Gingrich says he's considering presidential run

[Kidlicious]

ABS,

You're going to have to be specific about what you are arguing.

[Kidlicious]

......uhh, I am still making that argument. I am not wrong.

Taxes are a direct cost, as well as an opportunity cost. When I buy a box of brownies instead of a box of donuts, the opportunity cost is the donuts and the cost is the amount I spent on the brownies.

You realize that this is what he's saying, say the brownies cost a dollar, that they don't really cost a dollar. They cost a dollar plus the donuts, because he wants the donuts too.

Do you agree?

[Al B. Sure!]

The economic cost of taxes to the taxpayer is the value of the taxes in cash (accounting cost) and the value of the best alternative that the taxpayer could have spent that money on in the absence of taxes (opportunity cost). You should also factor in the value of the benefits derived from the government services financed by the taxes.

[Al B. Sure!]

Oops. Edited when I meant to post new reply!

here's what I had...

You realize that this is what he's saying, say the brownies cost a dollar, that they don't really cost a dollar. They cost a dollar plus the donuts, because he wants the donuts too.

Do you agree?

Yes. The accounting cost is the dollar. The opportunity cost is the value of the donuts (presumably a dollar). The economic cost is the accounting cost plus the opportunity cost so two dollars.

It does NOT matter whether you ever even had the two dollars!

[Kidlicious]

The economic cost of taxes to the taxpayer is the value of the taxes in cash (accounting cost) and the value of the best alternative that the taxpayer could have spent that money on in the absence of taxes (opportunity cost). You should also factor in the value of the benefits derived from the government services financed by the taxes.

No. Wrong! And this is why. You are essentially saying that the price of the brownies is the actual price tag plus the donuts. In the example of someone going to college someone is forgoing earnings. That's why you count the potential earnings.

This is why what you are now saying doesn't make sense. Let's say I got taxed two dollars, and I was going to buy and ice cream with that money. You are saying the cost of the taxation was actually two dollars and the ice cream. Are you serious?!

[Kidlicious]

Yes. The accounting cost is the dollar. The opportunity cost is the value of the donuts (presumably a dollar). The economic cost is the accounting cost plus the opportunity cost so two dollars.

It does NOT matter whether you ever even had the two dollars!

OMG! Break it down to simple math. Follow the money. The word 'cost' has a real meaning. It means you don't have something anymore or you forgo some earnings.

[Kidlicious]

The donuts don't actually cost the brownies because you never had the brownies. You could have had the brownies instead, so you can call the brownies an opportunity cost, but what you can not do is say, "THE DONUTS COST THE MONEY AND THE BROWNIES!"

[Al B. Sure!]

let's look again at what I said:

Yes. The accounting cost is the dollar. The opportunity cost is the value of the donuts (presumably a dollar). The economic cost is the accounting cost plus the opportunity cost so two dollars.

It does NOT matter whether you ever even had the two dollars!

There is no difference between the value/utility I receive from the donuts worth $1 dollar and the value/utility I receive from working for a few minutes and earning $1. The fact that the latter is cash isn't important.

The donuts don't actually cost the brownies because you never had the brownies. You could have had the brownies instead, so you can call the brownies an opportunity cost, but what you can not do is say, "THE DONUTS COST THE MONEY AND THE BROWNIES!"

What part of economic cost = accounting cost + opportunity cost do you not understand?

[Al B. Sure!]

The donuts don't actually cost the brownies because you never had the brownies. You could have had the brownies instead, so you can call the brownies an opportunity cost, but what you can not do is say, "THE DONUTS COST THE MONEY AND THE BROWNIES!"

Economic cost = accounting cost + opportunity cost

That is the freaking definition of economic cost. The economic cost of the donuts is the money AND the value of the brownies.

[giblets]

But the brownies don't cost what the baker charges you plus the donuts. You can either say that they cost what you are charged or you can say that they cost you the donuts (opportunity cost), because you were never going to have the money and the donuts so you would have lost something you never had.

But the government services don't cost the taxes you pay plus the privately run alternative to the government service. You can either say that they cost the taxes or you can say they cost you the privately run alternative (opportunity cost), because you were never going to keep the money and have the privately run alternative so you would have lost something you never had.

[giblets]

The donuts don't actually cost the brownies because you never had the brownies. You could have had the brownies instead, so you can call the brownies an opportunity cost, but what you can not do is say, "THE DONUTS COST THE MONEY AND THE BROWNIES!"

The government services don't actually cost the privately run services because you never had the privately run services. You could have had the privately run services instead, so you can call the privately run services an opportunity cost, but what you can not do is say, "THE GOVERNMENT SERVICES COST THE TAXES AND THE PRIVATELY RUN SERVICES!"

Well actually I'd say you can. But in that case taxes aren't part of the opportunity cost, so saying "government services not only require taxes, but also have an opportunity cost" is legitimate.

[Al B. Sure!]

Kidicious:

Also, don't forget the implications of a deadweight loss of taxation. That should also be factored into any calculus concerning the costs/benefits of taxation.

[Al B. Sure!]

Maybe to help everyone understand each other, here's my thoughts on the whole matter of taxation (my economics is a bit rusty so I may be making mistakes here but it's not rusty on something as basic as what economic cost and opportunity cost mean ):

The economic cost to a taxpayer of being taxed is the accounting cost (the tax itself) plus the opportunity cost (the value of the best alternative use of the money that was taxed). There should also be some factoring in of the value of the benefits received from the tax.

Now, taxes have a distortionary effect; that is, there is a corresponding deadweight loss associated with the tax. It occurs presumably because people and firms will change their behavior in order to reduce the amount of tax that they have to pay. The size of this deadweight loss varies.

As for what the taxes are spent on... the value of the spending (social services, defense, etc.) can be significant for the average taxpayer (there is a redistributive effect going on here; you and I as average relatively low earners obtain far more value from government spending than the cost of our taxes).

Also, government spending can in certain circumstances stimulate economic growth (Keynesian/fiscal multiplier [although this is generally mentioned with regards to deficit spending; don't remember the implications of taxation to the model]).

In the end, any examination of the appropriateness of a tax or its general effect on the economy has to take into account these highly-variable factors.

[SlowwHand]

It doesn't really matter. In the end we're all going to get screwed anyway.

[Al B. Sure!]

It doesn't really matter. In the end we're all going to get screwed anyway.

Did you intentionally paraphrase Keynes' "In the long run, we're all dead" to be witty or was it completely accidental?