Comments on: Looking at the deficit commission’s tax plans A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: kelvinator Sun, 14 Nov 2010 17:24:34 +0000 Yes, Dan, like mattski, I can’t agree with your view – I consider it part of the “free markets as religion” myth – that if we could only have a truly free market in health care in the US, costs would go down and the benefits would flow to all. In this view, it’s the gov’t regulation that’s the problem, rather than, for example, the immoral behavior of insurance companies which mutually agree to enact laws prohibiting int’l purchase of drugs, not to insure people who are sick and find ways not to pay insured people with valid claims. Anyone who looks at capitalism with clear eyes historically sees that corporations have always represented a pure profit motive only, and aren’t a good way to structurally embody humane values – they never have been. Structurally, by definition, they are capital looking for returns with very limited liability (responsibility) – organizations looting for booty based on projections of return on capital, restrained only by the particular morality of the people who happen to be in charge (until they’re fired for not generating enough profit) and by strong laws defending the common good – eg don’t poison the rivers, etc. For as long as capitalism survives in its current money-as-religion form, which I think may be shorter than most imagine, it will always be finding a balance between the free market ethic and “the nanny state” as you say. Without something like the nanny state, including, for example, unemployment insurance and social security in the US, capitalism might well already have been destroyed here – the people wouldn’t tolerate the uncaring brutality of its “dark side”. It might have been destroyed in the depression if FDR didn’t enact the very “nanny state” provisions that are now steadily being disassembled. Without doubt, I agree an overly intrusive state has a dark side too. But truly free and unregulated, intense concentrations of money and power build and corrupt the operation of the both gov’t and the “free” market itself and become monopolies under any form of gov’t. As Adam Smith himself said, paradoxically, monopolies distort and destroy the beneficial operation of free market capitalism. High prices don’t come from laws made by a gov’t that is “of, by and for the people” – they favor the businesses that charge the prices and pay politicians to have the laws enacted.

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.

By: mattski Sun, 14 Nov 2010 14:58:37 +0000 Dan Hess, the free market doesn’t work well for health care. Health care is not a commodity like cars or houses or apples. ive/2009/07/an-interview-with-kenneth-ar row-part-two/22279/

By: TFF Sun, 14 Nov 2010 12:55:32 +0000 The demographic issue is huge. That is what took down Japan’s economy (not a failure in education or work ethic!). Europe faces it next, and China isn’t far behind (though so much of their population lives in poverty so it might play out differently there). The US is actually the youngest of the big economies, if only slightly. (Thank those teen mothers and Mexican immigrants both legal and otherwise who make up a significant portion of our birth rate these days.)

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.

By: DanHess Sun, 14 Nov 2010 06:52:36 +0000 @kelvinator —

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.

By: kelvinator Sun, 14 Nov 2010 01:55:22 +0000 TFF – I agree that “class warfare” is overly simplistic, but it’s a good summary what’s been going on. The point of view of the richest in this country has, by design, had powerful influence on the American narrative since 1980, and that narrative declared war against social institutions that have supported ordinary people since their lives were shattered in the depression. It’s true, Baby Boomers did indeed pawn the future to support their profligate lifestyles. They were a big part of the electorate that bought into the overarching idiocy and hypocrisy of Ronald Reagan’s “Morning in America” baloney: Americans can all have endlessly grand lifestyles, don’t need to conserve energy, can cut government, kill gov’t regulation, kill unions and somehow prosperity for all will be funded by the ingenious natural machinations of the free market. Anyone paying attention is now seeing how that’s worked out; the free market is fine, but the thievery set loose by the lie that money and unregulated free markets should be our religion has been demonstrated over and over again. In fact, Reagan, while cutting regulations, greatly expanded taxes, government and debt. The unsustainable boom of prosperity since his term was driven by the largest public and private debt bubble – biggest credit card overdraft – in history over the last 40 years – the debt graphs, which can easily found online, are mind boggling. Debt growth is just now starting to fall out of the vertical exponential blow off phase. It’s been the grandaddy of Madoff ponzi schemes. That’s why the Fed as of Friday is now printing out of thin air every dollar the gov’t is borrowing – and they likely won’t be able to stop, regardless of what they say. The massive bubble is now popping, and I think the ultimate impact on US society is going to be well beyond what most people imagine – certainly much more than a generational storm.

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.

By: TFF Sat, 13 Nov 2010 20:43:45 +0000 Pete_b, the most significant Schedule A deductions are tied to home ownership. If you rent then you don’t get a mortgage-interest deduction and you don’t get a property tax deduction. State income taxes plus charitable contributions could conceivably top the standard deduction, but in many cases (especially for incomes in the $100k-$150k range) they do not. Doesn’t take much “luck” to figure this out, I agree. Simply familiarity with the tax code.

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.

By: kelvinator Sat, 13 Nov 2010 17:18:14 +0000 The discussion of taxes and government in this country has become pretty insane in the last couple of decades. It seems to me that class warfare has been quite real and that the WSJ, while providing useful information, is also one of the mouthpieces of the upper class financial mafia in this country. Wall Street controls gov’t to such an extent that it used hard earned taxpayer money to bail out and guarantee $12 trillion or lost by speculators who produce, as we’ve seen, virtually nothing real, and who engaged in systematic fraud very akin to Bernie Madoff. I’ve been a financial advisor for many years and had a clear enough, blow by blow view of Wall Street fraud to see the financial crisis pump and dump coming and save most clients from losses. I’ve followed every detail of this on-going crime for years, starting with Ronald Reagan’s “S&L deregulation” inside job 20 years ago that also cost taxpayers hundreds of billions.

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.

By: pete_b Sat, 13 Nov 2010 16:42:12 +0000 DanHess,

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)?

By: TFF Sat, 13 Nov 2010 16:30:33 +0000 Libertarian, federal revenues need to come in between 15% and 21% of GDP based on our present budgetary expectations. Only way to get below that range would be massive cuts in the entitlement programs (especially Social Security and Medicare).

Some slick charts here: 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: 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.

By: Libertarian1976 Sat, 13 Nov 2010 14:43:05 +0000 What happened to all the discussion of a flat tax? It would be interesting to see someone with the access to data to look at Dept of Revenue filings and evaluate the calculation of a 5%, 10% flat tax on GROSS income, no dissemination of capital gains or earned income. No deductions, including health care and mortgage interest. Assume the same for corporations as well.

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.