What should the top income tax rate be?

[GeoffC]

scrap subsidies, that way we the consumers only pay once for what we need, instead of an underhand twice. after all subsidies come out of our taxes.

[DTM]

Originally Posted by DMcCunney

Part of the problem is there is no direct connection between revenue and expense. When a legislator proposes a bill that will require the government to spend money, it doesn't specify where the money will come from. I've wondered, on occasion, about a law that would require legislators to say how the government would get what they wanted to spend.

Under my government, here's how that would work: In April, you'd fill out your tax return, but it would not include a computation of the tax, just a report of income, deductions, etc. that would be used to calculate your taxable income. The IRS would report to Congress the total amount of taxable income available. Congress would spend as it sees fit, then determine the fraction of available taxable income that represents. Every taxpayer would then be sent a bill for that fraction of their taxable income.

So if there were $20 trillion in taxable income and Congress decides to spend $4 trillion, that's 20%. If your taxable income is $20,000, you'd get a bill for $4,000. We accept cash, checks and credit cards, thank you.

Under that system, anyone who demanded that the government spend money on anything would intrinsically be demanding to hit everyone with a tax increase. And anyone who wanted a tax cut would have to do it by identifying the spending to be cut. And the budget would always balance.

[Robert Minneman]

Originally Posted by markbot

theoretically, economists say the best tax would be fixed and levied at the beginning of your life...assuming they knew your earnings power. consumption based taxes are actually among the worse types of taxes because they distort buying and selling decisions the most....creating a wedge between buyers and sellers.

fixed taxes are less distortive (think property taxes)

Ahh, but that's just it, taxes aren't used solely for raising income any more. Today our government is already taxing us (and providing "rebates") to "distort" buying decisions. We have (or will soon have) punative taxation on things the government wants us to stop doing, or at least do less of, like:

Purchasing cigarrettes/alcohol
Carbon emissions
"Fatty" foods

Just to name a few that come freely to mind.

As it stands now, our income is taxed, which does provide pressure against gaining more income. Several times in my life I've received increases in pay only to find out I've hit the next tax bracket, so being at the bottom of the next tax bracket caused me to net LESS money after taxes.

If you tax consumption, it provides pressure to not consume as much, yes, so that money would be saved, and at our current economic situation had we americans had even as little as a 10% savings rate, we would have avoided this whole situation.

One of the lessons we should learn is that "out of control" consumption isn't a LONG TERM good thing for an economy, EVENTUALLY the "bill" comes due.

So let's stop taxing income, earning income is good, let's start taxing consumption, spending ALL of your earnings isn't as good as spending some and saving some.

I don't see people saying, "Gee, I'd like to buy that 1000.00 wide screen LCD, but I don't want to have to pay an extra 200.00 for taxes, so I'll continue to watch TV on my old crappy screen."

That's just not how we roll in America, we'll buy it, regardless of the taxes if we think it's cool, and if it's a neccessity (as I mentioned in my previous post), it won't be taxes anyway, so no "harm" comes to the buyer-seller relationship on those items.

[Robert Minneman]

Originally Posted by markbot

Banks hold short term debt (savings deposits, etc) but invest in long-term assets (mortgages, etc) since liquidity is valued in the market place. This means that financial institutions are inherently prone to failure via a bank run (think of the movie It's a wonderful life).

a bank run is a self fulfilling prophecy as there is a dual nash equilibrium between "biz as usual" and bank run. if people think there is a bank run, this actually causes the bank run. this essentially means that only the government can coordinate the market place such that there is no bank run by effectively insuring deposits or giving the banks the power to prevent withdrawals.

the thing is that in the US only consumer deposits are insured. bear stearns et al all failed because the there was effectively a bank run in the wholesale market...where there is no insurance.

EVEN IN FREE MARKET CAPITALISM, the government must prevent banks from failing. think about the Great Depression and all prior recessions before deposit insurance. bank failures used to cause and extend very severe recessions.

to prevent moral hazard and the excessive risk taking that it can cause....the government should still prevent banks from failing...but they should also wipe out the equity holders. However, in the financial crisis, this didn't always happen....the equity holders were saved when they probably shouldn't have been.

But if I recall, the FDIC was setup to handle failing banks. The FDIC is a government controlled entity funded by the banks (they actually have to pay a premium for the "insurance" function the FDIC provides).

So any account holder with total deposits 250,000 or lower (I think that's what it is now) at a bank, will be covered in full. If the total of their deposits at a failing bank total more than 250,000 there is a possibility that they can lose that money over the 250,000 mark, but, typically the FDIC arranges for the failing bank to be taken over by a healthy bank which results in no loss of any deposits at all.

I think that system works well, it's just that recently we've had SO MANY banks that were failing they got a bit bogged down.

[Robert Minneman]

Originally Posted by DTM

Under my government, here's how that would work: In April, you'd fill out your tax return, but it would not include a computation of the tax, just a report of income, deductions, etc. that would be used to calculate your taxable income. The IRS would report to Congress the total amount of taxable income available. Congress would spend as it sees fit, then determine the fraction of available taxable income that represents. Every taxpayer would then be sent a bill for that fraction of their taxable income.

So if there were $20 trillion in taxable income and Congress decides to spend $4 trillion, that's 20%. If your taxable income is $20,000, you'd get a bill for $4,000. We accept cash, checks and credit cards, thank you.

Under that system, anyone who demanded that the government spend money on anything would intrinsically be demanding to hit everyone with a tax increase. And anyone who wanted a tax cut would have to do it by identifying the spending to be cut. And the budget would always balance.

I don't think our congress would act responsibly enough for this to work, especially considering they've passed legislation allowing for a 13 or 14 trillion dollar debt, about the size of the US economy today.

I think they'd see that as "Oh, there's 20 trillion dollars out there we can spend, let's do it"... And then we'd all get hit with a bill asking for ALL our money.

Nah, this plan scares the heck out of me and I'm glad I've never heard of it until now.

[DTM]

Originally Posted by Robert Minneman

I think they'd see that as "Oh, there's 20 trillion dollars out there we can spend, let's do it"... And then we'd all get hit with a bill asking for ALL our money.

But there's nothing to prevent them from spending the $20 trillion under the current system. At least this way, they have to plunder the people whose votes they'll soon be asking for, rather than plundering future generations to whom they'll never have to answer.

[GlennD]

Originally Posted by Donnageddon

Cancel all tax deductions for dependents and raise the tax rate for each dependent.

A family of four uses much more of the common infrastructure, and services than those without children. It makes absolutely no sense to have them pay less in taxes.

The government has an interest in encouraging production of future taxpayers and soldiers. All of us want to have future scientists and artists. Not to mention the nurses who will take care of us in our retirement homes.

Children are an investment, not just an expense; the deduction for dependents simply distributes the cost of children even to those who can't or won't raise children themselves.

[basilsands]

Originally Posted by GlennD

Children are an investment, not just an expense; the deduction for dependents simply distributes the cost of children even to those who can't or won't raise children themselves.

Very good point. Many societies today are reaping the penalty for not cultivating a culture where having many children is considered wise. In America the Social Security system is broken because there are not enough people under 60 to pay the pensions of their elders who decided that one or no children was plenty. Part of that points out the problem that legal abortion brings with it, ie 1/2 the children who would've been born in the US and would have been tax paying adults now (nearly 50 million) are not here to pay taxes.

More children / free market / lower taxes = future economic growth and national strength.

[DMcCunney]

Originally Posted by basilsands

Very good point. Many societies today are reaping the penalty for not cultivating a culture where having many children is considered wise. In America the Social Security system is broken because there are not enough people under 60 to pay the pensions of their elders who decided that one or no children was plenty. Part of that points out the problem that legal abortion brings with it, ie 1/2 the children who would've been born in the US and would have been tax paying adults now (nearly 50 million) are not here to pay taxes.

More children / free market / lower taxes = future economic growth and national strength.

It's not a question of cultivating a culture where having many children is considered wise.

Having many children tends to occur in lesser-developed cultures, where labor is primarily manual, child-mortality is high, and you have a lot of kids to insure there will be enough hands to get the work done.

In developed nations, the mitigating factor against having lots of kids is two-fold. The first issue is economics. Kids are expensive. The question is usually not how many you want, but how many you can afford. The second issue is that the level of development offers options. The career path of a woman is not limited to wife and mother. Some women choose not to have kids at all. Others try to balance kids and a career, and more children make that more difficult.

The US Social Security system was never intended for the role it is now filling, and is badly designed for it. In practical terms, it's the world's largest unfunded pension liability. Even if you assume a sufficient supply of new people is produced to grow up to be taxpayers and contribute, a "pay as you go" system is a disaster waiting to happen. Corporate pension funds invest contributions to generate the income to fund the pension payments they must make. Even that is not totally sufficient. General Motors, for example, now has two retired workers collecting pensions for each one working and contributing, and the UAW is facing hard decisions as the money simply isn't there to pay for things they've grown accustomed to having.
______
Dennis

[Elfwreck]

Originally Posted by basilsands

Part of that points out the problem that legal abortion brings with it, ie 1/2 the children who would've been born in the US and would have been tax paying adults now (nearly 50 million) are not here to pay taxes.

I'd like to see some statistics that indicate that the number of abortions equals, or is half, the number of children born. (I'm not sure what you're claiming the number is, but it seems very high.) Also, statistics indicating those children--often of underage, poorly-educated, impoverished single mothers, would grow up to be tax paying adults.

To reduce abortions, educate kids about fertility ASAP, and give everyone access to effective birth control. Are you also counting the number of children who "would have been born" if their mothers hadn't been on the pill?

[basilsands]

Originally Posted by DMcCunney

I
In developed nations, the mitigating factor against having lots of kids is two-fold. The first issue is economics. Kids are expensive. The question is usually not how many you want, but how many you can afford. The second issue is that the level of development offers options. The career path of a woman is not limited to wife and mother. Some women choose not to have kids at all. Others try to balance kids and a career, and more children make that more difficult.
...Dennis

That's my point, we choose the path for our nation based on the path we desire for ourselves. Looking historically at the world. Those poor nations with large families tend to last in stasis for thousands of years, virtually unchanged and quite often relatively happy with their lives and family. I am not talking about desperately poor people here, but those whom the west might consider poor nonetheless. Those who are in an unhappy / horrible circumstance are quite often there not because of their level of wealth rather because of outside forces controlling or even enslaving them. Regardless of their circumstance though, societies that focus on family first last for millenia even though we may see them as poor.

Successful, wealthy individualistically focused societies on the other hand always vanish after only a few centuries. Their empires dissolve for lack of financial support/new military recruits/adequate agriculture and they revert back to the small countries whence they emerged only a few hundred years earlier. Look at any empire of the past the cycle is apparent.

This, by the way, is not a judgement statement. It is a historical statement.

[basilsands]

Originally Posted by Elfwreck

I'd like to see some statistics that indicate that the number of abortions equals, or is half, the number of children born. (I'm not sure what you're claiming the number is, but it seems very high.) Also, statistics indicating those children--often of underage, poorly-educated, impoverished single mothers, would grow up to be tax paying adults.

To reduce abortions, educate kids about fertility ASAP, and give everyone access to effective birth control. Are you also counting the number of children who "would have been born" if their mothers hadn't been on the pill?

There are many statistics, far to many to mention specifically here, but here is a statement from the Alan Guttmacher Institute.

WHO HAS ABORTIONS? Eighteen percent of U.S. women obtaining abortions are teenagers; those aged 15-17 obtain 6% of all abortions, teens aged 18-19 obtain 11%, and teens under age 15 obtain 0.4%. [6]
Women in their twenties account for more than half of all abortions; women aged 20–24 obtain 33% of all abortions, and women aged 25-29 obtain 24%. [6]
Thirty percent of abortions occur to non-Hispanic black women, 36% to non-Hispanic white women, 25% to Hispanic women and 9% to women of other races. [6]
Thirty-seven percent of women obtaining abortions identify as Protestant and 28% as Catholic.[6]
Women who have never married and are not cohabiting account for 45% of all abortions.[6]
About 61% of abortions are obtained by women who have one or more children.[6]
Forty-two percent of women obtaining abortions have incomes below 100% of the federal poverty level ($10,830 for a single woman with no children). Twenty-seven percent of women obtaining abortions have incomes between 100-199% of the federal poverty level.* [6]
The reasons women give for having an abortion underscore their understanding of the responsibilities of parenthood and family life. Three-fourths of women cite concern for or responsibility to other individuals; three-fourths say they cannot afford a child; three-fourths say that having a baby would interfere with work, school or the ability to care for dependents; and half say they do not want to be a single parent or are having problems with their husband or partner.[7]

Similar statistics are available via the US Center for Disease Control

Here is a compendium article at Wikipedia that includes references and charts including income levels.

Facts demonstrate that between 45 and 50 million children. Looking back over the statistics I will stand corrected that it does not show 50% abortion rate. The number is more like 25%-35%. 3.1-4.2 million live births per year for .8-1.4 million abortions per year. The rate in the survey has been declining in recent years according to poles, but California, New Hampshire and Oklahoma have not reported since 1998. The population of California in particular being absent severely skews the numbers.

[basilsands]

By they way, I'm not making a judgment call here. My politics & philosophy are not the point. I am just saying that fewer people in following generations = less tax base & workforce to support older generations and infrastructure.

If we all want to live comfortable middle class lives, somebody has to do the work to keep the infrastructure up. If it's not our children it will be someone else's...probably someone we did not invite in.

[DMcCunney]

Originally Posted by basilsands

That's my point, we choose the path for our nation based on the path we desire for ourselves. Looking historically at the world. Those poor nations with large families tend to last in stasis for thousands of years, virtually unchanged and quite often relatively happy with their lives and family. I am not talking about desperately poor people here, but those whom the west might consider poor nonetheless. Those who are in an unhappy / horrible circumstance are quite often there not because of their level of wealth rather because of outside forces controlling or even enslaving them. Regardless of their circumstance though, societies that focus on family first last for millenia even though we may see them as poor.

Happiness is relative. You seek happiness where you can find it, and compare your lot against that of your peers. What makes you happy will vary by who and where you are.

Sure, folks in those static societies might appear "happy" and content with their lot, but what other options do they have?

When such societies encounter more developed societies with a greater range of options, discontent occurs rather rapidly. The history of India and China since encountering the West is largely the history of trying to come to terms with the impact. Both societies are in transition, no longer static, and both are attempting to become developed nations. That effort is fraught, because the process requires social and cultural changes rather at odds with the established patterns and traditions.

Successful, wealthy individualistically focused societies on the other hand always vanish after only a few centuries. Their empires dissolve for lack of financial support/new military recruits/adequate agriculture and they revert back to the small countries whence they emerged only a few hundred years earlier. Look at any empire of the past the cycle is apparent.

This, by the way, is not a judgement statement. It is a historical statement.

It is certainly a judgment statement. Whether it's supported by historical record depends upon your viewpoint and what factors you consider.

You may be correct, but that doesn't make it any less a matter of judgment.
______
Dennis

[Elfwreck]

Originally Posted by basilsands

If we all want to live comfortable middle class lives, somebody has to do the work to keep the infrastructure up. If it's not our children it will be someone else's...probably someone we did not invite in.

Or we need to develop technology that does work formerly done by people, and adjust our economies so that we don't punish people for not doing work that no longer needs human participation.

The post office could be cut down quite a bit more than it is, by encouraging more use of email... but for that to be a useful change, current postal workers need to be something other than "unemployed because their jobs have become obsolete." And the current postal system would have to change quite a bit to allow it to still deliver packages if it's not delivering letters every day.