Blow Up the Tax Code and Start Over

[Guest longinvestor]

I read up on the thread and I think it got a bit sidetracked. It started up on how the tax code should be reformed and it ended up in a discussion on how wealthier people are persecuted by the inheritance tax.

 

The way I see public taxation is that first society has a discussion on what services they want the government to provide: emergency services, public infrastructure, military, education, healthcare, etc. Then you sum up these services and they cost X and you have to collect more or less X in taxes. Then the decision comes how to divvy up the X amongst the people.

 

One thing to keep in mind is that the government is elected by all people and (ideally) its job is to look after the wellbeing of all people. Its job is not to protect the wealth of a select few. Throw in a couple of extra things like in most developed societies you have certain social norms and values - such as we don't let people die on the streets because they are poor and what you get is progressive taxation.

 

I personally agree a lot with progressive taxation despite the fact that I'm the top tax rate. Putting aside my personal political views I also like it because I think it makes good economic sense. I'll get to that in a bit.

 

I also saw there's quite a bit of preference for flat taxes of VATs. Those are highly regressive. The VAT is particularly bad because it's not only regressive but it also discourages consumption. So lower consumption => lower production -> lower sales, lower profits, unemployment, not good.

 

So how is a progressive tax system good for the economy or wealth. Well lets take me. I have everything I need. I buy certain things and my income is higher than my expenses by a significant margin. If you give me $100 I will not put it in the economy. I'll just save it. I don't even get gifts because there's nothing that I need. Now if you take someone that's poor and you give him or her $100 they go and spend it. That works it's way through the economy with a multiplier attached. So you get lower unemployment (which leads to lower govt expense and more revenue btw). However what you get is higher sales and profits for companies which leads to higher stock prices and higher wealth for me. The fact that it leads to more equal societies with less poverty and less crime is a nice bonus too.

 

However the reason the US Tax code should be blown up is that it's been so contorted by special interests that the statutory tax rates don't mean anything anymore. But I think it needs to go deeper than that to a societal change. Because if you start with a brand new code the powers that be will contort it back in no time. My personal opinion is that the US citizens need to become less partisan. Too many people identify themselves as republican or democrat and stick with the heard through thick and thin. I head from conservatives a lot of talk about social Darwinism. Why shouldn't that apply to politicians. How can you expect congressmen to behave properly if they do not fear for their positions. If one of them doesn't behave, break with the heard and vote for the other guy. I have a feeling that will improve things a lot.

 

Sorry for the essay

 

Nice, lucid post! Especially the point about how contorted the system really is, thereby making the statutory rates meaningless. Also like that you share what taxation means to your personal situation.

 

[rkbabang]

So how is a progressive tax system good for the economy or wealth. Well lets take me. I have everything I need. I buy certain things and my income is higher than my expenses by a significant margin. If you give me $100 I will not put it in the economy. I'll just save it. I don't even get gifts because there's nothing that I need.

 

Is it really necessary to explain to people on an investing board how savings contributes to available capital in a capitalist economy?  Unless you stuff it into your mattress, your $100 in savings can have a multiplier effect that benefits the world far more than the poor person's $100 spent on groceries.  Like most socialists you suffer from shallow 1st order thinking.

 

[rb]

I suppose a hippie "commune" is communism.  You all supposedly live equally and share everything.  In theory (or myth).

 

Relative communism is a spectrum between where you keep all of your assets & earnings, and you keep X% (and pay the rest in taxes to be shared with the rest of the inhabitants).

 

So a state like California is relatively more communistic than a state where the taxes are less.

 

Just thought I'd point out that the more taxes you pay, the more it looks like communism.

 

Communism is not a continuum but a single state where all of the productive assets in the economy are publicly owned.

 

What you're thinking of are social democracies. You know those awful places like France, Germany, and Sweden that have longer life expectancy, higher quality of life, and higher worker productivity than the US.

[rb]

So how is a progressive tax system good for the economy or wealth. Well lets take me. I have everything I need. I buy certain things and my income is higher than my expenses by a significant margin. If you give me $100 I will not put it in the economy. I'll just save it. I don't even get gifts because there's nothing that I need.

 

Is it really necessary to explain to people on an investing board how savings contributes to available capital in a capitalist economy?  Unless you stuff it into your mattress, your $100 in savings can have a multiplier effect that benefits the world far more than the poor person's $100 spent on groceries.  Like most socialists you suffer from shallow 1st order thinking.

 

Well I identify myself as a right wing conservative but that doesn't mean I can't think on my own. Other people can call me what they want I guess.

 

It does seem that I have to explain how savings works in an economy since some people do not understand. See when you have regressive taxation that leads to inequality which crimps demand. When you have a deficiency of demand then nobody needs your extra $100 in savings because they don't need the extra capital. See current interest rates.

[wachtwoord]

Current interest rates are due to central banks. In the current climate they'd easily be above 10% in a free market.

[rb]

Current interest rates are due to central banks. In the current climate they'd easily be above 10% in a free market.

So if the interest rates are kept artificially low by the central banks where is overheating economy and inflation that would occur in such a scenario?

[wachtwoord]

Oh there has been very high inflation for years. I think the Fed tripled the money supply in between 2012 and 2014? You can look up the exact numbers. Yes consumer prices haven't risen yet.

[rb]

Well inflation is measured by the change in prices not other metrics. Btw, between beginning on 2012 and present money supply in US increased by about 20%. I thought we were talking based on facts.

[wachtwoord]

Well inflation is measured by the change in prices not other metrics. Btw, between beginning on 2012 and present money supply in US increased by about 20%. I thought we were talking based on facts.

 

No it's not. Inglation is increase in the money supply. Change is prices is a poor ptoxy for that at best (and very manipulatable).

 

Oh and to be clear I'm talking M3/M4 here, not M0.

[rb]

Well inflation is measured by the change in prices not other metrics. Btw, between beginning on 2012 and present money supply in US increased by about 20%. I thought we were talking based on facts.

 

No it's not. Inglation is increase in the money supply. Change is prices is a poor ptoxy for that at best (and very manipulatable).

 

Oh and to be clear I'm talking M3/M4 here, not M0.

Ugh! Nevermind  ::)

[Liberty]

Constant hyperbole does no one any good, and if things start to get really bad, nobody will listen to those who have been crying wolf about police states, communism, fascism, totalitarism, etc, for years.

 

It's fine to say that things are bad/sub-optimal in ways X,Y, and Z, and that they could be improved through A,B, and C, without constantly evoking Stalin, Mao, and Hitler.

 

If I had a time machine and gave these people the choice to live where they live now or to be transported to being an average citizen in one of these regimes they constantly reference as being like today's, I'm pretty sure that they'd stay right here.

 

 

 

I think if you were one of the millions in jail in the US today you would think that it is already pretty bad.  If you were one of the thousands killed by police your loved ones would think it was already pretty bad. 

 

Just because it was much worse in other places and times doesn't mean that it isn't bad and getting worse here and now.  We live in interesting times, the private sector is doing amazing and wonderful things that are making all of our lives better by the day, but at the same time the government is gearing up for an all out war (both overseas and at home).  The police are killing thousands every year, hundreds every month, often getting away with murder even though the video is on youtube.  Business is operating under the weight of crippling regulations & licensing schemes in an almost outright crony-capitalist system.  Taxes, well this thread has gone over taxation already.  Imagine what would be possible if those weights were removed.

 

I never mentioned Hitler btw, I had more of the Mussolini/Italian system in mind when I said "fascist" not trying to imply the bigotry/antisemitism images that the words "Hitler" or "Nazi" seem to bring to mind.

 

The US has the most sophisticated spying system the world has ever seen, dictators and fascists of previous generations could never even dream of having the capabilities of the current CIA/NSA/FBI/etc. 

 

The US military is the best equipped in the world. As are the US police forces (federal, state, and local).

 

When it does get "really bad" it may happen quickly.  IMHO the only thing holding the whole leviathan back is the knowledge that there are more than 88 privately owned firearms for every 100 people in the United States.  When it does get "really bad", as you say, it will be really messy on all sides, which is the one reason it may never get to that point at all. It is more likely to get a little worse, but never cross the threshold where people rebel.  It may never get "really bad", but that doesn't mean it is good.

 

I do think the war on drug is a colossal mistake and the incarceration rate is ridiculous. But words mean something, and the US isn't communistic or a police state. In a police or fascist state, we probably wouldn't be having this discussion.

[RichardGibbons]

I thought we were talking based on facts.

 

Ah, yes, that's where you went wrong.... Leave your silly and irrelevant facts at home.  This is an ideological discussion. When the data doesn't support us, we'll make up new data. :)

[ERICOPOLY]

I suppose a hippie "commune" is communism.  You all supposedly live equally and share everything.  In theory (or myth).

 

Relative communism is a spectrum between where you keep all of your assets & earnings, and you keep X% (and pay the rest in taxes to be shared with the rest of the inhabitants).

 

So a state like California is relatively more communistic than a state where the taxes are less.

 

Just thought I'd point out that the more taxes you pay, the more it looks like communism.

 

Communism is not a continuum but a single state where all of the productive assets in the economy are publicly owned.

 

What you're thinking of are social democracies. You know those awful places like France, Germany, and Sweden that have longer life expectancy, higher quality of life, and higher worker productivity than the US.

 

I didn't say "absolute" communism, I said "relative" coomunism.  A social democracy is on the relative spectrum.

 

Our real property ownership works like a lease -- stop paying your property tax and get evicted.  It's not true ownership if you can't hang on to property that was bought and paid for.  It's a form of relative communism.  You have to pay a continual fee in order to occupy it, which is a lot like leasing something you already "own" from the community -- hence the reference to "commune" ism.

 

Relative, not absolute.  It's a spectrum.

[meiroy]

I suppose a hippie "commune" is communism.  You all supposedly live equally and share everything.  In theory (or myth).

 

Relative communism is a spectrum between where you keep all of your assets & earnings, and you keep X% (and pay the rest in taxes to be shared with the rest of the inhabitants).

 

So a state like California is relatively more communistic than a state where the taxes are less.

 

Just thought I'd point out that the more taxes you pay, the more it looks like communism.

 

Communism is not a continuum but a single state where all of the productive assets in the economy are publicly owned.

 

What you're thinking of are social democracies. You know those awful places like France, Germany, and Sweden that have longer life expectancy, higher quality of life, and higher worker productivity than the US.

 

I didn't say "absolute" communism, I said "relative" coomunism.  A social democracy is on the relative spectrum.

 

Our real property ownership works like a lease -- stop paying your property tax and get evicted.  It's not true ownership if you can't hang on to property that was bought and paid for.  It's a form of relative communism.  You have to pay a continual fee in order to occupy it, which is a lot like leasing something you already "own" from the community -- hence the reference to "commune" ism.

 

Relative, not absolute.  It's a spectrum.

 

Thing is, social democracy  is something that actually exists and with relative success while "communism" is a fictitious idea, a made-up name for something that has never existed other than perhaps a fantasy world in a book. Not even in Russia where it was Leninism or whatever, and for sure not in China, at any point. Better not use a word just for its negative connotation, it's very biased. Of course I am not saying by this that social democracy is a silver bullet or anything. It's not.

 

If one is not willing to accept liabilities why should they enjoy assets acquired and built through the liabilities (including disease and death) of others?

 

 

[ERICOPOLY]

The root word of communism is "common".

 

Fruits of labor and production are enjoyed "in common".

Assets are enjoyed "in common".

 

Now, if I go out and work in California and they take 50% of income as taxes, then I am getting a relatively higher share of my income per capita than everyone else (they divide the other 50% equally amongst themselves).  But that is relative communism. 

 

Under absolute communism I would get an equal pro-rata share as everyone else.

 

It's a sliding scale that depends on how much of my income can be kept to myself.  And how much of my assets they get to take back to the community every year (property taxes).

 

[rb]

The root word of communism is "common".

 

Fruits of labor and production are enjoyed "in common".

Assets are enjoyed "in common".

 

Now, if I go out and work in California and they take 50% of income as taxes, then I am getting a relatively higher share of my income per capita than everyone else (they divide the other 50% equally amongst themselves).  But that is relative communism. 

 

Under absolute communism I would get an equal pro-rata share as everyone else.

 

It's a sliding scale that depends on how much of my income can be kept to myself.  And how much of my assets they get to take back to the community every year (property taxes).

You are splitting hairs here in so many ways, I don't even know where to start. But in devotion to this fine board I'm going to give it one last shot. Not that I have any great expectations about it.

 

First of all, as other people here have mentioned, you haven't the faintest idea of what communism is or was. Just because you want to make your own definitions of it or pull some root words about it doesn't make it true.

 

There is no communist continuum. It was an absolute thing. All the productive assets were owned by the public. There was no place that was more "communistic" than another. They were either communist or they were not. Nothing in between.

 

Another thing you get wrong is that in a "communistic" society the taxes collected or the profits of capital were not divided equally by any measure. Your salary depended on the job you did and how good you were at it. You would not get a pro rata share just like everyone else. A teacher made significantly more than a shop floor labourer, etc. There were also very strong personal property laws under communism. But just for personal use. So you could own your house and you had probably better protections for that than even in the US. But you could not own three houses. There were also savings accounts on which you could get interest - which very "uncommunistically" was tax free. There was also no inheritance tax and you could leave as inheritance as much as you wanted.  :o

 

The idealism behind the whole system was to eliminate the capital owning class basically monopolistic companies that subjugated workers through asymmetrical powers of negotiation. In essence implementing something along the lines of EMT or perfect competition. You cannot earn excess return on capital.

 

Now nobody can tell exactly why communism didn't work, but there are some leading theories. One is that communism was designed for an industrialized society (namely England and Germany) but was implemented in mainly agrarian societies: Russia, China, and Cuba. To the other places it was mostly exported. Another one is that by eliminating all the forces of the market it leads to bad capital allocation hurting the economies through the supply side. Another one, and this is the really nasty one, is that communism lends itself to dictatorships whom want to stay in power perpetually and have committed horrendous atrocities towards that end. My feeling is that the failure of the system is really a mixture of those three.

 

You will notice that when I speak about these things I actually provide facts, not just pull a root word out of a dictionary to justify I point of view. When you compare California to communism you denigrate everyone who has suffered under the atrocities committed by those regimes. If you want to have a constructive conversation about these things you could go through the details of history and form a more informed opinion beyond the dictionary.

 

Now over time it was determined that unbridled capitalism doesn't work (that's you have the anti-trust act) and that communism doesn't work. The world has come up with another form called the social democracy (that is a spectrum) which is a combination between unbridled capitalism and communism delivered through progressive taxation. That is the most successful social and economic system we have developed to date and all of the developed economies are social democracies, including the US though they lately are at the lower end of the spectrum.

 

Also, as a P.S. throwing in California and their taxes without much behind it is not much to say about anything. We could compare California and Kansas which are at opposite ends. Yes California has higher taxes and Kansas believes in basically no taxes, or wish they had them or whatever. One cannot really move from California to Kansas because one don't like California's tax rate because one basically cannot find the job one had in California in Kansas. And for some weird reason the places where one can practice one's California job have progressive taxation systems with high top tax rates. Hmm...

 

Just food for though

[ERICOPOLY]

You are taking an implementation of communism and saying that is what it is.

 

Communism isn't China and it isn't Soviet Union, but elements of what they did are shades of communism.

 

It's like arguing that there isn't relative capitalism.  Of course there is.

 

There really are no absolutes in life as we know it.  You live somewhere in between keeping everything for yourself and sharing everything with others.

 

It's relative, it's a spectrum.

 

0% tax rate is less communist than 99.99%.  That makes California relatively more communist.

 

Why do you think communism is a negative term?  Too much "Red Dawn"?  Forget Emilio Estevez for now and ask what's wrong about sharing and why "social democrat" is more acceptable?

[rb]

You are taking an implementation of communism and saying that is what it is.

 

Communism isn't China and it isn't Soviet Union, but elements of what they did are shades of communism.

 

It's like arguing that there isn't relative capitalism.  Of course there is.

 

There really are no absolutes in life.

So out of all of that all you got is that your ideas are still correct and nothing else matters. No matter what actually happened. No matter what actually the people that designed these systems actually intended and how they intended for them to work. And you have no other ideas about how to improve our current societies besides that you should pay lower taxes. I rest my case.

[ERICOPOLY]

You sound angry.  You should read my comments again in the morning.  I feel like perhaps you have emotional ties to the usage of the word coomunism based on what you've experienced in life from how the word has been reserved for given implementations.

 

But those states that we've mislabeled as absolute communists really aren't pure communists.  They have non-communist tendencies.

 

Making things even across society is a communist ideal, and progressive taxation is on that spectrum.  It's not a bad thing to acknowledge it as on the spectrum.  It's just a realization that sharing ever greater amounts of your income in common is a progression towards sharing all of it.  And don't you feel that sharing all of it is communism?  If not, then what word do you have for total communal sharing?

[ERICOPOLY]

Ironically, social democrats who believe in making decisions "in common"  (aka: voting) are in a sense relatively more communist than Soviets who believed in centralized decision making (no voting, no sharing of decision making).

 

Think outside the box about what communism means.  Everybody sharing.  Communal living.  "Commune"ism.  Did the Soviets really share?  Were they communist?

[meiroy]

You are taking an implementation of communism and saying that is what it is.

 

Communism isn't China and it isn't Soviet Union, but elements of what they did are shades of communism.

 

It's like arguing that there isn't relative capitalism.  Of course there is.

 

There really are no absolutes in life as we know it.  You live somewhere in between keeping everything for yourself and sharing everything with others.

 

It's relative, it's a spectrum.

 

0% tax rate is less communist than 99.99%.  That makes California relatively more communist.

 

Why do you think communism is a negative term?  Too much "Red Dawn"?  Forget Emilio Estevez for now and ask what's wrong about sharing and why "social democrat" is more acceptable?

 

 

 

Dude. Seriously. What's up? Tell us what's wrong. Don't keep it in. :)

 

Communism is a unique concept in the sense that ALL is commonly shared. As in 100%. 

 

Saying that governance system X is 76% communism makes as much sense as saying someone is 76% pregnant.

 

Of course with the natural language you can say whatever you want as long as it is grammatically correct but than it is just political talk. Why not compare it to 100% free markets? Bias.

 

 

 

 

 

 

 

 

[ERICOPOLY]

You are taking an implementation of communism and saying that is what it is.

 

Communism isn't China and it isn't Soviet Union, but elements of what they did are shades of communism.

 

It's like arguing that there isn't relative capitalism.  Of course there is.

 

There really are no absolutes in life as we know it.  You live somewhere in between keeping everything for yourself and sharing everything with others.

 

It's relative, it's a spectrum.

 

0% tax rate is less communist than 99.99%.  That makes California relatively more communist.

 

Why do you think communism is a negative term?  Too much "Red Dawn"?  Forget Emilio Estevez for now and ask what's wrong about sharing and why "social democrat" is more acceptable?

 

 

 

Dude. Seriously. What's up? Tell us what's wrong. Don't keep it in. :)

 

Communism is a unique concept in the sense that ALL is commonly shared. As in 100%. 

 

Saying that governance system X is 76% communism makes as much sense as saying someone is 76% pregnant.

 

Of course with the natural language you can say whatever you want as long as it is grammatically correct but than it is just political talk. Why not compare it to 100% free markets? Bias.

 

Point me to where it is defined as 100% -- I can do it for you...  it's at the end of the spectrum.

 

Is capitalism 100%?  Yes... at the other end of the spectrum.

 

In between?  Lies the spectrum.

 

That would be a two dimensional spectrum where we're only talking about capital and not political decision making issues (the democracy thing vs centralized decision making without voting).

 

It's like you are saying there are only rainy days and sunny days.  And thus there is only "bias" if you believe there are also exist cloudy days that don't rain and that also don't have sunshine... correct?

 

Thinking in absolutes is lack of bias?  I don't think so.

 

Pshaw...  I can't believe I have to point out that there are grey areas in between the absolutes.  You know better than that.

 

[ERICOPOLY]

Why is "pure capitalism" an acceptable thing to say...

 

I've seen several times on this board people refer to comments like "in pure capitalism"...  blah blah blah...

 

That's obviously a reference to the idea that capitalism lies on a spectrum from very pure to hardly exists.

 

Yet you guys all believe that communism is only 100% or bust?  I'm not getting the disconnect here.  Explain.  It's clearly not 100% or bust.  It's also a spectrum.

 

This is weird twilight zone stuff -- you really think it's a 100% thing?

 

Is somebody a 100% Democrat?  Is somebody a 100% Republican?  Have you ever met somebody like me who takes some from one party, and some from another, and yet takes other things from other parties and forms a conglomeration of viewpoints?  Take the best of each one and yet identify with none of them 100%?  Well, you've just met your first -- me.

 

 

I think you guys are hung up on the word "communist" because you grew up watching Red Dawn and listening to Ronal Reagan.

 

Does it read better if you replace every reference to "relatively more communism" with "relatively less capitalism"?  Does that eliminate the "bias" for you?  Ironically, who is showing bias here??

[meiroy]

You are taking an implementation of communism and saying that is what it is.

 

Communism isn't China and it isn't Soviet Union, but elements of what they did are shades of communism.

 

It's like arguing that there isn't relative capitalism.  Of course there is.

 

There really are no absolutes in life as we know it.  You live somewhere in between keeping everything for yourself and sharing everything with others.

 

It's relative, it's a spectrum.

 

0% tax rate is less communist than 99.99%.  That makes California relatively more communist.

 

Why do you think communism is a negative term?  Too much "Red Dawn"?  Forget Emilio Estevez for now and ask what's wrong about sharing and why "social democrat" is more acceptable?

 

 

 

Dude. Seriously. What's up? Tell us what's wrong. Don't keep it in. :)

 

Communism is a unique concept in the sense that ALL is commonly shared. As in 100%. 

 

Saying that governance system X is 76% communism makes as much sense as saying someone is 76% pregnant.

 

Of course with the natural language you can say whatever you want as long as it is grammatically correct but than it is just political talk. Why not compare it to 100% free markets? Bias.

 

Point me to where it is defined as 100% -- I can do it for you...  it's at the end of the spectrum.

 

Is capitalism 100%?  Yes... at the other end of the spectrum.

 

In between?  Lies the spectrum.

 

There are only rainy days and sunny days.  There is only "bias" if you believe there are cloudy days that don't rain and that also don't have sunshine... correct?

 

Thinking in absolutes is lack of bias?  I don't think so.

 

Pshaw...  I can't believe I have to point out that there are grey areas in between the absolutes.  You know better than that.

 

 

No, no, no I think it would be easier for you not to call it "capitalism", on the other side of the "spectrum", but rather "0% communism" or "not even a bit communist" so the spectrum would be between "not even a bit communist" to "totally communist" and than all the arguments would be simplified to completely revolve around the communism concept without involving any type of bias.

 

I heard that Uber is starting UberShowerCommiShare in California in order to conserve water, so people can schedule shower time so they could shower together in groups of at least 5. That must be it.

 

 

[meiroy]

Why is "pure capitalism" an acceptable thing to say...

 

I've seen several times on this board people refer to comments like "in pure capitalism"...  blah blah blah...

 

That's obviously a reference to the idea that capitalism lies on a spectrum from very pure to hardly exists.

 

Yet you guys all believe that communism is only 100% or bust?  I'm not getting the disconnect here.  Explain.  It's clearly not 100% or bust.  It's also a spectrum.

 

This is weird twilight zone stuff -- you really think it's a 100% thing?

 

Is somebody a 100% Democrat?  Is somebody a 100% Republican?  Have you ever met somebody like me who takes some from one party, and some from another, and yet takes other things from other parties and forms a conglomeration of viewpoints?  Take the best of each one and yet identify with none of them 100%?  Well, you've just met your first -- me.

 

 

I think you guys are hung up on the word "communist" because you grew up watching Red Dawn and listening to Ronal Reagan.

 

Does it read better if you replace every reference to "relatively more communism" with "relatively less capitalism"?  Does that eliminate the "bias" for you?  Ironically, who is showing bias here??

 

I indeed think that the concept of 100% free market is exactly the same nonsense as Communism. They are both fictitious non realistic ideas.