"There is only one solution to this growth-destroying, confiscatory tax-rate future: Control spending growth, especially of entitlements. Meaningful tax reform—not with higher rates as Mr. Obama proposes, but with lower rates on a broader base of economic activity and people—can be an especially effective complement to spending control. But without increased spending discipline, even the best tax reforms are doomed to be undone.

Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush."


http://online.wsj.com/...l?mod=WSJ_Opinion_LEADTop


Since we've been having long debates with QZ on this subject, I thought this editorial may balance the scales a little. (Blame LCNers for bringing this subject up again on our internal forums that prompted a long discussion on it)

""There is only one solution to this growth-destroying, confiscatory tax-rate future: Control spending growth, especially of entitlements. Meaningful tax reform—not with higher rates as Mr. Obama proposes, but with lower rates on a broader base of economic activity and people—can be an especially effective complement to spending control. But without increased spending discipline, even the best tax reforms are doomed to be undone."

Lets say we agree on that. How does this address the following:
http://www.epi.org/...tures_snapshots_06232004/

or this:
http://www.ssc.wisc.edu/...0--%20Norton%20August.pdf

or this:
http://www.huffingtonpost.com/...ens-census-_n_741386.html


Tax rates have almost consistently gone down since the 1980s and yet we don't see any improvement. The only effective thing that seems to have brought true economic growth during that time period was the lowering of interest rates. We can no longer do that.
Explain please.

Cash shortages cause Per Capita income to fall!
A portion of your military leaves due to a lack of money!

lol@pang

You can't cut your social programs when they're most needed, during a recession; if everybody's hell-bent on curbing the deficit (which they probably should be...) you either need to cut other things or raise taxes, or both; The wealthy in America have doubled their take of the economy in the last decade; why not scale that back to where it was ten years ago? The top 1% of earners now takes in 20% of all income, compared to 10% a decade ago; so tax them until it's back to where it was a decade ago.

Also, so many republicans think the US is ABOVE the maxima in the Laffer curve it's sick. I don't know why they would think that, when the rate is insanely low. I suspect the maxima is at a *higher* taxrate than it currently is;

ya, I never understand why they want to give more money to people with the highest likelihood of saving it during a time when you want to spur spending :p

It's hard to believe that the Republicans are actually genuine in their beliefs that their plan helps all Americans more than competing ideas. There's also no question the US needs to reform its tax system and start thinking about taxation as a way to provide services to HELP drive the economy, rather than as a way for Uncle Sam to reach into your pocket. I don't like paying taxes, but I like driving on roads, having hospitals, national defense, incentives to get education, etc.

meh, we just need to blow up the banks that are holding our debt.

QZ, from the same WSJ explanation:

"Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO's projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages. At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor. "

When you talk about top tax rates you're really not incorporating state, SS, or Medicare which drive it up to be much higher than it appears. But in the long run, the obligations owed versus the spending rate means your 90% tax rate may become reality even for a middle class teacher. I don't think anyone should be rooting for that outcome.

argh - get rid of the morons and the academics....a failed solution is in place, and they are ompounding it

http://www.youtube.com/watch?v=airxvVmGnqc

Oompa Loompa, do-ba-dee-doo,
They’ve got a perfect solution for you.

well, just out of curiousity, why is the US debt ceiling based on the GDP, instead of the government's operating budget?

make the answer small. maybe tiny even.

dibs you suck

yah, i do like milk shakes, Thanks for noticing.

Move towards a consumption Tax!

It'd be somewher around 20%
even add another 5% to cover paying down the Principal of our debt, and this tax goes away, or is replaced with an infrastructure tax (thinking high speed rail, and clean energy)

1. The right % somewhere around 20%, brings a balanced budget.
2. Imagine companies wanting to relocate their headquarters to a country with 0% buisness taxes,
3. No taxes on wealth creation which creates more spending.

Add in a balanced budget requirement, Congress can only spend what comes in.


I'd also throw in some form of rebate for those making under 100K, a flat rate for taxes paid on food/clothing, and lower that rate till its 0 for a family making say 150K...

Done properly, paying off the debt, there's no reason we can't move to a clean economy, create a culture of weath creation again, for the middle class.
And maintain, social securtiy, medicare, and universal healthcare for all.

I am going to see if I can post up my federal outlays vs revenues as a % of GDP since WW2 tomorrow. It will show that no matter the tax rate, you collect essentially the same GDP, meaning tax rates are useless, so why would you oppress anyone with higher rates?

Anyways, for today, I think this will suffice to show why people are not investing.

http://www.realclearpolitics.com/...this_fear_in_america.html

i am not one to say taxes are good, but tarrif the fluff out of imports, lose your trade deficit, have american manufacturers build in america, and employ americans.

I should be able to buy a Calvin Klein suit in canada, produced in and sold from america, for the same price i can buy it from human rights abusers around the world. globalization encourages anti human rights and slavery.

and then my money goes to the good old usa, as opposed to indonesia or china or vietnam or fluffing myanmar for all i know or care.

and maybe do something with paying off china, like immediately, so you can get them the fluff out of your wallet and political interests.

trumper: yes, but I certainly hope the top tax rate is on people making a hell of a lot more than 60k; keep in mind that your SS &etc are all capped; for somebody making say $250k, they're paying hella lower taxrate than that; the marginal taxrate should increase in steps beyond $100k, maybe of steps of say 5% for every $50k, maybe to 70%


Servant: consumption tax is bad; it encourages people not to consume; and saving is what the rich do best; it's much better to tax on the income side.



Also, again, nobody addresses why many people seem to think we're above the maxima in the Laffer curve

sounds like consumption tax would eliminate a lot of gluttony and obesity. people might even lose enough weight where they don't need an SUV to get around town.

braden, raising tariffs is the absolutely worst thing we can do. Read on the Smoot-Hawley tariff that actually put us into the great depression.

Qz, before I answer that, would you answer me why the government should be as large as possible? Why should their job be to take as much money from the people as they possibly can?

Ok, I'm going to see how this table looks in here...

holy hell that looks bad, let me see what I can do...

http://www.boxcarhosting.com/.../viewFile.php?fileID=2646

There, that works, it's an excel document. It is incomplete, I do plan on getting tax information off to the right as well, but since this discussion involves this...


Since I don't have much time, the first thing I would look at is the receipts as a % of GDP in 2009 and 2010, why are they so low even though tax rates haven't changed?

CKHustler: I don't think it should be as large as possible, but I do think they should run a balanced budget, and start paying down their debt - here in alberta we managed to eliminate not only our deficit but our debt too: until the conservatives slashed the resource extraction taxes.

Governments should be running surpluses in boom times, so that they can be balanced during a recession or use the extra to spend during a depression/recession into deficit territory.


But you can't just gut social programs; take a look at martian's link - or check this out http://www.bit.ly/qXcrxb

There's a definite relationship between government spending on heath and life expectancy. If you want the US as a society to improve in metrics like life expectancy, lower crime, better education, better standard of living... then you can't just gut social programs.


Now, maybe you just don't give a fluff about people and want to live in a gated community away from the rest of society; but I think more Americans care about their society as a whole - at least I certainly hope so.

We're all interconnected, more than we realize.

The gated community that isn't affected by what happens in the innercity is a myth.

ck, you say great depression, i say fight a war in europe to get yourself out :P

I had to laugh, but sadly and I know you nubs up north read about it....our military was recently told that they may not get paid on a certain day, but still HAD to report to work, still had to fight this war over the middle east.
US needs to quit "playing" military powerhouse and trying to save the world. I find it ridiculous that we go help everyone and every other friggin country in need, while we have people on the streets, people can't feed their families. The US doesn't give a flying fluff about their own people. Eventually and soon...playing that game leads to financial armeggedon.

I think we should start over, cause what is going on now sure isn't working ;)

we just need to annex canada already

I need to get over that wall

wait what? annex canada?

Maybe if you default on your debt and the US dollar goes to $0 we can buy the US with the billions of copper (material value in coins!) pennies everybody in canada has stashed...

something i hadn't thought of before qz :P that's mildly interesting.
from what i can tell, there's an estimated 200 billion pennies circulating in the usa. this is, of course, a mix of the pre- and post- 1982 coins, so there's no real way to tell the value of the metal, but we're not anywhere near fixing the debt with the metal :P

oh. i misread your post :p you're using canadian pennies to buy us.

:))

I wonder if the debt limit will be just like the last one in april or whenver, when tehre were 'hours left' supposedly and then bam they passed it heh

sigh.......how to get out of the mess......

step 1 - admit there is a problem
step 2 - realize the system is the problem
step 3 - stop listening to the economic mumbo jumbo - it got you there in the first place
step 4 - back to basics

U.S. Congress is a drama whore?

Ok, so we agree that it is not the reason for government to exist to take as much money as it can possibly take from the people. I think you will see that spending cuts were 6:1 larger than tax revenue increases for Canada to balance their budget. Take a look at the table I already posted Q, it shows that revenues, regardless of tax rates, are pretty flat compared to GDP, so why should we continually raise taxes when it won't help? All it does is discourage growth while it has no benefit of higher revenues. It goes back to the video I posted even higher above, businesses/individuals aren't willing to spend money when there isn't any reward. When the government can decide at a whim that suddenly all those investments you made are worthless, or maybe they decide that all those investments you made are now nationalized, what business will create wealth? Why would someone put their neck on the line only to be beholden to the whims of politicians?

The relationship between government spending on health and life expectancy is skewed at best and ridiculous to compare at worst. What do those countries with high life expectancy have in common more than anything else? Wealth. The creation of wealth allows us to live better lifestyles not the creation of government programs. The exact cultures of each country have much more to do with actual life expectancies than anything else. We live slightly shorter lives in America due to the lifestyles we live not because the government doesn't spend enough.

Crime rates, education and standards of living really have nothing to do with government spending. Our crime rates are 100% culture and could possibly be blamed on the government and their backwards welfare programs that have created ghettos throughout the country. We spend more on education than anyone and yet we fall behind many countries in all tests. Here is a good summary of that: http://www.oecd.org/dataoecd/54/12/46643496.pdf

Standards of living come with wealth again, not government spending.

"Now, maybe you just don't give a fluff about people and want to live in a gated community away from the rest of society; but I think more Americans care about their society as a whole - at least I certainly hope so."

LOL, so because I want freedom, I don't give a fluff about other people. This is the disconnect you aren't seeing here. If everyone is given more freedom, wealth will be created and everyone's boats rise with a high tide. It's the difference between splitting the pie equally and baking a larger pie. America has traditionally had a "bake a larger pie" mentality, until about 1932 when it started changing. Did you know we were the largest producers in the world by 1895? How could that have happened without government programs creating an atmosphere of safety? It happened precisely because government stayed out of the way. For an example I cite President Grover Cleveland when he vetoed the Texas Seed Bill in 1887. http://mises.org/daily/3627

What happened after that you may ask? The farmers received 10x what the aid would have been from government by way of charity. Private charity. Almost anything the government does domestically can be done better by the private industry. Want to fund abortions? Create a charity and money will roll in. Want to help the poor? We already have charities and churches all over and they do a better job than creating section 8 housing ghettos. Want to feed the poor? Countless organizations do that already and again do a better job than the government. Do you know why they do a better job? Because they actually care. They are actually spending a limited(not unlimited) amount of money that was not received through lobbying, but through people and if they don't prove the money was worth it, they will cease to receive more. They compete with other such organizations which only increases their efficiency. The government throws more and more money at it hoping it will solve the problem, but it only increases corruption.

You want to find the largest culprits for regulations, look to the largest businesses. Clearly regulations must benefit big business, just check out the history of US Steel. Look to the banking crisis and by your own admission government was bought and paid for by the banks(I don't necessarily agree, but my viewpoint has an even more negative view on the governments involvement). What you cannot see is that government, so long as it has the power, will always be a corrupt force that has it's own best interest at heart rather than the people. Would you agree that medicare is treating citizens better than private insurance? Did you know that many doctors are refusing medicare patients because the repayment is either so small or delayed that they cannot run their business if they accept medicare patients? Would you agree that welfare and affirmative action has essentially placed the African American race back into economic slavery? Did you know that African Americans had a higher employment rate in 1960 before the civil rights act than they did after in 1970? How many millions of people will live on welfare their entire lives and have their kids follow in their steps because of how the welfare system is set up? How successful is a welfare program that keeps people on the dole for generations? Our education system throws more money at the problem than anybody, yet we cannot compete on any standardized tests with many other countries. Why? The intentions of liberals are honorable most of the time, but the actual consequences of their actions are usually disastrous. FDR wanted to help the poor and unemployed with his New Deal yet it kept us in the great depression for about a decade. Can you name any other time in our history where we had 10 years of bread lines in this country? Even the author of the New Deal said it was a failure.

I could go outside our borders and show where communism gets even worse, but I would hope that all here see communism as the failure it is so I do not see the need.

If I go back to the revenue question, if revenues remain relatively flat, why raise taxes? Even Pang admits that it was common sense to lower taxes after WW1 (which created a boom in the economy). Though he wouldn't admit it, his logic must lead to the conclusion that tax cuts led to the boom whether by spending side on government or supply side in private industry. Without that logic would be to admit that should the tax rates not been lowered we still would have had the roaring 20's. It seems that was not occurring since the recession of 1920 was proving to be worse than the crash in 1929.

In the end my logic is as follows: Keep the government small and create an atmosphere that will foster economic growth.

Your logic would be: Use government as the central pillar for economic growth and create an atmosphere for economic equality.

The only problem is that government is the antithesis of production and thus economic growth and wealth. Stagnation occurs and a slow death is what ensues afterward.

whew, sorry that was so long, my mind got running and got away from me.

lol braden, maybe what we need is another world war.

it worked for fdr. i mean, it's at least worth a shot, isn't it?

http://en.wikipedia.org/...enue_as_percentage_of_GDP

This would tend to suggest that different taxrates lead to different chunks of GDP; look at the continuum there! Canada takes in 32.2%, US takes in 26.9%; that's a pretty significant difference; I suspect if you adopted Canada's policies, you'd end up with similar numbers. (I believe this is more than just federal btw)

Furthermore check this out:

http://www.deptofnumbers.com/...nue-as-a-fraction-of-gdp/

that seems to suggest that tax revenues peaked (as a % of GDP) *RIGHT* before the bush tax cuts. That looks far from constant to me tbh.




This is a logical fallacy; what if you lowered it to zero? would GDP be infinite? What if you raised it to 100%? would you still only take in the same percentage? It makes no sense, and is mathematically impossible.





Isreal, Slovenia, Portugal, Cuba, Chile, Costa Rica, Greece... these are countries you would compare with the wealth of the US? Unlikely; I think it's more that they spend enough; Lifestyle is a part, sure, but government can influence lifestyle too, and probably has a responsibility to do so.



The problem with this, and with most republicans, is that it's always an "X is better, always!" point of view; Is there not too much freedom? What about no government, ie Anarchy; would that lead to more wealth creation, and everybody's boats rise? There is necessarily a point at which society as a whole gets worse with less governments.



Just like in China; do you envy the Chinese labourer who throws themselves out of their dorm windows? Do Americans want to live like that? Safety measures save *society* a lot of money, not the corporation, unless you put in government regulations that puts the burden of cost onto the corporation, so that they have a financial incentive to keep their employees safe.



So, like Canada (well alberta anyway), tax casinos & alcohol and give the money directly to charities &such organizations!



TBH I don't fully understand the insurance / doctor stuff in the US, being Canadian; all I know is that when we travel there, everybody recommends buying travel insurance *because if you get hurt in the 'states, you are SERIOUSLY fluffed*; In Canada, just about anything considered essential is covered, and if it's not it's reasonably cheap (compared to anything out of the states). And most people have private insurance as well, but it's something like Blue Cross -- which for families can be had for something like $85 a month, for a well covered plan (in low income brackets-- higher income bracket you pay more, $115 or so)
I go to the doctor for things like.. being sick; I get a prescription, I walk out of the doctors office -- I don't have to pay anything; I go to the phramacy, get my antibiotics for $50-$150 (depending on how exotic it is) and I go home.




The welfare system is a hard one, because I can recognize that it's horrible, but it's hard to see a better way to do it; other than perhaps giving people menial government jobs doing something like... building highways, but for minimum wage... or any other of a million things the government could employ people to do rather than just give them free money. Admittedly child care could become an issue, but there could always be exceptions or alternatives. This sort of thing is more of a fundamental change in the system though; to just drop welfare would crush inner-city america I think, which wouldn't be good for your society as a whole...



Hard to say exactly, when you have millions of people transferring from government employment with 0 expenditures (in the army) to private sector, + burning their cash. After world wars is never a "fair" comparison, because the market forces at work are *completely* different than normal.






mmm, not quite; My logic would be... Use government as a tool to improve the health and standard of living of society as a whole.

So like, including otherwise-unprofitable research & dev, forcing changes in society through regulation (for example, encouraging higher-density living, to reduce driving and commute times and allow transit like in singapore); or, like Canada, maintaining a Health Care system that operates at 1/10th the per-capita expenditure of the US, yet with better overall results. Sure, maybe lifestyle is part of that, but that's something government regulations can influence.


If we could eliminate the income tax and sales taxes, and replace them strictly with a flat tax on assets & land holdings, while taking in the same percentage GDP, I'd be fine with that as well; just the Income tax currently favours the wealthy, as it can be used to shift the majority of the burden on to the middle class.



Most changes in the US tax system in the last 30 years have been about marginalizing the middle class; the "middle class" such as we know it has been shrinking, with more people being pushed below, and some people being pushed above; I suspect it's healthier to have a STRONG middle class, rather than larger lower class and small but strong upper class; And I would tend to use government and taxes and regulations to favour strengthening that middle -- there's a lot of tin-pot dictatorships in africa that can very clearly demonstrate why having a 100% discrepancy between your rich and your poor is a bad idea.

Also, I like long posts :) more to discuss :)

"So, like Canada (well alberta anyway), tax casinos & alcohol and give the money directly to charities &such organizations!"

this would not be charity, but instead government funded social justice.

if you want to give that income to social justice, so be it, the government telling you it's illegal not to (tax evasion) is not charity.

well, you don't have to gamble or drink....

???

when i buy a pack of smokes, i pay something like seventy percent tax. most of that money gets funneled into health care. my smoking now pays for your broken arm.

i don't have to smoke, and you don't need to break your arm, so.. ?

you choose to smoke, you don't choose to break your arm? :P

or did you fall down the stairs outside your house the other day and woke up smoking? :D

i'm addicted, i was thirteen and clearly not well informed. actually, i'm counting on a billion dollar lawsuit in my future, because i had no access whatsoever to any readers digests in the fiftys.. i was born in eighty six, for fluffs sake.

not to mention all the small business korean and indian convenience stores that sold me cigarettes when i was clearly a thirteen year old child, i mean, they clearly owe me restitution. I'm dying, as you read this, my life is ending. pain and suffering, anybody?

go earn money and then hand it to me. i won't argue. go earn money and then somebody else tell you to give it to me? we'll see if you argue.

Or you can send me thirty percent of your next pay cheque to prove whatever it is you want to?

dunno, i might chew it off if i can't get it out of the bear trap.

same people that complain about second-hand smoke killing them, probably wouldn't have a problem in the world teaching their kids how to toast marshmellows around a campfire.

i get bad looks while at a bus stop, outside of the ttc property, but on a hot day the air lingers, and I get looked at like i'm a fluffing nazi at dackau (inappropriate?) while in dead stopped stand still traffic eighteen dozen cars in my bullfluff vicinity are pumping out ungodly and deadly emissions.

and yet i'm killing them and their children, me, with my single fluffing cigarette? i'm not allowed to smoke around you with a child, your god damn child isn't allowed fluff and fluffing scream while around me. those filthy italians called it quid pro quo? i call it take into my consideration, or don't demand i do for you.

(i also out of basic politeness and kindness don't smoke around anybody who might not want it.. but if i'm eight feet away, and that isn't good enough.. i did what i thought i should, you can go to hell; i matter, too)

horribly inappropriate. dachau. spell it right.
:)

LOL. gotta be nuttz to smoke at a bus stop anyway. all it ever got me, was people popping out of the ground trying to bum a smoke. i was walking thru Vineland on Monday, and a guy across the street tried to bum a cig off of me because he couldn't see that i was smoking a cigar.

NJ Transit doesn't allow smoking at bus stops. i can wait till i get to a smoking section. might get expensive for my client if they move it too far from where i work.

i don't care, if they give me too much crap, i won't tell them to go to hell, i'll send them there.

http://www.cdc.gov/...r/lung/statistics/age.htm

i think y'all are full of poo-poo ca-ca. looks kinda like just getting older exposes you to a higher risk of getting cancer. quit aging ya bloody noobs.