Taxation thought experiment

[Brad Wardell]

We were discussing previously whether high taxation represents a loss of liberty or is at least oppressive.

Since we live in a representative republic, if 99% of the population decided to have the top 1% pay 90% of their income as taxes, would you support that? If not, why not?

[Matthew Gallant]

http://www.truemeaningoflife.com/images/bret_michaels.jpg

[lesslucid]

I'd say that that would never happen, if it did happen it would be a staggeringly bad idea since the wealthiest 1% would simply leave the country, but nonetheless, I would "support" it in the sense that accepting outcomes and policies you don't like when they are supported by the majority is the basis of a functioning democracy. What alternative do I have? If 99% of people want something, then I have to live with legislation that enshrines what they want in law, unless I'm willing to take up arms and try to institute a dictatorship to prevent it... a dictatorship which opposes the desires of 99% of people, mind you, so it would have to be a bloody and brutal one.

So: "supporting" it in the sense of "accepting the legitimacy of a democratic outcome I dislike", while a bad option, is better than the alternative, and so yes, I would.

[Jason McCullough]

It's too badly described to evaluate in isolation. Are you talking 90% effective, 90% marginal, or what? What's capital treated like? What's the distribution look like for everyone else?

For amusement, however, note that the top marginal rate pretty much was as you describe (http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_top_rat es.5B20.5D) in the 1940s and 1950s. People obviously didn't pay that rate; I haven't seen an estimate of what the real incidence was in terms of less work, avoidance, and paying. Economic performance was enormous, and no one fled the country.

[StGabe]

I think it's probably impractical to have such a high tax rate but not particularly immoral as you seemed to be indicating in the other thread.

[Stepsongrapes]

We were discussing previously whether high taxation represents a loss of liberty or is at least oppressive.

Since we live in a representative republic, if 99% of the population decided to have the top 1% pay 90% of their income as taxes, would you support that? If not, why not?

The question implicates what percentage of annual, personal income that 1% represents.

If the top 1% earn 90% of the income in the country, hell yeah I would support it. It tells you that system favors these people in other ways. Keeping 9% of the total national income in the top 1%, annually, is still a lot.

Now, if the numbers were more like our current actuality (top 10% earn 50% of total income- http://elsa.berkeley.edu/~saez/saez-UStopincomes-2007.pdf) then the 1%/90% proposal seems extreme.

[Matthew Gallant]

I declare Brad's experiment with thinking a failure.

[BigWeather]

I think 90% would be excessive. However I wouldn't mind seeing tax rates like we had in the 1950s through 1970s.

Or just eliminate many of the loopholes that exist today.

When even rich folks like Warren Buffet think it is ridiculous how little they pay (http://www.timesonline.co.uk/tol/money/tax/article1996735.ece) then you know you've got an issue.

[Quaro]

90% effective tax rate is pretty different than a 90% rate. If it were effective, presumably the top bracket would have to be 99% and capital gains would have to be up there too somehow.

I would support a 90% bracket. Maybe 100 million+? 1 mil+ maybe 45%, 10 mil+ at 55.

[Brad Wardell]

I declare Brad's experiment with thinking a failure.

That's because you're Hitler...

[Doug Erickson]

Yes. The wealthy should have the strongest interest in a stable, secure society. That said, I am certainly not averse to paying my share, especially if I were in that 1%, since I prefer to share my country with collectively content people who have a certain minimum quality of life. Is this extortion/coercion by the poor? Only if you think you really are an island -- otherwise, life is a grand ol' compromise. Beyond that, it's all up to your level of testosterone and/or self-righteousness.

[Ender]

So the tyranny of the majority. That seems inconsistent with the spirit of 76, unless that minority happens to be the rich. Then screw em, they'll just pay their taxes and everyone can have a free lunch!

Either that or they'll move to Switzerland as the British are currently discovering.

[Doug Erickson]

Well, alternatively, the rich can use mythology, might, or their own money to coerce the poor. Welcome to humanity!

Besides, what divine agency grants a man "rights" or "freedoms" independent of the society said man participates in? Is the Constitution holy writ, authored by God's own Sharpie?

[sinfony]

Assuming that your hypothetical republic is in fact the present-day United States, then no, I wouldn't support a 90% tax for the top 1% of earners because they would just pick up and leave. If such a tax existed, however, I wouldn't liken it to slavery, as you so tactlessly tried to do in the other thread. I mean, poor hedge fund managers, bankers, and CEOs, who can be taxed at such appalling rates! It's almost as if they can't afford multiple vacation homes, private jets, and Congressmen! Meanwhile, the nation's poor, who benefit from the oodles of money apparently looted from the rich via various government programs that Brad probably hates, struggle to get by.

Take a stroll through the downtrodden parts of a major city some time, then come crying to me about your fucking taxes.

[Preachy Preach]

Either that or they'll move to Switzerland as the British are currently discovering.

They're not, y'know. People are chuntering about it, believe me (I get my ear bent fairly regularly in my day job), but very few are actually doing it. Despite fond libertarian fantasies, most people/companies/investors don't make their decisions with tax rates at the forefront of their minds. My job would be an awful lot easier if it were...

[Wisbechlad]

As it is a representive democracy, it isn't 99% of the population I guess, but 99% of the legislators?

As others have said, 90% effective or 90% marginal? I can see times when 90% marginal is required - e.g. WW2 (though in times of war, financing is normally done by forced saving, rather than taxes, and then the value of those savings eroded, e.g. compulsory war bonds paying low interest)

In peace time, no, I wouldn't support it as it is stupid IMHO. However, there are many things that representative democracies do that I don't support because IMHO they are stupid. But that's politics and society for you.

[Ender]

If by nobody doing it you mean 15 billion pounds worth of taxable income departing, then yeah I guess nobody is doing it.

But 15 billion is about 7 billion in corporate taxes. Not a small bit for the Brits.

[Preachy Preach]

If by nobody doing it you mean 15 billion pounds worth of taxable income departing, then yeah I guess nobody is doing it.

But 15 billion is about 7 billion in corporate taxes

Source?

Also, since when has the UK had a 47% corporation tax rate? You're subtly sliding from personal income to corporate taxation, which in actual fact, is becoming significantly more generous thanks to the participation exemption soon to be introduced.

[Ender]

Here let me google that for you (http://lmgtfy.com/?q=hedge+funds+leaving+the+UK)

Here is the top result (http://http://online.wsj.com/article/SB125115257255854987.html)


Lawyers estimate hedge funds managing close to $15 billion have moved to Switzerland in the past year, with more possibly to come. David Butler, founder of professional-services firm Kinetic Partners, said his company had advised 23 hedge funds on leaving the U.K. in the 15 months to April. An additional 15 are close to quitting the U.K., he said.

Ok so you're right, it is the personal tax rate that is causing them to leave. The UK still loses out on substantial personal tax revenues. Getting 40% of something is better than 51% of nothing.

[Hans Lauring]

Here let me google that for you (http://http://lmgtfy.com/?q=hedge+funds+leaving+the+UK)

Here is the top result (http://http://online.wsj.com/article/SB125115257255854987.html)



Ok so you're right, it is the personal tax rate that is causing them to leave. The UK still loses out on substantial personal tax revenues. Getting 40% of something is better than 51% of nothing.

Heh. How sad is it to try the (very old) lmgtfy ice-burn and then not even getting the actual link right.

But, yah for that completely factual an unbiased source. And for your impeccable logic - why didn't you just say that getting 1% of 15 beeeellions is better than getting 51% of FUCKALL. It would make the same point.

Of course the argument you'd have to counter with actual verifiable numbers is that the revenue loss from people leaving isn't greater than the gain from higher tax. Not that angry rich people threatening to leave should be basis for tax law - if those people leaving actually contributes something useful to society, like substantial revenue or jobs, then you might have a problem.

[Preachy Preach]

Which is about 7% of the total currently managed from the Uk, I'd note. I'd also note that the 50% tax rate has been known about only since April, so the reference to 'past 15 months' suggests quite a fair bit of deliberate spin is being put on the statistic. Would be interested to know how that compares with the normal flow of capital, both into and out of the UK. One-way levels of the flow are meaningless.

£15bn in assets, BTW <> £15bn of profits taxable in the UK. Let's say that the funds make a 10% return, and charges a 20% management fee. Virtually all of the investors in the fund won't be UK taxpayers (and even if they were, moving the management isn't going to affect their tax position). It's not tricky to structure this as a capital gain (taxed at 18%) - that's a UK tax loss of, from the back of a fag packet, £54m. Chunky, but to put it into perspective, it's about the amount of taxes I have oversight over in my current job.

[Preachy Preach]

To put this into perspective, a vastly more serious problem for the UK Treasury right now is the issue of what are known as Condé Nast claims. These were caused by a drafting cockup which basically reopened the statutory time limits for VAT reclaims from 3 years to all the way back to 1973. Claims totalling £4bn have been made. Now that's serious.

[Ender]

The burn is still applicable, but I fixed the link.

What you'll find is that tax(price) increases are sticky in the short run. In the long run, people adjust their behavior and even place of residence in response to them. You can argue that 54m is a small sum and nothing to worry about, but talk to California, New York, and New Jersey about what happens over time as people and companies migrate.

Saying "good riddance" when rich people and their capital producing ways depart seems like a fail policy.

[Dan Lawrence]

On top of all those points I'd add that its not necessarily a bad thing socially if the super rich do leave taking their tax revenue with them. As counter intuitive as it may seem their leaving will help reduce inequality in the UK and thereby likely improve the rest of the populations well-being. For those not exposed to the arguments about how wellbeing of the population is correlated with income & wealth equality in a population after a cetain level I reccommend The Spirit Level.

Finally, of course the super rich eventually run out of places to run to, especially nice places where they aren't at risk of sudden military coups. I shed not a single tear for them being potentially being brought down from 'super rich' to merely 'very rich'.

[Dan Lawrence]

The burn is still applicable, but I fixed the link.

What you'll find is that tax(price) increases are sticky in the short run. In the long run, people adjust their behavior and even place of residence in response to them. You can argue that 54m is a small sum and nothing to worry about, but talk to California, New York, and New Jersey about what happens over time as people and companies migrate.

Saying "good riddance" when rich people and their capital producing ways depart seems like a fail policy.


Only if you think that increasing economic growth is a universal good for humanity in all situations. That's your underlying assumption.

[Preachy Preach]

Ender, oh, two years ago, I'd have probably agreed with you, y'know. However, recent events have caused me to seriously reconsider the worth of the current bloated finance industry, and what real value it adds to the world. Given that it currently exists only through massive government intervention...

[Ender]

It can be argued that all of the massive government intervention was the result of prior intervention that distorted and corrupted the system. Then intervention was required because at the point when government was expected to hold things up, they let Lehman fail. That terrified the market, and terror means no one will loan anyone money.

It is more complex then to say, "Finance people caused this mess and should reap their just desserts." Bankers are the convenient scapegoat of those that played a starring role in setting the rules and incentives, the politicians.

Increasing economic growth leads to more medicine, more food, healthier people, more choices, more episodes of House and Lost, more computer games, and faster gaming machines. I'll take a double helping of economic growth please.

[Dan Lawrence]

Like I said above, economic growth stops improving wellbeing significantly after a certain point (a point which america and most developed countries have already reached) on a whole range of measures. Its not such a positive force on humanity that we should abandon all reason in pursuit of it.

http://www.equalitytrust.org.uk/why/evidence

The idea that a perfect capitalist system, that somehow with a little more purity in our markets, we would have prevented the banking collapse sounds like a faith based theory to me. In any case Capitalism doesn't map completely accurately to the world, with or without government, so the purely theoretical case cannot exist.

[Ender]

Wait a minute, so because a book was written to say that economic growth isn't good then it must be true? Case closed I suppose. Authors with radical biases never produce questionable studies or analysis...

I didn't say it was impurity that caused the collapse, just that pointing to the bankers that were playing by the rules established by the government as the root cause is misleading. They were told to give loans to risky people, they were told it was safe to take on increasing risk, they were subsidized to behave this way, and they were purchasing things rated by government sponsored ratings agencies as safe.

That is a simplification, but you can see where there was more than 'impurity' in the system.

[extarbags]

Were they told by the government to treat mortgage-backed securities as self-replicating cash machines? Were they told by the government to give mortgages to people with no income and no assets? Were they told by the government to only keep a small fraction of the cash they'd need to cover their debts on-hand? I doubt it.

[antlers]

Top marginal rates were 70% in the Nixon administration, and I believe as high as 90% as recently as Eisenhower.

I don't think anyone thought these were particularly immoral; the marginal rates kicked in at very high incomes.

There was a lot of incentive for creative task sheltering, but that is more a practical issue than a moral one.

[Dan Lawrence]

Wait a minute, so because a book was written to say that economic growth isn't good then it must be true? Case closed I suppose. Authors with radical biases never produce questionable studies or analysis...

I didn't say it was impurity that caused the collapse, just that pointing to the bankers that were playing by the rules established by the government as the root cause is misleading. They were told to give loans to risky people, they were told it was safe to take on increasing risk, they were subsidized to behave this way, and they were purchasing things rated by government sponsored ratings agencies as safe.

That is a simplification, but you can see where there was more than 'impurity' in the system.

You can look at the evidence yourself and draw your own conclusions on policy, which is in fact what the book advocates. Its not really a matter of opinion unless you think the data itself is suspect (mainly drawn from bodies like the UN). The people who wrote it don't really fit the image of far left radicals, more professorial academics.

I'd say that your implication that the evil government led on the innocent and clueless banking industry is a difficult to swallow proposition. Yes, government holds some culpability for loosening regulation, but it wasn't done for the fun of it, it was done at the behest of the banking sector. The government agencies that regulated CDOs were deliberately picked by the banking industry. The bankers are supposed to be the experts in this scenario, that the government had too much 'trust in their expertise' was probably the governments failing. Big banking and government financial policy became effectively the same thing for a while and I suspect the financial crisis is the result.

[Oghier]

There's no bright line, beyond which tax rates (marginal or effective) become confiscatory, immoral or wrong. I suppose every person balances their view of what is fair against what is best for the economy and society as a whole. For me, I'd draw the line around 75% marginal rate, and only for income in excess of $1m.

Comparisons to tax rates in the past may not be apt, as the Alternative Minimum Tax has really changed the game. The top marginal rates may have been very high pre-Reagan, but they don't reflect what people actually paid. With the AMT, it's much harder for even moderately well-off folks to shelter their income.

[unbongwah]

Brad, I realize you're just trying to get us to either agree with your "taxation = tyranny!!1! (in certain extreme cases)" stance or reveal what a bunch of damn dirty pinko socialists we are, but your setup is largely meaningless without knowing at least:

(A) How much wealth the top 1% have, in both absolute and relative terms;
(B) What the distribution of wealth is like in said hypothetical country; and perhaps most importantly,
(C) What that tax revenue is being spent on. [Paying down the national debt or universal health care == GOOD! Buying every citizen a solid gold commode because the Gold Commode Makers Union donated heavily in the last election == NOT GOOD!]

[Jason McCullough]

You can argue that 54m is a small sum and nothing to worry about, but talk to California, New York, and New Jersey about what happens over time as people and companies migrate.

Really, there's evidence that people leave those states due to tax policy? Do provide.

[Brian Seiler]

Really, there's evidence that people leave those states due to tax policy? Do provide.

Errr....taking no stance as to the relative quality of the source, I found this (http://online.wsj.com/article/SB124260067214828295.html) literally ten seconds after I punched the words into Google.

[Jason McCullough]

Nice try, Zarflax! The WSJ editorial page is not admissable evidence. Plus: Arthur Laffer and Stephen Moore? You're just fucking with me.

I guess I should have been more specific: really, there's non-stupid evidence?

[unbongwah]

In the D.C. area I know Virginia is seen as more business-friendly than Maryland, at least in part due to lower business taxes. Northern VA has seen a lot of growth in recent decades. And I know Marriott threatened to move its HQ from MD to VA to force some concessions out of MD a decade ago, though who knows if they were bluffing.

OTOH, based solely on rush-hour traffic patterns, a lot of people who work in VA apparently prefer to live in MD. Make of that what you will.

[RSofaer]

You can't make an assertion about how just a taxation scheme is without any data on what is bought with that scheme.

[Eric P]

In the D.C. area I know Virginia is seen as more business-friendly than Maryland, at least in part due to lower business taxes. Northern VA has seen a lot of growth in recent decades. And I know Marriott threatened to move its HQ from MD to VA to force some concessions out of MD a decade ago, though who knows if they were bluffing.

OTOH, based solely on rush-hour traffic patterns, a lot of people who work in VA apparently prefer to live in MD. Make of that what you will.

based on rush hour that 495 270 split is a fucking nightmare which hoses up the entire beltway.

[Papageno]

Were they told by the government to treat mortgage-backed securities as self-replicating cash machines? Were they told by the government to give mortgages to people with no income and no assets? Were they told by the government to only keep a small fraction of the cash they'd need to cover their debts on-hand? I doubt it.

But the Community Reinvestment Act and ACORN caused the whole crisis, don'cha know? It was, of course, poor people's fault, ultimately, as it always is. Their apparent powerlessness is just a façade that hides the fact that they really run everything!

At least according to what Fox News was peddling 24/7 last October, and tying it all to then-candidate Obama. :-)

[Papageno]

OK, snark aside, all of those things others have pointed out here with regard to Brad's original question apply.
1. What is the income share (of all income) of the highest-paid 1% (also: individuals? families?) Also, why arbitrarily the top 1%-- according to David Cay Johnston's book Perfectly Legal:... (http://www.amazon.com/Perfectly-Legal-Campaign-Rich-Everybody/dp/B000CDG8N8/ref=sr_1_1?ie=UTF8&s=books&qid=1252032875&sr=8-1), that percentile alone covers people bringing in 300-some thousand yearly all the way up to people bringing in millions daily/the sky's the limit. His thesis in the book BTW is that it's the latter people who, due mostly to the fact that they can hide and structure their income in myriad ways, pay a much smaller proportion of it in taxes than the former.

[Ender]

Dismissing the article because of the author's, that is an excellent way to go about life. Anyone that disagrees with your view, regardless of the facts they base their disagreement on, has nothing of value to say. Since you won't read the article...


Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.


Good riddance to the super rich. Take your jobs, your capital investment activities, and get out of here. We would be better off if Steve Jobs, Bill Gates, and Michael Dell would just leave our country. I believe Sweden has that same attitude which is why the founder of Ikea lives in Switzerland. I'm SURE the Swedish are glad for his departure.

[sinfony]

Dismissing the article because of the author's, that is an excellent way to go about life. Anyone that disagrees with your view, regardless of the facts they base their disagreement on, has nothing of value to say. Since you won't read the article...
Good riddance to the super rich. Take your jobs, your capital investment activities, and get out of here. We would be better off if Steve Jobs, Bill Gates, and Michael Dell would just leave our country. I believe Sweden has that same attitude which is why the founder of Ikea lives in Switzerland. I'm SURE the Swedish are glad for his departure.
When you learn to spell, I'll start to take your posts seriously. Also, I might point out that Steve Jobs, Bill Gates, and Michael Dell all still live in the United States, and, as far as I know, always have. And if Bill Gates left, I doubt I'd notice.

[Ender]

When I learn to spell? Please point out where I was in error. I left out a word, but that isn't a spelling error. It should have read, author's point of view, though when referring to 2 authors in this case would be authors', but I chose to stick with author's because it was a more general then specific statement.

My point about Steve, Bill, and Michael leaving was in response to those saying to let the super rich leave.

[Erlend Grefsrud]

It can be argued that all of the massive government intervention was the result of prior intervention that distorted and corrupted the system. Then intervention was required because at the point when government was expected to hold things up, they let Lehman fail. That terrified the market, and terror means no one will loan anyone money.

It is more complex then to say, "Finance people caused this mess and should reap their just desserts." Bankers are the convenient scapegoat of those that played a starring role in setting the rules and incentives, the politicians.

Increasing economic growth leads to more medicine, more food, healthier people, more choices, more episodes of House and Lost, more computer games, and faster gaming machines. I'll take a double helping of economic growth please.
Um, you are aware of why they let Lehman fail, right? It was to prove that the systemic integrity of the market would not be damaged by the collapse of a major institution, proving that our self-adjusting free market is perfectly fine without commie bastard intervention. You know who let Lehman fail, right? Poulson and Bernanke, for refusing to do a cash injection in the first place. They're hardly bleeding-heart liberals.

It's also a fact that politicians don't act in a vacuum. Many are certainly ideologically driven, blinded to reason like any blinkered zealot, but they have advisors because very often, politicians aren't economists or lack experience from financial institutions. Those advisors tend to be experts in their fields, and they tend to come from the ranks of successful investment banks. Essentially, the banks have consulted on their own regulation, and they've cleverly attempted to optimize the system for themselves, like any greed-is-gooder would do given the chance. After all, it's increasing the efficiency of the financial markets, and that must be good. Because if it isn't good, then why would we believe so?

[Hans Lauring]

Last I noticed IKEA still creates jobs worldwide even though the (incredibly tightfisted) Kamperåd doesn't live in Sweden anymore. Considering his reputation I don't think the Swedes would critize their high taxes, but rather certain rich peoples unwillingness to pay their part:



The Berne Declaration, a non-profit organization in Switzerland that promotes corporate responsibility, has formally criticized IKEA for its tax avoidance strategies. In 2007, the Berne Declaration nominated IKEA for one of its Public Eye “awards,” which highlight corporate irresponsibility and are announced during the World Economic Forum in Davos, Switzerland.[24]


I don't see how your opinion that because a lot of very rich people don't like paying taxes somehow correlates to the fact, that high taxes are bad... perhaps it's just the regulation and persecution of tax evaders that are bad and should be stepped up?

It's a well known fact in my country with high taxes, that international corporations like McDonalds, Coca Cola and Nestlé are set up in ways so they have no taxable profits in Denmark... does that automatically mean we should lower our corporate taxes, because we're losing tax income from those companies?
I'd prefer we plug the holes and tax them. If that means the loss of McDonalds burgers and crappy Nestlé foods, I'm sure some taxpaying company would fill that void.

[Ender]

Um, you are aware of why they let Lehman fail, right? It was to prove that the systemic integrity of the market would not be damaged by the collapse of a major institution, proving that our self-adjusting free market is perfectly fine without commie bastard intervention. You know who let Lehman fail, right? Poulson and Bernanke, for refusing to do a cash injection in the first place. They're hardly bleeding-heart liberals.


Step 1. Create straw man argument and attach it to someone as theirs without them asserting it
Step 2. Burn up straw man
Step 3. Pat yourself on the back for educating a dumb right-wing idealogue who didn't pay attention to his college professors


So is that how that works for you? I never claimed right or left responsibility for the banking collapse. I pinned primary blame on the politicians and bureacrats.

[magnet]

I believe Sweden has that same attitude which is why the founder of Ikea lives in Switzerland. I'm SURE the Swedish are glad for his departure.

The found of Ikea is an alcoholic Nazi who is so miserly that he makes Sam Walton look like Gianni Versace. I'm sure Sweden doesn't care where he hides his money or buys his cafeteria meals.

[Ender]

Clean up your spelling or you will risk having your post not read! It is "founder"

....

[nlanza]

Clean up your spelling or you will risk having your post not read! It is "founder"

You rock that hissy fit, dude.

[Stepsongrapes]

Dismissing the article because of the author's, that is an excellent way to go about life. Anyone that disagrees with your view, regardless of the facts they base their disagreement on, has nothing of value to say. Since you won't read the article...



Good riddance to the super rich. Take your jobs, your capital investment activities, and get out of here. We would be better off if Steve Jobs, Bill Gates, and Michael Dell would just leave our country. I believe Sweden has that same attitude which is why the founder of Ikea lives in Switzerland. I'm SURE the Swedish are glad for his departure.

Both you and Brad take up one side of the argument and act as if it is some big dispute:

1) People (especially rich people) don't like getting taxed.

I don't know about others, but I didn't think this one was actually up for debate.

What both you and Brad ignore are the benefits of the unsavory thing called taxes. And yes, some of those benefits are dirty, commie forms of wealth re-distribution (what do you think progressive taxes are??). That's why people are asking what you get for those taxes, what is the current wealth distribution, etc.

Heck, all your arguments could be resolved into the simple solution of tax no one.

But it's good to know that in-depth exposes show that taxes aren't particularly enjoyable to the taxee.

[Tortilla]

We were discussing previously whether high taxation represents a loss of liberty or is at least oppressive.

Since we live in a representative republic, if 99% of the population decided to have the top 1% pay 90% of their income as taxes, would you support that? If not, why not?

A lot of people have asked for clarification of the hypothetical, which shows a lack of initiative I believe. Since it's all hypothetical, one can make any assumptions one wants. So let's view it with some assumptions in place.

1. This hypothetical scenario is in regards to the Hypothetical States of America (HSA) and has an economy and wealth distribution roughly analogous to the USA.

2. The hypothetical proposed tax is on the top 1% of income earners (forget wealth, we are just talking income) and includes a consolidated view of income to incorporate capital gains, earned income, etc in the same taxation structure.

3. The income taxes on the other 99% of the population are at lower rates but not massively so, thus no perverse incentives are created for people to secure lower income jobs so that it results in more take home pay.

4. The income taxes are being spent relatively wisely in a way that benefits the whole population.

Given those assumptions, I'm down with 90% taxation.

[Jason McCullough]

Dismissing the article because of the author's, that is an excellent way to go about life.

The WSJ editorial page lies, a lot, and Stephen Moore is a goddamn idiot. Sorry. If your point is so clearly true, surely you can find an analysis by non-crank sources.

[Robert Sharp]

I'd say that that would never happen, if it did happen it would be a staggeringly bad idea since the wealthiest 1% would simply leave the country, but nonetheless, I would "support" it in the sense that accepting outcomes and policies you don't like when they are supported by the majority is the basis of a functioning democracy. What alternative do I have? If 99% of people want something, then I have to live with legislation that enshrines what they want in law, unless I'm willing to take up arms and try to institute a dictatorship to prevent it... a dictatorship which opposes the desires of 99% of people, mind you, so it would have to be a bloody and brutal one.


I disagree with this most strongly. Being in a democracy does not mean that whenever 99% of people think we should do something that we should do it. There are right, which are meant to protect against such tyranny. We do NOT live in a direct democracy in large part because you can't really protect rights in such a state. We have to have rule of law, and I don't think taxation should be decided by straight vote. Most people will vote for lowering their own taxes and raising others, and thus it's very likely you could have most Americans agreeing to make ONLY the extremely rich pay taxes at all.

It's a terrible way to run a state, IMO.

[Papageno]

Yeah, I've gotta go with Robert Sharp on this one to the extent that there are many things that the majority (whether directly or through representatives) should have no say over, like what consenting adults other adults choose to sleep with, and whether people can express their political views in speech and in writing.

Now I don't think tax rates particularly fall into that category. In theory we could have marginal income tax rates that took 95% of every dollar made over, say, 2 million a year, but as a practical matter it would be counterproductive because it would encourage emigration, etc.

It would be very nice, however, if we had the political will to actually enforce the existing tax law for those whose often staggering incomes don't get conveniently reported to the government on Form W-2. Luckily, there aren't that many people who make millions of dollars a year/month/day, so it shouldn't involve a huge outlay of resources on the part of the Feds to make them pay the 35% marginal rate or whatever it is. Alas, those same people give lots of money (because they can) to our American bought-and-paid for elections so no one with an ounce of political self-preservation instinct even talks about it.

[Brian Seiler]

Alas, those same people give lots of money (because they can) to our American bought-and-paid for elections so no one with an ounce of political self-preservation instinct even talks about it.

Ghellggh....

Do not attribute to malevolence that which can be adequately explained with simple inadequacy, or, in Wikipedia-speak, Don't Assume Bad Faith. Rich people are trying just about as hard as you are to avoid sending their money to the government and probably not much harder. There is a defensible argument that lower tax rates are a good thing. It's not a coincidence that a lot of Republicans are rich old dudes, but that, in itself, doesn't mean that their tax policy is a plan hatched for the express purpose of fleecing the nation. A 95% marginal tax rate has been tried on things in the past - listen to Taxman off of Revolver for a hint of how well The Beatles took it. Tax evasion these days is easy on account of how ridiculously complex the tax code actually is, but those complications are largely the result of good-faith efforts to make the system better, not shadowy back room deals between politicians and the three wealthiest heads of the secret council of the Illuminati to protect Donald Trump's investments. It irritates me to see what are honestly attempts to make things better, however misguided they might be, interpreted as deliberate attempts to do the wrong thing.

[Papageno]

As I wrote, I'm not arguing for a 95% marginal rate, nor anything approaching that. I just wish bazillionaires were paying their fair share. Note: I'm not even talking about "the top 1%" because that percentile has people on the bottom end whose lifestyle, while certainly prosperous and enviable to many of the rest of us, has little in common with that of people like the CEO's of major corporations.

And while I concede your point that the tax code is ridiculously complex, I don't in the least concede that most of that complexity ISN'T the product of some trade group/company/individuals/whatever trying to get out of paying what they would otherwise have to. There are a number of examples of it in that book I mentioned earlier in this thread. Just the story of how Oregon's own Bob Packwood introduced a provision that affected the taxation of private corporate planes, which became law, will make your blood boil. The effect of it is that it would actually cost less for the Federal government to write checks to cover first class tickets on commercial airliners for every trip taken on those planes--and many of those trips aren't even true business trips to boot--not that the government should be paying for them in any case even if they were.

[lesslucid]

I disagree with this most strongly. Being in a democracy does not mean that whenever 99% of people think we should do something that we should do it. There are right, which are meant to protect against such tyranny. We do NOT live in a direct democracy in large part because you can't really protect rights in such a state. We have to have rule of law, and I don't think taxation should be decided by straight vote. Most people will vote for lowering their own taxes and raising others, and thus it's very likely you could have most Americans agreeing to make ONLY the extremely rich pay taxes at all.

It's a terrible way to run a state, IMO.

Well, perhaps I should clarify my comments by saying that there are limits to what I would accept on the basis of 99% democratic support. Some moral wrongs are so absolute that they justify violent struggle to oppose them, even if the majority is in favour. John Brown believed, for example, that slavery was so immoral that it was justified to take up arms against a society that supported it. He made some bad decisions, imho, but on this point of moral judgement I would agree with him.

I also agree with you that we have to have the rule of law, but how do you think those laws should be made? If you want to eliminate the idea that the legitimacy of laws rests on the will of the majority, you have to suggest where else that legitimacy is going to come from - and why it should be allowed to supervene over the will of the majority. If democracy is so bad because of what can happen when 99% of people support something, what alternative do you propose? Any form of government has to be a compromise between ideals and reality. In some ways, that's a good thing: in reality, it's very, very hard to get 99% agreement to anything.

One of the advantages of a two-party system is that the platforms of both parties already represent "compromise packages". Nobody supports 100% of the things in "their" party's platform, and nobody gets exactly what they want. This is a big part of what protects us against people "voting their own taxes down and other people's taxes up". But if there was some mix of taxation that 99% of people supported, it goes without saying that both parties would adopt it as one of the main planks of their platform. Unless you believed that that mix of taxation was a moral evil on a level with slavery or genocide, what option would you have but to "support" (ie, accept) it?

[Andrew Mayer]

http://cache-foo.gawker.com/gawker/assets/video/stills/j/jindal_gawker.flv.jpg

I don't believe in hypothetical situations. It's like lying to your brain.

[cliffski]

A while ago a Uk politician (I think it was ming campbell) said that the whole principle of taxation is backwards, because it taxes what we want to encourage (economic activity and success) rather than what we want to discourage (unhealthy lifestyles, pollution etc).
I think he had an incredibly good point.
If Bill gates has built the biggest software company in the world and employed hundreds of thousands, and indirectly boosted an industry that employs millions, should he really be punished for it? On the other hand if a company like McDonalds is promoting an unhealthy diet, should they not be taxed for that, on the basis that taxation is one of the major ways in which government can actually bring about change in society.

Given a government that bans thing is often described as limiting peoples freedom (note people in EU complaining about the incandescent lightbulb ban), surely using the tax system to encourage and discourage behaviour is a better way?

To some extent we do this. There is no Uk sales tax on books or childrens clothes or cold food, because we want to encourage spending on those. There is a high rate of tax on alcohol and tobacco because these are considered to have a negative effect on society.
I don't see why we can't make an argument to shift the burden away from income tax, which effectively punishes peoples success, and towards things that people do that are considered harmful.
Why aren't all renewable energy products and products promoting a healthy lifestyle sold tax-free? Why do bicycles have sales tax?

As for the whole inequality thing, I don't care about inequality. inequality != poverty. If 1% of the UK public are super-rich it doesn't affect me, I get by. It might even be a good thing, if they spend a big part of their cash on posh houses that local average-income people get employed to build. How is this bad? unless you consider other people having more than you inherently evil or bad, which I don't

[cliffski]

We would be better off if Steve Jobs, Bill Gates, and Michael Dell would just leave our country.

Speaking from a country where the computer was invented, and which let other countries actually economically exploit the most significant invention of the modern age, I would caution against this attitude.

There is nothing magic that says Hollywood has to be in Hollywood or silicon valley has to be in silicon valley. Nothing is being physically mined.
Encouraging entrepreneurs to leave the country doesn't sound like a good plan.

[Robert Sharp]

If democracy is so bad because of what can happen when 99% of people support something, what alternative do you propose? Any form of government has to be a compromise between ideals and reality. In some ways, that's a good thing: in reality, it's very, very hard to get 99% agreement to anything.

One of the advantages of a two-party system is that the platforms of both parties already represent "compromise packages". Nobody supports 100% of the things in "their" party's platform, and nobody gets exactly what they want.

I didn't say democracy was bad. I said direct democracy is bad. A representative democracy, such as we have, seems fair enough despite some down sides. The key is that representatives that we can trust can judge the fairness of potential laws. I don't think taxes should be voted on at all. Doesn't CA have people vote on taxes? Does anyone ever vote on a tax increase, even when it is needed? More clearly, does a majority ever do so?

I think the major problems of a two party system outweigh the advantage you list as well. What you have is people (or the politicians who represent them) supporting things ONLY because their party supports it. I voted for Obama, for example, but I hate some of the spending he has pushed through. I voted for him because I didn't have a good alternative, frankly, and yet he now has my support. Having only two real choices is pretty lousy, IMO, regardless of any apparent compromises it appears to create.
(apologies if any of that quoting seems selective; I was just trying to get to the parts I was answering)

[Tortilla]

If Bill gates has built the biggest software company in the world and employed hundreds of thousands, and indirectly boosted an industry that employs millions, should he really be punished for it?


Taxation isn't punishment.

[cliffski]

Taxation isn't punishment.

Its a disincentive. Most people have a lot of different things they can do to enrich their lives that cost money. Thus if you take away some of my money, you are reducing my options and in a measurable way reducing my quality of life.
Taxing me reduces my quality of life. Without tax, I'd have a nice new car, and not a scratched and wonky old one.

Let me put it this way. Why should a successful entrepreneur be incentivised not to work any harder, or increase the size of their business?

[tiohn]

Taxing me reduces my quality of life. Without tax, I'd have a nice new car, and not a scratched and wonky old one.



Without tax, you wouldn't have anywhere to drive your nice new car.

[Hans Lauring]

Its a disincentive. Most people have a lot of different things they can do to enrich their lives that cost money. Thus if you take away some of my money, you are reducing my options and in a measurable way reducing my quality of life.
Taxing me reduces my quality of life. Without tax, I'd have a nice new car, and not a scratched and wonky old one.

Let me put it this way. Why should a successful entrepreneur be incentivised not to work any harder, or increase the size of their business?


How the hell can you extoll the virtues of the NHS in one thread and be against the concept of taxes in another?

Tax isn't punishment and luckily a lot of entrepreneurs don't mind paying their fair share of what's needed to keep society working - of course the interesting argumenet is what society needs to do to be considered "working well" and how we decide what's a fair share.
Arguing that tax in itself is bad or a disincentive is just stupid.

[lesslucid]

Actually, I think it's fair enough to say that taxation weakens incentives. It weakens your incentive to participate in the money economy, and (relatively speaking) makes activities like lying in bed daydreaming, or growing your own vegetables, more attractive.

If we could sustain the kind of government that appears to be necessary (practically, if not theoretically) for wealthy, successful, modern societies purely by Pigouvian taxation, I'd be all for it. But it doesn't seem likely. And while successful entrepeneurs may feel a bit miffed about how much tax they pay, ultimately being a successful entrepeneur is only possible in a society that produces enough wealth to allow someone to make a fortune (large or small) finding unexploited gaps in the economy, and such societies all have substantial governments which means a substantial tax bill.

[Stepsongrapes]

Its a disincentive. Most people have a lot of different things they can do to enrich their lives that cost money. Thus if you take away some of my money, you are reducing my options and in a measurable way reducing my quality of life.
Taxing me reduces my quality of life. Without tax, I'd have a nice new car, and not a scratched and wonky old one.

Let me put it this way. Why should a successful entrepreneur be incentivised not to work any harder, or increase the size of their business?

You're ignoring the other side of taxation: revenue generation. Heck, some would even dare say that taxation is primarily about revenue generation (gasp!).

Taxation as social engineering (e.g., a series of incentives and disincentives) is the whole reason the US tax system is as crazy complicated as it is. Many (most?) of our tax credits are intended to promote one activity or another. Abuse of the social engineering aspect is what often leads to crazy tax loopholes and dodges.

Suffice to say it would be hard to run a government on a revenue source that is (hopefully) shrinking. You'd have to constantly fine other "bad" behavior to slap taxes on. It's like hoping that the smokers of the world will be so addicted that they don't mind paying for government.

Talk about perverse and ill-advised.

[cliffski]

WTF?
Show me where I am against taxation...?
I just said we tax the wrong things. I said it several times.
Tax the fuck out of oil companies and McDonalds. Tax the bad stuff. Don't tax the good stuff. Incentives are at work.
I am not against taxation. never have been, never will be.

[cliffski]

Suffice to say it would be hard to run a government on a revenue source that is (hopefully) shrinking. You'd have to constantly fine other "bad" behavior to slap taxes on. It's like hoping that the smokers of the world will be so addicted that they don't mind paying for government.

Talk about perverse and ill-advised.

When no companies or individuals are doing anything that acts as a detriment to society, then I'll agree, and we can go back to taxing economic activity in general.
But we aren't there. We are here. And taxing bad stuff makes good stuff happen. In the UK, my car likely gets double the mileage your USA cars get. Why? Because we tax the fuck out of oil here, and it means there is an economic incentive to produce fuel efficient cars. A *good thing*.

Just imagine how much healthier the average US citizen would be if it was actually massively more tax-wise for food companies to make healthy food rather than fattening food?

If you think we shouldn't do this because it would mean the government is involved in social engineering and changing society, I think that ship has sailed. Thats what the government does, unless you are Ron Paul.

[lesslucid]

I didn't say democracy was bad. I said direct democracy is bad. A representative democracy, such as we have, seems fair enough despite some down sides. The key is that representatives that we can trust can judge the fairness of potential laws. I don't think taxes should be voted on at all. Doesn't CA have people vote on taxes? Does anyone ever vote on a tax increase, even when it is needed? More clearly, does a majority ever do so?

I think I agree with you up to the point where you say that taxes shouldn't be voted on at all. Representative democracy does indeed have its downsides but also protects us from potentially much worse downsides in direct democracy. But... whether people vote directly on taxes, people are, partly, voting on taxes whenever they go to elections.

Looks like you might just be saying that we shouldn't vote directly on taxes, though, which I would agree with.


I think the major problems of a two party system outweigh the advantage you list as well. What you have is people (or the politicians who represent them) supporting things ONLY because their party supports it. I voted for Obama, for example, but I hate some of the spending he has pushed through. I voted for him because I didn't have a good alternative, frankly, and yet he now has my support. Having only two real choices is pretty lousy, IMO, regardless of any apparent compromises it appears to create.
(apologies if any of that quoting seems selective; I was just trying to get to the parts I was answering)

No, your quoting seems fine to me. I ramble lengthily enough that it would be madness to try to respond to everything I write. ;)

I have mixed feelings about the two-party system... but looking at a country like Italy, with the technically more democratic system of full proportional representation, I'm glad to live somewhere a little more stable. Here in Australia we've got a pretty good system - in the lower house, we have preferential voting (what you people, I think, call "instant runoff voting") and then in the upper house we have state-based proportional representation, which means that at least in the upper house, if they've got a decent amount of support at least a few third-party types are able to get in. It means you can basically vote for whoever you actually would want to win, while still supporting the "less of two evils" out of the parties that actually have a chance of taking government.

[Larinson]

WTF?
Show me where I am against taxation...?
I just said we tax the wrong things. I said it several times.
Tax the fuck out of oil companies and McDonalds. Tax the bad stuff. Don't tax the good stuff. Incentives are at work.
I am not against taxation. never have been, never will be.

You implied that there was something bad about the way taxation works, therefore you are inherently against taxation, do you not see?

On a more serious note, with regard to the OP, my opinion on the question posed is very much aligned with the thoughts of Lord Salisbury:

"By a free country, I mean a country where people are allowed, so long as they do not hurt their neighbours, to do as they like. I do not mean a country where six men may make five men do exactly as they like."

It is not directly applicable, but the concept that just because a majority of people think that it is a good thing, does not necessarily mean that it should be enacted.

[lesslucid]

It is not directly applicable, but the concept that just because a majority of people think that it is a good thing, does not necessarily mean that it should be enacted.

Of course. But under what circumstances is it legitimate to go against the will of the people? And what measures is it legitimate to take to prevent the will of the people from being enacted? In the case of some situations, where there has to be one rule for everybody (eg, which side of the road should cars drive on?) then those "five men" damn well better do what "six men" have decided they ought to.

[Robert Sharp]

Looks like you might just be saying that we shouldn't vote directly on taxes, though, which I would agree with.


Yes, that's what I mean. I understand that we indirectly do so by electing officials who share our goals about what should be taxed and what those taxes should go to.



Here in Australia we've got a pretty good system - in the lower house, we have preferential voting (what you people, I think, call "instant runoff voting") and then in the upper house we have state-based proportional representation, which means that at least in the upper house, if they've got a decent amount of support at least a few third-party types are able to get in. It means you can basically vote for whoever you actually would want to win, while still supporting the "less of two evils" out of the parties that actually have a chance of taking government.

I like that. So you don't really have a straight two party system to the degree we do in the U.S. If the House of Representatives here worked a bit more like that, it might be a good thing, since more people would be represented. Of course, the counter is that it would become TOO fragmented and nothing would get done.

[Larinson]

Of course. But under what circumstances is it legitimate to go against the will of the people? And what measures is it legitimate to take to prevent the will of the people from being enacted? In the case of some situations, where there has to be one rule for everybody (eg, which side of the road should cars drive on?) then those "five men" damn well better do what "six men" have decided they ought to.

Yes, if there has to be a definitive aye or nay, then the majority should prevail. But frankly I think you picked a poor example, for I imagine that left or right hand drive was arbitrary and when initially decided was based upon riving habits. I think it kind of misses the spirit of the quote (though, that said, you did agree with it anyway, so we're into semantics now!).

[lesslucid]

Yes, if there has to be a definitive aye or nay, then the majority should prevail. But frankly I think you picked a poor example, for I imagine that left or right hand drive was arbitrary and when initially decided was based upon riving habits. I think it kind of misses the spirit of the quote (though, that said, you did agree with it anyway, so we're into semantics now!).

The point of the driving example is if one of those five men says to themselves, "well, fuck it, I didn't vote for left-hand drive, I don't see why I should have to do what they want me to do just because there's a couple more of them" then there will be serious consequences. And in fact, the society is (imo) justified in taking pretty serious steps, including the use of force, to prevent him from doing what he would individually prefer to do
in this case.

Of course, w/ respect to left or right hand drive, nobody is going to care enough to defy the will of the majority in such an idiotic way. But the principle holds for other issues where there are "externalities" for individual or group behaviour.

I guess the point is that, when six men make five become their slaves, it's wrong even though it may be "democratic" by some technical definition. But when six men make five drive on one side of the road, it's legitimate and proper even if the five don't like it and even if force has to be used to make them go along with it. There's a scale, I guess. And the question is, where on this scale does taxation belong? I guess my answer is pretty clear on that one. ;)

[Spam]

So, what's the tax rate in Dubai like these days. Not that any of the companies I'm involved with are relocating there and cutting US workforce, or anything.

[Preachy Preach]

No corporate income tax, and a 15% personal tax rate, from memory. Also, a willingness to ignore the fact you're living in a neo-feudal shithole whose growth model was essentially for the government to stoke up a real-estate bubble.

It's a fairly stupid place to relocate a corporation to for tax reasons, as the UAE's treaty network is... sparse.

[Ender]

Speaking from a country where the computer was invented, and which let other countries actually economically exploit the most significant invention of the modern age, I would caution against this attitude.

There is nothing magic that says Hollywood has to be in Hollywood or silicon valley has to be in silicon valley. Nothing is being physically mined.
Encouraging entrepreneurs to leave the country doesn't sound like a good plan.

I think we agree on this point. My sarcasm didn't come across properly. People, capital, and great ideas are pretty mobile. That is what worries me about punitive tax rates.

[Jason McCullough]

I too would be worried, if only there was some evidence that it was an actual problem rather than libertarian wish fulfillment.

[Papageno]

Hey, whatever happened to the idea that some libertarians had of all moving to New Hampshire and essentially voting in their preferred state gov't and setting up their Libertarian utopia there? Or is it another case of "talk is cheap"?

[Tortilla]

Its a disincentive. Most people have a lot of different things they can do to enrich their lives that cost money. Thus if you take away some of my money, you are reducing my options and in a measurable way reducing my quality of life.
Taxing me reduces my quality of life. Without tax, I'd have a nice new car, and not a scratched and wonky old one.


Fair taxation isn't even a disincentive. It's not punitive, and it's not money going down the drain. It buys a lot of services that directly and indirectly benefit the people paying the taxes.



Let me put it this way. Why should a successful entrepreneur be incentivised not to work any harder, or increase the size of their business?

I agree that 100% tax rates would be bad. Was anyone proposing that?

[Marged]

Fair taxation isn't even a disincentive. It's not punitive, and it's not money going down the drain. It buys a lot of services that directly and indirectly [benefits?] the people paying the taxes.

Exactly. Perhaps taxes should be considered overhead. Does the existence of overhead costs disincentive-ize business endeavors?

[Robert Sharp]

Fair taxation isn't even a disincentive. It's not punitive, and it's not money going down the drain. It buys a lot of services that directly and indirectly benefit the people paying the taxes.


Why can't it benefit people but still be a disincentive? A lot of people don't understand all the benefits of taxes and would far rather have the money in their pockets. I'm not saying they are right (though sometimes they are), but disincentive is a psychological point that is only loosely connected to actual benefits/costs.

[Tortilla]

Why can't it benefit people but still be a disincentive? A lot of people don't understand all the benefits of taxes and would far rather have the money in their pockets. I'm not saying they are right (though sometimes they are), but disincentive is a psychological point that is only loosely connected to actual benefits/costs.

I will concede normal and fair taxation is a disincentive to economic activity only if we also classify the need to get dressed, leave the house, and talk to other people is equally a disincentive to economic activity.

[Robert Sharp]

Come on, Kraaze. Play fair. You can't compare loss of discretionary income to getting dressed. Besides, for some people, those ARE disincentives to economic activity ;).

[Brian Seiler]

I will concede normal and fair taxation is a disincentive to economic activity only if we also classify the need to get dressed, leave the house, and talk to other people is equally a disincentive to economic activity.

But.....aren't they? In the technical sense? I've decided that I didn't want to go to a wedding because I didn't want to go to the trouble of obtaining the tuxedo I would have needed. If the dress code had been "Show up in whatever the hell," I probably would have gone. It doesn't have to be the predominant influence on decision making for it to be a disincentive. Paying for anything is a disincentive to that thing, and that's part of the whole "deciding what to do with our limited resources" economics thing. The existence of sales tax already motivates me to order as much stuff as possible from Amazon to avoid having to pay an arbitrary additional 8.25%. I'm not going to drive all the way to Kentucky to pick up a carton of cigarettes for $5 (not in the least because those are mostly horse shit and garden mulch from what I'm told, but also because I don't smoke), but when I'm given an otherwise equal choice and I opt to avoid taxation, how can you argue that they AREN'T a disincentive?

[Tortilla]

Come on, Kraaze. Play fair. You can't compare loss of discretionary income to getting dressed. Besides, for some people, those ARE disincentives to economic activity ;).

There is no loss. That's really the false perspective that I think it at the root of the libertarian delusion. Or maybe vice versa.

Taxation is like eating, it's just required to maintain an acceptable status quo. No rational person should bemoan the "loss" of tax dollars more than they should bemoan the "loss" of food at every meal.

[Tortilla]

But.....aren't they? In the technical sense?

Yes, they are. Hence my post.

[Erlend Grefsrud]

There is no loss. That's really the false perspective that I think it at the root of the libertarian delusion. Or maybe vice versa.

Taxation is like eating, it's just required to maintain an acceptable status quo. No rational person should bemoan the "loss" of tax dollars more than they should bemoan the "loss" of food at every meal.
What about the simpler argument: What if the purpose of business wasn't the accumulation of wealth, and social status rose from contributing rather than hoarding? What if shareholders weren't even a concern?

Why does there need to be economic incentives to performing jobs and services? Shouldn't we instead attempt to encourage social capital over liquid, moving power from the privileged to everyone?

[Brian Seiler]

What about the simpler argument: What if the purpose of business wasn't the accumulation of wealth, and social status rose from contributing rather than hoarding? What if shareholders weren't even a concern?

Why does there need to be economic incentives to performing jobs and services? Shouldn't we instead attempt to encourage social capital over liquid, moving power from the privileged to everyone?

Are we seriously going to have the whole debate about how communism doesn't work?

[Tortilla]

What about the simpler argument: What if the purpose of business wasn't the accumulation of wealth, and social status rose from contributing rather than hoarding? What if shareholders weren't even a concern?

Why does there need to be economic incentives to performing jobs and services? Shouldn't we instead attempt to encourage social capital over liquid, moving power from the privileged to everyone?

I'm sorry but I'm not in college anymore nor do I have a ready supply of marijuana at hand. Thus I would be unable to engage in that discussion in the proper style or do it justice in any fashion.

[Jason McCullough]

I think there a bit of wiggle room between communism and Reagan. Look at worker cooperatives (http://en.wikipedia.org/wiki/Worker_cooperative), for example. Not that I have any idea how good the concept is.

[sinfony]

What about the simpler argument: What if the purpose of business wasn't the accumulation of wealth, and social status rose from contributing rather than hoarding? What if shareholders weren't even a concern?

Why does there need to be economic incentives to performing jobs and services? Shouldn't we instead attempt to encourage social capital over liquid, moving power from the privileged to everyone?
Getting rid of a shareholders - what a brilliant scheme! In one fell swoop, venture capitalists, start-up companies, and companies in general will be destroyed! Then we can all go on living our lives using the barter system, supporting our local growers, raw food, no blood for oil, and so forth.

On a more serious note, German corporate law makes some concessions to worker well-being by requiring companies to have workers on the board of directors (well, one of the boards of directors. German corporate law is somewhat odd). Obviously, Germany has done fairly well, although the American model is superior in terms of maximizing shareholder wealth.

[Huzurdaddi]

although the American model is superior in terms of maximizing shareholder wealth.

You make it sound like this is a plus ...

[Robert Sharp]

There is no loss. That's really the false perspective that I think it at the root of the libertarian delusion. Or maybe vice versa.

Taxation is like eating, it's just required to maintain an acceptable status quo. No rational person should bemoan the "loss" of tax dollars more than they should bemoan the "loss" of food at every meal.

Of course there is a loss of discretionary income. By definition taxes lower discretionary income (http://en.wikipedia.org/wiki/Disposable/Discretionary_income). Why not just say that it's worth it rather than pretending that doesn't happen?

[sinfony]

You make it sound like this is a plus ...
Arguably, it is a plus. The US is the most prosperous nation in the world, and while I'm not a trickle-down nutjob, it's obvious that having loads of profitable companies means lots of good jobs and tax revenue (at least, when we aren't in the economic end-times).

[sinfony]

Of course there is a loss of discretionary income. By definition taxes lower discretionary income (http://en.wikipedia.org/wiki/Disposable/Discretionary_income). Why not just say that it's worth it rather than pretending that doesn't happen?
There's only a loss of discretionary income in the fantasy-land where you can make money at all in the absence of a functioning government, which of course requires tax revenue to operate. You only lose magic Libertarian Bucks to your taxes.

[Hawkeye Fierce]

Arguably, it is a plus. The US is the most prosperous nation in the world, and while I'm not a trickle-down nutjob, it's obvious that having loads of profitable companies means lots of good jobs and tax revenue (at least, when we aren't in the economic end-times).It's WAY too easy to get tunnel vision with this, though. Indeed, I'd argue that at least some of our social and economic issues stem from the lopsided view of an economy as purely about stock prices. There are plenty of other metrics which should be considered, like standard of living, median income, CPI, etc. I'd be perfectly happy to sacrifice some stock price efficiency for improvements in those areas.

[sinfony]

It's WAY too easy to get tunnel vision with this, though. Indeed, I'd argue that at least some of our social and economic issues stem from the lopsided view of an economy as purely about stock prices. There are plenty of other metrics which should be considered, like standard of living, median income, CPI, etc. I'd be perfectly happy to sacrifice some stock price efficiency for improvements in those areas.
No doubt about it. That's the role of government, though (sorry, libertarians). There isn't enough incentive for companies to worry about these sorts of things, and competitive pressure deters companies from being particularly progressive (e.g. few companies would likely have instituted a minimum wage because they would price themselves out of competition, so the government steps in with the FLSA and the like).

[Tortilla]

Of course there is a loss of discretionary income. By definition taxes lower discretionary income (http://en.wikipedia.org/wiki/Disposable/Discretionary_income). Why not just say that it's worth it rather than pretending that doesn't happen?

Because there is no loss of discretionary income. The widespread fallacy, that you seem to have completely internalized to the point where it is invisible to you, is that all income is discretionary and thus any tax is a burden. I completely reject that outlook as utopian nonsense.

[Erlend Grefsrud]

Funny how the only alternative to stone-cold capitalism is fairies and unicorns in crazy commie pinko-town. I think the economic incentives presented via the capitalist models are downright disruptive of social behaviour, and that they don't have to be that to be efficient. The meritocracy and plutocracy that results from excessive concentration of wealth is undesirable, and will eventually lead to even more serious schisms in society than we already have -- like it always has.

I don't understand the extreme resistance to the idea that the current model of economic incentivizing is flawed. I realize that it's silly to say that money doesn't matter, but really: Is it utterly and terrifyingly, ridiculously inconceivable that huge concentration of wealth is not the most efficient way of ensuring that every member of society can participate in the economy? Wouldn't larger diversity among consumers also drive innovation and grow new niches, possibly in a more organic and need-driven way than innovation being dictated by venture capitalists whose whim decides what the public wants?

What kind of irreparable damage would result from disrupting the concentration of wealth?

[Tortilla]

Funny how the only alternative to stone-cold capitalism is fairies and unicorns in crazy commie pinko-town.


No, that's a false dichotomy. There's a lot of ways to tame the worst aspects of pure capitalism so that a society can capture most of the benefits while avoiding nearly all of the drawbacks.



I think the economic incentives presented via the capitalist models are downright disruptive of social behaviour, and that they don't have to be that to be efficient. The meritocracy and plutocracy that results from excessive concentration of wealth is undesirable, and will eventually lead to even more serious schisms in society than we already have -- like it always has.

I don't understand the extreme resistance to the idea that the current model of economic incentivizing is flawed. I realize that it's silly to say that money doesn't matter, but really: Is it utterly and terrifyingly, ridiculously inconceivable that huge concentration of wealth is not the most efficient way of ensuring that every member of society can participate in the economy? Wouldn't larger diversity among consumers also drive innovation and grow new niches?

What kind of irreparable damage would result from disrupting the concentration of wealth?

I'd rebut that if was coherent enough to be rebutted. Unfortunately. I have no idea what you are claiming other than in a general sense you don't like capitalism.

[Erlend Grefsrud]

No, that's a false dichotomy. There's a lot of ways to tame the worst aspects of pure capitalism so that a society can capture most of the benefits while avoiding nearly all of the drawbacks.
I was remarking on how I was immediately met with "WAT COMMUNISM!?".

You don't need to rebut anything. I was asking why concentration of wealth is necessary to a working free market, and if it isn't, why is it desirable? That's a question, not a statement. That means I'm after information, which I'm hoping you can provide.

You don't need to project craziness or incoherence onto notions you don't find attractive. A good argument will suffice.

[Brian Seiler]

Because there is no loss of discretionary income. The widespread fallacy, that you seem to have completely internalized to the point where it is invisible to you, is that all income is discretionary and thus any tax is a burden. I completely reject that outlook as utopian nonsense.

Errrrr......I don't know if that works, what you're doing right there. You're basically asserting, no, discretionary income is that thing you have after taxes, and anything you have to spend on "fair" (whatever the hell that means) taxes isn't discretionary.

Well, yeah - that's the point. If you charge me fifty bucks a month to pay for a homeless shelter downtown, that's fifty less dollars I have to spend on video games. You've taken money out of the discretionary pool and committed it to some other action. The argument that you're not decreasing the discretionary money pool because your cause is just seems like utter nonsense to me. You can frame your argument for moral obligation without having to change the meaning of words. In this case, your argument would be that there's some moral burden for people who have fifty bucks to build a homeless shelter. Anything I do because of a moral obligation is still discretionary - morals govern assignment of value, and in this case you're going to end up asserting that Bob's need for a place to sleep outweighs my desire to play Chest Stomper 17 on release. The whole reason why it's a moral choice is because you don't have to make it one way and no other. In that regard, thinking of "discretionary money" as any money you've got left after seeing to your own personal survival makes the most sense for discussing the economic merit and impact of a proposal.


In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association in which the free development of each is the condition for the free development of all.

No....wait....that's not right.....


Blood's not thicker than money.

Wait...no....that's not the right one either.

I don't know what the hell you're on about, but one fact to which I have reconciled myself in my current advanced age is the understanding that capitalism is not optional. In an economy of scarcity, capitalism is the way things will work. Case in point, North Korea, or Russia back when it was a communist state, or, hell, anywhere. Capitalism structurally explains the way people interact with one another to exchange goods and services. You can't just throw it out. The best you can do, and the only thing you should try to do, is contain its excesses and force it to value humanitarian concerns outside of its natural purview. Complaining about how profit motives make people act poorly with respect to one another is like complaining about how gravity keeps stealing your ice cream.

[Tortilla]

I was remarking on how I was immediately met with "WAT COMMUNISM!?".


Well as far as I could tell it sounded like the vague dreamy defense of communism that normally accompanies a cloud of left handed cigarette smoke. I was getting horrible college flashbacks. Anyone who immediately starts wondering why people are so greedy and couldn't we all just get along sounds like they are broadcasting on radio 420 from lovely downtown Utopia. Apologies if that wasn't the argument you were trying to advance.



You don't need to rebut anything. I was asking why concentration of wealth is necessary to a working free market, and if it isn't, why is it desirable? That's a question, not a statement. That means I'm after information, which I'm hoping you can provide.


Fair enough. Concentrations of wealth are necessary because the capital part of capitalism is one of the mechanisms by which economic growth and progress is sustained. If everyone just earns enough to survive comfortably then nobody has excess with which to speculate on potential improvements.

[Enidigm]

Actually a better question is whether capitalism is the best fit for a world without growth. Not scarcity, so much.

[Spam]

Don't think we'll have to worry about that for a while. The IMF keeps having to readjust its projections upwards and people keep having babies.

[unbongwah]

(I think it was ming campbell)
Please tell me his nickname is "the Merciless."

There is no Uk sales tax on books or childrens clothes or cold food, because we want to encourage spending on those. There is a high rate of tax on alcohol and tobacco because these are considered to have a negative effect on society.
What you're describing are Pigovian taxes (http://en.wikipedia.org/wiki/Pigovian_tax) (or subsidies). We use them, too.

I don't see why we can't make an argument to shift the burden away from income tax, which effectively punishes peoples success, and towards things that people do that are considered harmful.
Well, for one thing, there's the question of ensuring the government has enough tax revenue to fund its activities. Income taxes are relatively predictable as long as GDP remains stable, IIUC. Pigovian taxes, OTOH, by their very nature are intended to reduce consumption of an undesirable good or service; so if they're effective at social engineering (i.e., suppressing demand for the target), you'll be generating less tax revenue from them over time. You end up needing to find new things to tax just to keep government afloat.

For another, consumption taxes like you describe tend to be regressive and hurt the lower classes more. Yes, they would have more money in their pockets if you lowered their income taxes, but if they pay more on goods, have you really improved their lot in life? E.g., fast food: one reason so many people eat it is because it's darn cheap; but if you raise the price of fast food thru taxes (without lowering the prices of healthier alternatives), then their consumers just end up paying more for meals. [Ironically, it's the flip side to the conservative argument that minimum wages don't raise the standard of living because the increased labor costs to companies get passed to consumers, which increases the cost of living by a roughly comparable amount and the working poor remain where they were.]

Honestly, you're presenting a false dichotomy, because there are already so many tax revenue streams - income, sales, property, vehicles, estate, tariffs, etc. - and you're unlikely to get rid of any of them, because governments sure do love their tax revenue. Best you can hope to do is fiddle with the rates to produce better outcomes.

[cliffski]

Exactly. Perhaps taxes should be considered overhead. Does the existence of overhead costs disincentive-ize business endeavors?

if you have a choice of countries when your overheads differ, then I can answer this:

YES. OBVIOUSLY.

It's called competition. If my competitors make cheaper games in country X because tax rates are lower I have a HUGE incentive to move to country X

[Marged]

if you have a choice of countries when your overheads differ, then I can answer this:

YES. OBVIOUSLY.

It's called competition. If my competitors make cheaper games in country X because tax rates are lower I have a HUGE incentive to move to country X

Although you do get what you pay for, to a varying degree.

[Tortilla]

if you have a choice of countries when your overheads differ, then I can answer this:

YES. OBVIOUSLY.

It's called competition. If my competitors make cheaper games in country X because tax rates are lower I have a HUGE incentive to move to country X

That's particularly hilarious considering that what you do and where you do it. Contemplating a move are you?

[jeffd]

if you have a choice of countries when your overheads differ, then I can answer this:

YES. OBVIOUSLY.

It's called competition. If my competitors make cheaper games in country X because tax rates are lower I have a HUGE incentive to move to country X

This is oversimplying things so vastly it's not even funny.

Tell me - why are video games still made in the US and Japan? Vietnam and India would be much cheaper...

[Hawkeye Fierce]

This is oversimplying things so vastly it's not even funny.

Tell me - why are video games still made in the US and Japan? Vietnam and India would be much cheaper...Yeah, I've always been dubious of the "hostage crisis" view of a national economy.

[Robert Sharp]

Because there is no loss of discretionary income. The widespread fallacy, that you seem to have completely internalized to the point where it is invisible to you, is that all income is discretionary and thus any tax is a burden. I completely reject that outlook as utopian nonsense.

Seriously? I'M being utopian by thinking that taxes lower discretionary income? You are changing the meanings of words in order to fit your vision of legitimate taxation. That's far more idealistic than my suggestion that we not obscure the meaning of discretionary (which means YOU the earner get to decide how to spend it). Look, I think taxes are important. I think they are a necessary part of living in a just society. But I don't play games with words like liberty by pretending that paying taxes is ONLY an increase in liberty. It isn't. It's a loss of negative liberty in order to gain positive liberty. At the risk of sounding like a four year old, your quote applies to you more than it does to me. You are the one internalizing a utopian vision by suggesting that taxes do not equal a loss of personal economic freedom on some level.

BY DEFINITION, discretionary income is that part of your income that you get to control directly, that part that is yours after you have paid the necessities in life. Aren't taxes one of those necessities? I mean I don't get to opt out of them. I must pay them. If taxes are lowered (as a percentage), I'll have more discretionary income. If they are raised, I will have less. I don't know what kind of game you think you are playing here, but I'm not falling for it. Now if your point is just that taxes are factored into your pay and that you factor it in when taking a job, OK. That's fine. If you want to say your total income was never discretionary, since you knew taxes where there, that's also fine. But it's not very relevant to the discussion of whether higher or lower taxes change discretionary income and cause incentive/disincentive.

I should add that I don't think all tax raises are punitive or disincentivizing. Clearly that's too simple. But so is the idea that they are never an influence on people or that they somehow don't affect discretionary income. So we both stand somewhere in between (I'm assuming you do, anyway). Where to draw that line is pretty important, but covering up the meaning of discretionary income isn't helping.

[Dan Lawrence]

Seriously? I'M being utopian by thinking that taxes lower discretionary income? You are changing the meanings of words in order to fit your vision of legitimate taxation. That's far more idealistic than my suggestion that we not obscure the meaning of discretionary (which means YOU the earner get to decide how to spend it). Look, I think taxes are important. I think they are a necessary part of living in a just society. But I don't play games with words like liberty by pretending that paying taxes is ONLY an increase in liberty. It isn't. It's a loss of negative liberty in order to gain positive liberty. At the risk of sounding like a four year old, your quote applies to you more than it does to me. You are the one internalizing a utopian vision by suggesting that taxes do not equal a loss of personal economic freedom on some level.

BY DEFINITION, discretionary income is that part of your income that you get to control directly, that part that is yours after you have paid the necessities in life. Aren't taxes one of those necessities? I mean I don't get to opt out of them. I must pay them. If taxes are lowered (as a percentage), I'll have more discretionary income. If they are raised, I will have less. I don't know what kind of game you think you are playing here, but I'm not falling for it. Now if your point is just that taxes are factored into your pay and that you factor it in when taking a job, OK. That's fine. If you want to say your total income was never discretionary, since you knew taxes where there, that's also fine. But it's not very relevant to the discussion of whether higher or lower taxes change discretionary income and cause incentive/disincentive.

I should add that I don't think all tax raises are punitive or disincentivizing. Clearly that's too simple. But so is the idea that they are never an influence on people or that they somehow don't affect discretionary income. So we both stand somewhere in between (I'm assuming you do, anyway). Where to draw that line is pretty important, but covering up the meaning of discretionary income isn't helping.


Surely taxes are discretionary because you can just move to where the taxes aren't. Like Vietnam :)

[Preachy Preach]

There's a cliché that tax advisors (myself included, depressingly) have started using recently - 'you mustn't let the tax tail wag the dog'. Tax structuring and rates should always be considered when making a commercial decision, but it should always be a second-order consideration, rather than the sole or main motive.

[Huzurdaddi]

There's a cliché that tax advisors (myself included, depressingly) have started using recently - 'you mustn't let the tax tail wag the dog'. Tax structuring and rates should always be considered when making a commercial decision, but it should always be a second-order consideration, rather than the sole or main motive.

I've almost always used that maxim wrt. investing. Those few times I haven't didn't turn out well (although as a proponent of the efficient market hypothesis I suppose I can't logically say that not following it caused the losses).

[Tortilla]

Seriously? I'M being utopian by thinking that taxes lower discretionary income? You are changing the meanings of words in order to fit your vision of legitimate taxation. That's far more idealistic than my suggestion that we not obscure the meaning of discretionary (which means YOU the earner get to decide how to spend it). Look, I think taxes are important. I think they are a necessary part of living in a just society. But I don't play games with words like liberty by pretending that paying taxes is ONLY an increase in liberty. It isn't. It's a loss of negative liberty in order to gain positive liberty. At the risk of sounding like a four year old, your quote applies to you more than it does to me. You are the one internalizing a utopian vision by suggesting that taxes do not equal a loss of personal economic freedom on some level.


We'll have to disagree on this then, since to echo your response I think everything you've addressed to me actually applies to you. I think calling taxes a reduction in discretionary income is in fact playing word games to frame taxes in an unrealistic fashion as somehow an optional and arbitrary thing.

A fair tax rate is a loss of personal economic freedom in the same way that breathing is a loss of personal biological freedom.



BY DEFINITION, discretionary income is that part of your income that you get to control directly, that part that is yours after you have paid the necessities in life. Aren't taxes one of those necessities? I mean I don't get to opt out of them. I must pay them. If taxes are lowered (as a percentage), I'll have more discretionary income. If they are raised, I will have less. I don't know what kind of game you think you are playing here, but I'm not falling for it. Now if your point is just that taxes are factored into your pay and that you factor it in when taking a job, OK. That's fine. If you want to say your total income was never discretionary, since you knew taxes where there, that's also fine. But it's not very relevant to the discussion of whether higher or lower taxes change discretionary income and cause incentive/disincentive.

I should add that I don't think all tax raises are punitive or disincentivizing. Clearly that's too simple. But so is the idea that they are never an influence on people or that they somehow don't affect discretionary income. So we both stand somewhere in between (I'm assuming you do, anyway). Where to draw that line is pretty important, but covering up the meaning of discretionary income isn't helping.

I think you moved the goalposts there. I agree that punitive or unreasonable taxation rates can exist and can influence behavior. Reasonable and fair tax rates will not influence behavior in any meaningful way.

[Brian Seiler]

I think you moved the goalposts there. I agree that punitive or unreasonable taxation rates can exist and can influence behavior. Reasonable and fair tax rates will not influence behavior in any meaningful way.

I'm (http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/conferences/taxforum2009/pres_Altshuler.pdf) not (http://www.fraseramerica.org/Commerce.web/product_files/ImpactofTaxesonEconomicbehavior.pdf) sure (http://www.entrepreneur.com/tradejournals/article/115077453.html) that (http://www.nytimes.com/2008/12/19/business/19tax.html?_r=1&em) you've done quite enough economic research on this subject. Unless you circularly define "reasonable and fair" to mean "not influencing behavior," any arbitrary tax rate you select will always create some effect on the population and what they spend their money on. Moreover, you're using the term "reasonable and fair" like it's an objectively verifiable quantity - I think you'll find that attitudes of what constitutes a reasonable tax vary wildly from individual to individual. If your assertion is that people will happily pay whatever they think is fair.....well, then you're arguing for the Objectivist model of voluntary taxation, and you're going to have to respond to the Wesley Snipes problem.

You're making a wild, crazy assertion here, but not providing any evidence for that claim. We would naturally expect that taking money out of a pool of potential discretionary income would decrease discretionary spending. The exceptional claim is that if you examine a situation in which a person has $10,000 in discretionary income and a situation in which a person has $7,500 in discretionary income over a fixed period of time that, assuming these individuals have the same buying habits and preferences, they will each spend roughly the same amount of money. That is not the expected result - the expected result would be to see the person with the extra $2,500 spending as much as 33% more than his counterpart. You can claim that if you want, but it's a statement made in contradiction to the behavior that we would expect to observe, and you need to substantiate it in some way.

If your claim is that we should pay taxes for things to happen because that is the right thing to do, why aren't you, you know, claiming that, instead of trying to torture the language to make it seem like doing what you argue is the morally correct option isn't optional at all? Your argument isn't that taxation doesn't remove discretionary money from the bigger pool of the economy - your argument is that it is worth removing that money from the economy and committing it to whatever you are advocating to achieve some result.

[cliffski]

That's particularly hilarious considering that what you do and where you do it. Contemplating a move are you?

yup. New zealand as it happens. I even went out there to check it out.
I look forward to reading you try and insist that I am wrong about my own thoughts, incentives and motivations.

It might be news to you, but businesses often relocate where there are tax advantages. I can't get my head around your blanket refusal to comprehend that.

[cliffski]

A fair tax rate is a loss of personal economic freedom in the same way that breathing is a loss of personal biological freedom.



WTF?

I look forward to a hilarious definition by you of 'fair tax rate'.
Normally this equates to 'anyone who earns more than X pays lots more tax' where X is the income of the person making the argument.
its also commonly true that the persons employer, who ultimately decides where the business that employs him is based, earns considerably more than X.

[Tortilla]

I look forward to a hilarious definition by you of 'fair tax rate'.

I've been using that deliberately vague phrase to avoid derailing the discussion into a debate over the minutiae of various tax proposals. So you'll have to keep waiting.

[cliffski]

Ah, as I thought, you have no idea what you are talking about either.
Glad we cleared that up.

[lesslucid]

BY DEFINITION, discretionary income is that part of your income that you get to control directly, that part that is yours after you have paid the necessities in life. Aren't taxes one of those necessities? I mean I don't get to opt out of them. I must pay them. If taxes are lowered (as a percentage), I'll have more discretionary income. If they are raised, I will have less. I don't know what kind of game you think you are playing here, but I'm not falling for it. Now if your point is just that taxes are factored into your pay and that you factor it in when taking a job, OK. That's fine. If you want to say your total income was never discretionary, since you knew taxes where there, that's also fine. But it's not very relevant to the discussion of whether higher or lower taxes change discretionary income and cause incentive/disincentive.

I suspect I don't really disagree with you but just to make the other side of the argument for a moment... "discretionary income" might refer to the part of your income that you have a choice about spending, or the part that you have a meaningful choice about spending. For example: you can choose not to buy any food at all. But if you continue doing it for long enough, you'll die of starvation. So... spending enough money on food to stay alive is in some sense non-discretionary. Anything more that you spend on food - for better food or for someone else to prepare it for you, &c, can be considered discretionary.

...anyway, if you pay money in taxation which the government then uses to provide services which, if they were not provided, you would have had to have paid for anyway, it may be that tax doesn't alter your discretionary income. If, for whatever reason, the government is able to provide that service more cheaply than the private sector could, then taxation may actually increase your discretionary income. If it were, at least, hypothetically possible for this to be the case, then it would not be definitionally true that taxation reduces discretionary income.

[Preachy Preach]

http://online.wsj.com/article/SB125236402166490829.html

I've met once or twice one of the people quoted here - he/she's on the ball.

[Robert Sharp]

I suspect I don't really disagree with you but just to make the other side of the argument for a moment... "discretionary income" might refer to the part of your income that you have a choice about spending, or the part that you have a meaningful choice about spending. For example: you can choose not to buy any food at all. But if you continue doing it for long enough, you'll die of starvation. So... spending enough money on food to stay alive is in some sense non-discretionary. Anything more that you spend on food - for better food or for someone else to prepare it for you, &c, can be considered discretionary.

...anyway, if you pay money in taxation which the government then uses to provide services which, if they were not provided, you would have had to have paid for anyway, it may be that tax doesn't alter your discretionary income. If, for whatever reason, the government is able to provide that service more cheaply than the private sector could, then taxation may actually increase your discretionary income. If it were, at least, hypothetically possible for this to be the case, then it would not be definitionally true that taxation reduces discretionary income.

For your food point, yes, that's interesting, but very hard to determine. If I pay 30 cents more for Jiff PB instead of generic, I suppose that could be seen as a luxury, and that 30 cents could be seen as discretionary. Plus, why do I need PB at all? Why not just bread, water and some multivitamins (or whatever is minimally necessary)? So while I see your point, I think it's a practical problem and doesn't change what we mean by discretionary. It only means we have to be careful about where to apply it.

With taxes, I must pay it. So I do not get to choose. Now, might the taxes be providing something I would have to pay for anyway? Yes, and in that sense I could see your point. But what are those things? Maybe roads (as an example)? Perhaps, but I would only have to pay for the roads I plan to use. Yet I am taxed to pay for all roads (in my state, at least). This is similar to the problem people have with single-payer healthcare. Yes, I would need to pay for my healthcare anyway (non-discretionary), but if I have to support people who are sicker/less healthy than I am through taxes, then the cost will be higher than if I paid for it myself. So I have lost discretionary income on the difference. There will always be programs the govt. is using tax money for that I do not benefit from directly (or even indirectly in some cases). So at least SOME of my taxes are a loss of my discretionary income because I never would have spent my money on those things.

Again, I support a single-payer system. I have no problem with paying a bit more in taxes to help with programs that I don't benefit from, also. I just don't like playing with the language so that it sounds like I haven't paid anything or lost some of my personal freedoms (to spend) through taxation. I have. Now we have to ask whether it was worth it. To me this is a much more open and accurate way of portraying what is happening. Kraaze's way obfuscates the procedure by suggesting that we owed it anyway, or that it was always a necessary expenditure by each tax payer and that no freedom is lost whatsoever.

Short version: Just say that paying for benefits for other people is part of living in a society and that it is reciprocated in lots of ways. Don't feed me a line about how taxes are like breathing.

[Tortilla]

With taxes, I must pay it. So I do not get to choose. Now, might the taxes be providing something I would have to pay for anyway? Yes, and in that sense I could see your point. But what are those things? Maybe roads (as an example)? Perhaps, but I would only have to pay for the roads I plan to use. Yet I am taxed to pay for all roads (in my state, at least). This is similar to the problem people have with single-payer healthcare. Yes, I would need to pay for my healthcare anyway (non-discretionary), but if I have to support people who are sicker/less healthy than I am through taxes, then the cost will be higher than if I paid for it myself. So I have lost discretionary income on the difference. There will always be programs the govt. is using tax money for that I do not benefit from directly (or even indirectly in some cases). So at least SOME of my taxes are a loss of my discretionary income because I never would have spent my money on those things.


I guess if you want to define discretionary income that way, that you should have the discretion to not pay for necessities and gamble away your own future prosperity, then I must concede you are correct. Taxes reduce your discretionary income.




Again, I support a single-payer system. I have no problem with paying a bit more in taxes to help with programs that I don't benefit from, also. I just don't like playing with the language so that it sounds like I haven't paid anything or lost some of my personal freedoms (to spend) through taxation.
I have. Now we have to ask whether it was worth it. To me this is a much more open and accurate way of portraying what is happening. Kraaze's way obfuscates the procedure by suggesting that we owed it anyway, or that it was always a necessary expenditure by each tax payer and that no freedom is lost whatsoever.

Short version: Just say that paying for benefits for other people is part of living in a society and that it is reciprocated in lots of ways. Don't feed me a line about how taxes are like breathing.

I still maintain that anyone who claims that reasonable taxes are optional or a reduction in freedoms is the one playing dangerous and dishonest rhetorical games. That sort of language suggests that taxes are some sort of problem to be solved and that any reduction in taxes is automatically beneficial progress. Look at what wonderful financial circumstances our government finds itself in after multiple administrations have tried to "starve the beast."

There is no sustainable civilized existence without government. There is no government without taxes.

[Tortilla]

Ah, as I thought, you have no idea what you are talking about either.
Glad we cleared that up.

You are losing your touch cliffski, or did you not mean to imply that you don't know what you are talking about in this thread?

[Hans Lauring]

No, he's losing his touch because he forgot to call you a filthy pirate as well.

[Robert Sharp]

I still maintain that anyone who claims that reasonable taxes are optional or a reduction in freedoms is the one playing dangerous and dishonest rhetorical games. That sort of language suggests that taxes are some sort of problem to be solved and that any reduction in taxes is automatically beneficial progress. Look at what wonderful financial circumstances our government finds itself in after multiple administrations have tried to "starve the beast."

There is no sustainable civilized existence without government. There is no government without taxes.

How does it suggest that reducing taxes is automatically beneficial? You are making a lot of leaps here. I never said anything like that. I never said we should lower taxes, much less get rid of them or government. Do you really read that into what I am saying here? I'm simply saying that all these benefits have a cost. I think we should admit that right up front and only then should we start to ask whether the cost is worth it. Taxes aren't reasonable just because they exist. They are reasonable if the benefits outweigh the costs. One of those costs is the discretionary income of the people who are paying the taxes. So it has to be weighed. I'm not saying anything more radical than that. I'm not a libertarian, as you seem to think. I thought Bush's tax cuts were a bad idea. It traded societal benefits and a controlled budget for a small amount of individual freedom (per capita). That trade is not worth it, IMO.

But your wording could be used to justify ANY tax.

[Tortilla]

How does it suggest that reducing taxes is automatically beneficial? You are making a lot of leaps here. I never said anything like that. I never said we should lower taxes, much less get rid of them or government. Do you really read that into what I am saying here?


It's a matter of framing, not explicit statements. I apologize if I'm overly combative on this topic, but I'm stick to death of debating libertarians who believe all taxes of all sorts are some sort of unjust undue burden on a citizen. Some of them are quite clever at framing taxation discussions in terms that automatically imply that all taxation bad, and one of the tricks is to keep a laser focus on how taxes take hard earned money away from deserving people with no mention given to the benefits or necessities provided by government services.




I'm simply saying that all these benefits have a cost. I think we should admit that right up front and only then should we start to ask whether the cost is worth it. Taxes aren't reasonable just because they exist. They are reasonable if the benefits outweigh the costs. One of those costs is the discretionary income of the people who are paying the taxes. So it has to be weighed. I'm not saying anything more radical than that. I'm not a libertarian, as you seem to think. I thought Bush's tax cuts were a bad idea. It traded societal benefits and a controlled budget for a small amount of individual freedom (per capita). That trade is not worth it, IMO.


I don't disagree with your math or logic, just the rhetorical impression you made with your choice of terms. You went beyond just mentioning taxation reducing discretionary income this time, and started talking about how taxation reduces freedom (implication: taxation is the enemy of those who love freedom). So rhetorically, those who are strongly against taxation are still winning because we are still having debates framed in their terms.



But your wording could be used to justify ANY tax.

That's a fair point. I'm not trying to justify unreasonable taxes, and could probably improve my point with some more specific wording than just talking about fair and reasonable taxes in a vague way. I know the thread will instantly turn into people nitpicking the details of any standard I set out for fair taxation if I tried, so I won't. If that leaves my argument unconvincing to you, so be it.

[Robert Sharp]

It's a matter of framing, not explicit statements. I apologize if I'm overly combative on this topic, but I'm stick to death of debating libertarians who believe all taxes of all sorts are some sort of unjust undue burden on a citizen. Some of them are quite clever at framing taxation discussions in terms that automatically imply that all taxation bad, and one of the tricks is to keep a laser focus on how taxes take hard earned money away from deserving people with no mention given to the benefits or necessities provided by government services.


I agree, and I would never intentionally do that. So how about if we just shake hands on the fact that we disagree about how the wording should be framed, and that we each have good reasons, and that words (especially in politics) are just screwed up by poor use over the years? Then we can hug. And dance.