Re: OT: oil profits


"McDuck" <wallyDELETEMEMcDuck@xxxxxxxxxxx> wrote in message
news:bcfa245nsipati8pi4m1ts32ujkui645s7@xxxxxxxxxx
On Fri, 9 May 2008 11:52:47 -0400, "BBrain" <widenerb@xxxxxxxxxxx>
wrote:


"McDuck" <wallyDELETEMEMcDuck@xxxxxxxxxxx> wrote in message
news:pv4724d7t584i2l176qbkfvtn2i5qc9ke0@xxxxxxxxxx


Government grew in the past, but it has not been growing at the
Federal level for several decades. It has grown at the state level
and, in some cases, at the local level. so you should be happy <g>.

I assume you are talking about spending growth as a percentage of GDP, etc.
I was speaking about growth in terms of the proliferation of programs,
regulations, rules and employees. Just take a look at the growth in the size
of the Federal Registry and you will see what I mean.


And how are these funds acquired? Higher taxes. So it seems we are paying
higher taxes to fund even more programs and with them, more controls. And
how do our political "representatives" sell these higher taxes? They
divide
us into groups, then they raise taxes on one group at a time. Since any
one
group is a small minority, they have little success in fighting back. The
most popular target right now seems to be the "very wealthy", who are
accused of "not paying their fair share". Who's next?

I do disagree strongly that one role of government is to mitigate the
inequality of wealth and income. And why in the world would you want a
system that tries to obtain this equality by penalizing the most
successful
in order to subsidize the least successful? Remember the great experiment
with communism? As I recall, it didn't work out real well. And socialism
isn't lookig that good either. I do agree that government should strive to
create equal opportunity for all, but to punish those who are lucky or
make
more of their opportunities than others is self defeating.

Does every conversation about fair taxes have to end up with a
discussion of Communism? The Communists did not have a tax system, or
not much of one. The USSR did have a modest tax to try to take account
of differences in family size, but certainly it did not have a
redistributive income tax.

However, Marx was on the mark with his claim that capitalism contains
the seeds of its own destruction. His point --- which we now
understand to be obviously correct --- is that unregulated capitalism
ends up with more and more wealth being concentrated in the hands of
the few, resulting in huge savings levels and little consumption (and
misery for the masses). He looked forward to the collapse of
capitalism as the entry to communism. Didn't happen because the
political process in the US and Europe intervened to end laissez faire
capitalism. And a redistributive income tax was a major part of the
solution.

I cited communism as an example of an economic sysyem that in theory would
redistribute income, thus every one would be "equal" in terms of sharing the
wealth of society. It failed mostly because it removed the economic
incentives for the average working person, which led to low productivity,
and required a strong central planning and control system of economic
activity, which had to include total political controls to work. This is
exactly the issue I am trying to make. To argue that communism as an
economic system failed because the US & Europe adapted the graduated income
tax is a very weak argument. By the way, I don't remember advocating for
"laisserz faire" capitalism, unless you are referring to my original remark
about government getting out of the way. I was making the point that I
believe that government is too large and too intrusive, and I was advocating
for less regulation, not an end to any government role at all. But I suspect
you already know that but decided to use the old ruse of restating the other
persons position in extreme terms to make it seem weaker.

The reason communism had no real tax system is that there was nothing to
tax! Virtually all property and all economic activity was owned and
controlled by the government. The central authorities decided how much each
person or family was going to receive, and the individual was almost
powerless to change it. Almost the only way you could "get ahead" under a
communist government was to become part of the governing elite. Human nature
being what it is, sure enough the governing bureaucrats cut out a bigger
share for themselves.

Most social scientists and economists agree that tax policies can be used
to
influence economic behavior; if you want less of something, tax it, if you
want more of it, lower the taxes or subsidize it.

Sure, partly true. I want less inequality, so who do I tax to get it?

You seem to be saying that you want to achieve equality by reducing the
wealth of the minority until it is more equal to the majority . I would
rather find ways to increase the levels of wealth for the minority uto make
it more equal. This doesn't always have to be about higher taxes and bigger
government programs.

The Wall Street Journal frequently makes the argument you have made
--- that a tax on the rich is a tax on success. It is not. Someone has
to pay. Do you or anyone else think that if we tax the poor more
heavily, we will have less poverty?

Of course a tax on the rich is a tax on success (at least economic success),
saying it is not does not make it so.
Exactly, since government itself does not create wealth, someone has to pay
the costs of it's policies, programs and infrastucture. I'm saying that with
less government, whoever pays will end up paying less. That's the whole
idea.
That's a bogus argument. I did not advocates increasing taxes on the poor
and you know it.

In fact, the economic literature shows that heavy taxes on the middle
class reduce work but that heavy taxes on the wealthy have little or
no effect on their conduct. If someone has $50 million and is still
working hard, you can be pretty sure it is not mostly for the money.
It is for power, glory, prestige, inner demons, whatever, but not to
satisfy their matieral needs or even material wants.

Maybe your choice of economic reading materials is different than mine. In
any case I wasn't thinking of the work side of the equation, but the effect
of reduced disposable (read investment) on the long term economic health of
our nation. The amount of money the rich spend on consumption is so small
compared to the whole that it has no signiicant effect in the economy.
Remember, the rich don't keep their money in their mattresses any more. They
invest it, and that is the source most capital investment in the economy.


Economists speak of two effects of an income tax --- the income effect
and the substitution effect. The latter occurs when a taxpayer
responds to higher taxes on income by working less (substituting
leisure for working). The former occurs when a taxpayer is working to
achieve some goal (e.g., buy a house) and works even harder after the
tax is imposed in order to be able to get the money needed to achieve
the goal. For example, If I'm making $50,000 after tax and working 40
hours a week, with the goal of buying a $300,000 house, I might work
50 hours to get back to $50,000 if an additional tax is imposed that
reduces my after-tax income. The effects have opposite signs --- that
is, the substitution effect reduces work incentives and the income
effect increases them. No one knows, a priori, which is more
important. In practice, they seem to balance each other out a lot of
the time.

Well, I prefer the side that says I get to keep most of the rewards of my
work. I am concerned about what happens when people decide it isn't worth it
to work harder, because as they make more the government takes more of it.
Maybe no one knows where that tipping point is, but I am not interested in
finding it, as the effect could be severe.

We need to be careful we
don't end up taxing success at very high rates in the name of equality. We
could end up with a lot less of it, then who would be next? My bet is that
the definition of "very wealthy" would be revised downward. Think of the
minimum alternative tax as a good example of how this happens.


Well, you said you favored graduated rates, so you do favor taxing
"success". Perhaps we disagree on the degree of progressivity we favor
--- don't know, as that issue was not on the table. I was arguing
against the flat-tax as a requirement of social justice.

You are right, I have no argument with the graduated tax. Why are you
injecting the flat tax into this discussion? I never even mentioned it.

As for the alternative minimum tax, I think it does not make your
point. The AMT was once a rough way of reducing popular tax loopholes
for upper-income people without facing the political problems of
taking them away from the middle class. Then congress took stuff out
of the AMT that were directed at the rich, such as the untaxed part of
capital gains. At that point, the tax was pretty stupid.

But it got worse. In 2001, when Bush and the Republican Congress
borrowed money to provide tax cuts for the rich, they refused to make
the adjustments in the AMT that had routinely been done when rates
were lowered. That fact, plus the lack of indexing of the exemption
level, created the current problem. But understand why. IF the Bush
people had not created the AMT problem by lowering the top regular
rate and not lowering the AMT rate, they would have had less money for
the tax cuts for the very rich. In effect, the upper middle class,
though the AMT, is paying for a good portion of the tax cuts for the
very rich.

I don't see how you have shown that the AMT does not make my point. It was a
tax originally aimed at the "upper-income" group to increase their effective
tax rates by eliminating the effect of previous revisions to the tax codes
made by Congress. It ended up affecting a lot of other groups as well and no
one, Republican or Democrat, has been willing to take the lost revenue hit
that would result from fixing that. Maybe not the perfect example, but good
enough for me.

Are the "rich" the only ones effected by capital gain taxes? What about the
millions of people who own stocks, bonds or real estate? Again, why invest
if your gains are taxed at a rate that doesn't justify the risk of losses.

Your argument seems to be that the lower tax rates caused more people to pay
the AMT. Obviously not so. The income levels at which the AMT applies were
not lowered, so it had no effect on who was hit with the AMT. The cause of
the increase in the number of people effected by the AMT is, as you say, the
lack of indexing for inflation. As I said above, nobody was willing to take
the hit required to fix it, so somehow this becoming a Bush/Republican plot
to give use the money to fund a "tax cut for the very rich" just doesn't
wash.

To paraphrase someone else, "Does every conversation about fair taxes have
to end up with a discussion of Bush and the Republican Congress?" Somehow I
knew it would get to this. The evil Bush and his Republican cronies are
really the bad guys, not high taxes.




.

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