What does fair mean when it comes to income taxes? [Archive]

NewtonTrino

30th March 2010, 01:47 PM

The marginal utility of income is normally thought of as something that decreases as income rises.

I guess one question would be, is this actually true? For example if I had $100M sitting in the bank right now I would be investing it into all kinds of different research groups and companies to help deliver needed services to the public and try and solve some of our problems.

Also it is a fairly mainstream view that a minimum threshold income should be a statutory entitlement in most rich countries.

Wouldn't a more logical view be that there should be a minimum statutory CONTRIBUTION by everyone to the public good? Of course if you're not capable of contributing that's a different thing. But why should an able bodied person not be required to contribute? If you can't pay taxes you can always put your labor into the pool to help out directly.

Both of these points argue that a fair tax code is a progressive one (one that takes an increasing share of income as income rises)

Sure, they argue this but is it substantiated?

Even if the marginal utility of income does decrease what does that have to do with contributing to the national upkeep?

One thought I had for a tax system was something like:

Total Budget / Number of Citizens = Tax bill sent to everyone.

However the tax bill would contain two numbers. The first is the number that would be required if everyone paid their bill. The second is the number you should send in that takes into account the percentage of people who don't pay (e.g. the GAO keeps stats on the amount of people that pay and figure out what we really need).

Paying is completely voluntary but if you don't pay there is some kind of social penalty (no voting? public humilation? Not allowed to contribute to political campaigns? Other ideas?). Note that you would never be cutoff from any government services for not paying but you might lose your right to participate in the government.

Thoughts? And no I don't think we could ever change to this system, it's a thought experiment for when I setup my own country ;)

NewtonTrino

30th March 2010, 01:49 PM

Well the value of protected interest he gets is proportional to his wealth, or income, or some combo of the two. Not that that is the only government service out there.

Calculating it exactly is not efficient so tax codes make approximations. Hence the existence of a few tax bands only

What if we did something like my idea above but we also had a property tax on all property. Say 1% per year of all property over $100M. This would be used to offset the tax bill sent to everyone in my other scheme.

Number Six

30th March 2010, 01:54 PM

Not to be too primitive about it, but realistically the tax system has to be good enough to the masses of people so that they buy into it. I mean, if you tell the giant mass of people in the middle and at the bottom "Screw you, we're going to make you pay like crazy," why wouldn't they bother to just revolt? Revolution isn't going to happen in the US because the people in the middle and at the bottom pay a small enough amount in taxes (in many cases, zero) that they go along.

Although a lot of people pay little or nothing and I can see how that would bother the people that pay a lot, the flip side of that is the following. A lot of people work full time jobs, pay little or not taxes and yet still don't have much to show for it. I think the USA would better off if people that played into the system, worked hard, kept their nose clean, etc, made a better wage and then paid some of that in taxes. They'd be both taking (in the form of good pay) and giving (in the form of working hard and then paying taxes). But instead, some do what they're supposed to do and yet are still hit with "You pay so little in taxes compared to the rich guy, therefore you're a sponger" thing.

I don't know, maybe I'm worrying about semantics too much. But isn't it something like only 40% of people pay any income tax at all? That leaves a lot that don't pay anything, whether their working to earn wages or not.

†= Crap!

30th March 2010, 02:00 PM

With my income the difference between 20% and 40% income tax would have a substantial impact on my life-style. It may very well effect my ability to get rent payed, whether or not I can fix my car if breaks down, or weather or not I can afford some particular medical treatment.

The difference between 20% and 40% for a millionaire is negligible. Oh, they can only afford one yacht? Cant quite scrape the funds together for that second summer home? Cry me a ****** river! The wealthy pay more because they can afford to pay more. That's fair.

a3sigma

30th March 2010, 02:02 PM

One thought I had for a tax system was something like:

Total Budget / Number of Citizens = Tax bill sent to everyone.

However the tax bill would contain two numbers. The first is the number that would be required if everyone paid their bill. The second is the number you should send in that takes into account the percentage of people who don't pay (e.g. the GAO keeps stats on the amount of people that pay and figure out what we really need).

What part of the figures I posted above did you not understand? OK figure it by citizen. A 3.5 Trillion dollar budget is over 10,000 dollars for every man, woman and child in the U.S. (I don't count the unborn, or the millions of frozen embryos.) Or, 40 thousand for a family of 4 regardless of the number of earners. With median income at 45K, far more than half of all households could not possibly pay their "fair share" and would be among your count of those who don't pay their taxes. So the wealthy take up the slack as you suggest. This is called a "progressive income tax."

Francesca R

30th March 2010, 02:05 PM

I guess one question would be, is this actually true? For example if I had $100M sitting in the bank right now I would be investing it into all kinds of different research groups and companies to help deliver needed services to the public and try and solve some of our problems.It's the utility to you that this point is concerned with, not the spillover utility to others. The latter does not decline, any more than--say--the utility that Cancer Research UK experiences from its millionth donated £1.

Wouldn't a more logical view be that there should be a minimum statutory CONTRIBUTION by everyone to the public good? Of course if you're not capable of contributing that's a different thing.Not particularly, because of the reason you give yourself.

But why should an able bodied person not be required to contribute? If you can't pay taxes you can always put your labor into the pool to help out directly.Libertarians and an-caps often make this point when they protest against taxation. For some reason, forced labour (or "compulsory donation of leisure time") is generally disliked as a concept even though it is not morally any different from forced donation of earnings from labour. (So--yes you have a point, and I will leave it for someone else to rebut it because logically I can't)

Sure, they argue this but is it substantiated?Eh? Those two reasons do substantiate it.

Even if the marginal utility of income does decrease what does that have to do with contributing to the national upkeep?If you accept that the marginal utility to you declines as you make your second million in a year, the marginal utility to the state of each dollar of it taxed does not. The state (society's demand for cash) is approximately insatiable (although ethics should dictate to what extent it should be satiated, but it is still probably going to to experience almost no decline in utility from your cash as your income rises, whereas you will experience a decline.)

Francesca R

30th March 2010, 02:08 PM

What if we did something like my idea above but we also had a property tax on all property. Say 1% per year of all property over $100M. This would be used to offset the tax bill sent to everyone in my other scheme.Property tax is (I think) usually regarded as more efficient than income or consumption tax. Inheritance/estate tax even more so. Some say that land tax is the best (though I disagree with that).

Again, for possibly irrational reasons, these taxes are so reviled that they get politicians voted out more readily than income and consumption taxes do.

Aside from that, your idea is functionally equivalent and arguably superior (on efficiency grounds)

a3sigma

30th March 2010, 02:12 PM

Oh, by the way. How many of you pay federal taxes of $10,000 for every person in your household? That's your "fair share". Again not counting state and local taxes, or Social Security. If you're not paying that much, do you consider yourself a deadbeat? welfare king or queen?

Disclaimer: By this calculation my wife and I have paid about twice our "fair share" every year throughout our working lives, and about equal to it in retirement. We don't consider ourselves overtaxed.

Michael Redman

30th March 2010, 02:12 PM

If you can't pay taxes you can always put your labor into the pool to help out directly.Unless you think the government can get a great deal more productivity out of labor than the private sector can, this is only going to make things worse.

NewtonTrino

30th March 2010, 02:27 PM

What part of the figures I posted above did you not understand? OK figure it by citizen. A 3.5 Trillion dollar budget is over 10,000 dollars for every man, woman and child in the U.S. (I don't count the unborn, or the millions of frozen embryos.) Or, 40 thousand for a family of 4 regardless of the number of earners. With median income at 45K, far more than half of all households could not possibly pay their "fair share" and would be among your count of those who don't pay their taxes. So the wealthy take up the slack as you suggest. This is called a "progressive income tax."

I would argue that the current budget isn't sustainable if these numbers are correct. I was thinking more about a budget of $1T or so which would be more like $4k per person.

NewtonTrino

30th March 2010, 02:28 PM

NewtonTrino

30th March 2010, 02:30 PM

Unless you think the government can get a great deal more productivity out of labor than the private sector can, this is only going to make things worse.

I'm not really a fan of forced labor. In my view taxes should just be voluntary which is what I was trying to get to with my system. Voluntary maybe with a small carrot (getting to vote) and possibly a small stick (a culture that looks down on people who don't contribute).

NewtonTrino

30th March 2010, 02:32 PM

Property tax is (I think) usually regarded as more efficient than income or consumption tax. Inheritance/estate tax even more so. Some say that land tax is the best (though I disagree with that).

Again, for possibly irrational reasons, these taxes are so reviled that they get politicians voted out more readily than income and consumption taxes do.

Aside from that, your idea is functionally equivalent and arguably superior (on efficiency grounds)

I could get behind something like this.

It seems like this does just come down to a practical issue. The way democracy is setup people can vote to take others peoples money. There are a lot more middle and lower income people than rich people, therefore rich people get less representation and pay more taxes.

I feel like one of the guys stuck in the middle. I don't consider myself RICH but I have a decent income that I pay a lot of taxes on.

a3sigma

30th March 2010, 02:34 PM

I would argue that the current budget isn't sustainable if these numbers are correct. I was thinking more about a budget of $1T or so which would be more like $4k per person.

The numbers are correct, and welcome to the world. How is it possible that every U.S. citizen and taxpayer doesn't know them?

Oh, and sustainable you say? Ready for another shock? see:

http://en.wikipedia.org/wiki/File:Debt_to_GDP_Forecast_Chart.png

I'm glad I'm not young. If I'm lucky, I might live until 2030. If I'm very lucky, not much longer.

Loss Leader

30th March 2010, 02:35 PM

Why isn't it? Are you claiming that Bill Gates gets more value from the government than the homeless does?
If so, can you substantiate that claim?

Yes. Look at the statistics of the total number of time Bill Gates has been robbed versus the number of times a homeless person has.

Michael Redman

30th March 2010, 02:39 PM

I would argue that the current budget isn't sustainable if these numbers are correct. I was thinking more about a budget of $1T or so which would be more like $4k per person.Are you suggesting we stop paying interest on the debt? Cut off the provision of social security and healthcare for people who are too old and/or infirm to work? Stop providing healthcare for injured veterans? End our ability to project military power overseas?

a3sigma

30th March 2010, 02:42 PM

Are you sure you've paid as much as you think? Most people seem to overestimate the taxes they pay.

Anyway how would you feel if you were paying 10x this?

I am more than sure. I have a copy of every tax return I've ever filed, 42 of them, and a running spreadsheet of all the data, with graphs of all the percentages. Doesn't everyone? Why on earth not?

Over my lifetime I've paid out right around 25% of my adjusted gross income in taxes -- state, local, and federal combined. 10x that, or 2-1/2 times my income, would seem excessive.

NewtonTrino

30th March 2010, 02:44 PM

Are you suggesting we stop paying interest on the debt? Cut off the provision of social security and healthcare for people who are too old and/or infirm to work? Stop providing healthcare for injured veterans? End our ability to project military power overseas?

Defintely end our ability to project military power.

If I was in charge we would have a small special forces military and a nuclear deterrent. And that's it.

That would cut a bit out of the budget ;)

Honestly though this is really just a thought experiment. What we have now works "good enough" and I'm not the kind of person to screw up something that works for magical pie in the sky fairy land stuff. I'll keep paying my taxes and hopefully we'll find a way out of the current mess.

The only real way out of this mess is more economic growth and given the tech curve we are on this seems feasible in the long term. I'll do my damndest to help get us there!

Dragonrock

30th March 2010, 02:49 PM

Michael Redman

30th March 2010, 02:50 PM

If I was in charge we would have a small special forces military and a nuclear deterrent. And that's it. I tend to agree.The only real way out of this mess is more economic growth.That, or piracy. Maybe we should turn into a nation of pirates, Somalia style.

drkitten

30th March 2010, 02:51 PM

Why isn't it? Are you claiming that Bill Gates gets more value from the government than the homeless does?

Certainly. The average homeless person never flies and therefore never gets any benefit from the FAA. The average homeless person owns neither stocks nor bonds, and therefore does not benefit from the SEC. The average homeless person does not have a bank account and does not benefit from the FDIC. The average homeless person does not own a car, and so does not benefit from DoT safety standards.

Et cetera.

NewtonTrino

30th March 2010, 02:53 PM

I tend to agree.That, or piracy. Maybe we should turn into a nation of pirates, Somalia style.

I suppose we could use our military to start stealing natural resources and create an empire. And rule over the rest of the world as our serfs or something ;)

a3sigma

30th March 2010, 03:01 PM

http://en.wikipedia.org/wiki/File:Debt_to_GDP_Forecast_Chart.png

While you're contemplating that chart, mentally superimpose the name of the President and majority party along the time axis. Who became President in 1980? What happened over the next decade? When did the number start to drop? When did it bump up again?

Dragonrock

30th March 2010, 03:04 PM

Certainly. The average homeless person never flies and therefore never gets any benefit from the FAA. The average homeless person owns neither stocks nor bonds, and therefore does not benefit from the SEC. The average homeless person does not have a bank account and does not benefit from the FDIC. The average homeless person does not own a car, and so does not benefit from DoT safety standards.

Et cetera.

So create a separated tax system. Everything is sales tax based on what you use. Of course, in many of the systems you named there already is some built in taxation. The FDIC is paid into by the bank. The FAA gets some of the airport fees that you pay when you buy a ticket. Fuel taxes help pay for roads.

Et cetera.

drkitten

30th March 2010, 03:11 PM

So create a separated tax system. Everything is sales tax based on what you use.

This has been proposed.

The problem, of course, is that flying on an airplane is not something subject to "sales" tax. You're not buying the airline. One of the problem with sales tax specifically is that it's more regressive than necessary. Poor people buy goods (which are taxed); rich people buy services (which are not). But this can be dealt with by a "consumption" tax instead.

The other problem is that it's difficult to tell whether or not you "use" some services, especially protective services. For example, who "uses" the SEC more, a buy-and-hold investor (who buys a stock once and holds it forever) or a day trader? While the day trader is generating more trades, the buy-and-hold investor is still relying on SEC on a continuing basis to make sure that the company is disclosing everything it needs to and following all the appropriate rules about transparency. Every day that Canadian tanks aren't shelling my house, I'm "using" the Department of Defense and Department of State to protect my house and property,.... I'm not sure how that would be taken care of, except possibly for a daily (or annual) fee proportional to the value of the property to be protected.

And behold, we've just re-invented the idea of property tax.

a3sigma

30th March 2010, 03:13 PM

So create a separated tax system. Everything is sales tax based on what you use.

Et cetera.

What you suggest is sounding like a Value Added Tax, which is very common in the rest of the developed world. Runs 15 to 25% in the EU.

drkitten

30th March 2010, 03:14 PM

What you suggest is sounding like a Value Added Tax, which is very common in the rest of the developed world. Runs 15 to 25% in the EU.

Not quite, but close.

And, yes, I think a national VAT would be a very good thing for the United States.

tyr_13

30th March 2010, 03:17 PM

They can afford it so they have to pay? By that logic since you can give me oral sex you now have to.

I wasn't aware that the government required oral sex to keep working. Did you steal that line from Bill Clinton?

a3sigma

30th March 2010, 03:20 PM

This has been proposed.

The problem, of course, is that flying on an airplane is not something subject to "sales" tax. You're not buying the airline. One of the problem with sales tax specifically is that it's more regressive than necessary. Poor people buy goods (which are taxed); rich people buy services (which are not). But this can be dealt with by a "consumption" tax instead.

Thank you, drkitten. Consumption AKA Value Added Tax.

For more see:

http://en.wikipedia.org/wiki/Value_added_tax#EU_countries

NewtonTrino

30th March 2010, 04:49 PM

drkitten

30th March 2010, 04:56 PM

Is there anyone else that agrees with me that a voluntary tax system would be the fairest?

Almost certainly not.

People certainly wouldn't pay.

If people aren't willing to pay without a gun in their face then why force them?

Because people still want services.

paximperium

30th March 2010, 05:05 PM

a3sigma

30th March 2010, 06:42 PM

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

Good link, thanks.

Everywhere I've been in Europe, public transportation operates on an honor system. Riders are simply expected, and relied on, to purchase and carry a valid ticket or fare card to use the system. I've seen very little enforcement in Western Europe -- almost never in Germany, Austria or Switzerland. Pretty heavy, and heavy handed, enforcement in Hungary and the Czech Republic, though. I've no idea why that is, heard some interesting speculation. Popular belief in the social contract, principles of governance, civic duty, and responsibilities of living in a civilized country may have something to do with it.

Would it work in the U.S.? Does anyone know of a city that has tried it?

a3sigma

30th March 2010, 07:13 PM

Is there anyone else that agrees with me that a voluntary tax system would be the fairest? Or am I just a crazy kook?

Seriously, the government needs money to provide services. If people aren't willing to pay without a gun in their face then why force them?

Tax laws, in fact nearly all laws in a civilized country, depend largely on voluntary compliance. This doesn't mean there may not be serious consequences for failure to comply. But, there isn't a cop standing in front of every home and business, and it's impossible to rigorously audit every tax return. Nobody has a gun in their face. Most people who cheat get away with it. If caught, the penalty is usually nothing more than a fine. Tax evasion is a calculated risk, and it's a pretty straightforward calculation at that -- amount saved by cheating, against the amount of the penalty and the odds of being caught. Pretty good bet, actually -- if Vegas offered odds like those, they'd go broke in a week.

If enough Americans cheated on their taxes, of course, the U.S. Treasury, our cities and states, would be even more bankrupt than they already are.

NewtonTrino

30th March 2010, 08:31 PM

Because people still want services.

Don't you see this as being a problem though? If people aren't willing to chip in why should they expect to get anything? To me this whole thing seems like organized extortion. We want free services and you have money therefore we take it from you. That's pretty hypocritical.

NewtonTrino

30th March 2010, 08:33 PM

Tax laws, in fact nearly all laws in a civilized country, depend largely on voluntary compliance. This doesn't mean there may not be serious consequences for failure to comply. But, there isn't a cop standing in front of every home and business, and it's impossible to rigorously audit every tax return. Nobody has a gun in their face. Most people who cheat get away with it. If caught, the penalty is usually nothing more than a fine. Tax evasion is a calculated risk, and it's a pretty straightforward calculation at that -- amount saved by cheating, against the amount of the penalty and the odds of being caught. Pretty good bet, actually -- if Vegas offered odds like those, they'd go broke in a week.

If enough Americans cheated on their taxes, of course, the U.S. Treasury, our cities and states, would be even more bankrupt than they already are.

Most people aren't in a position to be able to cheat due to the way they setup the system. I'm fairly certain if I was to not pay my taxes someone would show up at my house with a gun at some point to take me away. Hey, it happened to wesley snipes!

Anyway I don't cheat on my taxes and I would contribute to society if taxes were voluntary. However the amount I pay now is IMHO unfair given the representation that I have in the political process.

NewtonTrino

30th March 2010, 08:37 PM

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

But there are already a bunch of free riders. Those with lower incomes have voted to pay no taxes and have me take up the burden. There are plenty of middle class people who pay very little in taxes due to mortgage writeoffs, children and other tax credits. They've voted themselves a free ride. Some of these people could certainly afford to pay more of their share of the load.

Anyway it's clear nobody agrees with my volunteer taxes idea. I didn't figure this was something that would ever realistically happen. Maybe in the year 2525... if we're still alive....

lionking

30th March 2010, 09:12 PM

Don't you see this as being a problem though? If people aren't willing to chip in why should they expect to get anything?

So you are proposing roads not get built outside properties of people who don't pay taxes?

NewtonTrino

30th March 2010, 10:16 PM

So you are proposing roads not get built outside properties of people who don't pay taxes?

No, I didn't say anything about roads. All I'm proposing is that taxes are voluntary and that we try to create a culture where this works.

Puppycow

30th March 2010, 10:17 PM

I believe that there's a value to everyone, including the rich, of not having lots of beggars on the streets. The rich also benefit from having a large middle class, and living in a society where most people have means.

If everyone had to pay the same taxes, the poor and lower middle class would no money left over for anything else. Hence there would be no incentive to work except under the table, like illegal immigrants.

Does Bill Gates get more benefit from government than the homeless? Absolutely!

A "flat tax" BTW, is usually thought of not as the same tax for everyone, but as the same percentage of whatever's being taxed for everyone.

lionking

30th March 2010, 10:19 PM

No, I didn't say anything about roads. All I'm proposing is that taxes are voluntary and that we try to create a culture where this works.
Sorry, taxes don't pay for roads?????

Skeptic Ginger

30th March 2010, 10:24 PM

Why isn't it? Are you claiming that Bill Gates gets more value from the government than the homeless does?
If so, can you substantiate that claim?As a matter of fact, Gates believes he gets more from the government and should pay more. So did his father and they have both said so publicly. Gates believes the reason he got rich in the first place was because the country offered him the opportunity and the means, and for that, Gates believes he owes a lot back.

Skeptic Ginger

30th March 2010, 10:30 PM

Yes of course he does. He has more assets and property in which his interest is protected by enforced rule of law. This answer is elementary.Heck, Gates and a few hundred more millionaires have their own town and own police force. I do a little work for the City of Medina where Gates lives.

My son went to elementary school in Medina. The PTA fundraiser was a $50/a plate dinner and silent auction which raised over $100,000 dollars. One of the donated auction items was a Limo ride to school for your kids.

It's a fun little town.

NewtonTrino

30th March 2010, 10:33 PM

Sorry, taxes don't pay for roads?????

Stop putting words in my mouth. What the taxes are used for is immaterial to what I'm saying.

Pretending that the tax system is "fair" is silly. There is no such thing as "fairness" only what people can get away with. If everyone considers it "fair" for rich people to pay more tax that's fine. I'm just saying that I would prefer to live in a society where "fairness" was more about everyone contributing equally than ability to pay. Obviously my thinking here is so far outside the mainstream that it's pointless to even advocate for this. I'm also biased because I'm one of the guys writing the big checks.

Skeptic Ginger

30th March 2010, 10:40 PM

Puppycow

30th March 2010, 10:41 PM

Is there anyone else that agrees with me that a voluntary tax system would be the fairest? Or am I just a crazy kook?

Seriously, the government needs money to provide services. If people aren't willing to pay without a gun in their face then why force them?

Almost certainly not.

People certainly wouldn't pay.

Consider religions though. Most churches rely on voluntary donations.

I think that this is something that has never been seriously tried.

Maybe in some sci-fi future when/if there's more than enough resources for everybody to live the lifestyle they like, and it's like a status symbol to pay taxes (as like a rich philanthropist). And on the flip-side, disrepute attached to failure to pay taxes. So, the right social and cultural context would be necessary. Basically, people would have to believe in this at least as strongly as religious people believe in their religion.

lionking

30th March 2010, 10:42 PM

I'm also biased because I'm one of the guys writing the big checks.

Good for you. I'm paying the top marginal tax rate as I earn well above average income. I have no problem with it as it is the price to pay to live in a society which, more or less, believes in giving everyone a "fair go".

Your proposal would get nothing but derision in Australia (and most of the civilised world, IMO).

Skeptic Ginger

30th March 2010, 10:48 PM

... I'm just saying that I would prefer to live in a society where "fairness" was more about everyone contributing equally than ability to pay. Obviously my thinking here is so far outside the mainstream that it's pointless to even advocate for this. I'm also biased because I'm one of the guys writing the big checks.Your position may be based on the philosophy the poor are lazy and could earn more if they tried harder. Or maybe you are one of those Evangelicals (not all Evangelicals) like Jerry Falwell and Pat Robertson who believe God shows his favor by bestowing wealth on you and poor people deserve to be poor because God is punishing them. Perhaps you just don't care about other people.

What you might want to consider is everyone benefits when the majority of people have a decent minimum standard of living. There is less crime, less violence and so on. When we educate the whole population the country does better. Some children born into poor circumstances might be the next Einstein or Mozart and without an opportunity, society might never benefit from their genetic talents.

The health of the society affects everyone. The rich did not escape the plague, but had the poor not lived in rat invested housing, perhaps the epidemics of plague would never have occurred.

These are just some benefits in a society preventing all the wealth from being concentrated in the top 1%. This is not the same as saying wealth should be equalized. It's just saying there is a point where distribution which is too lopsided is unhealthy for everyone. It's one reason why revolutions were fought throughout history.

NewtonTrino

30th March 2010, 10:51 PM

Your position may be based on the philosophy the poor are lazy and could earn more if they tried harder. Or maybe you are one of those Evangelicals (not all Evangelicals) like Jerry Falwell and Pat Robertson who believe God shows his favor by bestowing wealth on you and poor people deserve to be poor because God is punishing them. Perhaps you just don't care about other people.

What you might want to consider is everyone benefits when the majority of people have a decent minimum standard of living. There is less crime, less violence and so on. When we educate the whole population the country does better. Some children born into poor circumstances might be the next Einstein or Mozart and without an opportunity, society might never benefit from their genetic talents.

The health of the society affects everyone. The rich did not escape the plague, but had the poor not lived in rat invested housing, perhaps the epidemics of plague would never have occurred.

These are just some benefits in a society preventing all the wealth from being concentrated in the top 1%.

But but but but... why are you assuming that we need to spend all the money that we currently to do take care of everyone? Under my system these people would still all be taken care of. It's just that we would only have as much money as people are willing to donate.

I never said ANYTHING about getting rid of social programs or any of that. All I said is that we should try a voluntary tax system.

NewtonTrino

30th March 2010, 10:54 PM

Consider religions though. Most churches rely on voluntary donations.

I think that this is something that has never been seriously tried.

Maybe in some sci-fi future when/if there's more than enough resources for everybody to live the lifestyle they like, and it's like a status symbol to pay taxes (as like a rich philanthropist). And on the flip-side, disrepute attached to failure to pay taxes. So, the right social and cultural context would be necessary. Basically, people would have to believe in this at least as strongly as religious people believe in their religion.

This is exactly my position. Leverage technology to be efficient, take care of everyone and do it voluntarily. Not paying your taxes would be looked on the same as pissing in public or other things which are not allowed in polite society.

I also completely object to the idea that the government needs to spend at it's current level to take of people socially. For some reason people think I'mn advocating that we stop all social programs. To the contrary this would give them a solid moral basis IMHO.

In the year 2525...

Skeptic Ginger

30th March 2010, 10:59 PM

But but but but... why are you assuming that we need to spend all the money that we currently to do take care of everyone? Under my system these people would still all be taken care of. It's just that we would only have as much money as people are willing to donate.

I never said ANYTHING about getting rid of social programs or any of that. All I said is that we should try a voluntary tax system.If all the rich people weren't lobbying Congress for their sweetheart deals and slices of pork, you might be able to get a government that didn't spend as much as the one we have. ;)

Seriously, I think you should look at how many billions are spent on corporate welfare subsidies and no-bid crony contracts. If you can get those out of the system, more power to you. It suggests your 'voluntary' tax idea is a fail. Heck, we can't get voluntary no stealing, how are we going to get voluntary paying?

NewtonTrino

30th March 2010, 11:01 PM

I wanted to address a few things in more detail here.

Your position may be based on the philosophy the poor are lazy and could earn more if they tried harder. Or maybe you are one of those Evangelicals (not all Evangelicals) like Jerry Falwell and Pat Robertson who believe God shows his favor by bestowing wealth on you and poor people deserve to be poor because God is punishing them. Perhaps you just don't care about other people.

Again, you are creating a strawman. My position is that people should contribute to the common good. If they aren't able too and need a hand up then I'm offering my hand. I certainly don't think poor people are lazy, most of them work harder than I do physically.

Where do you get off on telling me that I don't care about people because I think taxes should be voluntary?

What you might want to consider is everyone benefits when the majority of people have a decent minimum standard of living. There is less crime, less violence and so on. When we educate the whole population the country does better. Some children born into poor circumstances might be the next Einstein or Mozart and without an opportunity, society might never benefit from their genetic talents.

My god, where did I ever imply anything else? However a decent standard of living is created by everyone in society working together efficiently. If most people don't contribute and just take is the system really working?

I think education should be free for the record.

The health of the society affects everyone. The rich did not escape the plague, but had the poor not lived in rat invested housing, perhaps the epidemics of plague would never have occurred.

Wow, quite a tangent.

These are just some benefits in a society preventing all the wealth from being concentrated in the top 1%. This is not the same as saying wealth should be equalized. It's just saying there is a point where distribution which is too lopsided is unhealthy for everyone. It's one reason why revolutions were fought throughout history.

Isn't preventing wealth concentration a completely different topic than taxes? Why do taxes have to be the method used to control wealth?
Also if you want to tax wealth why are you taxing income and not property?

This whole argument comes down to peoples opinions on fairness. It's awfully easy to be cavalier about other peoples money, isn't it?

NewtonTrino

30th March 2010, 11:02 PM

If all the rich people weren't lobbying Congress for their sweetheart deals and slices of pork, you might be able to get a government that didn't spend as much as the one we have. ;)

Seriously, I think you should look at how many billions are spent on corporate welfare subsidies and no-bid crony contracts. If you can get those out of the system, more power to you. It suggests your 'voluntary' tax idea is a fail. Heck, we can't get voluntary no stealing, how are we going to get voluntary paying?

I don't know. Probably just make everyone so rich through technology that it doesn't matter anymore.

Francesca R

31st March 2010, 12:05 AM

Unless you think the government can get a great deal more productivity out of labor than the private sector can, this is only going to make things worse.No, government would take the labour without compensation, and compulsory labour would substitute for people's leisure time. In fact it would be a disincentive to take leisure time, so it might well be a good deal more efficient (for the economy) than taxing wages.

Francesca R

31st March 2010, 12:07 AM

I'm not really a fan of forced labor. In my view taxes should just be voluntary which is what I was trying to get to with my system. Voluntary maybe with a small carrot (getting to vote) and possibly a small stick (a culture that looks down on people who don't contribute).Unfortunately it is a very widespread result, empirically and theoretically, that voluntary action under-supplies public goods (IE you will raise less tax that way)

Francesca R

31st March 2010, 12:16 AM

[ . . . ] The way democracy is setup people can vote to take others peoples money. There are a lot more middle and lower income people than rich people, therefore rich people get less representation and pay more taxes. [ . . . ]Except it works opposite to that in respect of the popularity of taxes. Consumption tax (VAT) is the least progressive (with respect to wealth that is; it is flat/progressive with respect to consumption spending) and the least unpopular. Then income tax. Property tax and inheritance tax with typical thresholds can be made to almost exclusively hit the rich but people dislike them the most. Even people whose estates will not stand a chance of attracting inheritance tax typically loath the idea of "taxing someone after they die".

This is why I said it was perhaps irrational.

Inheritance tax is easier to avoid than property tax. Land tax--to its merit--is virtually impossible to avoid (but some believe that its application is self-undermining)

I feel like one of the guys stuck in the middle. I don't consider myself RICH but I have a decent income that I pay a lot of taxes on.Most people think that. Every millionaire I've met says "I mean, I'm not rich, . . ."

Francesca R

31st March 2010, 12:23 AM

Everywhere I've been in Europe, public transportation operates on an honor system. Riders are simply expected, and relied on, to purchase and carry a valid ticket or fare card to use the system. I've seen very little enforcement in Western Europe -- almost never in Germany, Austria or Switzerland. [ . . .] Popular belief in the social contract, principles of governance, civic duty, and responsibilities of living in a civilized country may have something to do with it.Unfortunately, not nearly so many people think that donating 20-50% of their income to the state is a civic duty.

Skeptic Ginger

31st March 2010, 01:03 AM

...Again, you are creating a strawman. My position is that people should contribute to the common good. If they aren't able too and need a hand up then I'm offering my hand. I certainly don't think poor people are lazy, most of them work harder than I do physically.

Where do you get off on telling me that I don't care about people because I think taxes should be voluntary?Is there something about the words, "may be", that you don't understand?

I have no clue what your underlying motives are. I merely noted possible motives and/or underlying beliefs which lead people to take the position you have taken in this thread.

... Isn't preventing wealth concentration a completely different topic than taxes? Why do taxes have to be the method used to control wealth?
Also if you want to tax wealth why are you taxing income and not property?

This whole argument comes down to peoples opinions on fairness. It's awfully easy to be cavalier about other peoples money, isn't it?Well that last sentence falsely assumes I don't have any money or don't pay a high rate of income tax.

As for preventing the concentration of wealth, there is no single action which a government such as ours can take to prevent concentration of wealth. However, a progressive tax is consistent with the philosophy that concentration of wealth is not ideal. Therefore a progressive tax is indeed fair.

Skeptic Ginger

31st March 2010, 01:09 AM

I don't know. Probably just make everyone so rich through technology that it doesn't matter anymore.It is resources that ultimately underlie wealth. You can't have technology without resources. If we can create unlimited cheap power, unlimited cheap food and water, and unlimited building materials through technology, then perhaps we could reach the goal you speak of.

McHrozni

31st March 2010, 01:11 AM

I'm curious what the common opinion here is about fairness in taxes. The main reason I ask is that the tax burden is firmly on those who make the most money. In my mind if the system was "fair" everyone would be paying an equal share of the national upkeep. Instead people consider an equal and often increasing percentage of income to be the fair thing.

So why should I have to pay a larger portion of the national upkeep than someone who makes less money? Is it just a case of practicality?

What would be wrong with a tax system where we divide the amount of the national budget by the numbers of citizens and send everyone an equal bill? We all get the same vote in how the money is spent after all. It might wake people up to the amount of money the government pisses away in our names.

And yes I'm biased because I've been working on my taxes going WTF.

Thoughts?

In my opinion, no tax system can be declared as "fair".
Is it fair for someone to pay more for the same service, just because he earns more? Of course not.
Is it fair for someone who earns less to pay the same for the upkeep of society as someone who earns more? Of course not.

The only thing we should concern us when determining taxes is how best to serve the society. This too is a complex question, which can also change from society to society. For example, one society might think that free schooling and health care are significant enough benefits to a society to warrant higher taxes to the rich, while another might disagree, and so on.

There is no best universal system of taxes, unfortunately.

Everywhere I've been in Europe, public transportation operates on an honor system. Riders are simply expected, and relied on, to purchase and carry a valid ticket or fare card to use the system. I've seen very little enforcement in Western Europe -- almost never in Germany, Austria or Switzerland. [ . . .] Popular belief in the social contract, principles of governance, civic duty, and responsibilities of living in a civilized country may have something to do with it.

I've seen some of that in Switzerland and Germany. They employ inspectors, who charge you an outrageous sum if you fail to produce a valid ticket. It was something like 140 Swiss francs for not having a valid bus ticket, that was about 0,5 franc. If they inspect 0,5% of all bus riders, buying the ticket is cheaper in the long run.

McHrozni

Fishstick

31st March 2010, 01:25 AM

Good link, thanks.

Everywhere I've been in Europe, public transportation operates on an honor system. Riders are simply expected, and relied on, to purchase and carry a valid ticket or fare card to use the system. I've seen very little enforcement in Western Europe -- almost never in Germany, Austria or Switzerland. Pretty heavy, and heavy handed, enforcement in Hungary and the Czech Republic, though. I've no idea why that is, heard some interesting speculation. Popular belief in the social contract, principles of governance, civic duty, and responsibilities of living in a civilized country may have something to do with it.

Would it work in the U.S.? Does anyone know of a city that has tried it?
This is a very interesting point in this context, I've never thought of it like that. I've been using public transporation to get around for over 15 years, and I can count on one hand the amount of times I've actually seen a ticket inspector on a bus or tram. Trains get a lot more inspections, but it's also a bit more expensive than bussing. Then again, there's a ton of buses and trams to check. You would think this causes the amount of free riders to skyrocket, but out of the people that are inspected, only 3% are riding with no valid pass. It could just be a different cultural mindset.

Francesca R

31st March 2010, 02:06 AM

Some buses in London ("bendy" ones, which the new mayor is getting rid of anyway) use voluntary compliance since they were introduced about 7 years ago. Fare dodging did rise but only to about 4% which agrees with the previous post. There are a lot of studies of honour systems and related stuff (which books like "Freakonomics" discuss IIRC) and part of the reason they work is that one tends to feel one is being watched (by one's peers) if one boards a bus and blatantly omits swiping the card, making for an uncomfortable journey which is apparently not worth the saving.

That effect would be lost when voluntarily filing several thousand quid of taxes in the privacy of one's home.

Fishstick

31st March 2010, 02:24 AM

if one boards a bus and blatantly omits swiping the card, making for an uncomfortable journey which is apparently not worth the saving.

That effect would be lost when voluntarily filing several thousand quid of taxes in the privacy of one's home.

This is a non-factor in my case I think, regular travelers do not swipe anything at all. The pass is just a piece of laminated paper which is shown to an inspector - you cannot make a distinction between someone who's hitching a ride and someone who has a busspass until they're require to produce it. Only one-time or casual travelers still use tickets which need to be swiped.

Francesca R

31st March 2010, 02:53 AM

To be strictly voluntary though, I think it would have to be: "Pay if you want to, and as much as you want to", rather than: "Kindly comply voluntarily with payment which is still compulsory".

31st March 2010, 02:58 AM

drkitten

31st March 2010, 06:00 AM

Don't you see this as being a problem though?

No.

If people aren't willing to chip in why should they expect to get anything?

Because they're willing to "ride freely" on other people who are willing to pay. Especially if they realize they can ride freely.

Bear in mind that "willing to" chip in isn't the same as chipping in. If I notice that I get the same level of bus service whether I pay or not, why should I pay? Of course, the only reason that I get any bus service at all is because people have been paying. I might be "willing to" pay (as in, if you asked to levy a $100 yearly fee for the city bus service, I'd vote "yes"), but at the same time I'm also willing to accept the service "for free" if no one actually demands payment of me.

Especially if the "services" aren't the sort of thing that can be withheld, such as police protection.

To me this whole thing seems like organized extortion. We want free services and you have money therefore we take it from you.

Not at all. We want free services and we take money from ourselves. If you don't want those services, you don't need to be part of this community.

That's pretty hypocritical.

I'd say it's the other way around. It's pretty hypocritical of you to accept services that are offered "to the community" while refusing to pay to support them.

drkitten

31st March 2010, 06:04 AM

No, I didn't say anything about roads.

Actually, you did. Just not as specific as "roads."

You wrote:

If people aren't willing to chip in why should they expect to get anything?

Roads are part of "anything"; if non-taxpayers can't expect to get "anything," they certainly can't expect to get roads. Therefore, you're suggesting that roads shouldn't be built outside non-taxpayers' houses.

All I'm proposing is that taxes are voluntary and that we try to create a culture where this works.

The only problem is that we're fairly confident that no such culture can be created; we've got several zillion years of history suggesting that if people can get a free ride, some will. You might as well propose that taxes are voluntary and that we try to create a four-sided triangle.

Michael Redman

31st March 2010, 06:49 AM

No, government would take the labour without compensation, and compulsory labour would substitute for people's leisure time. In fact it would be a disincentive to take leisure time, so it might well be a good deal more efficient (for the economy) than taxing wages.
You're assuming it wouldn't substitute for people's paid work time. People generally have their leisure time when it is not particularly easy to find paid work, i.e. at night and on weekends. Unless the forced labor was done at night and on weekends, it would require substitution of paid work time. Additionally, quite a few working people have only enough "leisure" time to get the daily work of living done, and would either have to give up paid work or sleep, no matter when the forced labor was scheduled.

Though, this is a rather silly subject to begin with.

daenku32

31st March 2010, 07:11 AM

Why isn't it? Are you claiming that Bill Gates gets more value from the government than the homeless does?
If so, can you substantiate that claim?

Considering that the government is what protects all that intellectual property, and ensures stocks are traded fairly, I'd say pretty much all his worth is directly dependent on the government.

AvalonXQ

31st March 2010, 07:16 AM

Consider religions though. Most churches rely on voluntary donations.

I think that this is something that has never been seriously tried.

I think voluntary taxation is an excellent idea.
It would be interesting to see how the government could manage if they couldn't just take what they want at gunpoint.

daenku32

31st March 2010, 07:18 AM

I think voluntary taxation is an excellent idea.
It would be interesting to see how the government could manage if they couldn't just take what they want at gunpoint.

I think they are called "failed states".

AvalonXQ

31st March 2010, 07:19 AM

I think they are called "failed states".

Can you give three examples of these states that tried voluntary taxation and failed?
The sentiment above was that the idea has never been seriously tried.

Fishstick

31st March 2010, 07:51 AM

You could always fill out Form 4029. Sure you'll still have income tax, but your taxes would no longer go toward socialism!

lomiller

31st March 2010, 08:53 AM

No.

Because they're willing to "ride freely" on other people who are willing to pay. Especially if they realize they can ride freely.

Bear in mind that "willing to" chip in isn't the same as chipping in. If I notice that I get the same level of bus service whether I pay or not, why should I pay? Of course, the only reason that I get any bus service at all is because people have been paying. I might be "willing to" pay (as in, if you asked to levy a $100 yearly fee for the city bus service, I'd vote "yes"), but at the same time I'm also willing to accept the service "for free" if no one actually demands payment of me.

Especially if the "services" aren't the sort of thing that can be withheld, such as police protection.

Furthermore a lot of government serves have very broad benefits that extend well beyond the people who deal directly with government. Since these benefits are often felt society wide it’s probably impossible to avoid receiving at least some benefit from them.

drkitten

31st March 2010, 09:15 AM

Furthermore a lot of government serves have very broad benefits that extend well beyond the people who deal directly with government. Since these benefits are often felt society wide it’s probably impossible to avoid receiving at least some benefit from them.

Exactly. Even if you don't drive, you still benefit from roads.

When your oven catches fire, the fire department arrives by road.
The ambulance arrives by road.
The stove repairman arrives by road.
And, ultimately, the replacement oven will arrive -- by road.

paiute

31st March 2010, 09:25 AM

Why isn't it? Are you claiming that Bill Gates gets more value from the government than the homeless does?
If so, can you substantiate that claim?

Bill Gates has several billions of dollars that you and I are paying the military to protect from whoever might want to come over and take it. The homeless guy doesn't have much to lose besides that bulging black trash bag. The shopping cart doesn't even belong to him.

Francesca R

31st March 2010, 09:41 AM

Can you give three examples of these states that tried voluntary taxation and failed?
The sentiment above was that the idea has never been seriously tried.Two of the closest approaches to this (which still get nowhere near voluntary taxation) might be California's Proposition 13 (http://en.wikipedia.org/wiki/California_Proposition_13_(1978)) and Colorado's TABOR (http://en.wikipedia.org/wiki/Taxpayer_Bill_of_Rights#The_Colorado_example).

Others more knowledgable than me can say whether these are generally thought to be successes or failures--though massive deficits and brownouts don't seem to be ringing endorsements . . . .

GreyArea

31st March 2010, 09:44 AM

Paying is completely voluntary but if you don't pay there is some kind of social penalty (no voting? public humilation? Not allowed to contribute to political campaigns? Other ideas?).

I might be willing to support a local experiment in voluntary taxation if there was a way to make sure people get what they pay for. If you don't want to be taxed for the community's infrastructure and services, you don't get to use any of it. This is actually more complicated than it seems.

Would you be willing to pay user fees for the times that you do want to use publicly-funded resources, even indirectly? Example 1: A road-use charge via the pizza delivery driver. Example 2: An education charge when you hire a publicly-educated person.

What's more, you would have to pay for the tracking and charging system required by such an arrangement. I'm not going to do it for you. For example, the camera that tracks how far you walked along that socially-paid-for sidewalk isn't free either, and you're the one who wanted it.

I expect that taxation is cheaper, honestly. And I say this as one of the top 1% of income earners in the world.

Also, if taxes were voluntary, wouldn't that also mean we each get to direct them where we want? What happens when not enough people pay for boring things like sewage treatment, and instead fund exciting things like municipal wi-fi? We'd have a wireless router in every lamppost, and sewage filling the rivers three days out of seven.

Some conscious coordination and sensible prioritization is necessary. It could certainly be more democratic than it is now, but what we have now is still better than an invisible hand.

I don't know. Probably just make everyone so rich through technology that it doesn't matter anymore.

What does this even mean? To which technologies do you refer?

It sounds like you might like to live in Iain Banks' Culture. This is not a bad desire. But we're an incredibly long way from that, by millennia, if it's even possible.

AvalonXQ

31st March 2010, 10:07 AM

Two of the closest approaches to this (which still get nowhere near voluntary taxation) might be California's Proposition 13 (http://en.wikipedia.org/wiki/California_Proposition_13_(1978)) and Colorado's TABOR (http://en.wikipedia.org/wiki/Taxpayer_Bill_of_Rights#The_Colorado_example).

As you noted, these are nowhere near voluntary taxation. These are examples of attempts to limit the amount of compulsory taxes collected.
It would be a pretty radical paradigm shift to go from our current process, where massive taxes are mandatory and everyone does what they can to minimize what they pay, to a voluntary scheme where it's explained what people need to pay but everyone decides how much to pay anyway.
Having been very involved in churches and their financials, I can tell you that the ones I've attended manage to get the money they need to operate by asking the congregation for it.
I can also tell you that, since they recognize that they're spending people's hard-earned money, they're pretty careful in what they spend it on.
Government being forced to operate on what people are willing to pay them -- it would be a very interesting situation indeed.
One of the most interesting repercussions might be the government having to vie for funds with private companies who claim to be able to do the job cheaper and more efficiently. It could lead to some privatization in areas where privatization could be better.
Or it could be terrible. Who knows?

AvalonXQ

31st March 2010, 10:09 AM

A related question that I don't know the answer to: let's say that I just wanted to give an extra $10,000 of my money to my state's Department of Transportation, to help cover the cost of repairing the roads. As of today, is there even any way to do it? Or would finding a way to add this donation to the budget likely eat up a good percentage of the ten grand just by itself?

drkitten

31st March 2010, 10:20 AM

Two of the closest approaches to this (which still get nowhere near voluntary taxation) might be California's Proposition 13 (http://en.wikipedia.org/wiki/California_Proposition_13_(1978)) and Colorado's TABOR (http://en.wikipedia.org/wiki/Taxpayer_Bill_of_Rights#The_Colorado_example).

Others more knowledgable than me can say whether these are generally thought to be successes or failures--though massive deficits and brownouts don't seem to be ringing endorsements . . . .

Leftist generally consider these to be abject failures. Libertarians generally point out that they aren't valid experiments because they didn't go all the way to voluntary taxation.

That's one of the biggest problems with libertarianism. People like AvalonXQ point out that the ideas themselves have never been tried in the exact form that any one particular proposal espouses. The unfortunate fact is that several different variants, of different similarity, have been tried -- and that the closer you get to the proposal itself, the worse the outcomes get. This seems to escape them.

Really, it's like some mad geologist claiming that the temperature at the center of the earth's core is 2 Kelvin.

No, it isn't. We've done lots of observations of the temperature of the earth, and it generally gets hotter the deeper you go. In fact, we've got some very well-validated models that tell us that the temperature is about 7000K (give or take 1000K). The fact that we've never managed to get a thermometer into the core itself doesn't invalidate what we do know about geological temperatures --- nor does it create any evidence to support this simply wacked out theory.

We saw this behavior on one of kevinquinyo's threads, where he was espousing the virtues of anarchy and declaiming that the problem with Somalia was not the absence of a strong government, but the fact that the government was not weak enough. How weakening this government even further would keep the warlords in check or eliminate piracy was never explained to the satisfaction of the readers.

lomiller

31st March 2010, 10:24 AM

Exactly. Even if you don't drive, you still benefit from roads.

When your oven catches fire, the fire department arrives by road.
The ambulance arrives by road.
The stove repairman arrives by road.
And, ultimately, the replacement oven will arrive -- by road.

Even if the roads were standard if any number of people in your neighborhood opt out of any of those services it will reduce the value of your property forcing you to either pay for them or opt out yourself in the hopes someone else will pay for it. Overall there is a huge benefit to everyone from having “everyone in” and this won’t happen if being “in” is voluntary.

To my knowledge there are no examples of voluntary participation in the payment of important services that has ever enabled a country to develop beyond third world status. There are, however, plenty of third world countries where the government is too weak to provide such services leaving the door wide open to this type of voluntary approach.

AvalonXQ

31st March 2010, 10:26 AM

That's one of the biggest problems with libertarianism. People like AvalonXQ point out that the ideas themselves have never been tried in the exact form that any one particular proposal espouses. The unfortunate fact is that several different variants, of different similarity, have been tried -- and that the closer you get to the proposal itself, the worse the outcomes get.

So, do we have examples where we actually get anywhere close to the proposals at all? There's a lot that would have to happen to try something resembling voluntary taxation, and capping taxes at current levels isn't really anywhere close.
It's like claiming you know the temperature at the core of the earth because you've taken the temperature both here, and at another building that is lower in elevation -- without even bothering to get below the crust at all.
Voluntary taxation would require a dramatic paradigm shift, not simply the same paradigm with a lower number thrown in.

drkitten

31st March 2010, 10:28 AM

A related question that I don't know the answer to: let's say that I just wanted to give an extra $10,000 of my money to my state's Department of Transportation, to help cover the cost of repairing the roads. As of today, is there even any way to do it?

Depends on the state. In general, a check sent to the state treasurer would do it.

What would happen would also depend on how specific a donation you wanted to make. If you simply wanted to donate to the state's coffers, that would happen more or less automatically. If you wanted to donate to a named program (i.e. the Department of Transportation or the Maintenance Division of the DoT), that's usually do-able as well. If you want to specify it more finely (i.e. you want to repair roads in Washington County), they may not be able to do that. And of course at the extreme, if you're just asking them to fix this particular pothole in front of this specific house (which happens to be yours),.... they're not contractors and they're not available for hire.

Skeptic Ginger

31st March 2010, 10:30 AM

.. (which books like "Freakonomics" discuss IIRC) ...The book has an interesting examination of the honor system snack food sales in various office buildings. Instead of vending machines some places have snacks for sale without the machine.

The seller who kept meticulous notes and had an extensive snack food sales route left a wealth of data for analysis.

Turns out the rich cheat a lot more than the poor and people steal more when they are angry. I don't recall if holidays made people steal more or less but it did differ. The author hypothesizes that feelings of entitlement affect one's willingness to steal.

Overall, theft was always a fairly small percent of the business so most people are honest most of the time when given a chance to steal undetected.

AvalonXQ

31st March 2010, 10:30 AM

Depends on the state. In general, a check sent to the state treasurer would do it.

Okay, well that's good news.
An interesting initiative to try would be, the next time my city or schools need more money, encourage voluntary donations rather than trying to put a tax levy together. See whether or not those of us who actually think the cause is worth it can put our money where our mouth is and create a culture of voluntary donation without having to run up against taxpayers' ire at all.
Again, the notion of giving the money to government of your own free will is so much the opposite of the system that we've set up, that it seems like it would take a lot of getting used to.

Skeptic Ginger

31st March 2010, 10:34 AM

I think voluntary taxation is an excellent idea.
It would be interesting to see how the government could manage if they couldn't just take what they want at gunpoint.What "they want"? Why do you suppose "they" don't represent "you"?

AvalonXQ

31st March 2010, 10:37 AM

What "they want"? Why do you suppose "they" don't represent "you"?

"They" keep expanding the size of government and the increasing amount of money "they" take from "me".

drkitten

31st March 2010, 10:40 AM

So, do we have examples where we actually get anywhere close to the proposals at all?

Yes. Any time "public goods" are supplied voluntarily, they're undersupplied. We've known this for centuries (look up "tragedy of the commons" sometime).

There's a lot that would have to happen to try something resembling voluntary taxation,

Not really. Look at almost any time something is moved from "mandatory" payment to "voluntary" payment and you'll see how things drop dramatically. You don't have to make all taxes voluntary to see what happens when you make some taxes voluntary.

Many non-profit organizations, for example, will do a "pay what you can" night as a promotional event, in the hopes of getting new people interested and aware of what they do. The symphony that usually charges $50/ticket will offer a "pay what you can" night to get people who otherwise wouldn't be interested to come in and hear a concert.

But these organizations almost invariably lose money on those nights, because people don't give as much voluntarily as they will when there's a set, fixed price.

Indeed, the US government has for years allowed people to pay additional (voluntary) tax "to reduce the public debt." It gets an average of less than a penny per person. (In 2009, the government got $3 million dollars (http://money.cnn.com/2009/11/11/news/economy/national_debt/), a new high for more than a decade -- out of a population of nearly 300 million people.)

Voluntary taxation would require a dramatic paradigm shift, not simply the same paradigm with a lower number thrown in.

And we've done that experiment on several scales, and the results have almost never supported the idea of "voluntary taxation." Indeed, we have is a population that demonstrably won't volunteer to pay $2000 to cover a $1999 tax debt.

And now you're suggesting that if we make the $1999 "voluntary" as well, then people will pay it?

AvalonXQ

31st March 2010, 10:44 AM

And we've done that experiment on several scales, and the results have almost never supported the idea of "voluntary taxation." Indeed, we have is a population that demonstrably won't volunteer to pay $2000 to cover a $1999 tax debt.

And now you're suggesting that if we make the $1999 "voluntary" as well, then people will pay it?

Well, again, the problem is that when you're forced to pay a lot, the culture says pay as little as you can. Are you going to voluntarily donate $10 to the guy who just robbed you of $100 at gunpoint? Unlikely.

Putting that aside, though, I would be very interested to see the results of voluntary payment that you're touting. You seem to have some solid knowledge on this. Do you have a good source I could read on the subject?

drkitten

31st March 2010, 10:47 AM

An interesting initiative to try would be, the next time my city or schools need more money, encourage voluntary donations rather than trying to put a tax levy together.

It would indeed be interesting.

Of course, the Federal government has been doing this "initiative" for years, without your help.

It brings in maybe a penny a person per year.

drkitten

31st March 2010, 10:57 AM

Well, again, the problem is that when you're forced to pay a lot, the culture says pay as little as you can.

Yes, and the culture also says "pay as little as you can" when you aren't forced to pay a lot, too. "Pay-what-you-can" loses money, remember?

It's hard to get hard numbers, because most of the people who do this write the losses off to advertising expenses --- or are simply doing it out of the kindness of their hearts (which I can respect, but it's hard to legislate "kindness"). But there's a facebook group (http://www.facebook.com/group.php?v=wall&gid=165202690061) dedicated to discussing this concept if you want to see more.

Read it if you like. I defy you to find a siingle group that tells you they make more and give hard numbers. A more typical story runs like this:

I volunteer at Loose Moose Theatre (Calgary) where ticket prices are $12 adult and $10 student. One night the cash register wasn't working, so we put a donations bowl on the counter, told people what the normal prices were, and asked them to donate whatever they wanted for the ticket. We took in an average of just under $10 per ticket that night, probably about 15% less than normal. So it worked out pretty well.

Most commercial enterprises aren't operating with a 15% profit margin they can just write off.

Or another :

Communitea Cafe in Canmore, Alberta... we have launched our lunch special as PWYC and it has worked out really great! We suggest a price eg) $12 for Pad Thai and most seem to stick close to it, some pay half, it is all good!

Again, she's acknowledging that she's losing income on it. That's great if you've got the income to lose.

But the government doesn't have income to lose. Indeed, the big problem with the debt is that people demonstrably want more services than they're willing to be taxed to pay. And we're fairly sure that people would pay still less if it were "voluntary." But people aren't willing to give up the services.

Voluntary taxation would make an unsustainable situation even less sustainable.

drkitten

31st March 2010, 11:04 AM

Another story from that same source:

Some friends of mine do an annual Christmas music and story-telling concert. Gorgeous accoustic music, uplifting harmonies and mulled cider in a small church.

The first time they did it on a PWYC basis.

And made almost no money.

They made a classic blunder of just standing up at the front at the end of the concert and saying, "If you enjoyed the concert . . . please put some money in the basket by the door."

If you do this often people will MEAN to put money in and forget.

The next year they just charged a sliding scale of $10-$20 and made off like bandits.

In my experience, sliding scale works much better for performances than PWYC.

Of course, "sliding scale" is exactly what the rest of the world calls "progressive taxation."

Trakar

31st March 2010, 11:08 AM

drkitten

31st March 2010, 11:13 AM

We all could probably agree much more easily if all the breaks, deductions and credits didn't vary the actual/net tax pay out (and thus the true effective tax-) rate so dramatically.

Well, the problem is that the actual pay "in" varies so much, the net tax pay "out" has to vary as well.

One of the problems with the current individual tax system is that businesses can deduct expenses from their income, but individuals typically cannot.

I.e. if my company sent a taxi to pick me up from my house for work, and dropped me off every day, that would be an expense to the company and it could write it off. (And the value of that taxi ride would probably count as "income" to me.) However, if I take a taxi to and from the office every day, I can't deduct that from MY income. I can't even deduct the gas I put in the car, let alone the cost of the oil changes and the new transmission or whatever.

The effect is that I might be spending a hell of a lot more to make $50,000 than you are (to make that same $50,000), and the only way to deal with it is to adjust deductions. E.g. if I need special clothes to do my work and you don't, I should be able to deduct my clothes -- and you shouldn't.

AvalonXQ

31st March 2010, 11:42 AM

Indeed, the big problem with the debt is that people demonstrably want more services than they're willing to be taxed to pay. And we're fairly sure that people would pay still less if it were "voluntary." But people aren't willing to give up the services.

Right, and that's because there's a disconnect between government services and taxation. There needs to be some way to make people attribute value to services and only get what they're willing to pay for.

drkitten

31st March 2010, 11:52 AM

Right, and that's because there's a disconnect between government services and taxation. There needs to be some way to make people attribute value to services and only get what they're willing to pay for.

Why? I can't even get only the cable channels "I'm willing to pay for," because it's not cost-effective for the cable company to slice the pie that thinly.

If you're saying "there needs to be" only in the sense that "it would be nice if,".... well, I guess I can agree with that. But it would also be nice if the dish fairies would come and do my dishes for me every night to save me on tidying up ..... but I can't reasonably ask for it.

If you're saying "there needs to be" in the sense that we should try to create one,.... no. We can't afford such a system.

As GreyArea put it:

Would you be willing to pay user fees for the times that you do want to use publicly-funded resources, even indirectly? Example 1: A road-use charge via the pizza delivery driver. Example 2: An education charge when you hire a publicly-educated person.

What's more, you would have to pay for the tracking and charging system required by such an arrangement. I'm not going to do it for you. For example, the camera that tracks how far you walked along that socially-paid-for sidewalk isn't free either, and you're the one who wanted it.

I expect that taxation is cheaper, honestly. And I say this as one of the top 1% of income earners in the world.

There's also simply the problem that I don't and can't know what services I'm "willing to spend money on," because the services themselves can be divided and re-sub-divided so finely. I'm happy spending money on "roads." Is this a license for the government to build Bridges to Nowhere with no oversight? I hope not. At the same token, I don't want fixing the pothole in front of my house to be held hostage by a bunch of tax protesters who've never even set foot in my time zone.

Similarly, I certainly don't know enough about road repair to know what the best and cheapest method of fixing potholes are. Someone's going to have to decide whether we use gravel, asphalt, melted Hershey bars, or Miracle-Compound X-13, and that someone can't be me.

At some point, I will have to trust the "experts" the government has hired to decide which roads are cost-effective to build, which potholes need filling this week, and so forth. But if that's the case, how the hell can I have a meaningful opinion about how much I value "roads" since I don't control the spending? If I don't know how much it will cost to fix that pothole, how can I have an opinion about how much to pay?

Francesca R

31st March 2010, 12:04 PM

It would be a pretty radical paradigm shift to go from our current process, where massive taxes are mandatory and everyone does what they can to minimize what they pay, to a voluntary scheme where it's explained what people need to pay but everyone decides how much to pay anyway.Radical or not, it is merely an extension of the logic already applied in myriad experiments including the CA and CO amendments to their constitutions.

Having been very involved in churches and their financials, I can tell you that the ones I've attended manage to get the money they need to operate by asking the congregation for it.Yes--it is not correct to say that this [obtaining voluntary payment for collective goods] cannot be done in any circumstances. Groups are sometimes able to get sufficient contribution from their members to finance the collective goods they provide.

If any member's share of the collective good exceeds their cost, and they can be excluded from it by being denied membership, then that's fine for example. Alternatively if the group is able to inflict some sanction, or provide some attraction that is individual and not part of the collective good, that can work too (such as kinship-compatable social incentives, in the instances of small or family groups). Religious doctrine may be able to bring something like this to bear in the case of churches and their members--I don't really know. (Some will claim that churches incorporate irrational beliefs in their incentive structure, which renders logic somewhat inoperable anyway.)

It is hard to see anything like this transpiring in the case of a government and its citizens, so I would maintain that it is a racing certainty--pace your "who knows?" protests that it has not been attempted--that citizens will not voluntarily act to further the interests of their society in sufficient measure.

I've cited this text (http://books.google.co.uk/books?id=jzTeOLtf7_wC&printsec=frontcover&dq=mancur+olson+the+logic+of+collective+action&hl=en&ei=XZyzS8KEAoKdlgerodi5BA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDkQ6AEwAA#v=onepage&q=&f=false) before several times but it is the seminal documentation of public goods and group theory (and practice). You can even read it all online.

Michael Redman

31st March 2010, 12:08 PM

Right, and that's because there's a disconnect between government services and taxation. There needs to be some way to make people attribute value to services and only get what they're willing to pay for.I don't agree with the a la carte services, but I do agree that people need to have a better idea of what's going on.

A nice start would be for each taxing agency to send a bill or reciept breaking down where your actual tax is going, the way it is often done with property tax. I know how much of my property tax goes to schools, police, etc. I know that I pay $200 a year to maintain my street frontage and alley, and how much less it would be if the alley were unpaved. I know I pay $40 for my city's recycling service. It's easy to get that itemized, because those items are collected at a predetermined set rate, and they just apply my specific facts and give me a number.

What would be nice is if after I do my state and federal income taxes, they send me a similar itemization. Say, for example:

You paid $10,000 in state income tax.
You paid $6500 for primary public education.
You paid $2000 for roads and public transportation.
You paid $150 for state parks.
...

You paid $50,000 in federal income tax.
You paid $17,500 in public debt interest.
You paid $750 for security theater at airports.
You paid $650 for science.
...

I bet there would be a lot of surprises for a lot of people.

Trakar

31st March 2010, 12:43 PM

Well, the problem is that the actual pay "in" varies so much, the net tax pay "out" has to vary as well.

Even this is inconsistent, both within any given tax bracket, most office places and certainly within the wider scope of individual/corporate consideration.

One of the problems with the current individual tax system is that businesses can deduct expenses from their income, but individuals typically cannot.

certainly one area (among many) of concern that should be addressed. What is equitable and desirous in this specific example? Do we clip the corporate deduction or add to the individual deduction?

The effect is that I might be spending a hell of a lot more to make $50,000 than you are (to make that same $50,000), and the only way to deal with it is to adjust deductions. E.g. if I need special clothes to do my work and you don't, I should be able to deduct my clothes -- and you shouldn't.

Is someone forcing you to do the work which requires special clothes? Are you capable of doing work that doesn't require special clothes, if effective taxation rates are tied to choices we make (even if it is as simple a choice as filing an EZ-form as opposed to a more detailed 1040 with all the appropriate addendum filings,...or hiring someone else to do so to minimize my liability) and the taxation system is so complex that there are large variations and inconsistencies even throughout the range of such simple choices, then the system is inherently unfair and unbalanced,...or so it seems to me.

Before we can really figure out whether a tax system is fair or unfair, however, (and in my opinion) we really need to agree to look the effective tax rates (taxes actually paid/gross income earned) and/or come to some across the board understandings with regards to net earnings.

drkitten

31st March 2010, 12:54 PM

Is someone forcing you to do the work which requires special clothes?

No, but if no one does the work requiring special clothes, it won't get done. Given that among the people to whom this applies are police and garbagemen,.... I'm not sure you want to make those jobs financially impractical.

if effective taxation rates are tied to choices we make (even if it is as simple a choice as filing an EZ-form as opposed to a more detailed 1040 with all the appropriate addendum filings,...or hiring someone else to do so to minimize my liability) and the taxation system is so complex that there are large variations and inconsistencies even throughout the range of such simple choices, then the system is inherently unfair and unbalanced,...or so it seems to me.

[Shrug.] Then you're wrong. Part of tax policy has always been to encourage people to make choices that are beneficial to society as a whole. That's why, for example, universities and hospitals are tax-exempt (and why they can accept tax-deductable contributions) -- because hospitals are good for society in a way that strip clubs aren't.

Similarly, savings and investment are typically good for society in a way that strip clubs aren't. And savings and investment for retirement are particularly good for society because they reduce the load on the public dole later.

So it's your choice. You can spend some of your money by giving it to the local hospital, you can put it in your 401(k), or you can give it one bill a a time to some poor girl who says she's working her way through college. But don't try to pretend that society isn't affected by which you choose.

Malerin

31st March 2010, 01:11 PM

For about half of "taxpayers", fair means they pay no income taxes (http://www.cbsnews.com/stories/2009/04/15/politics/otherpeoplesmoney/main4945874.shtml).

drkitten

31st March 2010, 02:11 PM

For about half of "taxpayers", fair means they pay no income taxes (http://www.cbsnews.com/stories/2009/04/15/politics/otherpeoplesmoney/main4945874.shtml).

Well, I think that's the OP's point. And TShaitanaku's as well. That's not "fair" even if it's the law. A lot of the details of the current tax code are just downright stupid and prone to gaming. But what they're both proposing has far too high a bathwater-to-baby ratio. Because a lot of the details -- and the general structure as a whole -- of the current tax code are actually a lot more sensible than what they propose.

For example : in general, Americans spend too much and save too little (although that's not true right this instant, it's been mostly true for the past fifty years at least), which is part of how we managed to get into this financial crisis in the first place. Too much spending and too little savings are bad for the economy, which is bad for everyone. Sure, it cuts into Bill Gates' dividend checks, but it also means that Sam's Deli is laying off people who are adding to the ranks of the unemployed.

So, adjust the tax policy. Pay 25-35% on money you make from a job, but only 15% on money you make "from savings." Even better, pay no taxes on money you make "from retirement savings." Rational consumers will stop and ask "do I really need that $4000 big-screen TV, or can I save it instead and make more money later?"

Example #2 : The amount of happiness you get from earning money (or the amount you lose from spending money) is not the same, depending on how much money you get. If you gave $20,000 to my fourteen year old niece, it would be the pot of gold at the end of the rainbow. She wouldn't even begin to understand how to spend it all. To me, it would be very nice -- it would make part of a down payment on a nice house -- but it wouldn't necessarily alter my long-term plans. To my father-in-law, it wouldn't change his lifestyle at all. I'm not sure Bill Gates would even notice.

So how do we make as many people as possible happy? Well,... how about this. The government needs 3 trillion dollars a year. There are about 16 million "millionaires" in the United States. Taxing each of them $200,000 would pay of almost the entire budget, and still leave them with more than enough assets to live on comfortably.

Or you can try to take $2000 each from the poorest quintile. There are about 30 million people making less than $10,000 per year in the USA. How many of the would experience substantial drops in their standard of living if you cut [i]their income by 20%.

Solution: a progressive tax rate. You can get more money and cause less unhappiness by taking larger percentages from people with more wealth.

a3sigma

31st March 2010, 02:44 PM

I don't agree with the a la carte services, but I do agree that people need to have a better idea of what's going on.

A nice start would be for each taxing agency to send a bill or reciept breaking down where your actual tax is going,

This information is readily available.

See http://en.wikipedia.org/wiki/2010_United_States_federal_budget

among many other sources for a detailed breakdown of Federal revenues and spending. Just multiply the percentages by your own tax obligation to see what you are paying toward each category.

I am sure that this information will surprise a lot of people, and I never ceased to be surprised by their surprise. Public spending is public information and always has been. (in the U.S. at least, and with the exception of the enormous amounts spent by the various clandestine agencies) It's been my observation that many who complain the loudest, know the least about actual tax and spending. There is really no excuse for any U.S. citizen not to be well informed.

AvalonXQ

31st March 2010, 03:10 PM

This information is readily available.

See http://en.wikipedia.org/wiki/2010_United_States_federal_budget

among many other sources for a detailed breakdown of Federal revenues and spending. Just multiply the percentages by your own tax obligation to see what you are paying toward each category.

I am sure that this information will surprise a lot of people, and I never ceased to be surprised by their surprise. Public spending is public information and always has been. (in the U.S. at least, and with the exception of the enormous amounts spent by the various clandestine agencies) It's been my observation that many who complain the loudest, know the least about actual tax and spending. There is really no excuse for any U.S. citizen not to be well informed.

If people's tax filings were public, we could send people all over the U.S. this sort of itemized document ourselves. Think about what sort of splash that would make.

Skeptic Ginger

31st March 2010, 03:25 PM

"They" keep expanding the size of government and the increasing amount of money "they" take from "me".That doesn't answer my question at all.

Who is "they" and why are "they" not representing you? Don't you vote? Is it the majority you feel oppressed by when it comes to taking your money, or, do you see the government as "they" and all the rest of the population as "not they"?

Skeptic Ginger

31st March 2010, 03:34 PM

For about half of "taxpayers", fair means they pay no income taxes (http://www.cbsnews.com/stories/2009/04/15/politics/otherpeoplesmoney/main4945874.shtml).But income taxes are only a fraction of the total tax we pay. From the source (http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=2276&DocTypeID=7) in your source only 11.6% of the "tax units" pay no payroll taxes at all. And since one pays FICA regardless of your minimum income, that 11.6% would have to be people with either had only non-earned income (rental income, dividends, capital gains, etc.), which hopefully they paid other taxes on. Or, it represents self employed persons who had net income losses.

NewtonTrino

31st March 2010, 05:50 PM

That doesn't answer my question at all.

Who is "they" and why are "they" not representing you?

I would argue because our democracy is broken.

Don't you vote?

Would it matter if he did?

Is it the majority you feel oppressed by when it comes to taking your money, or, do you see the government as "they" and all the rest of the population as "not they"?

I wouldn't say I feel oppressed. Life is pretty good anyway.

I would say that if you are taking more out of the system than you are putting in that you shouldn't get to vote.

Anyway I started this whole thread to see if my ideas about voluntary taxation were interesting to anyone else. Apparently it would fail with our current culture pretty badly from the response here. I definitely have a hankering to try some of this stuff in the future in an experimental setting. I wonder how hard it would be to buy an island and declare my own sovereign nation?

NewtonTrino

31st March 2010, 05:56 PM

But income taxes are only a fraction of the total tax we pay. From the source (http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=2276&DocTypeID=7) in your source only 11.6% of the "tax units" pay no payroll taxes at all. And since one pays FICA regardless of your minimum income, that 11.6% would have to be people with either had only non-earned income (rental income, dividends, capital gains, etc.), which hopefully they paid other taxes on. Or, it represents self employed persons who had net income losses.

FICA is one of the most regressive taxes ever. So yeah, I would definitely include FICA in any total tax calculations and it does make a significant different. Just calling it something besides income tax doesn't make it so. So I would agree all of the lower earners are paying it and it should be included in their overall tax bill when looking at who pays taxes (including the hidden part).

Skeptic Ginger

31st March 2010, 08:20 PM

FICA is one of the most regressive taxes ever. So yeah, I would definitely include FICA in any total tax calculations and it does make a significant different. Just calling it something besides income tax doesn't make it so. So I would agree all of the lower earners are paying it and it should be included in their overall tax bill when looking at who pays taxes (including the hidden part).So are you agreeing then, that the image of the rich paying some huge amount and the poor just reaping the benefits based only on looking at cherry picked aspects of taxes actually paid distorts the actual facts?

NewtonTrino

31st March 2010, 08:41 PM

So are you agreeing then, that the image of the rich paying some huge amount and the poor just reaping the benefits based only on looking at cherry picked aspects of taxes actually paid distorts the actual facts?

I'll agree that working people already pay a significant amount in taxes yes. And cherry picking to make it look like the rich pay less is bad yes.

However, this doesn't change the fact that some people contribute a lot more than others. If this is burden I have to take based on my success, so be it. I don't personally think it's all that fair but the people have spoken.

I reserve the right to found my own country somewhere else and try out whatever crazy system I want ;)

Malerin

31st March 2010, 09:35 PM

Michael Redman

1st April 2010, 06:55 AM

I would argue because our democracy is broken.
Our democracy isn't broken. It's perfectly fine. It's the electorate that's broken. People complain that their views aren't being represented, but they're too lazy to do anything about it, and just vote in the general election for whoever runs the prettiest ads on TV. Then they complain about who gets elected. That's not the system's fault.

drkitten

1st April 2010, 07:01 AM

I would argue because our democracy is broken.

If it is, it's people like you :

Would it matter if he did [vote]?

... who are breaking it.

I would say that if you are taking more out of the system than you are putting in that you shouldn't get to vote.

That's ridiculous. Let's suppose that I'm a soldier who was injured and disabled in Iraq. I will probably be collecting checks from the government for much of the rest of my life, and I'm going to have a hell of a time working for a living (by definition). This means that because I was willing to risk my life to serve my country, I no longer get a say in who's on my local city council?

Or how about the VA doctor who treats that soldier? He's drawing a salary of several hundred thousand dollars, all of which comes from the government. Because he's working for the VA, he doesn't get to vote?

Anyway I started this whole thread to see if my ideas about voluntary taxation were interesting to anyone else. Apparently it would fail with our current culture pretty badly from the response here.

Well, that's one way of putting it. I prefer to state that "it would fail with our current reality pretty badly from the start"; the problem isn't that voluntary taxation is a good idea for a bad culture. The problem is the tragedy of the commons (or the free rider problem), problems that as far as economists can tell, are endemic to the human race.... (Read Francesca's citation if you need to know more.)

NewtonTrino

1st April 2010, 07:30 AM

If it is, it's people like you :

... who are breaking it.

How so, I've always voted when I was able to. I think it's broken for exactly the same reason you do, the electorate is too easily swayed by idiots on TV. The 2 partys have a lock on the system where other views can't get any representation.

That's ridiculous. Let's suppose that I'm a soldier who was injured and disabled in Iraq. I will probably be collecting checks from the government for much of the rest of my life, and I'm going to have a hell of a time working for a living (by definition). This means that because I was willing to risk my life to serve my country, I no longer get a say in who's on my local city council?

Or how about the VA doctor who treats that soldier? He's drawing a salary of several hundred thousand dollars, all of which comes from the government. Because he's working for the VA, he doesn't get to vote?

These are quite the strawmen. It's not like I outlined every detail of my plan. Military service is obviously a contribution which should be counted. Working for the government isn't taking government services.

Well, that's one way of putting it. I prefer to state that "it would fail with our current reality pretty badly from the start"; the problem isn't that voluntary taxation is a good idea for a bad culture. The problem is the tragedy of the commons (or the free rider problem), problems that as far as economists can tell, are endemic to the human race.... (Read Francesca's citation if you need to know more.)

I guess the question is whether or not this is endemic to the human race or whether or not it's cultural. I agree that it's probably endemic.

Also I'm not so sure that the free rider problem is as much of an issue as you make it out to be. Givien technological advance over the next century it's entirely possible that productivity could increase so much that everyone can effectively be "rich" at least in terms of goods and services. This would imply we could reduce the tax burden or that it wouldn't matter.

NewtonTrino

1st April 2010, 07:32 AM

Our democracy isn't broken. It's perfectly fine. It's the electorate that's broken. People complain that their views aren't being represented, but they're too lazy to do anything about it, and just vote in the general election for whoever runs the prettiest ads on TV. Then they complain about who gets elected. That's not the system's fault.

I agree people are stupid. I think that the rules of the system can be tweaked to encourage a better outcome though. We do this all the time in game design to avoid idiots on your team spoiling the game for everyone.

Tippit

1st April 2010, 07:38 AM

But the government doesn't have income to lose. Indeed, the big problem with the debt is that people demonstrably want more services than they're willing to be taxed to pay. And we're fairly sure that people would pay still less if it were "voluntary." But people aren't willing to give up the services.

That's funny. So it's the people, not the politicians and bankers, who are responsible for our thirteen trillion dollar national debt. I suppose you're also blissfully unaware of the fact that, given fractional reserve banking and debt-based money, if the national debt were paid down in the current system, we would be utterly without a money supply.

drkitten

1st April 2010, 07:40 AM

These are quite the strawmen.

Hardly. By your own admission -- "It's not like I outlined every detail of my plan" -- what I responded to was what you wrote.

And what you wrote was a stupid idea.

Also I'm not so sure that the free rider problem is as much of an issue as you make it out to be.

You don't have to be sure. You also don't have to be sure whether or not there is gasoline in your car's tank. The car doesn't operate according to what you know, but according to what is.

If the best you can produce in your favor is an argument from your own personal ignorance,.... read a book.

Givien technological advance over the next century it's entirely possible that productivity could increase so much that everyone can effectively be "rich" at least in terms of goods and services.

This has happened. Look at the average standard of living in the United States today vs two hundred years ago.

All that technological advancement does is raise the bar for what is considered "rich." In 1900, you were rich if you had a phone. In 1950, you were rich if you had two phones. In 1990, you were rich if you had a cellular phone. In 2010, you are rich if you have multiple iPhones.

In 1850, you were rich if you had a horse. In 1920, you were rich if you had a car. In 1980, you were rich if you had a car for every driver in the house. In 2010, you are rich if you have a horse.... :D

This would imply we could reduce the tax burden or that it wouldn't matter.

No, it wouldn't. Tax burden has actually increased over the past two hundred years in the US, precisely because it costs more to supply the "minimum" to the people who can't afford it. Most people today would consider it morally unacceptable to condemn someone in the US today to the life of a 1930s sharecropper. I admit I share that opinion.

Again, this is econ 101. Wants are unlimited, goods will always be scarce. Even when you can supply iPhones to every household in the United States, people will still want the next better thing if they can get it.

TraneWreck

1st April 2010, 07:42 AM

I'm curious what the common opinion here is about fairness in taxes. The main reason I ask is that the tax burden is firmly on those who make the most money. In my mind if the system was "fair" everyone would be paying an equal share of the national upkeep. Instead people consider an equal and often increasing percentage of income to be the fair thing.

So why should I have to pay a larger portion of the national upkeep than someone who makes less money? Is it just a case of practicality?

What would be wrong with a tax system where we divide the amount of the national budget by the numbers of citizens and send everyone an equal bill? We all get the same vote in how the money is spent after all. It might wake people up to the amount of money the government pisses away in our names.

And yes I'm biased because I've been working on my taxes going WTF.

Thoughts?

I haven't read this entire thread, so apologies if someone already brought this up.

Income tax is the most progressive tax, which is why conservatives bitch about it. It is not, of course, the only form of taxation in America.

Look at this nifty little fact from a Jonathan Chait article:

"The bottom 99 percent of taxpayers pay 29.4 percent of their income in local, state, and federal taxes. The top 1 percent pay an average total tax rate of 30.9 percent..."

http://www.tnr.com/article/books-and-arts/wealthcare-0

The same phenomenon occurs when conservatives bitch about corporate taxes, "Wah, wah, we have a high corporate tax rate."

Tax RATE does not necissarily mean TAXES PAID.

So, when deductions and all levels of taxes are factored, we effectively have a flat tax.

Yes, that seems fair. In fact, I think the folks at the top, and especially the corporations that PAID NO TAXES during the Bush administration could pay a little more. We're in an economic crisis and fighting two wars. What is the patriotic choice?

drkitten

1st April 2010, 07:42 AM

That's funny. So it's the people, not the politicians and bankers, who are responsible for our thirteen trillion dollar national debt.

That's right. Who are responsible for the politicians?

I suppose you're also blissfully unaware of the fact that, given fractional reserve banking and debt-based money, if the national debt were paid down in the current system, we would be utterly without a money supply.

I'm "blissfully unaware of it" in the sense that it's absolutely false.

Like everything you've ever written on economics, really.

se7ensnakes

1st April 2010, 07:44 AM

The income tax as we understand it is a scam...it was created not by law but by propaganda. The thing is that the people that are benefiting from it have enough money to keep the propaganda going and "smart" people pick up on it. The stark fact is that the government can exist on constitutionally correct excise taxes, if it starts to mind monetary policy instead of letting banks dictate the amount of money in circulation. Private institutions have the awesome power to expand and contract the money supply, and thereby adversely effect economics, and politics. These private companies, these financial institutions have the mainframe computers running simulation games on money creation variances. let me repeat, private companies, control the money supply, not the congress or the president and it is just convenient to be able to turn real labor into paper that its value can be constantly diluted.
Before you attempt to change something you should try and read a little.
there is not a single person in this forum who can tell me:
1) According to the constitution / supreme court what is the subject of the income tax, for working people?
2) Where in title 26 is that subject defined?

TraneWreck

1st April 2010, 07:47 AM

AvalonXQ

1st April 2010, 07:51 AM

The income tax as we understand it is a scam...it was created not by law but by propaganda.

Oh really?

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

... seems like "law" to me. Or are you one of these whackos who believes that something can't be Constitutional even when we explicitly add it to the Constitution?

AvalonXQ

1st April 2010, 07:53 AM

Edit: why the hell is the word "a-m-e-r-i-c-a-n" being automatically changed to "USAian?"

I assume it's because it's April 1st -- the one day a year that people think it's reasonable to act like complete ******** to each other.
Not a fan.

GreyArea

1st April 2010, 07:55 AM

If this is burden I have to take based on my success, so be it.

On behalf of everyone who made "your" success possible, you're welcome.

In a world in which we are all of us beholden to accomplishments and problems we are heir to but unequal to, as well as implicated in the facilitative and frustrating efforts of the diversity of peers with whom we share the world, it is delusive in the extreme to imagine oneself the singular author of one's fortunes, whether good or ill. And so, only in a world in which the precarious are first insulated from the catastrophic consequences of ill-fortune in which we all play our parts can we then celebrate or even tolerate the spectacle in which the successful indulge in the copious consequences of good fortune in which we all, too, have played our parts. -- Dale Carrico
http://amormundi.blogspot.com/2010/02/dispatches-from-libertopia-anthology-of.html

Michael Redman

1st April 2010, 07:57 AM

I agree people are stupid. I think that the rules of the system can be tweaked to encourage a better outcome though. We do this all the time in game design to avoid idiots on your team spoiling the game for everyone.Unfortunately, people don't get motivated to make real systemic changes to encourage participation. It's too boring. They would rather throw up their hands, declare the system broken, and join a nonsensical movement like the teabaggers or join a militia and prepare to shoot cops.

As for the idea of asking people to pay for what they get out, I think its almost universally true that everyone pays less than what they get out. A lot less. Consider life in the state of nature. Pretty bad. What you're getting out of having government is vastly more valuable that what you're putting in. That's why we have society. It's a really good deal.

That doesn't mean you can't unfairly tax anyone, but just that you're going to have to find a different criteria for fair.

drkitten

1st April 2010, 08:05 AM

On behalf of everyone who made "your" success possible, you're welcome.

"I'm please to say that I achieved success completely on my own -- except for the first ten million, which I inherited."

I consider myself a fairly successful person,.... and no, I didn't inherit ten million dollars. I did, however, have the good fortune to attend a very good public primary and secondary school, good enough that I qualified for a scholarship to an extremely good (and extremely expensive) private university.

Both the university and the scholarship were largely supported by charitable contributions, contributions encouraged by the tax treatment of donations. And of course much of the academic activity at the university -- the stuff that distinguished it from South Hudson Institute of Technology -- was funded through federal research grants.

Upon graduation, I worked for a while in one of the few large privately-funded research labs left in the United States. The company that funded it sold it off years ago, and the lab itself has mostly shut down, precisely because there wasn't enough financial support for basic research in the absence of government funding. I left long before that happened, though, for a government-funded scholarship in a state-run Ph.D. program.

So even if Newton doesn't appreciate what you've done to help him become successful, I would like to thank you.....

se7ensnakes

1st April 2010, 08:29 AM

Tippit

1st April 2010, 08:33 AM

That's right. Who are responsible for the politicians?

Certainly not me, since I didn't vote for them. I think you have a distorted view of just how accountable politicians are to their constituents. George Bush increased the national debt (http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms)by some $4.36 trillion dollars over two terms. Did voting him out serve to change any of this, or prevent Obama from doing something similar? Of course it didn't, and won't.

I'm "blissfully unaware of it" in the sense that it's absolutely false.

Like everything you've ever written on economics, really.

You're 2 for 2 in terms of directly contradicting Federal Reserve Chairmen, congratulations. You claim inflation is not a tax, yet Ben Bernanke claims it is at 2:00 in this video:

D4yBrxmEOkY

Now you dispute my claim that without debt, we wouldn't have any money. Aside from this being patently obvious to those who actually understand how the system works, unlike yourself, it was admitted in Congressional testimony by fmr. Fed Chairman Marriner Eccles:

Marriner Eccles was the Governor of the Federal Reserve System in 1941. On September 30 of that year, Eccles was asked to give testimony before the House Committee on Banking and Currency. The purpose of the hearing was to obtain information regarding the role of the Federal Reserve in creating conditions that led to the depression of the 1930s. Congressman Wright Patman, who was Chairman of that committee, asked how the Fed got the money to purchase two billion dollars worth of government bonds in 1933. This is the exchange that followed.

Eccles: We created it.
Patman: Out of what?
Eccles: Out of the right to issue credit money.
Patman: And there is nothing behind it, is there, except our government's credit?
Eccles: That is what our money system is. If there were no debts in our money system, there wouldn't be any money.

You should be ashamed for being so authoritative, condescending, and insulting all the time, and yet, being so wrong.

AvalonXQ

1st April 2010, 08:40 AM

Surely if there is a law it must define the subject of the tax in question.

What do you mean "the subject of the tax"? Do you mean who is taxed?

drkitten

1st April 2010, 08:43 AM

I am betting that there is no one that could answer my questions, Just to show you the ignorance of people in general about the basis of the federal income tax.
Tranewreck and Avalon thanks for ascertaining my point about propaganda. Surely if there is a law it must define the subject of the tax in question. You just sit back and quote the 16th Amendment without aswering any of the two questions I posed.

In other words, you know you're asking meaningless questions, but insist on repeating them.

1) What is the subject of the income tax...according to the constitution / supreme court.

"taxes on incomes, from whatever source derived." -- 16th Amendement.

2) Where in title 26 is the subject of the income tax for working USAians mentioned.

Title 26, subtitle A, chapter 1, subchapter A, part 1, section 1(a).

"There is hereby imposed on the taxable income of -
(1) every married individual (as defined in section 7703) who
makes a single return jointly with his spouse under section 6013,
and
(2) every surviving spouse (as defined in section 2(a)),

a tax determined in accordance with the following table:[/QUOTE]

Sections 1(b) et seq. impose taxes on the taxable income of other groups such as heads of households. The phrase "working USAians" does not appear, because the tax is imposed on anyone with income, whether derived from work or not. (E.g. royalties on books are also taxed.)

In the same way, it doesn't state directly that redheaded plumbers are taxed. That doesn't mean that they're untaxed, it just means that Congress (correctly) felt that it was not necessary explicitly to name every possible subgroup of people who are subject to this tax.

Now you mentioned the 16th Amendment....what exactly are they taxing.

"income." Specifically, "gross income" is defined in Title 26 (section 61) as : "gross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust."

Hint: try to do some real reading, like supreme court definitions, NOT Propaganda.

Physician, heal thyself.

drkitten

1st April 2010, 08:47 AM

You should be ashamed for being so authoritative, condescending, and insulting all the time, and yet, being so wrong.

I would be if I were in any way wrong whatsoever.

Once again, you're simply illustrating that you're not only too dumb to read about economics, you're too dumb even to watch YouTube videos about it.

I'm ashamed that I'm not condescending and insulting enough, because you're still posting gibberish for the confusion of the onlookers and the degradation of the JREF educational mission.

drkitten

1st April 2010, 08:48 AM

What do you mean "the subject of the tax"?

It means he's never read the law he expects us to find definitions from.

AvalonXQ

1st April 2010, 08:52 AM

I'm ashamed that I'm not condescending and insulting enough, because you're still posting gibberish for the confusion of the onlookers and the degradation of the JREF educational mission.

I wouldn't be so worried about it. Even those of us who don't know very much about the US economy can still see how mindnumbingly wrong Tippit is.

Michael Redman

1st April 2010, 08:52 AM

How hard is it to understand the meaning of "all income from whatever source derived"?

Trakar

1st April 2010, 08:53 AM

No, but if no one does the work requiring special clothes, it won't get done. Given that among the people to whom this applies are police and garbagemen,.... I'm not sure you want to make those jobs financially impractical.

If all that it takes to make job financially impractical is the tax break they do or don't receive from from an annual self-investment of a couple hundred dollars, then these professions (and society in general) have a lot more to worry about than their taxes.

[Shrug.] Then you're wrong.

quite possibly, but you've yet to adequately address the issues I raise, yet alone refute or invalidate the arguments I raised, with the utterly meritless strawman senario you floated.

AvalonXQ

1st April 2010, 08:54 AM

I am betting that there is no one that could answer my questions, Just to show you the ignorance of people in general about the basis of the federal income tax.

Let's see how comfortable you are with the tax code.
Under Title 26 Subtitle A Chapter 1, if I am an unmarried head of the household and I make $123,000 in taxable income, what is the tax imposed?

AvalonXQ

1st April 2010, 08:55 AM

How hard is it to understand the meaning of "all income from whatever source derived"?

Very hard if you're someone with income that you don't want to be taxed.

drkitten

1st April 2010, 09:01 AM

quite possibly, but you've yet to adequately address the issues I raise, yet alone refute or invalidate the arguments I raised, with the utterly meritless strawman senario you floated.

I've addressed them. The fact that you don't like being disproven doesn't invalidate my point.

Trakar

1st April 2010, 09:05 AM

For about half of "taxpayers", fair means they pay no income taxes (http://www.cbsnews.com/stories/2009/04/15/politics/otherpeoplesmoney/main4945874.shtml).

And that is a problem that seems to underlie much of the sentiments against taxation. For the most part its not that people actually even understand what their fair and reasonable taxation rate is, its a matter of them paying taxes and feeling like they shouldn't have to pay anything at all, ever. I was taking a round about route to get to this same point, wanting to first establish a means of actually determining what a fair and equitable true tax rate should be and then comparing examples where individuals profess a feeling of inequity in their taxation debt. I suspect that in many cases the individuals who complain the loudest are already paying their minimal max, or would be if they took all the breaks and deductions legally available to them.

Trakar

1st April 2010, 09:15 AM

Well, I think that's the OP's point. And TShaitanaku's as well. That's not "fair" even if it's the law. A lot of the details of the current tax code are just downright stupid and prone to gaming. But what they're both proposing has far too high a bathwater-to-baby ratio. Because a lot of the details -- and the general structure as a whole -- of the current tax code are actually a lot more sensible than what they propose.

Exactly what do you think I am proposing?

As far as I am aware, I haven't proposed anything yet. I've no problem with a progressive tax code, I just don't think that a filing cabinet full of tax-break, tax-credit, and deduction obscurancies which distort and confuse the tax code as it is individually applicable, is a good (yet alone best) way to approach taxes, progressive or not.

drkitten

1st April 2010, 09:20 AM

Exactly what do you think I am proposing?

As far as I am aware, I haven't proposed anything yet.

You proposed eliminating the "filing cabinet full of tax-break, tax-credit and deduction obscurancies."

TraneWreck

1st April 2010, 09:25 AM

Trakar

1st April 2010, 09:25 AM

...Tax RATE does not necissarily mean TAXES PAID.

Which was the issue I was attempting to approach.

the quickest route to short-cutting this issue is to move into effective or actual tax rates instead of letting others simply argue about tax rates sans deductions, credits and breaks.

Trakar

1st April 2010, 09:32 AM

I've addressed them. The fact that you don't like being disproven doesn't invalidate my point.

I said nothing about likes or dislikes but if you are going to continue with the mind-reading charade and unsupported chicanery, perhaps you should be posting your responses in the more woo-filled antechambers of this forum.

drkitten

1st April 2010, 09:34 AM

Further to above.

Exactly what do you think I am proposing?

I think you're proposing this:

We all could probably agree much more easily if all the breaks, deductions and credits didn't vary the actual/net tax pay out (and thus the true effective tax-) rate so dramatically.

The idea that someone engaged in an expensive business should pay the same percentage of his gross income is silly.

You objected to the idea that garbagemen, who are among the lowest paid sector of our society, might find it a financial burden to pay for their work clothes. Let me turn the example around, then. Malpractice insurance can be a huge burden on doctors, in many cases topping two hundred thousand dollars a year (depending upon specialities). If malpractice insurance weren't treated as a business expense and deductable from gross income before taxes were paid, it's likely that there would be no ob-gyns left in the state of Florida.

Using only the national average, the "average" ob-gyn in the USA is paid about $250,000 per year. The "average" costs of malpractice insurance is over $100,000 -- more than 40% of the gross wages. Add another 40% in "tax" costs on top of this, and you're asking ob-gyns to live on take-home wages of about $50K.

No one would go onto that specialty for that. Why not go into pathology instead and clear $100,000?

CORed

1st April 2010, 09:35 AM

I'm gonna go with everyone pays but me.

Tippit

1st April 2010, 09:38 AM

I would be if I were in any way wrong whatsoever.

Once again, you're simply illustrating that you're not only too dumb to read about economics, you're too dumb even to watch YouTube videos about it.

I'm ashamed that I'm not condescending and insulting enough, because you're still posting gibberish for the confusion of the onlookers and the degradation of the JREF educational mission.

I just posted evidence of why your positions directly conflict with those of two Federal Reserve Chairman, and yet, you simply repeat the claim that you're not wrong. So not only are you wrong, you're delusional and/or lying. Why does anyone pretend you have any credibility about anything on these forums?

Trakar

1st April 2010, 09:38 AM

You proposed eliminating the "filing cabinet full of tax-break, tax-credit and deduction obscurancies."

Which, in no way requires eliminating or changing the idea of a progressive tax code, it just trims it down a bit making it easier to enforce and comply with while creating more transparency and equity in the system by eliminating many of the "gamable" elements.

AvalonXQ

1st April 2010, 09:40 AM

I just posted evidence of why your positions directly conflict with those of two Federal Reserve Chairman,

No, you didn't. You posted evidence of why positions other than the positions actually being discussed, were someone discussing them, would be contradicted by the apparent meanings you attribute to quotes mined from what two Fed Chairmen have said.
Very different things.

drkitten

1st April 2010, 09:43 AM

I just posted evidence of why your positions directly conflict with those of two Federal Reserve Chairman,

No, you posted evidence that don't actually understand what the out-of-context quotations you mined meant.

Which isn't surprising, because you've posted lots of evidence that you don't understand anything whatsoever.

Why does anyone pretend you have any credibility about anything on these forums?

Because it's not a pretence -- they recognize my ability to read for content is better than yours.

ETA: Are you really suggesting that all the people posting in support of my views are "pretending" to believe me, but are secretly convinced by you? I submit that the reason I have credibility on these forums is because people actually believe what I write. But maybe that's a question best left to the rest of the readership --- why are you all "pretending" to believe me and "pretending" not to support Tippit's viewpoint?

drkitten

1st April 2010, 09:48 AM

Which, in no way requires eliminating or changing the idea of a progressive tax code,

I didn't suggest that you were in favor of eliminating a progressive tax code. That's a stupid idea that happens to be one you don't hold.

I suggested you were in favor of eliminating deductions. That's a stupid idea that happens to be one that you do hold.

But the two stupid ideas share one characteristic in common --- they're overly-simplistic ideas with a grain of sense in them, but for which the baby-to-bathwater ratio is just too high.

AvalonXQ

1st April 2010, 09:50 AM

But maybe that's a question best left to the rest of the readership --- why are you all "pretending" to believe me and "pretending" not to support Tippit's viewpoint?

Bribery by a third party.

drkitten

1st April 2010, 09:52 AM

Bribery by a third party.

I suppose that makes as much sense as any other theory Tippit espouses. You should be aware, though, that you're not getting paid in "real" money, because in his universe Disney Dollars are the only source of value.

Tippit

1st April 2010, 09:53 AM

No, you didn't. You posted evidence of why positions other than the positions actually being discussed, were someone discussing them, would be contradicted by the apparent meanings you attribute to quotes mined from what two Fed Chairmen have said.
Very different things.

No. She claimed that the public is ultimately responsible for the onerous US national debt because they want services in excess of what they're willing to pay for them, which is an absurd justification for the debt. She also claimed that voluntary taxation doesn't work and used an example of how people would not contribute towards a fund to reduce the national debt as proof. I responded by pointing out the true fact that if we had no debts we would have no money, and backed it up with congressional testimony from fmr. Fed Chairman Mariner Eccles. Perhaps the public isn't willing to commit money to such a fund because they know this intuitively, or, more likely they just have a general sense that the national debt is the result of a giant fraud.

The fact that inflation is a regressive tax is something she denied in a previous thread, despite video evidence from Ben Bernanke to the contrary.

TraneWreck

1st April 2010, 09:54 AM

Posting this again because it seemed to slip by:

The bottom 99 percent of taxpayers pay 29.4 percent of their income in local, state, and federal taxes. The top 1 percent pay an average total tax rate of 30.9 percent...

Link above.

If the argument is that the tax code is too complex, I'll buy into that. If we're arguing that it's unjust, the facts just don't support that claim.

During a time in USAian history where we passed massive tax breaks against the debt, started two very expensive wars, and created a $9.5 trillion unfunded liability through prescription drugs and Medicare part D, corporations managed to avoid sharing the burden of our spending frenzy:

The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

http://www.reuters.com/article/idUSN1249465620080812

And it isn't just a Republican problem:

More than 60% of all U.S. companies paid no federal tax at all during the boom years of 1996 to 2000, the General Accounting Office reports.

http://moneycentral.msn.com/content/Taxes/P80242.asp

Given that corporate sales over the period in the first quote were $2.5 trillion, I think that's a signficantly larger issue than whether someone making $20,000.00 a year is paying income taxes. They, of course, pay payroll taxes.

And as we all should know, any income over $106,000 is not subject to social security withholding, a highly regressive policy.

AvalonXQ

1st April 2010, 09:54 AM

I suppose that makes as much sense as any other theory Tippit espouses. You should be aware, though, that you're not getting paid in "real" money, because in his universe Disney Dollars are the only source of value.

I thought the bills looked a little too -- colorful -- to be real money. They almost looked (blech) European.

AvalonXQ

1st April 2010, 09:57 AM

I responded by pointing out the true fact that if we had no debts we would have no money, and backed it up with congressional testimony from fmr. Fed Chairman Mariner Eccles.

Actually, no. You said that if we paid down the national debt we'd have no money, which isn't what Eccles was talking about, and is patently untrue.

drkitten

1st April 2010, 09:58 AM

No. She claimed that the public is ultimately responsible for the onerous US national debt because they want services in excess of what they're willing to pay for them,

Which is true.

which is an absurd justification for the debt.

Not at all. Your characterization as "absurd" is competely unfounded.

She also claimed that voluntary taxation doesn't work and used an example of how people would not contribute towards a fund to reduce the national debt as proof.

Among other examples showing that "voluntary payment" is undersupplied in nearly all studied circumstances.

I responded by pointing out the true fact that if we had no debts we would have no money,

You pointed it out, but it wasn't "true fact" then and remains a delusion of yours.

and backed it up with congressional testimony from fmr. Fed Chairman Mariner Eccles.

You backed it up with an out-of-context quotation that you don't understand.

Perhaps the public isn't willing to commit money to such a fund because they know this intuitively, or, more likely they just have a general sense that the national debt is the result of a giant fraud.

Or perhaps voluntary payments are simply undersupplied, which is why pay-as-you-go nights draw less. Unless you're suggesting that theatrical performances and restaurant meals are also "the result of a giant fraud"?

Which is no less counterfactual than anything else you've written,.

The fact that inflation is a regressive tax is something she denied in a previous thread,

Of course, the fact that it's not a tax at all couldn't be relevant here in Tippit-ville.

despite video evidence from Ben Bernanke to the contrary.

Video evidence that again you misunderstood.

I stand by my statement. You not only don't know enough to write about economics, you don't even know enough to watch videos about it.

Michael Redman

1st April 2010, 09:59 AM

No. She claimed that the public is ultimately responsible for the onerous US national debt because they want services in excess of what they're willing to pay for them, which is an absurd justification for the debt.It is an absurd justification. But is it a perfectly valid explanation.

Tippit

1st April 2010, 10:03 AM

Tippit

1st April 2010, 10:08 AM

Actually, no. You said that if we paid down the national debt we'd have no money, which isn't what Eccles was talking about, and is patently untrue.

Fair enough. If we paid down the national debt, we would still have private debt to the extent the Federal Reserve lends to member banks. However, if we paid down the national debt, we would suffer a depression that would make the Great Depression look like a walk in the park. It would amount to a monetary contraction far greater than the 33% used by the Fed to actually cause the Depression. The point is, paying down the national debt, or any substantial portion, is untenable given the monetary and banking system.

drkitten

1st April 2010, 10:10 AM

Posting this again because it seemed to slip by:

The bottom 99 percent of taxpayers pay 29.4 percent of their income in local, state, and federal taxes. The top 1 percent pay an average total tax rate of 30.9 percent...

Link above.

If the argument is that the tax code is too complex, I'll buy into that. If we're arguing that it's unjust, the facts just don't support that claim.

Well, I'd argue that it's unjust precisely because the rich consume much more government services and don't pay enough, but that's a different argument....

During a time in USAian history where we passed massive tax breaks against the debt, started two very expensive wars, and created a $9.5 trillion unfunded liability through prescription drugs and Medicare part D, corporations managed to avoid sharing the burden of our spending frenzy.

This is another issue.

Corporations don't really have money of their own; they're wholly owned by the shareholders/owners. The income that they generate is taxed at the corporate level and then taxed again when it's distributed to the owners.

Given that many (most) "corporations" in the United States are small, privately held operations (in many cases, one-man bands), I can certainly understand why they wouldn't pay taxes. I ran a small (one-shareholder) corporation for a while a few decades ago and never paid corporate taxes. I made a point of paying out all corporate profits to myself (as the shareholder) precisely because otherwise I'd be taxed twice on the same money.

"Corporation" doesn't just mean Coca-Cola and Raytheon. It also means Sam's Deli down the street, or Ray's Lawn Care Service. In fact, it's more likely to mean Sam's and Ray's -- there are something like five million "corporations" in the United States and only about 15,000 publically traded corporations (corporations in which you could buy stock).

The reason Sam has a corporation in the first place is for legal protection (so if he makes a bad tuna sandwich, he loses the deli but not his house) -- it doesn't mean that the corporation is anything other than an extension of his wallet....

drkitten

1st April 2010, 10:11 AM

What about the massive and highly regressive inflation tax, is that "just"?

It's totally unjust -- but also nonexistent.

TraneWreck

1st April 2010, 10:14 AM

What about the massive and highly regressive inflation tax, is that "just"? The debasement of our money affects the poorest the most, because they have more money as a proportion of their net worth than the rich do.

The inflation rate in February was 2.1%. If that rate holds steady for the year, that means it will take $1.02 next year to buy what costs $1.00 this year.

That's not killing anyone. The problem for the poor in America, right now, is unemployment.

But I take your point, and pretty much agree with the principle. Raising taxes on the wealthy would be a good idea, hell, ending the wage limit on Social Security would fix that program for the rest of the century, and setting the tax rate back to what it was under Clinton, and maybe a little higher (once the economy stabilizes), while giving tax breaks to people on the bottom would be a good idea.

The point of that stat, however, is that the wealthy aren't getting screwed, as they so enjoy whining about.

"Tax breaks" in the face of the existence of the Federal Reserve System are a joke. If tax cuts aren't accompanied by cuts in spending, they turn into deficits which are financed by borrowing, or monetizing debt (a regressive tax). So in this sense the "Bush tax cuts" simply redistributed the tax burden from the rich to the poor, with the help of the Fed.

The Bush tax cuts were attrocious fiscal policy.

drkitten

1st April 2010, 10:15 AM

However, if we paid down the national debt, we would suffer a depression that would make the Great Depression look like a walk in the park.

Of course, but this has nothing to do either with the Fed, or with monetary policy, or with fiat money, or with any of your hot-button issues.

Paying back the national debt would require a tremendous increase in the amount of national savings, which in turn would require a tremendous decrease in consumption, which would cause an economic downturn.

The point is, paying down the national debt, or any substantial portion, is untenable given the monetary and banking system.

No, it's untenable given the laws of economics. "You can't have your cake and eat it too." You can't raise savings and maintain consumption levels at the same time -- this would be true regardless of whether the debt is maintained in fiat money, gold bars, or cowrie shells.

Tippit

1st April 2010, 10:18 AM

Video evidence that again you misunderstood.

I stand by my statement. You not only don't know enough to write about economics, you don't even know enough to watch videos about it.

You're a liar. Please describe the context in which Ben Bernanke stated "I couldn't agree with you more, congressman, that inflation is a tax, and that inflation currently is too high." Here's the video again:

D4yBrxmEOkY

Please describe the context in which Marriner Eccles stated "That is what our money system is. If there were no debts in our money system, there wouldn't be any money."

drkitten

1st April 2010, 10:21 AM

The inflation rate in February was 2.1%. If that rate holds steady for the year, that means it will take $1.02 next year to buy what costs $1.00 this year.

That's not killing anyone.

Actually, it's better for the employed poor.

In contrast to Tippit's vivid imagination, inflation is actually good for the lower classes, because they tend to be the debtor class or at worst, the break-even class.

Inflation is terrible for the creditor class, because they lose real value in their cash-denominated accounts. If you don't have a bank account and instead work day-to-day, your wages tend to track inflation and you break even. If you rent, your rental payments tend to track inflation and you break even.

And if you've managed to buy a house and are carrying a mortgage, you will actually be better off because you're paying back in cheaper dollars.

(Of course, interest payments tend to equalize this; lenders ask for enough in interest that they expect to maintain their buying power and make a profit. But you can see the way interest rates and inflation track together to see that inflation is a problem for the wealthy, which is why they need to claw back more in times of expected inflation.)

The problem for the poor in America, right now, is unemployment.

Agreed.

TraneWreck

1st April 2010, 10:22 AM

Well, I'd argue that it's unjust precisely because the rich consume much more government services and don't pay enough, but that's a different argument....

Sure, I tend towards that perspective as well. That stat was meant to rebut the whining that the tax burden was unfairly placed on the wealthy.

This is another issue.

Corporations don't really have money of their own; they're wholly owned by the shareholders/owners. The income that they generate is taxed at the corporate level and then taxed again when it's distributed to the owners.

Given that many (most) "corporations" in the United States are small, privately held operations (in many cases, one-man bands), I can certainly understand why they wouldn't pay taxes. I ran a small (one-shareholder) corporation for a while a few decades ago and never paid corporate taxes. I made a point of paying out all corporate profits to myself (as the shareholder) precisely because otherwise I'd be taxed twice on the same money.

Well, most smaller businesses these days are run as LLC's. They choose how they want to be taxed, as partnerships or as a C-Corp. If they choose to be taxed as a C-Corp, they subject themselves to double taxation. That's why most don't.

"Corporation" doesn't just mean Coca-Cola and Raytheon. It also means Sam's Deli down the street, or Ray's Lawn Care Service. In fact, it's more likely to mean Sam's and Ray's -- there are something like five million "corporations" in the United States and only about 15,000 publically traded corporations (corporations in which you could buy stock).

The reason Sam has a corporation in the first place is for legal protection (so if he makes a bad tuna sandwich, he loses the deli but not his house) -- it doesn't mean that the corporation is anything other than an extension of his wallet....

It's the big guys that are causing the problem, though:

"About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year..."

Obviously we can make a distinction between the level at which a corporation should be taxed and a size at which we should give them a break. The same distinction we make with personal income.

AvalonXQ

1st April 2010, 10:26 AM

You're a liar. Please describe the context in which Ben Bernanke stated "I couldn't agree with you more, congressman, that inflation is a tax, and that inflation currently is too high."

I'd expect you don't know the context, since the video quite clearly cut Bernanke off in the middle of his statement to make its point.
Any chance you know where we can see all of what Bernanke said?

AvalonXQ

1st April 2010, 10:28 AM

It's the big guys that are causing the problem, though:

"About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year..."

That's a pretty meaningless statistic without any quantification of "the largest U.S. companies". Where did they cut off the count? The top 10% by size? 5%? Did they just look at the 4 biggest companies and it turned out one of them took a loss in '05?

Tippit

1st April 2010, 10:31 AM

The inflation rate in February was 2.1%. If that rate holds steady for the year, that means it will take $1.02 next year to buy what costs $1.00 this year.

That's not killing anyone. The problem for the poor in America, right now, is unemployment.

The US economy is highly productive, and technologically superior. If we had a static money supply, we would see deflation in the general price level, which is what the CPI purportedly represents. Even if the CPI rate were 0, stable prices would reflect an opportunity cost which itself reflects a form of regressive taxation. In other words, the poor (and everyone else) should have experienced lower prices as a result of productivity, but instead, they're either unchanged, or in this case higher by 2.1% (if you believe the bogus CPI figures). My point is that this is a tax that has been paid, and mostly by the poor.

But I take your point, and pretty much agree with the principle. Raising taxes on the wealthy would be a good idea, hell, ending the wage limit on Social Security would fix that program for the rest of the century, and setting the tax rate back to what it was under Clinton, and maybe a little higher (once the economy stabilizes), while giving tax breaks to people on the bottom would be a good idea.

The point of that stat, however, is that the wealthy aren't getting screwed, as they so enjoy whining about.

The Bush tax cuts were attrocious fiscal policy.

I'm not advocating higher taxes, I'm pointing out that the "Bush tax cuts" were about reallocating the burden from progressive income tax payers to regressive inflation tax payers - a fraud, essentially. I would advocate that if you're going to cut taxes, cut spending too. Maybe one less foreign war of aggression.

TraneWreck

1st April 2010, 10:42 AM

That's a pretty meaningless statistic without any quantification of "the largest U.S. companies". Where did they cut off the count? The top 10% by size? 5%? Did they just look at the 4 biggest companies and it turned out one of them took a loss in '05?

It was in that link I posted:

"...those with more than $250 million in assets..."

elbe

1st April 2010, 11:05 AM

Consider religions though. Most churches rely on voluntary donations.

I wouldn't consider religious donations completely voluntary: There is both peer pressure when they pass the plate around, and, I believe, an unspoken spiritual threat on the believer (If you don't donate you may not get into heaven).

Kodiak

1st April 2010, 11:09 AM

0% income tax for those at and below the poverty level.

A flat % for everyone else.

Tippit

1st April 2010, 11:16 AM

I'd expect you don't know the context, since the video quite clearly cut Bernanke off in the middle of his statement to make its point.
Any chance you know where we can see all of what Bernanke said?

I don't see how an honest person could take that out of context. What do you think Bernanke was talking about?

I think there is a longer version of that video, I'm looking for it now.

NewtonTrino

1st April 2010, 11:17 AM

Hardly. By your own admission -- "It's not like I outlined every detail of my plan" -- what I responded to was what you wrote.

And what you wrote was a stupid idea.

In your opinion.

You don't have to be sure. You also don't have to be sure whether or not there is gasoline in your car's tank. The car doesn't operate according to what you know, but according to what is.

If the best you can produce in your favor is an argument from your own personal ignorance,.... read a book.

Ride your high horse much?

Seriously we can't even talk about these ideas because they're so silly in your opinion?

I think it's unlikely that my idea would work in a place like the USA but that doesn't mean it couldn't work in a future society with a different economic culture.

This has happened. Look at the average standard of living in the United States today vs two hundred years ago.

All that technological advancement does is raise the bar for what is considered "rich." In 1900, you were rich if you had a phone. In 1950, you were rich if you had two phones. In 1990, you were rich if you had a cellular phone. In 2010, you are rich if you have multiple iPhones.

In 1850, you were rich if you had a horse. In 1920, you were rich if you had a car. In 1980, you were rich if you had a car for every driver in the house. In 2010, you are rich if you have a horse.... :D

I pretty much agree with this. Now keep going on that curve and where do we get to?

No, it wouldn't. Tax burden has actually increased over the past two hundred years in the US, precisely because it costs more to supply the "minimum" to the people who can't afford it. Most people today would consider it morally unacceptable to condemn someone in the US today to the life of a 1930s sharecropper. I admit I share that opinion.

I share it as well. However, they way to fix this is through freedom and liberty so that they can find a way to make a living in the world. Handing able bodied people money except for a limited time in unusual circumstances is IMHO a bad idea.

Again, this is econ 101. Wants are unlimited, goods will always be scarce. Even when you can supply iPhones to every household in the United States, people will still want the next better thing if they can get it.

What about when the time comes when material goods are free? When you can literally download the plans for a car from the internet and hit a button to build it. Then recycle it the next day into something else?

If we continue on our current tech curve that could be reality for our grandchildren.

Anyway, the sense of entitlement for other peoples money on here amazes me. You guys keep talking about how this country made it all possible but keep in mind that I'm an immigrant to the US and I wasn't educated here. The day I landed I started paying significant taxes. I could have emigrated somewhere else and if future immigrants like myself decide to go elsewhere, for whatever reason, this country will be poorer because of it. Yes the society in the USA is an overall good place to make a buck and some amount of taxes need to go into supporting the general welfare. But to tell me that since I have more money I have to contribute more isn't some sort of universal moral rule.

I guess I'm back to starting my own country. Luckily with free trade I'll still be able to sell into the US market and still ply my trade ;)

PS you're taking this way to seriously. I threw out an idea to see if other peoples concept of fairness matched mine. I guess not!!

Trakar

1st April 2010, 11:53 AM

I think you're proposing this:

The idea that someone engaged in an expensive business should pay the same percentage of his gross income is silly.

What's silly, is that you derived the idea that my words discussing an approach to understanding and discussing this issue in any way was a proposal that every one should be taxed at the exact same flat rate. That was, and is not my intent, and a simple question concerning that might have avoided what looks to be a lot of improper assumptions on your part. Try arguing against what I'm actually saying, not what you think I might be alluding to or headed toward, and the discussion might be a lot more productive.

You objected to the idea that garbagemen, who are among the lowest paid sector of our society, might find it a financial burden to pay for their work clothes.

No, I argued that if a garbageman loses the $80-some a year in tax credit that he receives from discounting $500 in uniform expenses and this makes him unable to affordably continue working as a garbageman, then he (and society in general) has much bigger problems of more immedate need than is going to be addressed by any taxation issue. Additionally, there are other ways to deal with this and virtually every other job-related expense, and most of them (throughout our society) are addressed alternatively with taxation deductions for them being more a confusing, little understood perk, for those with the knowledge of how to properly take advantage of them.

Let me turn the example around, then.

I'd suggest that there has already been too much spinning and not enough actual cogitation, but if you insist...

Malpractice insurance can be a huge burden on doctors, in many cases topping two hundred thousand dollars a year (depending upon specialities). If malpractice insurance weren't treated as a business expense and deductable from gross income before taxes were paid, it's likely that there would be no ob-gyns left in the state of Florida.

Answer me this, do doctors raise their fees to account for malpractice insurance or do they depend upon the tax credit due them by this business expense to pay for the insurance and the other local costs of doing business?

Using only the national average, the "average" ob-gyn in the USA is paid about $250,000 per year. The "average" costs of malpractice insurance is over $100,000 -- more than 40% of the gross wages. Add another 40% in "tax" costs on top of this, and you're asking ob-gyns to live on take-home wages of about $50K.

The average ob-gyn lives in a small to mid-sized community in what is colloquially known as fly-over country. The 40% you mention presumes that the physician either doesn't earn or take any deductions, credits or breaks, but even so, for the average ob-gyn, this is still a livable income in most of the average communities where they reside, not oppulent certainly. If you are presuming, however, that these true-rate taxes are true for everyone, then you also accept that all salaries and expenses will be similarly adjusted, in which case, the average OB-gyn's standard of income actually increases.
Ultimately, the issue is that taxation exception and distortion is the least equitable and most abused method of achieving equitable and fair progressive taxation. Now there probably are some times when this may be the least worst alternative, but I think that we could probably liposuction the majority of the currently existing deductions, breaks and credits from the tax codes, and slightly tweak those that are left to achieve a much more transparent and fair progressive tax system.

No one would go onto that specialty for that. Why not go into pathology instead and clear $100,000?

The median expected salary for a typical Physician - Pathology in the United States is $240,414, and all practicing MDs are required to pay for malpractice insurance. Their specialty results in somewhat lower fees, but so does location, and this is true for other specialties as well, so it is also at least somewhat doubtful that the typical OB-GYN living and practicing in smallsville is going to be paying out $100k/year in medmal insurance while only earning $250k(gross)/year.

Ultimately(and IMO), the best resolution to this type of issue is through insurance and tort reform (though I generally come down more on the side of attorneys and plaintiffs than defense and unreasonable caps in this regard). I'm just of the opinion that using the tax code to address these issues through credits, breaks and deductions, is one of the worst possible patchwork bandaids available to correct the current mess.

Trakar

1st April 2010, 12:21 PM

I didn't suggest that you were in favor of eliminating a progressive tax code. That's a stupid idea that happens to be one you don't hold.

I suggested you were in favor of eliminating deductions. That's a stupid idea that happens to be one that you do hold.

false dichotomy, big difference between talking about simplifying the tax code while enhancing its equity and utility through the trimming out of mess represented by the the vast majority of the tax breaks, deductions and credits, and then looking at adustments to the appropriate brackets, to more accurately reflect and approximate an equtable and appropriate true, effective progressive taxation code, and your mischaracterization of my position as being in favor of eliminating all tax breaks, credits, and deductions.

But the two stupid ideas share one characteristic in common --- they're overly-simplistic ideas with a grain of sense in them, but for which the baby-to-bathwater ratio is just too high.

Actually, all they share is your simplistic portrayal and suggestion that they represent anyone's opinion outside of your own misrepresentations.

If you're not sure what someone is talking about, ask them, don't assume you must already know what they haven't said.

Trakar

1st April 2010, 01:11 PM

0% income tax for those at and below the poverty level.

A flat % for everyone else.

Even without breaks, deductions and credits, this simply doesn't adequately address the issue that those who earn more, inherently take more advantage of governmental services and benefits than those who earn less, and completely ignores business taxes which are a complicated tangle all on their own.

I think I'd prefer to dispense with the catchall "poverty level," altogether and work with a "societal dependent" classification (for those who are fully dependent on social benefits and assitance for survival - >80% annual income/benefit is from governmental and private social contract subsidy), "societal assisted" (>20% annual income/benefit) (these two brackets are completely without annual federal income taxation obligation, but only the upper tier is actually eligible for annual refund/credit assistance) and then a three-tiered economic tax-obligation bracket on top of these (lower/medial/upper -for the sake of discussion, say: 5%, 15%, 25%) comprising (in conjunction with a tiered business tax system) the majority of the functional tax base.

JJM 777

1st April 2010, 01:39 PM

the tax burden is firmly on those who make the most money. In my mind if the system was "fair" everyone would be paying an equal share
There is a practical reason, in addition to any ideological reasons, why people near or under the poverty line are not forced to pay exactly the same amount of USD to the tax box as people with high income. Because they don't have the money to pay, and certainly not the willingness to pay in such circumstances, so the society would probably disintegrate into rioting, possibly civil war.

So the next option would be equal _percentage_ taxed from income (rather than equal total sum). The rich would pay more than the poor, but the same percentage. Some people say that this would be "fair", but hey the price already is different for different people, some would pay more USD and some would pay less. People get the same service, but pay a different price for it.

Taxation can never be fair as long as salaries are not fair, and it doesn't look like salaries will be fair any time in the foreseeable future, in any country, so we are doomed to debating about varying degrees of unfairness in the taxation and in salaries, within each country and even more so between rich and poor countries.

JJM 777

1st April 2010, 01:45 PM

0% income tax for those at and below the poverty level.

A flat % for everyone else.
A concise introduction to the practical necessity of progressive taxation:

Pity those who earn 1 dollar more than the poverty line limit. Earning one dollar less would have been tax free, but now they pay the full pot...

NewtonTrino

1st April 2010, 01:59 PM

There is a practical reason, in addition to any ideological reasons, why people near or under the poverty line are not forced to pay exactly the same amount of USD to the tax box as people with high income. Because they don't have the money to pay, and certainly not the willingness to pay in such circumstances, so the society would probably disintegrate into rioting, possibly civil war.

So the next option would be equal _percentage_ taxed from income (rather than equal total sum). The rich would pay more than the poor, but the same percentage. Some people say that this would be "fair", but hey the price already is different for different people, some would pay more USD and some would pay less. People get the same service, but pay a different price for it.

Taxation can never be fair as long as salaries are not fair, and it doesn't look like salaries will be fair any time in the foreseeable future, in any country, so we are doomed to debating about varying degrees of unfairness in the taxation and in salaries, within each country and even more so between rich and poor countries.

How can we make salaries fair then? Maybe I've been coming at this from the wrong angle. Actually my thinking all along has been that as tech gets better salaries should increase. So how do we make sure that everyone is getting paid decently? If that's the case then everyone would be able to chip in equally without and hard feelings.

drkitten

1st April 2010, 02:08 PM

I
Seriously we can't even talk about these ideas because they're so silly in your opinion?

Not at all. But we can't talk about those ideas as though they weren't silly, not and have a useful discussion.

What about when the time comes when material goods are free?

That time isn't going to come.

When you can literally download the plans for a car from the internet and hit a button to build it. Then recycle it the next day into something else?

At that point, the price of cars will be sufficiently low that few people will be interested in selling them. But there will be some other luxury good that is still in scarce supply and there will be a lot of money to be made in selling that to the few people who are able to offer enough for them.

drkitten

1st April 2010, 02:23 PM

What's silly, is that you derived the idea that my words discussing an approac
Answer me this, do doctors raise their fees to account for malpractice insurance or do they depend upon the tax credit due them by this business expense to pay for the insurance and the other local costs of doing business?

Some of both. They, like all self-employed people, pay taxes on their net income; expenses that are a necessary part of doing business (like insurance are subtracted from their income before taxes are part of it.

Or to put it another way, business expenses such as insurance are recognized by the IRS as a pre-tax cost.

Or to put it another way, a doctor with $300,000 annual income and $200,000 annual malpractice insurance will pay taxes on (at most) $100,000 worth of income, which will save him about $60,000 in taxes (in the 30% bracket).

The average ob-gyn lives in a small to mid-sized community in what is colloquially known as fly-over country.

Actually, he doesn't. The average ob-gyn lives in a large city, just like any other "average" US resident. Your demographics are about thirty years out of date. But that's not really relevant here.

The 40% you mention presumes that the physician either doesn't earn or take any deductions, credits or breaks,

That's right, because I'm pointing out the effects of your proposal to eliminate "deductions, credits, and breaks."

but even so, for the average ob-gyn, this is still a livable income in most of the average communities where they reside, not oppulent certainly.

Of course, the average doctor doesn't go into medicine to achieve a "livable" income. The average doctor wants and expects an opulent income -- and typically spent ten very expensive years of his life deferring consumption to achieve it.

If you are presuming, however, that these true-rate taxes are true for everyone, then you also accept that all salaries and expenses will be similarly adjusted, in which case, the average OB-gyn's standard of income actually increases.

Huh? How the hell do you figure that? By eliminating the business-expense deduction for his malpractice insurance, you added $60,000 to his tax bill, and therefore took $60,000 away from his standard of living.

Ultimately, the issue is that taxation exception and distortion is the least equitable and most abused method of achieving equitable and fair progressive taxation.

Asserting that doesn't make it so.

The median expected salary for a typical Physician - Pathology in the United States is $240,414, and all practicing MDs are required to pay for malpractice insurance.

That's right, but the average pathologist pays something like $20K in malpractice insurance -- call it a fifth as much.

Their specialty results in somewhat lower fees, but so does location, and this is true for other specialties as well, so it is also at least somewhat doubtful that the typical OB-GYN living and practicing in smallsville is going to be paying out $100k/year in medmal insurance while only earning $250k(gross)/year.

Shrug. "Average" ob-gyn salaries across the country are about $250,000 -- "average" ob-gyn insurance premia are about $100,000 per year. Your doubt doesn't change the facts. You're right that in Smallville both the absolute (gross) income and the insurance premia will be reduced, but this particular speciality pays extremely high malpractice insurance rates across the country, because it has a particularly sue-happy client base.

That's not necessarily a problem if you recognize that the costs of doing business as an ob-gyn are high and allow the tax structure reflect that. If, however, you expect the cost of being an ob-gyn to be the same as a pathologist and set tax rates accordingly, you'll find people leaving ob-gyn and or charging higher prices up-front to the customer since they'll need to bring in approximately $110,000 more in fees to cover the $80,000+ additional costs.

Ultimately(and IMO), the best resolution to this type of issue is through insurance and tort reform

Not really. Tort reform has been shown by every objective analysis to be more or less a non-starter in terms of reducing insurance costs.

I'm just of the opinion that using the tax code to address these issues through credits, breaks and deductions, is one of the worst possible patchwork bandaids available to correct the current mess.

Yes. I know that's your opinion. I'm simply pointing out that your opinion is wrong. When a student comes up to me and says "I'm of the opinion that 2+2=22," that doesn't mean I have to respect his ill-informed "opinion."

NewtonTrino

1st April 2010, 03:19 PM

Not at all. But we can't talk about those ideas as though they weren't silly, not and have a useful discussion.

In your opinion.

That time isn't going to come.

Care to explain your reasoning? Automated manufacturing, nanotech, AI etc. all are trending towards us reaching a point where manufacturing is incredibly cheap. Energy is the biggest barrier but it's a solvable problem.
Making services cheap is harder because we need really solid AI but I haven't seen anything that makes me think it's impossible.

Of course we might destroy ourselves first, but if we don't I'm fairly sure our current trends will continue.

drkitten

1st April 2010, 03:54 PM

Care to explain your reasoning?

Because as soon as one want becomes trivially achieveable, people want more. People want _more_ goods, not less, as they become more available.

Look at what's happened with telephones (which were witless luxuries in 1900) or televisions (which were witless luxuries in 1950), or video games (which were witless luxuries in 1975) and home computers (which were also witless luxuries in 1975).

Look at the additional demands placed on housing -- today, no one will even look at a house built to 1950s specifications. It's too small (the idea of sharing a bedroom with your children is considered faintly immoral, and people really want/expect every child to have a bedroom to themselves), lacks too many amenities (no one will buy a one-bathroom house any more, and a kitchen without a built-in dishwasher is almost unsellable).

Ten years ago, a house without cable hookups was unsellable. Ten years from now, a house without built-in Internet will be unsellable. Twenty years from now, I don't even know what the new must-have amenity will be, but I know it won't be free, which is why people will still scramble to update their older houses to include it if/when they need to sell.

Of course we might destroy ourselves first, but if we don't I'm fairly sure our current trends will continue.

That's right. And the current trends are what they always have been -- that wants will outpace goods available to satisfy those wants.

NewtonTrino

1st April 2010, 04:52 PM

Because as soon as one want becomes trivially achieveable, people want more. People want _more_ goods, not less, as they become more available.

You say this likes it's a universal law of human nature. Got any proof other than your opinion and analysis?

Look at what's happened with telephones (which were witless luxuries in 1900) or televisions (which were witless luxuries in 1950), or video games (which were witless luxuries in 1975) and home computers (which were also witless luxuries in 1975).

So people want things they are exposed to? Personally I think what's going to be valuable in the future is not goods but information (e.g. designs of things).

Look at the additional demands placed on housing -- today, no one will even look at a house built to 1950s specifications. It's too small (the idea of sharing a bedroom with your children is considered faintly immoral, and people really want/expect every child to have a bedroom to themselves), lacks too many amenities (no one will buy a one-bathroom house any more, and a kitchen without a built-in dishwasher is almost unsellable).

That's funny. You might want to let all of the people living in 100+ year old houses that they should move.

Ten years ago, a house without cable hookups was unsellable.

That's a bit of an extreme statement, care to retract it?

Ten years from now, a house without built-in Internet will be unsellable.

That's a bit of an extreme statement, care to retract it?

Twenty years from now, I don't even know what the new must-have amenity will be, but I know it won't be free, which is why people will still scramble to update their older houses to include it if/when they need to sell.

How do you know it won't be free?

That's right. And the current trends are what they always have been -- that wants will outpace goods available to satisfy those wants.

You could be right but you're just speculating (as am I). Either way the future is going to be a very interesting place.

Now where's my flying car dammit?!!

drkitten

1st April 2010, 06:45 PM

You say this likes it's a universal law of human nature.

I do, yes.

Got any proof other than your opinion and analysis?

Nope, aside from "logic" and "evidence" I have nothing.

So people want things they are exposed to?

Um, yeah? That's the whole idea behind "marketing" and "advertisement," among other things.

Personally I think what's going to be valuable in the future is not goods but information (e.g. designs of things).

Shrug. A design without a thing incorporating it is generally useless. And every thing implicitly incorporates a design. But that's one of the aspects that will make people want more "stuff"; if they can get stuff custom-fitted to their whims, they will want it -- and there's your scarcity value again.

You can see that already : "hand-made" items cost more in artisan shops than their mass-market equivalents do in Wal*Mart and Target.

That's funny. You might want to let all of the people living in 100+ year old houses that they should move.

I don't need to. They're more likely, though, to want to refurbish than to move -- and I don't need to tell them to refurbush. They generally already have. When was the last time you saw a house with an honest-to-God "icebox" or a pump in the kitchen but no faucets.

How do you know it won't be free?

Because if it were free, they'd have it already. What sellers are scrambling to put in is stuff that everyone wants but not everyone has, because they want to make their house more attractive to the buyer. Because there are hundreds of houses on the market, and each individual seller wants to move theirs by preference.

The same thing that every commercial enterprise is doing, really. I need to find something that makes the tacos from my truck better than any of the other taco trucks in the park, because that's the only way I can get more people to come to my truck over theirs.

So what can I offer that will get buyers to buy my house instead of my neighbor's? Central air conditioning? Everyone has that; that's not a selling point so much as a requirement -- I actually lose buyers by not providing it. Cable-ready? Again, everyone has that. But not everyone's got fiber optic to every room -- perhaps I can bring in the geek buyers by offering a house fully wired for internet. That will give me an edge over my neighbor. Or maybe if I completely redo the roof; that will cost me several thousand dollars but give me that necessary edge.

Of course, if redoing the roof cost pennies instead of thousands, my neighbor would have already done that. Which means I wouldn't get an edge by doing it, but I'd give her an edge by notdoing it. So I need to find something that I can do that she won't bother to do (because it's too expensive [or troublesome, which equates to expensive]).

You could be right but you're just speculating (as am I).

The difference is that my speculations are firmly grounded in empirical observations and economic theory. My statement that "goods are limited, wants are unlimited" has been around since Adam Smith -- but nothing has changed it or is likely to change it.

NewtonTrino

1st April 2010, 06:57 PM

The difference is that my speculations are firmly grounded in empirical observations and economic theory. My statement that "goods are limited, wants are unlimited" has been around since Adam Smith -- but nothing has changed it or is likely to change it.

I think the coming age of information is going to be a shock to your system. We're already seeing a transition from physical goods to information. The idea that there will always be scarcity of some type is probably accurate but this doesn't mean that we can't take care of all food, shelter and other infrastructure needs for almost nothing which could eliminate the need for much in the way of taxes.

"Goods are limited" already isn't true of anything made from information, for example music or other types of software.

Anyway I really don't disagree with your basic thesis that people are inherently greedy bastards. Things will become less scare and hopefully society can change with our technology. More than likely some religious nutjobs are just going to kill us all or send civilization back to the stone age before any of my ideas can become established.

drkitten

1st April 2010, 07:06 PM

I think the coming age of information is going to be a shock to your system.

Yes, you've made that perfectly clear. You're wrong.

We're already seeing a transition from physical goods to information.

Not really; information has always been valuable -- look at the history of fixing longitude at sea sometime.

What we're actually seeing is a decrease in the amount of labor necessary to produce physical goods, which frees up labor to create other goods (information as well as other types of physical goods) to satisfy people's unlimited wants.

The idea that there will always be scarcity of some type is probably accurate but this doesn't mean that we can't take care of all food, shelter and other infrastructure needs.

We can do that today. Funny, though, how almost no one in the United States is willing to live on an unrelenting daily diet of 1500 calories of beans and rice, or to live in a one-room mud hut with a dirt floor and a firepit for heating.

You're confusing "needs" and "wants" (again). As I said, we're already in a position to fill everyone's "needs," but that doesn't reduce the demand ("wants") for food, shelter, and infrastructure. Funny how uppity those peasants are; as soon as you provide them with a mud hut, then they start asking for a log cabin. As soon as you provide them with beans and rice, they start asking for meat and veg.

And so there will still be a need for taxes to provide them with what the more fortunate aspects of society take for granted,....

Anyway I really don't disagree with your basic thesis that people are inherently greedy bastards.

Well, that's good, because I don't really claim ownership of that particular thesis. It's literally the first lecture in the first econ class you may someday take.

NewtonTrino

1st April 2010, 07:53 PM

Yes, you've made that perfectly clear. You're wrong.

No, you're wrong. See how well that works?

Not really; information has always been valuable -- look at the history of fixing longitude at sea sometime.

No, really. Things like music and books that used to have to be physical media can now be made LITERALLY for free. With new types of nanotech many good may eventually fall into this category.

What we're actually seeing is a decrease in the amount of labor necessary to produce physical goods, which frees up labor to create other goods (information as well as other types of physical goods) to satisfy people's unlimited wants.

Yes!

We can do that today. Funny, though, how almost no one in the United States is willing to live on an unrelenting daily diet of 1500 calories of beans and rice, or to live in a one-room mud hut with a dirt floor and a firepit for heating.

We could certainly do a hell of a lot better than that if we tried.

Anyway my point here is that fulfilling these physical needs will become so cheap that nobody has to work unless they want to.

You're confusing "needs" and "wants" (again). As I said, we're already in a position to fill everyone's "needs," but that doesn't reduce the demand ("wants") for food, shelter, and infrastructure. Funny how uppity those peasants are; as soon as you provide them with a mud hut, then they start asking for a log cabin. As soon as you provide them with beans and rice, they start asking for meat and veg.

And so there will still be a need for taxes to provide them with what the more fortunate aspects of society take for granted,....

You're the one who is confused. Also you really seem to enjoy putting words in other peoples mouths.

Well, that's good, because I don't really claim ownership of that particular thesis. It's literally the first lecture in the first econ class you may someday take.

Are you an econ professor or something? That would explain the fossilized thinking. Or maybe you're just an old fart.

Tippit

1st April 2010, 08:32 PM

Dr. Kitten, how exactly did I take Bernanke and Eccles out of context? And if you are in any way employed as an educator, that alone explains the dumbing down of our educational system.

lionking

1st April 2010, 08:41 PM

Are you an econ professor or something? That would explain the fossilized thinking. Or maybe you're just an old fart.

Don't know, but unlike you, she knows what she is talking about.

Tell me NewtronTrino, do you consider taxation theft?

Skeptic Ginger

1st April 2010, 08:58 PM

It would seem at least some billionaires made money last year directly off the tax bailouts. And, some of them were taxed on the lower capital gains rate rather than the income tax rate.

Does anyone think they should have to pay more in taxes than the rest of the population which are still suffering the effects of the recession caused by many of these financial dealers' unethical practices?

Tippit

1st April 2010, 09:08 PM

NewtonTrino

1st April 2010, 11:25 PM

Don't know, but unlike you, she knows what she is talking about.

Oh, gimme a break. I started this thread a light hearted look at the tax issue from the perspective of fairness. What I've found is some sort of dark hidden underbelly of society that makes me ill. I don't fundamentally disagree with the basics of economics as presented and I'm not stupid. I'm asking the question, can we do better? God forbid someone throw out and out there kind of idea and ask for comment on JREF. God forbid someone doesn't go along with the idea that progressive taxation is the greatest idea ever.

I'm speculating on some cool future "society of plenty" and coming up with thought experiments about different ways to handle the social contract with regards to taxation. Dr. Kitten has done nothing but put words in my mouth and try to twist me into someone who doesn't care about the average person. I'm not scrooge, I just don't buy into the idea that the rich need to pay progressive taxes. I also don't buy the idea that the federal government in the USA has to spend more on military spending that the rest of earth combined.

Tell me NewtronTrino, do you consider taxation theft?

Theft is something that's against the law, so no. I think the situation is complicated though and there have certainly been countries that out and out stole property from their citizens and others (Venezuela comes to mind at the moment). If I really felt truly ripped off I could always move to another country anyway.

Fairness is something that each individual needs to decide for themselves because it's a moral concept. I accept that the current taxation system might be necessary but I personally don't think fairness enters into it at all.

JJM 777

2nd April 2010, 12:35 AM

How can we make salaries fair then? (...)Actually my thinking all along has been that as tech gets better salaries should increase. So how do we make sure that everyone is getting paid decently?
If everyone in the world were paid decently, all the Chinese toys and clothes in your local shop would cost many times more than they now do. The so-called "free market" rewards companies which find ways to reduce their employee costs (getting goods produced by underpaid workers in Far East), and punishes companies which pay a fair salary to their employees. As long as the "free market" stands as we know it, companies are forced to try minimizing their costs by paying to each employee as little as is possible, according to the laws of demand and supply. Hence comes a hierarchy of salaries where individuals with necessary but rare skills can bargain a bigger salary than individuals without any special skills.

---

Tech gets better, but technology is property, in some cases very expensive, which is privately owned by people who in the current economical system have risen to the top of food chain, thanks to their higher salaries and/or wealth inherited from ancestors. Some families are essentially wealthier than some others, and some nations are essentially wealthier than some others, thanks to what they inherited from the past generation.

Why should a machine owned by someone else increase the salary of its user rather than its owner? Often it doesn't, and that is what inspired people like Marx to write volumes about the class division of society, why the means of production (= technology of companies) should be owned by the state rather than the upper class of society.

Just thinking

2nd April 2010, 07:05 AM

If everyone in the world were paid decently, all the Chinese toys and clothes in your local shop would cost many times more than they now do.

Aside from trying to even remotely define what would be deemed as being "paid decently", just how many employees would be let go (to live without any income) when it's found out that such prices for said toys would reduce the company's profits to zero from lack of sales?

The so-called "free market" rewards companies which find ways to reduce their employee costs (getting goods produced by underpaid workers in Far East), and punishes companies which pay a fair salary to their employees.

This is an excellent example of error by omission. Yes, it does appear that way, until you look a bit deeper into what it is to run a business --- and it's just a teeny bit at that. Companies are always looking at ways to reduce costs, but wages are only a part of that. If the same wages were able to be paid to local workers, believe me, companies would much rather produce goods here and avoid international shipping altogether. And now with required health care, larger companies (those that employ more people), may find it even more difficult to keep local employees.

As long as the "free market" stands as we know it, companies are forced to try minimizing their costs by paying to each employee as little as is possible, according to the laws of demand and supply.

Again, that's only part of the equation. Why is it you keep arguing as if salaries are the only cost of doing business?

Hence comes a hierarchy of salaries where individuals with necessary but rare skills can bargain a bigger salary than individuals without any special skills.

And why shouldn't a person with better skills be worth more? You speak as if there is no such thing as worth, or at least that it's a bad thing.

---

Tech gets better, but technology is property, in some cases very expensive, which is privately owned by people who in the current economical system have risen to the top of food chain, thanks to their higher salaries and/or wealth inherited from ancestors.

Really? If that were true then all who won the lottery would own all of technology. Technology is the result of long hard work and dedication of and by individuals ... just why in the hell should the government get ownership? They certainly didn't develop it ... they may have farmed it out to private companies, and paid for some of it ... but to simply own it outright because it's technology is the weakest argument I've ever heard.

Some families are essentially wealthier than some others, and some nations are essentially wealthier than some others, thanks to what they inherited from the past generation.

Yes ... it's known as "Development" ... many nations do it.

Why should a machine owned by someone else increase the salary of its user rather than its owner? Often it doesn't, and that is what inspired people like Marx to write volumes about the class division of society, why the means of production (= technology of companies) should be owned by the state rather than the upper class of society.

It's known as private property ... that which is the result of one's labor, be it physical, mental or whatever combination of efforts and/or inputs. It's what some nations have made their foundations upon.

a3sigma

2nd April 2010, 07:14 AM

Oh, gimme a break. I started this thread a light hearted look at the tax issue from the perspective of fairness.

Silly me, I thought you were serious. So... this whole thread is an April Fool's joke? Good one, you got me.

NewtonTrino

2nd April 2010, 10:21 AM

Silly me, I thought you were serious. So... this whole thread is an April Fool's joke? Good one, you got me.

Nah, I just don't believe I should have to pay any taxes because I'm special.

NewtonTrino

2nd April 2010, 10:24 AM

If everyone in the world were paid decently, all the Chinese toys and clothes in your local shop would cost many times more than they now do. The so-called "free market" rewards companies which find ways to reduce their employee costs (getting goods produced by underpaid workers in Far East), and punishes companies which pay a fair salary to their employees. As long as the "free market" stands as we know it, companies are forced to try minimizing their costs by paying to each employee as little as is possible, according to the laws of demand and supply. Hence comes a hierarchy of salaries where individuals with necessary but rare skills can bargain a bigger salary than individuals without any special skills.

I get the problem, what I'm looking for is the fix. How do we make sure everyone has enough income to live comfortably?

---

Tech gets better, but technology is property, in some cases very expensive, which is privately owned by people who in the current economical system have risen to the top of food chain, thanks to their higher salaries and/or wealth inherited from ancestors. Some families are essentially wealthier than some others, and some nations are essentially wealthier than some others, thanks to what they inherited from the past generation.

Why should a machine owned by someone else increase the salary of its user rather than its owner? Often it doesn't, and that is what inspired people like Marx to write volumes about the class division of society, why the means of production (= technology of companies) should be owned by the state rather than the upper class of society.

What about if we got rid of patents and copyrights so that ideas were able to be freely used by anyone? Do you think that would help?

I think you've outlined the problem but what are the solutions? I don't see state ownership as a viable solution as we've already tried that a few times. At least not of the entire economy. State run gas companies, airlines etc. seem to work well enough I guess.

JJM 777

2nd April 2010, 01:04 PM

such prices for said toys would reduce the company's profits to zero from lack of sales?
I cannot follow what you assume that would happen:

a) The sales of toys would fall to zero, when their prices rise by 100% or 200%?
More probably, the total sales of toys would remain at current level (as USD), only the amount of items would be two or three times smaller, as each item would cost two or three times more.
or
b) A mysterious company X would continue selling toys for a low price, and all people would quit buying from the company whose prices rose by 100% or 200%
This is the reason why in the current style of market economy ALL companies are forced to use the lowest paid workers they can find, unless they can allure the consumers to choose their more expensive product because of nice design or fine quality. True, but changing the legislation would force the mysterious company X from the market.

Companies are always looking at ways to reduce costs, but wages are only a part of that.
Competition in paying to employees as little as possible is _the_ unwanted part of free competition, from a humanist or Leftist viewpoint anyway. If we remove this one aspect of competition by changing the legislation, the rest of free competition is mostly a positive force, "an incentive to create" as they say.

If the same wages were able to be paid to local workers, believe me, companies would much rather produce goods here and avoid international shipping altogether.
Environmentalists will tell you that this is exactly what should be done, to save the planet from unnecessary energy use and CO2 emissions.

Why is it you keep arguing as if salaries are the only cost of doing business?

I never said the word "only".

And why shouldn't a person with better skills be worth more?
If we overlook the fact that talent and basic health are inborn qualities, received and not "earned" by the person, there is some point in rewarding highly skilled individuals with higher wages. High(est) salaries are not the main problem anyway, the real problem are the low(est) salaries, which can only be raised by reducing or progressively taxing the highest salaries.

Technology is the result of long hard work and dedication of and by individuals ... just why in the hell should the government get ownership?

Government does not "own" anything, does Barack Obama own the oil reserves of Alaska? There is a moral point in rewarding innovative work with ownership of the fruits of the work, BUT in reality most innovations become the property of company _owners_ rather than persons who actually made the innovations, and then the company is possibly sold to investor Z from Russia or Italy whose money was made in the underworld. State ownership of innovations is at least as reasonable as the ownership ending up in the hands of privileged upper class individuals unrelated to the actual innovation, who for various reasons have the money to buy the company and/or its patents.

It's what some nations have made their foundations upon.
Nations like USA have a history of extracting natural resources and slave workers from abroad, and still in present time artificially boosting their standard of living with products manufactured by underpaid Asians in sweatshops.

How do we make sure everyone has enough income to live comfortably?
In places like Scandinavia it is done by progressive taxation that starts at 10% or 20%, rising up to 50% or 60%. Thus collected money is enough to pay free health care to everyone, free schools, free universities, free day care, and something like 500 EUR per month to the unemployed, students, and to mothers starting 4 months before and ending up to 2 years after birth.

In small oir-rich countries the same is done simply with the oil money, but that is not a solution for the entire planet.

What about if we got rid of patents and copyrights so that ideas were able to be freely used by anyone?
I detest the idea that anyone can have a monopoly right for information or innovations. But I do see sense in the idea of the patent or copyright owner having the right to receive royalties for their innovations, _without_ the right to forbid anyone from using the innovations as long as they pay the typical and reasonable royalties.

State run gas companies, airlines etc. seem to work well enough I guess.
True, but for the past decades World Bank and IMF have been busy forcing nations around the world to privatize all key sectors of economy. No loan if you don't privatize, that is how it goes.

Skeptic Ginger

2nd April 2010, 01:19 PM

No. The ones running wall street banks and brokerage houses, as well as AIG should be in jail.:D

Trakar

2nd April 2010, 02:32 PM

Some of both. They, like all self-employed people, pay taxes on their net income; expenses that are a necessary part of doing business (like insurance are subtracted from their income before taxes are part of it.

Then you need to address the issue consistently in our discussion and in your examples. In which case, the the typical ob-gyn most likely did not pay $100k for his insurance, or $100k in taxes and most likely adjusted his fees to cover all expected tax and expenses and earned exactly as much as the market would bear for his services. In most of the surveys I see quoting annual average salaries for OB-GYNs the $250k is itself a net salary figure, meaning that this is what is earned after expenses (including office and salary expenses as well as things like medmal insurance)

Actually, he doesn't. The average ob-gyn lives in a large city, just like any other "average" US resident. Your demographics are about thirty years out of date. But that's not really relevant here.

except in reference to the cost of medmal insurance, which is highly variable depending upon the city you work in, the medical facility you work in, and your own previous history and experience.

From the records I've been looking at, and I don't know how what all they considered, but the Group Practice Journal, Sept. 2009, ("Physician Compensation 2009: Calm before the Storm") lists the average individual overall collections (gross income) of the OB-GYN specialty at around $650k/year. Now out of that amount doctors have to subtract their office expenses, assitant and office worker salaries, and other incidental fees and expenses (to include medmal insurance), and in the end they are left with a net annual income of about $250k upon which their taxation is based.

Assuming no other income, or taxation breaks, credits or deductions are involved, we get a tax liability of around $64,531 (maximizing tax in all areas -single filler, not claiming any deductions or offsets, etc.,.) according to the IRS estimated tax calculator - http://www.irs.gov/individuals/page/0,,id=14806,00.html (http://www.irs.gov/individuals/page/0,,id=14806,00.html)

So this looks to me like the average/typical OB-GYN brings home, after taxes and cost of business expenses, around $180k/year. Not too shabby, considering the average teacher takes home about a tenth of that, and the overall median income in America is less than a fourth that much, and that's before taxes.

Don't get me wrong, physicians, particularly OB-GYNs, IMO, earn every dollar they pocket at the end of the year, but its disingenuous to so grossly distort their situation in the pursuit of your argument. As I stated earlier and have now demonstrated the average medmal rate is much lower averaging around $60k except in certain high-density, high risk areas where, coincidentally I'm sure, the fees and gross earnings of the physicians are markedly above the average for that specialty in the rest of the nation.

All of this is merely a derail, however, without relating it back to the initial point of consideration, which was that there is more merit in evaluating actual numbers and effective taxation rates and levels, than there is in simply discussing general taxation brackets without consideration of the various deductions, credits and breaks.

That's right, because I'm pointing out the effects of your proposal to eliminate "deductions, credits, and breaks."

The original intent was merely to get proper consideration of the magnitude of deductions, credits and breaks there are and how they potentially and perhaps occassionally practically result in a regressive effective taxation, despite the fact of stepped increasing tax brackets based on income increases.

And this was intended primarily as a discussion addition, not a policy proposal. That being said, any move to seriously simplify and meaningfully reform the US tax code generally revolves around eliminating or amending existent deductions, credits and breaks/exemptions. A blanket -ectomy, is probably extreme and potentially dangerous, but this isn't saying that there isn't a lot of bloat that can't or shouldn't be eliminated, and which would result in both a more effective and equitable taxation system.

Of course, the average doctor doesn't go into medicine to achieve a "livable" income.

The average doctor wants and expects an opulent income -- and typically spent ten very expensive years of his life deferring consumption to achieve it.

I don't know of anyone, regardless of training, experience, or skill who doesn't want, and in many cases expect an opulent lifestyle,...doesn't mean society owes it to them. I believe that any extensively trained professional should be adequately compensated for their knowledge and expertise, but this is true for any field of professional endeavor. American doctors may be culturally conditioned to expect opulence, but this is an expectation that has changed much over the course of the last century and undoubtably will continue to change into the future.

Just thinking

3rd April 2010, 11:26 AM

I cannot follow what you assume that would happen:

a) The sales of toys would fall to zero, when their prices rise by 100% or 200%?

Quite easily. If company A's prices are 2x that (or more) of Compay B's, guess who makes sales and who goes out of business. No business = zero profit. No business, no employees/jobs (at Cmpany A).

More probably, the total sales of toys would remain at current level (as USD), only the amount of items would be two or three times smaller, as each item would cost two or three times more.

And thanks for making my above point all the more clear. Downsizing (at the result of less sales) equates to less jobs and profit (and taxes) --- perhaps to the point of closing shop.

This is the reason why in the current style of market economy ALL companies are forced to use the lowest paid workers they can find, unless they can allure the consumers to choose their more expensive product because of nice design or fine quality. True, but changing the legislation would force the mysterious company X from the market.

I just love the way some only see the government taking over to run things, and then later on argue such things as ... "Government does not "own" anything ..." and "force the company X from the market".

Further replies would be futile and useless.

TraneWreck

3rd April 2010, 11:32 AM

I just love the way some only see the government taking over to run things, and then later on argue such things as ... "Government does not "own" anything ..." and "force the company X from the market".

Further replies would be futile and useless.

Hmm. So, if the government says, "Company X, if you make an unsafe product you can be sued into oblivion." That's the same as saying, "the government ownes Company X?"

Through its regulatory capacity, the government, as the representative of the people, can and should restrict the way a business can operate. THis is not "owning" the business.

You really want to keep labor costs low? Just kidnap people from poor countries and use them as slaves. Somehow the prohibition of slavery isn't viewed as the government controlling the free market.

Capitalism is a good system, so long as the parameters are set. We can easily have a discussion of where those borders should be without BEING GADDAM COMMIES.

JJM 777

4th April 2010, 12:21 AM

Further replies would be futile and useless.
The replies that you actually gave were not very useful either, since you refused to take into account the possibility of the law being changed and affecting ALL companies in the same way and at the same time.

drkitten

5th April 2010, 07:10 AM

Dr. Kitten, how exactly did I take Bernanke and Eccles out of context?

In your usual way. By strategically misrepresenting what they said.

drkitten

5th April 2010, 07:19 AM

Oh, gimme a break. I started this thread a light hearted look at the tax issue from the perspective of fairness.

Calling a fundamentally wrong idea "lighthearted" doesn't excuse sloppy thinking.

What I've found is some sort of dark hidden underbelly of society that makes me ill.

Yeah, it's cunningly hidden in every economics text that's been published since the 18th century. What a finding. In other news, comparative theologians report on the dark hidden underbelly of the Pope -- did you know that he's a Catholic?

I don't fundamentally disagree with the basics of economics as presented and I'm not stupid.

If you're not stupid, stop acting like it.

I'm asking the question, can we do better?

And you've been answered. Yes, we can, but not using the approach you so naively propose..

God forbid someone throw out and out there kind of idea and ask for comment on JREF.

Yes, but when you ask for comment, you should listen to what comments you get.

I'm speculating on some cool future "society of plenty" and coming up with thought experiments about different ways to handle the social contract with regards to taxation.

This "cool future 'society of plenty'" cannot in theory exist. This makes any thought experimetns based on it rather useless.

Dr. Kitten has done nothing but put words in my mouth and try to twist me into someone who doesn't care about the average person.

Then choose your words better so that your own words don't brand you an idiot.

I'm not scrooge, I just don't buy into the idea that the rich need to pay progressive taxes.

But there are lots of alternative approaches to progressive taxation that don't involve theoretical impossibilities.

I also don't buy the idea that the federal government in the USA has to spend more on military spending that the rest of earth combined.

Good for you. Unfortunately, that's not what this thread is about and it has nothing to do with your impossible 'society of plenty.'

drkitten

5th April 2010, 07:26 AM

What about if we got rid of patents and copyrights so that ideas were able to be freely used by anyone? Do you think that would help?

What would be the incentive to develop new ideas?

The whole idea behind the patent/copyright system --as made explicit in the Constitution, by the way -- is that inventors get a limited monopoly on their ideas, after which ideas become public domain and may be freely used by anyone. This is explicitly designed to encourage invention, because inventors otherwise are not able to secure the benefits of their hard work and creativity (look at the history of the cotton gin for an example. Although Whitney patented the cotton gin, it was so easy to make/use that patent infringement was rife -- and Whitney himself went bankrupt).

The alternative to patents and copyrights is demonstrably worse. People will simply keep their inventions as "trade secrets" (like the secret formula to Coca-Cola), which are not time-limited, but which also keep the public from ever deriving benefit from it.

Or they won't bother to invent at all, because they'll see the example of Whitney going broke and thing "why the hell should I put in that much work"?

Tippit

5th April 2010, 07:44 AM

In your usual way. By strategically misrepresenting what they said.

You've got nothing, Dr. Please explain how they were misrepresented, and what they "really" meant, since apparently they weren't speaking plain english.

drkitten

5th April 2010, 08:22 AM

You've got nothing, Dr.

I've got more than I need. Your misrepresentations are on record.

And what I don't have is time to rehash old arguments that you already lost.

TraneWreck

5th April 2010, 08:47 AM

What would be the incentive to develop new ideas?

The whole idea behind the patent/copyright system --as made explicit in the Constitution, by the way -- is that inventors get a limited monopoly on their ideas, after which ideas become public domain and may be freely used by anyone. This is explicitly designed to encourage invention, because inventors otherwise are not able to secure the benefits of their hard work and creativity (look at the history of the cotton gin for an example. Although Whitney patented the cotton gin, it was so easy to make/use that patent infringement was rife -- and Whitney himself went bankrupt).

I don't want to defend the idea of doing away with patent and copyright completely, that's like deploying nuclear warheads to deal with a bank robbery.

I will point out, however, that the scientists who worked with NASA in the 60's managed to make astonishing, important advancements in technology without ever patenting their innovations.

Additionally, most new drugs in the US are developed through NIH grants. Reagan passed a law that allows private companies to purchase those new drugs and patent them after they're developed (or the University researchers who developed the drug can start a new business with the patent--a better situation). The fundamental point being that it's not necessarily the idea of patenting one's work that generates new drugs .

Like I said, I think patent and copyright are important, but we can safely modify the risk/reward dichotomy without forestalling all innovation.

lomiller

5th April 2010, 08:55 AM

What about if we got rid of patents and copyrights so that ideas were able to be freely used by anyone? Do you think that would help?

how about we do that with all property, would that help?

That was a rhetorical question, because of course it would do immense damage. You can argue IP rights are too strong, to week or inappropriately applied, but without them there is no incentive to come up with ideas.

Cavemonster

5th April 2010, 09:11 AM

how about we do that with all property, would that help?

That was a rhetorical question, because of course it would do immense damage. You can argue IP rights are too strong, to week or inappropriately applied, but without them there is no incentive to come up with ideas.

More than that, the market for existing ideas will be heavily ruled by the largest companies.

A new drug company could never come into existence again, since the moment they finished their research and put out a product, a larger company would just reverse engineer it and sell it much cheaper and more widely advertised.

Neither could a new publishing house survive, or any new company that makes anything dependent on an idea. If larger companies are free to take that idea, they will easily beat the originator in price and publicity just through the economy of scale.

Not only will artists and writers have no incentive to create great stuff, they'll have no time, because the industries of commercial art which sustain artists while they're developing greater work will be completely decimated. Greeting cards, package design, web design, and many others. When there is no prohibition against stealing work, companies will only pay for the design that they have to.

Michael Redman

5th April 2010, 09:22 AM

You wouldn't even need to reverse engineer drugs. Even if you didn't have to explain them to the patent office, the FDA and potential prescribing doctors would still need to know what was in them and how they worked. Generics could be marketed as soon as the manufacturing was worked out. It would be nearly impossible to make enough profit in that amount of time to finance the research.

Cavemonster

5th April 2010, 09:26 AM

Yep, as much as copyright in the news seems to be a battle between large companies and consumers, the real important protections are the only things that make small companies and especially new ones competitive against huge corporations. Without a monopoly on ideas, it becomes a battle of resources that Goliath will always win.

NewtonTrino

5th April 2010, 11:30 AM

Things like software patents already cause innovation in some areas to be stunted.

Copyrights are also WAY WAY too long.

NewtonTrino

5th April 2010, 11:32 AM

Tippit

5th April 2010, 03:50 PM

I've got more than I need. Your misrepresentations are on record.

And what I don't have is time to rehash old arguments that you already lost.

You fail.

NewtonTrino

5th April 2010, 06:59 PM

I finally finished doing my taxes today. At least nobody can claim I'm not contributing to society.

JJM 777

6th April 2010, 07:48 AM

IP rights (...) without them there is no incentive to come up with ideas.
Your claim is not compatible with the fact that the employees of innovation and research departments DON'T GET any rights to their work, the company owner does.

So the incentive that you claim to be a necessity, hardly exists at all, and never has, yet innovations keep coming.

drkitten

6th April 2010, 07:54 AM

Your claim is not compatible with the fact that the employees of innovation and research departments DON'T GET any rights to their work, the company owner does.

Actually, it is. The employees of innovation and research departments are paid to produce innovations from the monies that their innovations generate. (An innovation department that never produced anything would be cut as a money sink.) So although the individual inventors don't get rights to their work, the company that pays for the inventors does -- and the individual inventors are still rewarded for their creativity.

In the absence of IP protection, there wouldn't be any incentive to the company to staff an innovation department, and the members of that department would be unemployed, or at least hired into different groups with different job responsibilities. Without IP protection, Bell Labs would never have existed.

So the incentive that you claim to be a necessity, hardly exists at all, and never has,

Wrong. The incentive is the only reason that companies can afford R&D staffs.

drkitten

6th April 2010, 07:56 AM

Things like software patents already cause innovation in some areas to be stunted.

Copyrights are also WAY WAY too long.

You have a serious problem with the bathwater-to-baby ratio. Did you know that?

Trakar

6th April 2010, 09:00 AM

A concise introduction to the practical necessity of progressive taxation:

Pity those who earn 1 dollar more than the poverty line limit. Earning one dollar less would have been tax free, but now they pay the full pot...

A remedy would seem to be to let everyone pay the same amount on the same amount of earnings. (ie., everyone pays 0% on the first $40k of earnings, 10% on $40-80k, 15% on $80-120k, 20% on $120-160k, 25% on $160 - 200k,...etc., not that these numbers are intended to be definitive, merely examples of concept). Would seem fair, at least with regards to net income, coming up with an equitable and fair means of determining net income, now that's a real hornet's nest.

NewtonTrino

6th April 2010, 10:25 AM

You have a serious problem with the bathwater-to-baby ratio. Did you know that?

What are you babbling about?

Software and business patents have been used to stifle innovation for years in the software space. Software moves so quickly that being able to patent it is, well, patently silly. If we want to keep these silly things the term should be dramatically reduced.

In addition current copyright law goes way way overboard in terms of length. For software something along the lines of 5-10 years would make sense. Same thing with music, books etc.

Now keep in mind that I make my living from software so I have to deal with the patent BS. I also benefit from the long copyright expiration time as well. Both of these things are probably of net benefit to me but not to the rest of society.

lomiller

6th April 2010, 10:42 AM

Things like software patents already cause innovation in some areas to be stunted.

Copyrights are also WAY WAY too long.

Copyright length is fine for it’s original intended use, which is works of art or literature. Appling this to computer code because it’s “written” makes no sense.

Software copyrights should be fine as long as restrictions like “non-obvious” are imposed. Copyrights are supposed to be issued for original innovative work, not something that anyone faced with a similar problem would have come up with in short order.

NewtonTrino

6th April 2010, 10:50 AM

Copyright length is fine for it’s original intended use, which is works of art or literature. Appling this to computer code because it’s “written” makes no sense.

I disagree. Copyrights on art and literature are also too long. Life of the author + 70 years is just ridiculous!

Software copyrights should be fine as long as restrictions like “non-obvious” are imposed. Copyrights are supposed to be issued for original innovative work, not something that anyone faced with a similar problem would have come up with in short order.

I think you mean patents right? Anyway how to you draw the line between obvious and non-obvious? Part of the issue is that it moves so quickly that it's almost impossible for them to have examiners who are on the cutting edge. How many people in the world are competent to decide that some new graphics technique is original or simply obvious? Not many.
Anyway if we could find a way to raise the bar here it would help. The terms are still too long though.

drkitten

6th April 2010, 11:07 AM

What are you babbling about?

I'm suggesting that your proposal to eliminate patents and copyrights is an overbroad and counterproductive solution to the rather minor problem of patent/copyright length.

As is typical of your economic suggestions, you're throwing the baby out with the bathwater.

drkitten

6th April 2010, 11:18 AM

Copyright length is fine for it’s original intended use, which is works of art or literature. Appling this to computer code because it’s “written” makes no sense.

I disagree. (First, I think that life + seventy is too long, but that's a minor issue.) But the idea that computer code shouldn't be copyrighted is silly.

The whole point of "copyright" is that it protects a specific "creative" work, but does not protect the idea contained in the work. If you want to write an operating system that is bug-for-bug compatible with Windows 7, nothing in copyright law prevents that. What it does prevent you from doing, however, is using any of the code that you didn't write yourself to do it.

Software copyrights should be fine as long as restrictions like “non-obvious” are imposed. Copyrights are supposed to be issued for original innovative work, not something that anyone faced with a similar problem would have come up with in short order.

Er, no. If you are faced with a similar problem and come up with a similar solution -- or even a character-for-character identical solution -- then you have not violated copyright. The legal term of art for this is "independent creation (http://www.quizlaw.com/copyrights/is_independent_creation_a_defe.php)" and it's well-understood to be a complete defense to claims of copyright infringement.

And the more technical the subject matter is, the more courts recognize the validity of independent creation. For example, if I copyright a circuit diagram, that gives me no claim to the circuit itself. You could copyright a nearly identical diagram, but with one wire drawn differently, as a completely independent work.....

And that's why copyrights do not have "non-obvious" imposed, but patents do. Because a patent does give you control over something that someone else has independently invented, so making sure that patents are only granted for something 'non-obvious' raises the bar and excludes frivolous patents.

drkitten

6th April 2010, 11:24 AM

The terms are still too long though.

Depends on the field. Computer science -- and software, in particular -- is famous for short development cycles and a remarkably quick transition from idea to product. I can have an idea on Friday and have it submitted to the iPhone store on Monday morning. For related reasons, computer science is also famous for short product lifetimes.

On the other hand, drug development is famous for long development cycles; the average time from beginning clinical trials before the FDA gives its approval is well over seven years -- which of course doesn't include any lab time before phase I clinical trials start. The effect is that most drug patents are more than halfway to expiration before the first pill is sold.

The idea that all of federal policy should conform to the demands of the IT industry seems somewhat,.... provincial.

NewtonTrino

6th April 2010, 11:37 AM

Depends on the field. Computer science -- and software, in particular -- is famous for short development cycles and a remarkably quick transition from idea to product. I can have an idea on Friday and have it submitted to the iPhone store on Monday morning. For related reasons, computer science is also famous for short product lifetimes.

On the other hand, drug development is famous for long development cycles; the average time from beginning clinical trials before the FDA gives its approval is well over seven years -- which of course doesn't include any lab time before phase I clinical trials start. The effect is that most drug patents are more than halfway to expiration before the first pill is sold.

The idea that all of federal policy should conform to the demands of the IT industry seems somewhat,.... provincial.

I said SOFTWARE PATENTS. Drug patents are definitely outside of my purview but given the red tape I agree they probably require more patent protection than software algorithms.

I have no problem with the patent system in general, just software patents.

Copyrights on the other hand have gotten completely out of hand.