The economy (or, We're All Doomed. Doomed!)

He's stated that the rich are taxed at 15% while the majority of us pay 25% (scroll up if you want to check it). This is quite simply a lie, whether by ignorance or by intent.

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Well, I'm not going to stoop to calling anyone a lier, you can pretty much find any information that will back up any statement...see Fox Noise. Who's being ignorant now? To state that folks with a moderate income have the same capability to take advantage of or even find loopholes in the tax code is ludicrous. That is why the rich have a lower effective tax rate than folks with moderate income. Who do you know that has lowered their tax rate by using those built in "cheats"?

We did a simul-post there, but I'm afraid you've got to go back to the drawing board. By tax code, your statement is incorrect. By your "effective rate" argument, your own supporting documentation shows that your statement is incorrect. Don't know what more I can offer ya.

As for the cheaters, anyone with a 401k or Roth IRA is using a tax shelter. You got either of those? They're pretty common, even for working shleps like me. That's a codified loophole that you very well might use, ya darn cheater. You must be rich.

Dte, I'm probably going to wish I'd kept my mouth shut--but did you see this story on 60 Minutes? Here it is in the New York Times online--the damn socialist rag!

Buffet Blasts System that lets him pay less taxes than his secretary

Warren Buffett, the third-richest man in the world, has criticised the US tax system for allowing him to pay a lower rate than his secretary and his cleaner.

Speaking at a $4,600-a-seat fundraiser in New York for Senator Hillary Clinton, Mr Buffett, who is worth an estimated $52 billion (£26 billion), said: “The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent. Mr Buffett told his audience, which included John Mack, the chairman of Morgan Stanley, and Alan Patricof, the founder of the US branch of Apax Partners, that US government policy had accentuated a disparity of wealth that hurt the economy by stifling opportunity and motivation.

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Edit: The source quoted is actually a British paper called The Times Online--not the New York Times as I stated--so it might actually be a socialist paper. The story with no noticeable deviation has also been reported in the US press, most noticeably on 60 Minutes(TV). Sorry for the incorrect attribution.

Do any countries have a low, progressive, dual, flat tax system ?

Here's my idea/suggestion :


1) Start taxing people once they are above the poverty line (approx. $20,000 US).

2) For those whose personal income is between $20,000 and $99,999 /yr., tax them at 15%.

3) For those $100,000 and up, tax them at 20%

4) The corporate tax rate could be set at 20%, with a complete exemption for small businesses.

This would simplify the tax code, and eliminate distortion.


Also :

-Eliminate all loopholes, and enact legislation with very harsh penalties for ANY form of tax evasion / loopholing.

-Make all gov't agencies very cheap and efficient - no earmarks, no lofty salaries for politicians, no corporate welfare (corporate welfare hit 90 Billion / yr. under Bush ), no extravagant budgets or bonuses for politicians, etc.

-Place a 1% tax on all non essential adult entertainment goods and services(adult movies, magazines, novels, alcohol, coffee, tobacco, etc.) and use that revenue to supplement the purchases of crucial items (food, shelter & clothing) for those in poverty.

-Reduce military funding and drug war spending / prison building.


My idea is a multi-spectrum approach, with fiscal conservatism, socialist and libertarian elements intertwined.

While some of your ideas sound good, there are a few problems with them. Your extra 1% tax for example conveniently forgets the already massive taxes on things like alcohol and tobacco.

Magerette, I sympathise with the issue of stifling motivation to work. Several years ago, while working full time, I also used to lecture in the evenings for various adult education type places. Then, they wanted to cut the lecture fee. With increased marginal rate taxation, travel cost, etc, I would have been working for less than half my day job rate, doing what was essentially overtime. I quit immediately!!

dteowner said:

@PJ- actually, your scenerio did not change the gross amount of spending, but that's not really important to the point. I quoted the wrong section of your post anyway. The foreign payments I'm talking about aren't the discretionary ones (bases, aid, etc) that increase the national debt. I'm talking about interest payments to foreign bond holders on the existing debt. It's actually that multiplier effect that I'm counting on. Joe's $10 for his plasma wide screen will pass thru several American hands before getting to Sony. A portion of Uncle Sam's $10 must go, via T-bill interest, directly to Chairman Mao without touching another hand.

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Again, that's true if you look at the totality of your government spending at the current level of national debt. I was, however, talking about a *change* in government spending -- moving $10 from the private sector to the public sector. Since the amount of foreign debt won't change, and that burden is already factored in, the government ends up with an extra $10 that it can spend as it likes -- without sending any to Chm. Mao; that's already taken care of with the situation before the tax-and-spend maneuver.

(Naturally there are lots of ways to spend that $10 -- the government could send all of it to Chm. Mao, thereby reducing the national debt which would reduce the drag on the economy in the long term but slow growth in the short term, it could send it all to Hassan the brickmaker in Al-Anbar, in which case it would be pretty much lost to the American economy, or it could pay ol' Joe in New Orleans to patch up a levee, in which case it would stimulate the American economy and improve American infrastructure.)

Arpyjee said:

Do any countries have a low, progressive, dual, flat tax system ?

Here's my idea/suggestion :


1) Start taxing people once they are above the poverty line (approx. $20,000 US).

2) For those whose personal income is between $20,000 and $99,999 /yr., tax them at 15%.

3) For those $100,000 and up, tax them at 20%

4) The corporate tax rate could be set at 20%, with a complete exemption for small businesses.

This would simplify the tax code, and eliminate distortion.

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It would also create a marginal tax of over 100% at the $100,000 line. If you made $99,999, you'd pay $14,999 and end up with $85,000; if you made $100,000, you'd pay $20,000 and end up with $80,000. In other words, that extra $1 you made would cost you $5,000.

That's why tax codes are progressive -- the idea is to avoid pushing the marginal tax -- the tax you pay for any *extra* dollar you earn -- past a certain point. In the 1960's in the US, the marginal tax was as high as 90%, which was a pretty obvious disincentive... or, rather, incentive to think of clever ways to evade it.

-Eliminate all loopholes, and enact legislation with very harsh penalties for ANY form of tax evasion / loopholing.

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That's easier said than done.

-Make all gov't agencies very cheap and efficient - no earmarks, no lofty salaries for politicians, no corporate welfare (corporate welfare hit 90 Billion / yr. under Bush ), no extravagant budgets or bonuses for politicians, etc.

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Eliminating earmarks and corporate welfare would certainly be a good idea, but lowering salaries for politicians might not be. If you lower them too much, you create an incentive for corruption. It would be a better idea to make sure the straight-out salaries paid to politicians are high enough to make the jobs attractive -- and then create an anti-corruption enforcement and penalty regime tough enough to provide a strong disincentive to corruption. Personally, I would suggest impalement on spikes in front of the Congress building.

-Place a 1% tax on all non essential adult entertainment goods and services(adult movies, magazines, novels, alcohol, coffee, tobacco, etc.) and use that revenue to supplement the purchases of crucial items (food, shelter & clothing) for those in poverty.

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Something like that already exists in most countries, albeit at a higher level. For example, in my country we have three different VAT levels -- the lowest for food, medium for books, and highest for everything else. In addition, we tax alcohol and tobacco pretty heavily.

-Reduce military funding and drug war spending / prison building.

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In the case of the US, the first would be easy (just stop pouring money down the black holes of pie-in-the-sky weapons programs), but the second would require a pretty thorough overhaul of the legal and penal system. You'd have to get the incarceration rate down a quite a lot.

My idea is a multi-spectrum approach, with fiscal conservatism, socialist and libertarian elements intertwined.

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It's a bit rough around the edges, but it's actually a pretty mainstream outlook on things.

OK dte, ya got me. I'm no expert on the specifics of taxation in the US and I can only ape what I've heard. I'll admit I got the original premise of the rich paying less taxes than the working class from sources like Air America and The Nation. It sounds as though these sources have some validity in this supposition I stated when one of the richest guys in America states the same thing I did, but from personal experience.

Thanks Magerette.

Looking back, I was a little harsh, Eliaures. Sorry about that. It's just dangerous to accept politicians' soundbytes at face value. You've got to really look at where the numbers come from (and I've gotten called out for the same sin a few times here, too, so it's not like it's an easy trap to avoid) and form your own opinions.

@magerette- it comes down to the nature of your income. The rules are the same for everyone, rich or poor, but rich people are more likely to have the means to take advantage of the loopholes. For me, 99% of my income is payroll, which falls under a rather expensive set of rules. That's typical of most working stiffs. For Warren, I'd bet less than 5% of his income is payroll. His income is coming from stocks and bonds, which are taxed under a different (and currently favorable) set of rules. Remember the big stink a few years back over reducing the capital gains rate? That's the rule that helps Warren out. Those rules would apply exactly the same to you and me, if we had $10 or $10,000,000 invested in them, as they do to Warren. Unfortunately, we are far less likely to be able to take advantage of those favorable situations because we're not sitting on a pile of cash like Warren is.

So, are the rules fair? Everyone's playing the same game by the same codes, so I would say yes. Do the rules, as they stand, make it easier for someone with a pile of money to make/save a buck than someone living hand-to-mouth? I say yes again. It actually circles back to PJ's "Black Henry Ford" discussion. Everyone has (and should have) the same opportunities, but realistically some people are better positioned to take advantage of those opportunities.

The reason I say that's fair (and, by extension, the tax situation is "fair" even if it still sucks) is a little more complicated. If we say that the only way something is fair is for everyone to need the same "reach" to grab an opportunity, then Joe Fry Guy has to have the same choices as Paul PHD. Joe Slacker has to have the same choices as Willie Worker. I've got real problems with that approach. People that work extra hard or improve themselves are doing so to improve their "reach". If you take that away, there's no incentive to be anything but the lowest common denominator.

dteowner said:

The reason I say that's fair (and, by extension, the tax situation is "fair" even if it still sucks) is a little more complicated. If we say that the only way something is fair is for everyone to have the same opportunity, then Joe Fry Guy has to have the same choices as Paul PHD. Joe Slacker has to have the same choices as Willie Worker. I've got real problems with that approach.

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Not quite: the point is that Joe Fry Guy's, Paul PhD's, Joe Slacker's, and Willie Worker's kids should all have the same opportunities.

In a perfect world, that is. In an imperfect one, anything that we can reasonably do to level the playing field between them should at least be given serious consideration.

(N.b.: I'm not thinking about "affirmative action" here. IMO it would be both fairer and more effective to concentrate on things like education, nutrition, and health care. That means public education without too much variation in quality between schools *and* a standard high enough that even Willie Worker and Paul PhD will send their kids there, pre- and post-natal health care and counseling that gets kids started on the right foot, and school meals that are actually good for you. That sort of thing.)

I editted while you were responding. Does that added info change your thought, PJ?

I don't know that you want to guarantee the level playing field. Part of the reason I "strive" is to create better opportunity for my kids. If everything's going to be levelled by Uncle Sam after the fact, I no longer have that incentive. The downside, and it's legit, is that some kids will suffer "the sins of the father".

dteowner said:

I editted while you were responding. Does that added info change your thought, PJ?

I don't know that you want to guarantee the level playing field. Part of the reason I "strive" is to create better opportunity for my kids. If everything's going to be levelled by Uncle Sam after the fact, I no longer have that incentive. The downside, and it's legit, is that some kids will suffer "the sins of the father".

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I very much doubt *any* society will be able to offer a playing field level enough to come close to what a kid's parents can do for them -- that's what the bit about the "perfect world" was about. However, it is possible to remove some of the biggest obstacles that steer Leroy Ford towards managing a crack gang and Henry Ford towards managing a software company.

Once again, it's a matter of balance -- absolute equality in opportunity for kids would mean something like taking them away from their parents and having them raised by the state, and I'm pretty sure we agree that that would be the wrong kind of equalization; it would make everyone worse off rather than almost everyone better off.

But we *can* do a quite a lot. And I very strongly believe we should.

For the record, there's a personal dimension to this topic. Namely, my family background. In a way, my father is a kind of Leroy Ford, although not black.

My father was born in a 16 square meter room. His father was a welder at a furniture factory, as well as an alcoholic. His mother was a waitress. My mother was the daughter of a dentist and an engineer. They were classmates.

My father worked extremely hard at school. He was the first in his family to get the "baccalaureate" -- the US equivalent would be "get into college." He was also one of less than a dozen in the country that year to graduate with six "laudaturs" -- the top grade for each of the subjects in the examination.

He then enrolled in the Polytechnical University to study technical physics, from which he quickly transferred into a just-emerging discipline, information processing science. He got his Dr.Tech at the age of 30, and tenure at age 35.

My mother went to pre-med, then med school, graduated, and has been practicing medicine ever since, first in the public health care system, and eventually switching to the private sector.

Now, there are a couple of salient points about this story.

(1) My parents lived a stone's throw from each other and went to school together, even though he was from a working-class family and she from a middle-class one; his parents were Communists and identified strongly with the Reds in the Finnish Civil War; hers, Conservatives, and identified with the Whites. (In fact, it's entirely possible that my great-grandparents were shooting at each other on the Tampere front -- both were involved in the fighting there.)

(2) Our country had, already at that time, thanks to a very small, wrinkly little fellow named Arvo Ylppö, a comprehensive child health care program, with counseling for young parents, vaccinations, and regular check-ups, followed by nutritionally balanced school meals from age 7 on up. That means that both of my parents started out roughly equally healthy, despite the big difference in family income, educational level, and general conditions.

(3) The school treated them more or less the same. They took the same classes, had the same teachers, got the same diplomas, were steered towards career choices based on their performance rather than their background. (The school's music teacher even tried to get my father to play the 'cello, but he felt that wouldn't go down well with the 'hood.)

(4) Secondary education was free, and even then they got a certain amount of state support for it -- a cheap, guaranteed student loan and subsidized housing. That means that my father could actually concentrate on his studies (although he did work at a paper mill in Sweden for the summer).

Basically, our society did what it could to make my father's choices easier for him, despite the fact that his home wasn't the most likely to produce a professor. Perhaps he would have been determined enough to beat the odds in some other system -- but the odds are that he wouldn't have. Thing is, he's not unique: if you go to a Finnish university today, you'll see students with all kinds of backgrounds, from all over the country. Sure, some groups will be over-represented relative to others -- there will be more kids from families where both parents have degrees than from families where neither do. But the system does level the playing field in noticeable ways, and I believe the entire country benefits greatly as a result.

Arpyjee said:

Do any countries have a low, progressive, dual, flat tax system ?

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Few countries in europe have flat tax:

* 2007: The Czech Republic has proposed a 15% income flat tax for this year, and a 19% corporate rate by 2010.
* 30 June 2007: Bulgaria's government coalition agreed a flat tax rate for personal income of 10%.
* 2008: Albania has proposed a 10% income and corporate flat tax.

Last January, Slovakia became the sixth Eastern European country to adopt a flat tax, which means all income-earners pay the same rate. Since then, Romania and Georgia have followed suit, creating a global proving ground for the concept. In the process, flat-taxers have moved Eastern Europe from a Communist backwater to an investment spring - pressuring its higher-taxed Western neighbors to adapt to the new environment.

US conservatives, meanwhile, hope the experience of flat-tax countries like Slovakia - which the World Bank named top economic reformer last year - will persuade President Bush to implement a flat-tax of his own.

Mr. Bush praised Slovakia's tax-reform efforts during a trip there last month. "I really congratulate ... your government for making wise decisions," he said.

Western Europe feels differently. To support large governments and sizable welfare payouts, many Western European countries impose a triple-tiered tax regime of Value-Added Taxes (VAT), akin to a sales tax, high taxes on corporate revenue, and personal tax rates that can exceed 50 percent. Eastern Europe's cheaper labor market and growing reliance on flat taxes leave Western European economies struggling to compete.

http://www.csmonitor.com/2005/0308/p01s03-woeu.html

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sigh...I was going to quit this thread but they keep pulling me back in.

All it takes for the average American to get tripped up is for your company to lay you off, to have an injury on the job, a child with an illness that the HMO won't cover because the treatment is "experimental", a natural disaster that wipes out your home, etc. At that point, it doesn't matter how much you have tried to provide for the future of your kids, the free market does not want to help.

I seem to have a lot of "there but for the grace of God, go I" in me. I was lucky. My family never had any hardships to slow our progress and my folks steadily progressed from living in a trailer to retiring to a very nice home in Santa Fe, NM. At a certain point in my fathers life, had he faced any of the obstacles above, he could have managed them and still been able to provide for my education and a modest retirement. Prior to that though, I shudder to think what the situation would have been.

One of the reasons I love Australia is that we have a 'concept; here we're proud of called the 'Fair Go'. I arrived in this country fresh out of University in Toronto with $50 earned working in a factory (my parents were lower middle class with 4 kids and little money) and one suitcase of clothes. I had no job, just a couple of degrees, but I knew they were short of teachers. From that humble beginning I've done very well and helped both my kids go to University. We have a scheme here where the gov't will pay your uni costs and then when you get a job, take a small percentage from your wage each week until the debt is repaid. Basically between that and scholarships, most people can do tertiary study if they wish despite their financial position. Do we have a totally level playing field? Of course not, it's not possible, but here we try to make it as level as we can!! It's called giving everyone a 'fair go'!!

The Chinese, the Koreans, the Russians,

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Don't forget india, they are buying US stuffs like crazy, wanta new indian land rover??