Just to comment on your last sentence in this post, and from what I just quoted, it sounds like that you are saying that a system that takes away from the productive and gives to the poor will cause an economy to collapse.What DOES cause an economy to collapse is taking more and more from one sector of society and giving that to another not because they merit it or were denied any benefit from society, but purely because they have less and will keep voting in people who will pay them for being poor.
am I misunderstanding you there?
That sounds a lot like progressive taxation to me. If you are saying that there is some mechanism of wealth distribution of the productive to the unproductive that will always lead to economic collapse, then I would like to hear what that is.
When it comes to economic efficiency you are right.This is why I support a flat tax that is uniform across the board. Any change that benefits one group benefits all. Any change that hurts one group hurts all. And THAT, coupled with an iron clad law that Congress is prohibited from using tax revenues to dispense charity or benevolence of any sort that benefits some but not all, I believe would solve a very large lion's share of both our economic and social problems in this country.
But economic efficiency only helps all people in the long run. In the short run, of a generation around, progressive taxation does help the poor by giving them more income then they would have otherwise in the short run. That much is a fact.
If you really ask someone why they support progressive taxation, I don't think they will go and tell you that it is better in the long run. So I don't think anyone is disagreeing with you, but you and them just have different goals.
Beyond that, I think there is actually a few negative effects from income inequality, even if the poor actually get more income. Income inequality increases civil unrest and makes people overly obsessed with consumerism, even though consumerism does not make people happier.
Even though economic growth is more important then those things I talked about, the negatives of income inequality need to be factored in to create good policies. (if you think those are negative outcomes from income inequality)
I don't think progressive taxation is unconstitutional, because congress is allowed to treat people differently. When someone commits a crime they are sent to jail, which means that when someone does something different. When someone does something different (like committing a crime or having higher income) they could have either higher taxes or go to jail.
Just curious, but what do you want a society to promote?Again, the USA is not Europe. All European countries are far more like one of our states or even one of our larger cities or counties than they are like the USA. The USA was founded and designed on an entirely different principle than the European model and it has been a success. I do not wish to revert to the European model.
If you support allowing people to be more happy, then European nations do a better job then the United States.
As with progressive taxation, it is all about your goals.
OK cool :PI have not said that progressive income taxes have ever or will destroy an economy. I think if you think that is what I said or implied, you should look more closely at what I have actually said.
Last edited by nerv14; 01-22-10 at 08:23 PM.
Income tax, but we should be taxing all sources of income according to the same, progressive, tax brackets. Income from inheritance or investment should be taxed at the same rate as wages. If we do that, we could easily lower the percentages at which income is taxed dramatically. No need for the uberwealthy to pay lower tax rates than the rest of us. Especially not when it costs us somewhere around $1 trillion/year to give them those tax breaks.
but investment taxes should be taxed at less of a rate, because it is those investments that cause economic growth. I like the idea of taxing investments at a progressive rate though.
Now, don't get me wrong, if you just taxed investments sky high and cut sales and wage taxes dramatically, we'd have the opposite problem. The economy would grow too slowly but have strong fundamentals.
The trick is to balance the two knobs correctly so that you have both a decent amount of consumer spending and a decent amount of investment capital. Intuitively, setting the tax rates on both about the same sounds like it would work, and historically that is what has worked best.
I was watching the West Wing the other day and Bartlett said something that struck me as particularly wise. His take was that the best economic policy is one that takes a little from every school of economics in moderation, but from none too much. We've bought into supply side economics hook line and sinker and the demand side fell apart on us. That needs to be brought back into balance or we're just going to have another bubble burst on us again here in another 5 years or so.
Last edited by teamosil; 01-22-10 at 08:52 PM.
sorry if this is brief.
I agree that there needs to be a certain balance of tax burdon. My only point is that there should be less taxes on investments then income or consumption.
Why do you think that we do not tax investments enough? I don't think we have obsessed with supply side economics. This a very complicated question, but if anything I think we have the opposite problem.
Compared to Europe, we have barely any sales tax. Sales taxes only tax consumption, which in effect tax investments less.
Just in case you didn't notice, the Patriots were some of the richest colonists around.
This county was founded on freedom and the assumption that tyranny is no way to run a country.
The fact of freedom ensures "economic disparity".
In terms of how it effects the distribution of wealth, it's getting pretty out of control. During Bush's entire reign, for example, the bottom 90% of the population actually LOST income while the top 1% quadrupiled their investment income. The gap between the rich and the poor in the US is shockingly wide. Far wider than it has ever been in our history and far wider than it is in any other first world country. One of the biggest reasons is that we've shifted the tax burden off of investors and on to the backs of people who work. If we had been taxing them both the same we could have had taxes on wages somewhere around 6% lower for each bracket while still making the same amount of tax revenue. So the 35% bracket would be 29%, the 15% bracket would be 9%, and so on. Think how much better off the vast majority of people in the country would be if they had 6% more income over the last 20 years... That's a huge sum of money that's been taken as taxes to cover the tax breaks we've given on investments.
In terms of the economic effects, the main warning sign that you have a situation where the balance has shifted too far towards favoring investment and too far towards undermining consumption is the stock bubble. If you have an overabundance of investment money the stock prices shoot up even past what is reasonable, but if you don't have enough consumer spending then those companies can't actually make the kinds of revenues required to justify those stock prices, so sooner or later the bubble bursts. We cut the cap gains tax in half in the mid 90s. Since then we had the massive dot com bubble, which crashed back down to just about where we were before it started. Then we had another 6 years of unbelievably strong stock market performance right after that crash, but again it crashed down to just about where it was before the cap gains tax cuts. It's exactly what you'd expect to see if the balance is leaning too far towards favoring investors over consumers.