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Replace The Welfare State

BigRat
Posts: 465
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2/24/2013 2:54:10 PM
Posted: 3 years ago
What do people here think about replacing the welfare state?

First, we would eliminate the following:

- All Federal Taxation (Income, Investment, Payroll, Corporate, etc.)

- A number of large federal programs including Medicare, Social Security, and all Anti Poverty Programs (Food Stamps, Medicaid, TANF, Housing Vouchers, etc.)

- The Minimum Wage

We would replace all of these things with the following:

- A flat 20% tax rate with no deductions or credits (with one exception to be shown below). This flat tax rate will not apply to investment income and will be territorial. The flat 20% rate will also apply to corporate income.

- A flat, universal, and refundable credit that is given to every single citizen and changes with inflation. The credit will be $2000 for every child ages 0 to 18, $4000 for every adult ages 18 to 65, and $8000 for every adult ages 65 and above.

This would greatly increase effinciency in the economy. It would get rid of all the perverse incentives in the current welfare system. It would be much simpler.

A poor family with two children making $20000 a year would pay $4000 in taxes and receive $12000 from this credit. This means they will be getting a net $8000 from the federal government.

Why do we not do this sort of thing?
Khaos_Mage
Posts: 23,214
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2/24/2013 3:22:13 PM
Posted: 3 years ago
At 2/24/2013 2:54:10 PM, BigRat wrote:
What do people here think about replacing the welfare state?

First, we would eliminate the following:

- All Federal Taxation (Income, Investment, Payroll, Corporate, etc.)

- A number of large federal programs including Medicare, Social Security, and all Anti Poverty Programs (Food Stamps, Medicaid, TANF, Housing Vouchers, etc.)
Most of these are administered at the state/county level. I do not think the federal government has much purview.

- The Minimum Wage



We would replace all of these things with the following:

- A flat 20% tax rate with no deductions or credits (with one exception to be shown below). This flat tax rate will not apply to investment income and will be territorial. The flat 20% rate will also apply to corporate income.
This is a tax hike on most people, a real big one.
A single person making $12,000 in 2012, would pay about $250 in fed taxes (2.08%), while under your system, the same person would pay $1,600 (13.3%).

- A flat, universal, and refundable credit that is given to every single citizen and changes with inflation. The credit will be $2000 for every child ages 0 to 18, $4000 for every adult ages 18 to 65, and $8000 for every adult ages 65 and above.


This would greatly increase effinciency in the economy. It would get rid of all the perverse incentives in the current welfare system. It would be much simpler.

A poor family with two children making $20000 a year would pay $4000 in taxes and receive $12000 from this credit. This means they will be getting a net $8000 from the federal government.
How is this much different than what we have? Currently, a married family of four making a combined $20,000 will get $7,236 from the feds.

Why do we not do this sort of thing?
It is a HUGE increase on the working poor, and likely a tax increase for families and the "middle class", and the rich will see either a slight decrease to a modest one with a chance of a few slight increases.
My work here is, finally, done.
blackhawk1331
Posts: 4,932
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2/24/2013 4:16:47 PM
Posted: 3 years ago
At 2/24/2013 2:54:10 PM, BigRat wrote:
A poor family with two children making $20000 a year would pay $4000 in taxes and receive $12000 from this credit. This means they will be getting a net $8000 from the federal government.

I may be misinterpreting what you're saying here (or missing something), but in this scenario, the deficit will increase. Poor families families will just keep popping out kids to get more and more money. They won't even need to work.
Because you said it was a waste, numb nuts. - Drafter

So fvck you. :) - TV

Use prima facie correctly or not at all. - Noumena
Khaos_Mage
Posts: 23,214
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2/24/2013 4:33:47 PM
Posted: 3 years ago
At 2/24/2013 4:16:47 PM, blackhawk1331 wrote:
At 2/24/2013 2:54:10 PM, BigRat wrote:
A poor family with two children making $20000 a year would pay $4000 in taxes and receive $12000 from this credit. This means they will be getting a net $8000 from the federal government.

I may be misinterpreting what you're saying here (or missing something), but in this scenario, the deficit will increase. Poor families families will just keep popping out kids to get more and more money. They won't even need to work.

Read my post.
This is already the case, except more people will be paying in more.

Actually, it is more perverse here because with two children and married, no one would pay taxes if they made less than $60K (currently, it is about $47K). This is not the case now, plus, you lose the revenue from capital gains and dividends.

The net effect here may be zero, but it would really hurt singles.
Plus, single parent homes would be hurt, too.
My work here is, finally, done.
Polaris
Posts: 1,120
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2/24/2013 4:44:50 PM
Posted: 3 years ago
At 2/24/2013 3:22:13 PM, Khaos_Mage wrote:
At 2/24/2013 2:54:10 PM, BigRat wrote:
What do people here think about replacing the welfare state?

First, we would eliminate the following:

- All Federal Taxation (Income, Investment, Payroll, Corporate, etc.)

- A number of large federal programs including Medicare, Social Security, and all Anti Poverty Programs (Food Stamps, Medicaid, TANF, Housing Vouchers, etc.)
Most of these are administered at the state/county level. I do not think the federal government has much purview.

- The Minimum Wage



We would replace all of these things with the following:

- A flat 20% tax rate with no deductions or credits (with one exception to be shown below). This flat tax rate will not apply to investment income and will be territorial. The flat 20% rate will also apply to corporate income.
This is a tax hike on most people, a real big one.
A single person making $12,000 in 2012, would pay about $250 in fed taxes (2.08%), while under your system, the same person would pay $1,600 (13.3%).

- A flat, universal, and refundable credit that is given to every single citizen and changes with inflation. The credit will be $2000 for every child ages 0 to 18, $4000 for every adult ages 18 to 65, and $8000 for every adult ages 65 and above.


This would greatly increase effinciency in the economy. It would get rid of all the perverse incentives in the current welfare system. It would be much simpler.

A poor family with two children making $20000 a year would pay $4000 in taxes and receive $12000 from this credit. This means they will be getting a net $8000 from the federal government.
How is this much different than what we have? Currently, a married family of four making a combined $20,000 will get $7,236 from the feds.

Why do we not do this sort of thing?
It is a HUGE increase on the working poor, and likely a tax increase for families and the "middle class", and the rich will see either a slight decrease to a modest one with a chance of a few slight increases.

I'm in pretty close agreement with you Khaos Mage. In my experience, simplistic solutions tend to not work for complex problems.
Khaos_Mage
Posts: 23,214
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2/24/2013 4:52:20 PM
Posted: 3 years ago
WHOAA!!!!

Recant most of what I have said, I was thinking the credit was a deduction, not a credit.

This will bankrupt the country, and INCREASE transfer payments.
A single person would pay no income taxes unless they made more than $20,000, as opposed to the current $9,500.
Married with 2 kids would pay nothing under $60K

This will incentivize people to make less, as the Earned Income Credit (and welfare programs) do.

Plus, all this lost revenue will be compounded with the loss of investment revenue. Which means the rich, like Mitt Romney, will pay much much much less than he did. About a loss of about $4 million if memory serves, as he only "earned" about $1 million, the rest were capital gains, dividends, and interest (i.e. investment).
My work here is, finally, done.
BigRat
Posts: 465
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2/24/2013 5:33:15 PM
Posted: 3 years ago
To the people who say this will bankrupt the country, you need to realize two things:

1.) Look at the dynamic effects here. This plan will greatly enhance economic growth which leads to more revenue and more GDP.

2.) We are replacing all government transfer programs and current deductions. The total cost of the credit with the current population and age structure would be roughly $1.3 Trillion. That is much less than the combined cost of Medicare, SS, Medicaid, and the other anti poverty programs is roughly $2.1 Trillion. I would like to eliminate even more programs that will lead to much more than $2.1 Trillion, but we'll stick with that for now for the sake of argument. Once the dynamic effects are taking into account, this plan saves a lot of money.

The tax plan (a flat 20% rate) saves a lot through growth and simply by raising revenue.

This plan is very fiscally sound.
JB.UT
Posts: 2
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2/24/2013 6:34:22 PM
Posted: 3 years ago
I would encourage all of you here to read the Times article by Steven Brill entitled "Bitter Pill: Why Medical Bills Are Killing Us". It is easily accessible on the Times website. It is rather lengthy but it offers an in-depth look at the healthcare industry. Without spoiling to much I do want to point out that the article makes clear that government Medicare is not the problem and it also points out that even insurance companies are hoping government will get the health industry under control. A statistic that I found interesting is that the Medical/Pharmaceutical industry spends a lot more on lobbying than the defense industry and oil industry combined. I hope you will take the time to read it. Link: http://healthland.time.com...
ZakYoungTheLibertarian
Posts: 253
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2/24/2013 8:22:53 PM
Posted: 3 years ago
the first half your proposal is pretty good. the second half is pretty bad. so you got it half right, which is about half better than most people get it. who are you, zombie milton friedman?
BigRat
Posts: 465
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2/25/2013 1:46:25 AM
Posted: 3 years ago
At 2/24/2013 8:22:53 PM, ZakYoungTheLibertarian wrote:
the first half your proposal is pretty good. the second half is pretty bad. so you got it half right, which is about half better than most people get it. who are you, zombie milton friedman?

Haha.

You gotta be realistic.
Khaos_Mage
Posts: 23,214
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2/25/2013 3:45:45 AM
Posted: 3 years ago
At 2/24/2013 5:33:15 PM, BigRat wrote:
To the people who say this will bankrupt the country, you need to realize two things:

1.) Look at the dynamic effects here. This plan will greatly enhance economic growth which leads to more revenue and more GDP.
Why, when it will increase "welfare" payments? The moocher who works part-time and lives with his parents could get $1,000 from the government (assuming he makes $10K)

If the welfare state is bad, why does this plan seem to promote/expand it?
The growth may occur, or the moral hazard. In the case of welfare, which occurred?

2.) We are replacing all government transfer programs and current deductions. The total cost of the credit with the current population and age structure would be roughly $1.3 Trillion. That is much less than the combined cost of Medicare, SS, Medicaid, and the other anti poverty programs is roughly $2.1 Trillion. I would like to eliminate even more programs that will lead to much more than $2.1 Trillion, but we'll stick with that for now for the sake of argument. Once the dynamic effects are taking into account, this plan saves a lot of money.

Except social security and medicare are NOT paid by income taxes, they are paid by payroll taxes.

Here's where your plan falls apart:
Assumptions:
Population of 300 million, with a ratio of adults, kids, and elderly of 2:1:1, yeilding an average credit of $4,500/American.
Using 2009 estimates, TOTAL INCOME for all Americans was $7,739,397,945,000. This includes investment income which you say shouldn't be taxed.

Total income tax to be collected = $1,547,879,589,000
Total credits offered = $1,350,000,000,000
Total revenue generated from income tax to federal government = $197,879,589,000 (about $200 billion)

In 2009, total income tax before credits was $976 billion. This plan would lose close to $700 billion, which is about 25% of the budget, and less after discretionary spending. Is welfare really 25% of the budget? (keep in mind that about 25% of federal spending is social security and not paid by income taxes)

http://www.irs.gov...
[look under heading of All Returns: Sources of Income, Adjustments, and Tax Items] it should be the third option

The tax plan (a flat 20% rate) saves a lot through growth and simply by raising revenue.

This plan is very fiscally sound.
Sorry, but it isn't.
If you used only the salary and wages figure, the government would pay out $208,582,302,600. Talk about welfare...
My work here is, finally, done.
BigRat
Posts: 465
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2/25/2013 4:19:05 AM
Posted: 3 years ago
At 2/25/2013 3:45:45 AM, Khaos_Mage wrote:
At 2/24/2013 5:33:15 PM, BigRat wrote:
To the people who say this will bankrupt the country, you need to realize two things:

1.) Look at the dynamic effects here. This plan will greatly enhance economic growth which leads to more revenue and more GDP.
Why, when it will increase "welfare" payments? The moocher who works part-time and lives with his parents could get $1,000 from the government (assuming he makes $10K)

If the welfare state is bad, why does this plan seem to promote/expand it?
The growth may occur, or the moral hazard. In the case of welfare, which occurred?

2.) We are replacing all government transfer programs and current deductions. The total cost of the credit with the current population and age structure would be roughly $1.3 Trillion. That is much less than the combined cost of Medicare, SS, Medicaid, and the other anti poverty programs is roughly $2.1 Trillion. I would like to eliminate even more programs that will lead to much more than $2.1 Trillion, but we'll stick with that for now for the sake of argument. Once the dynamic effects are taking into account, this plan saves a lot of money.

Except social security and medicare are NOT paid by income taxes, they are paid by payroll taxes.

Here's where your plan falls apart:
Assumptions:
Population of 300 million, with a ratio of adults, kids, and elderly of 2:1:1, yeilding an average credit of $4,500/American.
Using 2009 estimates, TOTAL INCOME for all Americans was $7,739,397,945,000. This includes investment income which you say shouldn't be taxed.

Total income tax to be collected = $1,547,879,589,000
Total credits offered = $1,350,000,000,000
Total revenue generated from income tax to federal government = $197,879,589,000 (about $200 billion)

In 2009, total income tax before credits was $976 billion. This plan would lose close to $700 billion, which is about 25% of the budget, and less after discretionary spending. Is welfare really 25% of the budget? (keep in mind that about 25% of federal spending is social security and not paid by income taxes)

http://www.irs.gov...
[look under heading of All Returns: Sources of Income, Adjustments, and Tax Items] it should be the third option

The tax plan (a flat 20% rate) saves a lot through growth and simply by raising revenue.

This plan is very fiscally sound.
Sorry, but it isn't.
If you used only the salary and wages figure, the government would pay out $208,582,302,600. Talk about welfare...

You don't understand the plan at all. First, I was clear that both social security and payroll taxes would be eliminated.

Also, you completely ignore the 20% corporate income tax that would also be included.

As for your figure about incomes, I believe, and maybe I am wrong here, you are using adjusted taxable income when you should be looking at total income. This 20% tax applies to total salaries and wages and business income at the individual and corporate level.

Now, since we are replacing all those programs (SS, all existing tax credits and deductions, Medicare, Medicaid, etc.), we don't need much revenue to run the government.

We just need to fund the military and some other basic functions.
Once you include the business tax and, as I'll explain below, the economic growth that will result, you get about what you need.

The economic growth will indeed be a result. The flat 20% rate that does not tax investment income is a very efficient form of taxation that gets rid of a lot of deadweight loss in the current tax code.

The credits replace all those programs and the minimum wage. One of the great things about these credits is that they are flat and universal and thus don't create high implicit marginal tax rates. That is, in current welfare systems, we see high MTRs because people lose benefits as their income rises. Not true of the credits.

The minimum wage also creates a lot of DWL (deadweight loss). The simplicity and lack of DWL are major benefits here. This plan really is fiscally sound.

Now, let's pretend for a second that the plan isn't (which it is). If you really don't think my numbers add up, fine. That doesn't mean we should just say forget the plan.

You can raise the tax rate to 25% instead of 20% or you can cut the credits to $1500, $3000, and $6000... or both. I'm sure you can agree that a plan that has a 25% tax rate with $1500, $3000, and $6000 credits is sound (again this plan eliminates both payroll taxes and SS/Medicare).

So, how would you feel about the same plan with those numbers?
Khaos_Mage
Posts: 23,214
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2/25/2013 5:32:55 AM
Posted: 3 years ago
At 2/25/2013 4:19:05 AM, BigRat wrote:
At 2/25/2013 3:45:45 AM, Khaos_Mage wrote:
At 2/24/2013 5:33:15 PM, BigRat wrote:
To the people who say this will bankrupt the country, you need to realize two things:

1.) Look at the dynamic effects here. This plan will greatly enhance economic growth which leads to more revenue and more GDP.
Why, when it will increase "welfare" payments? The moocher who works part-time and lives with his parents could get $1,000 from the government (assuming he makes $10K)

If the welfare state is bad, why does this plan seem to promote/expand it?
The growth may occur, or the moral hazard. In the case of welfare, which occurred?

2.) We are replacing all government transfer programs and current deductions. The total cost of the credit with the current population and age structure would be roughly $1.3 Trillion. That is much less than the combined cost of Medicare, SS, Medicaid, and the other anti poverty programs is roughly $2.1 Trillion. I would like to eliminate even more programs that will lead to much more than $2.1 Trillion, but we'll stick with that for now for the sake of argument. Once the dynamic effects are taking into account, this plan saves a lot of money.

Except social security and medicare are NOT paid by income taxes, they are paid by payroll taxes.

Here's where your plan falls apart:
Assumptions:
Population of 300 million, with a ratio of adults, kids, and elderly of 2:1:1, yeilding an average credit of $4,500/American.
Using 2009 estimates, TOTAL INCOME for all Americans was $7,739,397,945,000. This includes investment income which you say shouldn't be taxed.

Total income tax to be collected = $1,547,879,589,000
Total credits offered = $1,350,000,000,000
Total revenue generated from income tax to federal government = $197,879,589,000 (about $200 billion)

In 2009, total income tax before credits was $976 billion. This plan would lose close to $700 billion, which is about 25% of the budget, and less after discretionary spending. Is welfare really 25% of the budget? (keep in mind that about 25% of federal spending is social security and not paid by income taxes)

http://www.irs.gov...
[look under heading of All Returns: Sources of Income, Adjustments, and Tax Items] it should be the third option

The tax plan (a flat 20% rate) saves a lot through growth and simply by raising revenue.

This plan is very fiscally sound.
Sorry, but it isn't.
If you used only the salary and wages figure, the government would pay out $208,582,302,600. Talk about welfare...


You don't understand the plan at all. First, I was clear that both social security and payroll taxes would be eliminated.
I am aware of this. However, you laid out income tax plan, while saying the credit is offset by spending cuts, which included SS. Your credits do not offset savings, or are very close.

Also, you completely ignore the 20% corporate income tax that would also be included.
I did not address it, as all but the smallest of corporations (those with taxable income of $50K or less) will receive a tax cut. So, again, there is loss to the system.
http://www.irs.gov... [page 17]

As for your figure about incomes, I believe, and maybe I am wrong here, you are using adjusted taxable income when you should be looking at total income. This 20% tax applies to total salaries and wages and business income at the individual and corporate level.
Corporate is less revenue.
Income tax on salary and wages is less than the credit, so negative revenue.
Income tax on major other income:
Business (schedule C): net of $245 billion
Partnership and S-corp: net of $345 billion
net rent, gambling, royalties, farm: est. $100 billion
Total = $138 billion in tax revenue, which should offset the remaining losses.

My first figures used total income, not AGI, even though AGI was only about $113 billion less.


Now, since we are replacing all those programs (SS, all existing tax credits and deductions, Medicare, Medicaid, etc.), we don't need much revenue to run the government.
Since this plan loses about $1 trillion in personal income tax revenue, $700 billion in payroll tax revenue, and lowers the corporate tax revenue, how much do we need? This leaves a budget of $1 trillion or so, plus the current $1 trillion or so of discretionary spending.

We just need to fund the military and some other basic functions.
Agreed. However, as of now, these other functions are military, justice, agriculture, transportation, congress, intelligence (CIA), enforcement (FBI), and education, to name a few.
Once you include the business tax and, as I'll explain below, the economic growth that will result, you get about what you need.

The economic growth will indeed be a result. The flat 20% rate that does not tax investment income is a very efficient form of taxation that gets rid of a lot of deadweight loss in the current tax code.
Economic growth will likely occur, but will it occur at the level needed? Especially considering the pitfalls and psychological effects that will occur, namely laziness, lower wages, and opting for stock instead of a paycheck.

The credits replace all those programs and the minimum wage. One of the great things about these credits is that they are flat and universal and thus don't create high implicit marginal tax rates. That is, in current welfare systems, we see high MTRs because people lose benefits as their income rises. Not true of the credits.
People "lose" 20% of the income if they make more than the credit. Does this not have a chilling effect? Does the free money for moochers not have a moral hazard?

Keep in mind that the elderly will now not pay any taxes, nor children, nor about 25% of adults, more when you factor in families.
http://www.bls.gov...


The minimum wage also creates a lot of DWL (deadweight loss). The simplicity and lack of DWL are major benefits here. This plan really is fiscally sound.

Now, let's pretend for a second that the plan isn't (which it is). If you really don't think my numbers add up, fine. That doesn't mean we should just say forget the plan.

You can raise the tax rate to 25% instead of 20% or you can cut the credits to $1500, $3000, and $6000... or both. I'm sure you can agree that a plan that has a 25% tax rate with $1500, $3000, and $6000 credits is sound (again this plan eliminates both payroll taxes and SS/Medicare).

So, how would you feel about the same plan with those numbers?
It would be more financially sound, but with human psychology, it is difficult to believe this plan, in principle, would work.
My work here is, finally, done.
royalpaladin
Posts: 22,357
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2/25/2013 5:34:28 AM
Posted: 3 years ago
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.
Ragnar_Rahl
Posts: 19,297
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2/25/2013 5:45:40 AM
Posted: 3 years ago
At 2/25/2013 5:34:28 AM, royalpaladin wrote:
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.

The purpose of the state is not to stuff pockets but to protect lives and property (of citizens, or, if it's my kind of government, paying customers). Stuffing pockets (the welfare state) is a side project that somehow metamorphosed into the main thing it does.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
royalpaladin
Posts: 22,357
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2/25/2013 5:48:22 AM
Posted: 3 years ago
At 2/25/2013 5:45:40 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:34:28 AM, royalpaladin wrote:
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.

The purpose of the state is not to stuff pockets but to protect lives and property (of citizens, or, if it's my kind of government, paying customers). Stuffing pockets (the welfare state) is a side project that somehow metamorphosed into the main thing it does.

The state never existed to protect anybody. The origins of the state are repression, violence, and enriching the individuals within it. Not one state has ever chosen to forgo the opportunity to exploit the people, particularly the working class.
Ragnar_Rahl
Posts: 19,297
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2/25/2013 6:04:24 AM
Posted: 3 years ago
At 2/25/2013 5:48:22 AM, royalpaladin wrote:
At 2/25/2013 5:45:40 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:34:28 AM, royalpaladin wrote:
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.

The purpose of the state is not to stuff pockets but to protect lives and property (of citizens, or, if it's my kind of government, paying customers). Stuffing pockets (the welfare state) is a side project that somehow metamorphosed into the main thing it does.

The state never existed to protect anybody. The origins of the state are repression, violence, and enriching the individuals within it. Not one state has ever chosen to forgo the opportunity to exploit the people, particularly the working class.

States fail to exploit opportunities all the time, as we discuss in another thread. States have always exceeded their proper purpose (after all, no state has never been founded in a consistent articulation of that purpose), but having that excess be the main thing they do is something that varies throughout history.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
Khaos_Mage
Posts: 23,214
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2/25/2013 6:10:05 AM
Posted: 3 years ago
At 2/25/2013 6:04:24 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:48:22 AM, royalpaladin wrote:
At 2/25/2013 5:45:40 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:34:28 AM, royalpaladin wrote:
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.

The purpose of the state is not to stuff pockets but to protect lives and property (of citizens, or, if it's my kind of government, paying customers). Stuffing pockets (the welfare state) is a side project that somehow metamorphosed into the main thing it does.

The state never existed to protect anybody. The origins of the state are repression, violence, and enriching the individuals within it. Not one state has ever chosen to forgo the opportunity to exploit the people, particularly the working class.

States fail to exploit opportunities all the time, as we discuss in another thread. States have always exceeded their proper purpose (after all, no state has never been founded in a consistent articulation of that purpose), but having that excess be the main thing they do is something that varies throughout history.

Please, you two, please don't derail this thread.
My work here is, finally, done.
royalpaladin
Posts: 22,357
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2/25/2013 6:26:38 AM
Posted: 3 years ago
At 2/25/2013 6:04:24 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:48:22 AM, royalpaladin wrote:
At 2/25/2013 5:45:40 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:34:28 AM, royalpaladin wrote:
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.

The purpose of the state is not to stuff pockets but to protect lives and property (of citizens, or, if it's my kind of government, paying customers). Stuffing pockets (the welfare state) is a side project that somehow metamorphosed into the main thing it does.

The state never existed to protect anybody. The origins of the state are repression, violence, and enriching the individuals within it. Not one state has ever chosen to forgo the opportunity to exploit the people, particularly the working class.

States fail to exploit opportunities all the time, as we discuss in another thread. States have always exceeded their proper purpose (after all, no state has never been founded in a consistent articulation of that purpose), but having that excess be the main thing they do is something that varies throughout history.

States are not supernatural entities. They are composed of selfish humans, and recently, progressivism has put pressure on states to be more subtle with their exploitation.
Ragnar_Rahl
Posts: 19,297
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2/25/2013 6:29:51 AM
Posted: 3 years ago
At 2/25/2013 6:26:38 AM, royalpaladin wrote:
At 2/25/2013 6:04:24 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:48:22 AM, royalpaladin wrote:
At 2/25/2013 5:45:40 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:34:28 AM, royalpaladin wrote:
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.

The purpose of the state is not to stuff pockets but to protect lives and property (of citizens, or, if it's my kind of government, paying customers). Stuffing pockets (the welfare state) is a side project that somehow metamorphosed into the main thing it does.

The state never existed to protect anybody. The origins of the state are repression, violence, and enriching the individuals within it. Not one state has ever chosen to forgo the opportunity to exploit the people, particularly the working class.

States fail to exploit opportunities all the time, as we discuss in another thread. States have always exceeded their proper purpose (after all, no state has never been founded in a consistent articulation of that purpose), but having that excess be the main thing they do is something that varies throughout history.

States are not supernatural entities. They are composed of selfish humans, and recently, progressivism has put pressure on states to be more subtle with their exploitation.
More subtle and more all-encompassing. (Exploitation is not the word. Stop using it. I exploit my food to live. )
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
royalpaladin
Posts: 22,357
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2/25/2013 6:35:08 AM
Posted: 3 years ago
At 2/25/2013 6:29:51 AM, Ragnar_Rahl wrote:
At 2/25/2013 6:26:38 AM, royalpaladin wrote:
At 2/25/2013 6:04:24 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:48:22 AM, royalpaladin wrote:
At 2/25/2013 5:45:40 AM, Ragnar_Rahl wrote:
At 2/25/2013 5:34:28 AM, royalpaladin wrote:
Why just the welfare state? Abolish the whole state. I'm not paying taxes to stuff a rich guy's pockets. I might be willing to do it to help the indigent, but definitely not the rich.

The purpose of the state is not to stuff pockets but to protect lives and property (of citizens, or, if it's my kind of government, paying customers). Stuffing pockets (the welfare state) is a side project that somehow metamorphosed into the main thing it does.

The state never existed to protect anybody. The origins of the state are repression, violence, and enriching the individuals within it. Not one state has ever chosen to forgo the opportunity to exploit the people, particularly the working class.

States fail to exploit opportunities all the time, as we discuss in another thread. States have always exceeded their proper purpose (after all, no state has never been founded in a consistent articulation of that purpose), but having that excess be the main thing they do is something that varies throughout history.

States are not supernatural entities. They are composed of selfish humans, and recently, progressivism has put pressure on states to be more subtle with their exploitation.
More subtle and more all-encompassing. (Exploitation is not the word. Stop using it. I exploit my food to live. )

No, it's not "all-encompasing". The exploitation in the social sphere has been reduced significantly.
royalpaladin
Posts: 22,357
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2/25/2013 6:38:16 AM
Posted: 3 years ago
Exploitation is the correct word. Forced labor, tying people to the land, forced tribute, conscription, asserting control over natural resources when they don't belong to you, etc. is exploitation.
CarefulNow
Posts: 780
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2/25/2013 2:45:13 PM
Posted: 3 years ago
At 2/24/2013 2:54:10 PM, BigRat wrote:
Why do we not do this sort of thing?

Although the minimum wage benefits no one and a basic income such as the one you describe clearly would, it's easy to see why the former is more politically correct. The minimum wage appeals to the common sense that any worker is worth such a wage, and appears to simply take money from the appropriate party, the employer who receives the labor, and give it to the appropriate party, the employee who provides the labor. The minimum wage does not correct the cause of the exploitation, the worker's alienation from the means of production, but merely restricts their ability to make mutually beneficial exchanges with capitalists within that paradigm. The generally negative consequences are not, of course, de jure, but require a small measure of intelligence to foresee.

The basic income, on the other hand, is "money for nothing": no labor, in the case of the unemployed; no need, in the case of the rich. It's impolite to argue that the aforementioned alienation, a general sacrifice, is something worthy of compensation, or indeed to put property in its proper, social context at all.

As for the basic income's revenue source, I agree that a flat tax is best. But as the cause of the poverty that justifies the basic income is wealth inequality (parental wealth is a better predictor of income than parental income, for instance), I think a wealth tax would be more appropriate. There's too much volition in income, too much actual labor. That's not to say there wouldn't be a similar substitution effect in the case of a wealth tax, but wealth's greater temporal disconnect from the labor embodied in it would lessen that effect. Indeed, in the case of real property, even past labor pales in comparison to government spending as a giver of value.
Ragnar_Rahl
Posts: 19,297
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2/25/2013 2:47:15 PM
Posted: 3 years ago
At 2/25/2013 6:38:16 AM, royalpaladin wrote:
Exploitation is the correct word. Forced labor, tying people to the land, forced tribute, conscription, asserting control over natural resources when they don't belong to you, etc. is exploitation.

Existence is exploitation. Finding a job opportunity and nabbing it is exploitation. Finding wild berries and making jam is exploitation.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
BigRat
Posts: 465
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2/25/2013 2:58:10 PM
Posted: 3 years ago
At 2/25/2013 5:32:55 AM, Khaos_Mage wrote:


You don't understand the plan at all. First, I was clear that both social security and payroll taxes would be eliminated.
I am aware of this. However, you laid out income tax plan, while saying the credit is offset by spending cuts, which included SS. Your credits do not offset savings, or are very close.

Also, you completely ignore the 20% corporate income tax that would also be included.
I did not address it, as all but the smallest of corporations (those with taxable income of $50K or less) will receive a tax cut. So, again, there is loss to the system.
http://www.irs.gov... [page 17]

As for your figure about incomes, I believe, and maybe I am wrong here, you are using adjusted taxable income when you should be looking at total income. This 20% tax applies to total salaries and wages and business income at the individual and corporate level.
Corporate is less revenue.
Income tax on salary and wages is less than the credit, so negative revenue.
Income tax on major other income:
Business (schedule C): net of $245 billion
Partnership and S-corp: net of $345 billion
net rent, gambling, royalties, farm: est. $100 billion
Total = $138 billion in tax revenue, which should offset the remaining losses.

My first figures used total income, not AGI, even though AGI was only about $113 billion less.


Now, since we are replacing all those programs (SS, all existing tax credits and deductions, Medicare, Medicaid, etc.), we don't need much revenue to run the government.
Since this plan loses about $1 trillion in personal income tax revenue, $700 billion in payroll tax revenue, and lowers the corporate tax revenue, how much do we need? This leaves a budget of $1 trillion or so, plus the current $1 trillion or so of discretionary spending.

We just need to fund the military and some other basic functions.
Agreed. However, as of now, these other functions are military, justice, agriculture, transportation, congress, intelligence (CIA), enforcement (FBI), and education, to name a few.
Once you include the business tax and, as I'll explain below, the economic growth that will result, you get about what you need.

The economic growth will indeed be a result. The flat 20% rate that does not tax investment income is a very efficient form of taxation that gets rid of a lot of deadweight loss in the current tax code.
Economic growth will likely occur, but will it occur at the level needed? Especially considering the pitfalls and psychological effects that will occur, namely laziness, lower wages, and opting for stock instead of a paycheck.

The credits replace all those programs and the minimum wage. One of the great things about these credits is that they are flat and universal and thus don't create high implicit marginal tax rates. That is, in current welfare systems, we see high MTRs because people lose benefits as their income rises. Not true of the credits.
People "lose" 20% of the income if they make more than the credit. Does this not have a chilling effect? Does the free money for moochers not have a moral hazard?

Keep in mind that the elderly will now not pay any taxes, nor children, nor about 25% of adults, more when you factor in families.
http://www.bls.gov...


The minimum wage also creates a lot of DWL (deadweight loss). The simplicity and lack of DWL are major benefits here. This plan really is fiscally sound.

Now, let's pretend for a second that the plan isn't (which it is). If you really don't think my numbers add up, fine. That doesn't mean we should just say forget the plan.

You can raise the tax rate to 25% instead of 20% or you can cut the credits to $1500, $3000, and $6000... or both. I'm sure you can agree that a plan that has a 25% tax rate with $1500, $3000, and $6000 credits is sound (again this plan eliminates both payroll taxes and SS/Medicare).

So, how would you feel about the same plan with those numbers?
It would be more financially sound, but with human psychology, it is difficult to believe this plan, in principle, would work.

Here's what this new tax system would need to fund:

- The Refundable Credits

- Military

- Other Basic Functions (FBI, Basic Research, Infrastructure, etc.)

You are correct in saying the other basic functions are important, but they aren't all that expensive. All said, we probably need about $1 Trillion after the credits are taken into account (don't forget that it is okay to run a structural defiit of about 1 to 2% of GDP).

You are looking at the corporate income tax the wrong way. You are saying that we would lose revenue relative to current policy. I actually disagree with that but it is the wrong point. In your analysis, you acted like we would be getting no corporate income tax revenue at all.

What we need to do is look at all the revenue that would be raised and see it it can fund, adequatley, the credits and the other functions of the federal government.

It it cannot, we should take the same plan and change the numbers (25% instead of 20%, for instance).

One of the chief benefits of this plan, in my view, is that it reduces dependance because it gets rid of the high implicit marginal tax rates present in current welfare systems.
Contra
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2/25/2013 6:46:39 PM
Posted: 3 years ago
At 2/24/2013 2:54:10 PM, BigRat wrote:
What do people here think about replacing the welfare state?

First, we would eliminate the following:

- All Federal Taxation (Income, Investment, Payroll, Corporate, etc.)

- A number of large federal programs including Medicare, Social Security, and all Anti Poverty Programs (Food Stamps, Medicaid, TANF, Housing Vouchers, etc.)

- The Minimum Wage

We would replace all of these things with the following:

- A flat 20% tax rate with no deductions or credits (with one exception to be shown below). This flat tax rate will not apply to investment income and will be territorial. The flat 20% rate will also apply to corporate income.

- A flat, universal, and refundable credit that is given to every single citizen and changes with inflation. The credit will be $2000 for every child ages 0 to 18, $4000 for every adult ages 18 to 65, and $8000 for every adult ages 65 and above.

This would greatly increase effinciency in the economy. It would get rid of all the perverse incentives in the current welfare system. It would be much simpler.

A poor family with two children making $20000 a year would pay $4000 in taxes and receive $12000 from this credit. This means they will be getting a net $8000 from the federal government.

Why do we not do this sort of thing?

First, your proposed tax rate is too high. I think only a flat rate of 15% for both individual and corporate taxation must be applied.

Your plan is somewhat similar to a negative income tax. However, there are many problems with this pseudo-guaranteed income plan.

First, people don't have to work to be eligible. People could sloth and receive benefits. People who only support themselves (subsistence farming) would gain from the losses of others.

People would take advantage of this plan, and probably only work for a minimal time period to receive benefits. Tax distortions of this sort are prevalent. For example, Ronald Reagan worked until he earned the amount of income below the 90% marginal bracket, then he stopped working the rest of the year.

The subsidy is not really adequate. Political pressures would increase the subsidy up to the poverty line, which creates the same problem as a guaranteed income.

Taxation would be very high.

A guaranteed income is a bad, and very expensive policy, which many perverse incentives.
"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
CarefulNow
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2/25/2013 7:55:18 PM
Posted: 3 years ago
At 2/25/2013 6:46:39 PM, Contra wrote:
First, people don't have to work to be eligible. People could sloth and receive benefits.

People can already sloth and receive benefits. It's called owning property. If they want more than absentee rents, profits and interest, they have to work; if a recipient of basic income wants more than basic income, he too has to work. You would probably argue that absentee ownership is rare, so, the poor being of the same species, it should be no surprise that studies show the basic income's reduction of official labor hours ranges from 1% for those substituting some much-needed rest to 5% for those substituting education or childcare.

People would take advantage of this plan, and probably only work for a minimal time period to receive benefits. Tax distortions of this sort are prevalent. For example, Ronald Reagan worked until he earned the amount of income below the 90% marginal bracket, then he stopped working the rest of the year.

That's completely different. That ten percent is less than what the next highest tax bracket leaves is self-evident. That the marginal utility of money diminishes as income increases is an assumption. I happen to agree with that assumption, but it's as true for the tax base as it is for the welfare recipients, so much so that the labor supply curve is actually backward-bending, the income effect at a certain point overwhelming the substitution effect.
Khaos_Mage
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2/25/2013 8:39:08 PM
Posted: 3 years ago
At 2/25/2013 2:58:10 PM, BigRat wrote:
At 2/25/2013 5:32:55 AM, Khaos_Mage wrote:


You don't understand the plan at all. First, I was clear that both social security and payroll taxes would be eliminated.
I am aware of this. However, you laid out income tax plan, while saying the credit is offset by spending cuts, which included SS. Your credits do not offset savings, or are very close.

Also, you completely ignore the 20% corporate income tax that would also be included.
I did not address it, as all but the smallest of corporations (those with taxable income of $50K or less) will receive a tax cut. So, again, there is loss to the system.
http://www.irs.gov... [page 17]

As for your figure about incomes, I believe, and maybe I am wrong here, you are using adjusted taxable income when you should be looking at total income. This 20% tax applies to total salaries and wages and business income at the individual and corporate level.
Corporate is less revenue.
Income tax on salary and wages is less than the credit, so negative revenue.
Income tax on major other income:
Business (schedule C): net of $245 billion
Partnership and S-corp: net of $345 billion
net rent, gambling, royalties, farm: est. $100 billion
Total = $138 billion in tax revenue, which should offset the remaining losses.

My first figures used total income, not AGI, even though AGI was only about $113 billion less.


Now, since we are replacing all those programs (SS, all existing tax credits and deductions, Medicare, Medicaid, etc.), we don't need much revenue to run the government.
Since this plan loses about $1 trillion in personal income tax revenue, $700 billion in payroll tax revenue, and lowers the corporate tax revenue, how much do we need? This leaves a budget of $1 trillion or so, plus the current $1 trillion or so of discretionary spending.

We just need to fund the military and some other basic functions.
Agreed. However, as of now, these other functions are military, justice, agriculture, transportation, congress, intelligence (CIA), enforcement (FBI), and education, to name a few.
Once you include the business tax and, as I'll explain below, the economic growth that will result, you get about what you need.

The economic growth will indeed be a result. The flat 20% rate that does not tax investment income is a very efficient form of taxation that gets rid of a lot of deadweight loss in the current tax code.
Economic growth will likely occur, but will it occur at the level needed? Especially considering the pitfalls and psychological effects that will occur, namely laziness, lower wages, and opting for stock instead of a paycheck.

The credits replace all those programs and the minimum wage. One of the great things about these credits is that they are flat and universal and thus don't create high implicit marginal tax rates. That is, in current welfare systems, we see high MTRs because people lose benefits as their income rises. Not true of the credits.
People "lose" 20% of the income if they make more than the credit. Does this not have a chilling effect? Does the free money for moochers not have a moral hazard?

Keep in mind that the elderly will now not pay any taxes, nor children, nor about 25% of adults, more when you factor in families.
http://www.bls.gov...


The minimum wage also creates a lot of DWL (deadweight loss). The simplicity and lack of DWL are major benefits here. This plan really is fiscally sound.

Now, let's pretend for a second that the plan isn't (which it is). If you really don't think my numbers add up, fine. That doesn't mean we should just say forget the plan.

You can raise the tax rate to 25% instead of 20% or you can cut the credits to $1500, $3000, and $6000... or both. I'm sure you can agree that a plan that has a 25% tax rate with $1500, $3000, and $6000 credits is sound (again this plan eliminates both payroll taxes and SS/Medicare).

So, how would you feel about the same plan with those numbers?
It would be more financially sound, but with human psychology, it is difficult to believe this plan, in principle, would work.


Here's what this new tax system would need to fund:

- The Refundable Credits

- Military

- Other Basic Functions (FBI, Basic Research, Infrastructure, etc.)

You are correct in saying the other basic functions are important, but they aren't all that expensive. All said, we probably need about $1 Trillion after the credits are taken into account (don't forget that it is okay to run a structural defiit of about 1 to 2% of GDP).

You are looking at the corporate income tax the wrong way. You are saying that we would lose revenue relative to current policy. I actually disagree with that but it is the wrong point. In your analysis, you acted like we would be getting no corporate income tax revenue at all.

What we need to do is look at all the revenue that would be raised and see it it can fund, adequatley, the credits and the other functions of the federal government.
Let's do this.
Assumptions as before plus, we will assume that non income tax (Corp or indv) will equal non military spending and interest payments. (This other revenue is about $208 billion).

According to the White House proposal, the Dept. of Defense needs $553 billion (page 59 of doc, 63 of pdf), and $240 billion to cover interest payments in 2012 (table S-3). http://www.whitehouse.gov...

Furthermore, we will assume that the effective tax rate for corporations is 30% for all income and all corporations.
Now, income taxes of both sources need to be about $800 billion to fully fund the government.

Now, I have already shown that individual income taxes paid will equal the credits offered, so there is zero income.
Corporate taxes were estimated to be only $327 billion in 2012; however, if the rate is cut to 20%, it will only yield $218 billion.
Therefore, there is a shortfall of about $550 billion.

Now, you say there will be growth. However, to cover this shortfall, the immediate overnight growth would need to be about 35% for both individual incomes and corporate profits.

Please tell me how this plan is viable.
Keep in mind the following:
This assumes there is no discretionary spending
This does not address the debt
This assumes no pay cuts or detriment to incomes
This assumes no shifting from income to investment (rental property vs. stocks)
This assumes no moral hazards with people simply mooching off society and parents

It it cannot, we should take the same plan and change the numbers (25% instead of 20%, for instance).
Adding 5% to the tax will add about $65 billion, and cutting $500 from the credit will add about $150 billion. So, a plan of 30% tax and credit of $1K, 3K, and 7K would be viable on paper, but not in practice.

One of the chief benefits of this plan, in my view, is that it reduces dependance because it gets rid of the high implicit marginal tax rates present in current welfare systems.

How? There will be two tax rates, one for earned income at 20%, and one for investment at 0%.
My work here is, finally, done.