posts >> publuis > nikolai
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Publuis
It is important to understand the concept of money as a foundation to build tax structures. Currency is a value store. It is exchangeable at a given rate for a good or a service. A dollar then is nothing more than a potential good or service. With more dollars you have the potential to acquire more goods or services. Fundamentally important to this exchange is the actual value of money. How many goods or services it is worth? In these terms wealth is measured in possibilities or potential, not in the actual stockpile. Or put in other terms, money lost is opportunity lost, so a lot of money lost is lots of opportunity lost. Or lastly, if money loses value against the worth of goods and services opportunities for commerce are lost.
For example, in Russia during Soviet rule money’s value declined against actual goods and services. Therefore a consumer needed more money to buy the same good compared to its actual worth. Money lost value.
Therefore, taxation needs to adequately manage a nation’s revenue as well as maintain consumer purchasing power. If a majority of the tax burden is focused on those individuals with concentrated wealth, then the overall ability for the exchange of money for goods and services is limited. So to facilitate more robust spending, and in turn economic growth, sound tax policy is to reduce taxation on those who have the most purchasing power. To compensate for the reduction in tax revenue government spending must be tied to income, or the pay-as-you-go model. This can be done by cutting non essential government programs or shifting them to private sector services.
The notion that good tax policy is taking away wealth from those who have the ability to exchange their money for the goods and services that provide jobs is baseless. Rather, the wealthy need to retain a larger portion of their income so that they can in turn spend or save it. This will keep the value of the dollar high, and our economy moving forward.
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Nikolai
One of the most heated debates between the Democratic and the Republican parties is tax structure. When you take out the fancy words and phrases you’re left with two choices; raise taxes, or lower them. If we looked at those two options just as they are simply presented we’d be fools to think that raising taxes is the better option. Who wants to pay MORE money to the government? The answer is nobody. However, it’s not as simple as raising or lowering taxes. Think about what taxes pay for. Most if not all of the things it pays for are necessary to the lives we live today.
The Sixteenth Amendment in the US Constitution states, “The Congress shall have the power to lay and collect taxes on income, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” As much as we do not enjoy paying taxes, they are a must. I believe that those who make more money should have to pay a higher percentage of tax. The wealthy are able to afford to pay more taxes than the working poor, or working middle class. An argument can me made saying that the richest people should be paying less taxes because they are responsible for more of the spending which in return boosts the economy. This is true but unfortunately it will not solve America’s debt problem. There may not be a short term or even a long term solution to paying off our country’s debt, but raising taxes seems to be a step in the right direction… unless of course Visa is willing to offer us a credit limit of 3 trillion dollars with a low fixed rate!
19 Comments
March 7, 2008 at 11:49 am
The first step to getting this country out of debt is to massively cut back on government spending. If I had my way it’d be the military, but pick whatever government program you like (or don’t like) and there will ALMOST always be millions of dollars wasted annually within its bureaucratic structure. Obviously someone’s got to pick up the tab for our republican government’s spending spree, and it’s going to be the american people, but I think first the government needs to at least make steps in the direction of cutting down on spending. It’s like when a little kid is screwing around somewhere he shouldn’t be and breaks something expensive that doesn’t belong to him; his family will pay for it willingly, of course, but that kid’s activity is going to be restricted until he’s learned his lesson. I hate to refer to the government of my country as a naughty child, but there it is.
Publuis, you’re talking about putting the burden of taxes on the lower classes? Aside from not making sense (people who don’t have money to begin with can’t pay) your suggested plan will only broaden the schism between the upper and lower classes, knocking out the middle class entirely. Sure, the wealthy have more spending power, but piling taxes on the non-wealthy will only serve to take away what little spending power they have. I most certainly do not claim to be an economics whiz, but I’m pretty sure the idea is to have as many people fueling the economy as possible. Your plan doesn’t add up. Plus, the wealthy of this country already have the government by the scruff of the neck, the last thing we need to do is give them more power.
March 9, 2008 at 8:11 pm
Richard,
I promise I won’t disagree with you about everything, and if I do I still enjoy the debates.
I don’t see why lowering taxes on the rich has to hurt the middle class or the poor. I think that the people who actually move our economy are people with money to spend, I could be wrong I guess.
So it’s the trickle down effect; if people at the top spend money it makes its way down to the poor.
Instead of shifting the tax burden, we should balance the budget and use a model that ties spending to revenue.
If that means America takes a back seat to China or to India I’m OK with that. But I’m pretty confident that the American consumer, given the opportunity, will outspend anyone on the planet. And in reality that’s a good thing.
March 10, 2008 at 9:42 am
if the trickle down theory actually works, how in the world is the gap between the rich and poor growing (almost exponentially) every single year? hey, i’m a proponent of letting American workers keep their money (as much as possible), but the idea that giving larger tax cuts to the wealthy somehow works its way down to the poor is incredibly naive.
March 10, 2008 at 12:10 pm
Donald-
“So it’s the trickle down effect; if people at the top spend money it makes its way down to the poor.”
What makes it’s way down to the poor? Money? I’m pretty sure rich people spend a lot of money and we still have a lot of poor people.
How would you propose we balance the budget?
I agree with “brian”. Larger tax cuts for the wealthy wouldn’t be helping the poor very much. Maybe offer tax incentives to the rich who provide specialized services to the poor?
March 10, 2008 at 12:12 pm
Donald-
“So it’s the trickle down effect; if people at the top spend money it makes its way down to the poor.”
What makes it’s way down to the poor? Money? I’m pretty sure rich people spend a lot of money and we still have a lot of poor people.
How would you propose we balance the budget?
I agree with “brian”. Larger tax cuts for the wealthy wouldn’t be helping the poor very much. Maybe offer tax incentives to the rich who provide specialized services to the poor?
March 10, 2008 at 7:55 pm
tim-
i don’t think you meant to post that twice. but to be frank, the only way poor people have money is because people with more money give it to them, either to do a service or to make a good.
brain-
lets say the top 2% of income earners pay about 80% of the taxes (because they do) and let’s also say that poor people don’t pay a large portion of the taxes (because they don’t)…rich people are therefore subsidizing the tax burden of poor people. there is nothing overly naive about that.
lets also say most people people buy non essential goods and services with discretionary income (no I don’t have hard numbers here, I’m sure I could find them but I’m lazy). So we have a situation where people who have extra money at the end of the month save a portion and spend a bigger portion, the national savings rate in the in the negative…
what do you suppose those people are buying? clothes, consumer electronics, vacations, sporting goods, etc. who works these hourly wage jobs? Hotel workers in Vegas only exist because people with money go there and spend it…right?
so if we take away your Vegas vacation, how will those low wage hotel workers have any beds to change?
or better yet if we take away your gardening service, or your maid, name a low-wage job, it exists because there are people on the other end that have extra money to spend.
The trickle-down effect isn’t naive at all, its the basis of supply-side economics: you have to create supply to create output to create income to create demand…follow?
While you may disagree that it is a good model…you calling it naive is well, naive.
As to balancing the budget… I don’t know… ask Bill Clinton he did it. We could start by ending the Iraq War. We could also simplify the tax code so there are no loop-holes…
March 10, 2008 at 9:40 pm
no loop-holes?!? but then how will all those rich people have enough money to let trickle down to us poor folk?
A problem with trickle down is that it invariably widens the gap between rich and poor. If taxes were cut for the mass of working poor, and a small percent tax was kept on the extremely wealthy, then more people would have less burden and more chances to invest, save, spend, etc. But as it is, the mass of those barely making it are so busy keeping their heads above water they can’t buy the new escalade. Wouldn’t we rather everyone have purchase power then a select few giving economic handouts?
March 11, 2008 at 12:56 am
The reason why the ‘trickle-down’ won’t work in the united states is because, with the way we do capitalism, the jobs will be outsourced anyway – because it’s cheaper. You want proof, call your cell phone company’s customer service line. It’s always, always, always in the bottom line, no matter who gets hurt. The rich get richer, and everyone else becomes poor, because wealthy Americans, especially corporations, don’t want to pay premiums for American stuff. Now I’m not going to start railing about how starbucks is the cancer killing America or anything crazy like that, but you get the point. The ‘trickle-down’ idea is a lot like communism: great on paper, not so great in practice.
March 11, 2008 at 7:49 am
who knew we had a bunch of populists?
giving tax breaks to people who don’t pay a lot of taxes is never going to be government policy. even if a democrat gets elected in the fall, all they are going to do is let the bush tax-cuts sunset. that’s the first thing.
the second thing, while it may seemly socailly unjust to give the rich tax cuts–it’s not. they already pay more than thier share. like i said earlier, they already subsidize poor people’s tax burden.
thirdly, it does work in theory and in practice. income disparity is not relevant in this disucssion (while it is important). you must compare the bottom line of poor people before the bush tax cuts and after…not what rich people are doing.
wealth is not a zero sum game, if i get more it doesnt mean i took yours away–if we want to bring charts and graphs into this i can make that happen–so to say people are getting richer therfore others must getting poorer just doesn’t wash.
and richard, we don’t send any of those jobs i listed oversees, how do you propose I get my lawn cut from india??
as to outsourcing– that actaully helps poor people the most! outsourcing brings cheaper goods than americans can make, ergo poor people can things now they couldn’t before. Who wants to pay $5 for a product you can buy for $1 if its made somewhere else?
protecting bad american jobs isnt good policy either. No matter what Barack Obama says. NAFTA has created more jobs than it has killed and more importantly for you socially aware folks it has helped lots of people in Mexico sell thier goods in new markets.
(his economic advisor to the truth to the canadians..he doesn’t really believe what he is saying, he’s too smart)
March 11, 2008 at 8:46 am
First, as far as I can tell, “their share” is rarely paid in full.
Secondly, if your idea of a good job for me is cutting your lawn, then I am moving to India right now.
Sure let’s import cheap goods… but it is always at a cost. As our imports exceed our exports, so our debt increases. 3 trillion and counting. Anyone hear that Iraq is projected to cost 12 billion a month? Not to mention the damage to our debt it is causing. So yea, let’s keep the rich paying taxes, cuz theirs no way a bunch of poor working people up against the wall every month have enough disposable taxable money available to fund that endeavor.
March 11, 2008 at 9:18 am
Donald-
I’m pretty confused as to how “income disparity” has no place in this discussion. Isn’t the goal to boost the economy for everyone? Again I ask: if tax cuts for the rich somehow trickle down to the poor, HOW are the poor not benefiting?? The results of Bush’s economic policies are very clear. Regardless if you buy into zero-sum economics or not the fact is the poor ARE getting poorer while the rich are getting richer.
“giving tax breaks to people who don’t pay a lot of taxes is never going to be government policy.”
You’re right. Because the rich decide who get elected. Makes sense that they would elect those who will protect their interests.
“to be frank, the only way poor people have money is because people with more money give it to them, either to do a service or to make a good.”
But I thought the rich wouldn’t have to give money to the poor because their robust spending would automatically trickle down! Congratulations, you have just contradicted yourself entirely. Is that the way money trickles? Through the well documented charity of the rich?
What an amazing way to keep poor people poor. Programs and services to the poor leave them stuck in dependency (and poverty) while the rich keep the power in society.
March 11, 2008 at 9:30 am
im not now, nor have i ever argued for poor people to pay more taxes. your right that can’t happen, i don’t even think middle class people should pay more taxes, but i do think rich people should pay less.
if people actaully pay or not, you would have to ask the IRS, but my guess is a lot more people pay than don’t…tax evasion lands you in big boy prison.
cutting lawn is a good job, i’m pretty sure you give lessons to a wealthy kid who’s dad runs a landscaping and lawn cutting business.
i already said a good place to cut spending is the Iraq war. and i have said all along the remedy to our debt is not more taxes, but rather it is less speding.
plenty of states have balanced budget amendments and one has long been considered on the national level, it’s time we pass one, mandating that government spending must not exceed income.
as to our trade imbalance, if you want to create american made goods–deregulate industry, cut corporate taxes and let american firms compete on a global level–without subsidies. but you can’t have your cake and and eat it too.
you want employer’s, business owners, investors and other key capital fund raisers to pay the lion’s share of the tax burden therefore there is a lack of actual job creation.
why do you think america’s major corporations are moving to places like the london stock exchange or dubai…becuase the tax burden is less, they can raise capital to create companies (that employ people) without the hoops.
taxing and regulating kills business–which kills jobs, the cycle is pretty clear. i think we can both agree the only way to get people out of cyclical poverty is find them quality employment, your ideas would/are driving major employers out of California and out of the country.
March 11, 2008 at 10:12 am
brain-
my bad for not going in order, didn’t see your post for some reason…
I though i could paste these charts, but i can’t so check these out: the first one is a 2006 graph of the poverty rate over the last 40 years (In numbers and percentages..both matter). The second is per capita income.
http://www.census.gov/hhes/www/poverty/povertyrate.html
http://www.bea.gov/briefrm/percapin.htm
what i get from the first one is that deficit spending and tax cuts dont go well together. starting in the regan years when we started large deficit spending the number of poor people has gone up, while the precentage has gone slightly down. but if you look at say the nixon years when we had tax cuts and tight fiscal policy the numbers and percentages went down.
I will readily admit that the bush tax cuts in the midst of war-time spending are bad for the economy. but just because bush preverted supply-side theory doesn’t void the concept of virtue.
the per capita income graph shows growth from 2006 to current month to month, these numbers can be attributed to tax breaks, at least in part.
March 11, 2008 at 1:30 pm
If we pull out of the war in Iraq, doesn’t that just create a whole new list of problems?
I agree that cutting spending would help, but where do we cut from (assuming Iraq is not an option, or won’t be enough cut-spending)? What else can we afford to cut?
March 11, 2008 at 1:41 pm
first off apologies to brian–spelling–though it could be a complement to call you brain.
we can start with ag subsidies. then move on to cutting ear-marks, the vehicle through which pork becomes law, and then we can cut services and programs. instead of welfare and we create workfare, we can cut the department of education and give power back to the states, we can cut spending on the missles defense shield program known as star wars, the office of managment and budget has lots of ideas…those are just a few.
March 11, 2008 at 1:50 pm
and to your comment about ending the war in Iraq, check this out
http://www.iht.com/articles/2008/03/07/opinion/edroy.php
March 11, 2008 at 2:10 pm
to be fair from todays NY Times, from a columnist I read a lot.
http://www.nytimes.com/2008/03/11/opinion/11herbert.html?hp
this gets at what brian is saying
March 24, 2008 at 2:24 pm
“When you take out the fancy words and phrases you’re left with two choices; raise taxes, or lower them…However, it’s not as simple as raising or lowering taxes. Think about what taxes pay for. Most if not all of the things it pays for are necessary to the lives we live today.”
Necessary? Really? Income tax, sales tax, federal income tax…are these really necessary? Nevada and Oregon both do not have sales tax…they seem to be doing fine. And I can’t remember the last time I looked at my pay stub and thought, “Hmm..$300 for the Federal Govenrnment. Well, at least all the money is going to productive, necessary programs.”
We may get schools, roads, hospitals, etc. But we also get runaway welfare, food stamps, and other “social” programs that promote laziness rather than productivity. Why should other people live off my money? Is it a necessity that I pay for someone else’s life?
March 28, 2008 at 10:15 am
Sorry, correction on my part. Nevada does have sales tax, but NOT income tax.