are able to improve efficiency, but not the 'turn off the tap' approach.

The problem I have with that logic is two-fold. One, I don't see the historical record to back this up. Governments have not generally responded to a lack of resources with large-scale improvements in efficiency. Large-scale spending cuts, I can see, but efficiency is a factor of cost vs. benifit, not merely cost, so if benefits are reduced along with costs, efficiciency may even get worse. Governments do generally respond to a resource squeeze by becoming more active in their attempts to secure more resources. Take a local county government for example: you cut budgets for the county mounties, and so they spend more time writing up ticketable (and finable) offenses versus non-revenue duties so that they can keep their cash flow. Is the dept. more efficient? I don't think so, but I guess its debatable.

Two, I just can't follow how merely cutting funds improves efficiency. It may cut spending, but like I said before, spending and efficiency aren't proportionally inverse to each-other. Only when the ratio of spending to effect improves does efficiency improve.

So it boils down to two basic points against your theory that cutting taxes improves efficiency:

1) Cutting taxes won't necessarily cause spending reductions (loans are only one way to get around it). The current Administration demonstrates this.

2) Reductions in spending won't necessarily improve efficiency. Hamstringing programs by slashing budgets often results in the remaining funds being essentially a waste. I can rattle off a string of defense programs to demonstrate this.

As stated before, our government has never been forced to deal with a cut back in revenue realistically. Please point to any evidence that this has happened. When income has fallen short of expectations the government has resorted to debt and raising taxes.

Cutting funds (with limited or no ability to increase the debt) forces efficiency because with limited resources the government is forced to prioritize. The prioritization currently done is minimal. How many government programs out of the tens of thousands in existence are eliminated from year to year? Not many. New programs are created at a far faster rate than any old programs are retired.

Kadath · 08-25-2004, 05:38 AM

"As stated before, our government has never been forced to deal with a cut back in revenue realistically. Please point to any evidence that this has happened. When income has fallen short of expectations the government has resorted to debt and raising taxes."

That is exactly true, so what makes you think cutting their tax income will result in anything other than greater deficit spending?

onetime2 · 08-25-2004, 05:42 AM

Quote:

Originally Posted by Kadath

"As stated before, our government has never been forced to deal with a cut back in revenue realistically. Please point to any evidence that this has happened. When income has fallen short of expectations the government has resorted to debt and raising taxes."

That is exactly true, so what makes you think cutting their tax income will result in anything other than greater deficit spending?

Tax cuts alone are not sufficient. Deficit spending also needs to be addressed. I don't believe that we should never run a deficit but we do need to make it a rarity rather than a regularity.

Kadath · 08-25-2004, 08:04 AM

Hooray, we agree! I suggest we start by looking at the greatest instances of deficit spending: military expenditures.

98MustGT · 08-25-2004, 08:12 AM

Quote:

Originally Posted by Kadath

Hooray, we agree! I suggest we start by looking at the greatest instances of deficit spending: military expenditures.

According to our congress...
Cutting the rate of growth = a cut

jb2000 · 08-25-2004, 08:36 AM

Quote:

Originally Posted by onetime2

Your assesment of corporate versus government efficiency is pointless in this discussion. Corporations do not serve citizens they are designed to serve their owners.

You have a choice in whether to invest in a corporation you have no choice in paying taxes (well you can choose not to pay but then when you get caught you go to jail).

As far as quantifying efficiency while it would most certainly be a good exercise it is far from an exact science. As stated in my earlier posts, I have met virtually no one who believes the government is efficient at accounting for and spending the monies they receive. If you feel differently then please elaborate with examples why you believe it to be efficient as is.

In answer to your assertion that most people who feel the government is inefficient are anti tax, I say not true.

I am absolutely in favor of taxes. The government supplies a multitude of services that private companies or individuals could not. That being said, the government also has a history of continuing programs without justification, spending beyond their means, and sloppy accounting of receivables.

I am merely reporting my personal experience, which is indeed that most people who put forward the argument that taxes and spending should be cut because government is inefficient are indeed more eager to see the cutting of taxes and limiting of spending than improvements in government efficiency. There are those legitimately concerned with improving government, not just slashing it, and if you are in that group, that's great.

The problem with your theory though that somehow by cutting revenues we can force efficiency upon government just doesn't follow through in reality. You are right that the US Fed has not really faced constricted revenues, but local and state governments have, and it has not necessarily resulted in efficiency.

What has worked is to demand responsibility from those we choose to administer our government. Given a choice between responsible leadership and someone who is going to cut taxes, I'll take responsibility every time.

Government isn't a business, you aren't going to force improvement by trying to cut revenue. Improvement comes from putting the right people at the helm, who provide responsible and capable administration of our common resources.

filtherton · 08-25-2004, 08:44 AM

Quote:

Originally Posted by onetime2

The reason it hasn't worked is that it's never been done. There have been some tax cuts over the years but the government has never committed to remaining within a budget or accounting for all the monies it receives. The current system is designed to reward those politicians who bring home the pork and the country be damned.

So, do you think the current system is working properly and that the government is efficient at using the funds it gets now? If the answer is no, then how do you propose that situation is addressed? Certainly taking more from citizens won't change it.

I think that a more efficient government will require less money, obviously. What i'm not too sure of is whether you can force efficiency by allotting less money. Certainly it is possible, but currently it seems that funding cuts are followed by service cuts. Are reduced services more efficient? Depends on the economies of scale. I doubt any economist would say that reduced spending is always followed by an increase in efficiency. I think if you were going to use the recent economic unpleasantness as an example you could simply lay of a bunch of public employees and force the remaining workers to do the work of their departed coworkers in addition to their own. At this point i think we could afford to lay off the entire e.p.a. since they aren't really doing anything right now anyway.

A more important question is what causes the inefficiency. Too much money might contribute, but it can't be the only cause. What do you think is the root of all the inefficiency that seems to be rampant in the bureaucracy that is our government.

On a side note, the military is notorious for spending money like they're getting paid for it, yet i've never heard anyone expressing a yearning to cut military spending to try to improve efficiency. This leads me to believe that the idea of an inverse relationship between spending and efficiency in government is just a complicated ruse to justify the cutting of social programs. Not saying that this applies to you onetime, just to fiscal conservatives in general.

onetime2 · 08-25-2004, 09:11 AM

Quote:

Originally Posted by filtherton

I think that a more efficient government will require less money, obviously. What i'm not too sure of is whether you can force efficiency by allotting less money. Certainly it is possible, but currently it seems that funding cuts are followed by service cuts. Are reduced services more efficient? Depends on the economies of scale. I doubt any economist would say that reduced spending is always followed by an increase in efficiency. I think if you were going to use the recent economic unpleasantness as an example you could simply lay of a bunch of public employees and force the remaining workers to do the work of their departed coworkers in addition to their own. At this point i think we could afford to lay off the entire e.p.a. since they aren't really doing anything right now anyway.

A more important question is what causes the inefficiency. Too much money might contribute, but it can't be the only cause. What do you think is the root of all the inefficiency that seems to be rampant in the bureaucracy that is our government.

On a side note, the military is notorious for spending money like they're getting paid for it, yet i've never heard anyone expressing a yearning to cut military spending to try to improve efficiency. This leads me to believe that the idea of an inverse relationship between spending and efficiency in government is just a complicated ruse to justify the cutting of social programs. Not saying that this applies to you onetime, just to fiscal conservatives in general.

The military has spent the last decade reorganizing and spending more efficiently. The whole concept of joint operations (between Marine, Navy, Army, Air Force, and external military forces) is a perfect example of this.

This initiative in itself allowed the invasion of Iraq to be accomplished by about half the number used to liberate Kuwait just ten years ago.

And one of the primary drivers of this was less money available for them to spend.

I'm starting to fear we've gone horribly off topic here though.

jb2000 · 08-25-2004, 01:51 PM

Quote:

Originally Posted by onetime2

The military has spent the last decade reorganizing and spending more efficiently. The whole concept of joint operations (between Marine, Navy, Army, Air Force, and external military forces) is a perfect example of this.

This initiative in itself allowed the invasion of Iraq to be accomplished by about half the number used to liberate Kuwait just ten years ago.

And one of the primary drivers of this was less money available for them to spend.

I'm starting to fear we've gone horribly off topic here though.

I was in the Navy during much of this period of "right-sizing" as we were instructed to refer to it. Studying military affairs is a labor of love for me personally, so forgive me if I indulge this tangent for a moment.

There were many reasons for the reorganization of the military. The free-spending days were certainly over, which had partly to do with it. Many expensive programs hatched during the Cold War were strating to mature (peaking costs). But most importantly, the force structure and organization was too geared to the post-Vietnam Cold War environment (which it excelled in).

But in short, it was not as much a case of their budgets being cut, as much as it was legislators and administrations which demanded greater efficiency, and cut some programs/bases. The force structure changes were less financial and more mission based.

This is how you do gain in the efficiency department. You have leaders who are responsible administrators of the public trust. They actively work to improve the effectiveness of the agencies to best improve the efficiency of public spending. That in a nutshell is my argument: it starts with leadership and I would rather have a responsible leader who works to ensure that agencies operate as efficiently and effectively as possible, than one who eagerly cuts taxes at the expense of good governance.

onetime2 · 08-25-2004, 04:36 PM

Quote:

Originally Posted by jb2000

But in short, it was not as much a case of their budgets being cut, as much as it was legislators and administrations which demanded greater efficiency, and cut some programs/bases. The force structure changes were less financial and more mission based.

.

And how do legislators influence the military? Spending.

OpieCunningham · 08-28-2004, 04:50 PM

Quote:

Originally Posted by Phory

I have a small software and electronics business.

For example the year my partners and myself payed ourselves 20k we all had over 100k dollars worth of income and payed taxes as if we were in that tax bracket (since technically we did make that money.) even though like I said that isn't money we got to spend on ourselves.

No offense, but you're doing something wrong. Possibly you need a new accountant.

Owning a business absolutely should not create a situation where you are using your personal, taxable income for business expenses. In fact, one of the primary reasons for setting up an S-Corp or LLC or similar is to limit your personal tax liability.

The primary problem with our tax laws is the ability to manipulate loopholes. Of the two candidates, only Kerry recognizes this as the problem and only Kerry has proposed some solutions. In fact, Bush not only doesn't recognize the problem, he uses this manipulation of loopholes as the incentive to lower taxes on the wealthy.

Over the past few weeks of Bush's campaign stops he has described the situation as:

Quote:

Bush told voters in Sioux City that Kerry's answer to paying for additional spending is, "Oh, don't worry, we'll tax the rich."

But the president said the rich have accountants who can help them avoid taxes and that the answer to the question of who is going to pay for Kerry's programs is obvious.

"You are!" the president told the crowd.

Bush also said high taxes on the rich are a failed strategy because "the really rich people figure out how to dodge taxes anyway."

What Bush is stating is that Kerry's plan on increasing the tax rate for the wealthy is unfeasable because the wealthy don't really pay taxes anyway because they hire accountants and lawyers to find loopholes. Bush's "solution" is to lower the taxes on the wealthy.

How is that a solution? It's a gift to people who are avoiding their responsibilities.

This is the first reason that the conservative opinion that a progressive tax system is "unfair" has no merit.

The second reason is that we live in a classist culture. The upper class has a massively disproportionate amount of power, financial and political, in this country. Laws that require them to contribute greater proportional amounts of their income are one solution, a significantly imperfect solution, to that problem. To claim there is a "fairness" in equally proportionate tax burdens is to ignore the reality that with an increase in wealth comes an increase in power - any flat tax system, even if there were no loopholes, would be inherently unfair by virtue of disproportionate balance in power. The U.S. power structure directly follows class:

1- The Upper Class have, by definition, the lionshare of the financial power. Financial power allows for political power. As such, the Upper Class has the lionshare of the political power. Money buys elections (look at the financial status of politicians, almost invariably, the more powerful the position, the wealthier the candidate).

2- The Middle Class have group-financial power. Unfortunately, there are far too many of them to effectively use this power. Boycotts are rarely effective in anything but the most minor of issues. The Middlle Class have a modicum of political power in that their larger groups are the ones that have the largest say in who, from the Upper Class, is elected to positions of political power. But even this political power is subverted by their larger numbers - with larger numbers comes larger numbers of stupid people believing the Upper Class candidates self-serving promises.

3- The Lower Class has almost zero financial and political power. Their primary means of power is affecting pity within the Middle Class and Upper Class.

As you can see, a flat tax system (assuming the idealistic non-existence of loopholes) would not create a "fair" society by any means. A progressive tax system does not perfectly balance the power control, but it is assuredly more fair than a flat tax system.

jb2000 · 08-30-2004, 01:19 PM

Quote:

Originally Posted by onetime2

And how do legislators influence the military? Spending.

That's a pretty gross oversimplification. Yes, of course, the budget is the most obvious and tangible stick they have to enforce their will, but I think everyone knows that no Congress is ever going to run the military bankrupt just to get their way. They merely authorize or refuse to authorize specific programs. The budget is the legal process for doing so.

Basically, the point is that responsible leaders will pick and choose those programs that give the best 'bang for the buck' so to speak. This certainly involves choosing to spend or not to spend on certain things, but is not driven by a need to cut, but instead by a drive for effectiveness at the highest efficiency reasonable.

Your proposal of merely cutting funding to enforce efficiency isn't going to have the same beneficial effects. If Congress went to the military and simply said they wanted better results and so therefore were going to cut 20% of the DoD's budget, you don't seriously think that would achieve the desired end do you?

smooth · 08-30-2004, 01:27 PM

Quote:

Originally Posted by jb2000

That's a pretty gross oversimplification. Yes, of course, the budget is the most obvious and tangible stick they have to enforce their will, but I think everyone knows that no Congress is ever going to run the military bankrupt just to get their way. They merely authorize or refuse to authorize specific programs. The budget is the legal process for doing so.

Basically, the point is that responsible leaders will pick and choose those programs that give the best 'bang for the buck' so to speak. This certainly involves choosing to spend or not to spend on certain things, but is not driven by a need to cut, but instead by a drive for effectiveness at the highest efficiency reasonable.

Your proposal of merely cutting funding to enforce efficiency isn't going to have the same beneficial effects. If Congress went to the military and simply said they wanted better results and so therefore were going to cut 20% of the DoD's budget, you don't seriously think that would achieve the desired end do you?

I think it more likely that whatever party proposed that would be framed by the others as weak on defense and subsequently ran out of office. Then the accusing party would prolly ramp up spending to illustrate how strong and supportive they were.

I think the discourse surrounding Kerry's vote in regards to the budget demonstrates this amply. I won't necessarily go into it here, because people most likely have set their minds on one framing or another and I'm not likely to alter that.

But the discussion regarding education and welfare is still in flux, and those cuts can be argued either way, currently. Those are the ones we might expect to be cut for efficiency without too much political backlash. Kids and impoverished citizens have very little political clout. They also seem to have limited demands for empathy in the current social mileiu. And educators (and intellectuals in general) are just plain regarded and treated like shit in this nation relative to other places.

onetime2 · 08-30-2004, 03:21 PM

Quote:

Originally Posted by jb2000

Your proposal of merely cutting funding to enforce efficiency isn't going to have the same beneficial effects. If Congress went to the military and simply said they wanted better results and so therefore were going to cut 20% of the DoD's budget, you don't seriously think that would achieve the desired end do you?

So, you think the military changing gears to be more efficient was due to what exactly? Congressmen asking nicely that they change? I don't get your point in the least. The only significant direct control the Congress has over the military is spending.

08-23-2004, 09:08 PM	#2 (permalink)
theusername Insane	Most of the excessively rich find loopholes in the system. In the end it hurts the upper middle class who although live comfortably, they do not live like Kings. Raising taxes takes from the honest, leaves those who cheat the system alone, and gives to those who abuse the system. Pretty messed up. __________________ ?

08-23-2004, 09:44 PM	#4 (permalink)
Boo Leave me alone! Location: Alaska, USA	I hope this doesn't turn into another one of those "tax the rich" because they can afford it threads. Paying the same percentage on a higher amount of income is fair enough. I don't agree with all the loopholes. I do believe that getting screwed over because you make more money than the masses is against the constitution. No wonder people look for loopholes. We should all pay the same flat tax, no loopholes, with a minimum tax requirement based on personal income. Hard work and sacrifice deserves reward. It really sucks to think that when I get into 6 figures that everyone would believe that I was born with a silver spoon and deserve to pay a higher percent than they do. 37% is ludicrious! __________________ Back button again, I must be getting old.

08-24-2004, 03:45 AM	#7 (permalink)
onetime2 Junkie Location: NJ	These tax discussions always amuse me. I've met (or talked to via the internet) very few people who believe the government is particularly adept at controlling costs, tracking money, or spending wisely yet there are so many that are so willing to throw more into the system (of course it's usually people willing to put more of others' money into it rather than their own). The government is inefficient. The only way to force the government to become more responsible is to shut the ever flowing spigot of rising taxes. __________________ Strive to be more curious than ignorant.

08-24-2004, 03:37 PM	#16 (permalink)
jbuffett Tilted	Hmm, nice thought, but Kerry's plan calls for cutting the corporate tax rate by 5%. Kerry's not out to get you guy. Plus, at $100K in income, you're not in the top 2% of earners anyway, your taxes wouldn't go up one bit. Kerry'll get after the American corporations who benefit from our nation without being good taxpaying citizens. Take jobs overseas, lose tax breaks. Create jobs in the good old USA, get tax breaks. __________________ I do blame you for voting for Bush.

08-25-2004, 05:38 AM	#21 (permalink)
Kadath Muffled Location: Camazotz	"As stated before, our government has never been forced to deal with a cut back in revenue realistically. Please point to any evidence that this has happened. When income has fallen short of expectations the government has resorted to debt and raising taxes." That is exactly true, so what makes you think cutting their tax income will result in anything other than greater deficit spending? __________________ it's quiet in here

08-24-2004, 01:16 AM	#6 (permalink)
Diamond Guest	Thanks for the insight, you really have to read between the lines but its so blatantly obvious.... Do you really think that the "ruling elite" would allow themselves to take it in the ass? They got their monies safely tucked away out of reach of the tax man, such as investments in stocks or real estate. Yeah, they take a hit if/when it turned over, but if they hold on, it grows... another no-brainer. The ones who get hit hard by these "rich taxes" are the people who have the money coming in on paper, as income. They may be doing well for themselves, but who says you should be punished for hardwork?

08-24-2004, 09:29 AM	#10 (permalink)
Rekna Junkie	cut all the tax loopholes and the problem is solved

08-25-2004, 08:04 AM	#23 (permalink)
Kadath Muffled Location: Camazotz	Hooray, we agree! I suggest we start by looking at the greatest instances of deficit spending: military expenditures. __________________ it's quiet in here