Taxes, schmaxes who really cares.
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I had a conversation today with a friend of mine about an economic theory we have. Basically, the idea is excluding the extremes of 0% and and 100%, the tax rate of a nation is irrelevant over time. The idea is that the market naturally progresses towards a price equilibrium, and the innate value of goods in relation to each other does not change in the short run. This means that the cost of living will find a way to be met within the confines of available cash flow of society. So if the overall tax rate went up to 80%, demand would initially decrease but eventually prices would find an equilibrium again via deflation, and you again have the same level of quality of life relative to others at different income levels. Likewise, if taxes dropped to 10% overall, the disposable income would eventually drive up demand, and logically prices, until an equilbrium was reached at a higher level. This is a very simple version of the concept, as it doesn't take much into consideration, for example what the taxes are used for. In any case, I thought it sounded interesting enough, and I was hoping to get some input before digging deeper. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
All taxes are ultimately regressive, and are never levied for the benefit of the taxed. Taxes drain resources from the capital markets, wherein all wealth is created, and transfers resources to the public sector, which produces no wealth and often inhibits its creation. Taxes on income are specifically evil, as they punish the productive for their efforts, and reward the worthless for being idle. All taxes above a minimal level necessary to provide for the common defense and ensure domestic tranquility result in a skewed system of values, in which otherwise productive effort is wasted on finding ways and means to avoid taxes rather than creating more wealth for the society. The higher the rate of taxation exacted from the efforts of the useful members of a society, the lower the overall standard of living for all members of that society. If taxes are inevitable, the damage they cause can be limited by taxing consumption, rather than production. Taxing the earnings on investments in the capital markets is always counterproductive, as this reduces the incentive to invest in new industries and markets. Taxing consumption creates an incentive to invest and save, rather than to squander limited resources on fads and foibles. "How many times do I have to flush before you go away?" - Megan Forbes, on Management (12/5/2002)
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All taxes are ultimately regressive, and are never levied for the benefit of the taxed. Taxes drain resources from the capital markets, wherein all wealth is created, and transfers resources to the public sector, which produces no wealth and often inhibits its creation. Taxes on income are specifically evil, as they punish the productive for their efforts, and reward the worthless for being idle. All taxes above a minimal level necessary to provide for the common defense and ensure domestic tranquility result in a skewed system of values, in which otherwise productive effort is wasted on finding ways and means to avoid taxes rather than creating more wealth for the society. The higher the rate of taxation exacted from the efforts of the useful members of a society, the lower the overall standard of living for all members of that society. If taxes are inevitable, the damage they cause can be limited by taxing consumption, rather than production. Taxing the earnings on investments in the capital markets is always counterproductive, as this reduces the incentive to invest in new industries and markets. Taxing consumption creates an incentive to invest and save, rather than to squander limited resources on fads and foibles. "How many times do I have to flush before you go away?" - Megan Forbes, on Management (12/5/2002)
In my observations income taxation is also a tax on all but the wealthy. The wealthy can afford the accountants and lawyers so they can avoid the taxation. This leaves the burden on the middleclasses and poor to pay. As you suggest effort is wasted on learning how to avoid tax rather than increasing productivity. ( OT: Recently I was lucky enough to find a gigantic international taxation loophole. :-) } Equitable taxation is an imposibility that is without a realistic global solution. Consuption taxation must be universal in nature and must never be self defeating in its level. Example, 1. ) Couuntry X changes to a consumption tax, 2. )Residents of Country X start saving and investing to avoid the consumption tax. 3.) The consumption tax "take" is lowered as the residents are not spending enough. a) the consumption tax must be increased to compensate. b) 1st, 2nd, 3rd type industries sales decrease as consumers are spending less. 4.) repeat step 3. There are alternatives available other than consumption or income taxes, however vested interests would prefer we do not utilize them. Regardz Colin J Davies
Sonork ID 100.9197:Colin
You are the intrepid one, always willing to leap into the fray! A serious character flaw, I might add, but entertaining. Said by Roger Wright about me.
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A more significant issue might be taxation on consumption versus income. IMHO a consumption tax on all non vital (food, medicine, fuel/electricity, etc.) items is inherently fairer than any income tax (flat or graduated). Income taxation is fatally flawed for all the many reasons mentioned in the posts so far. It is intended by most states that use graduated income taxation to act in large part as a mechanism for redistributing wealth...at which it rarely succeeds. Some ideas are so stupid that only an intellectual could have thought of them - George Orwell
Abosultely. Consumptions taxes are the only fair way to go. I live in South Carolina, and one of the plans out new governor-elect proposed during campaigning was removal of our income tax. (over 18 yrs.!!! :wtf:) Even over such a long period, I'd still like to see it start happening. We will see soon enough if he was just BSing or if he will actually try to pass it. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
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In my observations income taxation is also a tax on all but the wealthy. The wealthy can afford the accountants and lawyers so they can avoid the taxation. This leaves the burden on the middleclasses and poor to pay. As you suggest effort is wasted on learning how to avoid tax rather than increasing productivity. ( OT: Recently I was lucky enough to find a gigantic international taxation loophole. :-) } Equitable taxation is an imposibility that is without a realistic global solution. Consuption taxation must be universal in nature and must never be self defeating in its level. Example, 1. ) Couuntry X changes to a consumption tax, 2. )Residents of Country X start saving and investing to avoid the consumption tax. 3.) The consumption tax "take" is lowered as the residents are not spending enough. a) the consumption tax must be increased to compensate. b) 1st, 2nd, 3rd type industries sales decrease as consumers are spending less. 4.) repeat step 3. There are alternatives available other than consumption or income taxes, however vested interests would prefer we do not utilize them. Regardz Colin J Davies
Sonork ID 100.9197:Colin
You are the intrepid one, always willing to leap into the fray! A serious character flaw, I might add, but entertaining. Said by Roger Wright about me.
Colin Davies wrote: Example, 1. ) Couuntry X changes to a consumption tax, 2. )Residents of Country X start saving and investing to avoid the consumption tax...... Would these consumers actually spend less though? There may be a shift in spending habits due to the new method, but I believe overall spending would remain. Any possible reduction would be short-term, during the period of adjustment, as would any possible increase. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
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Chris Austin wrote: A simple flat-tax may not be answer but the current system is broken and needs to be fixed. i agree. i don't think the problem is with the poor paying too little, though. there's really not much to be gained from taking more money from people who need every cent just to survive. i agree with the idea of 'reducing spending' that i hear the republicans talk so much about. now if they would just do that, we might be able to actually afford a tax cut or two. personally, i'd prefer if they started with defense-welfare programs like missile defense and GulfWar II : that's $200B+ right there. -c
Chris Losinger wrote: i'd prefer if they started with defense-welfare programs like missile defense and GulfWar II : Although, I do feel defense is the one thing government should actually be doing, I agree our current level of spending is fairly outrageous.1 $396B next year. That's $1414 per citizen. 130Million are actually working2, so they are paying over $3000 per year. I know I'd love to get about $1000 of that back. That would leave us at around $270B, or $70B over the combined spending of our Allies3 1http://www.cdi.org/issues/budget/FY03Highlights-pr.cfm[^] 2http://factfinder.census.gov/bf/_lang=en_vt_name=DEC_2000_SF3_U_DP3_geo_id=01000US.html[^] 3http://www.cdi.org/issues/wme/[^] BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
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I had a conversation today with a friend of mine about an economic theory we have. Basically, the idea is excluding the extremes of 0% and and 100%, the tax rate of a nation is irrelevant over time. The idea is that the market naturally progresses towards a price equilibrium, and the innate value of goods in relation to each other does not change in the short run. This means that the cost of living will find a way to be met within the confines of available cash flow of society. So if the overall tax rate went up to 80%, demand would initially decrease but eventually prices would find an equilibrium again via deflation, and you again have the same level of quality of life relative to others at different income levels. Likewise, if taxes dropped to 10% overall, the disposable income would eventually drive up demand, and logically prices, until an equilbrium was reached at a higher level. This is a very simple version of the concept, as it doesn't take much into consideration, for example what the taxes are used for. In any case, I thought it sounded interesting enough, and I was hoping to get some input before digging deeper. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
brianwelsch wrote: This means that the cost of living will find a way to be met within the confines of available cash flow of society. So if the overall tax rate went up to 80%, demand would initially decrease but eventually prices would find an equilibrium again via deflation, and you again have the same level of quality of life relative to others at different income levels. Likewise, if taxes dropped to 10% overall, the disposable income would eventually drive up demand, and logically prices, until an equilbrium was reached at a higher level. So if the overall tax rate went up to 80%, demand would initially decrease A LOT. Prices would find an equilibrium but not for some time. The increase in cost to the producers may initially cause inflation (called cost-push[^] inflation) until demand grinds to a halt. Deflation[^] and recession would be inevitable. The natural movement of prices is upward since most producers would be inclined to increase their profits rather than drop them to zero. I think think it would be catastrophic to the economy in the short run (10-15 years) but eventually it would recover and reach the equilibrium. It would be like someone who has never drank in there life to one night downing a twelve pack of guiness. There would be a lot of bloody heaving and a stomach pumping at the hospital followed by the worst hangover in the world. If taxes dropped to 10% overall, yes, the disposable income would immediately drive up demand, and prices (called demand-pull[^] inflation) until equilibrium. In the long run, lowering taxes is the best option since the goal of economists is not to control prices, but to control the cyclical ups and downs of the economy. Raising taxes that much would be chaotic while lowering taxes would actually help things. Sure there would be a drop eventually, but it wouldn't be the shock caused by an 80% tax rate.
Jason Henderson
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I had a conversation today with a friend of mine about an economic theory we have. Basically, the idea is excluding the extremes of 0% and and 100%, the tax rate of a nation is irrelevant over time. The idea is that the market naturally progresses towards a price equilibrium, and the innate value of goods in relation to each other does not change in the short run. This means that the cost of living will find a way to be met within the confines of available cash flow of society. So if the overall tax rate went up to 80%, demand would initially decrease but eventually prices would find an equilibrium again via deflation, and you again have the same level of quality of life relative to others at different income levels. Likewise, if taxes dropped to 10% overall, the disposable income would eventually drive up demand, and logically prices, until an equilbrium was reached at a higher level. This is a very simple version of the concept, as it doesn't take much into consideration, for example what the taxes are used for. In any case, I thought it sounded interesting enough, and I was hoping to get some input before digging deeper. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
Taxation, eh. Does anyone remember the Monty Python skit? That was so funny. I can still picture John Cleese, astride a horse, pointing a silly gun at a coach filled with nobles and exclaming, "Your Luppins or your Life!" Ultimately the sketch ended with him riding off, scratching his head, bewildered by this whole wealth re-distribution scheme. It was pure Python. Chris Meech "what makes CP different is the people and sense of community, things people will only discover if they join up and join in." Christian Graus Nov 14, 2002. "AAAAAAAAAHHHHHH!!!!! Those leaks are driving me crazy! How does one finds a memory leak in a garbage collected environment ??! Daniel Turini Nov. 2, 2002.
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I had a conversation today with a friend of mine about an economic theory we have. Basically, the idea is excluding the extremes of 0% and and 100%, the tax rate of a nation is irrelevant over time. The idea is that the market naturally progresses towards a price equilibrium, and the innate value of goods in relation to each other does not change in the short run. This means that the cost of living will find a way to be met within the confines of available cash flow of society. So if the overall tax rate went up to 80%, demand would initially decrease but eventually prices would find an equilibrium again via deflation, and you again have the same level of quality of life relative to others at different income levels. Likewise, if taxes dropped to 10% overall, the disposable income would eventually drive up demand, and logically prices, until an equilbrium was reached at a higher level. This is a very simple version of the concept, as it doesn't take much into consideration, for example what the taxes are used for. In any case, I thought it sounded interesting enough, and I was hoping to get some input before digging deeper. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
So if the overall tax rate went up to 80%, demand would initially decrease but eventually prices would find an equilibrium again via deflation The limit here is that eventually the cost of manufacturing exceeds to cost of sales. Of course, most of the taxes would then go to subsidies, such as we currently have for bread, etc., so you're probably right. However, if all this tax money went to missile defense instead of subsidies, then we'd have a problem. The problem is that taxes should never be used to subsidize the cost of consumer goods. This hides the true cost of something, resulting in a volatile economy. Instead, taxes should be used to subsidize services, such as health care, roads, missile defense, etc. And within those services, the gov't should be paying real costs for goods consumed as part of those services. Just a thought. Marc Help! I'm an AI running around in someone's f*cked up universe simulator.
Sensitivity and ethnic diversity means celebrating difference, not hiding from it. - Christian Graus
Every line of code is a liability - Taka Muraoka -
Colin Davies wrote: Example, 1. ) Couuntry X changes to a consumption tax, 2. )Residents of Country X start saving and investing to avoid the consumption tax...... Would these consumers actually spend less though? There may be a shift in spending habits due to the new method, but I believe overall spending would remain. Any possible reduction would be short-term, during the period of adjustment, as would any possible increase. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
brianwelsch wrote: Would these consumers actually spend less though? Yes, IMHO. However if the country's changed to a consumption tax, they would probably relieve income tax a bit which allowed for more disposeable income. As I mentioned previously sometimes the opposite occurs because many of the variables are derived from Human nature. But IMHO overall increases in taxation stunt production, and wealth creation. brianwelsch wrote: brianwelsch wrote: Any possible reduction would be short-term, during the period of adjustment, as would any possible increase. I think we will have to agree to disagree. :-) :-) Regardz Colin J Davies
Sonork ID 100.9197:Colin
You are the intrepid one, always willing to leap into the fray! A serious character flaw, I might add, but entertaining. Said by Roger Wright about me.
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brianwelsch wrote: Would these consumers actually spend less though? Yes, IMHO. However if the country's changed to a consumption tax, they would probably relieve income tax a bit which allowed for more disposeable income. As I mentioned previously sometimes the opposite occurs because many of the variables are derived from Human nature. But IMHO overall increases in taxation stunt production, and wealth creation. brianwelsch wrote: brianwelsch wrote: Any possible reduction would be short-term, during the period of adjustment, as would any possible increase. I think we will have to agree to disagree. :-) :-) Regardz Colin J Davies
Sonork ID 100.9197:Colin
You are the intrepid one, always willing to leap into the fray! A serious character flaw, I might add, but entertaining. Said by Roger Wright about me.
Colin Davies wrote: However if the country's changed to a consumption tax, they would probably relieve income tax a bit which allowed for more disposeable income. I understood that you meant the country would move to consumption tax exclusively. Colin Davies wrote: But IMHO overall increases in taxation stunt production, and wealth creation I do agree with this. There are just too many variables involved to create even a reasonably simple scenario that would allow my original idea to be true. :) BW "If you enjoy what you do, you'll never work another day in your life." - Confucius
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brianwelsch wrote: This means that the cost of living will find a way to be met within the confines of available cash flow of society. So if the overall tax rate went up to 80%, demand would initially decrease but eventually prices would find an equilibrium again via deflation, and you again have the same level of quality of life relative to others at different income levels. Likewise, if taxes dropped to 10% overall, the disposable income would eventually drive up demand, and logically prices, until an equilbrium was reached at a higher level. So if the overall tax rate went up to 80%, demand would initially decrease A LOT. Prices would find an equilibrium but not for some time. The increase in cost to the producers may initially cause inflation (called cost-push[^] inflation) until demand grinds to a halt. Deflation[^] and recession would be inevitable. The natural movement of prices is upward since most producers would be inclined to increase their profits rather than drop them to zero. I think think it would be catastrophic to the economy in the short run (10-15 years) but eventually it would recover and reach the equilibrium. It would be like someone who has never drank in there life to one night downing a twelve pack of guiness. There would be a lot of bloody heaving and a stomach pumping at the hospital followed by the worst hangover in the world. If taxes dropped to 10% overall, yes, the disposable income would immediately drive up demand, and prices (called demand-pull[^] inflation) until equilibrium. In the long run, lowering taxes is the best option since the goal of economists is not to control prices, but to control the cyclical ups and downs of the economy. Raising taxes that much would be chaotic while lowering taxes would actually help things. Sure there would be a drop eventually, but it wouldn't be the shock caused by an 80% tax rate.
Jason Henderson
Thanks for the links, Jason. :) I think the original idea is just too simplistic to ever be true. BW "If you enjoy what you do, you'll never work another day in your life." - Confucius