higher taxes don't make you competitive or balance your budget - Page 2 - U.S. Politics Online: A Political Discussion Forum

jviehe · #16 (**permalink**) 09-15-2008

Quote:

Originally Posted by skeptic1

Assuming a balanced budget (Ha Ha) tax budget 2005-6

In billions

Corp. Tax 33

Other 7

personal 107

SOC 39 ( 1/2 personal)

Consumption 49

Tot 235

could personal taxes stand an increase ?

As costs go up consumption goes down (except in fairy land)

I have no clue what you just said.

TSGracchus · #17 (**permalink**) 09-15-2008

Quote:

Originally Posted by Stapo

Have I said that? Nope.

Well, if you didn't, then I fail to see the point in what you DID say. If we can't solve the problem through tax policy, why are you discussing tax policy as a way to solve the problem?

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The only thing I'm saying is that taking away the tax burden on production/investment/income will lower our disadvantages, when it comes to the competition with low wage countries.

And what I'm saying in response is that this lowering of our disadvantages, while not nonexistent, might as well be for all the practical good it will do. And also, I'm saying that a tax on consumption will be an economic disaster (I believe you were also advocating one).

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Yeah, sure you are "right" (rather silly term in non-mathematical science matter)

No, it's not. Economics may not be a precise science, but it's not all matters of opinion, either. What you have recommended in this thread would be an economic disaster, and I can offer (and have offered) good solid reasons why I believe that to be the case.

Saying that it's "outdated," as if this were all a matter of fashion, isn't a substantive response. Saying "outdated or not, I'm still right," is an appropriate response to something that silly.

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I forgot that you said you believe to be so much more intelligent than the rest (was it 95%?) of the population.

More like 99%. However, that's not why I'm right here. I'm right here because our economy (and the global economy) are entirely dependent on consumer spending to remain afloat, and so any taxation that hurts consumer spending would be economically disastrous.

I understand what you're saying about being competitive in the global economy, but you have to recognize that we are competing with countries that use advantages we can't use without sacrificing over a century of hard-won labor rights. And even if we did that, the result would be an economic collapse that would make the Great Depression look like a three-day weekend. To even TRY to be competitive in a free-trade environment with China would be a national catastrophe.

There is really only one way to solve the problem: put pressure on China to bring their own labor laws up to civilized standards. We need to bring them up to our level, not sink ourselves to theirs.

erikvv · #18 (**permalink**) 09-16-2008

Quote:

Originally Posted by Stapo

I agree, in the globalised 21st century an intelligent taxation system can only be based on taxing consumption, rather than production/investment/income.

I essence I agree. But remember that the US does not have a collective system determining wages. If you would switch taxes to consumption without doing something about wages that would drastically reduced the purchasing power of the majority of the American working people, which hasn't had good growth anyway. In the US 65,5% of income is derived from labor, in western Europe it's 80%.

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These three are in the spotlight of international, globalised competition and should be sacred because of it.

Unhappily I don't see anybody being willing to take the political risk of trying to reform the current tax-laws into this direction, as just too many voters can easily get scared by it and as it would mean the reversal of the American consumer-backed society, back towards a substainale true investment/production growth driven one.

By the way are taxation loopholes a big problem in the US tax system as well?

jviehe · #19 (**permalink**) 09-16-2008

Quote:

Originally Posted by erikvv

I essence I agree. But remember that the US does not have a collective system determining wages. If you would switch taxes to consumption without doing something about wages that would drastically reduced the purchasing power of the majority of the American working people, which hasn't had good growth anyway. In the US 65,5% of income is derived from labor, in western Europe it's 80%.

Of course we have a system for determining wages. Its the free market. Switching to a consumption tax would increase purchasing power as the money previously being taken out of a paycheck and wasted by the govt would be put directly into the hands of the people who earned it. Eliminating embedded taxes and costs due to tax compliance would lower prices through increased efficiency.

TSGracchus · #20 (**permalink**) 09-17-2008

Quote:

Originally Posted by jviehe

Switching to a consumption tax would increase purchasing power as the money previously being taken out of a paycheck and wasted by the govt would be put directly into the hands of the people who earned it.

It's absurd to suggest that taxing purchases would increase purchasing power. Obviously it would reduce purchasing power, because it is a tax on purchasing power. A tax on something reduces it.

Stapo · #21 (**permalink**) 09-18-2008

Quote:

Originally Posted by TSGracchus

It's absurd to suggest that taxing purchases would increase purchasing power. Obviously it would reduce purchasing power, because it is a tax on purchasing power. A tax on something reduces it.

I can't speak for Jviehe, but at least for me a consumption tax based system is not about saving a wired consumption based economy or providing (imagined) purchasing power.

For me it's simply speaking all about taking (in the best case) nothing away from people's income and so to give them more/real choices what to do with their increased net-income and to place the burden of taxation on all products sold (not just the American made ones).

Anyway sure this could drive up the cost of some products, but at least people would have a choice whether to consume or not.

By the way how do you imagine this idea of yours to be implemented on a world stage(?):

Quote:

Originally Posted by TSGracchus

the way to deal with that is to institute policies that drive wages up, not to tax consumption..

jviehe · #22 (**permalink**) 09-19-2008

Quote:

Originally Posted by Stapo

I can't speak for Jviehe, but at least for me a consumption tax based system is not about saving a wired consumption based economy or providing (imagined) purchasing power.

For me it's simply speaking all about taking (in the best case) nothing away from people's income and so to give them more/real choices what to do with their increased net-income and to place the burden of taxation on all products sold (not just the American made ones).

Anyway sure this could drive up the cost of some products, but at least people would have a choice whether to consume or not.

By the way how do you imagine this idea of yours to be implemented on a world stage(?):

I dont bother reading anything tsgrachus has to say, but for me, the FT is about simplifying things to save people time and money, taking power away from the govt, treating everyone equally under the law, and enhancing privacy by reducing the amount of information you have to report to the govt about your finances.

TSGracchus · #23 (**permalink**) 09-19-2008

Quote:

Originally Posted by Stapo

I can't speak for Jviehe, but at least for me a consumption tax based system is not about saving a wired consumption based economy or providing (imagined) purchasing power.

For me it's simply speaking all about taking (in the best case) nothing away from people's income and so to give them more/real choices what to do with their increased net-income and to place the burden of taxation on all products sold (not just the American made ones).

Anyway sure this could drive up the cost of some products, but at least people would have a choice whether to consume or not.

What you said before was that you preferred it to an income tax because it would shift incentives away from consumption and towards savings and investment. Saying that it would penalize consumption and reduce people's purchasing power is another way of saying the same thing.

When you call it a "wired consumption based economy," you seem to be implying something that just isn't true. You seem to be implying that people have low saving rates because they're wasteful spenders. The truth is, people have low savings rates because real wages have fallen over the past few decades, and it is no longer possible to maintain a decent standard of living while also saving money, for most wage-earners. Another truth is, the economy NEEDS this level of consumption to keep itself turning. If people shifted their spending habits downward, without at the same time earning more money, the economy would crash.

If you set a consumption tax high enough to replace the current income tax, what would happen is that the percentage paid by middle-class people would increase, while the taxes on the rich would decline. That's because, as a percentage, the more money you make, the less of it is spent on consumption. (As an absolute amount the more you make the MORE you spend on consumption, but the increase doesn't keep pace with increases in income.) So the middle class, whose purchases are what keep the economy afloat, would have LESS money to spend/save/invest -- not more. The wealthy would have more, but with the economy tanking from inadequate consumer spending, they would have no incentive to invest it in job-creating ventures, because there would be no reason to foresee a good return to that investment.

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By the way how do you imagine this idea of yours to be implemented on a world stage(?):

It would have to be done by global economic governing institutions. It would require a change in focus in such bodies as the World Bank and the IMF, to reward responsible economics rather than old-style robber baron capitalism. A change in American trade policy so that we would reserve free-trade agreements for those nations that play by the same rules we do would help, but in the end the only solution is international.

Imperator · #24 (**permalink**) 09-20-2008

Quote:

Originally Posted by goober

Another, right wing spin piece from the WSJ editorial page.
Wow, states that have a well established population have higher tax rates than states that are growing.
Is that the cause or the effect?
Does it work through time also?
We had higher taxes in the 50s and more growth, higher taxes in the 90's and higher growth.
Yes the corporate income tax rate may be a problem now that corporations have become good at shifting their profits around to low tax jurisdictions. But you still need to collect the taxes to pay for the government, so when you advocate cutting a tax, if you want to do more than just whine about it, you should also indicate which taxes should be raised to offset the loss of revenue.

Spin piece? yes maybe that was just to much information for you to process. There’s nothing wrong with their numbers or their stance which you really never argue, just insist that its a spin piece with a throw away blurb regard the 50’s and 90’s vis a vis tax burdens is dishonest in that what the global markets were in the 50s and what they are now with no connectivity as to how they operate etc. is to me a spin away from reality.

States over spend, they then crush the easiest victims at hand, biz with higher taxes killing tax bases and those states I might add that have right to work as opposed to unionized slants are more healthy over all than those that don't.

One would think after the last 20 years this would be evident, but no, its okay to burden biz and then hammer them when they cry uncle and move out, yea those greedy bastards, while the pols that destroy them are left to cast for votes by bloating the budgets further with measures that just bleed future incomes by having to pay the debt on those loans they take to satisfy their base.

California for instance is living this nightmare right now, I have seen it up close and its ugly and is not viable. For Christ sakes they passed a budget where in they are borrowing against future income taxes and making folks, small biz, all of them pay quarterly tax earlier to close a gap...wtf? if anyone in that boat packs up and leaves the state , or moves offshore, what? they are greedy bastards too?

Stapo · #25 (**permalink**) 09-20-2008

Quote:

Originally Posted by TSGracchus

When you call it a "wired consumption based economy," you seem to be implying something that just isn't true.
You seem to be implying that people have low saving rates because they're wasteful spenders. The truth is, people have low savings rates because real wages have fallen over the past few decades, and it is no longer possible to maintain a decent standard of living while also saving money, for most wage-earners. Another truth is, the economy NEEDS this level of consumption to keep itself turning. If people shifted their spending habits downward, without at the same time earning more money, the economy would crash.

People are wasteful spenders and instead of adopting to lower levels of income, they went into financing their "wanna have it all, now" lifestyle with debt.That's not substainable economic behaviour and every economy based on such an illusion is doomed to fail.

Anyway wonder how the poor Chinese can maintain a high saving rate, given their lack of anything worth to be called decent living standards

Quote:

Originally Posted by TSGracchus

It would have to be done by global economic governing institutions. It would require a change in focus in such bodies as the World Bank and the IMF, to reward responsible economics rather than old-style robber baron capitalism. A change in American trade policy so that we would reserve free-trade agreements for those nations that play by the same rules we do would help, but in the end the only solution is international.

In my book there is no international solution for your desire to drive up wages/salaries in the USA. Anyway the only (terrible) solution for the problem you have detected I can imagine is, if we were all singing the Internationale.

TSGracchus · #26 (**permalink**) 09-20-2008

Quote:

Originally Posted by Stapo

People are wasteful spenders and instead of adopting to lower levels of income, they went into financing their "wanna have it all, now" lifestyle with debt.That's not substainable economic behaviour and every economy based on such an illusion is doomed to fail.

But the U.S. economy isn't a stand-alone, and its role in the global economy is as a consumer. Without American rates of consumption, the entire thing would come crashing down.

Suppose you're in business, manufacturing, say, MP3 players. Suppose all of a sudden people forego buying MP3 players in order to save money. What happens to your business?

This is oversimplified, but across the board it holds true: people have to keep spending at this rate or the economy will crash. What's more, the economy as it's constructed at present, with manufacturing largely being done by sweatshop labor in poor countries, people living in the advanced economies have to consume MORE than a reasonable share to make up for the fact that the sweatshop workers literally can't.

I agree that the setup is unsustainable, but by addressing only one part of it, and not the most crucial part at that, you are not proposing a workable solution.

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Anyway wonder how the poor Chinese can maintain a high saving rate, given their lack of anything worth to be called decent living standards

It's not that Americans can't survive if they consume less and save more, it's that without maintaining a high standard of living -- higher than is compatible with a higher savings rate -- the global economy would go into depression. So we're encouraged by advertising, as well as government policies, to consume instead of saving. And because at the same time real wages have fallen over the past few decades, the only way for people to do this is not only not to save, but in fact to go into debt.

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In my book there is no international solution for your desire to drive up wages/salaries in the USA.

As the problem is international in nature and scope, so must the solutions be. Either there is an international solution, or there is none. If there is none, then the global economy, and the U.S. economy along with it, is doomed. Perhaps that's the case, but I'm not prepared to give up just yet.

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Anyway the only (terrible) solution for the problem you have detected I can imagine is, if we were all singing the Internationale.

Good grief, not that strawman.

I don't think we're going to see a resurgence of Marxism any time soon. However, some degree of regulation and moderation of the free market is indeed necessary, yes. If you want to call that socialism, fine. Every advanced economy in the world incorporates socialist elements into it for a very good reason: it's necessary. It works.

chrisl · #27 (**permalink**) 09-20-2008

Quote:

Originally Posted by Imperator

California hasn't even passed a budget yet, many weeks into the fiscal year. The Democrats in Sacramento have proposed a series of new taxes on businesses and individuals with incomes above $1 million. Their plan would raise the top income tax rate to 12%, which would be the highest in the nation. They would also repeal a tax law allowing businesses to carry forward losses against future profits.

California is one of three states requiring 2/3 majorities to pass budgets. Unsurprisingly enough, they've failed to pass the budget on time 13 out of the last twenty years.

While a nonsensical rule, the failure to pass a budget on time has nothing to do with tax rates.

Much of California's budgetary mess boils down to what requires a 2/3s majority to do and what they do not. Borrowing is easier than paying for it, which is stupid.

Imperator · #28 (**permalink**) 09-20-2008

Quote:

Originally Posted by chrisl

California is one of three states requiring 2/3 majorities to pass budgets. Unsurprisingly enough, they've failed to pass the budget on time 13 out of the last twenty years.

While a nonsensical rule, the failure to pass a budget on time has nothing to do with tax rates.

Much of California's budgetary mess boils down to what requires a 2/3s majority to do and what they do not. Borrowing is easier than paying for it, which is stupid.

who said on time has anything to do with taxes? it has to do with the negotiations and I think the 2/3 rule just saved native Californians a lot of money, so forgive me if I disagree....

Angry American · #29 (**permalink**) 09-20-2008

Quote:

Originally Posted by Imperator

Well, as to higher taxes, as a sop for fiscal health well, as usual more proof is always required to reinforce this every once in a while.

The fed corp tax rate of 35% is by now not only a dinosaur but a travesty. Every competitive nation the planet has a lower corp tax rate, but no, we are supposed to believe that American goods can compete and the jobs that produce the a product to stay here even when when a co. in say Ireland (12.5%) builds a like product and we are undercut because thy can outbid us for a market. Reducing the corp tax rate is NOT a Biz. conspiracy; it’s a common sense issue, having to overcome a 22.5% addition to profitability is, well stupid and anti job, as co.’s have zero choice but to move offshore.

How Not to Balance a Budget
September 13, 2008; Page A12
Anyone who thinks the path to "fiscal discipline" is through higher taxes ought to look at the current budget spectacles in New York and California. The two liberal states have among the highest tax burdens in the country, yet both now find themselves with huge budget deficits and are debating still higher taxes to close the gap.

California has the highest state income tax rate in the country (10.3%), while New York State also has a high income tax rate (6.85%), with the combined state and city rate rising to 10.5% in New York City. Their overall government spending totals also happen to top the national charts. And, what do you know, California is $15 billion in the red this year while New York is trying to close a $6.4 billion 2009 budget hole, which budget expert E.J. McMahon of the Manhattan Institute expects to grow to $26 billion over three years.

California hasn't even passed a budget yet, many weeks into the fiscal year. The Democrats in Sacramento have proposed a series of new taxes on businesses and individuals with incomes above $1 million. Their plan would raise the top income tax rate to 12%, which would be the highest in the nation. They would also repeal a tax law allowing businesses to carry forward losses against future profits.

In August, Governor Arnold Schwarzenegger abandoned his promise not to raise taxes and proposed a hike in the sales tax -- by one percentage point for three years, which would bring the rate in many cities to as high as 9%. California taxpayers are fortunate that state law requires a two-thirds majority to pass a budget, which gives Republicans in the legislature leverage to block these tax hikes. They realize that these budget showdowns are the only chance they have to force even modest spending restraint.

A similar mess is playing out in Albany, where Assembly Democrats and Republicans have passed a budget with two added tax rates. Millionaires would face a one-percentage-point rate income tax hike (to 11.5% in New York City), while anyone making more than $5 million would get hit with another 0.85-point hike (to 12.35% in NYC). A new business tax of 4% would also apply to hedge fund managers.

The politicians who want all these new taxes are the same ones who scratch their heads and wonder why so many hedge funds are already based in Connecticut, or why Manhattan is losing its status as financial capital of the world. So far the only voice of reason has been Democratic Governor David Paterson, who has attacked the tax increase and wants spending cuts first.

Mr. Paterson knows what he's talking about, as New York State spending has climbed by 45% in the last five years, according to the Manhattan Institute. As for California, its spending soared to $145 billion in 2008 from $104 billion in 2004. Every time the politicians raise taxes, they merely lift their spending by as much or more, and then plead poverty and demand another tax hike during the next economic slowdown.

The "progressives" who dominate politics in these states target the rich on grounds that they have the ability to pay. They also have the ability to leave. From 1997-2006, New York State lost 409,000 people (not counting foreign immigrants). For every two people who move into the state, three flee. Maybe the problem for New York is merely bad weather, not high taxes.

Except that sunny California is experiencing a similar exodus. Over the past decade 1.32 million more native-born Americans left the Golden State than moved in -- despite beaches, mountains and 70-degree weather. Mostly the people who have fled are the successful, the talented and the rich.

If taxes don't matter, then maybe someone can explain the divergent economic paths of California and New York and America's two other most populous states, Florida and Texas. The latter two states have no personal income tax. Personal income has been growing about 50% faster in Florida and Texas than in California and New York. (See chart.) This year Texas became the No. 1 state for Fortune 500 corporate headquarters. About a dozen of those 58 corporations once called New York or California home, and taxes are one reason they departed.

We realize that none of this will matter to the Sacramento and Albany politicians, whose only priority is taking ever more money from the private economy to feed their patronage interests. But perhaps it will serve as a lesson to other states that haven't yet embarked on this tax-and-spend road to red ink and slower growth.

How Not to Balance a Budget - WSJ.com

This begs the question, then why have CEO's compensation packages gone through the roof? Maybe if corporate officers didn't eat up so much of the profits companies would have more capital to be competitive, even without changing the current tax structure.

Secondly, I feel there should be a high corporate tax rate, which could be lowered based on domestic investments, in labor, manufacturing, and materials. For example, if you sell televisions in the United States and have domestic distribution and service, drop the tax rate to 25%. If in addition to domestic distribution and service, you also have domestic assembly, then drop the tax rate to say 15%. Then if you add domestic manufacturing to the mix, really deserving of the 'Made in the U.S.A.' label, then drop the corporate tax rate to 5%.

Now I'm no economist, but--IMHO--that sounds like a meaningful way to help make American companies be more competitive.

Thirdly if American companies would accept the costs of being a truly American company, they should reap the rewards.

But our government has to make being an American company much more attractive than being nothing more than just a facade of an American company that pays its corporate officers huge salaries.

Georgerufus · #30 (**permalink**) 09-21-2008

America is screwed because none of it people have any money. What value are those assets if they