That’s one of the main questions I have about these schemes. One of the main advantages touted by thier proponents is that they’ll increase savings and investment. But I’ve never heard that the economy in the US is hurting for lack of investment capital. Instead, lack of consumption is what I usually hear blamed for economic slow down. When I got my tax cut, it came with a letter from the President encouraging me to spend it on nick-knacks to get the economy going, not to invest it in a mutual fund. Do we really need to encourage more investment? Are there really enough good investment opportunities to absorb more capital?
Did you ignore my counter-example?
How is your example double taxation any more than Joe Contractor being taxed when I pay him to build a house?
I got taxed for the money. Now I pay it to Joe Contractor and he gets taxed. One + one = two. Double taxation!
Money gets taxed again and again as it moves through the economy. But at least our contractor is creating new wealth (the house he built). Joe Scion is not.
spoke: The other issue you need to address is that simply taxing “the wealthy” at a higher rate does not necessarily lead to equalization of either opportunity or result. Tax revenues are as likely, or more likely, to go some pork barrel project in Congressman Powerhungry’s district as it is to help some poor shmoe who might need a helping hand. That is, I believe, one reason many people don’t like the idea of raising taxes, whether on “the wealthy” or any other demographic.
Maybe. I’m in favor of progressive (rather than regressive) taxation. But what I am definitely saying is that a tax code that eliminates taxation of the super-wealthy altogether (the direction Bush is headed) is both unfair and “bad.”
Doesn’t “pork barrel” spending stimulate the economy? In fact, isn’t that the whole point of “pork barrel” spending- that Senator Foghorn sends the money to his home state because it stimulates the economy there and makes voters there happy?
But let’s not assume all the money goes to “pork barrel” projects, however you define that phrase. Let’s assume some goes to rebuild deteriorating bridges in our nation’s highway system (something badly needed, by the way). Spending the money in that way not only improves our infrastructure, it creates jobs. Those bridge workers get paid. They go out and buy consumer items. The store owners get money. Which they spend.* Etc.* The economy gains.
This singular idea that taxation discourages wealth creation is really getting tired. If one wants to argue that taxation is a disincentive for particular behaviors, then shifting the tax burden to other behaviors will discourage those equally.
For example, I keep hearing that the capital gains tax discourages investment. However, if the capital gains tax is eliminated and the payment of individual ncome taxes are increased to compensate, then we have just raised the kind of taxes that discourage labor. Why on earth would this country, with its Protestant work ethic, discourage Americans from working? What makes encouraging investment by a fraction of the American people that much more importatnt than encouraging work by the overwhelming majority of Americans?
Further, I am very puzzled by the outrage at double taxation on the transfer of wealth through inheritence, as compared to the silence on the exemption of various local taxes. I would have imagined that the same folks who oppose estate taxes would also oppose the elimination of deductions for state and local taxes, otherwise people will be paying taxes on the money that they have to use for paying other taxes. That, to me, seems like a tax on taxes. I’m quite surprised that folks who have so much zeal for cutting taxes seem to not care about it at all.
I’m in favor of not taxes the poor, and taxing everyone else the same-- ie, something like a flat tax with a hefty deduction. That ends up being progressive, but doesn’t end up pitting different income groups against each other. You also have to keep in mind that the tax that affects the poor and lower classes the most is FICA (and state sales tax, to a certain extent), not federal income tax. But FICA reform is a whole 'nother can of worms.
I don’t really have a problem with taxing stock gains, for example, at the same level as income as long as those gains are indexed for inflation.
Yes, but it stimulates the economy in inefficient ways.
That’s not an assumption that is grounded in reality. I look at a federal government with a budget of $2.5T, which is simply much, much bigger than it should be. And I do think it’s irresponsible of Bush to continue to work the tax cut angle without working the budget reduction angle at least as much.
I have to quibble with that. I know exactly how much I’m paying directly toward the cost of my own health insurance; it shows up as a deduction on my paycheck (and on my deductible, and on my co-pay…). What I’m currently screened from is the knowledge of how much the government is paying (in the form of the deduction offered to business).
That payment comes back to me indirectly in the form of my own taxes, but I can’t point to any one line on my tax return and say “That’s the money that’s subsidizing my employer-offered health insurance”. So saying that the removal of this business deduction is making the cost of the system more transparent to me doesn’t make sense unless the extra cost that is now being shifted to me is balanced by a tax cut in my favour somewhere else. If there isn’t such a cut in my favour, then the cost isn’t becoming more transparent to me…it’s just becoming higher. (And I don’t have any investments in the United States, so I doubt any of the proposed tax relief is coming my way.)
I have to throw out that I can’t see this (eliminating health coverage deductions for businesses) as being in any way politically feasible. That has to be a trial balloon and not a serious proposal.
Scenarios (assuming it passes):
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Employer keeps employee coverage and takes one in the back to his after-tax profits. Suddenly the NFIB becomes a revolutionary organization.
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Employer stops offering coverage while other firms keep offering coverage. Suddenly employer can’t compete because all the talent has gone elsewhere. Employer folds.
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ALL employers cease offering coverage. People rebel at the direct cost of health care and either A) throw out the existing power structure at the earliest voting opportunity or B) keep them in but health care becomes such a hot button issue (flaming hot) that some form of National Health Insurance passes in about six weeks as every Rep and Senator tries desperately to keep their job.
Assuming the job market is hot enough to allow labor to be this mobile.
How about:
- Some employers, particularly the ones whose employees are at the low end of the skill spectrum and hence may not be able to change jobs at the drop of a hat, cease offering coverage. Rather than rebelling, their employees cross their fingers and join the ranks of the uninsured, hoping they don’t get any major illnesses. The number of Americans without health insurance swells dramatically, with all of the consequent secondary costs to society and loss of productivity that follows.
Which leads directly to the #3 scenario, above, and we get a change in the ruling party or NHS for USA.
Possibly true. Which is why it is so difficult to address the root causes of health care inflation. It is now perceived as being partially free, and thus imposing the costs directly on the consumer is seen as an increase, and fiercely resisted.
Correct. This is pretty much what I meant.
You are comparing apples and oranges. Joe Contractor and I pay a tax on our income. Then, in my scenario, they pay no tax on the money they accumulate and leave to their inheritors. In yours, they are taxed again. As I said, this is another tax. It is double taxation because you are imposing a tax that I am not.
You, in other words, are taxing money every time it transfers. I am taxing it only some of the times it transfers.
And, as I said before, if you tax investment, you are discouraging investment in favor of short-term consumption. You are reducing the chance of long-term economic gains brought about by investment.
If you increase taxes on investment and reduce it on spending, you encourage spending. If you increase taxes on spending and reduce it on investment, you encourage investment. If you increase taxes on both, you generally depress economic activity and encourage tax-avoidance behavior.
I am generally leery of the notion that the government ought to decide that some people are too rich, or have been rich too long, and simply act to bring them back down to the rest of us. If you care to discuss why you think people being richer than you or I is a bad thing - specifically - feel free. Just saying “Look! Bush got into an expensive college because his family made a shitload of money in the oil business!” doesn’t necessarily appall me. I generally support the notion that people ought to be able to keep what they earn, and that government spending ought to be strictly limited. And I don’t think the purpose of the tax code ought to be social engineering. The purpose ought to be to raise funds for the necessary purposes of government. Those necessary purposes do not include the politics of envy.
YMMV.
Regards,
Shodan
I agree that one has to judge it relative to our current system, although I’d put it more broadly than just our current tax system and say our whole economy. And, given the incredibly inequitable distribution in the gains made in our economy over the last ~25 years, as evidenced by the top 1% seeing their after-tax incomes grow by 201% (in real terms) between 1979 and 2000 while those at the median saw only ~15% increase and those near the bottom even less, I just don’t see how we can justify the notion that inequality is not increasing fast enough and we have to make it increase faster. I mean, starting from a situation in 1979 that already had very large levels of inequality and plenty fine incentives for wealth creation, we have gone way further in the direction of further inequality!
Is there a point where this sort of inequality is going to bother those folks on the Right? I mean, you even have ~20% of the faculty at Harvard Business School (plus faculty at other prestigous business schools) signing on to an open letter to President Bush expressing, among other things, concerns about these levels of inequality:
So, what you are really saying is that you don’t believe in “equality of opportunity” in any real sense at all that I can figure. (Probably none of us really believe it fully…i.e., I accept the fact that those born into a rich family will always have many very real advantages over those born into poverty. But, I do think we ought to make some attempt to ameliorate the extremes of this.)
No, that is a ridiculous misstatement, as you likely realize.
Oh hell, OK, you caught me. Any tax scheme other than simple confiscation of the entire estate less burial fees is a move to bring back slavery. And I support it fully. Yup, that’s it all right - the government ought to guarantee that nobody does any better than anybody else. Equality of outcome in all circumstances - that’s exactly what we should strive for.
And anyone who invests their money in the stock market or a business instead of handing it over to the government is taking food from the mouths of babies.
:rolleyes:
Regards,
Shodan
Re health care: the fairest thing to do, which of course means it has zero chance of going anywhere, would be to mandate that everyone has to get health insurance on their own if the employer deduction for health insurance is eliminated. Along with that, the employer would have to take the premium he’s now paying and fold that into the salary of the individual, minus the employer side of payroll taxes.
The effect on the market would be simple and immediate: health costs would fall rapidly, and productivity in the health sector would rise rapidly. Poor folks, who mostly don’t have health insurance now anyway, would suddenly find it easy to get a doctor who makes house calls, just like back in the old days.
It’s either this or national health insurance. I can go either way. The current situation is not a system; it’s a mess, and it desperately needs to be nuked.
Except I am not the one advocating an extreme position on one side. I don’t advocate complete confiscation of wealth of an estate, because I recognize that true “equality of opportunity” is in conflict with other goals like giving people the incentives to accumulate wealth and pass some of it on to their heirs.
But apparently, if one doesn’t advocate having no estate tax and in fact being completely opposed to using taxation (or perhaps any other policy, I don’t know) for ameliorating any inequalities that arise from being born into different circumstances, one is not pure enough and one must in fact be advocating that “the government ought to guarantee that nobody does any better than anybody else.”
Yup…And, we’re the extremists I suppose.
[Of course, my previous post is a response to Shodan’s and not pantom’s that appeared in the meantime.]
I think you overestimate the effect of political outrage over this issue.
First, not everyone would be affected: highly skilled workers will probably keep employer-provided health insurance due to labour demand, and of course the self-employed won’t notice any change. And not all of the workers who do lose coverage will raise a stink. Heck, some of them will take pride in “not taking government handouts”, even if they have to go uninsured to do it. From business’ perspective, the businesses which can drop health insurance without losing their workforce will see immediate monetary savings since they’re offloading their own costs for providing health insurance, not just the government’s. And many of the business which can’t drop health insurance without losing their workforce will make up the loss from tax cuts in the rest of the proposed package.
It’s an immediate benefit for some versus an immediate screwing for others, and the long-term screwing of everybody is over the horizon and hence easy to ignore. You think the government won’t be able to sell that if they really want to?
Can you define what an “equitable” distribution of income is? Just because something has changed, doesn’t mean that it’s bad. What are you, a conservative? 
Is there a point where this sort of inequality is going to bother those folks on the Right?
[/quote]
I don’t know. You’d have to ask someone “on the right”.
Again, what is an acceptable level of inequality, and how is it defined? I would propose that as long as the laws are nondiscriminatory and don’t favor one individual over another, then there is no good or bad level of inequality. There was certainly a time in the not too distant past when quite a few laws WERE discriminatory. To the extent that any of that remains, we should eliminate it.
No, you’re the one constructing strawman arguments accusing me of an extreme position.
What goes around comes around. If you are going to take the liberty of accusing me of not believing in " ‘equality of opportunity’ in any real sense at all", then don’t play the injured innocent when you get called on it.
Regards,
Shodan