Why do governments get into debt?

Discussion in 'Budget & Taxes' started by Anders Hoveland, Jul 28, 2013.

  1. pjohns

    pjohns Well-Known Member

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    Far too many politicians are concerned merely with their own personal interests--i.e. getting elected or re-elected--and this can be accomplished much more easily by promising an expanded list of goodies than it can be by promising fiscal discipline.

    Indeed.

    But the federal government in the US will not likely do so, for the reason indicated, above. (Note: State governments are a different matter: It is my understanding that 49 of the 50 states require a balanced budget, according to their respective state constitutions or laws.)
     
  2. Iriemon

    Iriemon Well-Known Member Past Donor

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    A loophole is a tax law that was put in to benefit a particular group by Congress, usually the rich or a particular industry or corporation. The one Shiva pointed out is a perfect example.

    It is outrageous that a guy like Romney living off his investments pays a lower effective tax rate than many middle income working families.
     
  3. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    The term "tax loophole" refers to a condition under the law where person can pay a lower tax rate on income or, in some cases, pay no taxes at all. The "capital gains tax" is inherently a tax loophole because it taxes investment income at about 1/2 of the rate when compared to all other forms of income.

    Of note, under the law and treaty agreements between the United States and foreign countries (e.g. the UK) investment income classified as a "capital gain' can be diverted through foreign "paper corporations" to avoid any taxation whatsoever but this is a legal "loophole" in the Capital Gains Tax that really can only be used by the very top of the top 1% of income earners. The law is universal but only the very wealthy can afford to do it. This probably explains it better than I can.

    Because of the costs of estalishing a corporation in these countries and the fact that often the money is "tied-up" to establish it as a long term capital gain (usually two years) most people, even investors, can't afford to live for two years without income to even get the cycle started. Remember though that this is based upon treaty agreements so the money the tax haven corporation earns in investments it holds are derived from a foreign source (US investments) and is not taxed and then, based upon receprication, the income to the individual from the paper corporation is "foreign income" from the corporation so it is not taxed either. Except for the "cost of doing business" the income is not taxed by any nation.

    And it's all perfectly legal so technically the person isn't paying any taxes because the tax rate is zero on income channeled through the paper corporation in a foreign country based upon a treaty agreement.
     
  4. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    While this thread is about national debt it should be noted that the only valid measurement for taxation is tax burden relative to income and for the person this relates to ALL of the taxes they pay (e.g. FICA, state and local taxes, fuel taxes, etc.) and not just federal income taxes. Contrary to what many believe when the total tax burden relative to income is addressed the lower the income level the higher the tax burden relative to income and the higher the income level the lower the tax burden is relative to income.

    A minimum wage earner can literally have over 20-times the tax burden relative to income when compared to someone with tens of millions of dollars in income which is why the statement "The wealthy aren't paying their 'fair share in taxes' is highly accurate based upon the only valid criteria.
     
  5. Iriemon

    Iriemon Well-Known Member Past Donor

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    As a general rule I don't think that is necessarily true. Generally, lower income people pay a smaller portion of total tax relative to their share of total income. But, as you point out, not at the top levels. The 1% get about 20% of the gross national income, and pay about 20% of the total tax burden paid by individuals, and there are certainly many examples, the most recent Republican candidate included, where those at the very top levels pay a lower effective tax rate than moderate income persons or families.
     
  6. OldManOnFire

    OldManOnFire Well-Known Member

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    You just don't get it and you let your jealousy control you. No tax laws are in place to benefit anyone! The laws on the books have been created by thousands of Congress members and many presidents and millions of voters...if you don't like the tax laws then contact Congress and your president. All Americans can have investment funds which are subject to capital gains which includes YOU and ME and 150 million Americans. It is petty jealousy if you believe another person can live off of their investments while others cannot...
     
  7. OldManOnFire

    OldManOnFire Well-Known Member

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    Laws are laws...tax laws are tax laws...tax laws are not loopholes as the term is used in politics. I simply cannot get excited about a tax system which has been created by 1000's of members of Congress and many presidents and accepted by voters over several decades of time. It's very complex and is designed as it is for many reasons which most of us will never understand or perhaps agree. It's a work in progress, reviewed and upheld or modified, not perfect relative to each person's perspective, but it is what it is and assuming the government enforces it's tax laws then everyone abides by those laws. I suspect and/or assume one reason for investments to be taxed differently than people and corporations is to encourage investments...therefore I can surmise if we increase capital gains tax rates that at some point this will have a negative effect on investments in the USA. Can anyone quantify the amount of lost tax income affiliated with your "paper corporations"?
     
  8. Iriemon

    Iriemon Well-Known Member Past Donor

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    A technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law. Used often in discussions of taxes and their avoidance, loopholes provide ways for individuals and companies to remove income or assets from taxable situations into ones with lower taxes or none at all.

    http://dictionary.reference.com/browse/tax+loophole

    When the government increases FICA taxes but slashes top income tax rates, capital gains tax rates, and estate tax rates, it's very easy to see what is going on.
     
  9. OldManOnFire

    OldManOnFire Well-Known Member

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    So...in your opinion, a tax loophole would be the millions of Americans who receive cash as a portion of their income, as in tips, when they only claim 'some' of the cash as income, or perhaps none of the cash as income, this is a tax loophole?

    Or...several more millions of Americans, who when preparing their income tax forms, are dishonest about charitable contributions, etc. this would also be a tax loophole?

    Actually, the two examples above are outright lies and tax evasion while corporations and wealthy people follow the tax laws.

    FICA taxes have nothing to do with income taxes...people pay in and people take out at retirement.

    In bold above...what's going on is jealousy of the wealthy...
     
  10. Iriemon

    Iriemon Well-Known Member Past Donor

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    Utter 1% apologist nonsense. To claim that "no tax laws are in place to benefit anyone" is sheer BS.

    You act like Congress couldn't possibly be motivate to pass tax laws that benefit special interests, because we know that never happens.
     
  11. Iriemon

    Iriemon Well-Known Member Past Donor

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    That isn't a matter of law, that is a matter of compliance. I'm not aware of any law that provides that you don't have to pay taxes at the full rate on tips.
    Same thing. You're confusing loopholes with compliance.

    They are. Unlike, for example, the special privileged low tax rate on investment income that until this year was only 15% maximum and allowed the uber rich like Romney who live on investment income to pay lower effective and marginal rates on his $20 million income than many middle class families.

    But I know you're good with that. 1% apologists would be.
    FICA taxes have nothing to do with income taxes...people pay in and people take out at retirement.

    What's going on is unfettered greed by the wealthy. The richest 1% having 40% of the nation's wealth isn't enough for you, is it?
     
  12. OldManOnFire

    OldManOnFire Well-Known Member

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    If I don't like what Congress does I vote for a different representative at the next election. Meanwhile I live my life by the laws and policy of the USA no matter if I like them or not. I don't care about anyone else but me and how I manage my life within the government policies in which I must live and operate. When I fail I'm not going to blame you, and the Dems and Reps, and Congress, and those evil wealthy 1% of yours. You spend all of your time on a witch-hunt while ignoring the root issues which plague this government and Americans. But hey...chase your jealousy or whatever it is that motivates you...
     
  13. Iriemon

    Iriemon Well-Known Member Past Donor

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    Just the kind of response we'd expect from the 1% club. Never mind we have 40% of the wealth, you shouldn't worry about we have and the lazy evil lower classes should go back to their miserable little existences.

    Only the little people pay taxes, right Leona? But hey...chase your greed or whatever it is that motivates you...
     
  14. OldManOnFire

    OldManOnFire Well-Known Member

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    Like I keep saying, if you cannot define a root problem then you cannot find a solution. Your jealousy of the wealthy keeps you focused on the 1% as if you are going to solve a problem? How about pretend for a moment that those evil 1% people don't even exist...now what action will your 'evil lower classes' take? Whatever actions they 'should' take based on their own merits and efforts, is what they should be doing today instead of being jealous of those 1% people. As long as your 'evil lower classes' do nothing, expecting others to solve their problems, nothing in their lives is going to change. The ONLY way they can effect personal change is to take personal actions. For all the sheep in the world...as long as they allow others to control their lives...then accept what those others provide for you...no whining!

    Back to the topic of this thread, which is government debt, the greatest thing the government could do is teach these tens of millions of Americans how to fish instead of giving them a few fish...
     
    Ndividual and (deleted member) like this.
  15. Iriemon

    Iriemon Well-Known Member Past Donor

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    I've certainly defined a root problem.

    Your greed keeps you focused on excusing the 1% for solving the problem.

    They'd have 20% more income and sufficient spending power to drive a robust recovery like the kind we had before trickle down.

    Great, then reverse the trickle down policies that have helped decimate the middle class and watch them grow.


    Doesn't help when the 1% control the ponds and the fish.
     
  16. Vilhelmo

    Vilhelmo New Member

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    Close, very close.
    It's not just anyone's IOU, it's the Government's.
    A $5 currency note, in my case the Canadian Dollar (CAD), is a transferable, non-interest bearing debt (IOU) of the Federal Government who promises it's acceptance in payment of all taxes, fees, fines, ect.
    The CAD is a unit of government debt & the debt in which all other debts are denominated, the unit of account.

    The only source of government money is the government.

    Again, you can't produce dollars. You only attain a transfer of existing dollars.
     
  17. OldManOnFire

    OldManOnFire Well-Known Member

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    Okay...please define your root problem...just one that we can talk about?

    I don't have much greed and I don't excuse anyone.

    I wasn't asking about taking income from the wealthy...I was asking what you think their course of action might be IF they cannot take it from the wealthy?

    There is no such thing today as 'trickle down policy'? Money spent in the economy, no matter who does the spending, energizes the economy.

    What you don't understand is if you truly believe the 1% own the ponds and the fish then you should know that the 99% must be consumers of those fish otherwise the business closes their doors...
     
  18. Iriemon

    Iriemon Well-Known Member Past Donor

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    http://www.politicalforum.com/showthread.php?t=333773&page=27&p=1063376719#post1063376719
    http://www.politicalforum.com/showthread.php?t=333773&page=27&p=1063376838#post1063376838

    Good for you. And I'm not jealous. So feel free to move out of the ad hom basis for your argument.

    Pay down the deficit. Increase educational and job training opportunities. Make medicare available to all.

    What does that have to do with trickle down policy?

    What you don't understand is if the 1% doesn't let you fish you don't get fish to eat, regardless of what you might have learned.
     
  19. OldManOnFire

    OldManOnFire Well-Known Member

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    I'm still waiting for an example of a root problem? Your URL's above don't define a root problem? You and your 1% group complain but please provide a single thing that you believe this group has a problem with and then we can find solutions.
     
  20. Iriemon

    Iriemon Well-Known Member Past Donor

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    A root problem of what? My links were post where I identified a number of reasons for the root problem that middle class incomes have stagnated.
     
  21. unrealist42

    unrealist42 New Member

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    The root problem is that economic growth is not widespread. The cause of that is a tax regime that reduces the risk of market speculation far below that of any other alternative so that is where the people with the money put it. The result it that top 10% have gained all the income growth in the past decade while the bottom 20% has experienced a decline in income and the 70% in between have seen their accumulated wealth shrink by 30% while their income has remained stagnant as extra money in the economy has become concentrated in market speculation.

    This is not the first time the US has gone through this, nor will it be the last but it is unlikely to change much until market speculation becomes a far more risky tax proposition.
     
  22. Durandal

    Durandal Well-Known Member Donor

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    Because they're spending 1) our money and 2) funny-money printed up as needed.

    The rest is just doing favors with said money to gain and maintain power and personal wealth.

    - - - Updated - - -

    Yeah, it won't be the last... As long as we shrug and accept this retarded system of theft from above.
     
  23. OldManOnFire

    OldManOnFire Well-Known Member

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    So you're saying middle class workers don't like their wages?

    Do you think this applies to 100% of middle class workers? 50%...25%...what percent?

    What percentage of middle class workers do you believe have taken steps to acquire more education and more skills in order to increase their workplace value?

    You do know that probably 99.9% of all those wealthy people you hate come out of the middle class group of workers...I'm sure you know this...
     
  24. OldManOnFire

    OldManOnFire Well-Known Member

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    Money will move to those areas which provide the best ROI...if this is the stock market then so be it. If other investments in business, or expansion, or whatever had great ROI the money will move to these areas. BTW; in order to have any money to invest in those evil stock markets, someone had to earn that money in the private sector, most of which taxes were paid...
     
  25. Iriemon

    Iriemon Well-Known Member Past Donor

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    Where did I say that? So you're saying the 1% don't like their income?

    I don't know. What percentage do you think?

    What wealthy people I hate?

    Proof of this fact please.
     

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