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Economic Fallacies of the Right

slo1
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9/26/2012 9:22:06 AM
Posted: 4 years ago
1. Everything is linear.
The idea that cutting the top tax rate from today's level, 35% ordinary income will produce the same result as a cut like Reagan's 70% to 28%. Many factors play into how well money moves through the economy. The only transactions that produce value directly are purchases for goods and services. Everything else creates money for future purchases of goods and services. "Future" is the key there.

2. Constant Credit
Credit is treated as a constant, but in reality it involves a cycle and is very key to money velocity and how effective investment results in down stream benefits. This is key as to why supply side economics does not consistently work. Demand can not be ignored and the boom bust cycle of credit should not be ignored.

3. Credit...<cough><cough> I mean SAVINGS is key
The white elephant in the room. Everyone talks a good talk about savings and how important it is to have a healthy environment. The reality with today's system is that deficit spending at a government level and private level is required to maintain the growth. The record string of 3% or higher growth that Bush II achieved was done via home investment. Credit went haywire in that companies took on unprecedented risk for immediate profit. We are still paying years later as the credit cycle still unwinds. Reagan ran 4% plus deficits. How do we grow without blowing up the next credit cycle? without blowing up the credit worthiness of the USA?

4. Investment gains are greater the working man.
A dollar that enters the system via an investment gain versus a dollar that enters the system via a pay check provides more lift to the economy. Fortunately even Ronald Reagan understood this fallacy and set the capital gains rate at the same level of ordinary income. The end consumer and health care spending accounts for 70% of GDP. Money spent on goods and services is a direct shot to the economy. Investment, while very much needed, trickles down indirectly which requires strong money velocity to produce the intended effect.

The right would like you to believe that tax cuts are the cure all, all the way down to a zero tax rate. The reality is that capital economic systems are complex. There are many variables, many of which are critical but often ignored. Unfortunately, understanding the complexities and where the "sweet spot" exists for taxation gets buried under rhetoric on both sides.

The entire system must be looked at as a whole. Cutting the top bracket from 35% to 25% may not produce the gains expected when capital gains rate is already at 15%. Higher unemployment for 20 years may be better than running extreme deficits. Lowering business tax rates may be more productive than further adjusting individual tax rates.

Unfortunately opinion rules Washington rather than fact. As a result we have gotten very different tax rates, which always creates uncertainty. Let's just chock that up to another left and right fallacy, which is "we are always right".
Jake-migkillertwo
Posts: 67
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9/27/2012 8:46:54 AM
Posted: 4 years ago
At 9/26/2012 9:22:06 AM, slo1 wrote:
1. Everything is linear.
The idea that cutting the top tax rate from today's level, 35% ordinary income will produce the same result as a cut like Reagan's 70% to 28%. Many factors play into how well money moves through the economy. The only transactions that produce value directly are purchases for goods and services. Everything else creates money for future purchases of goods and services. "Future" is the key there.

Total non sequitur. In order to prove that a reduction in top marginal tax rates won't produce the same effects as the Reagan tax cuts...you mention that only consumption is a good? Um, okay.

2. Constant Credit
Credit is treated as a constant, but in reality it involves a cycle and is very key to money velocity and how effective investment results in down stream benefits. This is key as to why supply side economics does not consistently work. Demand can not be ignored and the boom bust cycle of credit should not be ignored.

Sure, demand can't be ignored, because relative demand *and* relative supply determine the prices of goods and, thus, determine which goods will be produced. But in the long run when prices are flexible, more demand will not produce more output. There are only so many factors of production that can be employed at any given moment, so increased demand without an increased stock of factors will necessarily lead to higher nominal prices.

3. Credit...<cough><cough> I mean SAVINGS is key
The white elephant in the room. Everyone talks a good talk about savings and how important it is to have a healthy environment. The reality with today's system is that deficit spending at a government level and private level is required to maintain the growth. The record string of 3% or higher growth that Bush II achieved was done via home investment. Credit went haywire in that companies took on unprecedented risk for immediate profit. We are still paying years later as the credit cycle still unwinds. Reagan ran 4% plus deficits. How do we grow without blowing up the next credit cycle? without blowing up the credit worthiness of the USA?

See above statement.

4. Investment gains are greater the working man.
A dollar that enters the system via an investment gain versus a dollar that enters the system via a pay check provides more lift to the economy. Fortunately even Ronald Reagan understood this fallacy and set the capital gains rate at the same level of ordinary income. The end consumer and health care spending accounts for 70% of GDP. Money spent on goods and services is a direct shot to the economy. Investment, while very much needed, trickles down indirectly which requires strong money velocity to produce the intended effect.

The reason to tax capital income differently isn't that capital gains are somehow inherently "better" than wage income, the reason we tax them differently is that we want to encourage more investment, so we can ultimately increase our stock of capital, which increases real pre-tax wages for workers.

The right would like you to believe that tax cuts are the cure all, all the way down to a zero tax rate. The reality is that capital economic systems are complex. There are many variables, many of which are critical but often ignored. Unfortunately, understanding the complexities and where the "sweet spot" exists for taxation gets buried under rhetoric on both sides.

Your point?

The entire system must be looked at as a whole. Cutting the top bracket from 35% to 25% may not produce the gains expected when capital gains rate is already at 15%. Higher unemployment for 20 years may be better than running extreme deficits. Lowering business tax rates may be more productive than further adjusting individual tax rates.

Unfortunately opinion rules Washington rather than fact. As a result we have gotten very different tax rates, which always creates uncertainty. Let's just chock that up to another left and right fallacy, which is "we are always right".

your point?
slo1
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9/28/2012 2:21:52 PM
Posted: 4 years ago
At 9/27/2012 8:46:54 AM, Jake-migkillertwo wrote:
At 9/26/2012 9:22:06 AM, slo1 wrote:
1. Everything is linear.
The idea that cutting the top tax rate from today's level, 35% ordinary income will produce the same result as a cut like Reagan's 70% to 28%. Many factors play into how well money moves through the economy. The only transactions that produce value directly are purchases for goods and services. Everything else creates money for future purchases of goods and services. "Future" is the key there.

Total non sequitur. In order to prove that a reduction in top marginal tax rates won't produce the same effects as the Reagan tax cuts...you mention that only consumption is a good? Um, okay.

You can live in your imaginary world where unrealized gains mean something, but until a good or service is purchased it don't mean squat. The reason you can't say tax cuts for the rich will do the exact same thing then as it will now is that the deficit is not the exact same thing.

Exactly how far can you grow deficits before the impact of it drives down the value of the dollar so far it negates any value of tax cuts. Greece has found how hard it is to get out of that hole. That is exactly why the benefits of tax cuts don't calculate on a linear scale, it requires deficits to achieve it and there is a limit on how far a deficit can grow.



2. Constant Credit
Credit is treated as a constant, but in reality it involves a cycle and is very key to money velocity and how effective investment results in down stream benefits. This is key as to why supply side economics does not consistently work. Demand can not be ignored and the boom bust cycle of credit should not be ignored.

Sure, demand can't be ignored, because relative demand *and* relative supply determine the prices of goods and, thus, determine which goods will be produced. But in the long run when prices are flexible, more demand will not produce more output. There are only so many factors of production that can be employed at any given moment, so increased demand without an increased stock of factors will necessarily lead to higher nominal prices.


The beauty of capital system is when there is more demand dollars will not be left on the table and production will be increased. It is absurd to suggest otherwise. The only time that has proven to not be true is when the bottle neck is caused by a commodity which can not be acquired due to physical or trade limitation. Higher prices from a delayed production is a good problem to have. That creates jobs and will get fixed. Lower prices due to excessive inventory is a bad problem to have, lest one thinks that 8% unemployment or higher is good.

3. Credit...<cough><cough> I mean SAVINGS is key
The white elephant in the room. Everyone talks a good talk about savings and how important it is to have a healthy environment. The reality with today's system is that deficit spending at a government level and private level is required to maintain the growth. The record string of 3% or higher growth that Bush II achieved was done via home investment. Credit went haywire in that companies took on unprecedented risk for immediate profit. We are still paying years later as the credit cycle still unwinds. Reagan ran 4% plus deficits. How do we grow without blowing up the next credit cycle? without blowing up the credit worthiness of the USA?


See above statement.

4. Investment gains are greater the working man.
A dollar that enters the system via an investment gain versus a dollar that enters the system via a pay check provides more lift to the economy. Fortunately even Ronald Reagan understood this fallacy and set the capital gains rate at the same level of ordinary income. The end consumer and health care spending accounts for 70% of GDP. Money spent on goods and services is a direct shot to the economy. Investment, while very much needed, trickles down indirectly which requires strong money velocity to produce the intended effect.

The reason to tax capital income differently isn't that capital gains are somehow inherently "better" than wage income, the reason we tax them differently is that we want to encourage more investment, so we can ultimately increase our stock of capital, which increases real pre-tax wages for workers.

The right would like you to believe that tax cuts are the cure all, all the way down to a zero tax rate. The reality is that capital economic systems are complex. There are many variables, many of which are critical but often ignored. Unfortunately, understanding the complexities and where the "sweet spot" exists for taxation gets buried under rhetoric on both sides.

Your point?

I shall repeat, "Unfortunately, understanding the complexities and where the "sweet spot" exists for taxation gets buried under rhetoric on both sides."

If that is not point enough for you then I don't know what your point is for asking what the point is. Put that point in your pipe and smoke it.

The entire system must be looked at as a whole. Cutting the top bracket from 35% to 25% may not produce the gains expected when capital gains rate is already at 15%. Higher unemployment for 20 years may be better than running extreme deficits. Lowering business tax rates may be more productive than further adjusting individual tax rates.

Unfortunately opinion rules Washington rather than fact. As a result we have gotten very different tax rates, which always creates uncertainty. Let's just chock that up to another left and right fallacy, which is "we are always right".

your point?

We can't do what is right for the country because both parties whipsaw us back and forth with taxation policy, which creates uncertainty, which causes business to save money and not spend money, which in turn hurts us even more.
darkkermit
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9/28/2012 4:33:01 PM
Posted: 4 years ago
I always contend that conservatives don't understand macroeconomics, and liberals don't understand microeconomics.
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Wallstreetatheist
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10/1/2012 2:19:49 AM
Posted: 4 years ago
At 9/26/2012 9:22:06 AM, slo1 wrote:
1. Everything is linear.
The idea that cutting the top tax rate from today's level, 35% ordinary income will produce the same result as a cut like Reagan's 70% to 28%. Many factors play into how well money moves through the economy. The only transactions that produce value directly are purchases for goods and services. Everything else creates money for future purchases of goods and services. "Future" is the key there.

I don't see how "Everything is linear" relates to the point about tax rates. Of course different tax cuts will be different, as different people will experience changes to their incomes. Another problem with this is the assertion that only some categories of transaction produce direct value. This is nonsense, unless you analyze value objectively. Rather, every voluntary transaction produces value for both, as both have subjective values and believe that the transaction will benefit them. Even in the case of a coercive transaction, one person gains value, at the expense of another. Value cannot simply be measured in the purchases of goods and services, because people find different ways to gain value.

2. Constant Credit
Credit is treated as a constant, but in reality it involves a cycle and is very key to money velocity and how effective investment results in down stream benefits. This is key as to why supply side economics does not consistently work. Demand can not be ignored and the boom bust cycle of credit should not be ignored.

The problem with many economists is in their treatment of credit. I would agree that constant credit is an economic myth, similarly to the myth of constant apples, oranges, or any other scarce good. Rather, credit demand and supply fluctuates. Another myth is that credit involves a cycle. In reality, the cycle is artificially created when the fed presses some buttons to create more money, and sends the new money to lenders. If this was instead sent to other people, for a temporary amount of time, there would be a cycle in another good. Not sure where you are going with the last two sentences.

3. Credit...<cough><cough> I mean SAVINGS is key
The white elephant in the room. Everyone talks a good talk about savings and how important it is to have a healthy environment. The reality with today's system is that deficit spending at a government level and private level is required to maintain the growth. The record string of 3% or higher growth that Bush II achieved was done via home investment. Credit went haywire in that companies took on unprecedented risk for immediate profit. We are still paying years later as the credit cycle still unwinds. Reagan ran 4% plus deficits. How do we grow without blowing up the next credit cycle? without blowing up the credit worthiness of the USA?

The truth is that savings is key. People need saved goods in order to undertake future projects. The statement that deficit spending is required to maintain growth the way its traditionally understood is a fallacy, most predominently with government debt (caused by deficits). Government deficits without savings are a bad idea (actually all spending is), because they transfer money from efficient projects to inefficient ones, with the lure being a government taxation guarantee.
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Stephen_Hawkins
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10/1/2012 4:42:44 PM
Posted: 4 years ago
At 9/28/2012 4:33:01 PM, darkkermit wrote:
I always contend that conservatives don't understand macroeconomics, and liberals don't understand microeconomics.

I'd move it to neoliberals don't understand equity, while new liberals don't understand efficiency, but I see what you're driving at.
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darkkermit
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10/1/2012 9:13:19 PM
Posted: 4 years ago
At 10/1/2012 4:42:44 PM, Stephen_Hawkins wrote:
At 9/28/2012 4:33:01 PM, darkkermit wrote:
I always contend that conservatives don't understand macroeconomics, and liberals don't understand microeconomics.

I'd move it to neoliberals don't understand equity, while new liberals don't understand efficiency, but I see what you're driving at.

Neoliberals understand equity, they just don't want it.

Unless your referring to equity as Equity = Assets-Liability.
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slo1
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10/2/2012 6:57:56 PM
Posted: 4 years ago
At 10/1/2012 2:19:49 AM, Wallstreetatheist wrote:
At 9/26/2012 9:22:06 AM, slo1 wrote:
1. Everything is linear.
The idea that cutting the top tax rate from today's level, 35% ordinary income will produce the same result as a cut like Reagan's 70% to 28%. Many factors play into how well money moves through the economy. The only transactions that produce value directly are purchases for goods and services. Everything else creates money for future purchases of goods and services. "Future" is the key there.

I don't see how "Everything is linear" relates to the point about tax rates. Of course different tax cuts will be different, as different people will experience changes to their incomes. Another problem with this is the assertion that only some categories of transaction produce direct value. This is nonsense, unless you analyze value objectively. Rather, every voluntary transaction produces value for both, as both have subjective values and believe that the transaction will benefit them. Even in the case of a coercive transaction, one person gains value, at the expense of another. Value cannot simply be measured in the purchases of goods and services, because people find different ways to gain value.

The point I was making is that a tax cut by X amount does not generate a linear return of growth. There are too many factors involved with growth that have to be considered. Even if one only considered deficits as one of the other factors, there could be a point were tax cuts would actually damage the overall economy because it puts the deficit above a point where the dollar looses value. It is not a linear equation like many republicans like to position it, while ignoring other factors.

The only value to the economy is when a good or service is purchased. Think of it this way. If I invest $10,000 into a stock, I have added nothing in turn to the economy. Now there is indeed someone who sold me $10,000 of stock, who now has 10,000 cash which could indeed use it to purchase something. The problem is that one does not know that. They could have lost money from their original position they may have gained money. If they buy a bond with it, say a corporate bond. That indeed could also be put to use, but lets say the corporation uses that $10K to pay off debt. I still have not yet produced anything in the economy. The money goes to the debt holder, who then borrows it again and it gets spent buy someone to buy a car.

Did the corporation who used the $10K to pay down debt get some value, sure. Strengthening their balance sheet will indeed help them. Did anything happen in this transaction that was a direct input into the economic. Not until the car was purchased.

One could argue the company that lowered its debt in theory is in a better position to create purchase transactions, but I could just as easily argue that since the overall economy is lacking demand from high unemployment and a deflationary environment and they are contracting with the deflationary environment.

Point is trickle down does not work unless there is demand to support expansion. Sometimes the expansion can preclude the demand, but not always, if wages are declining and there are not other growth factors to drive discretionary spending.

To sum it up. Lowering the tax bracket from 79% to 28% is a no brainier. However in this environment lowering from 35% to 25% for ordinary income while capital gains is already at 15% is destructive. IMO
keepinitreal
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10/5/2012 8:34:16 PM
Posted: 4 years ago
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.
darkkermit
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10/5/2012 8:52:15 PM
Posted: 4 years ago
At 10/5/2012 8:34:16 PM, keepinitreal wrote:
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.

Alright how far do you want this principle to go? Instead of a flat tax system, it can be based on a fee-based system? Everyone pays the same amount, regardless of wage. Do you think it would be fair that everyone has to pay $10,000 for government services, regardless of ability to pay. If so, why not? Wouldn't it be truly fair if everyone paid the same amount instead of the same rate.
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Contra
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10/5/2012 8:56:47 PM
Posted: 4 years ago
At 10/5/2012 8:52:15 PM, darkkermit wrote:
At 10/5/2012 8:34:16 PM, keepinitreal wrote:
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.

Alright how far do you want this principle to go? Instead of a flat tax system, it can be based on a fee-based system? Everyone pays the same amount, regardless of wage. Do you think it would be fair that everyone has to pay $10,000 for government services, regardless of ability to pay. If so, why not? Wouldn't it be truly fair if everyone paid the same amount instead of the same rate.

Slippery Slope
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
darkkermit
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10/5/2012 9:29:42 PM
Posted: 4 years ago
At 10/5/2012 8:56:47 PM, Contra wrote:
At 10/5/2012 8:52:15 PM, darkkermit wrote:
At 10/5/2012 8:34:16 PM, keepinitreal wrote:
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.

Alright how far do you want this principle to go? Instead of a flat tax system, it can be based on a fee-based system? Everyone pays the same amount, regardless of wage. Do you think it would be fair that everyone has to pay $10,000 for government services, regardless of ability to pay. If so, why not? Wouldn't it be truly fair if everyone paid the same amount instead of the same rate.

Slippery Slope

Not really. " Based on the notion that we are individuals with the same equal rights and that no one should be treated differently"

If you are charging people different amounts for the same government services, they are still being "treated differently". Its really only a matter of semantics why a flat tax sounds fairer. However, a flat tax is still saying, this guy who makes 5 times more, has to pay 5 times more.
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Contra
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10/5/2012 9:53:19 PM
Posted: 4 years ago
At 10/5/2012 9:29:42 PM, darkkermit wrote:
At 10/5/2012 8:56:47 PM, Contra wrote:
At 10/5/2012 8:52:15 PM, darkkermit wrote:
At 10/5/2012 8:34:16 PM, keepinitreal wrote:
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.

Alright how far do you want this principle to go? Instead of a flat tax system, it can be based on a fee-based system? Everyone pays the same amount, regardless of wage. Do you think it would be fair that everyone has to pay $10,000 for government services, regardless of ability to pay. If so, why not? Wouldn't it be truly fair if everyone paid the same amount instead of the same rate.

Slippery Slope

Not really. " Based on the notion that we are individuals with the same equal rights and that no one should be treated differently"

If you are charging people different amounts for the same government services, they are still being "treated differently". Its really only a matter of semantics why a flat tax sounds fairer. However, a flat tax is still saying, this guy who makes 5 times more, has to pay 5 times more.

It is a slippery slope in one sense.

A Progressive tax grossly distributes costs, some will probably pay nothing, while others will pay a lot. For example, John may make $35,000 a year and pay say 12% for the income tax, while Jill makes $8,393,000, which is 27,877% more than John, yet Jill will (at a say 25% rate after deductions) pay 49,858.3% more than John.

So Jill will have a greater tax burden. The distribution of payments is more equal as percentage of income under a flat tax, and is "equal" in the amoral sense of the word with a lump sum tax.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
Contra
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10/5/2012 9:54:13 PM
Posted: 4 years ago
At 10/5/2012 9:53:19 PM, Contra wrote:
At 10/5/2012 9:29:42 PM, darkkermit wrote:
At 10/5/2012 8:56:47 PM, Contra wrote:
At 10/5/2012 8:52:15 PM, darkkermit wrote:
At 10/5/2012 8:34:16 PM, keepinitreal wrote:
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.

Alright how far do you want this principle to go? Instead of a flat tax system, it can be based on a fee-based system? Everyone pays the same amount, regardless of wage. Do you think it would be fair that everyone has to pay $10,000 for government services, regardless of ability to pay. If so, why not? Wouldn't it be truly fair if everyone paid the same amount instead of the same rate.

Slippery Slope

Not really. " Based on the notion that we are individuals with the same equal rights and that no one should be treated differently"

If you are charging people different amounts for the same government services, they are still being "treated differently". Its really only a matter of semantics why a flat tax sounds fairer. However, a flat tax is still saying, this guy who makes 5 times more, has to pay 5 times more.

It is a slippery slope in one sense.

A Progressive tax grossly distributes costs, some will probably pay nothing, while others will pay a lot. For example, John may make $35,000 a year and pay say 12% for the income tax, while Jill makes $8,393,000, which is 27,877% more than John, yet Jill will (at a say 25% rate after deductions) pay 49,858.3% more than John.

So Jill will have a greater tax burden. The distribution of payments is more equal as percentage of income under a flat tax, and is to the furthest extent "equal" in the amoral sense of the word with a lump sum tax.

*Fixed
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
darkkermit
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10/5/2012 10:12:34 PM
Posted: 4 years ago
At 10/5/2012 9:54:13 PM, Contra wrote:
At 10/5/2012 9:53:19 PM, Contra wrote:
At 10/5/2012 9:29:42 PM, darkkermit wrote:
At 10/5/2012 8:56:47 PM, Contra wrote:
At 10/5/2012 8:52:15 PM, darkkermit wrote:
At 10/5/2012 8:34:16 PM, keepinitreal wrote:
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.

Alright how far do you want this principle to go? Instead of a flat tax system, it can be based on a fee-based system? Everyone pays the same amount, regardless of wage. Do you think it would be fair that everyone has to pay $10,000 for government services, regardless of ability to pay. If so, why not? Wouldn't it be truly fair if everyone paid the same amount instead of the same rate.

Slippery Slope

Not really. " Based on the notion that we are individuals with the same equal rights and that no one should be treated differently"

If you are charging people different amounts for the same government services, they are still being "treated differently". Its really only a matter of semantics why a flat tax sounds fairer. However, a flat tax is still saying, this guy who makes 5 times more, has to pay 5 times more.

It is a slippery slope in one sense.

A Progressive tax grossly distributes costs, some will probably pay nothing, while others will pay a lot. For example, John may make $35,000 a year and pay say 12% for the income tax, while Jill makes $8,393,000, which is 27,877% more than John, yet Jill will (at a say 25% rate after deductions) pay 49,858.3% more than John.

So Jill will have a greater tax burden. The distribution of payments is more equal as percentage of income under a flat tax, and is to the furthest extent "equal" in the amoral sense of the word with a lump sum tax.

*Fixed

The point is how do you define what is considered "equal" tax and "unfair" discrimination? Its only because of language that the flat tax sounds fairer.
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darkkermit
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10/5/2012 10:15:13 PM
Posted: 4 years ago
Like the way we calculate how much you pay for the flat tax is:

salary*(flat tax rate) = how much you pay.

But if we had a different formula:
salary^(tax rate + 1) - salary = how much you pay.

People might consider the latter fair If our language made it sound like its fair. Even though it would be completely unfair, since it would create a salary cap.
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Contra
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10/5/2012 10:27:40 PM
Posted: 4 years ago
At 10/5/2012 10:15:13 PM, darkkermit wrote:
Like the way we calculate how much you pay for the flat tax is:


salary*(flat tax rate) = how much you pay.

But if we had a different formula:
salary^(tax rate + 1) - salary = how much you pay.

People might consider the latter fair If our language made it sound like its fair. Even though it would be completely unfair, since it would create a salary cap.

Fair really cannot be defined, that's why it's (unfortunately) used often for political labeling and language. For example, "Fair pay act", or something else.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
slo1
Posts: 4,361
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10/10/2012 10:33:50 AM
Posted: 4 years ago
At 10/5/2012 8:34:16 PM, keepinitreal wrote:
Based on the notion that we are individuals with the same equal rights and that no one should be treated differently (discrimination) then taxing heavily the rich would contradict this principle. Everyone will have low tax rates while the rich would have high tax rates is unfair discrimination. Also, if the government is going to re-distribute a portion of tax revenue from the rich to less fortunate than this is also unfair and biased.

A very common example used: Everyone takes a test and let's say a few of the students studied hard gets a 90 or above on the tests. The majority or the middle percentile gets a 70-80 score and the bottom get below 70. The passing grade is 70. Let's say that this teacher wants everyone to pass and thought it was unfair the bottom got a lower score and will now re-distribute the score from the high scorers to the bottom scorers. This will give the higher scorers less incentive to study because they know that their test points will be subtracted and be given to the students who don't study. That's one issue and the other issue is that those who don't study will continue to not study because they know they will get free points and a passing grade when they get low scores.regardless.

The biggest fallacy of the right is that taxation should be equal. Not only is that impossible but it is inefficient in a society that provides social services to its populace. IE: why tax a poor person at 20% rate, if you are just giving it back in the form of social services. It would be better to let them keep their money and do a better job in mandatory education, k-9th, on training them how to manage it better.

We need to move to consumption taxation which includes risk management as a consumable item. IE: a person who owns 100 acres of land gets much more benefit of $700B plus defense spending than someone who owns nothing.