Hell to the Chief

Well I agree, let's get rid of all the bush era tax cuts. My taxes went down $2k a year for the past ten years.. and it's gonna cost me $3k?? $4k? per year to pay it off? And for how many years?

George H.

The Repubs have maneuvered him into an absurdly damaged position. He made it so easy for them that they hardly had to try.

Interesting times.

John

Keeping tax rates seemingly low while continuing apace with unprecedented spending is extra-destructive, we agree. It's not like we don't know we'll have to pay that money back, plus interest.

Meanwhile, total personal income tax revenue was $900 B in '09. The confessed deficit was $1,400 B.

Doubling everyone's taxes still wouldn't balance the budget, not even close.

This chart showing revenue and spending sources is to scale: (view in fixed font)

=3D=3D=3D=3D=3D=3D 2009 =3D=3D=3D=3D=3D=3D

$3.5T .-----. |_____| Everything else | | Defense ($636B) $2.1T |_____| .------. ------->|_____| Interest ($199B) |------| | | Welfare (~$550B, estimated) |SS tax| |-----| |------| | | Medicare + Medicaid ($679B) |income| |-----| | tax | | | Social Security ($659B) '------' '-----'

Income Spending

So, ultimately, as the Debt and Deficit Commission pointed out, we have a spending problem, not a taxation problem. This level of spending can't be paid for, not even with insane levels of taxation.

Curiously, the White House / Republican compromise *raises* spending by roughly 5%. That's unhelpful.

We should cut federal spending, and cut across the board, for starters. Germany's doing it, the UK's doing it, why can't we?

-- Cheers, James Arthur

What if we're on the downslope of the Laffer curve?

Actually, with some taxes we are (corporate income and FICA) and some we aren't (sales, gas taxes). But politics demands that we tax the wrong stuff.

John

On sales taxes we are behind the curve, big time. You and I as business people can't do it or just won't, but Joe Q.Public does it all the time: They check out TVs at a local big box store. Then they go home and scope out prices on web sites. But only the ones that have free shipping and are out of state. On a plasma TV the difference between paying and not paying can easily exceed $200. That's serious money. Also, take a look at license plates of big fat RVs. There's a clear pattern there.

...

I'm not sure what to do about taxes. Raising taxes in a recession is bad policy, but OTOH not raising and pretending like you still have the money is even worse.

Really, we simply must stop spending. There is no other solution, not with our current numbers.

As a 2nd order effect, what we're spending money on right now suppresses growth, destroys jobs, etc., so doing less of that will improve revenues all by itself.

($3.5T / $2.1T) =3D $1.67 the feds spent per dollar in income. If we weren't doing that, we wouldn't even have to worry about this stuff.

-- Cheers, James Arthur

It's almost the opposite, at times, in business -- I'm constantly amazed at how much more expensive simple little things like pens and markers are at places like Staples vs. Wal*Mart... yet I've yet to work anywhere that Wal*Mart was considered an acceptable source of office supplies. Strange...

Granted, Staples has a much larger selection, but why spend the extra money at a speciality store if you don't have to?

We need a Federal sales tax.

John

Sure. 900% salex tax will provide everyone with free housing and healthcare...

Agree about the spending, but more people with good jobs would not only bring in tax revenue, it would reduce government costs. The current tax structure is ideal for killing productive jobs.

An amazing mantra lately is that "consumer spending drives the economy". The argument is that government spending creates prosperity from some multiplier effect or other. Everybody will be happy if those tightwad consumers, including the ones on unemployment, would just go out and buy Chinese stuff. Makes no sense to me. 98% of economists are profound idiots.

John

Staples delivers to the door, and raises fewer questions with the tax authorities, since most of the stuff they sell is useful only for businesses.

If Walmart.com delivers to the door there's a lot less reason to avoid them, though. I sure don't want to spend money sending an employee to line up at Walmart or Costco just to save a nickel a pen.

I'm not so sure that's quite as much the case anymore given how many laptops, eBook readers, digital camera, Bluetooth headphones, GPS receivers, portable hard drives, batteries, and other bits of technology they sell.

(Same with Costco -- although a lot of business people shop there, I suspect these days more of their revenue comes from non-business-related purchases.)

Wal*Mart will gladly ship orders to your door.

Yes... you need a decent-sized order before that would make any sense.

---Joel

When it's not a boot, it's a boa constrictor around the economy's neck. All that would be better, though, if the amounts taken were smaller.

Because deficit spending is effectively taxation, just deferred, I prefer to just be honestly taxed. But, I'd prefer it even better if they spent less, wasted less, so we could be taxed less.

That part's true--they're the 'demand' part of 'supply and demand.'

That's the Keynesian multiplier, the idea that giving a dollar to hapless Joe, unproductively employed, buys bread from the baker, who buys screws at the hardware store, etc. Nancy Pelsoi adds all the benefit of those transactions and concludes that $1 in food stamps adds $1.84 to the economy, and is a great stimulus.

Keynesians add the benefits, but omit that there's a similar trail of harm working backwards, that gov't took that dollar from hardworking Tom, who then can't buy that pair of shoes, which hurts the cobbler, etc.

There are other losses. Obviously, the money isn't transferred 100% efficiently. Further, the gov't pays higher wages. And, harm is done because the money was taken from a productive, good use (as measured by Tom's success), and re-allocated to a more dubious, politically decided use.

The net result is that 2-3 useful jobs are destroyed for every new artificial job created. 'Stimulus' by redistribution destroys jobs, period. It also distorts demand, inefficiently allocates resources, etc. All bad.

Me neither.

Bernanke's bent on driving us out of cash, thinking that the threat of devaluation (inflation) of our savings will send us all on buying sprees, stimulating the economy.

-- Cheers, James Arthur

at

True, I never understood that either. For my office I buy at Walmart if they have it. But only at odd hours because I don't like to stand in line, since their lines can be slow.

You've got to keep good records, then they can ask all the questions they want.

They do here. Just order online and select the home delivery option. They do not care whether that is a business or not.

I wouldn't either. But you don't have to. Not much different with office stores though. You might save 5mins because of shorter lines but you lose that again by having to go a few extra miles. Our next office store is almost 15mi away, Walmart is under 10mi.

Yet another tax? On top of all the taxes what we already pay? Absolutamente not.

Yes, absolutely! And tax the sales of stocks, bonds, futures, securities, and all that Wall Street stuff.

_THAT_ would nail "the rich," by golly!

And when some guy buys a corporation for $100,000,000,000.00, he pays $23,000,000,000.00 in Purchase Tax. >:->

Cheers! Rich

Some guy in a hot-air balloon gets lost, so sets down in some nice big grassy field. Somebody runs up to him, having noticed the balloon, and the guy asks him, "Where am I?" guy 2 answers, "You're in the middle of a big green field." G1: "You must be an economist." G2: "Why do you say that?" G1: "Because your answer is precisely accurate and totally useless."

Cheers! Rich

Nope, he buys a corporation in Asia instead, moves lock stock and barrel to Singapore -> problem solved. Which is what every person with savings will probably do in one way or the other because, obviously, they do not want to be double-taxed.

You give the Republicans way too much credit.