I was thinking about my remarks about the tax cuts for individual taxpayers that I wrote in my article on bank credit yesterday. I said:
One can argue about the necessity for budget cuts, but the fastest way to balance the budget is to reduce expenditures and reduce taxes which would ultimately yield more revenue for the government from a growing economy. It is still my opinion that growth will be flat and that we will be facing inflation, assuming the Fed continues to monetize federal debt. But money in our pockets will be more “stimulative” than if given to the government to spend. This is a huge, complex issue, which I will deal with soon in another article.
I will stand on those remarks but with a bit more explanation. The reality is that there is no tax decrease at all. Pretty obvious. It just continues the Bush tax cuts. While beneficial in an economic sense, it puts no new money into people’s pockets. I think I zoned out a bit when I wrote the above statement. It is still true that “money in our pockets will be more ‘stimulative’ than if given to the government to spend.”
On a similar topic, I am galled when I hear politicians despair over the fact that the rich are not paying their fair share or that this “cut” will cost we taxpayers money. What a crock. Two crocks actually. Here is the truth. The really rich, the top one percenters, pay 38% of all individual income taxes. The top 10% pay 70%. And tax cuts cost us? No, it is federal spending that costs us. When are these people going to understand that we don’t want our taxes raised? Cut the damned spending.
Curious, where do you see cutting the damned spending? Have yo looked at the Military spending? How about the security spending? How about all the loopholes? Of course, there is the Fed & its what ever it is they do spending, oh yes, they don’t spend, they just load @ or close enough 0 % interest, but only to the TBTF institutions. Perhaps infrastructure, which surely you consider a waste? AH, perhaps the easiest would be to eliminate the social obligations the Government presides over? That would cover a lot of territory, wouldn’t it? How about just. . . . well, an arbitrary figure, say, 60% of the American population to start, increasing to say 85% becoming homeless, jobless, thereby creating a dangerous precedent to those who have retained the power & influence? Of course, you have a choice, either move to a third world country, or continue to wait as this country becomes one, perhaps within this next decade? Something to think about.
You cut the damned spending by returning government to its constitutional purposes and shed unfunded programs that are none of government’s business.
Ah yes the “defense” bogeyman shines through again. I am a proponent of defense cuts included in across the board spending cuts, but if you look on a relative basis defense spending is NOTHING compared to government entitlement spending. Let’s be at least a little intellectually honest here. How about disbanding public unions? How about cutting the public sector workforce across the board by 25%? How about indexing public sector pay as a discount (10-20% to off-set lack of position accountability) to the equivalent private sector position? Let them take their “credentials” to the private sector and really see what a Phd in poli-sci will be valued at. How about job training programs instead of 3 years of UI benefits? How about attempting to efficiently allocate capital to education programs that are successful (or even yet, how about a real market based solution)? How about restructuring the tax system (how about letting EVERYONE pay something to take part in real allocation decisions)? How about getting rid of all defined benefit plans (SSN, etc)? How about getting rid of wasteful government organizations only designed to expand and consolidate government power(HUD, FCC, NEA, DOE, etc, etc)? There are so many ways out most of which are politically untenable to the majority of people unwilling to take personal accountability and the pain of overall deleveraging (ie, like the 1st poster).
Jeff, I propose we just write canned responses to every one of your posts. If it isn’t military spending, it has to be the lack of government regulation, or it could be because of the greed of corrupt corporations, or it could be that everything is “unfair” and some race/class/gender is being attacked by immoral strawmen.
Maybe this is the natural decline of a civilization. Everyone entitled to loot from the productive. It is pathetic and unfortunately it is the majority now.
Marco, I think this is the beginning of
a beautiful friendship.
what? 70% where did you gt that figure? seriously, i thought it was 38% according to wiki tax brackets for incomes over 1,000,000.00. please enlighten me.
What about the wall street shenanigans. I can’t believe they have totally reformed their character. why all the emphasis on the government for being the only problem. i do agree with you about the federal reserve. I had no idea that they elected people that served terms. that’s too scary.
i couldn’t sleep at night without the military and to give them credit,the government that is. they did freeze their salaries for 2 years.
what about the lobbying in congress to get the laws passed (or not passed) that corporate america wants. isn’t that counted. You got your tax package omg. I surely hope the economy will continue at a flat rate of growth. if so, technology innovation will help us in exports to keep it ummm flat.
38% is the tax bracket (39, I believe).
70% is the total share of government personal income tax, paid by the top earners.
You left out some other truths. The one percenters also bring in 25% of the income in this country. This is a huge disparity. Fact: after we bailed out the elite rich on wall street, they proceeded to reward themselves with huge bonuses. Now we are going to extend these tax cuts for these robber barons. How is that for a truth.
I do not see tax cuts working to grow the economy when we are deleveraging. Tax payers will use savings to pay down debt. Not to spend. I guess all you have to do is look at the tax cuts of the last 10 years and you can see where we have ended up. An insane person might ask for more tax cuts and expect a different result.
Yes we need to cut spending. No one thought that we needed to cut spending when the housing bubble was inflating. Remember deficits did not matter then.
Cutting spending while we are deleveraging will be a disaster. I am prepared for it. Most people are not.
Why are the “elite rich” only concentrated within wall street? I am by no means trying to squash anyone’s favored narrative but the bailouts hit the elite states, the elite unions (even gave them a car company by completely ignoring cap structure/bk priority), the elite universities, and especially the elite cleptocrat politicans associated with all these favored groups. The whole thing, in it’s entirety, was pure unadulterated state sponsored graft (welcome to Chicago writ large). Any other argument smells of simple class warfare.
Of course taxpayers will use the savings to pay down debt but that is primarily driven by the fact that the current administration continues a full frontal assault on the same issue for 2012. It was supposed to be about attempting to solidify certainty, and even though it could have, this administration once again snatched defeat from the jaws of victory. I would argue an insane person would actually formulate an argument claiming that tax cuts of the previous 10 years are the catalyst for our current situation. That just reeks of partisan simplicity and little understanding of capital markets and corresponding government regulations. Are you really daft enough to argue that we are all better off providing the inefficiencies of government more of our hard earned capital, especially now?
Sorry to be so simplistic but it seems that if the law were practiced in it’s true form, per Bastiat, the government would be forced to live within it’s means and would not be able to extort money the way that they do. What is the opening line in “The Law” by Bastiat? “The law, perverted.”?
Marco, my college history teacher would agree with you in as we are like the roman republic.
He would also find it sad that we declined so early.
I am going to remain optomistic (not as in mystic)
Don’t you want us to recover?
I assure you this is not a canned remark.
What would imply to you that I don’t want us to recover?
I simply want us to recover in sustainable and meaningful way and IMHO that means a complete restructuring of this country. It is no different than a distressed company at this point, you can keep kicking the can down the street until the doors closed doing the exact same things, or you can restructure. We have enough information to know that large government sponsored welfare states lead to systemic collapse and unsustainable obligations. However, restructuring is painful, it is hard work, it ignores entitlement, and because of this I “believe” there will never be any appetite to do what is necessary.
Look around you. You have close to 10% (U-1) unemployment and all anyone is concerned about is making sure that the top 2% (the primary small business owners and the engine for job growth) continue to have little incentive to bring this number down all in the name of “fairness” (despite paying the majority of taxes).
There are two views of man:
1) a slave to society, who can never pay off the blank check drawn on his productive efforts. Punished, not for his vices, but his virtues. The more and smarter he works, the more hated by his fellow man he will be–and punished harder. The vicous, on the other hand, are rewarded with the loot given to them, unearned, that was taken from the productive.
2) a free man, who owns his life, and therefore has the corolalry rights of liberty and property. It is not for central planners and “do gooders” to sit there are philosophize about how much of his efforts the producer is “allowed” to keep. It is, unless he chooses to give it to you. Until then, if you want to give to charity, you will not be stopped.
It should be clear that in view #1, government is totally unlimited. It may do anything and everything which it can get away with. People, on the other hand, are totally restricted to whatever few acts are permitted to them.
In view #2, the government is strictly limited to the powers granted to it in the constitution. People are unlimited, except those few things (e.g. murder, arson, rape, robbery, fraud) that are prohibited in a short and clear body of laws.
Btw, forget the terms “the rich” and “the poor”. Our increasingly-fascist economy obviously creates lots of unproductive rich people, but for purposes of clarity and for purposes of envisioning an actual free market and free republic, let’s consider that one does not become rich by being unproductive. When we talk about taking the wealth of the productive–by force–let’s be clear that this is what it is. Armed robbery of innocent people.
Bearster Reviewing Corporate Taxes under Title 26 subtitle A Chapter 1 Subchapter Part 11 a)Corporations in general…b)Amount of Tax D 35% of the Taxable income that exceeds 10,000,000.00. That’s what I thought. I read before, so I reviewed it. Also, it appears there is an Alternative Income Tax that can be used by Corporations of 20% It appears there is no cap on it but I could be wrong. I would imagine a corporate entity would use this figure when they couldn’t go below 20% in exemptions and deductions. I’m obviously not a Corporate Tax Attorney, but I’ve done Alternative Tax on Constructions Companies when I worked as an accountant. I remembered it when I looked up the United State Income Tax Alternative Amount of 20%. Obviously, my point is, There are many ways to skin a cat and they all are legal so why not give the Feds a break and look to Wall Street Which is probably right now receiving Don ha ha he even looks mafia Bernanke’s little keystroke. Marco, you’re the one who said that we were in what might be a natural decline of a civilization. What do you call productive. What I see going on out there in the Business world and when I was in it was mostly shenanigans. The only ones that appear to be producing to me now are our innovators of technology and well you saw the list. economist’s were not on the list.
I am pragmatic. By me saying we could be witnessing something does not mean ipso facto I am applauding it. The liberal force is strong in you. No logical thinking and setting up strawmen at will(“when i was in the business world” / “shenanigans”). Anyway, that I have to argue these points probably means I need to end the dialogue with you.
Marco:
I have no idea what you are talking about. Being an Austrian theory free market laissez-faire capitalist libertarian Lockeian-Jeffersonian type, I guess that doesn’t appeal to a pragmatist like you. I’ll bet you really disliked my article In Praise of Theory.
I was responding to the last 3 sentences toward me by leslie goudy, Jeff. Claiming I want to see the country self destruct because I somehow am against big government intervention and fiscal stimulus instead of a complete restructuring (ie, spending cuts).
Thank god. I guess I misunderstood your comment. My excuse: I had back surgery yesterday so maybe I wasn’t coherent. I’m fine, one day surgery, back home
complainingrecuperating.Let me try to restate my point. The question “what tax rate do you pay” is the same as “how much do you pay divided by how much is your income”.
The question “of the total tax take by the government, how much of it was paid by you” is different.
Capiche?
If you have a skewed wealth distribution curve, in order to raise any money at all to fund any government services you have to have a skewed taxation structure. If the bottom 50% or the population only makes say 10% of the total income of the population, if you tax them at 50% of their income that only represents 5% of the total income of the population. If the top 50% of the population makes 90% of the income, then if you tax that demographic at 20%, you will bring in revenue of 18% of the total income. So clearly, taxing the upper half of the spectrum is a much more successful way of raisign enough revenue to pay for yur roads, your police, your firemen, yuor military and your social welfare. You simply cannot raise enough money to pay for any of those things by taxing poor people they have no MONEY!
I am all for reducing Goobermint expenditures, but the fact of the matter is there is no CHANCE you can cut those expenses enough to pay for all the things expected of Goobermint in order to maintain Property rights and keep the society safe for Pigmen to become outrageously rich. So the only solution here if Pigmen want to stay rich is to tax them to beat the band :-)
A logical solution to the problem is to tax all earnings over say $1M at 90%, and drop a 20% Fair Tax on consumption on anything under that so everybody pays something, but you generate enough revenue from the top end to pay for the actual cost of running the society.
RE
Sure, it is logical to set a boundary above which one is not really permitted to keep one’s income. Just as it is logical to decide that “we” don’t want people to produce more than a certain amount.
Oh, you think wealth is zero-sum, and it can only be looted or mooched but not produced or destroyed?!?
You’re disasterously wrong, as unfortunately we will all soon find out.
RE, this is simply one of the most dispicable lines of thought I have seen. You and your ilk can rationalize theft all you want but this is nothing more than pure class warfare. You cannot make a rational argument that it is not immoral to bleed more from certain individuals based on “fairness”. Fair to whom? You? There used to be a time when the citizens of this country would all aspire to the highest pay brackets no matter where they started from and that would be enough not to place egregious taxation on the top brackets. It is called upward mobility and there has NEVER been a culture that has come close to that of the US over the last 200 years. But 60-80+ years of liberal entitlement has finally snuffed out that thinking.
I am pretty sure the 80-100 hours I put in working to build my skill-set and drive value-add to my private employer is rarely matched by most. I have EARNED the lifestyle and opportunities afforded to me and I, and only I, take responsibility for myself. As long as I continue to execute I will continue to (I hope) find a market that will pay me just. Because of this, people like yourself think I should redistribute my income (btw, why do you all conveniently ignore the taxation of “wealth” in these discussions?)to provide for those unwilling (see what I did there, I ignored “unable” because charitable donations can take care of that) to take individual responsibility for their own outcomes?
I’m not “rationalizing theft”, I am just running the numbers here for you. You want a balanced budget or not? You aren’t going to get it by taxing people who have no money. If you are digging for gold, do you dig in a played out mine with empty shafts, or do you dig in a mine with thick seams of gold in it? I would dig in the mine with the biggest nuggets. Its just common sense.
RE
Because, and I will type slowly…WE DO NOT HAVE A REVENUE PROBLEM AND WE HAVE NEVER HAD A REVENUE PROBLEM.
i love it reverse. 20% is the figure i thought of when considering all the variables. i’m sorry if i came over that way to you marco. Jeff i like it better when you view the world through the Austrian theory free market laissez faire capitalistic libertarian lockeian-Jeffersonian lense than a type. You can remove the lenses. I can relate to John Locke but Jefferson was confused. H thought the banks should pay for the police instead of use their money for fair trade overseas and loaning money. Madison had to straighten him out on that. peace on earth guys i’m done with this blog
you call Jefferson confused?
It’s not even rich enough to be ironic.
Hi Jeff,
this is unrelated but I wanted to point you to an interestin gblog from NZ from one of our primary free market proponents, Roger Kerr.
He made an interesting reference to a paper
http://rogerkerr.wordpress.com/2010/12/10/friday-graph-the-us-post-war-miracle/
by David Henderson, published in November 2010 by the Mercatus Centre at George Mason University.
I’m sure you will find it of interest.
Cheers
K
Konrad,
Thanks for the referral and thanks for reading! I’ll check him out.
Jeff
Reverse Engineer, “but the fact of the matter is there is no CHANCE you can cut those expenses enough to pay for all the things expected of Goobermint in order to maintain Property rights and keep the society safe …”
Nonsense. New York Times came up with a cute little interactive to let people try and fix the budget. I can easily be fixed with 100% tax cuts. None of which I have a problem with.
The biggest bang for the buck is when you peg social security increases to GDP. GDP isn’t a perfect metric, but pre-defined pension plans are just ponzi schemes. Frankly, there weren’t enough cuts in the list to make me really happy. “Cancel Ballout Programs” wasn’t there.
Enjoy.
First of all, if you believe anything produced by the NYT is in any way accurate, you have been drinking liberal Kool Aid for far too long. Second, the “Puzzle” is extraordinarily one-dimensional, it doesn’t account for synergystic effects in lost tax revenue when you make some of the cuts. If you cut all those military contractors, all the folks they employ will be on the unemployment lines, not paying taxes and now a liability on your balance sheet. Third, best of luck with cutting SS without feeding Cat Food to the Seniors.
Anyhow, as I said, feel free to make cuts,but you still need to raise revenue, and you don’t raise revenue from people who have no money. Even Vampires cannot suck blood out of a bone dry corpse. A smart Vampire goes after nice Pink and Juicy and Fat Pigmen full of Blood to suck.
RE
No kidding. The synergistic effects of canceling back-door handshake contracts would be wonderful. Look at Lockeed Martin, pissing away billions of dollars and decades of projects that turn into bunk. There is no market incentive, cost/benefit analysis, just endless sacrosanct funding.
Take a look at the movie, “Pentagon Wars” – http://www.youtube.com/watch?v=pyakI9GeYRs – This 10 minutes of the movie gets the whole point across.
I work for government. Just looking at the groundskeepers, if we could fire them and bring in local landscaping crews we could do the same job with 10% the work force.
Exactly, which means 90% of the workforce is then Unemployed, not paying taxes and your tax receipts drop more than your savings. Try again
RE
omg i’m back bearster point taken. and jefferson ended up bankrupt you know, he was a complete idealist. i do than the lord for him if you will pardon the cliche, regarding getting rid of the federalists, but i was referring to the Philadelphia papers. You don’t think that banks should finance the police department do you? that would make us a police state. i am not a liberal please don’t think of me with a label anymore okay? Marco, i don’t know why you took that remark seriously but it was an attempt at a joke, get a sense of humor as i was told to do and have done. it’s obvious you’ve worked very hard for what you have and are not on wall street. as is the human condition in all strata of society, most people just slide by the easiest way they can and don’t really work. My point about wall street is they are no better than, dare i say it liberals that slide by on the government dole pay whatever. Most people don’t aspire do they?