My new plan for America, part 2, Tax reform



  • You will gain more on your investment if you put the money in a bank account with 1% interest than you will letting the Government handle it in the Social Security system.

    These poorer people have 10 years to save up until they are 65, and most people don’t stop working at 65.

    So the rich have more to loose, big deal.

    Success = More Money = More money to spend. Success does not mean I owe a larger percentage of my money to the Government.

    Bill Gates should be taxed what we all are taxed. If he makes 1 Billion a Year (just making the number up, easier on the math) and he pays 30% interest, he’s paying a hell of a lot more than any other citizen.

    Even if the business takes up that additional 7.5%, thats less money for the worker. 7.5% adds up.

    More money to the rich = More investment. More investment = companies do better. Companies do better = Everyone gets payed more.



  • @Wild2000:

    @Yanny:

    The Average American pays about 15% of their income to Social Security per year.

    Incorrect. The average American only pays 7.5%. Since most Americans are employees of a company, the employer picks up the other 7.5%.

    @Yanny:

    If the Average American works for 40 years, they put a lot of money into Social Security. However, the amount of money they get back is an incredible low number. Someone like 1/30th of what you payed.

    So, would you rather put away your own money or let the Government do it and waste 29/30 of the money?

    Social Security is a failing system. The longer it stays around, the harder it will be to eliminate.

    I agree something needs to be done to the current system. However, scrapping it is not the correct answer. Also, I am not sure if you only receive 1/30th back of what you pay in. Numbers seem off.

    @Yanny:

    Wild, explain to me why A) Social Security should stay how it is and B) Why the rich should pay a larger percentage of their money to the Government than everyone else.

    As I stated above, I think the system needs an overhaul. However, getting rid of it is not the answer.

    I already answered why the rich should pay a larger percentage. They have much more to lose. Who has more to lose? Bill Gates or you?

    Maybe a better way to think about what money is getting taxed is to think about discretionary income. If a flat tax percentage were used, who would have a larger percentage of discretionary income left? The rich would have a larger percentage and the poor would have a much smaller percentage. The flat tax magnifies this difference even more than the current system.

    Something to recognize about our current tax structure is that each level of money is taxed in groups. I am not sure what the exact brackets are off hand, but the first $20,000 of income for a lower income tax bracket individual is taxed at the SAME rate as an individual in a higher bracket. It is only the additional income that is taxed at a higher rate.

    Yanny, you have still not addressed what would happen to individuals who receive SS relating to disabilities, etc. You also have not addressed how the lower class individuals are going to be able to save for retirement since they are now being taxed at a higher rate. In addition, you have also not stated how new education on investing will be funded now that everyone has to know how to invest. To many, investing is scary, complex, and time consuming. Since the government will no longer paying out SS, it has to somehow prevent people from not saving. People not investing themselves is a huge issue.

    First of all, it plainfully obvious to see that a person can make a LOT more money if they used their social security money to invest. Social Security only gives a person a paltry 2% return on their money. Bah, what a waste.

    Next, you still haven’t convinced me why a person with more money should pay higher taxes. Look at it this way. If Bill Gates walked into McDonalds to buy a hamburger, would you expect him to pay an enormously higher price for that burger, becuase McDonalds has to be able to give away free burgers to those who can’t afford them? It’s completely unfair. Whereas, if everyone payed the same amount for that hamburger, then the prices are cheaper and those who still can’t afford them don’t get the burger. (Figureatively, of course. 😉)

    For the disabled, that’s a touchy subject. I don’t neccessarily agree with funding the disabled. Of course I’m not referring to the handicapped or the mentally challenged, but rather the rediculous people that are considered disabled. There are fat people that are legally disabled, and a host of other rediculous qualities. I don’t agree with spending my hard earned money to fund their over-eating habits.

    For the physically and mentally handicapped, however, I suggest something similar to the welfare system. Only A LOT MORE STRICT. I don’t want to see it abused the way today’s welfare system is battered.

    Lastly, I think it’s within everyone’s ability to invest their money. Even putting it in the bank is considered investment. Of course it won’t yield that much in return, but everyone should be able to wisely invest their money. If you’re scared of investing, then don’t do it. I could care less if you didn’t invest. 😉



  • @Yanny:

    Bill Gates should be taxed what we all are taxed. If he makes 1 Billion a Year (just making the number up, easier on the math) and he pays 30% interest, he’s paying a hell of a lot more than any other citizen.

    Even if the business takes up that additional 7.5%, thats less money for the worker. 7.5% adds up.

    More money to the rich = More investment. More investment = companies do better. Companies do better = Everyone gets payed more.

    Yanny, this is old school “trickle down” economics. Ronald Reagan tried this. It doesn’t work.
    More money to the rich does not trickle down to the poor. That is an economic fallacy. The rich do not always invest this money, but many times just purchase items made by few people with artificially inflated value.
    Also this investment might be better made by “the people”. Particularly if “the people” could spend it on products that they need. After all, that’s the more important “investment”, no? Otherwise the investment is artificial.
    And again, because “Bill Gates” makes more, he requires more gov’t input - more regulation, more protection, blah blah blah, and he’s also consumed more - more education, and likely made use of other gov’t programs etc.



  • @cystic:

    he’s also consumed more - more education, and likely made use of other gov’t programs etc.

    How do you figure? Why would you say that Bill Gates uses more gov’t programs than anyone else?



  • Starting with the McDonalds example given by someone else. Should Bill Gates pay more for his burger? The question you should be asking is should the guy who wants Ketchup on his fries pay more than the guy who doesn’t? Perhaps you might want to ask how much does it cost for health inspectors to examine restaurants? Who funds these inspectors? Should people who eat out more frequently than others fund a higher percentage than others? How is this cost going to be captured and appropriated?

    If people eat out more frequently, they pay each time for their use of the facilities.

    Back to Bill. Is it fair to say that he likely travels by air much more frequently than most? Does he therefore use publicly funded airports and terminals much more than others? Does he use these facilities much more frequently than the poor, who perhaps never fly anywhere? Can we establish a user fee for access to an airport? Do we really know whether or not the airport fees paid by a carrier accurately reflect usage rates by specific persons? Is this cost therefore truly recoverable from Bill? Since 100’s of millions of public money was spent on building the airport, is there not also a lost opportunity cost for those who don’t use the airport? Could not the money have been spent on something else of more value to them?

    He pays for use of the airport. So, he’s helping the economy by using the airport a lot. There are a lot of jobs at the airport.

    Does Bill live in a large house in a suburb? Are the infrastructure costs for mainline plumbing, electricity, access roads etc much higher there than in a densly populated urban area? Does the increase in property taxes that Bill pays adequately cover the differential? Is their not another lost opportunity cost for those who don’t live in the suburbs? Can they not make a claim that any public funds expended would be better off spent on infrastructure in an urban area? Enough of Bill for the moment. You get the idea that connecting usage and fair share is quite complex.

    Big house = more property tax.

    So, we decide to eliminate certain programs and certain taxes. What is the true net effect on the economy? Cystic Crypt made an excellent point on how the rich use their money. Much of it is invested outside of the country. How does that help the countries economy? More is invested in high value, high margin toys. How much of that really trickles down? Is $1M spent on a yacht at a 50% margin the same as $1M spent on food at the local grocery store at a 10% margin? All of the evidence published in economic circles would suggest not. It would appear that very little of the windfall of the rich in a tax reduction change actually makes it way into the base economic drivers of a country.

    As I said earlier, this plan would be implemented with the Nuclear Power thread. The Nuclear Power Thread is designed to boost the economy while saving the Government cash.

    What about the poor? Let’s assume for a moment that the solution would tradeoff Social Security for increased present day cashflow. What do we want them to do? Do we want them to save it for retirement? Perhaps we want to be like the Japanese and have a huge proportion of savings, but a stagnant economy? What would be the net effect on actual money supply and consequently, infaltion? Assume we can make the solution work in combination with tax cuts, so the net effect on the poor is zero and on the supply of money is zero, so inflation does not rise. Instead of investing in SS with a potential 2% return, we can now save however we wish, with potential higher returns. Of course, money and wealth are not actually created in a stock market, just redistributed. For every buyer, there is a seller. Now what % of the poor are educated enough to participate in this market on their own, with at least a reasonable chance of success? I would suggest few. Indeed, I would suggest that informed buyers generally have the advantage over the uninformed. Indeed, even a capital loss is of some value to a rich man, whereas for the poor, a loss is a loss. So perhaps the poor can buy the services of others to aid them. Have you not just redistributed a portion of the poor’s wealth to someone above them?

    Perhaps we actually want the poor to use their increased disposable income to consume now, have a better life now. Perhaps we believe that this consumption will actually be good for the economy in the short term. But what happens in the longer term? What happens when the poor consume their disposable income in the short term, perhaps aiding the economy, but then the economy tanks because of global forces well beyond the poor’s ability to influence? We would seem to have traded off short term increased consumption for decreased long term security. What are the long term ramifications of doing so? Perhaps the answer lies not in eliminating SS, but in restructuring it, so that a higher return is offered. Maybe SS should buy gov’t bonds, but then again, this would increase the money supply and create infationary pressures.

    Education is the key. Bonds are probably the smartest thing, but let the people handle their money. And we don’t get a 2% return on our money. We get a negative return.

    I am not suggesting that I have all the answers to these questions. I am suggesting that the questions are actually extremely complex and the solutions proposed above are far too superficial and rely upon a set of assumptions which history has demonstrated as at least partially false. One of the base fundamental problems with an income tax system, as opposed to a consumption tax system is that the link between usage of service/product and actual cost is very unclear. On the other hand, without income tax, a 100% consumption tax system would be extremely vulnerable in recession & stagnation.

    England has a strange tax system. No income tax, in fact very few taxes. However, there is a steep 17% sales tax.



  • With taxes, California has the worst of everything.



  • @Soon_U_Die:

    Starting with the McDonalds example given by someone else. Should Bill Gates pay more for his burger? The question you should be asking is should the guy who wants Ketchup on his fries pay more than the guy who doesn’t? Perhaps you might want to ask how much does it cost for health inspectors to examine restaurants? Who funds these inspectors? Should people who eat out more frequently than others fund a higher percentage than others? How is this cost going to be captured and appropriated?

    Back to Bill. Is it fair to say that he likely travels by air much more frequently than most? Does he therefore use publicly funded airports and terminals much more than others? Does he use these facilities much more frequently than the poor, who perhaps never fly anywhere? Can we establish a user fee for access to an airport? Do we really know whether or not the airport fees paid by a carrier accurately reflect usage rates by specific persons? Is this cost therefore truly recoverable from Bill? Since 100’s of millions of public money was spent on building the airport, is there not also a lost opportunity cost for those who don’t use the airport? Could not the money have been spent on something else of more value to them?

    Does Bill live in a large house in a suburb? Are the infrastructure costs for mainline plumbing, electricity, access roads etc much higher there than in a densly populated urban area? Does the increase in property taxes that Bill pays adequately cover the differential? Is their not another lost opportunity cost for those who don’t live in the suburbs? Can they not make a claim that any public funds expended would be better off spent on infrastructure in an urban area? Enough of Bill for the moment. You get the idea that connecting usage and fair share is quite complex.

    So, we decide to eliminate certain programs and certain taxes. What is the true net effect on the economy? Cystic Crypt made an excellent point on how the rich use their money. Much of it is invested outside of the country. How does that help the countries economy? More is invested in high value, high margin toys. How much of that really trickles down? Is $1M spent on a yacht at a 50% margin the same as $1M spent on food at the local grocery store at a 10% margin? All of the evidence published in economic circles would suggest not. It would appear that very little of the windfall of the rich in a tax reduction change actually makes it way into the base economic drivers of a country.

    What about the poor? Let’s assume for a moment that the solution would tradeoff Social Security for increased present day cashflow. What do we want them to do? Do we want them to save it for retirement? Perhaps we want to be like the Japanese and have a huge proportion of savings, but a stagnant economy? What would be the net effect on actual money supply and consequently, infaltion? Assume we can make the solution work in combination with tax cuts, so the net effect on the poor is zero and on the supply of money is zero, so inflation does not rise. Instead of investing in SS with a potential 2% return, we can now save however we wish, with potential higher returns. Of course, money and wealth are not actually created in a stock market, just redistributed. For every buyer, there is a seller. Now what % of the poor are educated enough to participate in this market on their own, with at least a reasonable chance of success? I would suggest few. Indeed, I would suggest that informed buyers generally have the advantage over the uninformed. Indeed, even a capital loss is of some value to a rich man, whereas for the poor, a loss is a loss. So perhaps the poor can buy the services of others to aid them. Have you not just redistributed a portion of the poor’s wealth to someone above them?

    Perhaps we actually want the poor to use their increased disposable income to consume now, have a better life now. Perhaps we believe that this consumption will actually be good for the economy in the short term. But what happens in the longer term? What happens when the poor consume their disposable income in the short term, perhaps aiding the economy, but then the economy tanks because of global forces well beyond the poor’s ability to influence? We would seem to have traded off short term increased consumption for decreased long term security. What are the long term ramifications of doing so? Perhaps the answer lies not in eliminating SS, but in restructuring it, so that a higher return is offered. Maybe SS should buy gov’t bonds, but then again, this would increase the money supply and create infationary pressures.

    I am not suggesting that I have all the answers to these questions. I am suggesting that the questions are actually extremely complex and the solutions proposed above are far too superficial and rely upon a set of assumptions which history has demonstrated as at least partially false. One of the base fundamental problems with an income tax system, as opposed to a consumption tax system is that the link between usage of service/product and actual cost is very unclear. On the other hand, without income tax, a 100% consumption tax system would be extremely vulnerable in recession & stagnation.

    This isn’t a very good reason for overtaxing the rich. First of all, there are many public services that I pay for, yet I don’t use. If you want to go to a “pay more as you use more” basis, then I don’t want to have to pay for public schools, social security, managed healthcare, light rail, public transit, car insurance, health insurance, or any other such services that I don’t use. Making an individual pay more just becuase he uses a public service more is rediculous. I’d like to see someone actually try to implement something like this. It’d be a disaster.



  • No, I’m simply saying that becuase the taxpayers all contribute, you shouldn’t be weighing one person more then another.

    I guess my biggest problem is the fact that some people don’t contribute AT ALL. We have MANY people in this country who simply don’t pay ANY taxes whatsoever, and that pisses me off. They use the system, they enjoy the system, yet they don’t contribute to the system. Seems pretty unfair to me…



  • General plans (like what Yanny is providing) and overviewing are meant as only to be used a set of guidelines for what has to be done. I’m sure we don’t want this discussion to turn into a game of “Campaign for North Africa” where ever logistical problem must be factored in. That requires a group of people (each specialist) and cannot possibly be covered in just one topic. However, that doesn’t mean we should give up and just complain, instead of giving an alternative that can used to help enact similar changes in the government. Remember, to risk little is to gain little. You start high and work yourself down.



  • I agree with SUD’s well thought-out and challenging posts (which is self-serving in a way, in that he supports my position to an extent 🙂 )

    Go back to your “intro to economics” classes with regards to the “less taxes vs. more cash injection”. You may be surprised that one drives the economy far better than the other. Of course when it comes to inflation, ironically a way to control that might actually be reducing spending (and therefore reducing taxes - pulling money out of circulation in this way).
    I don’t purport to be an expert on this, particularly with respect to the American taxation system - i have enough trouble with the Canadian one, and i understand it better than many of my family and friends :).



  • Well, in case anyone was wondering what the problem with our current Social Security program is, here is something interesting:

    Right now, American taxpayers face a nearly $20 trillion unfunded Social Security liability. Although today we have a large Social Security surplus, when baby booms start retiring, the government is going to start paying out more benefits than it receives in payroll taxes. Around 2020, the Social Security deficit alone will be around $100 billion, and it will approach $300 billion a year by 2037.

    We can’t continue on the path we’re on. Although short-sighted people might think it’s wonderful that we’re providing for our old-people, longterm views dictate that we’re making a mistake.



  • A few points.

    First, Yanny, you sound like a capitalist. I thought you were a lefty. Maybe after getting screwed by taxes reality sunk in.

    Second, SUD, Bill Gates does cost the government dozens of times of what a poor person does. However in taxes, even if you did it by flat per4centage, he would be putting in hundreds to thousands of times as many taxes.

    Third, Crypt, if you put Social Security money in an account, like an IRA, you would make much more money. The governement makes like 1.5% on your Social Security money.

    Fourth, Crypt, the Candian economy is more like what you want and less like what Yanny wants. And the Current U.S. system is more like what Yanny wants than what you want. Which economy is doing better. Which country DEPENDS upon the other countrie’s economy.



  • @yourbuttocks:

    Third, Crypt, if you put Social Security money in an account, like an IRA, you would make much more money. The governement makes like 1.5% on your Social Security money.

    Fourth, Crypt, the Candian economy is more like what you want and less like what Yanny wants. And the Current U.S. system is more like what Yanny wants than what you want. Which economy is doing better. Which country DEPENDS upon the other countrie’s economy.

    Yeah, i don’t know anything about the US social security thing.
    Also i think that Canadians are overtaxed. It seems that overall the structure is similar (as you move up, your income increase is taxed at a higher level - not your overall income blah blah blah), but our system is just a little too crazy. I do agree with Yanny in that i’m sure both countries need an overhaul of their current systems (stupid Borden - income tax was only supposed to be around until after the war).
    ahhh well. It’s hard being a fiscal conservative with a social conscience . . . or is that fiscal liberal with a conservative conscience?
    UGGGG



  • I’m not the person to work out the details. However, I am a US citizen, and I am trying to get laws changed. My general plan (and the Nuclear Energy thread) are ment to be a general overview for experts to build on.

    Bill Gates may use the facilities more, but he pays his taxes like us all. And he pays the carrier who pays the airport for use of it’s utilities. He pays the hotdog guy who pays the airport. The carrier and the hotdog guy also pay taxes on the money that Bill Gates contributed.



  • @Soon_U_Die:

    YouButtocks: no doubt that even under a flat tax scheme, the wealthiest 5% would pay 100s or even 1000s the times of tax as the poorest 5%. Unfortunately, what we don’t know is whether that is enough or fair. Perhaps they should pay 1000s to 10,000s of times as much? Without a fully allocated cost structure, one cannot say for sure. I have given very minor examples that people can relate to on an everyday basis, which doesn’t seem sufficient to make my point for some of our readers. So I will give you just one big one. How should the cost of Defence & Security be allocated? One way to look at this would be to assume every person is assigned the same cost on a per person basis. But another way would be to assume that Defence & Security is actually about protecting wealth, in which case, you might allocate on the basis of a persons total share of the nations total wealth. What do you think the implication would be to the top 5% if you suddenly allocated the total Defence & Security budgets on that basis? Perhaps, when you start looking at it this way, 100s to 1000s of times is not enough. Just food for thought. The point is that rather generic statements about these things is insufficient to actually make prudent decisions. Personally, I’d rather love for all of us to pay less tax; meaning I’d rather discuss what programs should be cut. Most Tax Reform discussion is not really about cutting taxes, it is really about redistributing the tax base. There is definitely some potential merit in doing so, as certain taxes are more efficient at things than other taxes. Here is a cut and paste of a simple point or two which illustrates what we actually don’t know 🙂

    Further to this, not just Defence, but also consider:
    Education - Bill and his employees are enjoying the benefits of education to a considerable degree. One might say that they used as much public education as the poor, however Bill is profitting immensely from his and his employees’ education - more than most.
    Foreign Affairs - the wealthy enjoy the benefits of money spent in this department considerably more than most. For example trade is HUGELY dependent on a gov’ts relationships with other countries built on wise use of tax dollars. Furthermore the wealthy travel more, etc.
    Infrastructure - roads and other public structures and utilities (not the pay-per-use ones as much) are likely to be used more by the wealthy (transport etc.).
    Legal - the gov’t spends tons o’ cash in regulating companies and lawsuits designed to protect the American people from the hubris of the wealthy.
    and i’m sure that someone of a more meticulous mind and idea of the way the American gov’t system is run could figure more out.

    Speaking of which - SUD - what is your background? You smell like an accountant 🙂



  • Two things about the Candian economy.

    1. Dolar is worth less than the U.S. one

    2. Sells 90 percent of it’s exports to the U.S.

    The U.S. is so strong we prop up other economies by buying and buying and buying with a tiny amount of selling



  • exactly
    :lol:


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