Anyway, the real problem is global overpopulation and diminishing resources. Seems like the generational issues will end up being an important side story, but the population/resource issues will likely begin to become more and more disruptive lead story before too long I agree with you, Dan, that the developed countries are in decline, but I don’t see why you don’t include the US in that pack of decliners – although our demographics are a little better. Yee gods! As of this week, the US is now printing 100% of the money it borrows out of thin air. Last week, Richard Fisher, head of the Dallas Fed, told us this kind of financial auto-erotic fraud has historically destroyed countries economies. The problem is not just funding gov’t deficits due to massive overspending on “nanny state” programs. It’s that capitalism actually needs nanny state programs to be acceptable to people – contrary to the popular myth, the free market alone doesn’t come close to supporting a good life for the vast majority of humans, particularly in a world of limited resources and growth. It’s brutal, as we’re all in the process of finding out, as gov’ts make a massive effort to blunt the impact with monetary interventions and nanny programs. The only solution is really going to be for the great citizens (geniuses, entrepreneurs and pirates) who have amassed great wealth to be forced to share their monopoly on the Earth’s wealth and resources more broadly while everyone collaborates to plan a sustainable future, or for everyone to hunker in their bunkers and prepare for anarchy. Based on current politics and the in vogue propaganda that somehow brutally capitalist free markets are uncorrupt and will take us to a humane and sustainable future, it’s difficult to be hopeful.

http://www.theatlantic.com/politics/arch ive/2009/07/an-interview-with-kenneth-ar row-part-two/22279/

As a society, we’ve definitely strayed too far towards narcissism. Perhaps as a reaction to the Vietnam War and Watergate? People lost a lot of trust in government during that decade. The problems are not insurmountable, but we need to work together to “spread the pain”. The pain is inevitable, and grows the longer we wait. But we cannot realistically place the burden entirely on one segment of society.

Those are great lines. The problem is, most of the developed world outside of America is in genuine decline. Demographic decline, from which I don’t see an escape on the horizon.

I am not sure why it is, but it seems a nanny state sucks some kind of vitality out of a country on a very deep level. I am 50% Austrian and my wife is Japanese. To see these great nations and so many others in deep decline makes me sick to my stomach but the future will be much dimmer as a result. If you see Nigeria or Bangladesh neatly filling the gap, you are more optimistic than me.

Most people deep down want to have the dignity of taking care of themselves. They are proud of that and don’t want to be treated like children.

No, Americans aren’t fools being manipulated by rich overseers. Your opinion of Americans does not seem to be very high.

Yes, medicine is way too expensive in America, but see how competition is blocked at every turn. There is no free market in medicine. The AMA has long been a cartel limiting supply. Insurance regulation prevents competition across state lines. There is no clarity of pricing and even if there were people wouldn’t care because they have no skin in the game.

I admire people I’ve seen interviewed in Sweden who are happy to pay high tax rates because they realize it creates a society that is concerned about and supports the lives of all of its people. America seems to have become a society of small minded, selfish people believing in a Ronald Reagan myth that sounds good, but in fact is untrue, brutal and immoral – whose hospitals put sick people without insurance on the street, and which doesn’t retrain and employ people without a job, but leaves them to wander the streets as well. The US is the only advanced country without public health insurance – amazing – and look at the utter load of c**p that the rich have somehow successfully fed to the American electorate about why the US should not have health insurance for all – unbelievable – when delivering good quality public health care has been successful and much more cost efficient in every other developed country than the private system here. It’s been a well funded war, fought and won by the insurance companies, the Koch brothers and many others.

On taxes and spending, yes, hard decisions need to be made now. The question is, what values will guide the decisions? A society in which the poor and middle class admire and believe rich bandits instead of fighting for their own interests and to uphold the common good is at risk of evolving toward an anarchy that benefits no one.

Kelvinator, if you combine Social Security and income taxes, our tax system is only progressive at the very bottom. Once a household passes the median, its combined taxation on wage income holds pretty steady between 40% and 50%.

Even while in the 15% income tax bracket, individuals pay FICA tax (another 15% if you count the employer portion) and frequently find themselves in a “tax credit phaseout” window (adding another 5% or more). Add state income tax and you reach that magic 40%.

By the time the income tax bracket passes 25%, Social Security contributions are capped and thus the total marginal tax rate drops back a bit.

That said, I don’t think it is healthy to push marginal tax rates over 50% on *anybody*. I’ve already chosen to largely withdraw from the labor market because it doesn’t pay to work. (I pick my hours and work for a charitable organization at a below-market salary.) Surely there are others in a similar situation?

But is it “class warfare”? Or “generational warfare”? The Baby Boomers pawned the future to support their profligate lifestyles and now are VERY CONCERNED that Social Security and Medicare might be “deprioritized”. Read “The Coming Generational Storm” by Kotlikoff for an interesting perspective.

And, of course, is there really any question who’s winning the class war, because they’ve made successfully fools of the American electorate? The notion that the richest Americans, who even now are back-ordering $800,000 watches in Beverly Hills – should not pay much, much more taxes on a percentage basis than the middle class and that the government should be done away with instead of replacing corrupt liberals and conservatives alike and taking back its role of representing the overwhelming majority of common people against the power elite is absurd beyond belief. When gov’t becomes an instrument of the rich, it’s fascism, and that appears where we are headed if tea partiers in Tennessee actually believe they should advocate fewer gov’t programs and tax cuts for the mega wealthy.

You said “Good luck finding a high income earning [sic] that does not use itemized deductions!”.

But you also quoted from an article that said “seven out of every eight households with income over $100,000 itemized their deductions”.

If by “high income” persons, you are talking about the same people described in the article, then fully 1/8 of such houeseholds – 12.5% – do NOT itemize. How much “luck” do you think is required to find a member of a minority that comprises double digits of the population (of “high income” earners)?

Some slick charts here:
http://www.usgovernmentrevenue.com/feder al_revenue

The income tax is roughly 50% of the total (believe this combines personal and corporate income taxes), while social insurance taxes (mostly Social Security and Medicare) make up another 40%. The other revenue sources are comparatively minor.

You could replace the income tax with a 10% flat tax on gross income, however that would gut the EITC — a way of reducing poverty for the “working poor”. A more likely proposal (which has been suggested in the past) is a 15% flat tax with a substantial initial exemption so that households below the median pay nothing.

See Table #5:
http://www.taxfoundation.org/taxdata/sho w/250.html

Households below the median account for barely more than 10% of the AGI (and that doesn’t even count corporate profits). Exempting them isn’t costly and makes the system somewhat more fair.

I would still prefer a tax on CONSUMPTION rather than a tax on INCOME, however. This would obviate the need for tax-deferred college and retirement accounts because all tax would be deferred until it is used. A VAT is easy to administrate, harder to dodge with under-the-table transactions, and offers fewer loopholes.

And no, accountants aren’t going out of business regardless of the system… Calculating the AGI is most of the work, especially for people with complex situations.

The problem of course would be that thousands if not millions of tax accountants and lawyers would be unemployed as well, but wouldn’t it be great to know exactly what tax you are going to pay all the time?

On a similar vein, let’s let the states manage sales tax. If a flat tax isn’t enough for the Feds, then giving them sales tax power certainly isn’t going to help. States would then be on even footing on how they want to manage growth, either by taxing their citizens to death or managing growth.

Something definitely needs to change in our taxation of corporations. Evidence over the last decade, through a cycle of boom and bust, demonstrates that international corporations do not see any profit in investing in the US. They have been investing overseas and leaving their profits off-shore. There are several factors in play, but a 35% corporate tax rate is certainly a huge disincentive. I’m no fan of corporate giveaways, but we can’t force them to invest in the US. We need to establish a system where that is in their best interests.

And yes, a consumption tax (perhaps a VAT) makes a lot of sense and goes a long way towards reducing the perverse incentives that our present system creates.

Personally… and I know this may be unpopular, but I don’t think the purpose of taxes should necessarily be to maximize revenue. The gov’s job is to promote and protect the prosperity and well being of its citizens. If maximizing tax revenue compromises the well being of citizens, you don’t try to maximize it. Also… there is some social engineering. If you can guide the capital flow of taxes to create jobs, grow industries and spur innovation… or to protect the nation’s security… that is a valid use to me.

This would have the added benefit of bringing much of the underground economy into the tax system. Currently people who make money under the table get to keep it all and not pay taxes. This system would make it so that when they spent their money in the real economy they would pay into the system and we would get our share in taxes.