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unfair.

But they do *already* pay more in absolute terms, even if as you claim they can end up paying less as a percentage of income. Or are you really saying that they consume so much more government-provided resources that they are a net drain compared to the less well off?

Only if you ignore the point I am making - higher earners already pay more in absolute terms even some manage to pay less in percentage terms.

Yes there are loopholes, and in fact I am generally in favour of closing the loopholes and of higher tax rates for the rich.

But I do at least recognise that they already pay more in absolute terms whatever loopholes may exist and whatever tax scheme is in force.

Put another way, your starting point seems to be than an equal tax rate is most equitable, and bemoaning deviations from that. But one could equally well start with the belief that an equal *absolute* contribution is most equitable, or alternatively that everyone should contribute in proportion to the government resources they consume.

They also don't proportionally "do better out of government services." a) Everyone benefits from lower costs, greater stability, etc. b) In the USA, 2/3rds of "services" are redistribution from high to low. IOW, 2/3rds is not benefiting those who pay, it's hurting them. c) The supposedly valuable "services" are quite a small part of our taxes.

The greater problem in America is that there is no level of taxation that can pay for Barack Obama's level of spending. We're spending roughly 1.6x revenue, with the biggest programs yet to come. Obama's promised more than we can pay.

Note that that simple fact is without even debating the value of what he's spending /on/, mind you. To that, I'd say he's spending on things that permanently reduce the workforce, reduce start-ups, bolster big companies, increase costs, poverty, and so forth.

That is, we're not purchasing investments, we're buying long-term liabilities.

James Arthur

Yes, that is what I was trying to say. Maybe they even do much worse, paying for private health care and education instead of state schools and hospitals, etc.

Well he's just following the republicans there isn't he, as far as I can see (from these far shores...). Only difference is that he at least wants to try to pay for some of it with some increased taxation.

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That last part is what PresBO implies, but it's incorrect. Unfortunately everyone talks in relative measures, and no one seems to understand the actual amounts and proportions.

Here's a capsule: first, Bush was spending more than we had. "Stimulus." Then, Obama added 28% /on top of that/ in his first two years, bringing us up to spending 1.6-1.7x(*) revenue. More war, more Patriot Act, more TSA, etc.

(*) The ratio improved slightly last year, but addt'l programs coming online (Obamacare) make that temporary.

Obama's tax proposals aren't serious revenue proposals, they're political ploys. Added together, if Obama got all the taxes he's proposed, it only covers 8% of his spending increases. That's why he talks about "fair share," and never about who's going to pay how much.

The truth is that he has to raise taxes 60%, which the economy could not survive.

And, he wants to spend more.

James Arthur

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They don't so much consume extra resources as derive extra benefit from the services that are provided for the community as a whole. Because their business activities and/or investments are on a larger scale than those of the less well-off, they put - for example - more traffic on the roads per head than people who are collecting lower incomes - the paragraph to which you are responding has already said pretty much exactly that, so why am I having to repeat myself?

True, but their incomes reflect a higher level of economic activity, which is - in part - facilitated by services which we all use and pay for collectively. They may be single individuals, but they represent the tip of a much larger economic ice-berg. Their higher incomes come

- in the end - from more extensive economic activity, and that loads up the infra-structure. Collecting income tax in direct proportion to income would reflect that.

In practice, we collect more from high earners than low earners for a very simple reason - the poorest have to take home enough money to pay for the food and housing that keeps them healthy enough to work and look after their kids. In most advanced industrial countries we subsidise the very poor to keep them alive and in a state where they could work if we could find work to give them. The system switches more or less smoothly from subsidy to very low taxation as income rises - you don't want people discouraged from working by poverty traps - and ramps up to something like a 60% tax -varying from country to country - on the highest tranche of earned income.

The UK and Sweden had a 95% rate on the highest incomes for quite a while, but that proved to be a waste of time. High earners got together with their lawyers and tax accountants and devised ways of getting to use money or services in ways that avoided exposing them to income tax.

So do I, but it doesn't really make sense to have a system where ten people earning $1M per year would be better off if they all signed their incomes over to one of their number, and got his accountant to pay all their bills.

It isn't.

A road is a resource, but do you "consume" it by driving over it, or by having the delivery vans that make you money drive over it? Heavily used roads wear out faster than lightly used road, but erosion is also a problem. The national defence forces are more valuable to people who are engaged in overseas trade than they are to people who only trade within the country, but trying to quantify benefit would be a nightmare. If you home is stuffed full or jewellery, expensive art object and high end consumer durables you get more benefit from the police force than do people with nothing worth steaaling ...

-- Bill Sloman, Nijmegen

Imagine a picture of Mandy Patinkin here. He'll be saying "I do not think that word means what you think it does." All flat taxes are non-progressive or anti-progressive.

It's also a matter of economic efficiency - due to to a concept called "the marginal value of money".

it's not necessary for it to be used to ameliorate "unfairness" if it's more efficient...

-- Les Cargill

Except that f you are turning over more goods and services, you benefit more.

How do you work that out? This is a technical question, and I'll be interested to see your answer.

But would they be better off if the service wasn't provided in the first place? Delete the national defence forces - are the rich then in a position to buy equivalent defences - for themselves alone - more cheaply?

Defence would be the biggest, closely followed by social security. Defence stops foreign invaders from ripping off your property - or at the very least, making it difficult for you to do business. Social security discourages the starving poor from doing the same thing on a smaller scale. The US doesn't spend enough on social security, and consequently has to spend a lot on incarcerating the more irascible members of the not-quite-starving poor.

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Perhaps not, but Keynesian pump-priming deficit budgeting isn't intended to be sustained for any longer than it takes to get the economy out of recession - which finally does seem to be happening.

Your accounting, not his.

Which is to say that you'd churn out the usual Tea Party political propaganda. Obama is not a Republican, so anything that is doing has to be bad, even when it was good when George W Bush did exactly the same thing.

America's GNP dropped by 25% between 1929 and 1933. The immediate consequence of the sub-prime mortgage crisis was an equally rapid drop in GNP which was arrested and - just - reversed, by Keynesian pump- priming.

An economy is rather more than the sum of it parts.

A 25% drop in GNP is lots of people going out of business, and lots of factories ceasing to work. You can't recreate a working business overnight, or start a factory running again by turning the power back on - the money that was originally invested in those businesses is gone for good.

You might not have been purchasing investments, but you were putting money into preserving existing investments - a point that I've made repeatedly but which never seems to register with you.

-- Bill Sloman, Nijmegen

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To put a finer point on it, (Bush + Democrat Congress) was spending irresponsibly, about 1.2x revenue, for "stimulus".

(Obama + Democrat Congress) added another 40%-of-revenue worth of spending on top of that, bringing our total spending up to a suicidal

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It's not suicidal if it works, and it seems to be working - US unemployment is down again, if only to 8.3%, but at least it's moving in the right direction.

Abstaining from stimulus spending would have been slightly more suicidal, but your perverse set of preconceptions blinds you to this.

-- Bill Sloman,

In economics 'progressive' and 'regressive' are technical terms with

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There's been some slight improvement since the Republicans took away one of the houses of Congress in 2010, but there are still about 5 million fewer people working today than when the stimulus started in

(I'm looking at the BLS numbers)(series LNU04000000, and LNU02000000. Type those IDs in here

You should love the housing bubble then--government bankers giving out Keynesian stimulus in all directions: the road to prosperity.

James Arthur

Well I missed you last few lines. And I think you missed that resources used by *companies* should be financed by *corporation* taxes, not personal ones.

As does corporation tax, already.

Well none of this really *costs* any more to provide for rich or for poor. Might as well say the rich derive more benefit from hospitals because their life is "worth" more :)

Of course the real reason the rich should pay more taxes is simply that they can afford to. Really the only point I wanted to make is that they

Hi Les,

Yes, I did know "progressive tax" has a technical economic meaning, That's why I clarified my "alternative" usage above. I.e., even a "non-progressive" tax still takes more from the rich than the poor.

You mean efficient as in maximising the size of the economy?

Thanks, had not thought of that possibility.

Yes alright sorry I upset the armchair economists here :)

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Correlation isn't causation - certainly not in this particular case. The recovery was going on before congress got infested with the Tea Party lunatics, and has continued despite their best efforts to sabotage it.

As I've mentioned before, their logic seems to be that continued recovery seems to offer Obama a good chance of re-election later this year, and that the electorate will be stupid enough to blame him if they can slow down or reverse the recovery - a rather negative program, even for Republicans.

This does rather skate over the fact that in 2008, a house price bubble was about to burst, and the construction industry was busy building houses that they hoped to sell at inflated prices, employing lots of people in the process.

You really don't understand Keynesian pump-priming, do you. It's necessary in a recession, but suicidally stupid when the economy is running at - or close to - capacity. Amongst other things it is inflationary, as employers raise salaries in an effort to compete for the services of the skilled workers that they all need, and price in an effort to get the goods that they all want.

And - of course - it's not sustainable, as you keep on pointing out, completely missing the point that it's a temporary measure designed to keep the economy turning over within striking distance of full capacity until investor confidence is restored, and only until investors recover the confidence to put their own money back to work to make more money, rather than keeping it in the bank, in the hope of being able to buy up the competition for ten cents on the dollar when their weakest competitor goes bankrupt.

-- Bill Sloman, Nijmegen

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Except that the US has one of the highest rates of corporate taxation in the world, and one of the lower rates of corporate tax collection. Corporations pay lobbyist to write corporate tax loopholes into irrelevant legislation, and the whole process of corporate tax collection is hopelessly arbitrary and irrational.

That one area where the rich don't derive any dramatic extra benefit. They get around more - having more money to travel and more need to talk to other people - and are thus more exposed to infectious diseases, but this won't scale with their income. Warren Buffett won't see 630 times more people than somebody making $100,000 per year.

Why did I need to mention it? It's blindingly obvious.

-- Bill Sloman, Nijmegen

Ah, defining sort of a "floor" function then? Okay. I had not deduced your meaning. Why, I shoulda - it's the Most Reasonable Explanation. For whatever the reason, progressive taxation is a good story for people in general - they like it.

I wonder if it's not "to those whom more has been given, more is required", paraphrasing that famous bon mot. It's one of the last remaining "duty" ... things in a very Liberal world of very individualistic people. Indeed, the *income* tax was designed partly to give people skin in the game and partly ( in the US ) to provide an alternative to taxes on alcohol to pave the way for Prohibition.

Since Duty is a *Conservative* value, it gets rather confusing...

In maximizing the velocity of money. We generally have more trouble when there's too little money flow than when there's not enough. Like right now....

The theory as I understand it is that this is a double whammy - not only can taxes be used in a modestly redistributive manner ( which is supposed to improve velocity - the poor spend more relative to income ) but it puts money more at risk for those who have it, and they'll supposedly be tempted to use it for productive things rather than hoard it.

As a person of means, the story goes that if the poor have more money to spend, chances are some of it will rub off on you by virtue of increased business.

This is a good story, but there's not a lot of empirical evidence for it. Obviously, it's hard to isolate factors out, and using something like correlated perturbation analysis ( X increased taxes and GDP went up faster ) is even harder. Curiously, most people say this most of Reagan, and hold that Kennedy *lowered* taxes and GDP increase went up. As engineers, we know that drill.

It's worth double checking my assertions for yourself - see what you think, really. I don't really know myself - it's something that's deeply ambiguous. It's a story, really, not a theory.

but social science is like that.

-- Les Cargill

I'd say "provided an easy target" rather than "upset" :)

-- Les Cargill

Upset is better.