When you have a 35+% corporate tax rate (not including state taxes and other additional federal taxes), every corporation is going to do everything in its power to avoid paying that much. A lower, flat tax rate would be a HUGE improvement over the current system. According to BusinessInsider.com, "115 companies on the S&P500 pay less than 20% in taxes" through various loopholes and tax credits. Several companies, including notable ones such as Red Hat and Boeing, have actually gotten away with tax rates of under 5%. A flat tax of 15% sounds worse on paper, but it could be just as effective and much simpler if tax credits weren't as generous to large corporations and loopholes were shut down. http://www.businessinsider.com/companies-pay-lowest-tax-loopholes-2011-2?op=1
I've had a couple of days to think about your answers to me, so here's a little feedback. I am not trying to derail your thread about a tax plan by talking about employment because the two subjects are closely related to each other. I understand that automation has cut down on the numbers of people employed in manufacturing. But I think you know that there is an old "truism" that says that one can prove anything using statistics. I have heard that "40% since 1970" statistic before, but what it leaves out is the dramatic reduction in manufacturing employment since NAFTA was signed. The treaty went into effect in 1994. About 4 years later this dramatic decline began. We have lost around 5 million jobs in the sector since then. Anecdotally, we see evidence of this all around us all the time. As I'm typing this, I am sitting in chair at a desk at a computer wearing clothes, all of which were manufactured overseas. Ford recently announced plans to build an auto assembly plant in Mexico. About 80% of all the autos built there are going to be shipped to the U.S. for the U.S. market. I bought some nice bar stools for our kitchen bar from a nice American-sounding company in the midwest, and when I got them, the boxes were all marked "Made in Viet Nam". Same story when I just recently bought some heavy-duty shelving for my garage from a company named "Whalen". The Carrier Air Conditioning company moving to Mexico made a splash in the headlines recently in this political season. I see that as being fraught with danger if you're talking about government-mandated wages that dramatically elevate the minimum wage. I am not unsympathetic to low-wage service industry workers, btw. It has nothing to do with being unsympathetic. Production jobs have always had better wages than service industry jobs. I remember, as a teenager, making the minimum wage of $1.85/hr and getting a raise to $2/hour. I left that job for a production industry job and started at $3.50/hr, a 75% raise. This, of course, required my previous employer to find another worker. He was, in effect, in competition with the production industry for workers which was part of the reason he paid a little above the minimum wage. I see that as all disappearing now. Service industry employers are no longer in competition for workers with the production industry because, largely, the production industry barely exists anymore. It exists, but not at a level where the service industry has to compete with it for workers. I see this as being unhealthy for our economy in the big picture. We have a trade deficit with other countries that hovers around $500 billion a year. Somehow, we need to find a way to get this back into balance. I don't think we do this by punishing other countries, but I don't mind making it difficult for U.S. companies to contribute to the problem. My approach to getting a fair balance of trade and to get the U.S. producing again would be carrots, carrots, carrots ... with negative sanctions held in reserve as a last resort. "The stick" so to speak, that we could waive around mostly, but only use sparingly. In any event, as I said before, I believe we address a whole host of problems in this country when the country is producing and when there exists a healthy diversity of jobs available at all income levels. Issues such as health care, crime and violence, infrastructure maintenance, education, taxation, and achieving a balanced federal budget are all improved in an economy that is vibrant at all levels. But every study I can find shows an erosion of the middle class, a growth of the underclass, and more and more wealth getting concentrated in the highest economic strata. And I ask myself, "Is it any wonder?" We can't pay for health care, crime and violence in the cities is terrible, infrastructure is decaying, our federal budget is waaaaay out of control, we are losing half a trillion dollars a year to other countries in trade deficit, and, unless a young person goes into huge debt and obtains a technical/professional degree, their only other choice is low-paid service work. I really do like your taxation model. I think there are some great ideas in there. All I am suggesting is that, to fix this country, while we do need to reform taxation, taxation is one part of the puzzle. I think our approach should be holistic; that is, tackling taxation and tackling this lopsided employment situation that has evolved in this country. I have heard people say, "Well, we can never go back." I just completely reject that defeatist thinking. Well, naturally, under my proposal, "gaming the system" like that would not be rewarded. And remember, in assembly plants, all parts produced in the U.S. by other companies that supplied the assembly plant would be subject to the same benefit. The fundamental idea is to get us at least trying to be competitive again, trying to give all Americans at different education and skill levels an opportunity to do meaningful work producing wealth within the country, with the positive secondary and tertiary benefits that would inevitably result from that. The feeling is mutual. Our discussion has not devolved into politics and the blame game. Instead, we have remained focused on practical ideas and solutions. Great discussion!
We can't fix all of the problems with a tax proposal but I simply don't see how putting more money into the pockets of super-wealth investors by not taxing income from domestic manufacturing helps anything. It doesn't lower the prices of goods but instead increases them for the American consumer. It won't create more jobs because the manufacturing will simply be automated as artificial intelligence and technology expands. The manufacturing jobs, and in fact all jobs, are still being replaced by automation; the power of organized labor that was predominately responsible for the rise of the middle class in the 1950-1960's has been destroyed by the right-wing economic agenda from the Reagan era; and the unopposed downward pressure of the market on compensation is going to drive more and more government spending to mitigate the effects of the ever expanding poverty in the United States due to lower compensation. Of note we've not reached the point where the federal budget is way out of control. It's being driven by necessity and we can certainly afford to fund the necessary spending today. Federal general expenditures are roughly $3 trillion and that can be funded from over $15 trillion in gross income annually. The problem that I address is that we're not collecting the tax revenues from those that can afford to pay the taxes.
The idea is not to put more money into the pockets of investors. That can be addressed by a progressive personal income tax rate anyway. The idea is an attempt to induce manufacturers to stay here rather than to relocate overseas and to make it harder for foreign manufacturers to undercut our domestic manufacturers. Prices can't go up too much because of competition. The idea is not to eliminate competition, but to be competitive. Other countries pay low wages to workers in manufacturing. We could help counter that by eliminating taxes on our manufacturers. This phenomenon is true, but, factories are not going to be taken over completely by robots. Ford, for example, is building a plant in Mexico that is going to employ 2,800 workers. I assume it will be a state-of-the-art plant. It bothers me that Ford is going to share the wealth of their enterprise with 2,800 Mexican workers rather than 2,800 U.S. workers. I think that's what I said earlier, didn't I? The whole point of what I've been talking about is to try to reverse that trend. Yes, I think we are in agreement on that. Now that I've responded to your points, allow me to just give one example of a company in a town near where I live. This first link is from their "About" section. Scroll down and watch the 3 minute video. http://us.a-dec.com/en/Company/About-A-dec/Heritage This next link is from their "Careers" section, "Benefits" subsection. Look at those benefits!! http://us.a-dec.com/en/Company/Careers/Benefits This company employs 832 people in a town of about 25,000. Now, granted, probably not every single one of their employees lives in that town, but most of them do or live near it. That computes to one out of every 30 residents in the town works there. Can you imagine the economic impact that has on that community? And not only to personal income in the town, but to services like schools, fire, police, roads, etc, through the property taxes the company pays. This is what I aim to encourage. Every city and town in America ought to have something like this, bigger or smaller, but something like it going on because we have done everything in our power to make the U.S. the best place to manufacture stuff in the world. And the bi-products would be better incomes, lower costs to government, and an easier road to a balanced budget. Another way of saying it is this: You don't win the war relying just on men with rifles, or just tanks, or just pilots in the sky. You win it with a multi-pronged attack.
Some good ideas, but it leaves too much room for manipulation and corruption. Within 10 years the nation would be right back where it is now. It has to be simple like a flat tax. Every dollar earned, you pay 10 cents to the government. No deductions, no credits, no scams, no coupons, no "pretend you care about the poor" progressive taxation. If the USA GNI is about $20T, the govt gets $2T. Everyone pays, everyone has skin in the game, nobody can be bought off by politicians who take from one group to pay/bribe/buy another group. 10% tax rate not high enough? Maybe go to 20% temporarily to transition and to pay out current SS recipients - but then here we go again with a special payout for a special group, and the door is open for the politicians to corrupt the system
I'll try to summarize a response to all of the above basically in order. Investors "earn" money in two ways. They receive income on dividend payments from the corporation but not all corporate profits are paid out in dividends but investors still increase their wealth by the re-investment of corporate profits because the value of the stock increases. It's not income to the investor unless the investor "cashes out" but the wealthy don't "cash out" their investments because they really don't need the money. No taxes are collected on these "profits" while the super-wealthy continue to expand their personal wealth. Think of it this way. Bill Gates didn't become super-wealthy based upon income (that's taxable) but instead he became wealthy because of his percentage ownership in Microsoft that expanded exponentially and that wealth was untaxed. You claim that there wouldn't be a price increase but if a product can be produced overseas for $10 but costs $15 dollars to produce in the US that's a 50% increase in the cost to the consumer. We can also note that if the difference really was $10 v $15 then the lack of a tax on profits would not induce the manufacturing company to relocate the work here. If we assumed a 10% profit margin and a 25% tax then that's only 25 cent tax savings. That's not going to over come the $5 difference in the cost of production. It's a misconception to believe that manufacturing workers are under-paid when compared to US manufacturing workers. While they receive less in "dollars" the cost of living in the other major manufacturing countries is often considerably less than in the United States. For example in China the manufacturing workers receive very high compensation relative to the cost of living in China. The US currently manufactures about $2 trillion in durable goods and is the 2nd largest manufacturing nation in the world. We fell behind China in 2011 slightly but we also know that China is dramatically reducing steel manufacturing currently, one of it's key manufacturing products, and is likely to fall back into second within the next year or so. By exempting manufacturing from corporate taxation we could assume that based upon a 10% profit and a 25% tax on profit that would result in $50 billion in lost tax revenue but that wouldn't create any jobs because it's based upon existing US manufacturing jobs nor would reduce US production costs that are unrelated to the profit margin which is in addition to the production costs. From a cost/benefit standpoint the lost federal revenue alone would have to result in at least 8 million new manufacturing jobs with an average compensation of $50,000/yr and that's not going to happen, period. Manufacturing jobs don't actually average $50,000/yr in wages. Here's where I believe your proposal fails. First and foremost the "taxes paid on profits" are not a component of the "business plan" and don't affect business decisions. Creating the tax exemption would not result in more US manufacturing jobs being created. There are already significant cost advantages for manufacturing companies to domestically produce products which is why we're the 2nd largest manufacturing nation in the world. Exempting current US manufactures from taxation costs far more in lost government revenue than any economic benefits that would be gained. US manufacturing is already benefiting financially from US government spending that's often little more than a subsidy for manufacturing. Manufacturing is such a small component of the US economy that favoritism in our tax codes for manufacturing over other forms of enterprise would not help the US economy.
It's interesting that you point to a "service industry" that can't be exported as an example. Yes, we need the "service sector" to step up and provide adequate compensation and benefits to their employees but most don't. That can only be pragmatically accomplished based upon a mandatory "living wage" (actually "living compensation" that includes wages and benefits) because without that mandate the "unopposed" market has driven the compensation to below what the household can survive on which requires government welfare assistance to mitigate. I'm a card-carrying Libertarian that more often than not opposes both the Democrats and Republicans but I don't hesitate to draw from either when it's appropriate. I agree completely with FDR on this. No enterprise has any right to exist in the United States if it doesn't ensure that it's workers are earning a decent living.
Starting with the proposal first it calls for the elimination of ALL deductions and the tax being imposed on gross income (revenue) so what happens if we do that across the board. Not only does it eliminate all personal tax deductions but it also eliminates all business deductions and well and all enterprises would be forced to pay the same "flat tax rate" on their gross income (revenue) and that would drive most enterprises in the United State out of business. "Wait, wait, wait" you say, "We're only going to tax the profits on business income." But if you do that then, to be fair, you can only tax the profits on personal income as well. In point of fact the income tax was only intended to tax profits from it's inception and I carry that forward in my proposal but instead of itemized deductions for the individual I establish the "exemption" that covers the typical "cost of living" for the household. In principle I treat enterprise and individuals identically under the proposal. You claim that the proposal can be manipulated and corrupted but I'd ask how? Median household income, the criteria for the household exemption, is statistically based and cannot be manipulated or corrupted. The tax rate is based upon estimated gross profit of households (income in excess of the exemption) and enterprise divided by the authorized general expenditures. While the rate is based partially upon an estimate the tax rate would be adjusted in the following year for any errors in the estimate and it cannot be manipulated or corrupted. The only control that Congress has is in determining the authorized expenditures because the other factors (median income that establishes the personal exemption, business deductions, and the tax rate) cannot be changed by the Congress. So how exactly is Congress going to manipulate or corrupt the proposal when it's control is limited exclusively to determining the authorized general expenditures? Of course everyone living in America always has "skin in the game" because we pay many state and federal taxes in addition to the federal personal income tax. For example even the minimum wage worker is paying the FICA tax to support retirees which is another federal expenditure. Everyone driving a car is paying both federal and state fuel taxes. Everyone that owns a home or that rents an apartment is either directly or indirectly paying the property taxes. The tax burden of all Americans (regardless of citizenship) has never been limited to just one tax and we all have "skin in the game" when it comes to supporting our country at both the state and federal level. It's always been nefarious to claim that the person that doesn't pay an income tax isn't supporting America. The same claim would have to be made that if you don't own and operate a car and pay the fuel tax or if you don't drink distilled spirits and pay the "whiskey" tax then your not supporting America.
Congress will always attempt to manipulate the system, it was that way from the moment the Constitution was written. On taxation, as soon as you establish any exemption, any income threshold below which taxes are not paid, any process for estimating future income and tax rates, you open the door wide open for abuse. The fact that median income is "statistical" in no way means it is above manipulation. Look at all the "adjustments" to the CPI calculation that have been performed since Carter was president - every single "adjustment" resulted in a decrease in the calculated CPI. Why? Because due to the compounding of the CPI over time, that has a huge impact on govt obligations, annual-cost-of-living adjustments for SS & disability & military pay & military retirement & fed pay & more are all tied to the CPI. The govt has a strong interest in lowering the CPI. For taxation, the govt will have a strong interest in maximizing tax revenue, which means "calculating" a median income which maximizes tax revenue. That's hyperbole and irrelevant. Everyone should pay income tax so that everyone has a vested interest in keeping a watchful eye on govt spending, and so the govt cannot play the class warfare game.
Admittedly Congress can manipulate virtually anything but median income is far less susceptible to manipulation than the "deduction" system we have now which isn't based upon any statistical analysis. For example what's the statistical argument for having a mortgage deduction on million dollar home loans? Median income isn't even as susceptible to manipulation when compared to the CPI that has to be weighted based upon spending habits of the typical household for it to be accurate. In any case the median income has been calculated for decades using the same criteria and changing the criteria once established is far more difficult that simply passing a bill providing favorable deductions for the wealthy so that they have a lower tax burden. Arguably false based upon history where the Congress has failed to collect enough tax revenue to fund the authorized expenditures. At least under my proposal all of the authorized expenditures are automatically funded so the tax isn't too little or too much but instead it's just right based upon the spending authorizations. Why not require everyone to pay the same tax on fuel that funds our highway system regardless of whether they own/operate a motor vehicle? Why not require everyone to pay the same 15.3% on all income to fund Social Security/Medicare? Why not require everyone to pay the Whiskey Tax even if they don't drink alcoholic beverages? This belief that people don't care about the government spending if they don't pay the income tax is not founded upon any rational argument. Statistically 47% of all income households don't pay a personal income tax today and to claim that they don't care about government spending is absurd. What could be argued is that those that fund the political campaigns (higher income households) care less about government spending today because their taxes don't go up with increased spending. There's no linkage today between spending and taxation and so the individual household isn't financially harmed by increased government spending because their taxes remain unchanged. That changes under my proposal because it establishes the linkage between spending and taxation.
And the CPI was calculated consistently (a defined basket of goods) for over a century until the 1980's when a slight tweak was made under Reagans admin (Carter wanted to tweak the CPI but couldn't get it done). If nothing changed, we would not have an income tax and a national debt. But things change. Don't pay any of those taxes. There should be one tax, at one rate, to fund everything the govt does. Its not perfect, some will say its not completely fair, but its totally honest and has the minimum chance of abuse. Taxation is often used to perform social engineering, its used when politicians want to encourage - or discourage - a particular behavior. The proceeds from taxation are sued to pick "winners", to influence elections, buy favors. Of course taxation influences people. One tax, one rate. That's the only way.
And so the conversation continues ... Yes, but my belief is that government should exist for the good of the people, rather than the people existing for the good of the government. (There's a libertarian point of view for you.) If something improves the opportunities for success for the people, but that something costs the government money, my first reaction is to do the thing that is good for the people. And, as I said before, things that are economically good for the people are good for the government. I'm afraid I remain unconvinced. Didn't you say you were an aerospace engineer? And I think you said you made a lot of money as an aerospace engineer, didn't you? I am sure it took a lot of education and years of experience to become a successful aerospace engineer. But I am also quite sure that all of your technical ability would be worthless if there wasn't an industry that was trying to use your engineering skill to make better aircraft or space vehicles. Absent those industries, your knowledge might just be some interesting theory, but otherwise worthless. Absent production industries, you, with all your education and technical expertise, would need to find some low-paying service industry work. The point I am making is that you yourself are an example of the wealth that is created for people when we are actually producing things. Similarly, my father was an engineer in nuclear energy. He entered the field in the early 1950s, and he worked on ways to use nuclear energy to power the U.S. Navy and to create domestic energy. His company built the reactors and sold them to their customers. He made a good living. But it all would have been for nothing if there was no market for the actual production of the reactors. The production of those reactors created wealth for him and thousands of other people in the business - from the engineers to the actual construction people. And so, if the production of things creates wealth for our people - more wealth than service industry work - I am all for it. I think it is good for the people, and it is good for the government's fiscal bottom line. All statistics I can find point to a shrinking middle class. And so, some favoritism that may help turn that around is fine by me. What's good for the people first; what's good for the government comes second. Are you talking about A-DEC? A-DEC is not service industry. It is production. They build dental equipment. We disagree. I agree with your idea of tax exemption at and below the median income level, but I don't believe in a mandatory "living wage". I'm more the "work your way up" type. I think when you have to scrimp to get by, maybe share expenses to get by, you learn the values of self-discipline and frugality and self-reliance rather than if it is all just given to you too easily. I'm an independent, and I do the same thing.
I'm not sure how you establish correlation between the CPI and the income tax and national debt. Yes, the CPI was based upon "basked of goods" that included both actual products and services but the problem has always been that people put different things into that basket based upon numerous factors. For example a retiree doesn't proportionately spend the same amount of money on the same goods and services that a working age person does. When it comes to the income tax many have argued to repeal it and return to funding the US government the same way we did before the income tax based upon the 16th Amendment that was ratified in 1913. Of course we can't. If we look back to 1913 (where we had a balanced budget) the entire US budget was only $11.7 billion dollars and if we adjusted that for inflation the federal government would only have $283.92 billion in general revenue to fund all of the general expenditures. Generally speaking these other taxes are excise taxes that, in principle, are a "use" tax where the tax revenue funds the costs of the government related to the use. The "fuel tax" is an example where it's purpose is to fund the interstate highway system. The problem is when the tax isn't enough to fund the expenditure such as in 2007 when the federal government only collected about $30 billion from the fuel tax but authorized $40 billion for the interstate highway system. The federal fuel tax needed to be increased by 33% to cover the federal expenditures for that year. My proposal eliminates the use of the tax codes to fund government social engineering and, of course, currently 47% of all households can't be influenced by the income tax because they have a zero or negative federal income tax liability. I've eliminated all deductions and tax credits so if the government (Congress) wants to do something like "social engineering" then it has to do it with an appropriation and not a tax code change. While I don't eliminate all forms of federal taxation I do establish "one rate" for all income taxes that imposed upon "profit" as opposed to "gross revenue" so that individuals and enterprise are taxed based upon the identical principle where only "profits" are to be taxed. It makes no sense that an enterprise can write off expenditures while the individual can't write of the same expenditures such as rent, transportation, energy, etc. but I do draw one distinction. Arguably enterprise doesn't waste money on unnecessary expenditures while individuals do so I've limited the write off for the household to only those mandatory expenditures established by the "exemption" because no one needs to live in a million dollar home or drive a Ferrari. So I've fully met your "one tax" rate in my proposal and it's based upon the "profit" (gross revenue minus mandatory expenditures) of both the individual household and enterprise where both are fundamentally treated identically.
We're in agreement in principle. Wealth is a combination of "goods and services" and today "services" create far more wealth than goods. You used an dental equipment company (that I mistakenly read as a dental service provider) and the dentist creates far more wealth by providing a service than the dental equipment company does by producing dental equipment. Once again if we address the manufacture of durable and non-durable goods we're only addressing about 4% of all jobs in the United States while over 1/2 of the people are producing wealth by providing a service and the wealth they're creating literally dwarfs the wealth being created by the manufacture of durable and non-durable goods. There might be an argument if we lacked production capabilities but we don't. We can produce twice as many automobiles than can be sold because those that purchase new cars are predominately in the service sector and can't afford to purchase a new car. We have a "consumption" problem and not a productivity problem. If we increase compensation in the service sector, where the majority of jobs exist and where most of the wealth is created, then it increases the number of jobs in the manufacturing sector. Born in 1949 I grew up in the heyday of the middle class and I worked my way up the economic ladder because there were a lot of middle income jobs on that economic ladder. Today, as noted, the middle class is shrinking and that means fewer and fewer middle income jobs. So we have more individuals in lower income positions and fewer jobs in higher income positions for them to be able to advance up the economic ladder. We've pulled the rungs out of the ladder that are required to move up and we have more and more people trying to climb that ladder. People can't do what I was able to accomplish because the middle income jobs that helped me advance economically don't exist today. They don't have the same job opportunities where they can advance economically. Those jobs have disappeared. Are there things we can do to address this? Absolutely but we can't do it with a tax code. I refuse to be the beauty queen that ignorantly calls for "world peace" because I know that many factors are involved, each of which must be addressed independently, for that to happen. So yes, we can have a discussion on how to bring back the middle class, to provide the rungs on the economic ladder so that people can advance economically, but we can't do it with a tax proposal because the taxes aren't the problem that's destroying the middle class.
On the CPI, you make the exact same argument the government made in justifying its manipulation of the CPI. It sounds reasonable, but its a scam - if it were true there would be multiple CPI's used for the various cost of living adjustments, for example as per your post one for a retiree and a separate one for a working age person. And why does the "refinement" of the CPI calculation always result in a lower CPI? There are sites that compare the old and new methods. Even the Erskin-Boles proposal included yet another "modification" to the CPI in order to reduce govt spending - it was not to make the CPI "more accurate", but lower. ***** No, you did not meet the "one tax" concept. This is what I wrote - "One tax, one rate." Its very basic, all people pay taxes, there is one tax rate for all people. See how simple that is to describe? Your "one tax" proposal takes paragraphs to describe and has thresholds, and treats different people/businesses differently, and you seem to allow the govt to have various taxes such as income taxes and excise taxes. While your plan is possibly better than the current situation, it will at best be a temporary improvement. There are too many options and decisions which will be abused by the govt and special interests. The only way to minimize corruption, be fair, and make the politicians answerable is a simple one tax rate for all approach. No deductions, no credits, no favourites, no govt calculations or thresholds. *** There is no real difference between business taxes and an individuals income taxes. Business profits get passed on either to the employee & consumer (through reinvestment in the business and improved products and new products that meet consumer needs) or to the people who own the company who then pay tax on the distribution. Business taxation is just another scam to increase federal revenue.
I actually see the services industry as mostly just shuffling money around. It results in wealth for the successful owners of the services (the franchise owner of a Safeway store, for example), and it brings more pay to people who provide more skilled services than it does to people who provide low-skill services. So basically, the money just creates the mechanism for the barter of their services to one another, doesn't it? The butcher pays the plumber who pays the store clerk who pays the gas station attendant who pays the waitress, etc, etc, etc. I don't see this as "creating wealth". I got to thinking about A-DEC again. I read that they now have 1000 employees and annual revenues of $250 million. They sell dental equipment they make to 23 different countries. A large portion of that revenue goes to their employees in the form of pay and benefits. They provide work to people all up down the ladder of skill and expertise. Their manufacturing operation must pay millions in property tax which pays a big piece of the cost of fire, police, schools, roads, city and county government. They would also be supporting the state through the state corporate tax. To my mind, this is "creating" wealth. Imagine the impact on the community if this company disappeared due to overseas competition. Then, simply translate that problem on a national basis. I'm skeptical. Supply and demand pushes prices up or down. For example, in times of economic prosperity, the cost of housing (to rent or buy) goes up because the demand becomes more competitive for the existing supply of homes. In times of recession the demand becomes less competitive, so the prices go down so the home business can stay in business. My concern with dramatically increasing wages in the service sector is that (1) this would require government intervention, and (2) that the market forces of supply and demand would just sort of soak up any large increase in the money possessed by the service sector in the form of higher prices for everything, from housing to soup to nuts. What I am in favor of is a production based economy that creates wealth and opportunity. The service sector will feed off it, just as it does in that town where A-DEC is. I agree with you that the tax code cannot reverse this trend by itself. There are some other important national issues to address as well in order to really try to reverse this trend. The tax break aimed specifically at manufacturers was not meant as a "magic pill", but, instead, as just one measure among others our country should commit itself to.
What I actually see is the nefarious and disparaging use of terminology when we refer to "high skill" and "low skill" labor and to "manufacturing" and "service" that isn't supported by reality. There are no "low skilled" jobs because all jobs require the employee to use both their mental and physical capabilities to accomplish the tasks assigned by the owner/management of enterprise that is either incapable or unwilling to perform. Some jobs are more mental and some jobs are more physical but it's still the "labor" of the person in performing the assigned tasks and all of these tasks are designed to generate income for the enterprise and all of those tasks require skills that some people have while others don't. I was a very successful manufacturing engineer, for example, but I couldn't "flip a burger" to save my soul at a McDonald's. I didn't have the knowledge or the skills to do that. Not only didn't I have the knowledge to actually cook a hamburger properly in a commercial environment but I didn't know the health and safety precautions necessary for that position. I knew the health and safety requirements in a manufacturing environment and I received significant compensation for that knowledge but the burger-flipper knows the same health and safety requirements for the food industry. Why was my knowledge more valuable than the burger-flippers when both are equally important? That burger-flipper is highly skilled when it comes to the job knowledge necessary for the tasks they're required to perform. What we know is that all employees have many skills that the employer doesn't call upon to perform the tasks assigned. The employees are always highly skilled but often those skill are ignored, unrecognized, or not called upon by the employer. That doesn't imply they aren't highly skilled but just that their skills are not being used properly. How about another less invidious and less disparaging terminology where we can refer to employees as having "general skills" and those with "specialized skills" because there's nothing inherently disparaging between being a "generalist" and a "specialist" from a natural rights perspective. We need only understand that the very argument for the "natural right of property" is based upon the labor of the "generalist" that provides all that they require directly from nature through their labor. If we literally removed "commerce" then the "generalist" survives while the "specialist" dies. We can also note that the person requires both commodities and services equally and that their value is also inherently equal. We require a non-commodity "service" when we're incapable or unwilling to do something for ourselves. For example I might need a back massage to relieve a cramped muscle but I can't give myself a back massage. It's physically impossible but I can pay someone to perform that service for me and that's valuable because it can relieve severe pain. You may not like to address it as "wealth" but that's because you limit the definition of wealth. Wealth is literally what we have in excess of what we require in both commodities and services. Of course we also find that many services are a direct cost of producing a commodity as well. For example the transportation industry is a service industry but without transportation few commodities would ever be produced. The tax accountant provides a service but because we have taxes that many, especially those in enterprise, are incapable or unwilling to address, the accountant provides a valuable service to those that have enough wealth to share in paying for the service. Define "large portion" of revenue because as a manufacturing expert I would state, without knowing specific details, that the percentage of gross revenue going to the employees in wage and benefit compensation is somewhere between 20% and 30% because that's typical of a manufacturing business plan. It might be a "large amount" based upon gross revenue but it's not all that large of a percentage. You can also refer to the financial benefits to the community and economy in employee compensation, taxes, and other financial benefits by this mid-sized manufacturing company but which produces more, this manufacturing company or all of the dental service provides that use their equipment? The dental service industry using the equipment produced by this company is providing at least 100-times more benefits to the community and economy when compared to this mid-sized manufacturing company. Not claiming that A-DEC isn't contributing but that the contribution of this company is dwarfed by the contributions of the service industry it relies upon. There's an inherent problem even if we overlook the housing market that is highly dependent upon credit that can create artificial demand resulting in inflated and unsupportable demand. The marker works very well for enterprise but there's a caveat because there's a 'bottom line" to how low prices can go. No enterprise can long survive operating at a loss because if that happens the enterprise eventually goes bankrupt and ceases to exist. When it comes to employment there is no "bottom line" for compensation and, as we know, tens of millions of households are "operating at a loss" because the person cannot simply cease to exist like an enterprise. So market forces work for enterprise because a bottom line is created where no enterprise can indefinitely operate at a loss but it doesn't work for employment because no bottom line inherently exists and employees, that can't simply cease to exist, are often forced by the market to operate at a loss. You once again ignore the fact that a production based economy feeds off of the service sector economy that's producing more wealth than the production sector. This is reflected by all of the GDP statistics where the percentage of wealth being created by manufacturing is only a small percentage of the total wealth being created. Once again the tax break doesn't result in more employment or product pricing reductions because the employment and pricing are based upon market demand. Without an increase in consumption, that has to be funded by income, a manufacturing company like A-DEC isn't going to hire even one more employee because they don't require more employees to support their current production based upon consumer demand. We can also note that the profit margin is always based upon gross revenue in the business plan and the business plan doesn't include taxes that are only based upon the profit. Some would argue that less taxation would allow more investment in the enterprise to increase productivity but the problem with this is that the re-investment of profit is already tax deductible so there's no advantage and the enterprise doesn't need to increase productivity because there isn't a demand for more products anyway. If we want a sure-fire way to increase production then it's by providing more disposable income to the consumers, not the producers, because its the consumers that drive production. I would note that a "living wage" isn't a magic bullet either nor is it really the preferred means of increasing income for those that spend the highest percentage of income on consumption. It would be far more preferable for there to be a balance of economic power between organized labor that seeks to increase compensation based upon productivity of the worker and the market that seeks to reduce compensation relative to productivity of the worker. There's a problem here that many seem to ignore. During the strongest days of organized labor, where it was instrumental in the creation of the middle class during the 1950's and 1960's (that we're now losing) it was often controlled by organized crime that often resorted to unlawful coercion is securing contracts to increase compensation for the workers. During the late 1960's and early 1970's we destroyed the influence of organized crime which also took away the "unlawful coercion" that existed in securing the contracts. So even had we just removed the influence of organized crime, and it's unlawful practices, the unions would have still lost the power to negotiate on an equal basis with the employers. We really needed to increase the lawful powers of the unions to replace the unlawful coercion of organized crime for the balance that existed prior to about 1970. Of course, based upon a Republican agenda that favors the enterprise, we've actually decreased the lawful powers of the unions and we've seen the results with the evaporating middle class in America today. So we could increase the lawful powers of the unions but it would take decades before that would result in the rebuilding of the middle class just like it took decades for the diminished power of the unions to result in the destruction of the middle class. Economic policy changes don't change anything over night but instead take decades for the policy change to have a real effect. A "living wage" isn't the preferred means of increasing income to the workers, that would drive increased demand for goods and services, but it does have much more rapid effect as a higher minimum wage can be achieved over a much shorter period of time (e.g. under a decade) without adversely effecting the economy.
We did have two different CPI's when it came to workers v retirees but, because retirees are highly effected by increased medical costs because people use more medical services when they become old, the Congress abandoned the two different CPI's to nefariously reduce Social Security benefits. I'm not sure that all changes in the CPI have always resulted in a reduced CPI but arguably that could be true based upon the Republican agenda to reduce government expenditures by any means possible. Of course the "median income" is not based upon a defined "basket of goods" and isn't influenced by spending habits that can change based upon a decline in income. It's a much more limited category where it's not nearly as easy to manipulate. We're not taxing "spending" so the spending habits of a few thousand people used for the CPI index is irrelevant. We're taxing income and income is easily quantifiable and virtually impossible to manipulate. Once again I'm not saying it can't be nefariously manipulated but it's far harder to manipulate than most possible criteria. Okay, here it is based explicitly upon your criteria. An income tax on profit and with a single tax rate. Not sure where you come up with your ideas on corporate income taxes but they're based upon fallacies. First of all the corporate income taxes exclusively on the profits and the costs of labor is a deductible cost to the enterprise. The price to the consumer, which includes the profit margin, is completely unrelated to a tax imposed on the profits. Re-investment of profits into the enterprise are tax deductible so no income tax is imposed upon those re-investments. Payments made to the stockholders in the form of a dividend would be potentially subject to individual income tax and to avoid double taxation where both the corporation and the individual are being taxed on the same "income" dollars the dividend payments by the corporation would be tax deductible. So if the profits are paid out to the stockholder then the stockholder pays any required income taxes and the corporation isn't taxed on that revenue. If a corporation has excess profits, not paid out as dividends (where they would be taxed based upon personal income) and not re-invested in the enterprise (where they would be tax deductible), then those profits would be taxable because those profits were not taxed.
The CPI calculations and reforms have nothing to do with R versus D. The Democrats under Carter first proposed refining the CPI to reduce it, but Reagan was the first to actually implement a CPI modification. Both parties are to blame. Erskine Boles was bipartisan, one of their recommendations was lowering the CPI. "An income tax on profit and with a single tax rate." OK, I can agree with that, but "profit" is open to interpretation. Its easy to just make it "for every dollar you receive, ten cents goes to the govt".
I wish to say that I did not mean to denigrate any person who works for a living, no matter what they do. I have a lot of respect for people who earn what they have through work, especially those who work for lower wages and who live modestly. Been there, done that. I remember supporting my wife and I in 1980 on $6.35/hr. That's an interesting philosophical position you hold. It almost sounds as though you think a "burger flipper" should make as much as an aerospace engineer. But upon reflection, I assume you mean that a burger flipper should make a wage that can make them financially independent, although living modestly, while certain other occupations that require more education or expertise would still command more in wages and allow them to live less modestly. You're right. I did the math, and if A-DEC has gross revenues of $250 million, and 30% of that goes to 1000 employees, that's an average of $75,000 per employee, so that makes sense. Yes, there is certainly a symbiotic relationship between the manufacturing industry and the service industry. What bothers me is that a good company like A-DEC provides salary, medical insurance, profit sharing, and retirement funds. It is a dying breed of company, isn't it? My blood runs red, white, and blue, and I care about this country and its future. When I think about the sheer amount of stuff I own that was made overseas, it bothers me. I see the clothes on my back and the chair I'm sitting on as I type this as a lost opportunity for some American somewhere because we cannot compete. When I read that we have a yearly trade deficit of around $500 billion a year with the rest of the world, it bothers me. The deficit of trade in goods is actually higher than that, but that $500 billion number is in goods and services, and we still export more in services than we import. But what happens when foreign countries reach a point where they can create their own services or buy them for less from other countries? Yeah, but I don't want that increased disposable income to just get spent buying stuff from other countries, which is exactly what would happen if we just gave everybody more disposable income. What I want is for production to have every chance we can possibly give it to be viable in this country. I want more A-DEC's that provide decent wages and benefits. When I look at the crime and despair and hopelessness that exists in our inner cities, I am aware that these cities were built upon industry that is now long gone. And it's not that we don't have the labor pool or raw materials, or the wherewithal; it's that the jobs (that aren't automated) have gone overseas. It's that we couldn't compete! This bothers the hell out of me! And you know what? I wouldn't mind importing stuff from other countries if the balance of trade was even, but it isn't. If the balance of trade was even, it would be trading our wealth for an equal amount of their wealth in a mutually beneficial relationship. Yes, but in those days in the 50's and 60's we were running a trade surplus with the rest of the world. It was around 1970 that that started to change, and it started dramatically changing in the late 1990s. The stats are here: http://r.search.yahoo.com/_ylt=AwrT...ands.pdf/RK=0/RS=3ZJhawdkLBf7Aw1pTyk.XuuXRqk- I am not against unions and worker protections. And I do believe the law should protect the right to form unions. But I also think unions must be flexible and smart and work as partners with the employer rather than as an adversary. But all of that is for naught if the work isn't here in the first place. Which brings me back to my original suggestion about the taxation of our manufacturers. I realize that it's not "The Answer". It is meant as an inducement, perhaps a small item in what ought to be a whole strategic plan to bring them here and keep them here.
Your assumption, based upon reflection, is absolutely correct but let me provide the foundation for that philosophical belief. I'm a self-proclaimed "progressive libertarian" and libertarianism is based upon the natural rights of the person and when we related to labor it's the natural right of property that is all important. The foremost recognized argument for the natural right of property was put forward in 1690 by John Locke in his Second Treatise of Civil Government, Chapter 5. http://www.constitution.org/jl/2ndtr05.htm Locke establishes a direct linkage between the labor of the person and their support and comfort. A person has a natural right of property to that which is necessary for their support and comfort based upon their expenditure of labor. Support obviously takes precedent because if you can't support yourself then you can have no comfort and comfort is subjective because it is all that a person can use in addition to what's absolutely necessary for their support. In addressing the natural right of property Locke is referring to the "generalist" that provides for all they need personally based upon their labor directly from nature but Locke goes on to address commerce as well. Commerce is based upon specialization where numerous people specialize in the production of the goods and services we require and by doing so they produce more than what the generalist can provide. By way of example, of we needed five things that we can label with the letters A-E all in equal amounts the generalist can produce one of each with their labor but if we have five people that each specialize in producing each of the items then they can produce more than 5 of each item. This provides a surplus that can be shared by the five people that trade that which they produce for that which they require. Locke supported commerce because everyone would have more than what they could achieve on their own. We know that Locke was absolutely correct that through specialization the people could create far more than they require for their support by specializing. Today the US economy produces over $15 trillion in gross personal income and experts have determined that it would only require about $3 trillion for every household to have enough income to provide for their support. We're producing five-times more than what we need for our "support" because our economy is based upon specialization and trade. The additional $12 trillion relates exclusively to "comfort" and, as noted, how much comfort the household requires is subjective. The vast majority of people only seek reasonable comfort in their life. They don't really want to live a millionaire's lifestyle but they would like to be able to be able to take a vacation for example. The problem with our current economy is that we're not ensuring that at least $3 trillion is being divided between all of the people where they are "supported" by our capitalistic economy. The other $12 trillion doesn't need to be divided proportionately between the population but it's mandatory, based upon the natural right of property, that the $3 trillion is divided between the households so that they can support themselves based upon their labor. So the "comfort" can vary but not the basic support for the household. It's the "support" that has to establish the bottom line for both income and taxation. Taxing income used for basic support is a violation of the natural right of property. The income required for support is not subjective because MIT has quantified it with the MIT Living Wage Calculator. http://livingwage.mit.edu/ Some will question MIT's quantification of the "living wage" necessary for the basic and mandatory expenditures of the household, and even I did that, but in the end I realized that I had an opinion while MIT had the data to support. The only flaw that I was finally able to establish is that the MIT Living Wage Calculator only addresses "annual expenditures" but doesn't address "lifetime expenditures" of the household. We only have a limited number of working years and that requires us to earn more than our basic and mandatory annual expenditures so that we will have the assets necessary to generate income when we can no longer earn an income. When creating my tax proposal I couldn't directly use the MIT living wage calculator to ensure that taxation didn't violate the natural right of property that must provide for the basic support of the household. The MIT living wage calculator is too specific for use as a basis for a national tax. So I created an "Exemption" with the general intent that it would exempt income not just for the minimum mandatory expenditures required for "support" but that it might also exclude a minimum amount of income required for "comfort" as well because the household also has a natural right of property for some comfort. My "Exemption" isn't perfect and I'm the first to admit that but it's based upon the Natural Right of Property that our government is mandated to protect and not violate. The taking of excess income exclusively used for "comfort" is not a violation of the Natural Right of Property because the Natural Right of Property doesn't establish a quantifiable amount of "comfort" that the person/household is entitled to. Support is quantifiable but comfort is not. That's why I argue for a "Living Wage" and why I argue for the "Tax Exemption" because both are based upon the Natural Right of Property for all people that expend labor in our economy because our economy is exclusively based upon commerce. We also know that our economy can easily afford to provide, as a minimum, a living wage to all of the workers because the living wage only represents 20% of the wealth we're producing.
Yes, there is a symbiotic relationship between all sectors of our economy that's not limited to just the manufacturing and service sector. Yes, when it comes to the manufacturing sector I'm very knowledgeable because it's my area of expertise. Your fears that companies like A-DEC are a dying breed are unfounded because there are numerous financial reasons why manufacturing companies that provide domestic goods remain in the United State. For example the cost of international shipping imposes a huge cost on product that must be included in the end item cost to the customer. We can also note the significant time delays involved in international trade. Let me provide some examples. I've recently met a man that's involved in the spice trade importing spices from Africa for use in essential oil products. He just returned from a buying trip in Africa where he purchased thousands of dollars in the raw spices but they won't be delivered to him for another four to six months. That's a huge amount of capital for a small business to carry on the books for an extended period of time. Yes, he has to purchase the raw materials from Africa but comparatively another company producing a product where the raw materials can be purchased domestically would do so. While I'm retired I'm also co-owner in a small manufacturing company today where we produce after market parts of the Harley Davidson 500 and 750 Street motorcycles. It's a niche manufacturing company where our sales are predominately domestic but we do sell overseas. Our best selling item retails for $29.95 plus $7.95 S&H for domestic sales or $37.90 total. That same item sent to Australia or India, where we have other customers, still costs $29.95 but the S&H costs are $20 uninsured and $90 if insured. We typically ship uninsured and so far we've been lucky because no shipments have been lost. So we're an "exporting" company but realize that an imported product also has the same cost associated with shipping although bulk shipping obviously reduces those costs. It's still a cost on top of the manufacturing costs so the foreign manufacturing costs must be significantly less than the domestic costs of production. Of course we seeing a dramatic increase in the foreign manufacturing costs of goods so the "cost savings" for foreign production that existed in the past is disappearing today. The international markets are beginning to balance out as foreign workers are seeing significant increases in compensation while American manufacturing workers are not. Basically foreign produced goods are costing more and more all of the time while foreign workers are earning more and more all of the time. The trade deficit you're worried about is slowly disappearing and this happens. We exploited cheap labor in foreign countries but that cheap labor is beginning to evaporate. The Chinese and Mexican machinist is almost earning the same wages as the American machinist these days and their wages are going up faster than the rate of inflation. But I will tell you what you should be worried about. Why aren't service sector employers providing the same salary, medical insurance, profit sharing, and retirement funds as A-DEC? This belief that they can't afford it is pure nonsense to anyone that's ever written a business plan.
No argument but as noted the "median income" is less susceptible to manipulation than the CPI that's based upon a limited number of items (200) subject to discretionary spending habits of a limited number of people. Profit for the household is no longer open to interpretation because the basic mandatory cost of living has been quantified by MIT. I've addressed this in a prior post in response to a question on the "living wage" where I broke down "cost that relates to support" and "profit that relates to comfort" of the household. I've also addressed why I don't use the actual MIT Living Wage Calculator to establish the Exemption because it's too specific to location to use as a criteria for a national tax Exemption. If we used the MIT Living Wage Calculator it provides too many opportunities to "cheat" on the Exemption for the household. Instead I use the Median Income that should cover the cost of living plus minimal comfort (profit) for the household. Once again I'll remind you that my proposal is not perfect because perfection is a dream and never a reality. As you mentioned my proposal is superior to what we have now and, in fact, it's far superior to what we have now and it's the best I could do. I've historically asked others to come up with a better proposal but no one has done that to date. Some have tried, and that's appreciated, but all have inherent problems that I've pretty much overcome pragmatically.
Once again you prove my point. You think that because some organization (the govt, MIT, etc) has calculated something that it is not only perfect but immune to change. Wrong. The only way to handle taxation is to be as simple as possible - for every dollar a person receives, 10 cents goes to the govt.
Where do you get your ideas? No one is claiming that the brilliant minds at MIT conducted a perfect study but instead we can accurately claim that it's the only actual study that's quantified the cost of living throughout the United States. As I mentioned in a previous post I believe there are errors in it because it only addresses annual expenditures and not lifetime expenditures that also have to be funded by annual income. In short it's my opinion that it under-estimates the total income requirements for the household that also include funding lifetime expenditures such as retirement. Of course all I have is opinion on my side while MIT has data to support it's analysis and the data takes precedent over the opinion. I'm certainly willing and would encourage studies by other prestigious groups that would quantify the "minimum living wage" required for households so that we could have comparative studies but that would be a comparison based upon data collection and not a comparison of opinion v data. We need to note that "simple" also includes "simply stupid" as well. Imposing a 10% tax on all gross revenue also necessitates imposing that identical tax on enterprise and that would drive much of the enterprise in the United States, many of which have less than a 10% profit margin, into bankruptcy. You want to differentiate between the enterprise and the person but the enterprise is the person. All private enterprises are owned by people so if we're going to impose a 10% tax on gross revenue of the "person" then it must also include the gross revenue of enterprises the person owns as well. You can't have an "enterprise loophole" when it comes to taxation. If you do then logically the person would incorporate their household to avoid the taxation (and some wealthy individuals do that today).
