Time to kill Trickle Down Economics

[Michael Hardner]

East Bay Express Article

This is obviously a partisan attack on Friedman economics, but there are some good facts in there to consider and debate. The economic debate, in the public sphere, is full of myths, misunderstandings, and misleading information.

What I have never understood is how the drive to cut taxes will end, or why there is so much strife after decades of productivity improvements.

Let's have a thread with lots of numbers, facts and graphs, hmmm ?

[Michael Hardner]

Gretchen Carlson, the Fox News host, said last year that "47 percent of Americans don't pay any taxes." John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans. Ari Fleischer, the former Bush White House spokesman, once said that "50 percent of the country gets benefits without paying for them."

Actually, they pay lots of taxes — just not lots of federal income taxes. Data from the Tax Foundation show that in 2008 the average income for the bottom half of taxpayers was $15,300. This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax-free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

[M.Dancer]

Let's have a thread with lots of numbers, facts and graphs, hmmm ?

Happy to comply

http://www.nationmaster.com/country/ca-canada

[Michael Hardner]

Great page.

Taxation in Canada

First thing we need to address is that the %contribution to tax often includes only income taxes as with here.

Proportion of taxes paid by the broad income group - richest 30% (Data is for mid-1990s). Taxes include all direct income taxes, including employee social security contributions. Income groups were built on the basis of final disposable adjusted income.

This gibes well with the claim in the article that puts the effective tax rate highest on the poor.

[Michael Hardner]

Next, I'd like to look at effective total tax rate by income group over time.

[Michael Hardner]

Here's one:

Visualizing Economics

[M.Dancer]

Next, I'd like to look at effective total tax rate by income group over time.

First, I would like to know what that is supposed to mean?

Effective? Okay, 100% is very effective....so is 0%

Next, I would like a thread that is unboring

[Michael Hardner]

First, I would like to know what that is supposed to mean?

Effective? Okay, 100% is very effective....so is 0%

Next, I would like a thread that is unboring

Boring, yet here you are.

Total tax rate including sales taxes, payroll taxes, income taxes as % of income.

[M.Dancer]

Boring, yet here you are.

Total tax rate including sales taxes, payroll taxes, income taxes as % of income.

And what is effective about that?

[Michael Hardner]

And what is effective about that?

It's a word to describe the rate that is actually paid, not a potential tax rate, or a tax rate attributed to an income range.

[Michael Hardner]

It's a word to describe the rate that is actually paid, not a potential tax rate, or the ideal tax rate attributed to an income range.

[Sir Bandelot]

No surprises here. Everyone needs to buy gas and food and clothing. We are all taxed at the same rate for those things but if your income is low, those taxes represent a bigger chunk of the "effective" money one has to live with.

The reverse is also true- when a 2% increase is given across the board, those making the most money get the biggest gain.

Now I'm no commnist I believe people should get compensated based on their merits, but as far as this trickle-down theory goes, ecce homo... shit runs downhill

[bush_cheney2004]

Boring, yet here you are.

Total tax rate including sales taxes, payroll taxes, income taxes as % of income.

Got any Canadian data?

[Pliny]

When the budget has reached 3.8 trillion, double that of the last Clinton budget and over 1 trillion more than the last Bush budget. Why would revenues be considered the only problem and a justification for raising taxes? And with the economy going bust from the housing bubble, revenues were bound to drop.

It appears that supply side economics was abandoned in the nineties as taxes were raised. GWB restored a bit of the concept in 2001 by cutting taxes but doubled spending as well and Obama is already spending a trillion more. So why is supply-side economics the culprit?

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax-free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

I have stated it before that taxation marginalizes the poor. They are expenses that no one escapes and they mostly affect the poor and marginally poor. It is the reason why the ranks of the poor are growing. Utility taxes, water taxes, transit costs, are all applied and essential if you wish to participate in society. Tent city is the place to escape them. It seems a rather fruitless effort to be at the level of poverty one is at, work harder to make more money and then make no progress because now you just moved into an income tax bracket that leaves you worse off than if you had changed nothing. There should be no taxes on income of any sort. You can then choose to live in tent city if you want and you won't be punished for trying to move out of it. As for the rich, they wouldn't have to live in fear of their government confiscating their property and hiding their money in the Cayman Islands.

But the fact remains that the political class likes to impose itself on the economy and in doing so considers itself the benefactor of wealth, making law also gives those in the know an inside edge on where to put their money to best use - preferably someplace where they can bail themselves out.

[Bonam]

In Canada, low income earners also get much of the GST/HST that they pay back in the form of sales tax refunds. Or, in some cases, the refunds actually give back even more money than the person paid in GST/HST. This should be taken into account before stating that sales taxes impose a heavier burden on "the poor" in Canada.

Edited April 18, 2011 by Bonam

[Pliny]

In Canada, low income earners also get much of the GST/HST that they pay back in the form of sales tax refunds. Or, in some cases, the refunds actually give back even more money than the person paid in GST/HST. This should be taken into account before stating that sales taxes impose a heavier burden on "the poor" in Canada.

A heavier burden on the "marginally poor", and that is the problem with any increase in taxation. I forgot to mention the biggest culprit for increasing the ranks of the poor; and that is inflation.

If one must ask why the rich are getting richer and the poor poorer then perhaps he should ask where the poor come from. I believe the liberal left thinks they come from someone getting more than their fair share of the wealth thus leaving others poor. The rich are hording all the "money" and it isn't fair. We must therefore, enlist an agency to legally take the money from the rich. Government then abandons it's raison d'etre, that being the protection from foreign or criminal threat to person and property. It's prime objective. It's purpose now becomes alloyed with being the arbiter of who should have, and who should not and how much each should have.

[dre]

A heavier burden on the "marginally poor", and that is the problem with any increase in taxation. I forgot to mention the biggest culprit for increasing the ranks of the poor; and that is inflation.

If one must ask why the rich are getting richer and the poor poorer then perhaps he should ask where the poor come from. I believe the liberal left thinks they come from someone getting more than their fair share of the wealth thus leaving others poor. The rich are hording all the "money" and it isn't fair. We must therefore, enlist an agency to legally take the money from the rich. Government then abandons it's raison d'etre, that being the protection from foreign or criminal threat to person and property. It's prime objective. It's purpose now becomes alloyed with being the arbiter of who should have, and who should not and how much each should have.

Government then abandons it's raison d'etre

Modern governments abandoned your personal subjective view of their raison d'etre thousands of years ago.

[Pliny]

Modern governments abandoned your personal subjective view of their raison d'etre thousands of years ago.

At least a hundred years ago this time around anyway.

[Michael Hardner]

If one must ask why the rich are getting richer and the poor poorer then perhaps he should ask where the poor come from. I believe the liberal left thinks they come from someone getting more than their fair share of the wealth thus leaving others poor. The rich are hording all the "money" and it isn't fair. We must therefore, enlist an agency to legally take the money from the rich. Government then abandons it's raison d'etre, that being the protection from foreign or criminal threat to person and property. It's prime objective. It's purpose now becomes alloyed with being the arbiter of who should have, and who should not and how much each should have.

Government's prime objective is to ensure the collective happiness of its people is maximized, not to protect private property. Your philosophy gets off on the wrong foot from the outset, and your entire reasoning deteriorates from there.

As for where the poor come from - I already showed you how LBJ's war on the poor decreased income disparity in America. As has been pointed out many times now, the wealthiest and more powerful have a natural advantage over the masses, which needs to be tempered by one of our most unnatural human inventions - democracy.

[Bonam]

Government's prime objective is to ensure the collective happiness of its people is maximized,

That's an awfully bold statement. Where in any of the things that comprise our constitution is that specified, exactly? The American one, at least, does make a mention of happiness. Speficially, people are supposed to be free to pursue it. It doesn't say anything about the government ensuring the maximum collective happiness, however.

I think if you truly believe this statement you are really misinterpreting the primary role of government.

In my view, the primary role of government should be to uphold the rights and freedoms granted its citizens under that government's constitution or equivalent document(s)/tradition(s).

Edited April 20, 2011 by Bonam

[dre]

That's an awfully bold statement. Where in any of the things that comprise our constitution is that specified, exactly? The American one, at least, does make a mention of happiness. Speficially, people are supposed to be free to pursue it. It doesn't say anything about the government ensuring the maximum collective happiness, however.

I think if you truly believe this statement you are really misinterpreting the primary role of government.

In my view, the primary role of government should be to uphold the rights and freedoms granted its citizens under that government's constitution or equivalent document(s)/tradition(s).

Well whether or not the concept of happiness is directly enshrined in framework documents or not, thats by nature what every elected government is trying to do... unhappy voters wont re-elect them after all.

I personally think that the governments core purpose is to provide a transactional framework and everything else is aligned behind this, including social welfare, maintaining order, upholding rights, etc. All these things are done to create an engine of happy productive citizens that will drive the economy and not raise to much of a stink.

[Michael Hardner]

That's an awfully bold statement. Where in any of the things that comprise our constitution is that specified, exactly? The American one, at least, does make a mention of happiness. Speficially, people are supposed to be free to pursue it. It doesn't say anything about the government ensuring the maximum collective happiness, however.

I think if you truly believe this statement you are really misinterpreting the primary role of government.

In my view, the primary role of government should be to uphold the rights and freedoms granted its citizens under that government's constitution or equivalent document(s)/tradition(s).

Who enforces the constitution ?

You seem to answer that in your last paragraph. All right, what if I take out happiness and say promote the general welfare ?

[Bonam]

Who enforces the constitution ?

You seem to answer that in your last paragraph. All right, what if I take out happiness and say promote the general welfare ?

I don't see either happiness or welfare as something that the government is meant to maximally provide on a collective basis. Rather, I see the role of government as creating a framework, a background, in which individuals are free to pursue these things on their own. A background where laws are enforced, rights are respected, contracts are honored, etc.

Well whether or not the concept of happiness is directly enshrined in framework documents or not, thats by nature what every elected government is trying to do... unhappy voters wont re-elect them after all.

Not necessarily true. Fear or discontent can be as powerful or more powerful a motivator to make people vote a certain way than happiness.

I personally think that the governments core purpose is to provide a transactional framework and everything else is aligned behind this, including social welfare, maintaining order, upholding rights, etc. All these things are done to create an engine of happy productive citizens that will drive the economy and not raise to much of a stink.

I tend to agree with this. The government should provide a solid framework for its citizens to operate in. But if that operation doesn't happen to yield "the most collective happiness" as Michael suggests, well, I don't think that it is the government's job to redistribute the happiness.

[sk1d]

One theory I've heard a few times, it's borderline conspiracy theory, but it's plausible....

All of these neo-con, right wing, free market people all believe that the less government, the better; the market will take care of everything. One way to hamper the ability of the government to interfere in the market is to reduce the amount of money the government can spend... so they cut taxes. The whole trickle down and being competitive with other nations and creating jobs, are all excuses to justify their goal of reducing the role of government.

Edited April 21, 2011 by sk1d

[Michael Hardner]

I don't see either happiness or welfare as something that the government is meant to maximally provide on a collective basis. Rather, I see the role of government as creating a framework, a background, in which individuals are free to pursue these things on their own. A background where laws are enforced, rights are respected, contracts are honored, etc.

That sounds Libertarian to me. Anyway, most don't see it that way, especially in Canada.