Big Buget, Big Taxes

[Ursa Majoris]

Two points about your chart, It appears as though income dips with each recession which would make sense. I would love to see what it did during the great depression but I have an idea that data wouldn't fit so well with your hypothesis, which is why the graph starts with the boom following WWII. I'd also point out that while GDP has risen, so has the size of government isn't it possible that the uncontrollable spending has more to do with why the median income is not keeping pace with GDP, and not some nefarious group of CEO's and bankers sitting in dark smoke field boardrooms?

I don't see where government spending has anything to do with it. It seems crystal clear to me that from 1945 through 1980, the increase in overall wealth was shared equally (presumably by percentage) amongst all. After 1980, something happened to send what had previously been a near-perfect relation to a very divergent one.

 

As for the dips in income, of course they were there with recessions - GDP would drop over that time too. As GDP rose again after each recession, median income jogged along, keeping pace nicely, hence the "all boats rising" statement.

 

Bottom line - that increase in GDP has been funneled into a smaller and smaller group.

[Yukon Cornelius]

not the bogeyman of a disappearing middle class you keep dreaming up.

If you dont think that the middle class is slowly disappearing you need to step out of your castle. U don't have to agree with why but it is.

[Ursa Majoris]

You know I really don't care, because I don't give a chit about equal outcomes, but of equal opportunity. I shouldn't say that, I do care about equal outcomes when liberals like you and Ursa are so concerned with it that you would bar someone equal opportunity just in try to manufacture an equal outcome. So I guess to some degree I do care, but definitely not for the reason you do. I care about the guy that doesn't get into MIT even thought his SAT and class standing are higher than that of minority, because your equal outcomes infringe on his equal opportunity.

 

Here is something for you to chew on too. I'm going to make mine. I'm not going to significantly change my lifestyle if I can help it. If that means I give my self a raise (increase my distribution) at a much greater rate than the raises I give my employees well so be it. Why do I need to do this? To keep up with inflation and additional risk being piled on via regulation and litigation. Why is there inflation, taxation, regulation, etc..? I'm going to make mine, if my employees don't like what I'm offering them, they are free to work else where or start their own business.

 

I get the impression I've got under your skin with this, almost like exposing some dark family secret to the light.

 

What affirmative action (with which I don't agree, FYI) has to do with this is beyond me. You're floundering here.

 

What is in dispute is this divergence and nothing you've said so far has showed why it is suddenly necessary for the divergence to exist when it didn't before. Gotta assume that companies existed between '45 and '80 and made nice profits, right?

[Yukon Cornelius]

I don't see where government spending has anything to do with it. It seems crystal clear to me that from 1945 through 1980, the increase in overall wealth was shared equally (presumably by percentage) amongst all. After 1980, something happened to send what had previously been a near-perfect relation to a very divergent one.

They call him Nancy

[gbpfan1231]

Perhaps... but how many came from households making 30k for a family of three?

It is usually a family of 5 or 6 on 30k. Maybe if the family made 30k it should stay a family of two until that family of two gets a bit above 30k???

[yo mama]

Enough bicker, kids. Read this.

 

The the top 20% of America holds 85% of the wealth. And the concentration of wealth has, in fact, been slowly but surely becoming more and more concentrated in the top 20% of Americans for a long time. The concentration of the Nation's income into the top 20% is even more pronounced.

 

You can argue about "why" that's happening, but you can't dispute that it "is" happening.

 

ETA: if the top 20% holds 85% of the wealth, is it REALLY so objectionable that the top 50% pay virtually all of the taxes?

 

Frankly, the people who are getting screwed under the current system are high-income wage earners that have NOT accumulated wealth. They pay far more in taxes than those who have wealth, but little income.

Edited February 3, 2010 by yo mama

[Azazello1313]

Frankly, the people who are getting screwed under the current system are high-income wage earners that have NOT accumulated wealth. They pay far more in taxes than those who have wealth, but little income.

 

I do agree with that. and those with relatively high income compared to relatively low accumulated wealth, they tend to be the upwardly mobile, the entrepreneurs, the ones out there creating wealth and opportunity in the economy. they get hosed now, and it's going to get much worse in the next few years.

[yo mama]

I do agree with that. and those with relatively high income compared to relatively low accumulated wealth, they tend to be the upwardly mobile, the entrepreneurs, the ones out there creating wealth and opportunity in the economy. they get hosed now, and it's going to get much worse in the next few years.

It makes it hard to get ahead, especially if you live in an area with a high cost of living.

 

I've often thought that a blended system of taxation that weighted income, consumption, and net asset value would be the only way to truly achieve tax "fairness." And as long as the value of assets were being taxed during lifetime (like with real property taxes) you could do away with the estate and gift tax. Using any one system of taxation invariably distorts the responsibility for that Nation's tax revenues for or against some people, even if the system is "revenue neutral." Obviously "the poor" like the income tax because it favors them. Obviously "the wealthy" disfavor taxation based on value, because they have virtually all of it. I've warmed up to the idea of a consumption tax, but think current proposals underestimate the adverse effect of black and grey markets for goods and services that would invariably sprout up.

 

But achieving that kind of "fairness" would inject additional complexity into our revenue collection and enforcement, which would be problematic. Plus, any taxation based on the value of one's assets requires governmental intrusion into the nature of our assets, which raises privacy issues. Even if we could get taxpayers, politicians, and lobbyists to abandon their own self interests for a moment there is no "easy" answer on how to both simplify the system of taxation and make it as fair as possible... assuming we can even agree on what "fair" is.

[Perchoutofwater]

I've warmed up to the idea of a consumption tax, but think current proposals underestimate the adverse effect of black and grey markets for goods and services that would invariably sprout up.

 

I think you probably over estimate it. Sure you've got the yard guy that is basically himself and his mower that might skirt it a little bit, but I see a lot less potential for abuse than we have with the current system. Living in Texas which has a sales tax, aside from things that are already illegal and thus on the black market such as drugs, there are very few things I can think of, and for the most part it would be the lower earning single horse shops that could skirt it. If you make the penalty harsh enough and actually enforce it, you can probably rid of most of that.

[yo mama]

I think you probably over estimate it. Sure you've got the yard guy that is basically himself and his mower that might skirt it a little bit, but I see a lot less potential for abuse than we have with the current system. Living in Texas which has a sales tax, aside from things that are already illegal and thus on the black market such as drugs, there are very few things I can think of, and for the most part it would be the lower earning single horse shops that could skirt it. If you make the penalty harsh enough and actually enforce it, you can probably rid of most of that.

Even it a consumption tax worked flawlessly, it still wouldn't address the inequities of someone with $10mm in assets who doesn't spend any more money than an above average wage earner with $0 net worth. While I'm sure *you* wouldn't have a problem with that scenario, such a system would be distorted in favor of a very specific segment of society.

[Perchoutofwater]

Even it a consumption tax worked flawlessly, it still wouldn't address the inequities of someone with $10mm in assets who doesn't spend any more money than an above average wage earner with $0 net worth. While I'm sure *you* wouldn't have a problem with that scenario, such a system would be distorted in favor of a very specific segment of society.

 

Equal protection, not equal outcome. Right now we have neither, because regardless of what you give some people they will just waste it, and the producers are being penalized.

[wirehairman]

Even it a consumption tax worked flawlessly, it still wouldn't address the inequities of someone with $10mm in assets who doesn't spend any more money than an above average wage earner with $0 net worth. While I'm sure *you* wouldn't have a problem with that scenario, such a system would be distorted in favor of a very specific segment of society.

 

How often would that scenario actually happen? Typically, the person with the $10mm in assests is going to drive nicer cars, live in a bigger house, eat at better restraunts more frequently, etc., and if they don't, more power to them.

 

At the same time, it might drive the "above average wage earner" to start saving and developing some net worth instead of wildly participating in the materialistic disease rampant in America.

[yo mama]

Equal protection, not equal outcome. Right now we have neither, because regardless of what you give some people they will just waste it, and the producers are being penalized.

:inigomontoya: You keep using that word. I do not think it means what you think it means. :inigomontoya:

[yo mama]

How often would that scenario actually happen? Typically, the person with the $10mm in assests is going to drive nicer cars, live in a bigger house, eat at better restraunts more frequently, etc., and if they don't, more power to them.

 

At the same time, it might drive the "above average wage earner" to start saving and developing some net worth instead of wildly participating in the materialistic disease rampant in America.

Happens more often than you think. I have a lot of clients who are asset rich with non-income producing assets. Its especially common for older wealthy people to be tight-fisted with their cash, no matter how much they have. Plus, business owners get to mask a lot of their personal consumption as business expenses, which gives them a tax deduction working class Joes don't get.

 

Secondarily, past consumption tax proposals are predicated on past levels of consumption. We're now experiencing a massive contraction in spending habits that should force any consumption tax proposal to be revisited. The beauty of the income tax is that it taxes people even if they don't spend their money; they can horde it all they want, but the government still gets paid. Not so with a consumption tax, which: (1) gives it its own flavor of volatility that does not exist with "value based" taxation; and (2) creates an immediate disincentive NOT to spend money that would be subject to taxation (though with any form of taxation people will conform their behavior to avoid it).

Edited February 3, 2010 by yo mama

[Azazello1313]

Even it a consumption tax worked flawlessly, it still wouldn't address the inequities of someone with $10mm in assets who doesn't spend any more money than an above average wage earner with $0 net worth. While I'm sure *you* wouldn't have a problem with that scenario, such a system would be distorted in favor of a very specific segment of society.

 

well, the only thing money's good for is buying stuff. whether you intend to spend it now, in 5 years, in 20 years, you gotta spend it sometime. if you want to hoard all your money so that your kids can spend if after you're dead, that should be your prerogative. if you want to spend everything you make as soon as you get it, that should be your prerogative. that's why I think a consumption tax that exempts food and a certain amount of housing costs is the best way to go. would it incentivize delayed gratification a little bit? sure, but I don't necessarily think that's a bad thing.

[yo mama]

well, the only thing money's good for is buying stuff. whether you intend to spend it now, in 5 years, in 20 years, you gotta spend it sometime. if you want to hoard all your money so that your kids can spend if after you're dead, that should be your prerogative. if you want to spend everything you make as soon as you get it, that should be your prerogative. that's why I think a consumption tax that exempts food and a certain amount of housing costs is the best way to go. would it incentivize delayed gratification a little bit? sure, but I don't necessarily think that's a bad thing.

The practical issue is that hitching tax collection to peoples prerogative to save or spend could break the revenue collection system if everyone stops spending. A nation of tight-fisted savers would cripple the national fisc. Without a means to collect a predictable source of tax revenue the federal government would be running even worse deficits. An income tax or tax on value doesn't have the drawback (though they have plenty of others). While I certainly respect the merits of a consumption tax, it is not perfect standalone solution. Though it might be preferable to our current system, assuming spending habits remained relatively constant.

Edited February 3, 2010 by yo mama

[driveby]

Why, then, all the hysteria? The answer is politics.

 

The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.

 

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