Re: Federal Expenditures


"Islander" <nospam@xxxxxxxxxxx> wrote in message
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Jerry Okamura wrote:
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Jerry Okamura wrote:

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js wrote:


Here is a somewhat different perspective on the Reagan tax cuts. It
deals with the issue of "equity" in that arguments are oft presented
suggesting that tax rate cuts favor the "rich".

http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

This paper points out up front that, "...the reduction of high marginal
tax rates actually increased tax payments by "the rich," also
increasing their share of total individual income taxes paid." It
makes no claims about an overall increase in revenue.


That is fair. As far as I know total federal revenue did not decrease
during the Reagan years, did it?

There is no question that there


has been a shift in payment of taxes from the lower classes to the
upper classes, but this is offset by an increase in wealth at the top.
I think that this is why Rumple wanted to look in detail across the
income groups.


Well, it would seem to me that would be pretty obvious. Since the rich
pay most of the taxes, any reduction in the taxes they pay, will
"increase their wealth". The question it seems to me is so what? If
any person has more money in their pockets they will either spend it, or
invest it, won't they? What does the government do with that
money...they spend it. In neither case, do the two groups bury it <g>.


If the tax cuts only produce a redistribution of wealth favoring those
at the top, what is the benefit to our economy overall?


That is my question.

We used to pride

ourselves in the strength of our middle class and they paid a major
share of income tax.


They did? I could have sworn that every study I have seen on the subject
matter shows that the rich pay a disportiionate large share of the income
tax...

This is no longer the case since the middle class and

below are seriously hurting. It makes no sense to brag about how much
of the tax burden the wealthy are assuming without also pointing out
that they own most of the wealth now. This is the main point of the
Montague paper, but unfortunately one would like to see more recent
figures.


Well, I will repeat, the middle class is hurting because about 40%
(probably higher) of the money they earn is taken away by the government.
If they had that 40%, then they would not be suffering would they?


Well, one solution to that is greatly reduce the amount of money that
government spends, then every taxpayer can have more money in their
pockets, can't they? And why is the middle class hurting, well if you
take away about 40% of their gross income, by definition they they have
less money to spend.

The point is that a tax policy that worsens the gap between the wealthy
and the middle class is a bad policy. The United States is already high
on the Gini scale at 4.67 where 4 is considered too high and 6 or higher
is a predictor of social unrest. The Gini scale has also been correlated
to health and other social problems.



Well, then support polices that greatly reduce government spending, that
will result in less money the government needs, that in turn will result
in lower taxes, which in turn will help the middle class...
Let's attempt to separate two issues here. One is the reduction of
government spending and the other is a tax policy that redistributes
wealth in favor of the wealthy. I will argue that the redistribution of
wealth in favor of the wealthy is a bad thing for our society independent
of whether or not government spending is reduced.

We are experiencing an example of this locally and I believe that your
islands are as well. We are experiencing an influx of wealthy people who
are driving up the price of real estate to the point that even middle
income families cannot afford to purchase a home. There are no longer any
homes available for less than $200K and the median price of a home is now
$475K. Real estate prices have doubled in just 3 years. The result is
that we are having difficulty filling critical skill jobs needed to
support the basic island infrastructure. These same people scream bloody
murder at any hint of increasing taxes so that we can pay sufficiently
high salaries to attract and retain the workers that we need. Unlike most
communities commuting from less expensive areas is not possible. We know
that we are losing our younger families--there are fewer here today than
15 years ago while the overall population has grown by 50%. Here, the gap
is enormous. Average salaries are $26K/yr while over 1/4 of total family
income is in just 1.9% of our population. We live in a wonderful place,
but as the population ages we are beginning to see problems emerging.
Lowering taxes won't solve the problem and in our case would make it
worse.

Okay, let me try to tackle the basis of your argument. Homes become
unaffordable when the spread between the price of that home and the wealth
of the average Joe becomes too wide. There is relatively nothing you can do
that could effectively lower the cost of a home, because the biggest cost
element is the land... other than perhaps free up more land. That of
course won't work either because no landowner is going to put up their land
for sale for less than they can get on the open market. I suppose one
argument that could be made is if the government bought the land, and sold
it for far less than they bought the land for... The cost of building the
home itself, has not changed substantially over time. So, what can we do
about those basic facts. Well, since you cannot do a whole lot about the
cost part of the equation, the only part that you can do something about is
the wealth of the individuals, so they can afford to buy that home. It does
not help the individual to be able to buy that home, when the government
takes a good chunk of what they earn to spend on their pet projects. As I
understand it, the government takes about 40 cents of every dollar that a
person earns away from them. I am sure, that if the government did not take
such a big chunk of a persons earnings, more people would be able to afford
to buy that home. As for your comment that people are screaming bloddy
murder at any hint of increasing increasing taxes so we can pay higher
salaries, that does not make any sense at all. As for your comment that we
are losing our young families, that is what happens when we have a society
puts a very high price on raising a family. When people think the risk
outweigh the advantages, then they will tend not to want to take the risk.
I do not know what island you are talking about, but if you are talking
about Hawaii, income is relatively low here in Hawaii, because our main
industry is tourism. A good number of the jobs that are needed to feed that
industry are not going to be the high paying jobs...they will mostly be the
lower paying jobs...


.

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