Tax Reform Thread

[Drake Tungsten]

This blog post that I linked to in the Healthcare Reform Thread deserves to be linked to again here. Lots of interesting information on optimal tax policy.

The optimal size of government is a partisan issue. The optimal tax mix isn't.

[Ben Kenobi]

Ben, who has higher unemployment, Canada or US right now?

Historically it's been Canada. Every year except this one Canada has had far higher structural unemployment.

From what I can see, ours at the moment is at about 8.2 percent, compared to the US which is about a percentage point and a half higher.

We've had the GST since 1992, and every year except this one Canada has had higher unemployment.

VAT is a job killer. It raises the costs of goods and services all the way down the chain.

[Ben Kenobi]

A regressive tax is generally a tax that is applied uniformly.

So the percentages don't matter then. Rich people are paying more than poor people, so a flat tax is not regressive.

[giblets]

So the percentages don't matter then. Rich people are paying more than poor people, so a flat tax is not regressive.

If a tax is applied uniformly then the poor pay a higher percentage of their income. Regressive vs. flat vs. progressive is all about the percentages.

[Ben Kenobi]

But the tax, by definition, is not applied uniformly, because the rich pay more than poor people.

The only truly 'uniform' tax would have everyone pay the exact same amount.

[Drake Tungsten]

Someone please start a thread explaining the difference between progressive, flat and regressive taxes so Ben can take his retardation elsewhere.

[notyoueither]

Historically it's been Canada. Every year except this one Canada has had far higher structural unemployment.

From what I can see, ours at the moment is at about 8.2 percent, compared to the US which is about a percentage point and a half higher.

We've had the GST since 1992, and every year except this one Canada has had higher unemployment.

VAT is a job killer. It raises the costs of goods and services all the way down the chain.

It's pretty plain that you do not undertand what a VAT does.

http://en.wikipedia.org/wiki/VAT

[KrazyHorse]

Historically it's been Canada. Every year except this one Canada has had far higher structural unemployment.

From what I can see, ours at the moment is at about 8.2 percent, compared to the US which is about a percentage point and a half higher.

We've had the GST since 1992, and every year except this one Canada has had higher unemployment.

VAT is a job killer. It raises the costs of goods and services all the way down the chain.

The only difference between a flat tax and the VAT is in where it's collected and possibly the treatment of already-existent capital (the VAT expropriates those who already have large sums of money relative to the flat tax). The incentive effects are identical.

Jesus ****ing christ.

[Drake Tungsten]

There's a good article on the U.S. national debt in the Spring 2010 issue of National Affairs. Here's what it had to say on taxes...

Fifth, policymakers must understand that while some tax increases will almost certainly be required, not all taxes are created equal — and that which form the tax hikes take will make a big difference to our future prosperity.

Taxes on income, for example, are usually worse for the economy than taxes on consumption. That is why one finds a rising chorus of economists recommending the introduction of a value-added tax, rather than higher income taxes, if our nation decides it wants to support substantially higher government spending. High tax rates similarly tend to be worse for the economy than low rates — which is why economists usually favor reforms that eliminate special exemptions and deductions, thus broadening the tax base and allowing for lower rates. Finally, it is preferable to levy taxes on behaviors we want to discourage rather than on those that are necessary for economic growth. Where appropriate, taxes on pollution, for instance, should be preferred over taxes on working, saving, or investing.

This approach to taxes is derived from a broader — and crucial — imperative that policymakers should heed as they seek to improve our fiscal health: Promote growth, or at least minimize the harm to it. As lawmakers consider changes to spending and tax policies, they must always consider carefully the effects their proposals will have on economic expansion.

For instance, policymakers should not always assume that a larger government will necessarily translate into weaker economic performance. A few years ago, Peter Lindert — an economist at the University of California, Davis — looked across countries and across time in an effort to answer the question, "Is the welfare state a free lunch?" He found that countries with high levels of government spending did not perform any worse, economically speaking, than countries with low levels of government spending. The result was surprising, given the usual intuition that a larger government would levy higher taxes and engage in more income redistribution — both of which would undermine economic growth.

Lindert found that the reason for this apparent paradox is that countries with large welfare states try to minimize the extent to which government actions undermine the economy. Thus, high-budget nations tend to adopt more efficient tax systems — with flatter rates and greater reliance on consumption taxes — than do countries with lower budgets. High-budget countries also adopt more efficient benefits systems — taking care, for example, to minimize the degree to which subsidy programs discourage beneficiaries from working.

Of course, the United States should work to reduce the economic inefficiencies in our current policies regardless of whatever else we decide. But such efforts will be even more important if America chooses — either explicitly or, more likely, implicitly — to become a higher-budget country. Our existing tax system is notoriously inefficient and will not scale well to higher revenue demands. If policymakers decide they want to boost revenues, they will need to embrace a more efficient tax system — perhaps including value-added taxes — even if they are perceived as less progressive. Similarly, as spending programs expand, policymakers should focus on ways to reduce the anti-work incentives implicit in such programs. (The incentive for early retirement created by the structure of Social Security benefits would be a good place to start.) These kinds of reforms would make sense regardless of the direction of federal spending policy — so leaders across the political spectrum should be able to agree on many of them.

http://www.nationalaffairs.com/publications/detail/america-in-the-red

[KrazyHorse]

If a tax is applied uniformly then the poor pay a higher percentage of their income. Regressive vs. flat vs. progressive is all about the percentages.

They pay an equal percentage of their consumption. Savings are deferred consumption. Eventually the rich person or their descendants will pay the tax.

Currently, there is a huge tax disadvantage to saving relative to consumption. Income which is saved (outside a retirement account) is taxed at regular rates, and then returns on these savings are also taxed (at various rates, depending on the type of returns, yet another unnecessary distortion). Let M be a given individual's marginal tax rate on earned income. This means that an individual has to choose, at the margin, between consuming (1-M) now and consuming some value in the future whose NPV is LESS than (1-M) (by an amount equal to the NPV of the taxes he pays on the appreciation of his savings).

Any tax on capital gains or interest distorts at the margin of intertemporal choice.

[KrazyHorse]

What the **** do you think people ****ing save for, you twits? To roll around in giant stacks of money like Uncle ****ing Scrooge?

The only real difference between a consumption tax and a flat earned income tax is simply that existent wealth is taxed by the consumption tax (it's actually a free lunch as far as expropriating the rich goes!). Also, with a consumption tax, savings get taxed later, while with an earned income tax they get taxed now. However the NPV of the two tax bills is equal.

[Drake Tungsten]

What the **** do you think people ****ing save for, you twits? To roll around in giant stacks of money like Uncle ****ing Scrooge?

I would be pissed that you're stealing my material, but I did blatantly steal "****" from you...

You're the one who's deranged. Rich people aren't putting their savings into an Uncle Scrooge-like money bin; they're putting it into banks or investing it in corporations, which provides necessary capital and helps the economy grow, which makes everyone better off.

http://apolyton.net/forums/showthread.php?p=5765536#post5765536

[Hauldren Collider]

What the **** do you think people ****ing save for, you twits? To roll around in giant stacks of money like Uncle ****ing Scrooge?

QFT. I heard someone accuse corporations of doing this with their "massive profit margins". He couldn't seem to get his head around how corporate profits work.

[KrazyHorse]

Can't be bothered. How far back was that?

[Hauldren Collider]

No, this was in my history class at school. Even though it's a school for smart people that has an admissions test, there still manages to be some crushingly retarded dumb****s