Yes, that was it, thanks!
So are those economists really from all across the spectrum?
Democracy is a bitch, isn’t it?
The other option, where the privileged make unilateral decisions, doesn’t really have a great track record for fairness. I’m a fan of the kind of unfair where you aren’t walking over bodies in the street.
I saw that, and to be honest, it just basically confirmed my belief that economists are the dumbest smart people on the planet. The reason why the electorate, and politicians would disagree with much of what they suggest is because those things don’t work in reality.
The point of agreement of the economists is that taxing changes behavior. Because of this if you tax something you get less of it and if you cut taxes on something you get more of it. Taxing income taxes what people put in to the economy, therefore people put in less, less work, less investment. Taxing consumption means people consume less resources, leaving more for other people.
Taxing consumption also does not punish savers the way income taxes do. Say you have two quarterbacks who sign million dollar contracts. They both pay 35 percent in taxes on that. One quarterback buys a mansion, a sports car, and a yacht. The second buys a modest home, sensible car, and a bass boat. He uses the rest of the money to invest in a lemonade business. He is then taxed on the profits of the lemonade business. The first quarterback spent his money on himself and the second used the money to create something for society. The tax on income instead of consumption penalized the second quarterback, whereas a consumption tax would penalize the first.
Consumption taxes are realistic, in that most states already use consumption taxes to fund a majority of the operations. What is holding them back is the idea that they do not punish rich people enough.
Do you know how they address the fairly obvious problems I mentioned? That’s not to say that a federal VAT might not be a good idea, but it seems that a consumption-only tax system has lots of problems.
Semantics. If payroll taxes were redefined as part of “income tax”, your figure would be much higher, without actually changing what anybody pays. And the OP specified replacing all taxes, not just the income tax.
In any case, the income tax as originally implemented applied ONLY to the wealthy. It was expanded when the government decided they needed more money.
The other people are getting taxed more also, which means that there will be less production - and thus fewer jobs. Certain things, like energy, we might want to reduce consumption of, through efficiency.
We’ve just seen the economic consequences of a reduction in consumption, and they are not pretty.
In real life very few rich people consume anywhere near all their income. And the mansion spins off continuing revenue to the locality. Remember also that while the second guy does get taxed on profits, he still has most of the profits, and so is in better shape than the first guy.
You are also assuming consumption and income taxes both - which is not the subject of the thread. In that case the second guy gets a big bonus but pays the government very little on it. I applaud his modesty, but the coffers of the treasury probably won’t.
I just saw a link that said California gets 55% of its income from sales taxes.
I didn’t find a direct comparison, but this interesting pdf report breaks down tax payments by percent of income by different income classes.
(California is on page 30). For 2007, the bottom 20% paid 6.5% of their income in sales taxes and 3.2% in property taxes, and almost none (0.1%) in income taxes. The top 1% paid 0.8% in sales taxes, 1.4% in property taxes and 7.5% in income taxes. (Property tax versus sales tax rose with increasing income.)
Now, I doubt the consumption of the rich would change much with less income tax and more sales tax. So, you have this gigantic gap.
BTW the regressive nature of sales taxes is very clear from this table. Property taxes are much less regressive except for the 1% - I suppose because house value tracks income pretty well.
That’s just California, they have this info for every state.
Hey, remember when anti-tax types complained that the income tax, originally instituted to tax very high incomes, was now being paid by over 50% of the populace, and that wasn’t fair?
Because I do.
We were discussing this on LiveJournal, and noticed that they pitched 6 ideas that contradicted each other.
[QUOTE=peristaltor, on LJ]
Planet Money has devolved into a show that treats all branches of economics like the country bar in The Blues Brothers treats music; the bar has “both kinds, country and western,” just as PM has both kinds of economics, libertarian and Austerian. Their bias has become so great it’s embarrassing.
Think about it, folks: This is a show called* Planet Money* whose correspondents have no idea how the majority of our money is created. I’ve listened to every episode just to be sure. They are clueless, and when they get a clue through evidence, as happened in the TAL episode dealing with QE, they treat it as head 'splodey material.
[/QUOTE]
Not economically, apparently. Maybe there’s a gay one and a Baptist, or something. 
[bolding mine]
This is hilariously wrong. Consumption means purchasing things, which is how people contribute to the economy. Raising taxes doesn’t make people work less, either; it lowers incomes, which incentivizes them to work more.
[I snipped a bunch of nonsense about how taxes are “punishment.” When you pick a cherry, are you punishing the tree?]
We could solve this problem very easily - channel the massive amounts of money paid to the very rich to lower paid workers. The income tax the rich pay will go down, the tax paid by the bottom 50% will go up, and problem solved.
You may get outraged that people,with no money pay no taxes. I get outraged that the former CEO of PG&E, California’s explosive gas company, gets well over $30 million for getting fired when it comes out that they took money the state gave them in rate increases to update pipeline safety to funnel into profits. Then a neighborhood blew up because they over-pressurized a pipe. But I’m sure that guy will make productive investments with his money, so it is all good.
Here’s an idea…make the federal government smaller.
This is bizarre. Think of an island with coconut trees. One person is planting coconut trees, one is eating coconuts, who is contributing to the economy of the island? What makes an economy wealthy is productivity, try going to Haiti and telling them that their problems are caused by people not buying enough stuff. Did the huge vault in living standards that came with the industrial revolution happen because people decided to start buying more stuff?
Lowering income causes people to work more? Two scenarios, one I pay you five dollars for every basket of cherries you pick and the other I pay you ten dollars for every basket of cherries you pick. In your scenario you pick more cherries in the first scenario.
If the tree would like to keep the cherry you are punishing the tree by taking its cherries.
You are correct. That is an idea. There is no dispute about that.
That’s a quite broadly-advocated idea, usually followed up by plans of the form “Naturally we’ll cut X to save money but keep Y because it’s naturally so important”. For any sufficiently large group of people, the union of all of the Xs comprise the entire current government, as does the union of all the Ys.
People seem to think that if taxes were lower they’d have more money to spend and life would be wonderful, but is that really true? Wouldn’t prices just go up, I mean companies generally don’t make the best thing they can and add 5% markup, they look at the market and sell whatever people want to buy an an afford.
I’m happy to pay taxes, and I pay quite a lot (in the UK). I’m happy paying people in bad circumstances to leave me alone. I’ve lived in the times where people didn’t have enough money, it didn’t make everyone jump out of bed and look for a job, it make too many people drink and take drugs and then look for things they could steal so they drink and take drugs some more. I don’t want to go back to those times again.
The is of course the question as to how high taxes should be, and I don’t know the answer, but I also don’t see any evidence that they’re too high now, apart from people trying to avoid paying them, which I doubt would go away if they were lower.
What I find amazing is that the rich seed these ideas into the press: ‘Taxes aren’t fair’, ‘Taxes are too high’, ‘Lower taxes would mean more jobs’ and people who benefit greatly from higher taxes on the rich go ‘Yeah, that’s right, less taxes for the rich’. Seems really weird to me.
But people trying to avoid paying taxes means that they aren’t spending that time doing anything else, like working or spending their money. All else being equal, a system that creates less avoidance behavior will be more efficient, even if you don’t count the increased governmental revenue. It will be more efficient just because there will be less wasted activity spent trying to avoid it, and fewer sub optimal economic decisions based on what will cost the least in taxes.
ETA: this is biggest reason why the 90% + tax rates of the 50s-70s were bad looking back on it, because they were coupled with lots of ways to deduct from your taxes. So people sank money and time into tax shelters rather than productive businesses.
Well, yes. Where else did it come from? If no one bought houses, cars, health care, or food, how did their standard of living go up>
$10 an hour might motivate you to pick more cherries if you don’t need the money. But in real life, most of us need the money we make. If you cut the amount you pay down, most workers will either work more to make up for it, or if they can, try and find better work. This was and is again a fact of life for coal miners who have to work longer hours as the price per ton falls.
So, what do you want to give up, and how to explain it to those who depend on it. Remember that the Republicans, those advocates of smaller government, are in an absolute tizzy about shrinking the military.
We need to cut programs that are only abused by sponges who never contribute anything, such as Social Security, and keep spending on Job Creators in the Responsible Red States who are paying all the taxes for the Blue States, such as farm subsidies.
I’m sure the Haitian economy would be better off if more people bought stuff. But the root cause of that is that they cannot afford to buy more stuff. Ditto here. The middle and lower classes in the US are not sitting on piles of money they refuse to spend out of spite.
Before the Industrial Revolution the average person made stuff like clothes themselves. When industrialization made clothes cheaper to buy than to make then the factories began ramping up because the demand was there. They did not start with giant clothing factories in the hopes of getting people to buy. In fact, IIRC, it started with the mass production of thread and fabric so that it was easier for the average woman to sew clothes, and then moved to ready to wear clothes.
If no one on your island liked to eat cherries, neither of these alternatives is very clever. Ditto if no one on your island could afford to buy cherries.
As for the main thrust of your comment, I’m glad that you are now for increasing the minimum wage. Good for you, sir!
Damn right! Since the Republican run states are so much better managed, by definition, we should require that states only get what they pay, which would show those Democrat run states, like California, a lesson.
are they buying it.?