Political Roundtable Pulsar of Annihilation part IV

[barelyawake]

No, Nate, the money on the sidelines does not pale in comparison with the debt. The money on the sidelines is not a static figure -- once is becomes engaged in the economy it expands exponentially. It is a static figure only while on the sidelines.

Again, this was done by design. The Heritage foundation has said this was the plan for decades. Starve the government, and then cuts must occur. Bush puts tax cuts and two wars on the credit card, so we have to make cuts. And what is Romney's plan? Pay for Bush's mistakes by taking programs away from the middle class, and then make his own new mistakes (that the middle class will have to pay for) by starting more wars, increasing the military spending and more cuts for the rich.

PS the other side of your coin is you can't cut middle class jobs and programs, and somehow increase your customer base. Our problem is customers. Our problem is a vanishing middle class. I'm not sure how many times that needs to be said.

[Induveca]

Indu: I'm not sure how to respond to you because your posts seem based on emotion and personal experience. Which is fine -- folks can cast their vote, throw their support...whatever...based on whatever criteria they want. I do not mean that as a criticism. I haven't had your experiences so, I can't really address much of what you're saying in a constructive way.

I do agree with your thoughts on the US party system. It's artificially polarizing and creates an illusion of choice. I don't think there's truly that much difference between Obama and Romney. Although it's kinda tough to tell with Romney because of his ever-changing positions.

I don't see Obama as a socialist or a radical. I'm skeptical that a modest tax increase is going to cause businesses to flee, manufacturers to eschew America, and lead to the death of the American economy. I think businesses will locate where it's advantageous to locate, and that equation will surely involve more than just looking at the tax code. Maybe it'll be more advantageous for YOU to conduct your business elsewhere, but I'm wary of generalizing from anyone's personal experience, including my own.

That was more run than emotion (same thing I guess). Interesting debate end of the day, but increasing the dividend tax by 100% is a huge blow in any accounting system for a profitable private business.

Partners have to double up on their estimated taxes, which is money coming directly out of the company's end of year profit.

There's a good example of trickle up, not trickle down.

[Zonkerbl]

Playing devil's advocate re flat tax and VAT ideas:
What happens to charitable organizations - when the tax incentive to give to charities goes away?
What happens to the housing industry when the mortgage interest deduction goes away and interest rates go up?
What happens to people's savings when there is no tax incentive to contribute to 401k's and IRA's?
What happens to the banking industry because of the previous 2 issues?
If you switch to a flat tax, exceptions are inevitable, and eventually you end up with a tax code just as cumbersome as what you have today.
Does the VAT include a tax on food and/or medicines? If yes, it's probably going to end up being a regressive tax. If not, what rate would it have to be to raise adequate funds for the nation? Is the rate going to be so high that low and mid class people buy less - meaning the economy contracts and there are fewer jobs?

I don't know about charity. I'm sure some tax geek more knowledgeable than I could figure something out.

We've been subsidizing the housing industry for several decades. Where did that get us? Time to phase that out. Time to phase out a large section of the banking industry that only exists because of this subsidy, use those resources more productively somewhere else. Same goes for the other distortions introduced by the tax system, like 401ks.

If you eliminate social security payments and instead top off the social security fund with money collected from the VAT, you make the VAT a lot less regressive.

Switching to a VAT does two things: The current system penalizes you for working. When you work, you pay tax. When you sit around on your butt playing video games, you pay nothing. So a VAT should actually increase labor force participation. It also eliminates all the crazy penalties for being rich that don't actually penalize any rich people, only people who earn money unexpectedly. It also eliminates any double taxation issues, so folks like Induveca wouldn't have to consider taking their businesses offshore to avoid it. Well, and thirdly, because we're the only idiots who DON'T have a VAT, we tax our exports. How dumb is THAT? Switching to a VAT will eliminate the idiotic tax on exports we currently have, making us more "competitive" (whatever that means).

It probably won't make the tax system any simpler -- there can and probably will be exemptions and so on. But it will make the tax system less costly to administrate, because everyone in the supply chain is checking the numbers of the people upstream from them. It's a self-administrating system.

[fugop]

At the most basic level, the problem with a flat tax is that it is wrong. When government taxes its citizens to contribute to their mutual welfare, there is a strong ethical case for:
1. asking those who benefit more from the system to contribute a higher proportion;
2. asking those who suffer less marginal pain from taxation to pay a higher proportion.

Those aren't efficiency arguments, they're ethical arguments. The country spent forty years fighting this out during the Progressive Era.

[Zonkerbl]

Doesn't work. People who earn more *don't* pay a higher proportion. Look at Romney - the system is very easily gamed, if you have time to prepare. The current system only collects a higher proportion from people who didn't expect to earn that much, like science fiction writers and lottery winners.

If you want the rich to pay at least the same share everyone else does, put in a VAT.

[Ruzious]

Indu: I'm not sure how to respond to you because your posts seem based on emotion and personal experience. Which is fine -- folks can cast their vote, throw their support...whatever...based on whatever criteria they want. I do not mean that as a criticism. I haven't had your experiences so, I can't really address much of what you're saying in a constructive way.

I do agree with your thoughts on the US party system. It's artificially polarizing and creates an illusion of choice. I don't think there's truly that much difference between Obama and Romney. Although it's kinda tough to tell with Romney because of his ever-changing positions.

I don't see Obama as a socialist or a radical. I'm skeptical that a modest tax increase is going to cause businesses to flee, manufacturers to eschew America, and lead to the death of the American economy. I think businesses will locate where it's advantageous to locate, and that equation will surely involve more than just looking at the tax code. Maybe it'll be more advantageous for YOU to conduct your business elsewhere, but I'm wary of generalizing from anyone's personal experience, including my own.

That was more run than emotion (same thing I guess). Interesting debate end of the day, but increasing the dividend tax by 100% is a huge blow in any accounting system for a profitable private business.

Partners have to double up on their estimated taxes, which is money coming directly out of the company's end of year profit.

There's a good example of trickle up, not trickle down.

Then pay more in salaries, since that will save you more tax dollars.

[dandridge 10]

Doesn't work. People who earn more *don't* pay a higher proportion. Look at Romney - the system is very easily gamed, if you have time to prepare. The current system only collects a higher proportion from people who didn't expect to earn that much, like science fiction writers and lottery winners.

If you want the rich to pay at least the same share everyone else does, put in a VAT.

I don't see how you can make these blanket statements, especially given how Obama defines "rich". Obama defines rich as any family making over $250,000 a year. I fall within that category. I can guarantee you that I pay a higher proportion in taxes and pay more than the majority of people in this nation, and there aren't any "games" I can play to avoid that.

The biggest problem that I have with Obama and many of his supporters is they seem to characterize the rich as billionaires who are scheming the system to pay less taxes that a person that makes $50,000 a year. In reality, these people are miniscule compared to the percentage of people making $250,000 + a year. People can argue all they want on whether people in this category should pay more in taxes, but don't tell me that we are not paying the same share as everyone else. The vast majority are paying way more.

[Zonkerbl]

If you're self-employed, you need to fire your tax preparer. If you're a salaried worker, you get paid $250,000+ in salary and not stock options? What, are your HR staff comprised entirely of morons?

No offense. Genuinely interested. Why are you not taking advantage of the many ways to game the system?

[fugop]

Doesn't work. People who earn more *don't* pay a higher proportion. Look at Romney - the system is very easily gamed, if you have time to prepare. The current system only collects a higher proportion from people who didn't expect to earn that much, like science fiction writers and lottery winners.

If you want the rich to pay at least the same share everyone else does, put in a VAT.

I'm aware of real tax rates, as opposed to nominal tax rates. It's not like there's a natural law obstacle to a progressive tax system -- it's the product of policy choices.

[dobrojim]

I appreciate the forthrightness of your statement. I think the issue I would take with
it would be that I would agree w/Obama that a family making over 250K a year is rich.

The number that is routinely tossed around is that that level of income would
place you in the top 2%. Even if that's wrong and you're only in the top say 5%,
isn't that high enough to be called rich? At what level does rich start?

Not trying to vilify here. I congratulate you on your success and have no reason
to think you don't earn it. The problem I see is with the relatively small dare I
say miniscule proportion of people who earn considerably more than you do and
through loopholes, accounting and the like pay at a hugely lower rate than you do.

[dandridge 10]

If you're self-employed, you need to fire your tax preparer. If you're a salaried worker, you get paid $250,000+ in salary and not stock options? What, are your HR staff comprised entirely of morons?

No offense. Genuinely interested. Why are you not taking advantage of the many ways to game the system?

I am an attorney and there are no stock options. If you want to tell me how I can pay less in tax than a person that makes $50,000 a year, I am all ears because my accountant certainly hasn't figured out a way.

[Ruzious]

If you're self-employed, you need to fire your tax preparer. If you're a salaried worker, you get paid $250,000+ in salary and not stock options? What, are your HR staff comprised entirely of morons?

If you're self-employed, you can take a lot more deductions than you can as an employee - and that reduces your self-employment tax and your income tax. It also gives you a lot more flexiblity in terms of retirment plan options and allows you to deduct medical insurance without the restrictions of itemized deductions.

[Zonkerbl]

Doesn't work. People who earn more *don't* pay a higher proportion. Look at Romney - the system is very easily gamed, if you have time to prepare. The current system only collects a higher proportion from people who didn't expect to earn that much, like science fiction writers and lottery winners.

If you want the rich to pay at least the same share everyone else does, put in a VAT.

I'm aware of real tax rates, as opposed to nominal tax rates. It's not like there's a natural law obstacle to a progressive tax system -- it's the product of policy choices.

There is a natural law obstacle to a progressive tax system. It's called representative democracy.

Any time you go into a situation trying to forcibly take money away from a rich person, you're likely to fail. You say "policy choice" likes it's some sort of accident. "Oh, if only it wasn't for this crazy irrational and unpredictable 'policy choice,' my forcible wealth distribution scheme would have worked." Policy choices don't happen in a vacuum. If you try to implement a policy that makes rich people worse off, the rich people will try to implement "policy choices" so that it doesn't work. That's how democracy works, and rich people are the best at it.

Don't waste your time playing a game you can't win -- you'll end up with the crazy system we have today. Throw the whole crazy thing out and replace it with a VAT.

[Zonkerbl]

If you're self-employed, you need to fire your tax preparer. If you're a salaried worker, you get paid $250,000+ in salary and not stock options? What, are your HR staff comprised entirely of morons?

No offense. Genuinely interested. Why are you not taking advantage of the many ways to game the system?

I am an attorney and there are no stock options. If you want to tell me how I can pay less in tax than a person that makes $50,000 a year, I am all ears because my accountant certainly hasn't figured out a way.

Not "less in tax than a person that makes $50,000/year." Be careful. We're talking about proportionality here. Romney paid more in taxes than 99% of everybody else in the economy and that's a fact. But he only paid 14% of his income.

An individual making $50,000 a year pays, what, 20% of their salary in taxes, if they take the standard deduction? What % do you pay? Not, what is your marginal tax rate, but what proportion of your salary do you pay in taxes?

[Edit: As a Federal Worker at the higher end of the pay scale, I went through a period of four or five years when my marginal tax rate was about 100% as the various tax deductions I would have qualified for were phased out as my salary went up. Child tax credit, interest on student loans, and one other thing I can't remember. So I'm a little bitter - I strongly suspect that people in my salary range, which is much, much less than $250,000, pay a higher proportion of their salary than aaaaaaaaanybody else. But you might be even worse off than I am!]

[popper]

Given our deficits and debt, taxes will eventually have to be raised on just about everyone.

I recently read that our income tax system is the most progressive in the world.

Romney pays the exact same tax rate on passive income as does a secretary or school teacher. Tax incentives for capital gains are a bipartisan policy that encourages risk taking.

[dobrojim]

I'm usually amazed at how small a %age I end up paying.

My income is reduced quite a bit by:

max TSP contribution, deduction for health insurance

I itemize deductions but am barely ahead of the std deduction by doing that
since I am nearing the end of my mortgage.

I have 2 kids under 18 at home (child tax credit)

with all that I bet my actual rate based on my gross pay is pretty small

[dobrojim]

That's how democracy works, and rich people are the best at it.

That's the problem with how we fund campaigns. Pols listen a lot more to people
who write checks for them. The reality being that they can then buy incredibly
sophisticated advertising that results in large numbers of people voting against
their own interests.

[dandridge 10]

I appreciate the forthrightness of your statement. I think the issue I would take with
it would be that I would agree w/Obama that a family making over 250K a year is rich.

The number that is routinely tossed around is that that level of income would
place you in the top 2%. Even if that's wrong and you're only in the top say 5%,
isn't that high enough to be called rich? At what level does rich start?

Not trying to vilify here. I congratulate you on your success and have no reason
to think you don't earn it. The problem I see is with the relatively small dare I
say miniscule proportion of people who earn considerably more than you do and
through loopholes, accounting and the like pay at a hugely lower rate than you do.

Dobrojim,

Although I don't agree with Obama's definition of rich, my beef wasn't necessarily with how Obama defines "rich." My beef is with blanket statements that say the "rich" are not paying the same (implying lower) rate than everyone else. Its malarkey because I am one example where Obama was define "rich" and I clearly am paying more that most people in this country. And, I am not even counting the Alternative Minimum Tax and the limitations on deductions than I have that most other people don't I don't know the statistics on this (and perhaps someone could shed some light), but I would venture to guess that the majority of people in the 250,000 + class do in fact pay a higher rate when taking all this in consideration.

[dandridge 10]

If you're self-employed, you need to fire your tax preparer. If you're a salaried worker, you get paid $250,000+ in salary and not stock options? What, are your HR staff comprised entirely of morons?

No offense. Genuinely interested. Why are you not taking advantage of the many ways to game the system?

I am an attorney and there are no stock options. If you want to tell me how I can pay less in tax than a person that makes $50,000 a year, I am all ears because my accountant certainly hasn't figured out a way.

Not "less in tax than a person that makes $50,000/year." Be careful. We're talking about proportionality here. Romney paid more in taxes than 99% of everybody else in the economy and that's a fact. But he only paid 14% of his income.

An individual making $50,000 a year pays, what, 20% of their salary in taxes, if they take the standard deduction? What % do you pay? Not, what is your marginal tax rate, but what proportion of your salary do you pay in taxes?

[Edit: As a Federal Worker at the higher end of the pay scale, I went through a period of four or five years when my marginal tax rate was about 100% as the various tax deductions I would have qualified for were phased out as my salary went up. Child tax credit, interest on student loans, and one other thing I can't remember. So I'm a little bitter - I strongly suspect that people in my salary range, which is much, much less than $250,000, pay a higher proportion of their salary than aaaaaaaaanybody else. But you might be even worse off than I am!]

I am paying 35% of my salary in taxes, and this does not count the AMT. I believe married couples filing jointly pay 15% if they make 50,000 a year (25% if single).

[dobrojim]

I would agree with you that you shouldn't be lumped in with a those
who make way more but pay a lower rate. I agree with Obama
that we need a return to higher levels of progressivity in the tax
code for the reasons fugop succinctly put a page or 2 ago.

The rates in effect during Clinton or Reagan would be a reasonable
place around which to negotiate. But we have one party who
won't talk about it at all spouting about 'job creators' when
the empirical evidence we have says that is malarkey.