What would you do if 95% of your income were taxed?

And you wouldn't care if others standards of living goes down because of these progressive taxes? As long as yours goes up?

 

A marginal decrease in the standard of living of those better off is an insignificant price to pay for a great increase in the general standard of living. Over time this actually increases both the wealth and standard of living of the better off significantly more than if the general living standard had not risen. It is quite unfortunate that the wealthy these days are too greedy and simple minded to see this.

 

Exactly and that is what taxation is meant to do, enforce policies the government desires whether they be social, political, fiscal or moral. The government could decide not to tax anything at all and fund everything through the power of fiat money. It could still do everything it does today and the only harm done would be to increase the possibility of inflation if the economy could not produce enough goods and services to fulfill demand. Say our economy was at full employment where everyone had a standard of living comparable to the middle class in the 60s. Then assume that all these workers still produced more goods and services than the amount of money in the system. There would be no inflation because you were still in surplus. Reverse it and then you would have more money around than things to buy which would then force savings which takes money out of the system. If the goods and services in short supply were items that one had to have, then money would drive up the price of those items creating inflation. Or you could tax us to get rid of the excess money in the system.

 

It would depend what I got for my money, and how much spending power I had with the 5% that was left.

But 95% is pretty steep, assessed on my entire income. I would probably work less hard and do off-the-books work on the side.

I was taxed; it's not "my" money any longer. But if all the government is doing is holding our collective money in a big pot and doling it back out to us on request, that's an inefficient waste. It would be better off finding a way to avoid taking the money in the first place, or to directly subsidize the "approved" items.

But all you're really doing here is demonstrating that extremely high levels of taxation are counter-productive. Taxing 100% of income would be stupid, too.

What you're not doing is making any coherent argument about what an "extremely high level of taxation" is, especially in a world of marginal rates.

The thing most conservatives don't realize is that in a democracy, government is us. We decide how much government we want, and then we tax ourselves to pay for it. It's not "them" taking "our" money and flushing it down a hole. It's "us" developing a (hopefully) fair system of taxation to pay for the government we said we wanted.

So the real answer is, "Once we decide, as a group, how much government we want, then the proper level of taxation is whatever it takes to pay for that much government."

If we decide we want government to do essentially everything and the only discretionary money we need is for beer and cigarettes, then a 95% tax rate would be reasonable. I think it would have other problems -- like, nearly destroying the incentive to work, eventually bringing the whole system down -- but it wouldn't be "excessive" on its face, because we as a nation had decided that's what we wanted to do.

In summary, our tax burden should be as high as it needs to be to pay for the government we want -- and no more. If the taxes strike you as too high, then work to convince voters that they want less government; taxes will fall accordingly.

What is indefensible is to consume government services, then (*)(*)(*)(*)(*) about having to pay for them.

 

"Starve the beast" doesn't actually work. All it does is boost the deficit and create a generation of taxpayers who think they can get 10 pounds of government services while only paying for 8 pounds.

Way to go, "personal responsibility" party.

 

True in a sense. The govt spends more than it takes in, it doesn't matter if taxes are increased or decreased, if revenue increases or decreases, the govt just spends and the debt keeps increasing.

And there is no "party of personal responsibility". The socialist democrats and the GOP (that would be the party that just rubber stamped the socialist's budget) are equally corrupt and fiscally irresponsible.

 

Not true in any absolute sense. There is no reason we can't balance the budget. But first, GOP intransigience on the issue needs to end.

#1, you could pass tax increases and spending cuts with language built in that says the savings/revenue can only be used for deficit reduction. That would actually be politically popular, though the cuts themselves wouldn't necessarily be.

#2, you adopt things like PAYGO, which requires all new spending be offset by tax increases or spending cuts. Democrats support PAYGO; Republicans oppose PAYGO on the flimsiest of pretenses.

#3, you recognize that in the short term, the only way to eliminate the deficit and start paying down the debt is through a combination of tax hikes and spending cuts. Democrats have offered a 2.5-to-1 ratio of spending cuts to tax increases: for every $1 in tax increases intended to eliminate the deficit, they would accept $2.50 in spending cuts. Republicans rejected that. In 2012, every Republican presidential candidate rejected a TEN TO ONE ratio. Until Republicans are ready to deal with reality (or get their asses booted from office), we will be unable to address the deficit.

#4, in the long term, we need to have a national discussion about the role of government. If we can reach some sort of national compromise on that, we can set an appropriate taxation level to pay for it.

 

On 1, 2, 3 - been there, done that, didn't work. Paygo was the big thing with the Democrats a few years ago, still failed. Congress is out of control, and now we have a King in the White House who wants to be able to tax without Congress, so its all totally off the tracks.

And no tax increase will solve this financial problem, the total obligations of the US govt is over $200 Trillion, more than the GDP of the entire world. If you confiscate every penny of every American, you can't solve the problem.

On 4 - forget it, there will be no national discussion and compromise, the divide is too great. One side wants even more government control and spending than we have now, they will never compromise and will ram their dictates down the nations throat every chance they get. The other side wants far less government control and less spending. There is no middle ground.

The system is broken, there not even the rule of law any more.

 

PAYGO failed? Where? It has only "failed" in any sense because Republicans refuse to agree to it.

PAYGO was in effect from FY1991 to 2002. It helped reduce government spending and the deficit, resulting in technical surpluses in the last two years of Clinton's presidency. PAYGO wasn't solely responsible for that, of course, and some was due to the tech bubble. But it certainly didn't "fail".

PAYGO expired in 2002, and Bush and Republicans actively fought against renewing it -- mostly because they didn't want to to have to pay for Bush's massive tax cuts. So we got a ballooning deficit.

Congress is elected. If they are out of control, it's our fault.

And the president is only a "king" if you completely ignore the actual definition of the word. Your hyperbole does not help your credibility.

Closing the annual deficit is highly doable -- even at $500 billion, it only represents about 2.7% of U.S. GDP. At a 2.5-to-1 ratio, we could do that with $150 billion in new taxes and $350 billion in spending cuts. That much new taxation would be pretty afforadable -- $500 per capita, on average. Do I want to cough up another $500 in taxes? No. But that's where "personal responsibility" comes in. We have an obligation to pay for the government we are getting.

The $350 billion in cuts would be significant, and hurt -- but it's doable.

As an aside, once we're paying full freight for our government, conservatives might find they have a lot of support for cutting the size of government. But as long as taxpayers are getting government services at a discount, nothing can get fixed.

To get your $200 trillion figure, you're adding up every expected obligation for the next 75 years -- such as Social Security and Medicare payouts to an aging population. While real, that's a very long time frame, and renders your comparison to a single year of global GDP invalid.

Global GDP is about $77 trillion. So that $200 trillion figure represents less than three years of global GDP, and about 3.5% of global GDP over the next 75 years.
http://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/

Considering that the United States accounts for roughly 20% of Global GDP, that shouldn't be a big problem.
https://www.quandl.com/c/economics/gdp-as-share-of-world-gdp-at-ppp-by-country

Incorrect. The problem was your math.

I agree that #4 is a bit utopian right now. But the rest is doable.

Again, your hyperbole only harms your credibility.

 

The Govt theoretically could do all sorts of crazy things. But what do you think the term span of members of the Govt would be if they actually imposed a 95% effective tax rate as you hypothesize?

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A Govt that cannot raise money through taxes is impractical.

 

Demonstrably untrue. In 1993 the Govt raised taxes, which flooded the Treasury with excess revenues. While spending increased, increases were moderate. '

As a result, a then record deficit (proportionally bigger than the one we have now) was turned into an unfortunately short lived surplus.

False equivalency. In the last several decades, one part has a far better record of the budget than the other.

 

You talk about just closing the deficit with $500B. That's just today. The govt has $17T in debt, and $207Trillion in total obligations.

Yes, the $207T represents the obligations the govt has made, including social security, medicare, military retirements, etc. Those are promises the govt made and people have based their lives around.

Comparing that value to one year of global GDP shows the magnitude of the problem, and that $207T is in TODAYS dollars, not in future dollars. At 4% interest and monthly payments, the govt would have to come up with $70Billion a month ($900B a year) for 75 years to mee those obligations. That's assuming the govt stops the $500B to $1T annual deficit. Where is the govt going to get an extra $1.5T - $2T a year? Its not going to happen. The debt cannot be met.

 

Still on that false surplus story? Get over it, move on, its a dead horse.

 

If the Govt simply balances the budget, the relative size of the debt drops by half in about 12 years or so.

SS is not an obligation like a debt. It is a projection of future expenditure 75 to 100 years into the future making numerous assumptions. And apparently not including the offset of potential revenues.

That absolutely is not "TODAY'S" dollars. Prove the Govt owes $207T in today's dollars.

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Not sure what you are talking about. I've simply illustrated the fallacy in your assertion with reference to recent history.

 

So we shouldn't fix what we can?

First rule of finding yourself in a hole: stop digging. That, at least, we can do.

We will either find a way to pay those obligations, or we will restructure the obligations so we can pay them. For instance, if SS runs out of money, benefits will drop to about 75% of what has been promised. The world will not end.

The government is currently able to borrow money basically for free (10-year Treasury bills are now paying about 2%, which is below the rate of inflation).
http://www.treasury.gov/resource-ce...interest-rates/Pages/TextView.aspx?data=yield

So time is actually our friend, not our enemy. But that's only if we stop adding to the pile.

First, we stop the annual deficit. I've already demonstrated that's doable. Then, as the value of the debt declines relative to inflation (thanks to those low Treasury rates), we'll see the debt load grow more and more manageable even if we do nothing.

Then, we decide how much we can afford to put toward reducing the accumulated debt and meeting those obligations.

It's all quite doable. But the first thing is to stop the deficit. Which will take tax hikes and spending cuts. Which hasn't happened because Republicans refuse to consider any sort of tax hike. If you think the debt is a serious problem, write to your GOP Congress members and tell them you think a 2.5-to-1 cuts to hikes ratio is quite reasonable, and they should stop stonewalling and start working with Democrats to identify specific hikes and cuts.

(Personally, I think Democrats should be tasked with finding spending cuts and Republicans should be tasked with finding tax hikes, so both sides are forced to work against their own stereotypical preferences, and so Republicans can't blast Dems for raising taxes and Dems can't blast Reps for hurting the poor, or whatever).

 

If history is any guide, the Republicans will raise taxes on the middle/lower classes.

 

That would be their choice (though clearly any such deal would require bipartisan agreement).

I just trust Dems to find spending cuts that do the least harm, and (to a lesser extent) trust Republicans to find tax increases that also do the least harm. And I like the idea of both parties having to work against their inborn preferences.

 

LOL, I trust the Republicans to do the least harm to the 1%.

 

You are right, its not $207T, its over $222 T.

This is from a 2012 interview, but go to Kotlikoff's papers (Boston College Economics Professor) for more

http://www.realclearpolicy.com/blog...ce_kotlikoff_us_222_trillion_in_debt_363.html

RealClearPolicy: Cox and Archer argue that the U.S.’s underlying debt is much higher than the officially stated debt of $16 trillion. They argue that if you add up the unfunded obligations the government has -- to Social Security, Medicare, federal workers’ pensions, and so on -- the real debt is about $87 trillion. Can that be right?

Kotlikoff: That’s wrong. It’s $222 trillion.

That’s what we economists call the fiscal gap. I don’t know what those guys are looking at, but we economists do it a certain way. We’re not politicians. We’re just doing it the way our theory says to do it. What you have to do is look at the present value of all the expenditures now through the end of time. All projected expenditures, including servicing the official debt. And you subtract all the projected taxes. The present value of the difference is $222 trillion.

So the true size of our fiscal problem is $222 trillion, not $87 trillion. That’s comprehensive and incorporates the official debt. The official debt in the hands of the public is $11 trillion, so the true problem is 20 times bigger than the official debt.

 

Possibly. But one hopes that when forced to come up with tax increases in the full glare of public view, they'd be at least somewhat interested in covering their butts. Especially because they'll know that their proposed hikes will have to get at least some Democrat support, just as the Democrat spending cuts will need to get at least some Republican votes.

It's one thing to make vague claims like "cutting taxes on the rich will make us all wealthier." It's quite another to try to explain why "I'm raising taxes on the poor and middle class in order to spare the rich."

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That does not materially alter the discussion we're having.

 

"Unfunded obligations" are not debt.

So they are looking at all the projected future expenditures and taxes to the end of time, making serveral assumptions about those projections, and coming up with a big number.

Exactly how many years are there between now and the end of time?

So if we take a subset of the years until "the end of time," say, 1000 years, that equals about $200 billion a year.

So if your concerned, write your Republican reps and tell them to compromise on a tax increase to get a budget deal to get the deficit down.

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Let's be realistic. The Republicans are *never* going to agree to any tax increase on their pampered babies.

 

Not without a lot of moaning and groaning. But I think the public spotlight -- and the knowledge that whatever they do must attract some Democratic support -- would force them to do at least a little bit, as a fig leaf if nothing else.

The Democrats would loudly publicize a Republican effort to tax the poor in order to spare the wealthy. Why would the Republicans hand Dems such a powerful cudgel?

I suspect they would fight to protect the wealthy for a while for appearances sake, and then cave to political reality.

 

I don't think they'll do that. They just won't agree to increase tax period.

 

I agree we should stop digging the hole deeper.

Time is definitely not on our side. The interest rate is artificially low and that is temporary, the US Fed will not be able to keep ZIRP much longer.

And while the zero interest is good for the government, it is destroying retirees and those on fixed incomes who planned their finances assuming historic interest rates. Those people have been spending their principle and will run out of money far earlier than planned.

Then there is the stock bubble, with zero interest the only investment making money is the stock market so people - including retirees - are dumping their money into the market. Most companies are not worth their stock value, stocks are hugely over valued. When that bubble collapses, its really going to hurt, and all those retirees on a short time horizon will never recover.

And inflation is not under 2%. The govt started playing with the CPI in the 1970's, its in the govt's interest to keep CPI low because so many expenses are tied to it (cost of living adjustments in SS & military retirement, etc). That's why one of the recommendations of the Simpson-Bowles Deficit Reduction plan was to modify the CPI calculation to "make it more accurate" which also conveniently reduces the CPI and saves the govt money. It was first made "more accurate" under Reagan, but every time the calculation results in a lower inflation number. CPI is a scam.
http://www.forbes.com/sites/periann...l-rate-of-inflation-dont-bother-with-the-cpi/

There is no tax/spending reduction plan that will solve the problem as it currently stands. The obligations (including social security) have to be restructured.

And you can play your partisan game of "blame the Republicans" but that just shows you are not serious. The nation did not get into this situation because the Republicans are devils and the Democrats saints. They all played the game equally irresponsibly.

 

Not true at all. We have more than sufficient income to pay for the programs without modification.

Make SS taxes applicable to all income, not just those falling in the middle/lower income categories. Eliminate the special, privileged exemption of SS taxes on investment income. Make SS benefits means tested. Those things alone would probably put it permanently in the black.

Any realistic solution has to be a compromise with tax increases.