It seems we already have a flat tax

[shanek]

Ever wondered how much you pay in taxes? Turns out, if you're in America, it's 40%--no matter who or where you are, at least according to this article in MSN Money:

http://articles.moneycentral.msn.com/Taxes/Advice/YourRealTaxRate40.aspx

We have a national flat tax, albeit one with bumps and potholes.

The fact that the political parties won't acknowledge this is one reason they are doing a disservice to the voting public.

Instead, both parties have a vested interest in the theatrical possibilities created by the idea of graduated tax rates. Notice that I said "the idea of" graduated tax rates. That should not be confused with reality.

Politicians talk this way because they generally talk about only one tax: the federal income tax, which offers graduated rates from 10% to 35%.


Politicians rarely talk about what real people experience: the true maze of taxes and government benefits. If someone put them all together, we could see what our actual tax burden was. We could see who pays at the highest or lowest rates. Discussions of tax policy wouldn't be a waste of time.


Well, two researchers did it.


In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson have found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%.

Dang! Well, so much for that "we're helping the poor because they don't pay much in taxes" or "the rich get out of paying taxes" crap!

[Darth Rotor]

Ever wondered how much you pay in taxes? Turns out, if you're in America, it's 40%--no matter who or where you are, at least according to this article in MSN Money:

http://articles.moneycentral.msn.com/Taxes/Advice/YourRealTaxRate40.aspx





Dang! Well, so much for that "we're helping the poor because they don't pay much in taxes" or "the rich get out of paying taxes" crap!
Is this a discussion of the "total tax bill" model?

DR

[Random]

I'm not sure what the point of this post is. The "flat tax" advocates in the US have been playing this shell game for a while, failing to calculate payroll taxes. It's not really news.

[fishbob]

Dang! Well, so much for that "we're helping the poor because they don't pay much in taxes" or "the rich get out of paying taxes" crap!

Don't go hyperbolic on us. I don't know anybody who has said what you are saying 'so much for'.

Also, depends on your definition of "rich". Half a million a year is certainly a lot, but the big stars, CEOs, and what most of us think of when we think "rich" did not show up in the study. Also, 'earned income', undefined, was the basis of comparison. What was included, what was left out?

[shanek]

Maybe not people on this board, but there are plenty of politicos and pundits making those claims.

One completely unrelated question: How can this thread possibly have 3 replies but 0 views???

[Mahatma Kane Jeeves]

One completely unrelated question: How can this thread possibly have 3 replies but 0 views???They changed a setting on the forum software a while back. "Views" only gets updated on the hour.

[TragicMonkey]

One completely unrelated question: How can this thread possibly have 3 replies but 0 views???

The software has been updated to detect scrolling rate, and thereby deduce whether people have actually read the whole thread before replying, and deduct the others from the views count. Do the results really surprise you?

[The Painter]

I like the Forbes plan. The tax code is way too complicated. If you ask 5 IRS agents to figure your taxes, you get 5 different answers. They can’t even figure it out. You have to pay an accountant to tell you what you have to pay the government. A double hit.

In Forbes's carefully thought out plan, there would be one rate -- 17% -- after generous exemptions for adults and children. Under the Flat Tax, for example, a family of four would pay no federal income tax on its first $43,765 of income and would pay only 17 cents on every dollar it earned above that level. There would be no tax on Social Security benefits. No tax on personal savings. No capital gains taxes. And small businesses and family farms wouldn't have to worry about being wiped out by the death tax -- no taxation without respiration. Best of all, there would be no more time-consuming complications -- you could literally fill out your tax form on a single page or even a postcard!

Works for me.

Flat Tax (http://www.forbesbookclub.com/BookPage.asp?prod_cd=c6801)

[The Don]

How would the 17% tax raise enough money to pay for everything ?

He shows how the Flat Tax that will translate into a tax cut for every American

The US budget is already in signficant deficit, reducing the tax take would only exacerbate the problem.

[Random]

I like the Forbes plan. The tax code is way too complicated. If you ask 5 IRS agents to figure your taxes, you get 5 different answers. They can’t even figure it out. You have to pay an accountant to tell you what you have to pay the government. A double hit.



Works for me.

Flat Tax (http://www.forbesbookclub.com/BookPage.asp?prod_cd=c6801)
But the Forbes plan keeps regressive payroll taxes in place. The reason we have an effective flat tax rate now, as Shanek has discovered, is that we have a regressive Social Security tax structure, combined with a mildly progressive income tax structure. Flatten out the income tax structure, and you have a system where the rich pay a smaller and smaller percentage of their income in taxes the more money they make.

Eliminate capital gains and estate taxes, and a lot of wealthy individuals who live on stock dividends, most notably Steve Forbes, will pay nothing in taxes. People who actully work for a living don't fare so well.

[Beerina]

How would the 17% tax raise enough money to pay for everything ?



The US budget is already in signficant deficit, reducing the tax take would only exacerbate the problem.

That's like saying removing one foot from a person's neck makes it hard to balance standing on only the other foot.

[The Don]

That's like saying removing one foot from a person's neck makes it hard to balance standing on only the other foot.
Huh ?

All that government pork has to be paid for somehow. Either the money comes from taxes or it gets borrowed. The amount of pork will always rise so long as politicians are in power.

[Michael Redman]

Eliminate capital gains and estate taxes, and a lot of wealthy individuals who live on stock dividends, most notably Steve Forbes, will pay nothing in taxes. People who actully work for a living don't fare so well.Rich people spend their money more wisely than poor people, and therefore deserve to keep it more. At least, I think that's the theory.

I would love to see a system where all income was treated the same, no matter the source. I would also like there to be only one source of collection, whether income tax or VAT. Perhaps keep some incentives for saving, and for investing, but otherwise eliminate all tax shelters, loopholes, deductions, etc.

Everyone should pay some tax, even if it is a very small amount, and even if people on the bottom end up getting more in services then they pay in taxes. Paying taxes gives people a sense of participation and ownership. It gives incentive for people to care about how the money is being spent, and the feeling that the government is accountable to them for answers.

[The Don]

Rich people spend their money more wisely than poor people, and therefore deserve to keep it more. At least, I think that's the theory..
And looking at the way in which the rich spend their money I am compelled to agree wholeheartedly

I would love to see a system where all income was treated the same, no matter the source. I would also like there to be only one source of collection, whether income tax or VAT. Perhaps keep some incentives for saving, and for investing, but otherwise eliminate all tax shelters, loopholes, deductions, etc..
I prefer a range of tax collecting methods. If we were just to collect from a single source then that would tend to change the way people operate to avoid that source. If it were VAT then smuggling would tend to increase (look at the UK and cigarettes), if it were solely income then people would provide benefits in kind (like in the '70s in the UK) which would be hard to quantify.

Loopholes will always be found
Everyone should pay some tax, even if it is a very small amount, and even if people on the bottom end up getting more in services then they pay in taxes. Paying taxes gives people a sense of participation and ownership. It gives incentive for people to care about how the money is being spent, and the feeling that the government is accountable to them for answers.
That makes a great deal of sense to me.

[Michael Redman]

And looking at the way in which the rich spend their money I am compelled to agree wholeheartedlyYou mean like buying $5000 purses and jewel-encrusted cell phones? High level Scientology auditing? Shooting captive animals in private game parks? Donating to creationist museums? New Age health spa vacations?

[shanek]

How would the 17% tax raise enough money to pay for everything ?

We could eliminate the Income Tax right now, replace it with nothing, and support the government the size it was in 1984, with all the Cold War spending, welfare and education spending, etc., even after adjusting for inflation.

[Random]

We could eliminate the Income Tax right now, replace it with nothing, and support the government the size it was in 1984, with all the Cold War spending, welfare and education spending, etc., even after adjusting for inflation.

OK, I’ll bite. How?

[shanek]

Just with the rest of the revenues. Go do the comparison yourself. Look at the budget figures, revenues, and do a Google search for "inflation calculator." Anyone can verify this.

[Michael Redman]

We could eliminate the Income Tax right now, replace it with nothing, and support the government the size it was in 1984, with all the Cold War spending, welfare and education spending, etc., even after adjusting for inflation.Eliminate the income tax, but keep payroll tax. As of 2006, we would have $1.363 trillion without the income tax, but only $525 billion if we also eliminated SS payroll tax.

1984 budget of $852 billion adjusts to $1.663 trillion in 2006 dollars, so, even with SS tax, you're not quite there.

(It's interesting to note, that, as a percent of GDP, both discretionary spending and the total budget are actually taking a smaller bite today than in 1984. Federal government spending hasn't grown any faster than the economy as a whole.)

http://www.cbo.gov/budget/historical.pdf

Edit: Sorry, I didn't adjust the 1984 figure for inflation the first time, and made a false argument on the basis of comparison.

[Beerina]

Huh ?

All that government pork has to be paid for somehow. Either the money comes from taxes or it gets borrowed. The amount of pork will always rise so long as politicians are in power.

That was, of course, my point.

It reminds me of an old Willy & Ethyl cartoon. An idiot greasy spoon cook is pouring Willy a cup of coffee, but Willy has pulled the cup away and started drinking. The cook shouts, "Cup your hand! Cup your hand!", being too stupid to think of stopping pouring.

As the deficit climbs out of control, politicians shout, "Raise taxes! Raise taxes!", being too power hungry to think of cutting spending.

[Beerina]

Rich people spend their money more wisely than poor people, and therefore deserve to keep it more. At least, I think that's the theory.

No, the theory is that people won't work as hard if their balls are being stepped on. Curious thing, that.

And high income taxes punish new money. Old money that is already in the bank, such as the family of FDR, or the Kennedys, is much less affected.

Curious thing, that, too.


Everyone should pay some tax, even if it is a very small amount, and even if people on the bottom end up getting more in services then they pay in taxes. Paying taxes gives people a sense of participation and ownership. It gives incentive for people to care about how the money is being spent, and the feeling that the government is accountable to them for answers.

Margaret Thatcher tried this, with a "poll" tax. The idea being that, by forcing people to pay this tax out of their ass, instead of hiding it in VATs all over the place, the people, by seeing directly how much they had to pay, would start voting to reign in all the spending.

It worked, but in a backfire way -- people hated her for it.

[Quixote]

Ever wondered how much you pay in taxes? Turns out, if you're in America, it's 40%--no matter who or where you are, at least according to this article in MSN Money:

Maybe. The article does say that, but it also says something completely different, so it's not at all clear what the author is trying to say. At one point, he writes "Most workers will pay about that much on each dollar of income when all taxes ..". There, he is talking about an overall rate. Elsewhere he writes "As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%,..." There, he refers to a marginal rate, a completely different measure. It's anybody's guess what Laurence J. Kotlikoff and David Rapson actually said. We're certainly not going to get it from the MSN Money article.

BTW, if he was really talking about overall rates, the numbers are way off. My overall rate was 23% the last time I calculated it, and my federal rate has gone down since then.

[fishbob]

Maybe. The article does say that, but it also says something completely different, so it's not at all clear what the author is trying to say. At one point, he writes "Most workers will pay about that much on each dollar of income when all taxes ..". There, he is talking about an overall rate. Elsewhere he writes "As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%,..." There, he refers to a marginal rate, a completely different measure. It's anybody's guess what Laurence J. Kotlikoff and David Rapson actually said. We're certainly not going to get it from the MSN Money article.

BTW, if he was really talking about overall rates, the numbers are way off. My overall rate was 23% the last time I calculated it, and my federal rate has gone down since then.
I got the impression they were including property taxes, sales taxes, other state and local taxes on top of the federal income and SS taxes. But the article was vague enough that I could be completely wrong.

[Quixote]

I got the impression they were including property taxes, sales taxes, other state and local taxes on top of the federal income and SS taxes. But the article was vague enough that I could be completely wrong.

They were including taxes at all levels of government. That's one of the reasons I am sceptical of the conclusion expressed in the Money article, which may have nothing to do with the research it purports to be commenting on. State and local taxes vary too widely from state to state and within states to calculate a meaningful rate based on income alone.

[Quixote]

I can't locate the cited paper, but the NBER Reporter (Fall 2006) summarized the paper as follows:
Kotlikoff and Rapson perform a
detailed analysis of taxes and saving over
the life cycle. Their paper offers four main
takeaways. First, thanks to the incredible
complexity of the U.S. fiscal system,
it’s impossible for anyone to understand
her incentive to work, save, or contribute
to retirement accounts absent highly
advanced computer technology and software.
Second, the U.S. fiscal system provides
most households with very strong
reasons to limit their labor supply and
saving. Third, the system offers very highincome
young and middle aged households,
as well as most older households,
tremendous opportunities to arbitrage the
tax system by contributing to retirement
accounts. Fourth, the patterns by age and
income of marginal net tax rates on earnings,
marginal net tax rates on saving, and
tax-arbitrage opportunities can be summarized
in one word: bizarre.

[shanek]

BTW, if he was really talking about overall rates, the numbers are way off. My overall rate was 23% the last time I calculated it, and my federal rate has gone down since then.

Did you include everything? Even what you paid in sales tax etc.?

[shanek]

I got the impression they were including property taxes, sales taxes, other state and local taxes on top of the federal income and SS taxes. But the article was vague enough that I could be completely wrong.

Yes, they were.

[Quixote]

Did you include everything? Even what you paid in sales tax etc.?

Yes. I added my federal income and employment taxes, local property taxes, sales tax (estimated using household size and income), and an estimate of my federal excise taxes.

[Quixote]

Until we know how Kotlikoff and Rapson computed the index being referred to in the article as a marginal tax rate, it isn't likely to make sense. However, it is clear that their study does not support the contention that we have a flat tax in the US. The material Burns reproduced in his article refutes the notion that Americans total tax rate schedule is flat.

A couple making $30,000/year has a "rate" of 42.3%. If they were making $50,000/year their "rate" would be 24.4%. If those rates are tax rates, either marginal or average, the rate schedule is clearly not flat.

[Michael Redman]

No, the theory is that people won't work as hard if their balls are being stepped on. Curious thing, that.

And high income taxes punish new money. Old money that is already in the bank, such as the family of FDR, or the Kennedys, is much less affected.

Curious thing, that, too.I'm talking about why Forbes thinks it's OK to tax workers' earned income, but not the unearned income of the rich.

[Solitaire]

I wonder what Shanek thinks of the Fair Tax. (http://en.wikipedia.org/wiki/FairTax) ;)

[shanek]

I've already made my feelings on that quite clearly known; there's no need to rehash it all here.

[my_wan]

I remember when the wealthy could pay as much as 90% tax, if they admitted making any. I remember gas lines. I remember working under the table for $10 per day (way less than minimum) because there were no jobs. I remember the taxes coming down and all the yelling about the rich getting all the breaks. I remember the jobs coming back. I now see we earn over 4 times per person on average nationwide than we did then, not to mention so much lower unemployment. You want those taxes back on the rich you'll only f%$% yourself. Sure There are those who will take a dollar from them give you a dime and say, see how well I'm looking out for you? Our government doesn't use what you pay them for bills, they use what you pay them as collateral to borrow money. If we got back what the government payed in interest this year alone Iraq would be payed for several times.

I also remember when people were complaining the Japanese owned the market so all the jobs were over there. Then when the Japanese came here to build plants with jobs for us because it was cheaper than Japan people complained the Japanese were buying us.

Get over it! Quit complaining that the rich should pay everything for you. Demand wages instead. If taxes was 100% how much money or jobs would there be? How much less than 100% does it need to be before tax cuts actually bring in less money? Nobody knows. We just know all tax cuts so far have paid for themselves. Even Clinton knew better than to raise taxes. How low taxes can go really depends on how many years you want to wait for the cuts to pay for themselves. It could still go lower than the 40% we pay now.

Oh yes anybody ever heard of econophysics? A progessive tax is like letting the air out of your tires without having a flat. Plus your paying all the IRS agents, accountants, and lawers to pretend your doing the right thing.

A pure republican system is just as awfull as a pure democratic system, you just feel better about yourself suffering under todays democrats.

[Random]

Get over it! Quit complaining that the rich should pay everything for you. Demand wages instead. If taxes was 100% how much money or jobs would there be? How much less than 100% does it need to be before tax cuts actually bring in less money? Nobody knows. We just know all tax cuts so far have paid for themselves. Even Clinton knew better than to raise taxes. How low taxes can go really depends on how many years you want to wait for the cuts to pay for themselves. It could still go lower than the 40% we pay now.
But they haven’t. The Regan tax cuts lead to a drop in revenue, the Bush Jr. cuts led to a drop in revenue. The economy kept expanding, but it usually does than when taxes are not changed so that doesn’t mean anything by itself. The expanding economy eventually led to an increase in revenues, but revenues would have gone up anyway. It’s like taking credit for gravity.

Can taxes be so high they actively hobble the economy? Yes. But have we been at that level recently? I don’t think so.

Besides, taxes alone are only half the equation. Spending is the other. A country with a 20% tax rate that spends it on healthcare, schools and infrastructure improvement will probably do better than a country with a 10% tax rate that spends it on making solid gold statues of its leaders, and then hurling them into the Marianas trench. Tax rates in Europe are a lot higher than in the US, but they have better education systems, better healthcare provided to everybody, and a better social safety net.

[Michael Redman]

Don't forget the effect on the economy of huge increases in federal spending. You can't give tax cuts all the credit for stimulating the economy when a significant portion of economic growth is simply more spending by the federal government. (Or, as our recent expansion, a rash of people spending all their home equity.) Tax cuts clearly do not always pay for themselves, and it's far from a unanimous position that we haven't already pass the point of optimized revenue.

Anyway, who here is suggesting huge tax increases on the rich? I'm simply saying that I think the rich should not be exempted from taxation, simply because they didn't have to work to earn their income.

[shanek]

Saying government spending helps the economy is nothing but a broken window fallacy. What do you think would have happened to that money had the government not taken it in taxes to begin with?

[Quixote]

I remember when the wealthy could pay as much as 90% tax, if they admitted making any. I remember gas lines. I remember working under the table for $10 per day (way less than minimum) because there were no jobs.

And is there any connection among those memories? No. Gas lines were caused by an oil embargo, not hign taxes. As for jobs, high taxes lead to high spending. And what does the government spend most of its money on? Salaries, and payments to contractors who pay salaries.

[Quixote]

Saying government spending helps the economy is nothing but a broken window fallacy. What do you think would have happened to that money had the government not taken it in taxes to begin with?

According to the don't-tax-the-rich crowd it would have been socked away in investments, i.e., not spent on current consumption. The incentive to invest is the only legitimate selling point the don't-tax-the-rich crowd have.

[Michael Redman]

Saying government spending helps the economy is nothing but a broken window fallacy. What do you think would have happened to that money had the government not taken it in taxes to begin with?The fallacy would apply if someone were arguing that the government should tax more, because it could spend the revenue, which would stimulate the economy.

Of course, no one is saying that. What I'm saying is that the federal government stimulates the economy by deficit spending.

[Almo]

Everyone should pay some tax, even if it is a very small amount, and even if people on the bottom end up getting more in services then they pay in taxes. Paying taxes gives people a sense of participation and ownership. It gives incentive for people to care about how the money is being spent, and the feeling that the government is accountable to them for answers.

Good point, in my opinion!

[Quixote]

Originally Posted by Michael Redman
Everyone should pay some tax, even if it is a very small amount, and even if people on the bottom end up getting more in services then they pay in taxes. Paying taxes gives people a sense of participation and ownership. It gives incentive for people to care about how the money is being spent, and the feeling that the government is accountable to them for answers.

Good point, in my opinion!

For that to work, people would have to know that they are paying taxes, how much they are paying and to which governmental entities they are paying them. I know of no studies on these issues, but anecdotal evidence strongly suggests that a disturbingly large portion of the population is ignorant of one or more of the above.

Even people who are aware and informed don't always agree on how much tax they are paying. The main bone of contention is so-called hidden taxes.

[Michael Redman]

For that to work, people would have to know that they are paying taxes, how much they are paying and to which governmental entities they are paying them.I'm not saying that all people need to have an accounting of how their money is spent, and understand the issues involved, I'm simply saying that someone who identifies him or herself as a "taxpayer" is more likely to feel like they have a stake in the game, and are more likely to pay attention, and to make their feelings known.

I get this idea, in part, from working with legal aid clients, and, more importantly, working with people who run legal aid clinics. It is their experience that people who pay for representation (even a tiny portion of what that representation actually costs) are more involved in their cases, not only participating for their own benefit, but expecting to get quality representation, and to be kept informed of what is going on. They feel more in charge of the situation. People who get totally free representation tend not to trust their lawyers (who are working for someone else, they figure), not get involved, and sometimes even disappear in the middle of a case. A little bit of anecdotal evidence with criminal representation supports my opinion, as well.

My guess would be that people who don't pay taxes similarly don't feel a sense of ownership in the society, nor a responsibility to try to help improve it (or at least its governance).

[Quixote]

I get this idea, in part, from working with legal aid clients, and, more importantly, working with people who run legal aid clinics. It is their experience that people who pay for representation (even a tiny portion of what that representation actually costs) are more involved in their cases, ...

I don't doubt that. You may be confusing cause and effect. Maybe only people who are involved in their cases are willing to pay. That is, willingness to pay may be an indicator of interest rather than its cause. But let's assume that payment generates interest. The client knows exactly how much he paid and to whom. Taxpayers do not always know.

I'm not saying the information is being kept from them. In the instances of which I am aware, the ignorance is self induced. Most people don't seem to know or care how much they pay in taxes.

[WildCat]

We could eliminate the Income Tax right now, replace it with nothing, and support the government the size it was in 1984, with all the Cold War spending, welfare and education spending, etc., even after adjusting for inflation.
Does it also include an adjustment for the extra 70 million or so people living here now that didn't in 1984?

[Ben Tilly]

Yes. I added my federal income and employment taxes, local property taxes, sales tax (estimated using household size and income), and an estimate of my federal excise taxes.

Did you count Social Security under "employment taxes", or did you omit them?

[shanek]

Does it also include an adjustment for the extra 70 million or so people living here now that didn't in 1984?

Sure, because tariffs and excises have gone up along with it.

[Ben Tilly]

Useless trivia. What was the top marginal income tax rate during the largest expansion of the US middle class on record?

That expansion happened in the 1950s, and the top rate varied between 91 and 92%. Average rates back then were less than they are now. For exact rates by year, see http://www.truthandpolitics.org/top-rates.php.

Note that starting in the early 70's the middle class has been in decline. The median family today makes less real money today than the median family in 1975, despite the fact that we work longer hours, get shorter vacations, and typically have 2 people working! It is interesting to compare THAT to the top marginal rates as well.

Makes you think again about how trickle-down (doesn't) work, huh?

[WildCat]

Useless trivia. What was the top marginal income tax rate during the largest expansion of the US middle class on record?
More useless trivia: How many people actually paid the top rate? I bet it's close to 0, loopholes, exemptions, and tax breaks were rampant.

[WildCat]

Sure, because tariffs and excises have gone up along with it.
Doubtful that those revenues exceeded the income tax revenue of those extra people, and certainly not the extra expenses.

[Ben Tilly]

More useless trivia: How many people actually paid the top rate? I bet it's close to 0, loopholes, exemptions, and tax breaks were rampant.

It was close to zero, largely because $400,000/year was, in the 1950s, an absurd amount of money.

Further I'll note that at the time there were far fewer loopholes, exemptions and tax breaks than at current. As may be seen by the fact that the most popular tax break was the "flying nun exemption" - if you donated as much or more than your current salary to charity, then you didn't have to pay taxes. This was surprisingly easy to do if your family collected something (eg art) that appreciated rapidly.

The appreciation was probably sped up rapidly by people gaming the system. For instance you'd have a charitable foundation (eg the Ford foundation) that your family was on the board of directors for. So you'd donate a large chunk of money to it to buy a painting (rack up one large donation), and then you'd donate a similar painting whose valuation was set by the previous purchase (rack up another large donation). The result was that the public now had 2 nice paintings on display, and you had no taxes to pay that year.

(For the curious, this is a large part of how many prominent New York museums got endowed.)

Cheers,
Ben

[shanek]

Useless trivia. What was the top marginal income tax rate during the largest expansion of the US middle class on record?

That expansion happened in the 1950s, and the top rate varied between 91 and 92%. Average rates back then were less than they are now. For exact rates by year, see http://www.truthandpolitics.org/top-rates.php.

Note that starting in the early 70's the middle class has been in decline. The median family today makes less real money today than the median family in 1975, despite the fact that we work longer hours, get shorter vacations, and typically have 2 people working! It is interesting to compare THAT to the top marginal rates as well.

Makes you think again about how trickle-down (doesn't) work, huh?

But is that due so much to the top rate going down, or to the rate on the middle class going up? I think it's the latter.

[Random]

But is that due so much to the top rate going down, or to the rate on the middle class going up? I think it's the latter.

Actually, I attribute it to the rise of free trade, massive trade deficits, and the near obliteration of our manufacturing class. Manufacturing jobs provided a way for individuals without extensive skills, training, or talent to support themselves and their families. With them gone, one of the major pillars supporting the middle class has been taking away.

[Michael Redman]

In 1984, excise and duty accounted for $49 billion of a $852 billion budget.

In 2006, excise and duty accounted for $99 billion of a $2.654 trillion budget.

In 1984, the government spent $228 billion on defense alone. Adjusted for inflation, that would be $445 billion in 2006, and that represents only a fraction of the size of government spending in 1984.

So, considering these facts:
1984 budget in 2006 dollars: $1.663 trillion
2006 revenue minus income tax: $1.009 trillion (Or $179 billion if you eliminate $838 billion in Social Security tax.)

I fail to see how you could have a government even remotely near the size of that in 1984 without income tax.

http://www.cbo.gov/budget/historical.pdf

[shanek]

Actually, I attribute it to the rise of free trade,

One word of caution: don't go thinking the agreements we have are actually free trade just because they have the words "free trade" in the title. If it really is a free trade agreement, why would it be more than one paragraph long? "There shall be no restrictions on trade between X and Y" and maybe some things about tariffs. Why do they need to be thousands of pages long?

Because they aren't free trade. It's regulated trade.

massive trade deficits,

Another word of caution: stop talking about trade deficits as if they're a bad thing. A trade deficit is matched dollar for dollar by additional foreign investment. And all it means is that more people from other countries are willing to invest in American companies, creating more jobs and more opportunities here. Again, basic economics.

Manufacturing jobs provided a way for individuals without extensive skills, training, or talent to support themselves and their families. With them gone, one of the major pillars supporting the middle class has been taking away.

I know; manufacturing and textile jobs around here have all but disappeared. But that is exactly due to those regulated trade agreements and all sorts of regulations and restrictions our country puts on legal businesses. They make the cost of production much higher, so that it's cheaper to go overseas, or many of them go out of business entirely.

[my_wan]

But they haven’t. The Regan tax cuts lead to a drop in revenue, the Bush Jr. cuts led to a drop in revenue. The economy kept expanding, but it usually does than when taxes are not changed so that doesn’t mean anything by itself. The expanding economy eventually led to an increase in revenues, but revenues would have gone up anyway. It’s like taking credit for gravity.

Can taxes be so high they actively hobble the economy? Yes. But have we been at that level recently? I don’t think so.

Do you remember the stagflation prior to the Reagan? All revenue was dropping at the time anyway not because the revenue dollars were dropping but because of inflation outstripping growth. All economic growth is a reduced cost of goods and services. Wether that takes place as a reduced cost or higher income makes no difference. In general any tax has a hobbling effect on growth. The question is how much return we get from less corruption, increased services, and protections. These can in some cases be worth more than the cost but there is a limiting factor. Governement spending is not generally self financing like the rest of the economy. Tax cuts was originaly a democratic issue with Kennedy. Unlike the past present tax rates are not draconian nor would undoing the Bush tax cuts. At this point tax cuts are mostly political. The emphasis should be on spending controls at this point. The biggest myth I see is a progressive tax.

http://www.taxfoundation.org/news/show/323.html

Besides, taxes alone are only half the equation. Spending is the other. A country with a 20% tax rate that spends it on healthcare, schools and infrastructure improvement will probably do better than a country with a 10% tax rate that spends it on making solid gold statues of its leaders, and then hurling them into the Marianas trench. Tax rates in Europe are a lot higher than in the US, but they have better education systems, better healthcare provided to everybody, and a better social safety net.

Yes this is exactly why I say a pure replublican economy is just as draconian as a purely democratic one. Just look at New Zealand. The real problem is that our government uses taxes not to pay expenses but borrow against.

Care should be taken when comparing our educational standards to others. US statistics are based on all students regardless of diability. This is often not the case in other countries. In a lot of these countries education is an excersize in memory where right or wrong is all that exist. In algebra class in high school I had a teacher that didn't know the steps had a reason. If you tried to ask for a reason you got labeled a troublemaker. She just had all the steps memorized.

[Ben Tilly]

But is that due so much to the top rate going down, or to the rate on the middle class going up? I think it's the latter.

Well the two are tied together - reduce taxes on the wealthy and there is pressure to make it up on the middle class.

But I really do think that the first is a big factor. Think. Suppose you're Joe CEO. You have a choice. You can pay yourself more and take some vacation time, or you can keep the money in the company and enjoy the experience of being in charge of a corporate enterprise. If your marginal tax rate is low, the former looks like a lot of fun. But if it is over 90%, then the second starts to look more reasonable.

And a final note about trickle-down. The key idea is that if you give people money, they'll spend it and that is good for the economy. The problem with trickle-down as a theory is that the people who are least likely to spend extra money that is handed to them are the wealthy! They're more likely to not have any pressing needs or desires, so it just goes into an investment account. By contrast if the poor receive extra money, they have plenty of stuff to spend it on that they really want, so the money gets spent much faster.

(At one point in my life I got curious about trickle-down and went looking for actual research supporting it. I found a lot of reasons not to believe in it, but nothing that supported it!)

Cheers,
Ben

[Michael Redman]

Isn't the trickle-down idea that the rich will invest the money in enterprises that will provide jobs to the poor?

Of course, what demand for those enterprises there is I guess they simply assume. Seems to me that you could just as easily give the money to the middle-class and poor, who would spend it, creating demand, and therefore incentive for business to expand, creating jobs. . . and end up in the same place. I really don't get why it is thought the investment by the rich does more to expand the economy than the same money put into the economy by everyone else.

Especially when the poor buy Wiis, and the rich invest in Nintendo.

[Ben Tilly]

Isn't the trickle-down idea that the rich will invest the money in enterprises that will provide jobs to the poor?

Of course, what demand for those enterprises there is I guess they simply assume. Seems to me that you could just as easily give the money to the middle-class and poor, who would spend it, creating demand, and therefore incentive for business to expand, creating jobs. . . and end up in the same place. I really don't get why it is thought the investment by the rich does more to expand the economy than the same money put into the economy by everyone else.

Especially when the poor buy Wiis, and the rich invest in Nintendo.

Good question.

It is, of course, obvious why the rich prefer the idea of trickle down. And there is always money for those who wish to cater to the egos of the rich. And they have political influence. So it is easy to see why a theory like trickle down would get so widely disseminated.

However I still haven't seen a good defense of the theory. Or any empirical data backing it up. (There is, however, no shortage of data that doesn't back it up. A good chunk of it is buried in Wealth and Democracy by Kevin Phillips.)

Cheers,
Ben

[shanek]

But I really do think that the first is a big factor. Think. Suppose you're Joe CEO. You have a choice. You can pay yourself more and take some vacation time, or you can keep the money in the company and enjoy the experience of being in charge of a corporate enterprise. If your marginal tax rate is low, the former looks like a lot of fun. But if it is over 90%, then the second starts to look more reasonable.

I see what you're saying. Of course, if the CEO gets paid in stock, the latter makes the most sense.

And a final note about trickle-down. The key idea is that if you give people money, they'll spend it and that is good for the economy. The problem with trickle-down as a theory is that the people who are least likely to spend extra money that is handed to them are the wealthy! They're more likely to not have any pressing needs or desires, so it just goes into an investment account.

But investments go to expand companies and create jobs, so that isn't it.

The reason why it doesn't work is that it's a broken window fallacy, plain and simple.

[Jaggy Bunnet]

But I really do think that the first is a big factor. Think. Suppose you're Joe CEO. You have a choice. You can pay yourself more and take some vacation time, or you can keep the money in the company and enjoy the experience of being in charge of a corporate enterprise. If your marginal tax rate is low, the former looks like a lot of fun. But if it is over 90%, then the second starts to look more reasonable.

The problem is you never get to this position - who is going to set up a company in the expectation that 90% of whatever they make is going to be paid in tax? It simply is not worth the hassle.

They either leave for somewhere without stupid tax rates, find a loophole or don't bother setting up the company in the first place.

[Ben Tilly]

The problem is you never get to this position - who is going to set up a company in the expectation that 90% of whatever they make is going to be paid in tax? It simply is not worth the hassle.

They either leave for somewhere without stupid tax rates, find a loophole or don't bother setting up the company in the first place.

Funny, that isn't what happened in the USA when we actually had such taxes.

I can give you a big part of the reason why not. In today's dollars, that marginal tax was on income over about $3 million per year. (Check for yourself using http://www.westegg.com/inflation/.) If you started a business from scratch and it became successful, you would have no expectation of winding up in that kind of income bracket. Therefore that possibility would not dissuade you.

For a personal example my grandfather did exactly that during this tax era. He was the T in http://www.cmtengr.com/. This was (and still is) a successful business. When he died he was worth a million. Not bad for a half-indian born in poverty who started working in a factory at 6. (Then my grandmother lost it all, but that's another story.) Do you think that he ever faced that top marginal income tax rate? Not a chance!

Cheers,
Ben

[Jaggy Bunnet]

Funny, that isn't what happened in the USA when we actually had such taxes.

Are you seriously claiming there were no loopholes?

[Random]

They either leave for somewhere without stupid tax rates, find a loophole or don't bother setting up the company in the first place.

The “loophole” or “evasion” argument never made sense to me. People find ways around or violate tax laws, therefore we shouldn’t have tax laws? We should have lower tax rates because people won’t pay above a certain rate? People violate posted speed limits, should we abolish speed limits? People commit murder, should we make murder legal?

The fact that people try to wiggle out of their responsibilities and obligations is no reason to lift them. To do so would just be rewarding bad behavior.

[Jaggy Bunnet]

The “loophole” or “evasion” argument never made sense to me. People find ways around or violate tax laws, therefore we shouldn’t have tax laws?

Good luck finding anyone actually making that argument. Let me know when you do.

We should have lower tax rates because people won’t pay above a certain rate?

Absolutely. Lets say the tax rate is 10% for the first $1,000 you earn every month and 95% thereafter. The hourly rate is $10 an hour and to keep things simple, there are four weeks in a month.

Think you will find many people willing to work more than 25 hours a week?

People violate posted speed limits, should we abolish speed limits? People commit murder, should we make murder legal?

Relevant how precisely? Remember that the use of loopholes is NOT illegal.

The fact that people try to wiggle out of their responsibilities and obligations is no reason to lift them. To do so would just be rewarding bad behavior.

Increasing tax rates beyond a certain level leads to reduced, not increased, income.

If the tax rate was 40% for earnings above $1,000 a month instead of 95% do you think tax revenue would go up or down?

[Ben Tilly]

Are you seriously claiming there were no loopholes?

It is human nature to invent such loopholes. However the tax system hadn't accumulated as many by then as it has now. See http://forums.randi.org/showthread.php?postid=2381660#post2381660 for a discussion of the main tax loophole that was in use.

Cheers,
Ben

[Ben Tilly]

The “loophole” or “evasion” argument never made sense to me. People find ways around or violate tax laws, therefore we shouldn’t have tax laws?
Good luck finding anyone actually making that argument. Let me know when you do.

Well you came close to making it in http://forums.randi.org/showthread.php?postid=2385259#post2385259.

We should have lower tax rates because people won’t pay above a certain rate?
Absolutely. Lets say the tax rate is 10% for the first $1,000 you earn every month and 95% thereafter. The hourly rate is $10 an hour and to keep things simple, there are four weeks in a month.

Think you will find many people willing to work more than 25 hours a week?

And you've just demonstrated that it is possible to be absurd and then get absurd results. Let's change that example to something closer to what actually happened in the 50s. Let's change your model to tax income at over $3 million/year at 90%. I maintain that nobody has a reasonable need for making more than $3 million/year. The disincentive would not stop any useful work from happening. In fact most of us don't personally know anyone who would be hit by that kind of tax. (I'd be an exception to that rule.) It would, however, reduce some of the inequities in our system.

If you trot out the tired example of CEOs, you'll just make my point. Every study that I've seen on the subject finds that there is a negative correlation between CEO compensation and company performance.

Don't forget, this is a taxation model that this country tried. When we tried it we saw the greatest expansion of the US middle class on record and we had one of the most economically level societies in the world. Since then we've moved the opposite direction of having virtually level taxes. (When I looked into this a decade ago, we were past that, the very wealthiest people on average pay lower tax rates than most of us! As Warren Buffett once commented, there is something wrong when he pays a lower tax rate than his secretary.) The result is that the middle class first stagnated then declined, the gap between CEO compensation and worker compensation has skyrocketed, and we're now the most unequal country in the industrialized world. (And we have the poor health outcomes to prove it.)

I don't consider these changes good.

The fact that people try to wiggle out of their responsibilities and obligations is no reason to lift them. To do so would just be rewarding bad behavior.
Increasing tax rates beyond a certain level leads to reduced, not increased, income.

If the tax rate was 40% for earnings above $1,000 a month instead of 95% do you think tax revenue would go up or down?

Ah, yes. The infamous Laffer curve that was popularized by Reagan.

You know how much empirical evidence that I've seen suggesting that we're anywhere near that magic tradeoff from the Laffer Curve? None! Zip! Nada!

So why do we hear so much about it? Well my guess is that it is because there is always money to be made by pandering to wealthy people. And wealthy people like to see theories popularized that say wealthy people should get taxed less. (Can you say regulatory capture anyone? I thought so.)

Cheers,
Ben

[Jaggy Bunnet]

Well you came close to making it in http://forums.randi.org/showthread.php?postid=2385259#post2385259.

Only if you have reading comprehension problems.


Ah, yes. The infamous Laffer curve that was popularized by Reagan.

You know how much empirical evidence that I've seen suggesting that we're anywhere near that magic tradeoff from the Laffer Curve? None! Zip! Nada!

So why do we hear so much about it? Well my guess is that it is because there is always money to be made by pandering to wealthy people. And wealthy people like to see theories popularized that say wealthy people should get taxed less. (Can you say regulatory capture anyone? I thought so.)

Cheers,
Ben

Ah yes, the fallacy that high tax rates apply to only rich people.

Under the current UK tax system, the top personal tax rate is 40% if you look only at the headline numbers. However there are over 1.7 million people whose marginal tax rate is over 60% and it can go as high as 78%.

These are NOT rich people. They are people who are in receipt of means tested tax credits. We also have a problem of people giving up on ever getting a job and living on benefits permanently. Do you think that these facts might just be connected? That having excessive marginal tax rates deters people from working?

[Ben Tilly]

Ah, yes. The infamous Laffer curve that was popularized by Reagan.

You know how much empirical evidence that I've seen suggesting that we're anywhere near that magic tradeoff from the Laffer Curve? None! Zip! Nada!

So why do we hear so much about it? Well my guess is that it is because there is always money to be made by pandering to wealthy people. And wealthy people like to see theories popularized that say wealthy people should get taxed less. (Can you say regulatory capture anyone? I thought so.)

Cheers,
Ben
Ah yes, the fallacy that high tax rates apply to only rich people.

Under the current UK tax system, the top personal tax rate is 40% if you look only at the headline numbers. However there are over 1.7 million people whose marginal tax rate is over 60% and it can go as high as 78%.

These are NOT rich people. They are people who are in receipt of means tested tax credits. We also have a problem of people giving up on ever getting a job and living on benefits permanently. Do you think that these facts might just be connected? That having excessive marginal tax rates deters people from working?

First of all citing some high marginal tax rates is not empirical evidence that we're past the point of diminishing returns on the Laffer curve.

Secondly I am in the USA, not the UK.

Thirdly in the tax regime that I was discussing, which held in the USA in the 1950s, high tax rates did only apply to rich people. IIRC the median family's tax rates were about 20%.

Do you have any more straw men to set up?

Regards,
Ben

[Jaggy Bunnet]

First of all citing some high marginal tax rates is not empirical evidence that we're past the point of diminishing returns on the Laffer curve.

I never said it was - a strawman.

Secondly I am in the USA, not the UK.

Whoop dee doo for you. Or did you actually have a point?

Thirdly in the tax regime that I was discussing, which held in the USA in the 1950s, high tax rates did only apply to rich people. IIRC the median family's tax rates were about 20%.

So? How does that impact on the fact that TODAY high marginal tax rates appear to be deterring people from working? You are the one who argues it doesn't happen, or is there some fundamental difference that you believe explains it?

Do you have any more straw men to set up?

You are the one busily fabricating them. For example

"People find ways around or violate tax laws, therefore we shouldn’t have tax laws?"

[Random]

Good luck finding anyone actually making that argument. Let me know when you do.

No one specifically makes the argument because it sounds stupid to pretty much anybody. But it seems that whenever there is a discussion of progressive taxation, someone who is against progressive taxation will throw in the “fact” that rich people either evade taxes or use loopholes. When someone in favor of progressive taxation mentions this “fact”, they usually follow up with how we should increase enforcement. When someone against progressive taxation mentions this, they don’t link it to anything, and the “fact” is left to sit there without real comment. Why is that?

If the argument surrounding the “loophole” statement is not an argument against progressive taxation or an argument in favor of greater enforcement, what is it? Is it just a piece of trivia thrown out there willy-nilly like, “the platypus has webbed feet”? Is it put out there in support of a larger theory, and if so, what is it?

This is the source of my confusion about the “loophole” statement.

[Ben Tilly]

First of all citing some high marginal tax rates is not empirical evidence that we're past the point of diminishing returns on the Laffer curve.
I never said it was - a strawman.
You raised it as a response to my request for empirical evidence that we're past the point of diminishing returns on the Laffer curve. So my reply pointed out that you hadn't provided me with what I was asking for.

Secondly I am in the USA, not the UK.
Whoop dee doo for you. Or did you actually have a point?

My point was to clarify what country I was talking about when I said, "...we're past the point of diminishing returns..."

Thirdly in the tax regime that I was discussing, which held in the USA in the 1950s, high tax rates did only apply to rich people. IIRC the median family's tax rates were about 20%.
So? How does that impact on the fact that TODAY high marginal tax rates appear to be deterring people from working? You are the one who argues it doesn't happen, or is there some fundamental difference that you believe explains it?
Where do I begin?

First of all, when you entered this part of the discussion, it was about whether the tax structure in the USA in the 1950s was a good idea. It is a non-sequitor to imply that it would be a bad idea because you don't like the current tax structure.

Secondly I never said that high marginal tax rates don't deter anyone from working. Instead I said that I've never seen evidence that we're past the point of diminishing returns on the Laffer curve. Those a very different statements. Well before you reach the point of diminishing returns you're going to find that some people are deterred by taxes. The question is whether they do it in enough numbers that the extra tax reduces overall tax revenues.

Thirdly the instances that you are discussing are cases where due to a quirk in the tax laws people have high marginal rates even though their overall rates are not that high. In that situation it should be possible to restructure the tax system so that overall rates stay the same and marginal rates don't go so high.

Do you have any more straw men to set up?
You are the one busily fabricating them. For example

"People find ways around or violate tax laws, therefore we shouldn’t have tax laws?"
Thank you for demonstrating how poor your memory is.

If you want to know who said that, read http://forums.randi.org/showthread.php?postid=2385932#post2385932. The closest that I came was in http://forums.randi.org/showthread.php?postid=2386668#post2386668 where I said you had come close to making it. Despite your comment in http://forums.randi.org/showthread.php?postid=2386709#post2386709 about poor reading comprehension, that is correct.

More specifically you had argued that it was a bad idea to have certain types of tax laws because people will leave the country, find a loophole, or not start companies. Which is not the same point as the one you criticized, but it is very similar.

Regards,
Ben

[Jaggy Bunnet]

More specifically you had argued that it was a bad idea to have certain types of tax laws because people will leave the country, find a loophole, or not start companies. Which is not the same point as the one you criticized, but it is very similar.

Regards,
Ben

Sorry but I think you DO have comprehension problems.

Saying that a particular tax law is a bad idea is not remotely similar to saying that we should have no tax laws.

Or do you think that because I oppose marginal tax rates of 60%+ on poorly paid people I am arguing that all tax law should be abolished?

[Jaggy Bunnet]

If the argument surrounding the “loophole” statement is not an argument against progressive taxation or an argument in favor of greater enforcement, what is it?

This is the source of my confusion about the “loophole” statement.

If tax rates are high, people spend money and effort to avoid paying them - they exploit loopholes. This is not an economically beneficial use of their time and resources.

If tax rates are low, it is not worth the time and money to avoid them.

Alternatively you can try and close all the loopholes, problem is that you end up with a massively complicated tax system and it is probable that the legislation to close the loophole will also impact on legitimate activity that the legislature does not find objectionable.

[Random]

If tax rates are high, people spend money and effort to avoid paying them - they exploit loopholes. This is not an economically beneficial use of their time and resources.

If tax rates are low, it is not worth the time and money to avoid them.

Alternatively you can try and close all the loopholes, problem is that you end up with a massively complicated tax system and it is probable that the legislation to close the loophole will also impact on legitimate activity that the legislature does not find objectionable.

So, you think tax rates should be low enough so that it is not worth the effort to avoid them? That’s going to be a pretty low tax rate indeed. And again, it just seems to be rewarding bad behavior.

[Jaggy Bunnet]

So, you think tax rates should be low enough so that it is not worth the effort to avoid them? That’s going to be a pretty low tax rate indeed. And again, it just seems to be rewarding bad behavior.

No, I think you need to be realistic when you consider the consequences of having high tax rates.

[Quixote]

Did you count Social Security under "employment taxes", or did you omit them?

I included it, of course. What else, other than medicare, would be included in employment taxes for for someone who is not an employer? If I were an employer, I would have mentioned that.

[Quixote]

Sure, because tariffs and excises have gone up along with it.

But, as was pointed out the last two times Shanek made that claim, it does not include an adjustment for inflation. Shanek is comparing 2007 revenue with 1984 expenses, not 2007 revenue expressed in 1984 dollars with 1984 expenses.

[Quixote]

Folks seem to be using "marginal rate" to mean both the marginal rate and the average rate. It was mentioned, for example, that someone with a marginal rate of 90% would pay 90% of their income in tax. Unless the tax were completely flat, that wouldn't happen. A person's marginal rate is the rate at which each additional dollar received is be taxed.

Suppose the tax is 10% on the first $30,000 and 20% on everything above that. Then someone who has received $25,000 has a marginal rate of 10%. When his income reaches $30,000, his marginal rate becomes 20%. If he made a total of $50,000 for the year, his total tax would be $7,000 (10% x $30,000 + 20% x $20,000) and his average rate would be 14%.

Calculating one's marginal rate on the fly is not too hard if your financial life is simple. People with high marginal rates seldom have simple financial lives.

[Quixote]

There was a study done back when the highest marginal rates were extremely high on whether the high tax rates were a disincentive for top executives to earn more money. I read about the study years ago and have idea where to even start looking for the details. The researchers concluded that top executives are not motivated by money, but by the challenges of the job, so the fact that Uncle Sam got 90+% of each additional dollar was not a disincentive. As someone has probably noted already on this thread, there is a point at which more money will not appreciably affect someone's life.

[Jaggy Bunnet]

There was a study done back when the highest marginal rates were extremely high on whether the high tax rates were a disincentive for top executives to earn more money. I read about the study years ago and have idea where to even start looking for the details. The researchers concluded that top executives are not motivated by money, but by the challenges of the job, so the fact that Uncle Sam got 90+% of each additional dollar was not a disincentive. As someone has probably noted already on this thread, there is a point at which more money will not appreciably affect someone's life.

Problem in the UK system is that the highest marginal rates are at low (often very low) levels of pay.

So people who are likely to already have a low hourly rate also pay a very high tax rate on their earnings. It is hard to blame them for concluding it simply is not worth it.

[Ben Tilly]

If tax rates are high, people spend money and effort to avoid paying them - they exploit loopholes. This is not an economically beneficial use of their time and resources.

If tax rates are low, it is not worth the time and money to avoid them.

Alternatively you can try and close all the loopholes, problem is that you end up with a massively complicated tax system and it is probable that the legislation to close the loophole will also impact on legitimate activity that the legislature does not find objectionable.

How sadly we have been brainwashed to the point where we believe that something fundamentally simple has to be complex. The truth is that the loopholes come from complexity, and the solution is to reduce complexity. I'd be willing to bet that the impacts on legitimate activity would be more than paid for by the fact that a simpler tax code would make filling forms much cheaper.

The USA had a simple income tax system originally. It got more complex over time. And the nature of politics says that it will continue doing so until the system collapses under its own weight. For instance googling I just ran across the fact that in 2001 the US tax code had 733 sections. By contrast the 1954 code had 103. And the 1954 code was significantly more complicated than the code in the 1920s. Even going from 1995 to 2001 you find a 10% increase in how many words are in the tax code.

Part of being simpler was that there were fewer places you could look for loopholes and exemptions. Which meant that there were fewer of them. Given that there were fewer exemptions, it was much harder to game the system then than it is now. (Not impossible, but harder.)

Regards,
Ben

[Jaggy Bunnet]

How sadly we have been brainwashed to the point where we believe that something fundamentally simple has to be complex. The truth is that the loopholes come from complexity, and the solution is to reduce complexity. I'd be willing to bet that the impacts on legitimate activity would be more than paid for by the fact that a simpler tax code would make filling forms much cheaper.

The USA had a simple income tax system originally. It got more complex over time. And the nature of politics says that it will continue doing so until the system collapses under its own weight. For instance googling I just ran across the fact that in 2001 the US tax code had 733 sections. By contrast the 1954 code had 103. And the 1954 code was significantly more complicated than the code in the 1920s. Even going from 1995 to 2001 you find a 10% increase in how many words are in the tax code.

Part of being simpler was that there were fewer places you could look for loopholes and exemptions. Which meant that there were fewer of them. Given that there were fewer exemptions, it was much harder to game the system then than it is now. (Not impossible, but harder.)

Regards,
Ben

Now this we can agree on - although you really need to try and keep up with our ever burgeoning level of complexity. A 10% increase in six years? If only our own government could restrict itself to such limited increases in legislation.

Between 2001 and 2005 the UK tax legislation increased by 58%. An addition of over 1 million words in that period.

http://www.lexisnexis.co.uk/useful_information/press_center/press_releases/pr_2006_06.html

[Michael Redman]

Between 2001 and 2005 the UK tax legislation increased by 58%. An addition of over 1 million words in that period.
See, that's because you English are so much better with the language. Of course your code is growing faster. It takes Americans much longer to figure out how to say something properly, so we usually just copy what you've already done.

[Jaggy Bunnet]

See, that's because you English

That's fighting talk!!

[my_wan]

According to the don't-tax-the-rich crowd it would have been socked away in investments, i.e., not spent on current consumption. The incentive to invest is the only legitimate selling point the don't-tax-the-rich crowd have.

The so called "don't-tax-the-rich crowd" has nothing to do with not taxing the rich. It doesn't matter if the rich are the only people taxed it will still cost the poor in a higher cost of living. Wealth is like a pot luck dinner. Government officials that organize the dinner doesn't have to contribute to the food. They can also invite others who are not obligated to contribute. This is not a problem and even disirable by itself until large numbers of people that can afford to contribute are not because they were invited by the government. Why then do we claim the solution is to require the wealthier of those not invited to contribute more.

Why do we claim taxing the rich more is the solution when we should be asking that same money to go toward better wages for the workers. Because it is easier in a democratic power to point fingers at the rich as a scapegoat to continually wrench more resources from the people without taking any blame for the limited resources available to the poor.

Debt spending is just one of the mechanisms for doing this. Our tax is the resources used, not the money taken. Money is just a resource tracking mechanism. When the government debt spends we pay that tax in goods just the same as if we payed those taxes up front. Since the actual money was borrowed we must then continue paying more taxes to the interest predominately going to the same rich people we want increase taxes on to cover the cost. The working class must ultimately pay this tax a second time when we transfer the wealth back to the rich we borrowed it from.

This can only work as long as our economy grows. It also means that only a percentage of increased productivity goes to increased standard of living for rich and poor together. We have in the last generation paid for this to a large degree by having both parents instead of just one go to work. The tax the rich crowd fails to see that they are making themselves slaves. Bush screwed us on our best chance this generation.

[Michael Redman]

That's fighting talk!!I hope so. It's been years since I last insulted you.

What are you, anyway? Welsh?

[Jaggy Bunnet]

I hope so. It's been years since I last insulted you.

What are you, anyway? Welsh?

I suppose I should expect no better from a Texan.

[Michael Redman]

I suppose I should expect no better from a Texan.Hey, now, no need to get nasty.

I'm from Minnesota (And currently reside there. I've got snow shoveling muscles to prove it.) I only lived in Texas for a while (13 years). And got "educated" there. And got married. To a cracker. But all that doesn't make you a Texan, as any Texan will loudly tell you.

Besides, I never said "y'all", even once (I say "you guys", even to mixed gender groups). I own neither s**t-kickers nor Stetson (but I do have at least 6 distinct kinds of winter coat). I don't throw washers (ice fish). I don't stop at the gas station and pick up a roadie (wish I could). I don't tactlessly blurt out my opinion regardless of how the audience may feel about it (I don't tactlessly blurt out my opinion regardless of how the audience may feel about it ).

And, although I can bbq a decent brisket, I prefer a pork shoulder in my smoker.