I said: “I’d prefer a tax cut that benefits the poor more then the middle class, and the middle class more then the rich.”
Knitz said: “The problem is Hazel the poor do not pay any income taxes. Many of them get earned income credits which means they get money for not earning enough to pay taxes. Some people want to increase this amount, but in no way can you reduce the income taxes of the poor.”
I reply: I didn’t spell it out, but by “tax cut” I did not mean a cut in just the income tax, I meant a reduction of other taxes as well, including the ones paid by the working poor: payroll taxes. Why not reduce these taxes for low paid workers and eliminate the them for the lowest paid? Leave them as is for the middle class, and increase them for the rich? I realize that this would be subsidizing the poor at the expense of the rich. I say, fine, let’s soak the rich and subsidize the poor. And while we’re at it, how about eliminating sales taxes on all purchases of items costing less then $500.00? Or some other cut-off point, I’m not particular.
pohjonen points out that the poor do pay income taxes. I know my ideas about payroll taxes are highly unlikely to ever be put into effect, but couldn’t we raise the thresholds for income taxation? I have to suspect that these thresholds were set long ago, and never adjusted for inflation.
The thing about eliminating payroll taxes for the poor is that it would require converting Social Security from a retirement program to a welfare program.
Social Security is supposed to be a forced investment program. If you work, the government puts some of YOUR money aside for YOU. You get it back when you retire, plus interest. Theoretically.
Get rid of the Social Security witholding tax, and suddenly you’re saying, “The government is responsible for paying everyone a retirement benefit.” That’s nothing more than welfare, and it has serious implications for society, for the motivations for work, for government budgets, etc. Specifically, in something like ten years Social Security will go from a surplus to a deficit as the baby boom retires. If you don’t make the lower income classes pay into Social Security, the government will have to assume a huge, unfunded mandate.
Seems to me, with my plan, Social Security would become a welfare plan only for the poorest among us. It would be partially subsidized for the somewhat less poor. The current deal would remain in effect for the middle class and above.
We could also draw an arbitrary line at the end of 2003, and say that people entering the labor force on or after Jan. 1, 2004 will not receive Social Security payments if, when they reach retirement age, they are very rich (top 1%, 2%, 3%, something like that). It would not be fair to deny Social Security payments to anyone who was promised them, but let’s stop promising them to the super-rich.
So, El Jeffe, are you going to back up your assertion that
As I previously showed, there will be a point where lower taxes will slow down an economy due to lack of essential services.
As a premise of this, I posited that there are some things a government can do more efficiently than the private sector, and/or proactive things it can do to increase the economy. The list is certainly debatable, but I believe it exists.
Do you disagree with this premise?
If there is anyone who does, well, I dont think this is really the right thread to state one’s objections, but I myself wouldnt mind debating that.
But I think that given the premise of essential government services, it’s pretty much provable that lower taxes will not always boost an economy.
Well, some libertarians who want to rid us of social security claim that the program is regressive now, so making it more progressive might just even it out. (Admittedly, the arguments about progressivity and regressivity for SS get rather complicated because they depend strongly on the assumptions you make about how you account for intergenerational transfer. But, it is interesting to note that it is people on the libertarian end who have recently made the “social security is regressive” argument.)