Sally, Bob, and Jane

How much do we pay and for what do we pay?

The Tax Foundation has been around for a long, long time.

People are noticing it now.

In a recent study we see the impact of the Obamacraticons tax hike, which begins in January, on lower income tax payers…..

http://taxfoundation.org/publications/show/26766.html

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8 Responses to Sally, Bob, and Jane

  1. The Deziel Theory says:

    Article 1 of the Constitution and the 16th Amendment cover taxation. “Redistribution” is a slightly myopic view of the system, it is a progressive tax system (in place for the past 100 years or so). Note that we also have regressive taxes in some sectors.

    In a capitalist market economy, the larger an investment is, the higher its rate of return. This is due to both economies of scale and the increased range of investment opportunities. In addition to these economic forces, those who control greater amounts of capital within a society are able to participate more directly in shaping government policy, often in ways that further maximize their wealth. Thus, due to both economic and political realities within a market economy, it is a natural process for the wealthiest individuals and firms in a society to become disproportionately wealthier over time. In order to prevent the political instability resulting from the natural stratification of the populace into an ever smaller and wealthier aristocracy or moneyed class, and an ever larger working class, all free market democracies engage in progressive taxation and programs to enhance economic opportunity for the lower and middle classes.

    I would love to see the “Bush tax cuts” extended for the lowest tax brackets only. With a portion of his staff leaving, hopefully President Obama can recruit some new economists.

    • joe says:

      Your analogy is quite interesting, to say the least. So in your view, every time Washington enacts new regulation which may in fact make it more difficult for a new startup, or smaller business in a particular industry to compete against those who may have greater access to the lawyers who draw up, and the lawmakers who sign these bills into law, taxation should be increased to the wealthy, and redistributed to sooth the masses and keep them barefoot and pregnant in the kitchen ?
      So much for the Dem’s being the party of the “little guy”.
      You seem to have created a scenario where you accept a government which beats back opportunity for those who wish to participate in the true marketplace, those with the new inventions, or idea’s, and supplants them with subsidies for that which only government wishes to be produced. Why allow government to stack the deck in the first place ?
      This is a recipe for a stagnant economy.
      But if we look beyond just the means of the wealthy in this country, we would realize that as the wealthy do in fact get wealthier, so does everyone else. Our poor drive cars, buy plasma tv’s ect.
      When we use the tax code to punish success, we simply get less success.
      BTW, the lowest income bracket, thanks to things like earned income credit, actually now see april fifteen as a pay day.

      • The Deziel Theory says:

        Ah, I never identified as a Democrat. And I don’t agree with a number of current subsidies.

        We have actually seen a widening between the wealthy and the poor. The highest tax bracket income increased by 8% over the past year. Meanwhile, median income has declined and the poverty rate has increased. The theory of “trickle-down” economics is just that, theory. Also, there is no evidence or research (of which I know of) that supports the idea of income taxation creating decreased worker motivation.

        Even a flat tax on income would still create “redistribution”. Only a highly regressive tax would equalize those numbers. How would you adjust the current income tax structure?

  2. joe says:

    “We have actually seen a widening between the wealthy and the poor. The highest tax bracket income increased by 8% over the past year”
    And Art Laffer writing in the WSJ provides us with a reason for this phenomenon.
    http://online.wsj.com/article/SB10001424052748704113504575264513748386610.html
    “Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be. ”
    In other words, the people who can are now shifting income to this year, from next to harbor it from next year’s expected hikes.

    “Also, there is no evidence or research (of which I know of) that supports the idea of income taxation creating decreased worker motivation”
    Motivation, I don’t know. Capital shifts, absolutely. Will those shifts result in more investment, resulting in more income to be taxed at the higher rates ? Probably not.
    See, what is needed to get us out of this ditch is growth. Not government growth, but private sector, “help wanted”signs all over growth. This is how one expands the economic pie. Look at it this way, the first dollar taken through a tax increase, is the dollar that would have been spent on expansion, or investment.
    But replacing those jobs that were lost is a monumental task. This growth must not only replace the jobs lost in the private sector under normal day to day economic circumstances, but also population growth, along with the task of sawing away at the ten percent number. And they must do it under the gun of regulation, including minimum wage hikes, Obamacare mandates, fines, union burdens, EEOC, OSHA, ect. This requires that the goods and services produced must have value. Only the private sector can correctly identify this value. It is only the incentive of profit, that can drive this growth.
    Government cannot even begin to perform this funtion. At it’s very best, all it can do is perform at a net wash, because every dollar payed to it’s employees, must be eventually removed from the private sector, which results in one less job there.
    ” How would you adjust the current income tax structure?”
    The problem with the flat, or fair taxers argument is that they fail to address the big monkey in the room, spending. Until we get a handle on this completely out of control federal government spending binge, no method of tax collection will be worth a hill of beans.
    How about some form of federal balanced budget amendment, such as what the states have ? How about a return to the Lincoln greenback, placing monitary policy back in the hands of congress and the treasury ? At least then we could directly hold accountable those responsible for the most insidious form of taxation, expanding the money supply.

    • The Deziel Theory says:

      How would the average shift-worker shift income from 2011 to 2010? Laffer cites IRAs and 401(k)s being shifted. The vast majority of American shift-workers do not have either. And Laffer citing the shifting of money by “high-income taxpayers”. Again, no American shift-worker is in the high-income category. So I ask (honestly), how does someone with a $30K income, no 4019(k), a car payment, and rent/mortgage payments shift income from 2011 to 2010? I ask honestly as I may have overlooked something in the article.

      I still disagree with the “incentives” idea. Laffer (and many others) have simply taken a theory of motivation from the fields of psychology, sociology, and organizational behavior and superimposed economics on top of it. Unlike the social sciences, however, economics is a far different beast. As for your aversion to regulation, think of the “horrible” regulatory agencies next time you take an aspirin (and don’t die), or go to work (and don’t get injured), or eat a hamburger (and don’t get sick), or a host of other daily scenarios. Government regulation, as long as it’s strong and focused, is a very bright star in our society.

      I agree with you, spending is out of control. It has been for years. But extending the tax cuts will do no good. Alan Greenspan did an interview on NBC’s Meet The Press where he discussed the issue (http://www.huffingtonpost.com/2010/08/01/alan-greenspan-extending_n_666549.html). The write-up is from the Huffington Post, liberal I know, but it’s just a write-up, not commentary. A balanced budget ammendment would be a poor idea as well. My state has a legal mandate to balance the budget each year. Because of this, legislature spends in inordinate amount of time debating the budget each year. They could be using this valuable time to discuss actual legislation. A balanced budget also means HUGE spending cuts in key areas (my state is aiming towards education). While I oppose radical spending, a little deficit isn’t so bad. Better economic times will create surplus and even the score. The problem my state is having with balancing the budget will be exponentially worse on a national scale.

      I would advocate for letting the tax cuts expire, except for the lowest tax brackets. Research has shown that, when given extra income (AKA tax cuts), the middle and upper economic brackets save or invest the extra money. This does not stimulate our economy. In contrast, the lower brackets spend nearly 100% of the extra money. These are our spenders, they need to have the cash in-hand to spend and stimulate production (which equals more jobs, blah, blah, etc).

  3. joe says:

    “How would the average shift-worker shift income from 2011 to 2010?”
    The Laffer article refers to the effects looming tax increases have on financial decisions of taxpayers. Pay particular attention to the actions of the top bracket payers, considering that the top five percent pay over fifty percent of income taxes.
    http://www.taxfoundation.org/news/show/746.html
    This should, one would think, be of particular interest to anyone advocating raising their tax rates.
    “I still disagree with the “incentives” idea”
    No degree in social sciences is needed to understand why one may wish to keep more of the money they earn.
    “As for your aversion to regulation, think of the “horrible” regulatory agencies next time you take an aspirin (and don’t die), or go to work (and don’t get injured), or eat a hamburger (and don’t get sick), or a host of other daily scenarios”
    Why must you assume that the business who produces your asprin, or your hamburger is motivated by anything other than producing the best product. Would’nt a poisonous asprin or a bad hamburgur mean a loss of customers, or litigation ? And as far as the hamburger is concerned, even with both regulation, and federal inspectors present at the plant, some still get sick from hamburger. BTW, this is what your “bright star” is doing to small business
    http://smallbiztrends.com/2010/09/small-businesses-hit-harder-by-regulations.html
    ” My state has a legal mandate to balance the budget each year. Because of this, legislature spends in inordinate amount of time debating the budget each year”
    How horrible it is that we demand a legislature to perform menial tasks such as balancing a budget, instead of putting on their drunken sailor act.
    While I oppose radical spending, a little deficit isn’t so bad
    Please define “little”

    “Better economic times will create surplus and even the score”
    Funny, I can recall a couple of fella’s with the same mindset just before bankruptcy
    ” In contrast, the lower brackets spend nearly 100% of the extra money. These are our spenders, ”
    How many people will they hire ?

  4. The Deziel Theory says:

    What is the aversion to our progressive tax system? What happened to conservatives being defenders of the Constitution? The Tax Foundation (which is a biased organization, but that’s for another time) simply illustrates the progressive structure of the federal income tax. Even with a flat tax, there would still exist a disproportionate contribution to federal revenue via income taxes.

    Lack of regulation is what lead to the current state of our housing market. Enough said.

    The business article illustrates the concept of economies of scale. Did you know that a small local restaurant pays more for forks than a large chain restaurant? Should we abolish forks because they’re running the “little guy” out of business?

    I don’t know of a textbook number for running a deficit. But, the federal government can borrow money at an incredibly low rate (1%-2%). So someone with a mortgage, car payment, or school loans is running a much more irresponsible deficit than the federal government. Ezra Klein, of the Washington Post, wrote a good article on deficit spending, and why building infrastructure now is a good idea, a couple weeks ago. http://www.washingtonpost.com/wp-dyn/content/article/2010/10/01/AR2010100103123.html?nav=emailpage

    The lowest tax brackets will spend the money on goods and services. Due to this demand, businesses will have to increase supply, thereby increasing demand for jobs. The higher tax brackets will place the extra money in a 5-year CD (or similar investment vehicle), doing very little for job growth.

    And perhaps a degree in the social sciences is needed to realize that there are multiple drivers of worker motivation. While there may be a weak correlation between high taxes and decreased worker output, there is no direct causation.

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