Arkady Grudzinsky


This conversation is closed.

Would you prefer sales tax to income tax?

The power to lay and collect taxes is, perhaps, the greatest power of the government. With this power alone, the government can encourage or prohibit certain behaviors without passing additional laws - it can effectively ban alcohol, tobacco, firearms, etc., can coerce people to marry, to have or have no children, buy gas or "green energy", buy real estate, lock up their money for decades in retirement accounts (both policies make people return a large percentage of their income straight back to the banks withdrawing huge amounts of cash from circulation). Taxes inhibit the taxed activity.

I see several advantages of sales tax compared to income tax:

1. Sales tax inhibits spending, income tax inhibits earning. When money are taxed when spent, not when earned, it may encourage saving and investing rather than spending and incurring debts.

2. One can avoid paying a sales tax on discretionary items by not buying these items - sales tax is less coercive.

3. Sales tax on discretionary items appears to be self-regulating. When it is too large, people stop buying the taxed items, and the tax revenues drop. It's easier to determine the economic effect of sales tax and optimize the sales tax percentage. Whereas, the economic effect of changing income taxes is a lot harder to determine.

4. The tax code would be extremely simple - just a look-up table of tax rates (this may be a naive statement).

5. "Taxing the rich" would mean taxing the excessive luxurious lifestyle. Why would a frugal billionaire who leads a lifestyle of an average citizen be taxed more than an average citizen?

I understand, there is no "correct answer". This is why I post this as a debate. I'd like to know how many people think this way and to hear cases for or against both types of taxation.

Edited 4/13/2013: This seems to be a similar idea:

Closing Statement from Arkady Grudzinsky

I'd like to thank everyone for the discussion.

There were good points made:

- that sales tax would make "the rich" pay smaller percentage of their income than "the poor";

- that no matter what type of tax we have, "the rich" will still have an opportunity to avoid it - either by spending money overseas or by making money overseas bringing into consideration the necessity of a uniform wold-wide taxation.

- A good discussion whether charity should be voluntary or compulsory and whether people should contribute to society voluntarily or forced to do so.

- Good references to other resources such as Mises institute.

- Interesting point in a video referenced by Krisztian Pinter that taxes have a way of distributing across all layers of society - often what seems to be "a tax on rich" becomes a burden on "the poor" bringing up the idea of a uniform tax (sales or income) with equal percentage for the rich and the poor.

- A good discussion with Pat Gilbert of how government intervention in free market creates artificial incentives and "bubbles" which are unlikely to exist otherwise.

These are just some points worth noticing. I appreciate having a civilized discussion on such highly politicized topic involving social justice, economy, and morality. This is where TED community stands out.

  • Apr 20 2013: The problem with a sales tax is that it tends to be regressive, meaning that it hits poor people harder. Individuals with less money spend a greater percentage of their income on necessities. On the flip side, taxing luxury items tends to discourage wealthy people from buying them, which means that it isn't nearly as viable of an option if you're trying to create a stream of revenue.

    Also, you mentioned that a sales tax could be a benefit in that it discourages spending, but may encourage saving or investment. Investment is good for the economy, particularly in the long run, but saving money is typically only good for the individual. There is such a thing as excessive spending and consumption, but consumption ultimately enhances the strength of the economy. One person's consumption is another person's income. I'm not saying that saving money is bad, or that spending money is completely good, but I don't think that you can consider that type of incentive to be an advantage of a sales tax.
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      Apr 20 2013: Regarding regressiveness of sales tax, it seems to be #1 objection against it. What do you think of the idea of "prebate" discussed in proposal?

      Good point about negative effect of holding on to money. I think, inflation does a good job discouraging people to hold on to cash. I believe, cash is only good as a medium for exchange. It does not have intrinsic value. I internalized this so much over years that "saving" to me is synonymous to "investing".

      Also, it's not completely true that saving is good only for individual. E.g. when a person has cash reserves, he does not burden the society to support him in case of hardship or emergency.
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    Apr 12 2013: in theory, it is a good way. however there are problems with it, namely two major ones, one preference and one practical. the preference one is that many people want the state to "fine tune" the tax system, like apply different taxes to high income people regardless of their spending habits, and lower taxes on families, farmers, young people, old people, nurses, whatever. sales tax does not allow the state to grant special treatment, nor the people to aspire for them.

    the practical one is that in most first world countries, the tax is so high, it is practically impossible to collect it in one kind of tax, since people would simply reject to pay it, and go to the black market instead. it is too tempting, they can break the law once, and save themselves a huge amount of money. with a plethora of different taxes, you make the cost of avoiding one tax not worth the smaller sum it saves you.

    in my view, the theory of taxation is this. a good tax system is the one that maximizes the income of the state with the less fuss about it. the best tax is a hidden tax. that's why we have corporate taxes. that's why we have inflation, which is a form of taxation. the best tax code is designed by psychologists.
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      Apr 12 2013: Re: "sales tax does not allow the state to grant special treatment"

      Exactly. This is one of the reasons I like sales tax better.

      Re: "the practical one is that in most first world countries, the tax is so high, it is practically impossible to collect it in one kind of tax, since people would simply reject to pay it, and go to the black market instead."

      This is what I meant by "self-regulation". It does not make sense to increase sales tax beyond a certain point - the revenues will drop because either people will stop buying the product or buy it in the black market. A $1000 tax on a bottle of alcohol will be effectively equal to prohibition and will lead to the same flourishing of crime. This is what I mean when I say that the government does not need to create gun-control laws, nor does it have to prohibit drugs.

      I like the idea of hidden taxes. With this in mind, compelling everyone to fill out the tax return form sounds like a bad idea. I find it somewhat humiliating to fill in how much I "owe" with my own hand, signing it under penalties of perjury and sending it to the IRS as a "patriotic" and utterly hypocritical act of "voluntary compliance". I understand, it's a necessary evil. Just take my money, if you must, as much as you must. Just don't make me "voluntarily" sign that I somehow "owe" it.

      Who came up with the idea to put the pictures of the Statue of Liberty on all tax publications, return checks, etc.? What kind of twisted logic associates taxes with liberty?
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    Apr 20 2013: Again, there are circumstances that have some in financial straits. These need to be addressed by all of us. I have made the point that small local soup kitchens seem to help feed people better the the fancy government offices handing out food stamps. My point is that there are and may always be those among us that need help and our national conscience dictates that we help those who need help.
    My problem is that the Federal Government takes tax revenues and does wasteful things with it.
    One of a thousand examples, our Department of Education gave out hundreds of billions to young students without thought and consideration. Universities raised tuition and fees to "use" this money to educate these young students.
    Today, we have tens of thousands of sociology majors out of work and owing 100s of billions in loans. Smart???
    We have disabled veterans, who are waiting years to get resolution on their deserved benefits. I am one, who has been waiting for a few years, myself. The "joke" around our VA hospital is whether or not we'll live long enough to get our final disability settlement. Actually a few of my colleagues didn't make it. Now that is what we pay our taxes to accomplish.
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      Apr 20 2013: Mike, I also have a feeling that private charitable organizations are good at what they do - charity while bureaucracies are good at what they do - bureaucracy. When politicians give away public money, it seems to be done not because of the concern for the cause, but to get votes for the next reelection. It has nothing to do with charity. Doing "charity" with other people's money to help myself is hypocrisy, not charity. This is why we have bloopers like $400 mln facility for homeless and millions given away to faux "victims" of hurricanes. The real beneficiary of the $400 mln expense was the contractor who built the facility and the politicians themselves who, perhaps, got a few votes for "caring for the poor".

      I do believe, however, that taking care of disabled veterans is the responsibility of the government who caused the disability by sending people to war. This should be a part of defense budget and included into the cost of wars. I don't view this as charity or a "social program". Charity from private individuals towards veterans is due on top of that.
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    Apr 20 2013: Regarding the poor it should be noted that this is a category of income very few people stay in the same category for long poor or rich. A category is not flesh and blood people.

    People talk about how unfair the taxes are on the rich with the loopholes. By the way a flat tax would eliminate a lot of this thus raising revenue.

    Another thing to look at on this is that the poor don't pay taxes either. For starters 50% of all income tax payers pay 0, this is a fact. Additionally public transfers (welfare) does not show up in the statistics so the income of the poor is about 35% higher than is reported. Not to mention how much they make by working for cash.

    So the regressive notion is very debatable. Not to mention the fact that when you pay people to be poor they get good at being poor just as when you pay people to be disabled they get real good at being disabled. This is great for politicians seeking votes but it creates a sense of entitlement which is probably worse in the UK but we are not far behind in having enslaved citizens who have less lived lives.
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      Apr 20 2013: You make some good points Pat.
      One thing I'm curious about is the fact 50 percent of the money they pay in tax is reimbursed in the form of tax returns. They don't get all the money they pay in back in taxes via the refund.

      The govenment keeps some of it so they do pay taxes. A typical family making $40,000.00 a year pays in 40000 X .28 = 11200.00 dollars in taxes. Of this amount they receive an average of $3,000 in refund. That's $11,200 - $3,000 = $8,200 in taxes they pay each year. So these people are payiing 8.2/40 x 100 = an effective tax rate of 20.5%

      To pay zero tax, you would have to earn $24,200 a year, and will pay no taxes because the $11,600 standard deduction plus four exemptions of $3,700 each will lower their taxable income to zero [source: Williams].
      A married family with only 1 child will pay a $3,700 in taxes.
      These families still have to pay sales tax which eats up the remainder of their funds, mostly leaving them with large debt (in one form or another) each year.

      The solutions is to raise the lowest income to $40,000 so everyone will have to pay taxes, or live with these lower income families paying zero taxes, which seem fair to me. It's impossible to live on just $24,000, send you kids to college and save money. That comes to: housing ($800)+ utilities (200) + auto insurance (110) + junky car payment (250) + transportation gas of (125) = $1,485. Leaving them $285 in the red each month. Lets not forget the have to pay the governmet a total of 300 each month in take out taxes leaving them a total of $585 in the read each month.

      These are the people who need a hand up in our society. The reast of us are doing great and should stop trying to force taxes on them. If there is a difference in revenue - expenses the tun the governent then we can raise taxes on the upper earners as well as the upper middle class. The reast are barely making it as it is.
      Seems simple to me.
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        Apr 20 2013: I thought the marginal fed tax (on 40k) was 15% not 28%?

        It is commonly known that 50% of the people pay 0 tax on the federal level. Even if that exact number is debatable the fact that a percentage approaching 1/2 is true.
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          Apr 20 2013: It's true. About ½ don't pay any taxes but not all these people are poor.
          Approximately 71% of the working population (92,594,960 people) made between 1-50k last year.
          Income Number of people % of us revenue.
          $50,000 – $75,000 17,396,916 13.374%
          $75,000 – $100,000 9,247,839 7.110%
          $100,000 – $200,000 8,422,603 6.475%

          The total of people who actually paid tax revenue is 130,076,445 out of an eligible to work population of 170 million people. *interesting note: (170M-130M)/170 X 100 = 23% unemployment rate.

          With a population of over 300 million people paying sales taxes whither or not contributing this money to the general tax fund would be an alternative system would depend on how much tax they payed in.

          Does anyone have an idea how much money this is?
      • Apr 25 2013: I think that Pat is right. The tax rates for gross income of $40,000 before deduction of the standard deduction and exemption for a young couple amount to $19,000 in 2011 tax rate, and $19,500 in 2012 rate. The actual tax for 2011 would be $2,304 for a rate of 5.8%, and tax of $2,229 for 2012 and a net rate of 5.6%. Even if you count the $40,000 as after the std deduction and the exemption, the actual tax would only be $6,131 which is 15.3% of the "taxable income" of $40,000. In either case, the tax amounts could easily be found in a table at the end of the "Tax Guide" for 2011 or 2012, no computation is needed.

        So the amount of tax as $11,200 for a gross income of $40,000 is way off the target.

        Let me propose a tax system of the combination of the income tax and value-added-Tax (VAT), the latter is easier to manage than sales tax. The Federal Income Tax could be 0% for income of under $25,000, and 5% for $25,000 to $50,000, and 10% for $50,000 to $120,000, then a flat rate of 20% for all income over $120,000, all are based after reduction of exemptions and standard deductions but no itemized deductions. The tax rates and deductions will be adjusted for inflation. The shortage from the income taxes would be supplemented by the VAT.
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          Apr 25 2013: How much revenue would this generate for the running of our country?

          How much revenue do we need to properly fund the operating costs of our country?
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      Apr 20 2013: I like your points that people get better at what they are paid to do. A good point also that "rich" or "poor" is a subjective term. The limits between "rich" and "poor" constantly move, usually up. For example, if we define "rich" as making $250,000 per year today and make them pay through the nose, in 5 years we will find 50% of the population paying through the nose due to inflation.

      I, personally, don't like counting other people's money and making judgments. E.g., my family, perhaps, spends more than average on food because we buy, mostly, organic and gluten-free food. So, someone looking at my monthly expenses might consider such spending a luxury and advise to shop in lower-end grocery stores. But consider that I have 3 kids allergic to gluten, fish, eggs, and many other things. On the other hand, I know people who live very frugally to afford, say, a family vacation or to buy expensive (from my point of view) bicycles for the whole family. Everyone has different priorities. I don't like to make a judgment of what to consider a luxury or a necessity for others and don't like when others make such judgments as well - something I hear a lot in discussions regarding who is rich and how much they should pay. That "rich" person making $1,000,000 a year may have a sick and disabled child and a wife with cancer. I don't want to tell people that they "ought to contribute to society".
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        Apr 20 2013: Inflation? Didn't you hear what Morgan Stanley said? Inflationis on the slide. :)

        I agree with you inflation is going to eat us alive before consumers quit buying all together just to eat. This, of course, means another crash is on the way.

        I agree about people's privacy concerning their money. I think what ever tax system we have it should be fair and take the facts into consideration that no one person is an island unto themselves. We all pitch in and should have a fair share of the profits.

        A world without garbage collectors is a real stinky place to work and live, in fact, it could be dangerous to our health.

        An idea without laborers is soon blown away by the wind of time. Laborers with no direction or guidance are living on their savings.

        For many decades now, there has been a sense of disparity about how the working class is loosing value and the upper class is buying up all the assets. 2009 showed us this was indeed the case. Now, the wealthy own everything and control the ebb and flow of commodities, including housing. We are at their mercy. The only way we can show our discontent is to stop being consumers. Rich people who depend on consumerism are severely affected by consumers who keep their money in their pocket.

        Yes this is a two edged sword. manufacturing, employment, vs consumerism are locked in a battle of survival. I think if more money is put into the pockets of consumers and an environment is created that alleviates their fear of economic collapse, things will get better.

        The government needs to scale itself down while accomplishing the same amount of work.
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      Apr 22 2013: A flat tax would not raise anymore money than the progressive system we have now. It would, place an even greater burden on those making $24,000.00 and less each year, reduce the amount paid by the rich and increase the burden on the middle class.

      I think the progressive system we have is more flexible, that is, it can be changed easily to deal with the fluctuations that occure in our economy and geopolitical climate.

      There is no real solution but to have a constitutional amendment that calls for a balanced budget each year, with a ceiling on borrowing. This system would only work if everyone pitched in and did their part, in their own private economic situations, that is, keep personal debt to a minimum and bite the bullet during hard times.
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        Apr 22 2013: The poor get about 30% more than is reported as income because of the way they report government transfers. This in conjunction with the fact that very few people stay in any one category overstates, makes this concern more conjecture than reality.

        The very idea of income tax is backwards as it discourages people from producing. Sales tax is the corollary and discourages consumption and encourages production.

        It eliminates a huge expense doing your tax return.

        The balanced budget idea imo would not work as it would just encourage accounting contortions.

        The solution is an educated constituency that would force the government to shrink (think emaciate)
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          Apr 22 2013: And I should take your word for it because?

          How do they report government transfers?

          I agree people are financially fluid, economiclly speaking, but what exactly does that mean to you?

          Sales tax is a means to gather revenue to support local governments -period. There is no traffic control attached to it's function.

          A balanced budget is necessary. any contortions can be dealt with by the legal system. Those obeying the law outnumber those who don't.

          Good luck educationg the world and converting them into honest hard working, emphatic human beings. That is the ultimate idealism but we are far from that epoch.

          We have to deal with what is ubtainable and pertinate to the situation at hand. More taxes on the rich will help out, but not solve the problem. We need to cut down the size of govenment without decreasing it's effectiveness, if that's possilbe.

          Technology can help but it will require initial expenditures. We need to look at it like this:

          I can't cut my lawn because the lawnmower is too heavy and I have a sloping run. I need to convert my lawn mower to a remote controlled machine. I can't afford to buy one so I need to build it myself. It takes time to save the money and time to do the work. In the end, I will be able to more effectivley deal with my lawn without hurting my body. I can also let my neighbors (in simular circumstances) borrow my lawn mower so they won't have to suffer the expenses. This will reduce the cost of cutting many lawns, producing more effective work).

          We need to bond together and help one another in a more effective manner - a real ideal that we can manufacture- other than everyone going out and buying (one) device that can serve many. This will, of course hurt our consumer economy but it will, in the end, make us more effective for less money. The economy will adjust, eventually.
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        Apr 22 2013: Just read the first paragraph of this:

        I'm sure there are more references but I have heard that 30% of the lowest quintiles income is in transfers that don't show up as income.

        Regarding the balanced budget there are always unintended consequences with this sort of legislation. As they say the devil is in the details and it will likely not get what it is stated to get which is typically the case EG the department of energy, education, homeland security, etc

        It can easily be reduced without losing ANY benefit

        The education is inculcated by the culture which is the real problem as it teaches instead entitlement.

        A remote control lawnmower is a cool idea.
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      Apr 22 2013: There is always a reason for how people behave Pat. Note this comment:

      "Yes: On net, average federal income tax rates are negative -- post-tax income exceeds pretax income -- for the two lowest income quintiles. But that's not the same as marginal tax rates, which measure the amount of money taken out of each additional dollar earned. It's the marginal rate, most importantly, that creates the disincentive to work." ~

      When you have a couple of million dollars to make some deals, your odds of making a profit increase. When you are a hard woking, lower income person, trying to get ahead in the world and change your lifestyle it's almost impossible to do because you can never make enough money or qualify to borrow to move ahead.

      So, why even try? Why not just sit where you are (still working hard) and get used to the situation? They are not slaves. In the US, everyone has the opportunity to get ahead and become rich. As long as their marginal rate is so high, they will continue to be at the bottom of the pile.
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        Apr 22 2013: To give you an idea of how specious Bloomberg's conjecture is consider that only 5% of the people who were in the lowest quintile in 1975 were still there in 1991.

        What is wrong with this thinking (of this successful businessman who is a stupid economist, similar to Warren Buffet) is that they are comparing categories instead of people. Would you compare baseball hitters the same way ie by a category instead of the hitter? Of course not yet people listen to this or Elizabeth Warren which is pure propaganda.

        Again politicians only care about getting elected and will make up anything in order to achieve that end.
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          Apr 22 2013: I understand you suggesting. But, since the crash, many more people make up that quintile. It's probably higher. War manufacturing helped to create jobs in 1975 and the war ended that year also -those jobs went away.

          We have the internet Pat. We don't need politicians anymore. We need to come together and work things out ourselves. There is a large movement taking place that concerns sustainably living. All that is required to get in the game is to start a garden at home, by any means, and learn to live frugally. Better health, less expence, and more effecient use of energy are some of the benifits. We don't need our politicians permission to get in the game.

          As these people come together, they also form a large voting lobby that will control the politicians, forcing them to do our bidding. We have to start the ball rolling, not the politicians.

          They have control because we gave it to them, We can regain that control by using effective communications and individual persistance and hard work. The great thing about growing food is the initial capital costs are almost negligable.
        • Apr 24 2013: Pat,

          I can't believe you called Warren Buffett (mispelled) a "stupid economist."

          Clearly you know little about his economic knowledge, which is undoubtedly far above your own (mine too)
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        Apr 22 2013: The Keynesians would have you believe that the economy should be an even level line and that they can keep it that way. This is funny because the Austrians will tell that the bubbles are created by the very ones who claim to fix it.

        If left to it's own devices the free market levels things out right quick as this is just a natural phenomenon. Which is controlled by the incredibly elegant mechanism of self interest.

        Yup the tail wags the dog, what I'm saying is that we need to dock (cut off) the tail
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          Apr 23 2013: Yes indeed.
          We know how the course runs because we have run it before. I remember 73 and 82. Now I can say I remember 09 and 10.

          Our economy today is driven by greed, which is not necessarily a bad thing for those who win the game. Every now and then some companies come along and start to dream and we are soon chasing asteroids or putting together the first Mars colony. The problem is that those who have established their empires don't want to see them fade away or disappear all together. They have a hard time living with what they have made because they see it wither and along with it the power the money gave to them.

          In the end it's all about Dreams or Power.
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        Apr 25 2013: Nicholas Heins

        OMG I'm so embarrassed to have committed such a faux pas, btw if you really want to rub my nose in it write it like this Warren Buffet [sic], that is the epitome of scorn from a superior.

        Warren Buffet is not an economist at all. He is an investor and from what I hear more lucky than good at investing. You bet I know more about economics than he, not that he raises the bar.
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    Apr 19 2013: I am not sure on how to comment on this. It's like asking would you like to be shot by a firing squad or hung from a tree.
    So, living in a complex world, I understand that for the use of public goods and services, that are some fees are to be paid. There is no free lunch so to speak. I have lived where there are income taxes, VAT taxes, sales taxes, and the list goes on. I read somewhere that the average American who is probably not as badly taxed as other peoples, pay some 75 taxes of various sorts and sundry fees to public entities. I am not sure they could be brought down to just one. But, if I had to pick, I guess I would pick a simple single rate income tax. I would allow a simple deduction for those who live in poverty. It all should happen on one piece of paper on one side. All those other taxes on corporations and businesses and death and and and be eliminated. Businesses just add taxes to the price of goods. So, that's just paying more taxes through other people. Maybe half of the tax money would go to the city, 3/8 to the state and 1/8 to the federal government.

    BUT Taxes aren't the real problem, it's how they are spent. My city spent over $400 million on a shelter for homeless . It's a beautiful campus, like a resort. Most homeless still sleep under the bridges. They also spend over $30 million a year for public childcare facilities for poor people who can't afford childcare.
    It's so the single Moms can go find jobs, most don't. Still we got a lot of potholes to be filled, but not enough money in the city budget. The state is not much better and don't get me started on Federal waste. 22 Federal Departments and over 50 cabinet level offices. We got a Department of Labor and a Department of Business (Commerce), wouldn't make more sense to have one department to be the referee between the two. The duplication goes on and on. My problem isn't so much about taxes as it is about waste.
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      Apr 19 2013: Re: " I would allow a simple deduction for those who live in poverty."

      What do you think of the idea of "prebate" from The idea is that everyone pays the same tax rate (the site advocates a "consumption tax", but it could be a flat income tax as well), and the government pays to each person, regardless of income, a sum equal to poverty level, however it's defined - a bare minimum to survive. I think, it's a good idea. It's clean as a whistle, does not discriminate between rich or poor, black or white, fat or thin, young or old, takes care of child credits, dependent exemptions, social security, etc., and allows those who live in poverty to pay 0 taxes or have a tax benefit while those earning/spending more to pay progressively larger percentage. The prebate, in my opinion, should be a bare survival minimum. It should not allow for any level of comfortable living or it will discourage work.

      You pointed out the fundamental problem with charity. While there is this Christian commandment "Give to the one who asks you", you never know how the money you give to the poor will be spent. They may be spent on drugs and alcohol doing absolutely no good to society. Charitable giving, in my opinion, does more good "to the soul of the giver" by making him kind and compassionate than it does to the one who receives. With this in mind, coercive charity through taxation does no good to anyone. It perpetrates hypocrisy and corruption. It does not make the givers kind and compassionate, and it is dubious that it does any good to those who receive either.
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      Apr 20 2013: Government waste works like this:

      You have an uncle who makes Uniforms for the TSA. You rangle a contract with your uncle to purchase, say, $50 million dollars worth of cheap uniforms, which the contract out to mexico to manufacture. You uncle gives you a a nice kickback of 2.5 millon dollars (over time) in forms that are hard to track.

      While you may actually need the uniforms (eventually) They could have been purchased directly from the Mexican manufacturer in the first place for $12 million dollars, cutting the uncle and his govenment representative family member out of the picture.

      This happens all the time with our elected officials and their inter-agency, manager friends.

      If computers were properly used, the efficiency of the governmet would increase dramaticly in just a couple of years. Medical cost could be halved by applying the same process.
  • Apr 18 2013: So flat taxes and sales taxes are basically ways to increase taxes on the poor and decrease taxes on the rich. So I ask this question. What impact do you think this would have on the wealth distribution of the United States? I assume from your point #4 that you think the rich pay too much taxes and should be taxed less. So I guess I would also ask if you feel the tax code should be structured to make the poor pay more and the rich less and if the problem with our country is that the poor have too much and the rich too little?

    You may believe in a tax system that maximizes pain. So you may believe that you should tax a family deciding between heat and food for their children $200 instead of taxing a "frugal billionaire" $200 that will not impact his life. Or perhaps you work for a credit card company because this would be a windfall for credit card companies and would in effect raise the rate of taxation for the poor.
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      Apr 18 2013: William, I'm not sure how you assume what I think from #4 beyond what it says. This is a debate. I presented my position in order to hear opposing arguments, not to push any agenda. I'd like to open my mind, consider things I have not considered before, and other people to do the same. Have you read the proposal on I have not heard any opinions on the idea of "prebates". It seems to me that people approach the question with preconceived opinions and are not willing to consider any alternatives or or facts.

      I understand the argument that taxing consumption instead of income, people who spend most of or more than what they earn will pay larger percentage than people who spend a fraction of it. But... I also believe the following (let me know if you disagree):

      1. I believe that "us vs. them" mentality is harmful for society. Blame games grow into mutual hate and violence - wars between classes, religious groups, etc. I believe, "1% vs. 99%" is a harmful view, in principle.

      2. I believe, "taxing the rich" is an illusion. It's like having a "no smoking" area in a restaurant where smoking is allowed in the same room or an area in a swimming pool where people are allowed to pee in the water. Krisztian has shared a video below The video has an example of who ended up carrying the burden of a 10% sales tax on yachts and private jets over $100,000 imposed by Bush I. One might think, such tax wouldn't affect "the poor", right?

      Tax burdens have a way of leveling across the society. You tax corporate income, and the corporation will either lay off workers or increase prices on its products passing on the buck. If it does neither, it may go bankrupt and close altogether. You tax the billionaires with either income or sales tax, and they will move the money and the jobs overseas leaving "the poor" at home without either. Am I incorrect?
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        Apr 19 2013: I can speak to the effects on the boat industry which is tru dat

        It is an interesting idea to privatize everything at the very least we should consider the venerable Mr Rothbard.
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      Apr 18 2013: Moving and managing money and business overseas to avoid income taxes is risky and costly. Buying products overseas and paying high shipping costs or buying the products on the black market to avoid sales taxes is risky and costly too. When people prefer such risk and cost to paying taxes, it means that taxes are too oppressive. They need to be adjusted to maximize the revenue. Maximizing the tax revenue should be the goal, not "justice". Justice cannot be measured. Revenue can.

      So, given that taxes flatten themselves anyway, and the question is not "who to tax?", but, rather, "how much?" without killing economy, I believe that sales tax allows for better and faster economic feedback than income tax.

      I like the idea of "prebates" from It creates a guaranteed income for everyone. The poor who make less than the poverty level will have tax income, the middle class would effectively pay a small tax, whereas the rich will pay the largest percentage. That's what it seems. I have not heard any reasonable arguments to the opposite. I'd love to.
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    Apr 18 2013: The tax rate for both options would be the determiner. All things being equal, sales tax is the more fair.
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      Apr 18 2013: Perception of fairness depends on how we think of numbers - in terms of percentages or in terms of dollar values. The main argument against the sales tax is that those who spend all of or more than what they make will pay a larger percentage than those who spend a fraction of what they make. However, 20% of $20,000 is $4,000, while 10% of $1,000,000 is $100,000. Who pays more?

      "Statistics are used much like a drunk uses a lamppost: for support, not illumination."
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    Apr 17 2013: Arkady

    I am a supporter of consumption taxes as a more mature and responsive source of money to fund our collective services and interests (government), than income taxes. Consumption tax is a larger frame than simply sales tax. It includes, for example, fuel used in transport trucks, ocean freighters and agricultural equipment. The net effect of consumption taxes is that they send a price signal to the market (that is, to all of us). The meaning of that price signal is that there is a serious cost to the earth and the rest of us in consuming material and energy. We cannot avoid consumption, but we can choose to reward and reinforce inventions and behaviours that create qualitative value for society with the minimum consumption.

    The price signals sent by income taxes, without proportional taxes taken from consumptive industries, sends a perverse set of price signals. Full employment is devalued, while the price of shipping goods from distant places or from energy inefficient production is subsidized. Faced with these price signals any corporation must focus its creative talent on exploitation of off shore jobs rather than jobs at home. On shore industries that are highly consumptiive (ie. irrigation agriculture of bulk grains) are subsidized while industries that are less consumptive and job creative (ie. permaculture farms) are discouraged.

    I look for the day when there are no income taxes and we charge every industry or carrier that sells to our market is charged for the all of the energy and material consumption involved in the production AND transport of their goods to us. I am not arguing for an increase or decrease in taxation - save that for a different debate.
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    Apr 17 2013: related: mises institute seminar, titled the "Taxes Are What We Pay for an Impoverished Society", videos available on youtube here:
    (more on the same channel)
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      Apr 18 2013: Much of this is true, but controversial. It's hard to imagine a society where taxes are paid voluntarily, in the amounts people feel like paying in proportion to the benefits they receive.

      A few interesting thoughts - income tax on benefits and salaries received from the government is a strange concept. It reminds me the hoax from commercials where they claim you will "save" $20 on a $100 spent. That's $80 expense, not $20 savings. In the same way, $20 taxes paid on $100 received from taxes is $80 tax consumption, not $20 tax payment.

      Interesting thoughts on how "taxes on the rich" are paid by everyone else except the rich. When a corporate income is taxed and the corporation has to jack up the price on its products or lay off people to avoid losing money, who pays the tax?
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        Apr 18 2013: it is hard to imagine a society without a king. it is hard to imagine a society without a slavery. it is hard to imagine a society with universal suffrage. these arguments could have been, and possibly were uttered. but history taught us that these things pretty much possible, and even desirable. today these arguments sound incredibly shallow. so why the same argument is worthy with imposed taxes or a coercive state in general?
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          Apr 18 2013: This is a very good point.

          However, don't you think that "king" and "slavery" have simply changed names and forms? The oppression still seems to be there. Whether you have to submit to the will of the king or to the will of the democratic majority - one way or the other, you have to give up your interests and money. Doesn't a 25% income tax amount to involuntary servitude from January till the end of March? Even without tax, there seems to be no way out of slavery through mortgage payments and credit card interest.

          Universal suffrage seems to be a misnomer too. Teenagers don't vote, inmates don't vote, immigrants don't vote (even legal immigrants who do pay taxes and contribute to society) anyone who is considered "incapable of making decisions" is pushed aside. But who decides who is "incapable", how and why?

          Can these "injustices" be completely eliminated rather than replaced by other injustices?
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        Apr 18 2013: that's a good point. slavery can be seen as a concept. we can say, slavery is owning someone else's time (=life). i can own all of his time, in which case he is my slave. or i can own a part of his time, which does not have dedicated name, but it is in essence the same thing. tax is partial ownership of a person's life. of course it is better to be partially owned. just like it is better to be mildly hurt than badly injured. similarly, it is not a different concept if one rules all the others, or 51% rules the 49%. but clearly, more people are satisfied with the latter arrangement.

        what we do for many hundreds of years, if not thousands, is that we identify and eliminate, one after the other, instances of slavery, theft and murder. the powers that be always tell us that their rule, theft and murder is different, it is just and it is in the interest of the people. but it only takes time to see through these lies, and make the next logical step toward the eradication of aggression.

        side note: in my world, there would be no universal suffrage, there would be no voting at all. but i agree that if we take democracy seriously, everyone should have exactly one vote, criminals, mentally disabled, infants, does not matter.
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          Apr 18 2013: I think, we are on the same page. In our "ideal world" people don't pay taxes, the poor and the sick are taken care of by the voluntary charity of the rich and the healthy, all services are provided by the market for a fair market price, mutually agreed upon and paid voluntarily; there is no need for courts and police because there is no crime and injustice; and voting is not necessary because there is no need to push or enforce any legislature on anyone.

          But while we are working at achieving these ideals and try to eliminate slavery, theft, extortion, and murder, we seem to need police, courts, and jails, at the very least. We also need to define what constitutes crime and how to deal with it. Hence, we need voting, the institutions of power, and we need to collect taxes to maintain them. And these institutions of power and taxes which are a form of robbery corrupt the society creating oppression, injustice, theft, extortion, and murder which they are supposed to eliminate.

          It's a vicious cycle. It's not unique to society. Immune system is supposed to protect our bodies, but when it is under-active or over-active, we start suffering from HIV, MS, celiac disease, hypo- and hyperthyroidism, allergies, autism, psoriasis, etc. These are just few examples of autoimmune diseases. Most of today's incurable diseases are autoimmune disorders. They are the toughest to address.
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        Apr 18 2013: we did not get rid of kings because nobody wants to be a king anymore. we did not get rid of slavery because people don't want to own slaves. we find ways to ... so to speak "convince" those that want to initiate aggression not to do so. stable society is the one that can defend itself against aggressors, not the one that has no aggressors. we can find ways to operate a free society despite all the wrongdoers and selfish people out there. we do want law enforcement, guards and all that stuff. we just don't necessarily want a coercive organization provide those.
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          Apr 18 2013: I hope, "we" will find a way. In my opinion, to achieve society without coercion and greed, "we" need to quit thinking that "they" (the 'rich', 'the 1%' or whoever) should be forced pay more to provide benefits for "us" ('the 99%').

          Not that "they" shouldn't pay. I just think that forced charity isn't charity at all. It can only be sustained by force and coercion and, ultimately, doesn't make anyone more kind or rich.
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        Apr 19 2013: but we don't need a society without greed or attempts of coercion. of course it would be good, but unrealistic in our foreseeable future. we need systems that protect us, or help us protect ourselves, from aggression. the question is who operates, owns such systems, and what their jurisdiction is. the state is such a system, but it is a monopoly on an arbitrarily chosen territory, it's jurisdiction is everyone in the territory, and participation is not voluntary. this system is obsolete.
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    Apr 12 2013: The U.S. in the past had roads, public utilities and financed wars without any of the taxes you mention and no inflation for at least 100 years. They financed this with tariffs on imports, which some say was the reason for the civil war as the north would have lost most of its funding from tariffs.

    To me I would prefer to see national Sales Tax but only if there was no other tax. As this would encourage saving and discourage consumption. This would also discourage inflation.

    Otherwise a flat tax instead of a marginal income tax. This would reduce the loopholes and eliminate a lot of unnecessary expense for calculating taxes.
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      Apr 12 2013: Thanks, Pat. I'm thinking along the same lines. Not to mention that without income tax the government would have a lot fewer opportunities to mess with people's personal choices, such as marriage, parenting, charity, or investing. Import tariffs can also easily fix the trade deficit and the problem of exporting jobs to China. The government does not need any sophisticated Acts of Congress to fix economy, health system, gun control, inflation, etc. It seems to be possible to do all this with a simple and wise tax policy.
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        Apr 12 2013: Yes the less funding of imbeciles the better.

        Tariffs are a bad idea as they create a tit for tat type deal and comparative advantage becomes terminated at that point. This was tried by Hoover with the Smoot Hawley act in 1930 and instantly shot up unemployment. A truly moronic action by congress and Hoover.

        At the end of the day it requires an educated constituency that can be lobbied for this sort of legislation.
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          Apr 12 2013: I did not know about Smoot Hawley act. Well, then I'm wrong regarding tariffs fixing trade deficit and job export to China.
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        Apr 12 2013: It is a misnomer that the Jobs going to China is the problem or a problem at all. The reason is the comparative advantage
        This is the best talk on TED explaining how it works:
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          Apr 13 2013: Great talk. Thanks for the reference.

          Matt Ridley is absolutely correct saying that nobody knows how these products are made. People who designed the computer I'm using now have no idea how to make a processor, and people who make the processor have no idea how the operating system works. The damn thing does not have a "Creator"! It also "evolved", just like humans.

          And you are right too. With our current ability to communicate over the globe instantly and make physical deliveries overseas within days, the globalization is just inevitable.

          And yet, there is nothing like ripe tomatoes from the vine grown in your own backyard...
        • Apr 16 2013: I'd have to say that jobs going to china is not a misnomer, if a person considers reciprocity. It seems you and Arkady have not. By saying such, do you hope people will find you intelligent? If you're wrong, will others know it and challenge you, knowing it will likely anger you and Arkady if proven? If not, don't you spread ignorance?

          Just saying. We all like to talk, but perhaps we should present things as questions, instead of leaving ourselves open to being shown our own ignorance, that will make most all people angry, while it makes most people reluctant to join the conversations.

          The only thing I learned in that Ted talk, was that no one person knows how to make a pencil or mouse.

          Did you or Arkady learn more things from that talk? If so, what?
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        Apr 13 2013: Cool that is my favorite video on TED

        Yes and do you see how comparative advantage creates jobs and is a win win situation?
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          Apr 13 2013: I agree. On the same note, it seems to be an illusion that illegal immigrants "take jobs away" from U.S. citizens.
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        Apr 13 2013: Yes the truth is we would be screwed without the immigrants at both ends of the spectrum. No indigenous person is willing to work in the fields or many other menial jobs and the other end of the spectrum with high tech what % of the indigenous graduate with a BS or better?

        One caveat the state gives a lot of perks to the immigrants which gives them an unfair advantage over the indigenous. Calif has 12% of the population of the U.S. with 33% of the welfare.
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    Apr 26 2013: This was a good thread
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    Apr 26 2013: There is NO connection between taxes and charity.
    Any donation is a free will.
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      Apr 26 2013: That's what I advocate as well. Then, charity should not be tax deductible. Right?
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        Apr 26 2013: NO.
        What do you mean - charity?
        Why do you want to tax donation for charity?
        What is the big problem?
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          Apr 26 2013: OK. I think, we misunderstand each other. I was talking about deducting charitable donations from the taxable income of the person who gives to charity as it is done now. I think, this should not happen if we decouple charity from taxation.

          You seem to mean that the receiver of charitable donations should not pay income tax on the money received. Correct? If this is the case, I agree. Sorry if I misunderstood.
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          Apr 26 2013: It's still unclear to me how to avoid income declaration to the government if we have income tax, even uniform.
  • Apr 25 2013: Sales Taxes are historically viewed as regressive taxes because the poor will spend their total income on things they need and pay tax on all of it. While those who are better off are able to save or invest. The money saved or invested is not taxed currently so the wealthy are seen as getting a freebie.

    If you were able to eliminate Income taxes altogether, the Sales/Use tax seems to become the most fair. The rich would pay taxes not at a higher rate, but certainly a higher amount since they are consuming at a greater rate.

    Conversely, a flat tax on income would also seem fair as all those who earn will pay at the same rate. Those who make more, will pay more in total but at the same rate as those who are lower paid.

    Under the Sales/Use tax scenario, the savings and investments of the rich are more like an annuity for the government. One day, those funds will be spent. At that time, the taxes will be collected, not only on the original income earned but also any and all gains made as a result of the savings and investing.

    In a flat tax scenario, the income taxes are paid NOW, at the time of the earnings. The expectations of the citizenship should be that their elected officials are good stewards of those funds. Saving and investing for the future while conducting the business of running the government today.
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      Apr 25 2013: You fail to mention that the "poor" get as much as 30% of their income from government transfers that is not taxed, this would be welfare, section housing, food stamps, WIC, healthcare.

      The sales VAT/Sales tax would be the way to go, but only instead of not in addition to

      The other area that this would help, that has not been mentioned is the prediction factor which anyone investing is always looking at. Which in the last 6 yr craps are more predictable than this clown.
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      Apr 26 2013: Re: "Under the Sales/Use tax scenario, the savings and investments of the rich are more like an annuity for the government. One day, those funds will be spent. At that time, the taxes will be collected, not only on the original income earned but also any and all gains made as a result of the savings and investing."

      Hopefully... unless these "savings and investments" disappear in the next Enron or Madoff scheme. But this is a good point. Unless the employer matches 401k contributions (which can be up to 100% return right off the bat), I see little reason to lock up money for decades and wait till I pay off my mortgage, my kids grow up, and I will have much fewer deductions and exemptions than now.

      I agree. Either flat income of flat sales tax would work - not both and no exemptions, deductions, and room to wiggle.
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    Apr 25 2013: Arkady: you may keep your idea I have no obligation to fallow. This is not a personal attack.

    If government pays you so you could eat, means that Gov. must steal money from somebody (taxes) or print money (inflation – different form of robbery).

    Charity (not Gov.) is something special. The problem is that Gov. (and politicians) wants to replace charity. We should support charitable org. This one and only exemption does NOT require lawyer. It requires a proof. Contribution for them (max. 10%) does NOT destroy the idea of ‘same tax for everybody’.
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      Apr 25 2013: If you have a uniform income tax withdrawn at the source, with no returns and lawyers involved, and you want charitable donations to be deductible, then the charitable donations must be deducted from the paycheck which limits the the freedom to give to whomever and wherever we want. Otherwise, it seems necessary to fill out a tax return to get the money back which resurrects the necessity for lawyers and opens up the discussion of what donations are qualified.

      Re: "If government pays you so you could eat, means that Gov. must steal money from somebody (taxes) or print money (inflation – different form of robbery)."

      I agree. This is why I'm not a fan of government doing charity with other people's money. With "prebates", the trick is that the rich will get the prebate also. Prebate does not depend on how much you make.

      Taxes are extortion of money under threat of violence. There is no way around it. How it is used and who receives does not change the way government gets the money. By definition, benefits from taxes don't go to the same people in proportion of what they pay. If this were the case, there would be no reason to take the money from people to begin with.
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        Apr 26 2013: Arkady: I want to be short (time is almost out). Charitable org. must be legal. Donor does NOT need a lawyer.

        Taxes must be for Country, State and City expenses: not for any kind of charity.

        Implementation of sale tax only (no other taxes) leads to the era of ‘Al Capone’. Simply, you need Brinks like company to relocate any goods.

        My proposal is: no property, no sale, no sin taxes, …. One and only: income tax – simple, equal, unchangeable forever.
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          Apr 26 2013: You got a whole system on your web site. I'll check it out some day. This needs a bit more consideration. In general, I agree with what you say. I'd go with uniform income tax as well. I like simple, consistent, and honest systems that leave no room for hypocrisy. The existing income tax system does not fit these requirements for me.

          Well, nothing is unchangeable forever. "The only sure thing is change" (or "death and taxes" in another version of this adage).
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          Apr 26 2013: Re: "Taxes must be for Country, State and City expenses: not for any kind of charity."

          If government does not do charity to help the poor, there seems to be no reason to make charitable contributions tax deductible. Isn't the logic for charity deductions that it relieves the government of the burden to help the people who benefit from these charities? If taxes don't go to disaster relief, food stamps, etc., there should be no connection between taxes and charity.
  • Apr 25 2013: What could be the disadvantages of sales taxes? Maybe it hurts tourism and luxury product exports? Probably rich people are more prone to leave your country/area. In a recession, people would buy less, you would get less taxes, and the problems would get worse??

    No idea, just some random thoughts thrown out there. But are these 2 systems really excluding each other? Would a system with both income taxes and sales taxes be too complicated, or maybe more flexible because it gives you more knobs to turn and to fine tune the system??
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      Apr 25 2013: #1 perceived disadvantage of sales tax system is that people who spend most of their income ("the poor") would pay larger percentage than people who spend only a tiny fraction ("the rich"). With sales tax, rich people would shop elsewhere, with income tax, rich people will move elsewhere to make money. Pick your poison.

      In a recession, government tax revenue would drop either way: people buy less because they earn less because employers hire less and pay less wages because customers buy less of the products because... Also, investors invest less because they have no confidence in the future because the news in the media does not look good: unemployment's up, earnings are down, and businesses have hard time finding money to fund their businesses because investors invest less because...

      An easy way to stop recession is to suppress the negative news in the media, but we cannot do that because we have freedom of speech. It's a screwed up system that eats its own euphemism and complains that it does not taste good.
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    Apr 25 2013: I support the idea of income tax only. Why? It is easy to calculate (percentage of income). In addition, I hate any exemptions. Why? This is an occasion to cheat. I say this: you are smarter, you make better income, but you must pay equal taxes (percentage) regardless of your smartness. Usually, simplest thinks (ideas) are more honest.
    Sale tax or consumption tax is not good in my sight. This is double taxation. Not honest.
    Income tax is totally different. You make income, so you contribute (%) to your City, State and Country. I see this honest. I would support the idea of three and only taxes: 5-5-10% (City – State – Country). Any other taxes I consider as the greed of the government. If the government needs more money so it should encourage people to make more money, not to steal money in the form of a tax.
    I think that we are done with this joke: consumption tax. I am guessing; some people are working on this and if the bill is ready, the consumption of politicians is consumption tax free. They will have tax free zones with no public access and fictional prices. You can learn this from post-communist countries history.

    Meantime, if I buy a rotisserie chicken (price is $5) I must pay $1 tax, means 20% ($0.50 sale tax and $0.50 special ‘chicken rotisserie’ tax). My $6 is after about 30% taxes, so real price is about $9 (I do not count property tax). $9 is much more than minimum/h earning. Well, some people must work over 1h for a rotisserie chicken (not organic). Who is calling this an honest tax? Yes, only politicians who live on taxes and benefit from taxes. Is this an American dream?

    Current spending is a proof that politicians and political parties were all the way wrong. They made a lot of mistakes we must pay for and we should NOT trust them anymore.
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      Apr 25 2013: I 'd say, income tax can mean double taxation as well. E.g. you pay social security and medicare tax and it's not deducted from gross income for federal income tax calculation. So, income tax is paid on the money you have never received. I agree that deductions open up possibilities to cheat.

      Having both income and sales tax means double taxation. Having just one is not so bad. There still may be multiple taxation when the same item is resold multiple times. But it depends on how sales tax is implemented. VAT, for example, seems to avoid this.

      Special tax-free trading zones would amount to deductions and exemptions from income tax. Regardless of the system, it's always possible to find a way to cheat. I agree that the more complex the system, the more possibilities there are.
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        Apr 25 2013: O.K. – you support sales tax, so you want to tax what I ‘eat’. You do not care of my income, so I must pay taxes even when NOT working. This is a joke (to me).

        I support ‘income tax only’: means, I do NOT care what you ‘eat’, but if you make income, you are obligated to contribute to the City, State and Country: same tax forever, no exemptions (but charity), and same tax for everybody (no tax accountant or a lawyer required). Isn’t it simple?

        Who has made our life so complicated? I know you know: politicians – social parasites.
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          Apr 25 2013: Check out With "prebates", if you don't make income, the government would pay you so that you could eat.

          I don't push any agenda here. I'd like to know the pros and cons of each way. I, personally, would pay more taxes than now if U.S. replaces income tax with sales tax. I've listed why I like sales tax better and I am open to discussion without personal attacks.

          Yes, same tax for everybody. No lawyers, no exemptions, no deductions, no returns.

          I agree with "no exemptions" but not with "(but charity)". "But charity" means an exemption and this means lawyers, deductions, and returns that follow thus destroying the wonderful idea of "same tax for everybody". This means that charity must be excluded from government budget and delegated to individual contributions altogether.
  • Apr 25 2013: Arkady,
    What most people do not realize (and are never taught in public school because it is an example thereof) is the concept of 'legal plunder.' Every TEDster should google that and read about it until they understand. Most of what our governments (federal,state, local) to is a violation of liberty supported by legal plunder.

    That being said, I think the un"Fair Tax" has a big problem: lower income people spend almost all their money out of necessity, so they will bear a bigger portion of the tax load. Whereas, those who benefit the most from government would pay very little proportionally. I suggest instead a Transaction Tax. All economic transactions are taxed at the same flat rate. Get paid? X% comes out. Buy a stock? X% tax. One company attempts a mega-merger? X% tax. All income tax, deductions, corporate tax, import duties, everything else would vanish under one simple Transaction Tax.

    Of course this would never happen with corporations controlling the US, but it would be the most fair system. It would reduce speculative stock trades, which would reduce poor/short-term management focus on quarterly goals, as well as make day-traders, acquisition and merger attorneys, and real-estate flipping bums get real jobs. Truth hurts.

    Donations would not be taxed because it's not a transaction - money goes one way with nothing being received.

    Transaction Tax is the answer.
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      Apr 25 2013: This book explains the concept of legal plunder and how it comes about quite well. Corruption is the reason. Not only corruption of the rich and the powerful, but corruption of the public (you and me) as well. Of course, nobody considers seizing property under threat of violence "plunder" when it is committed by the government. Instead, people associate such act with "liberty" by using the image of the iconic statue on everything associated with federal income tax much like they use images of sexy girls in beer commercials.

      I agree that transaction tax would damper stock day trading, real estate flipping, and encourage long-term investing based on financial fundamentals rather than speculation. It may slow down economic "bubbles" and crashes and make them less severe.

      However, do you support the idea of multiple taxation? E.g. my salary would be taxed once when I receive it, and twice when I spend it. The stock will be taxed twice too.

      Drawing analogy between economics and electricity, this may be an equivalent to adding resistance to every wire in a circuit. It will slow down the whole circuit, increase energy loss on heat dissipation, decrease battery life, decrease power output, etc. While resistance is necessary in certain parts of circuits, in other parts, it's best to avoid it. I'm not sure if applying a uniform transaction tax is a wise idea.
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        Apr 25 2013: If government stays out of it the bubbles are mild and self correcting. That argument does not hold water.
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          Apr 25 2013: I disagree. Given that economy is a system with positive feedback loops
, when it's completely unregulated, there is nothing to stop economy from railing up and down like a Schmitt trigger. There must be a mechanism to create a negative feedback loop - when the system suppresses small disturbances rather than magnifying them.
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        Apr 25 2013: Bubbles occur mostly because of government intervention as with the housing bubble.

        The housing bubble was created by regulation. Regulations create unintended consequences like housing costs skyrocketing. Another example of this is in education and the trillion dollars of debt created by government meddling in higher education.

        The last thing we need is more government regulation to create more bubbles.

        The one regulation that does work is the free market. Which ends bubbles without consequence or any legacy.
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          Apr 26 2013: Can you explain how government intervention created the housing bubble? I thought, there is an opinion that the lack of regulation in mortgage industry and lack of requirements for mortgage loan qualifications created the frenzy. When stocks crashed, the money was poured in real estate - a natural "free market" reaction. The speculators started buying the houses like crazy, the banks started lending like crazy under a false assumption that the price growth will continue and the borrowers will be able to sell and pay off the loans very soon, with everyone making a profit. Then, with lack of the rules in financial industry regarding derivatives, there was this shady business of loan repackaging and reselling by banks. Then of course, things went sour when this exponential expansion burned out. Where is the hand of the government in this "plot"? Or am I missing something major in this general picture? Wouldn't a mechanism discouraging house flipping and other real estate speculations such as a tax on real estate transaction slow this down a little?

          I may agree that government regulation may create false incentives and lead to disproportional development of an industry which has no demand. Or create requirements that immensely increase expenses such as requirement for universal health insurance or requirement to comply with REACH environmental regulations (a different topic close to my heart). But I would approach government intervention on a case-by-case basis, without making blanket statements.
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        Apr 26 2013: As per the Matt Ridley talk the key is communication (much more important than IQ) which means don't stop listening.

        There is a lot of conjecture regarding the housing bubble most of it comes from politicians . This means you have to consider their motivation, which is to get elected and only getting elected which means you have to throw out most of what they say.

        Almost all (if not all) bubbles are caused by government meddling. The source for this is the Mises institute. This fact alone could save many a lot of grief. Like John Moonstroller if he would listen.

        The key culprit was Alan Greenspan (an Ayn Rand fan, did not practice what he preached) as he made a lot of money available for lending to occur. It doesn't matter what they cook up as long as it is not financed. Since it was that was the biggest problem.

        What they cooked up was the CRA, which said that everyone has the right to own a home. The key conspirators were Barney Franks and Chis Dodd who were head of the banking committee in the house and senate respectively. They told the banks they had to make the loans or the banking committee would cause their business plans grief. They also made it palatable by having Freddie and Fannie buy all the paper. Neither ran for reelection last year after many years in office. The bankers left on own would never have made these loans, do you see how non sequitur this is?

        The conjecture said that the repeal of Glass Steagal allowed the OTC derivatives, but they were not regulated ever so Glass Steagal had nothing to do with it.

        The sub primes were a tiny part of the market for decades the only reason they became an issue was because of Barney and Chris for reasons stated above.

        The repackaging thing is conjecture as well. The media who also has one agenda and only one which is to sell advertising so you have to throw out most of what they say. They went on about trillions of dollars in the derivatives which is great for scaring people but not to educate
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        Apr 26 2013: The investment banks hedge their bets they do not go all in on anything. All the chatter about Lehman Brothers having a gazillion dollars in exposure, so when all was said and done what was the final settlement? Something like 20 million because of the hedging of their bets. So the question is with the hundreds of trillions of dollars that the media was yammering about why don't they talk about it anymore? Do you see how non sequitur that is?

        Who cares if people flip houses so what?

        The energy companies that were financed by the government all went out of business once the funding ran out.

        The blanket statements that I make are not out of ignorance.

        I suppose this is hard to assimilate all at once, as I REALLY am asking you to take the red pill. I assure you I'm not talking this stuff for fun. Out of all the participants on TED there are just a few who really get this stuff. As Krisztian says it is really tiring to get anyone to listen.

        It is encouraging to see you and some others talking about how economical slavery is putting us all in the yoke.
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          Apr 26 2013: Well, I'm not familiar with most of the facts and names that you list. I'll check them out as I have time. But if everything is how you describe, that's what I called "creating artificial incentives". That's exactly how the government causes people to make weird decisions.

          E.g., I've heard of a couple with a sick child that would qualify for some government medical program if the family income were lower or the child had a single parent. So, these people had a choice - for the dad to quit work or to divorce to qualify for the program.

          Why is buying a house considered such a bliss in this country? You get into debt for 30 years, you have to get fire insurance, do all maintenance, pay utilities, pay property taxes. You cannot just take off and move to another state for a new job without the hassle of selling the property. The house may or may not appreciate or it may get destroyed by a hurricane, flood, or an earthquake (huge risk). You can't even die in peace - you have to worry about estate management, probate, etc.

          Tenants don't have to mow their lawns and if a heater breaks down or the roof leaks or toilet overflows, they just need to call the landlord. And if things are not fixed, they have the right to stop paying rent. And if the house is destroyed, just move to another place.

          Why do people go through the pain and suffering of home ownership? Ah! Mortgage interest deduction! And an artificial demand for homes which drives the prices up (FHA loans with no money down guaranteed by taxpayer's money, etc.) Now, magically, buying a house without being able to pay for it makes financial sense. Otherwise, it does not.

          Thanks. Now what you say makes sense.
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          Apr 26 2013: A friend of mine who works as a digital animator used to work on movies, but now works in gaming industry. I thought, working on movies is more "sexy". She said, no, and sent me this article that shows how government subsidies destroy whole industries because of politics.

          "LOTR" wasn't shot in New Zealand for beautiful scenery.
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          Apr 26 2013: I have to confess my own hypocrisy. I must admit that despite my views and what I say here, if I would qualify for a government refinance program to lower my mortgage, I would take it. After all, "I'm entitled" I pay taxes. I'm the 99%. This false charity makes everyone a hypocrite (I am included).

          How many of us have the integrity to reject a social security paycheck, even if we have money to support ourselves? I don't - I admit.
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        Apr 26 2013: Yes that is how it works, co opting people. Look at goverment workers making 6 figure salaries for skills that would normally qualify for a fraction of that salary. On average a federal employee makes twice the money of their private sector counter parts. If you are them even if you are very conscious of your integrity that is going to be hard to say no. Marco Rubio has already changed his stance on issues to be more "main stream", what was it that co opted him? The possibility to run for president.

        That is interesting about the VFX workers. I guess that explains why James Cameron moved to NZ? funny his movies portray big evil business it would appear as the psychs say he is projecting. It seems like the VFX workers are doing that to themselves? Can their services be replaced overseas?
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          Apr 26 2013: I'm not sure if VFX services can be replaced overseas, but I also got an impression that the problem VFX people have is self-inflicted. They seem to agree to take lower salaries with no benefits and all these oppressive work conditions in order to "win" over competitors. Instead, they need to get together and say "no" - work together instead of working against each other. That's a separate issue from government subsidies forcing people to make poor business decisions.
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        Apr 26 2013: That is an aspect of the free market. They are doing work they want to do as such there appears to be more supply than demand?
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    Apr 25 2013: A sales tax is much fairer and the government technically should not have the right to audit you. 4th amendment, secure in your papers. A sales tax would yield more taxes from wealthier people because of loopholes.
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      Apr 25 2013: U.S. income tax has a multitude of problems with Constitution. Article I Section 2 says "Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers,..." - to avoid "taxation without representation" which was one of the main grievances in Declaration of Independence. Tax on income from property was considered to be the same as direct tax on property and was considered unconstitutional until 1913. Amendment XVI does not change Article I Section 2 but makes income taxable. I'm still puzzled whether income tax is still considered to be direct. The government states that income tax now has "the nature of indirect tax". Well, tax on wages can be considered a tax on transaction. But tax on property income has not changed its nature. Weird.

      You are right about Amendment IV. The government cannot rummage through our papers without a warrant. This is why everyone needs to sign a return under penalties of perjury waiving this right.

      Amendment V prohibits self-incrimination. The back side of form 1040 clearly says that we can go to jail if anything in the form is incorrect. And many people do not understand what they sign. But it's not considered "self-incrimination" somehow. And don't mention Amendment V in a conversation with IRS. Such people are treated by IRS in a special way.

      Amendment XIII prohibits involuntary servitude (slavery). Yet, income tax means that part of my time is spent serving the government without my consent. Etc.

      I learned these things along with legal cases arguing them in favor of the government some time ago, when I was younger and more naive. I do not advocate any of these arguments. By all means, "do not try this at home". But I'm still in awe of the absurdity of this system.
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        Apr 25 2013: 16 is on the top of my list of amendments that need to go. I am also really adamant about 17.
        The states gave up their influence in the federal government. So, 16 gave them hands in our back pockets and 17 left the states in the dust... with states rights gone and most individual rights on the line (consider the bill of rights issues) can the worse case scenario be far behind? Or am I being to worrisome... it could never happen here.
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          Apr 25 2013: It's somewhat scary to watch how easily people give away their rights and are eager to give more power to the government in exchange for "security". It's like sheep trusting a wolf to protect them or appointing a goat to guard a cabbage orchard. The wolf loves any stories and incidents that instill panic and fear of horrible "dangers out there" and, usually, exploits them to the full extent.

          I was reading comments to Yahoo news regarding the Boston bombing. Most of the commenters are eager to throw away the IV, the V, the VI along with the 1964 Civil Rights Act while considering their opinion "patriotic". The idea that select people can be considered "enemy combatants" based on their ethnic and religious background and denied the right to due process at government's whim to "save taxpayer's money" scares me more than terrorism. Protecting rights is one area where I would rather not "save taxpayer's money".
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          Apr 25 2013: Here is a great review from John Stewart of some weird opinions of how to "strengthen" and "protect" America.

          Reminds me of this story:

          Foxy Loxy: "Well, well. Where are you rushing on such a fine day?"

          Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey, Turkey Lurkey (together) "Help! Help!" It's not a fine day at all. The sky is falling, and we're running to tell the king!"

          Foxy Loxy: "How do you know the sky is falling?"

          Chicken Little: "I saw it with my own eyes, and heard it with my own ears, and part of it fell on my head!"

          Foxy Loxy: "I see. Well then, follow me, and I'll show you the way to the king."

          Narrator: So Foxy Loxy led Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey, and Turkey Lurkey across a field and through the woods. He led them straight to his den, and they never saw the king to tell him that the sky is falling.
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      Apr 25 2013: By the way, there is a controversy around mortgage interest deduction (all-American favorite). Mortgage interest on rental and commercial property is a business expense (like any other business loan interest) and should be deducted from business or rental income. Mortgage interest on personal residences seems to be a personal expense, much like any other personal credit interest (car loans, credit cards, etc.) If we deduct personal expenses from personal income, let's deduct everything else - food, utilities, credit card interest, etc. If we don't deduct personal expenses from income, let's not deduct personal residence mortgage income. The whole issue, again, smells with hypocrisy and riddled with logical inconsistencies.
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    Apr 24 2013: Income tax should not exist, instead of making the average American spend hours trying to calculate income tax we could make it more simple and apply our taxes only to the goods and services that we buy. It would close the tax loopholes for the rich and everyone would pay their fair share. The wealthy would pay more in accordance to their income because they simply have the means to buy more products than those without such a high level of income.
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      Apr 24 2013: So what is fair about paying more because you make more?... that logic is lost on me.
      Everyone should pay the same rate...if you make more then you would pay more. That is as far as I can stretch the logic of fair share.
      Better if everyone would pay $20 a year to the governments to operate. The governments would then know or could pretty much estimate their income and budget accordingly. But, budget is a dirty word for governments. It implies restraints, planning, judicious use of taxpayers funds. None of this is evident in current governments spending.

      Right now, the governments, all of them, spend money first and then go out of their way to collect it or borrow it. It's not about taxing, it's about spending...
      Whether taxes are collect through sales or income, it really doesn't matter how either is more efficient or fair, it the funds are squandered and wasted.
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    Apr 24 2013: Pat said: " This will be my last response as you are not listening and there is no point to this......"

    I am listening to you Pat. I've read your posts, looked at your videos and articles, etc. You are stuck in a one-sided understanding. We all are. We choose our side and we push it. Nothing wrong with that.

    I don't think you have all the answers, anymore than I do. But we can't let that stop us from networking and looking at the problem. We have to agree on something somewhere. I think that something should be free medical care for all citizens. I don't see it as moving us into a socialist country and we could stop it there. Let Private enterprise pay for the police, emergency care, firemen and military. Cut the size of government down to something affordable. Eveyone clean up behind themselves and keep the country clean. Save some resources for a rainy day, just like we do in our everyday lives.

    Quite messing with food production, housing and medical care. That's the basic stuff we all need to support. Let the economy be based on something tangible, not paper and philosophical financial ideas. We've heard it said, "Let's bring the troops home and cut down on the war spending".... well, lets bring our economy back and start manufacturing things in this country. Let Mexico do it's own thing, Canada also. We can work together and create a hemispherical economy on our side of the planet. Let the other side do it's own thing. Let Europe Russia and China worry about North Korea.

    The pursuit of Money is not worth wasting a whole lifetime. There is the pursuit of peace and the eradication of human suffering. Taxes are necessary to operate and run this country. We should be looking at how much we need, not who pays for it. We should all pay for it. Those who do better with their part of our mutual resource base in this country should pay a bit more.
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      Apr 24 2013: Re: "The pursuit of Money is not worth wasting a whole lifetime. There is the pursuit of peace and the eradication of human suffering. Taxes are necessary to operate and run this country. We should be looking at how much we need, not who pays for it. We should all pay for it."

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      Apr 24 2013: " production, housing and medical care. That's the basic stuff we all need to support."
      "We should be looking at how much we need, not who pays for it. We should all pay for it."

      That's the demand side! Thanks.
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    Apr 24 2013: Hi Ryan, Good to hear from you.

    Yeah. Sometimes I wonder what the world would think of the US if we put forth a major effort to bring free medical care to all citizens of the US. That would put us pretty much as the ultimate leader in the world. I think just doing that one thing would help most poor people climb up into the American Dream and realize it on a large scale.

    When you watch your wife or kids get sick and there is little you can do, it has to be a depressing episode in someone's life.

    Personally I don't think it would cost as much as people think. It might take a big slice out of making real money in the medical field but I think it would be really uplifting for the whole country. There would be other ways to make money besides human suffering and misery.

    I think citizens would take more pride in our country and that could only help to build up the moral we need to jump on some really big project, like mining asteroids or a united effort to harness geothermal energy.

    Taxes are the only way we have to unite all citizens in the effort to make this country the greatest in the world, a model country for all others. We can still pull this off and get over this slump but we need to all pull together and get behind something on a social level.
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    Apr 23 2013: Pat said...Real personal income has risen 50% over the last 30yr. per capita consumption has gone up by the same amount..."

    The cost of bread has gone up from 25 cents a loaf to $4.00 a loaf in the last 30 years also Pat. That has the effect of offsetting personal income. 30 years ago I could afford to pay for my Doctor visits with cash while making a bit above the Minimum wage, while my wife stayed home and took care of the kids and the house.

    What is inflation vs. a rise in personal income.

    Paragraph one. is about securing wealth. It cost money to move wealth around and contracts help to bind it in certain banks and organizations, so it's not done as often as you think. Money isn't that mobile. It's still in the hands of those who created it in the first place. It is a myth. Debt is what is real.

    Paragraph 2: Yes I could wait but why do I have to?. Because real industrial growth has died, the wealthy now have to invest in food and housing to make a buck, leaving the end user out in the cold.

    Paragraph 4: O had nothing to do with the crash Pat. The investors don't like the new laws that regulate them. The are treading slow because they don't know how to work within a real framework of honesty and dream building. They are used to making a fast buck. Honest hard work is beyond their ability to function within.

    Considering our current debt size, I doubt anything will survive another bubble pop. I don't think we will be bailing out the losers again. We are broke.
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      Apr 23 2013: That 50% is inflation adjusted.

      1 still no idea

      2 just wait it will save you big time

      4 that is your opinion but not the opinion of investors. Think about it, say you want to grow your money and see a niche in the market place. You predict this will double your money in 5 yr (most of that will come after you pay back the investment) but O institutes Obama care and you don't know what that is going to do to your costs or your customers, additionally Frank Dodd has not come to full flatulence yet and is going to be onerous, and most of all runaway debt hanging like a sword over head makes you feel like Damocles. So what do you say deal me in or deal me out? Trust me they are no stranger to hard work.

      The debt is typically fixed by inflating the dollar.

      You have the memes stuck in your head playing over and over. Wake up John take a listen to what I'm saying, I'm trying to help you.
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        Apr 23 2013: Hey pat, I think this kinda kills your 30% rise across the board thing:

        " A Rise in Wealth for the Wealthy; Declines for the Lower 93%
        An Uneven Recovery, 2009-2011

        by Richard Fry and Paul Taylor"

        "...O institutes Obama care and you don't know what that is going to do to your costs or your customers, additionally Frank Dodd has not come to full flatulence yet and is going to be onerous, and most of all runaway debt hanging like a sword over head makes you feel like Damocles. So what do you say deal me in or deal me out? Trust me they are no stranger to hard work. .."

        I know they work hard, greed is a hard driving force. But, they forget the other people who are responcible for their ability to make money. What about all the Veterans who died so they could have a safe environment to make all this money via their hard work? ALL of American needs to be taken care of Pat. The wealth needs to be distributed in a human way so everyone will benefit, especially where health care is concerned. It's not Obama Care, it's the Liberal mindset that everyone needs to be taken care of. If everyone worked on wall street and had the same opportunities many of these people had, who would take out the garbage? Who would go on the special ops that keep this country safe?

        It's a misnomer to speculate that everyone can be a wall street trader or even reach the great American Dream if Wall street is increasing the price of food and housing just to make up for the lack of other trading opportunities.

        It wasn't wall street that won WWII. It was the multitude of Americans who put the flesh on the line that accomplished that feat. Their children and grandchildren should get something for that sacrifice. I think across the board health care for all Americans is not asking too much. Taxes is the only way to accomplish that. Wall street cry babies are a problem for all.
        • Apr 24 2013: Well said John and I would add that the stock market is just more taxes on people that are not investors. If the gov, the huge corporations bribing our gov to further their greed at our expense and the fed don't stop their greedy pursuits, the world will pay and is paying. They will ride the world economy into the ground.
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          Apr 24 2013: This will be my last response as you are not listening and there is no point to this...

          As I inferred before without the Vets there would be no economy, so absolutely whatever the vets need it is good by me.

          But that is light years different than the government making everyone dependent on the government for their life.

          Regarding your specious pew research article. This is standard fare for the liberal "think tanks". But as I stated before (indicative that you are not hearing me) household statistics or any other statistical category are not real people. So they have figured how to cherry pick the statistics to make it sound like the the evil 1% are exploiting the ones who would rather be taken care of, so what. As I stated previously the real reason the house hold income category changes is because of divorce in households.

          Business people do help people by virtue of the fact that the purpose of a business is benefit the customer. You would say it is to make money but the kicker is that the customer could not care less if the business makes money only whether or not the product or service benefits them. This requires damn hard work if you think otherwise you have never had a business. By statistic only 4% of business's last past the 5yr mark. Your delusion is that these are big corporations but as I indicated to you before they are not.
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    Apr 23 2013: Hi again. Depends on the situation I guess. When jobs are saved new ones can be created over time if the failed model is readjusted or controlled better... But I get your point, it's a question of beautiful theory vs. cruel practice, maybe also sentiment for the old instead of seeing possibilities in the new...

    Thank you both Ben and Arkady, it's been a real pleasure discussing this.
  • Apr 23 2013: Arkady,
    You live in Beaverton.
    I was raised in Beaverton, where they income tax, but no sales tax ( and you are not allowed to pump your own gasoline).
    Now I live in Seattle, where we have no income tax, and nearly 10% sales tax.
    364 days of the year, I would rather live in Oregon.
    Only 1 day of the year, I would rather live in Washington.
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      Apr 23 2013: Yes, but they deduct 5% from each paycheck. Of course, people from Washington love Oregon - they come here to shop all the time. And Washington residents from across the river who work in Oregon don't have to pay Oregon income tax either. I can understand why people in Washington love Oregon income tax.

      The cheapest gas in Oregon right now is $3.29 per galon. The cheapest gas in Washington is $3.19. Do you know why? Because we pay 10 cents per galon to the guy who inserts the hose and swipes the card through the slit.

      I'd rather save the 5% of my paycheck or pay off a credit card and insert the hose and use the slit myself than never see my money and then pay some dude to insert the hose for me :-)
      • Apr 24 2013: I really don't care about pumping my own gas or not.
        But I do care about having to pay an extra 10% for anything that's not food.
        It would be different if the tax was included in the price (like a VAT), but it's not.

        FWIW, my wife disagrees with me too (along with a majority of voters in WA).
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          Apr 24 2013: Food is the second largest expense in my family after mortgage. At 10% sales tax, with those 2 excluded, I would pay less than 5% of my gross income. Besides, the tax would be in my face with every purchase and would make me think whether I want to pay it or not. The way things are in Oregon, I simply never see the money and have no choice. I also have to file 2 tax returns. I find tax returns a humiliating time waste.
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    Apr 22 2013: > Pat and Arkaady:

    "There has been a bruising battle over how much America's largest corporations should pay in taxes, especially as the size of the federal budget deficit grows. While on paper the federal corporate tax rate is 35%, companies usually pay far less than that because of loopholes and subsidies. " ~

    "The top 1 percent of taxpayers paid 33.7 percent of all individual income taxes in 2002. This group of taxpayers has paid more than 30 percent of individual income taxes since 1995." ~

    100% - 33.7% = 66.3%. The 71% number came from a govt. site. I'll try and find it again. The 66.3% is a calculation from the above website data.

    The upper 5% pays the biggest part subsidised with the lower middle class. Those making under $24,000.00, of course, pay little to nothing.

    Looking at income, the rich make the majority of the money when compared to every other individual.

    "Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes. In all years since 1990, taxpayers in this group have paid over 94 percent of all individual income taxes. In 2000, 2001, and 2002, this group paid over 96 percent of the total." ~ : This supports Pats assertion but Pat does little to define who the 50% are leaving some to imply they are the top 1% or the very rich.

    "According to a recent report from the Congressional Budget Office, the Americans paying the highest effective marginal tax rates are, for the most part, low- to middle-income individuals" ~
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      Apr 22 2013: Corporate welfare is a bad thing. But as noted before corporations do not pay taxes the consumer does.

      There has always been income disparity and there always will be. It is irrelevant, it is income mobility that is important.

      It is important to note that much of the income disparity meme comes from a report by Piketty and Saez that fails to report that much of the disparity comes from tax law changes that encourage people to report income as individuals rather than corporations. Another meme is one espoused by Elizabeth Warren that shows household income has dropped precipitously in the last 30yr but she fails to report that the rate of divorce is the cause since when ever there is a divorce the household income is cut in half.

      Of course the top 50% includes the top 1% I'm missing your point.

      this site refutes your CBO quote: just look at the graph
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        Apr 23 2013: Income mobility is important but protecting the income is even more so. Sometimes you can't keep it unless you share with others, else they will take it from you and delve it amoung themselves. The world is not a more peaceful place, just more complex.

        I've been trying to buy a home for the last two years. The problem is -people with lots of money who want to make more betting on a future they think will support them into the next decade. I can't compete in bidding wars with wall street who has billions to toss in the game while I onlyh have a bank who is willing to lend me the difference to purchase a home.

        To wall street it is just about making more money. To me it is the last home I will buy. Wall Street sent a group with 11.5 billion dollars to buy up all the nice homes, leaving the junk. They hope is to make 8% for 5 years while renting the homes to those who can afford it. I am left with one option: Build a home, a bit smaller than I wanted. On the down side, my bank and others who own these forclosed homes don't want to lend to build they want to lend to get rid of debt -so I am stuck, along with many others who may have to rent the rest of our lives.

        The middle class is going down as a result of the the same thing that happened before WWII, presipitated by the same forces the caused the Great Depression. The money lenders and bankers wnat it all and to control it all. But, forces in Europe decided differently and chose war as a means to level the playing field and take it all away from them. Of course the price we paid was too great but once all had been destroyed, it had to be rebuilt again, providing jobs for the many who were left.

        Thus is the history of capitalism and how it will always be played out. Communisim tried a different approuch but could not weed out the collected need to centralize the wealth and hang on to power. Socialisim was the only course left to those who had their country destroyed by that war who didn't want Communisim.
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          Apr 23 2013: Clearly I'm not going to show you anything. On the off chance there is someone who will read this, who knows he doesn't know (on TED, right) I will respond.

          1st paragraph I have no idea what you are talking about

          2nd Paragraph You would be better off to wait until the bubble pops again and you will be able to buy a house for much less

          3rd see paragraph #2

          4th the class warfare is created by politicians it is not as much substance as they want you to believe. Real personal income has risen 50% over the last 30yr. per capita consumption has gone up by the same amount. Admittedly since O has taken the reigns this has not been true but that is because he has scared the hell out of the investors who have said deal me out. As far as the middle class and the great depression goes, the middle class was created after WW2

          5th I have no idea what you are talking about.
  • Apr 22 2013: As for the Fair Tax, I'm not sure, seeing as how I don't know enough about it. I don't think that keeping all of your income makes much difference if you are paying more for everything that you purchase. The Government has to take money out via taxes at some point, so you're not necessarily gaining much. As for the suggestion that you would exempt necessities from taxation - I like the idea. If you can make the system progressive, I'm more likely to support it.

    As for saving money, you can also make the argument that money saved in banks is good because banks can use it for loans. As a whole, though, I would say that saving money isn't strictly good for the economy like spending money.
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      Apr 22 2013: Fairtax makes the tax progressive through the concept of "prebates".

      It is believed that exempting "necessities" from taxation will not make the tax progressive. E.g. "the rich" buy more expensive food than "the poor", so, exempting food will give progressive exemptions to the rich. And taxing "luxury items" will backfire on the working people when the rich will stop buying them killing whole industries and causing price drops (see the video in one of Krisztian's comments regarding the 10% tax on luxury boats and private jets).
  • Apr 21 2013: Unfair taxes bribery and our gov, helped small companies back in the 70s to become multinational corporations, that now bribe any and all gov's, to do most all of their bidding, only people aren't taught to think for themselves, in any school in any nation, but you can always use the copy and paste methods you were taught in every school in every nation.
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    Apr 21 2013: Giving this more thought, taxes should be collected in the fairest means to all citizens, the mechanics that we are debating is not the real question to me.

    The real question is the apparent abuse of the taxing systems by government to do social engineering, populist policy programming or sustainment of the governmental employment.
    Taxes should be that which is used to maintain government operations as prescribed by the rules establishing the government. All this other stuff is bogus BS.

    Almost every great political revolution in modern history has been over the perceived abusive taxing by the established government. What amazes me is that in most every case new governments have not learn from the misdeeds of past governments. My only conclusion is that someone hands out stupid pills to those running for office. If you believe I am wrong...consider this...
    Does the number of programs to save taxpayers dollars equal the number of ways to increase the number of ways to collect taxpayers dollars?
    And to make this conversation even more mind boggling, we have commentators that are considering various methods of combining and interfacing taxing methods to increase the monies flowing into wasteful government coffers.
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      Apr 22 2013: Mike,

      They say, "power corrupts; absolute power corrupts absolutely". People with power increasingly use this power to their own benefit. Democracy is no exception. Majority increasingly votes to benefit itself at the expense of minority until the minority disappears. The process is inherently unbalanced.

      Many people point out that "the rich" will avoid sales taxes. I think, it's good. People need a way to avoid taxes. The reason I like sales taxes better than income taxes is exactly that when people feel that the tax is too much for what they get in return, they can choose not to pay it by not buying the taxed items. I see it as the balancing mechanism which makes voting for more benefits to force the minority to pay ineffective.
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    Apr 21 2013: A mix of both consumption and income taxes seems to work well.

    Actually id like total wealth to also be a factor for income tax. No idea how this would work in practice.
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      Apr 21 2013: You realize that you offer triple taxation? Once - when the money is earned, twice - when the money is spent, thrice - when the money is neither earned nor spent. Actually, with the tax on wealth, there is no end to multiple taxation of what has already been taxed. How fair is that? Just one method, please.

      Taxing wealth would be a direct tax and would need another amendment to the U.S. constitution. It is an interesting idea to tax cash that sits in the bank doing nothing: a) it will compel people to invest or spend the money ASAP; b) it would affect only people with large banks accounts a.k.a. "rich". The problem, of course, that they will simply move the money off-shore.
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      Apr 21 2013: We might as well declare that the people are slaves of the government, because no matter what people do, all property will leak into government coffers. Taxing what has already been taxed is like declaring that a person can be tried for the same crime every year.
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    Apr 21 2013: Arkady, how about a consumption tax? We can use energy equivalent of consumption or a resource equivalent of consumption - a ubiquitous resource like, say, water.
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      Apr 21 2013: Taxing water consumption does not seem like a good idea to me. There are many forms of consumption taxes. Sales tax is one of them. I'd say, this debate is about the principle - is it better to tax consumption (expense) or production (income)? Of course, one person's expense is another person's income. So, at the end of the day, it does not matter much. Perhaps, the difference is which side of the transaction should pay? I think, it affects our motivations.
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        Apr 21 2013: Arkady, I understand your point. But it seems by extension of your own logic (one person's expense is another person's income) sales or income tax will not make much difference. I think the question about consumption and production goes more fundamental. Yet more fundamental is whether one is trying to control the supply side or demand side.
        I think it will be better if we work on the demand side. We must be aware about the real cost of our demand and consumption. A tax system which constantly reminds us of that will, IMO, work in our best interest.
        I am no economist but I think taxing the consumption on the resource side is more logical. When I say water, I don't mean free water only but the embedded water (virtual water too) part of our consumption. Technically we can calculate the water footprints of most commodities. For example production of one cup of coffee requires 35 litres of water. Please check this.
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          Apr 22 2013: Interesting. I don't trust these calculations much, though. How is this 35 litres number determined? Who writes the formulas?

          Taxation is a fascinating topic. It combines economy, morality, social justice (reaching into religion). Few things reflect the philosophical principles of "unity of the opposites", "yin-yang", etc. as prominently as economy and taxation.

          I think the tax system needs an inherent balancing mechanism. It seems to me that the ability to "vote with the money" against burdensome taxes by not buying the taxed products can serve as a natural regulator for taxes.
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        Apr 23 2013: Dear Arkady,

        Please don’t trust the calculations without checking by you. As to your questions:

        1. How the water footprints are calculated – By following an internationally accepted manual and referring to data maintained by international bodies.

        2. Who writes this formula - Arjen Y. Hoekstra, Ashok K. Chapagain, Maite M. Aldaya and Mesfin M. Mekonnen. For information about the lead author check this.

        I agree that taxation is an interesting subject. It is deeply linked with governance. And sadly, governments will hardly be creative enough to think in the direction I indicated.
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          Apr 23 2013: Interesting. I may agree that 228 pages is shorter than the current U.S. Title 26. But, by its nature, it's still a book of rules to which most of the people need to agree, not just an international body of experts in the field. Title 26 was also written by a "body of experts" called "Congress".

          Interesting information. I'm not sure how to apply it to taxation. It's also not clear why "water" and not "oxygen" or "energy" or "man-hours".
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        Apr 23 2013: I will put my money on a technologist and visionary than Congress. :)
        I am not sure either. I pitched the idea because I thought taxation could be a great tool to conserve resources just not control it's flow in a preferred direction.
        It doesn't need to be water but water is the most ubiquitous resource used in economy. Oxygen does not qualify. Energy in watt-hours can work too. Man-hour cannot as it's output is not standardized.
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    Apr 20 2013: As a 100% disabled Combat Veteran, I'm considere one of the (Entitled) personages some people talk of. They dismiss the fact I lost body parts and function that would have made me more competative with healthy people.

    One thing most people over look is the money given to the (entitled) is spent in it's entirity in the local community for food and desperately need meds and utilities. The (Unentitled) get their money through govenment contracts at rediculiouslly low interests rates and use it to make more profit for themselves. It's true they have to spend money to support their lifestyle but the more money you have, the cheaper you can buy in bulk and sell of the rest as inventory in your business interprise or to other suppliers, making even more profit for yourself.

    I think those who recieve less are doing better at putting the money back into circulation, almost immediately.
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      Apr 20 2013: That is not entitlement. But I suspect you know that.

      I genuinely thank you for your service.

      A touch stone of any economy that is not known by the average person is that jobs and prosperity are created by investment. Agreement or disagreement is irrelevant the climate is either made conducive to investment or it isn't. This is why the economy has been so anemic for the past 5 yr. When FDR would utters words like paraphrasing "the business man just thinks he is going to produce goods as he sees fit without any government intervention" Not to different from what we see today with the current POTUS. And then they wonder why there are no jobs, funny stuff except it is not that funny.
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      Apr 20 2013: John, I very much support giving to the needy. My son has a learning disability, and I feel the pain of parents with disabled children. I believe, however, that the motives of why people donate to charities and the attitudes of those who receive it, are important. When people donate to the needy to get tax benefits or to get "political capital", it's not charity. When people donate because they are forced to, it's not charity.

      On the other hand, I think, charity and other help needs to be accepted with humility and gratitude and not taken as something "due". My friend volunteered at a donation center and witnessed "poor" people quarreling about the items or expressing indignation regarding why they did not get something. This attitude seems disgraceful to me.

      I believe, taking care of disabled veterans is the part of the deal when the government sends people to war. It must be the part of the defense budget, not a social program. I believe, veterans fully deserve the honor and the privileges. But I also believe that honoring myself and demanding privileges for myself isn't right. It's a delicate issue, I know. I hope, I don't offend anyone here.
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        Apr 20 2013: Not really talking about needy people Arkady. I'm sorry I'm not making myself clear.

        My point is that not all rich people put money back into our economy or support the country by paying taxes. The majority of tax receipts come from the 71% of the working population, not the rich.

        A sales tax system might be a good idea but I haven't seen any real figures to support the idea. Can you point some out or did I miss something?
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    Apr 20 2013: I digress but this notion crossed my mind while reading the last comment about inflation.

    In the future with nano engineering it will be possible to molecularly engineer materials at which point I would think gold will be less valuable?

    Peter Diamandis talked about the price of aluminum in the mid 1800s being more expensive than gold or platinum. When the technology changed that allowed aluminum to be made cheaply its value came down to a buck fiddy a pound
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      Apr 20 2013: Yes. Napoleon III sported aluminum silverware at his royal banquets.
      Values are weird. Why we consider someone with some numbers in an "account" wealthy and how people can transfer this virtual value by swiping a piece of plastic through a slit connected to an iPhone is mind-boggling.

      Aluminum, however, unlike gold, is said to be the third most most abundant element in the Earth crust and the most plentiful metal. Gold is an element, not a compound or some special and more rare form of a common element (like a diamond consisting of carbon). You need a nuclear process to "make" it.

      One doesn't need nano technology to create value from junk, rocks, thin air, or nothing. Just a little bit of imagination and a few words or images arranged in the right way called "advertisement".

      Read this
      One of the fads of the Internet era - creating and selling brand names. Think how celebrities sell their names to product manufacturers (e.g. Beats by Dr. Dre). It's all virtual now.
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        Apr 20 2013: Ok so no alchemy in the future
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        Apr 20 2013: It cost more energy to produce aluminum than to make gold with the present technology. Gold is less abunddnt than aluminim and there is where the cost differential comes into play. If energy costs were to rise at a considerable rate (which I doubt would happen), this difference would disappear.

        Most of the cost of producing gold is in locating and mining it from the earth.

        Per tonne of metal produced these figures were several orders of magnitude
        greater than those for other metals, such as steel and aluminium. However, gold is produced
        in much smaller quantities, so the total environmental footprint for global gold production is
        smaller than some other commonly used metals, including steel, copper and aluminium.

        On average gold cost less to produce than aluminum because we produce less of it and it is less abundent. Of course if it were as as abundent as aluminum, it would cost less to produce and probably replace aluminum in certian applications, like copper wire for instance. It could be strengthened making it suppior to copper lines loosing less power in the transmission process.

        There are golden asteroids in space. :)
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    Apr 19 2013: Given the choice, I would prefer a sales tax. But with that said, I just thought of something. What if we had no tax of any kind, and we just officially allowed the government to print however much money we needed up to budget constraints. That would devalue everyone's currency equally, but officially, instead of this secretive way we do it now. As long as we devalue less than our GDP increase (roughly), we should experience some growth, I think?

    I know this is a pipe dream, but as long as we're talking about radical changes, does this have any merit?
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      Apr 19 2013: I had this thought too. Inflation is another form of taxation, of course. But it is fundamentally different from income or sales tax. Income and consumption taxes tax exchange transactions. Whereas inflation taxes the money itself. It's an equivalent of direct fixed percentage tax per capita. It will also tax everyone holding U.S. cash and it is well known that most US dollars banknotes are outside the United States. Such legislation will immediately cause people throughout the world exchanging dollars for other currencies or gold that would flood the market with cash. So, the effect would be devastating.

      It's best not to touch this money press.

      In 1990, right before the USSR collapse, the former USSR finance minister Pavlov who later was a part of the 1991 putsch, decided to "fix" economy by obsoleting 100 rouble notes overnight thus extracting "surplus" cash from the citizens who did not hold the money in the bank. I won't describe the reaction of the population. Soon after that, U.S. decided to change the $100 design. The U.S. government ran a huge campaign in Russia (and, perhaps, other countries) explaining the reasons for this change and "educating" the population regarding security features of the new notes, etc. I remember even receiving a survey phone call asking me questions regarding what I know about this exchange. The concern about panic among people dumping dollars was very real.

      I think, the government wants cash to stay out of circulation. I believe, this is one of the reasons why the government encourages taking mortgages and contributing to 401k funds which immediately returns huge sums to the bank and ties up cash for years.
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        Apr 19 2013: Is not that global dollar deflation/collapse coming one way or another, for all dollar holders? Sooner or later, everyone who holds a dollar will get devalued, I think. Might as well get us all on a level playing field at some point.
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    Apr 19 2013: Tax separates human society from anarchy or the natural tribal state of our existence. The Philosopher Thomas Hobbes summarizes this state of nature were the lives of people would be "solitary, poor, nasty, brutish and short." For any meaningful government to thrive, taxes are necessary to support the fundamental or even optional activities of that government.
    We all hate taxes, but tax is, even more than law, the foundation of civilization. Laws are good but without a will and a force to enforce them they are useless. The will comes from our wish to be safe and the force comes from our willingness to "pay" for the enforcement of the laws.
    The types of tax often determine the amount of power a "state" will have. A flat tax, for example minimizes the power of any state. A complex income tax maximizes that power. Sales tax and VAT fall some where in between. Of course there are many other taxes; marriage, death, ownership, locality, etc.
    The choice of sales tax versus income tax, therefore, is a choice by the citizens of how much power they want to invest in their legislative bodies. The economics are nearly irrelevant as taxes can be manipulated to reach any desired figure of income.
    I don't support any particular form of tax but I do hope all citizens think carefully and deeply when enacting or seeking any tax law.
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      Apr 19 2013: Re: "The choice of sales tax versus income tax, therefore, is a choice by the citizens of how much power they want to invest in their legislative bodies. The economics are nearly irrelevant as taxes can be manipulated to reach any desired figure of income."

      Someone said that "giving the power and the money to the government is like giving the booze and the car keys to a bunch of teenagers".

      One of my objections to the income tax in its present form is its extreme complexity and manipulative nature. The whole process of preparing a tax return is a hypocritical tax-evasion game. What everyone is doing when preparing the tax return is stretching and twisting definitions of "business expense", "depreciation of assets", "business use", values of donated items, whether a car driven to work or between two places of work can be considered a "business expense", whether tuition in a private kindergarten was paid for education or for the childcare so that the parents could work; and even then, the ability to take the deduction depends on whether the spouse works or not. Forgive me my French, but this seems like a crock of shit to me. The process of signing under penalty of perjury a certificate full of arbitrary definitions (i.e. lies) that I owe money to a coercive agency, possibly, incriminating myself, is detrimental to morality and sense of human dignity. I think, the tax system should have just one or two numbers for the government to play with (the rate, for example) - that's it. No tax breaks, subsidies, returns, deductions, exemptions, etc. The less the government and everyone else can manipulate the system - the better for everyone.
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        Apr 19 2013: A single global consumption tax (sales tax) = common sense.

        Add death tax + gift tax + bad stuff tax - no other taxes

        It would fix the biggest problem - wealth inequality - from there it would be possible to solve many other seemingly intractable problems that are consuming maximum resources for minimum results.

        The Digital Revolution makes global, national, local governance possible through a website like msn.(States are obsolete)

        Next step is 'The Political Revolution' - global e-democracy for equal opportunity - democratic government by the people for the people.

        A single global political party - a public company - like Microsoft or Apple. It could launch simultaneously in USA + UK + AU + NZ + Japan

        Boards of Directors are global thought leaders who are elected by each other in (like the Papal Conclave).

        Executives are experts with track records of success in their portfolios who are pre-selected by the Board and elected by the citizens on 10 year contracts. (Politicians become extinct)

        State of the art common sense political, legal and financial systems devoid of ideology. (Current systems become extinct)

        Transfer of wealth to rich + demand for austerity + debt burden + political shambles will lead to widespread anarchy in enough countries for people of USA to vote for major change in due course.

        Then it will be easy to create a global, national, local political party within the current framework that wins elections and executes massive rapid structural change post election.

        Governance principles, policies, procedures, practices that are commonsense.

        People in dictatorships go to website and click.

        'Dictatorship' 'Prequalify' 'Countries' 'Qualifications' 'Egypt' 'Customize' 'Defense Request' and get on with the peaceful task of winning online support in order to get armed support from other countries.

        It could start from a global political activists club - a social commercial network that empowers political activists - anybody interested?
  • Apr 19 2013: Would you prefer sales tax to income tax?

    "I understand, there is no "correct answer". This is why I post this as a debate. I'd like to know how many people think this way and to hear cases for or against both types of taxation."

    There is a third case... that being the old adage... "He who has the gold makes the rules", and you can pretty much surmise the answer from that, well at least in a "democracy" :)
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      Apr 19 2013: Yes. I love those variants of "The golden rule of morality" - "Do unto others before they do one to you" and "He who has the gold makes the rules". These talks are, pretty much, inconsequential. I realize that.

      But understanding the economic and social mechanisms is not useless.
      • Apr 20 2013: I never said it was, but in someways one has to realize the reality that we're in, if only to know what the consequences of change are. That's where the true value lays in discussions like this. And as you can no doubt see, getting consensus is probably the biggest challenge. Maybe because, and due to the fact morality, like which tax do you think is better, is inherently subjective.
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          Apr 20 2013: Yes again. Unfortunately, there is no litmus test to determine what is "just". The definitions of "just" are often opposite, depending on which side of any proposed transaction people find themselves.

          The definition of "rich" is also vague. Most people define "rich" as people making or having more money than themselves. There are as many definitions of "rich" as there are people.

          Yes, consensus is the key and understanding each others opinions promotes consensus.
  • Apr 18 2013: Arkady: You're right; the main attraction of Income taxes was sold as "Fairness" in 1913, but as we have seen, the real result has been ever more complicated ways for wealthy people to avoid taxes.But the objections about the poor doing relatively worse with a Sales tax are correct. You seem to be aware of the "" proposal of how to avoid this pitfall. The net result would be that the Prebate woould even out the discrepamcy automatically, and , if particularly frugal people wanted to, they could pay NO tax , as long as they were content to buy second hand stuff alll the time. The greatest benefit of all would be transparency: your tax rate would be on every sales receipt. Politicians hate that; no more secret deals with the IRS. Of course, saving the 250 billion dollars the IRS costs every year would be great too. As well as the disappearance of all those tax lawyers in D.C. Most of whom are there to influence the IRS for their clients.
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      Apr 19 2013: Well, with the proposal, a whole parasitic industry will disappear. I've heard, Americans spend billions of hours preparing tax returns each year. Imagine all that time released for productivity or just simple enjoyment of life! Imagine employers not having to pay 7.62% to match your 7.62% social security taxes and giving this money to you. That's a 15% increase in your paycheck from which you don't owe anyone a dime! (I'm not even talking about income taxes which is charged on top of that, from the 7.62% you never see - how "fair" is that?) No fear of audits of any kind, wage garnishment or imprisonment unless you are a smuggler. No more "I pay enough in taxes to donate to poor. Let the government take care of them." lame excuses to avoid charitable giving.

      Why do people choose slavery and hypocrisy over freedom?
  • Apr 18 2013: Sorry, typo. My assumptions were based on #5 where you basically imply that you feel billionaires should receive massive tax breaks. I think prebates is an awesome idea. It is similar to the notion of a basic guaranteed income and does make the tax structure more progressive and shifts that "Fairtax" from burdening the poor to burdening the middle class, but still represents a massive tax cut for the 1%.

    1. Yes, "us vs. them" is generally harmful. Strangely, I have heard this talking point before. You may have heard my talking point. Massive wealth gaps are an indication of an unjust society and are bad for society. You can't convince people struggling to pay for food and heat that they are in the same boat as the guy putting in a car elevator in his house who earns what they do in a year in a day. Especially when they are working 40 hours a week and the car elevator guy is not working at all. Closing your eyes and pretending there are no income differences seems insane. Economics impacts every aspect of your life from your education to whether you marriage will last.

    2. I think your point is that taking taxing takes money out of the economy and could be harmful to the economy. But then the government spends that money stimulating the economy. The question is where you take money from. Like I said above, you should take money out with a few general goals in mind. Like how to cause the least suffering and how to discourage or encourage certain things (i.e. smoking, marriage).

    Look, you made it clear you don't believe that we should not tax rich people or corporations and I would agree that the Fairtax is a good way to do that. I assume since you didn't answer my questions about wealth distribution that you do feel that this is a good way to make the rich richer and the poor poorer and that that is your goal. I also assume the goal is to not tax stock purchases to further enrich those who can afford to purchase ownership.
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      Apr 18 2013: Economy is a system with "positive feedback". Any economic process tends to enhance itself. A drop in stock prices causes people to sell stock which causes the price to drop further. It works in the opposite direction too. It's nobody's fault, but rather the nature of capitalist economy that rich are getting richer and poor are getting poorer. Capital concentrates, monopolies form, etc. At some point, the system adjusts itself through recessions and revolutions. That's how things are whether we want it or not.

      Health means continuous circulation and renewal. In biology we talk about circulation of blood, nutrients, oxygen, excretion of waste. In economy we talk about circulation of products, services, and money. To sustain healthy economy, we do need a mechanism of circulating wealth.

      I agree with the notion that wealth needs to return from the rich to the poor. It is not my goal to make the poor poorer. I don't like the idea of making rich poorer either. I'd rather see everyone prosper.

      Taxing stock purchases seemed to me as a good idea some time ago. Stock speculations don't create products or services for society. A sales tax on stock purchases would inhibit day-trading and stock speculations, encourage long-term investing and may serve as a damper on those self-feeding exponential bubbles and crashes.

      Assumptions usually turn wrong. I don't think, I have an agenda here. I just want to learn what people think. #5 is just a notion that what people despise about rich is the excessive luxurious life style, not necessarily the ability to generate wealth. I can't see how ability to make money per se can be bad. It's all how we use it. Note that the hypothetical "frugal billionaire" in my #5 would not be putting a car elevator in his mansion. He would live in a 3-bedroom house or an apartment and drive a 15-year old Honda Accord while using his untaxed billions to create jobs. (An extreme example to illustrate the point).
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    Apr 18 2013: My experience has been rather psychological in that regard. Given that the government does source enough funding for whatever fiscal year it's battling through, giving out some of our hard-earned money seems a tad easier when making it with a "business sale" rather than "labor". I am curious as to how that would manifest itself in large economics, such as the states'. Hard to have the ear of Senatros on this as they probably weigh in "spending vs tax" cuts, notwithstanding where the latter comes from.
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    Apr 18 2013: A sale tax would encourage black-market goods and the smuggling them, the rich would buy high cost items out the US, thus killing US industries that make high cost items.
    If you allow different tax rates for different items the lobbyist moves in and corrupts the system.

    In short a sales tax hurt the poor, no matter how you do it.

    FYI: there is a "correct answer” it is call a flat income tax.
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      Apr 18 2013: When people prefer to risk going to jail by selling and buying goods on black market or to pay high shipping costs to paying a sales tax, it means that the tax is oppressive. Income tax also encourages the rich to move the money or themselves out of the country thus killing domestic industries. People who suffer are the ones who don't have the money to move and the ones whose jobs go overseas. Take the recent farce with Gérard Depardieu.

      When both happen, it means that the tax is too large. The goal must be to maximize the revenue, not to "make them pay". I believe, the economic feedback from changes in sales tax is much faster and easier to read than the feedback from implementing or eliminating an income tax deduction. With sales tax, people just stop buying the taxed item which is easily measurable and allows for quick and precise adjustments. With income tax, who knows where people use the extra income or where they choose to cut spending and which industry would hurt as a result?

      I know, there is no "correct answer". This is why, this is a debate, not a question. I want to understand the issues better from both sides.

      What do you think of the flat consumption tax and the idea of "prebate" from
    • Apr 19 2013: no it isn't. a flat tax means all the super-rich can pay 0 tax, shifting the burden onto everyone else.

      say you run a business employing 10 people at $10k a year and you make $100k a year yourself. everyone pays 10% so that's fair right? what's to stop you from paying your workers $9k a year and keeping $110k for yourself, effectively handing them 20% tax while you pay 0? they could go work for another company sure, but there's nothing to stop the owner of the other company doing the same thing, which is what he'll do, to "remain competitive".

      when you have tax rates on a curve, it makes it unfeasible to pull this scam on employees, because you'd have to cut their wages many dollars for every $1 you wanted to keep for yourself.
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        Apr 19 2013: Under a flat-tax everyone pays the same percentage no matter how much or little they make, including employees, companies, and the owners.
        So if the owner pays himself $0, the company still pays taxes on its profits.
        There is not curve, no working the system of books, no deductions, no loopholes, everyone pays no matter if they made money working, investing, lotto, they pay the same percentage.
        So if its 18% and you make a $100 you pay $18, and if you make $100,000,00 you pay $18,000,00. Simple!

        And if your married and have children you pay the same as someone single with no children. No long-form vs. short-form, no dependents, no deference filing separately or together.
        • Apr 20 2013: no there's a loophole. as i've said if it's a flat rate all a rich person has to do is re-balance his employees' salaries to pay 0% tax. when there's a proper curve, it's harder to do this.
          if it's 18% and you make $100,000.00, you reduce salaries or benefits so u make $118,000.00, then paying 18% tax on that leaves you with the $100,000,00 as if you paid no tax. the same with investments, say you dividends by 18%, every company knows then that they have to increase dividends by 18% to keep their shareholders happy, and they do that by cutting the workforce, so again the workers are left to pay the tax of the rich for them.

          on top of that, a curve is also the right balance. richer people are usually company owners and depend much more on roads etc since it's not just for them personally but to keep trucks on the road, goods coming to their factory, and provide routes for their employees and customers. they owe more to society and hence should pay more.
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    Apr 18 2013: Income tax please. The sales tax places an out of proportion burden on low income families, plus a low sales tax can be counted on to encourage spending and therefore hopefully create jobs, if you are paying 15% sales tax on your new shoes odds are you'll wear the old ones longer and repair them not buy new ones. With shoe sales down the store doesn't need 3 sales people, and it goes on from there. If 2 families spend 20,000 dollars on taxable items and the sales tax is 8% then both have paid 1,600$ but if one family is earning 50,000 and the other 100,00 then the first family is paying a 3.2% tax while the second WHICH EARNS MORE is paying only 1.6% and a family that earns only 25000 dollars if it could afford to buy so much in goods would be paying 6.4%. a minimum rate of income tax of 3% on incomes over 20,000$ plus 2% for every 100,000$ over 100,000$ with a tax of 50% on heirs of estates should the heir inherit more than 100,000,000$ of real estate liquid capital and assessed value of stocks art jewelry ect, that would discourage the passing of multi billion dollar fortunes to a single heir the odds are better with multiple heirs of smaller estates that the heirs will invest the money aggressively which if capitalism is at all viable should encourage growth and new jobs.Personally I think maybe 20,000,000 is still to much to inherit tax free but you'll see the reaction to any suggestion of such a tax sparks chaotic negative responses its as if people are really worried that it will apply to them. My tax plan has everyone who earns over the poverty level contributing, and if the guy making 200,000 dollars thinks he should not have to pay 10000$ when the guy earning 20,000 is paying 600$ he should remember that it is the commonly owned infrastructure and the maintenance of an orderly law abiding society that allows him to earn that money, and keep it without the expense of maintaining a private army.Don't forget now the guy who earns 190,000$ would only pay 5700$
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      Apr 18 2013: What do you think of the proposal on
      What they propose is to replace all payroll taxes with a single 23% sales tax. Sounds like a lot, however, currently, the social security and medicare alone are 7.62% from employee + 7.62% from employer = 15.24%. To make sure that people who live at or below poverty level don't pay taxes, the government would pay every person, including children and dependents who do not have any income, the worth of poverty level (say, $214/month, $2569/year)

      People who spend equal amount of money would still pay the same tax, regardless of income. But let's assume *equal percentage* of spending instead of equal amount. The system proposed on will result in the following compared rates for 3 families of 2:
      Family 1 income $20,000; Family 2 income $50,000; Family 3 income $100,000
      Family 1 spends $10,000 (a half); Family 2 spends $25,000; Family 3 spends $50,000
      Family 1 tax $2,300; Family 2 tax $5,750; Family 3 tax $11,500
      Family 1 prebate $5,138; Family 2 prebate $5,138; Family 3 prebate $5,138
      Family 1 net tax -$2,838 (-14.19%) - tax benefit; Family 2 net tax $612 (1.22%) - small tax; Family 3 net tax $6,362 (6.36%) - larger tax.
      Looks progressive to me.

      And if the family earning $100,000 spends $10,000 and invests $90,000 to create jobs, why is the $90,000 has to be taxed? If it simply sits in the bank, it is penalized by inflation. IMO, that's a sufficient incentive to have savings invested. And if the rich family still holds the $90,000 cash (which is, certainly, the choice of the money owner), it is, in a way, compensates for inflation by keeping cash from circulation and increasing the purchasing ability of the other people's money.
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        Apr 24 2013: I think the "fairtax" proposal is worth serious discussion, but you could improve your example by using more realistic figures. For example, the current federal poverty level for a 2-person household is $15,510, about 3 times your figure. The figure does not go up linearly with the number of persons in the household. Also, a family of two earning $20,000 today would probably spend it all, and those making $50,000 would probably not be able to save more than $10,000, max, spending at least $40,000.

        To me, the main advantage of the sales tax is its simplicity. Income tax, with its many special provisions, is a nightmare for most individuals (the current instruction booklet for our basic tax form runs to over 200 pages), and they are not able to correctly figure their tax without paying to have it done for them. Paying a fee to pay your tax is ludicrous.
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          Apr 24 2013: Re: "Paying a fee to pay your tax is ludicrous."

          Not only that, but forcing everyone to sign under penalties of perjury a paper that people do not understand given that they may go to jail if it is incorrect is strange too.
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    Apr 18 2013: I'm trying to find out the amount of the "intolerable taxes" imposed by the British government which, ultimately, caused the Boston Tea Party and the Declaration of Independence with all consequent events. The exact amounts seem to be thoroughly obscured. Does anyone have a reference to the actual numbers?
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    Apr 18 2013: All taxes are good if money comes back for the benefit of people. Alas in my country and also in most, the money so collected is wasted in filling the coffers of rich and powerful. Its a SHAME.
  • Apr 18 2013: it's a great question, and i agree in principle, but in reality there are too many ways for the super rich to avoid paying sales tax for it to be viable. the most basic way would just be to buy things overseas and have them sent. we already have tax havens where the super rich avoid paying taxes, they'd do even better by becoming sales outlets accepting payments for goods at 0 or close to 0 sales tax. a lot of big corporations such as amazon, starbucks, and google are already doing something quite similar, which results in them paying no tax at all in the countries they actually operate.

    the second is corporate welfare. companies will just keep the same strategy they have now, they'll pay lobbyists to make sure that no matter what the tax rate is or what form the tax is, they'll get a tax rebate from the government to cover it. the only way to fix tax is to make it uniform world-wide so no-one can avoid paying their fair share by shifting overseas, and to completely and forever end subsidies and tax breaks.
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      Apr 18 2013: It is true that sales tax is avoidable. I consider this an advantage of sales tax. When people avoid paying sales tax by not buying the product or prefer to pay huge shipping costs from overseas to paying the sales tax, it sends a signal that the tax is oppressive and is larger than people are willing to pay. No referendum is required. People vote with their money. These days, everyone can buy from overseas. You don't have to be rich to order a product from China or Singapore.

      Preferential tax treatment of certain groups over other is a different question. Isn't that what the tax system is for - wealth redistribution? When money are forcefully taken from one group of people, someone has to receive it. And who receives the benefits is determined by bureaucracy, not by free market or charity. To eliminate the preferential tax treatment, we seem to need to get rid of the tax system altogether and implement market and charity-based distribution of services provided by the government.

      But I share your sentiment against subsidies and bail-outs. They push economy and justice out of balance. (e.g. Tax breaks are different. Tax breaks for the poor or to stimulate certain industry (e.g. promoting green energy) can be useful.
      • Apr 18 2013: well for starters i think sending more jobs offshore is a bad idea, and there's no need to pay a shipping cost. what you do is receive the goods in your own country, but pay for them in another. it's already what big companies are doing now with their profits so they don't have to pay any tax - say they make $20m in america, they have their head office in switzerland charge them $20m for services so they make $0 in america and pay $0 tax. great for switzerland, terrible for the american citizen who has to pay more or lose services.

        tax isn't for wealth distribution, it's for citizens to pay their fair share towards the running of the country. many people erroneously think that every uses the same amount of services, but actually the richer you are, the more you depend on services such as roads, education, and hospitals to supply yourself and your company with healthy and intelligent employees, your company with supplies, and to make sure your customers can get your products.

        what do you mean by market and charity-based distribution of services?

        i agree that it's important to stimulate certain industry to drive innovation and improvement in the standard of living, but that can be done through grants and interest-free loans (to fund the building of a factory to produce better goods that would otherwise be too expensive, to be paid back when the products' success kicks in), tax breaks aren't necessary.
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          Apr 19 2013: Doesn't income tax (a tax on earnings) contribute to sending jobs offshore where producers don't have to pay payroll taxes and benefits and have to pay far less to workers? In terms of giving unfair advantage to the rich, I think, sales tax and income tax are equally bad. I don't buy the argument that sales tax is worse than income tax because with sales tax, the rich will pay less and the poor will pay more than with income tax. All arguments work both ways, and seem like speculation.

          Regarding grants and interest-free loans. These can be done by private individuals and companies who are interested in the products and services. You are right. The rich need the roads. If government doesn't build them, people who need them will. Same with education. (This idea is a can of worms. It won't work as investment, if motivation is only profit. A high level of charity from wealthy people seems to be necessary here.) It may not be necessary to use tax money to coerce people into doing this or that. That's what I mean by market and charity-based service providing.
      • Apr 19 2013: i agree there's no much in it, but income tax is paid by workers, whereas sales tax is paid by retailers. i didn't mean to say sales tax is worse, just that it's not better. i think we both agree though that we need to have consistency between countries to remove the incentive to send jobs offshore. i agree it's both ways, and my point is that we need to fix the problem of tax evasion, rather than just changing the tax format where it'll still be evaded.

        people who need roads will not build them because they're expensive and not directly profitable. a country as a whole benefits greatly from there being a good transport system where goods can be moved about freely. it's the same with education, there is little incentive for an individual to set up a robust system of education, but it is beneficial to a whole society if the entire country's population is well educated. charity is optional and that's where it falls short. also for charity, you necessitate there being people with more money than they need, and the whole reason the super-rich have so much money is because it's not in other people's hands. countries with higher standards of living, happiness, and life expectancy also have good income distribution and low charity. why should we congratulate the super rich for keeping so much money for themselves (eg by firing their countrymen in order to employ foreigners overseas) and then giving it back?
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          Apr 19 2013: Re: "people who need roads will not build them because they're expensive and not directly profitable... it's the same with education."

          Yes, I've heard this and I have to agree. As I said, the problem is that people are thought to be driven, mostly, by profit. In fact, they are not as Dan Ariely points out. Often, recognition is more important for people than profit. But the common belief that money is the main motivator is what prevents us from doing good "for goodness sake".

          Re: "charity is optional and that's where it falls short."

          It seems to be a cultural issue. U.S. has a cult of rich and famous. People loathe and admire them at the same time. People follow their each step in magazines, on Internet and TV. Most people long to become "rich and famous". Yet, when it comes to taxation, everyone calls them "dirty rich", "ridiculously rich", etc.

          The cultural problem that exists in the U.S. which it spreads all over the world and for which the U.S. is loathed and worshiped all over the world as well is that people are honored not by their contribution to society or personal character, but by how much money they have. This has been pointed out by many foreign authors since long ago. Things (even useless junk) is valued by how much it costs, not by its usefulness or aesthetic qualities. (I've heard, Dan Ariely has received an Ig Nobel prize for the research showing that expensive placebo drugs are more effective than cheap placebo drugs.) The cult of money needs to be replaced by the cult of love. I think, that's the way out of poverty, slavery, coercive taxation, and many other woes.

          "Charity is optional" is where I see it being immensely stronger than compulsory taxation. Of course, it's an idealistic view, but ideals are not useless.
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          Apr 21 2013: "Why should we congratulate the super rich for keeping so much money for themselves."
          We shouldn't :) Or - we should congratulate them if they actually made the money themselves and did not keep all of it to themselves but actually do something with it for the greater good. See - Bill Gates.

          "People are honored not by their contribution to society or personal character, but by how much money they have"
          Paradoxically - whatever your contribution to society, personal character and/or how much money you have, you will be honoured by some and hated by others, often on very wrong or shallow basis. Sad but true.

          ""Charity is optional" is where I see it being immensely stronger than compulsory taxation. Of course, it's an idealistic view, but ideals are not useless."

          It is stronger than compulsory taxation, but only on the nidealistic plan. In practice, like building roads, hospitals and devising education, it is unfortunately weaker.

          The problem that remains, especially in the US, is that the beloved ridiculously rich, view taxation as compulsory charity used or misused by the poor - the ones who the rich themselves see as the weaker ones, not strong enough to get themselves rich as they did themselves (provided that they actually did that themselves, not just inherited the money and/or power of influence). On the other hand, some lf the weaker ones may actually use compulsory charity or rebel against the rich ones instead of just being regular, hard-working people. And the circle closes. It is human nature that makes this circle difficult to stay in its perfect shape. Nietzsche described it neatly in "On the Genealogy of Morality", a really good, timeless book.
      • Apr 20 2013: i think i agree with you in principle. my objection stems from the application of that principle in reality. if all the rich were like bill gates (though even he picks and chooses who he gives his money to) we wouldn't be having this conversation, but we've got all the trumps out there who spend their money of gold-plated private jets rather than fulfilling their obligation to give back to the society that's given them so much. when you have a compulsory taxation system that nobody can get out of, you take away the choice of people who would choose to keep more than their fair share and also ensure it gets spread around to all those less lucky.
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          Apr 20 2013: Ben, would you like it if I tell you that you have an obligation to give part of your money to whoever I think you should give it to (say, charity A) especially if you have reason to believe that I would benefit from charity A? You may rightfully ask, "why charity A? I don't like their cause, I don't like the way they operate, etc."

          Even if you yourself feel that you ought to give to charity A, me compelling you to do it or saying that you have such "obligation" would seem completely inappropriate and would, in fact, discourage you from giving. Shouldn't we respect other's choices and decisions so that others respect our choices? It seems to be a totally democratic, "American", and patriotic sentiment. Also I believe that each of us should better be concerned with our own morality than morality of others to stay away from hypocrisy.

          So, although, I also agree with you in principle that everyone should feel an obligation to give back to society, I also object in principle that anyone should be compelled to do so. "Convinced" or "persuaded" - perhaps. This "convincing" and "persuading" can be done through public opinion, peer pressure, media, and general culture of giving and charity. The culture that we have now, glorifies "getting rich" and media persuades to consume rather than give.

          Of course, there seems to be a paradox - nobody can be forced to do anything voluntarily. It's an oxymoron. But the change in culture is not impossible. It just must start from "self" and spread like a viral youtube video by the power of "self" (I am).
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          Apr 24 2013: Arkady:

          (this is about a comment that you made that I can no longer reply to in this thread)

          Can non-uniformity in economy be a positive progress factor? Of course it can - mutations can be both positive and lethal. Lucikly, we have more control of the economy than we have of our mutations... Or we should, really...

          I'm not sure I'm so convinced by the analogy to physics, although it's interesting and temtpting to think and analyse in this way. My rationale for this skepticism or uncertainty can be worded in this way - economy, as language, art, music, farming, is a part of culture and an expression of our human nature and tendencies to controll nature, progress, inspire and make better. It is not an organism that is independent of our nature or culture. Of course, we are dependent on it now as we have always been dependent on the sun and the moon, but we did not create them. Economy is an expression of our human nature, why not stop speculating too much about it and do something good with.
          Maybe I'm just typing all this because the one time I invested, I lost 30% because of crisis...But still, I could have lost it all ;-)

          Thank you for a good and challenging discussion to eveyone involved!
      • Apr 22 2013: arkady you really are full of very interesting questions and points! i indeed would not like that, but it's the reason why that's important, as it's the same reason i'm for more tax and less choice for individuals. my money going to charity A also assures that my money is not going to charity B, and neither you nor i could say which if either was more deserving. i'm an avid supporter of democracy, yet i'm also vividly aware of my own and people in general's shortcomings of information. can we really say it's democratic when people are choosing between charities A, B, C, and D if they haven't heard about charities J, R and S, and there isn't even a charity for problems H, P, and Y?

        in my own situation i pay taxes in 2 countries, japan where i live and australia where i keep my investments. i've been asked if i object to paying tax in australia since i don't live there and am lucky to even spend 1 week per year there, and i don't object at all. my tax goes to the roads, education, health, power etc of the companies i'm invested in and the people that run and work at them, so it's money well spent. also it's divided by need, rather than whatever is most popular.

        on charity, here in japan in the first few years of my living here i was quite disheartened to find that charity is extremely low. i've never once seen a collection tin or been doorknocked for money (though still get the occasional jehovah's witness, another story!), there aren't any free announcements for charity or tv and no celebrities campaigning for the cause they've chosen to further. what we do have though is mandated employment, basically a law that says "if your company is X size then you have to employ Y number of people". that coupled with a minimum wage around $20k per year means charity really isn't needed. with good employee numbers no-one gets tired, so customer service is great, even though there are no tips!

        convinced/persuaded? why should people be able to opt out of their fair share?
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          Apr 22 2013: Ben,

          Very interesting to read about Japan. How did they handle the tsunami? Was there still no charity, no donations? I can't believe, Japanese don't help each other. Japanese are the nicest people I have met.

          What do taxes look like in Japan? Do they pay income or sales tax? How are social programs? How do they fund education? Are there school fundraisers?

          On the other hand, let's not forget that Japan has the highest ratio of national debt to GDP - 236%, with Greece a distant second at 170% (
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          Apr 22 2013: Regarding the choice of charity. It seems to me that when people can choose which charity or cause to donate to, we will have a larger variety of charities and there is a higher possibility that if H, P, and Y are real problems, there will be a charity for them. Your argument seems to work against yourself. Can government cover all social problems adequately? Reading Mike Colera's comments, it seems that even those "covered" appear to be superficial.

          Regarding voluntary donations. Read this article about cognitive dissonance, especially, the section regarding induced-compliance paradigm. When people have to do something they don't like, if you force them or pay them to do that, they will do it for the money or because of the punishment, but they will never come to like doing it. Whereas when the external motivation is insufficient to justify doing what people don't like, people resolve the cognitive dissonance by creating an internal belief (e.g. that they like the activity or that they "store a treasure in heaven"). My point is that forced donations will never make society more compassionate, in my opinion. But, of course, the lack of forced donations, perhaps, will do no better. So, I don't really argue with you :-). I just think, it would be nice to have no taxes and everyone donate voluntarily.

          "You may say I'm a dreamer, but I'm not the only one"
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          Apr 24 2013: Just a couple more thoughts:

          Ben - from what you're saying and from what I've seen, heard and experienced I gather that the better the system is, the less demand there is for charity within that system and more demand for charity outside the system. If the system provides for its citizens well celebrities don't need to step in to help them. And if the citizens are well provided for and don't need to help other citizens they have the means to help other systems (if they really want their help, but that's a different story...) And how good and robust the system is can be tested by national or multinational catastrophies or failures. Nothing new really, just a summary.

          Arkady - the bail-outs and the tree analogy you proposed - businesses do have to be fruitful, nobody can disagree with that and providing palliative care to them is a waste of time and assets, but that's not a bail-out should be. If it is or becomes one, something's wrong with the system, either on a level of legislation or respect for the legislation, balance of ownership, economy or the very foundations.
          I agree with all you say about uniformity and neeed for integrity of uniformed services, but those services don't create themselves - they are called to existence and controlled by governers, communities or both, in unison or not, in response to a demand. The more uniform, justified and stable the above are, the less corrupt their uniformed services tend to become. The more corrupt, unstable or badly controlled the system is, the worse the situation within the services and consequently - within the system they are set up to help stabilise. Then again, there's human nature, imperfect, ego and sociocentric and entropic as a consequence, both internally and externally. Still - we are evolving and so do our systems, towards a better future. Yes, I'm one of the dreamers :)
      • Apr 22 2013: great point bringing up the tsumani. there was charity and donations immediately after the tsunami, but not what you could call "a charity". the local convenience store had a collection box for people to give their spare change to the 7-11 tsunami fund, and some students from my school came around collecting money too, but the lion's share came from the government who provided temporary housing and a huge part of the budget was allocated to helping the area.

        we pay both income tax and consumption tax, it's about half the rate i used to pay when i lived in australia. the big reason for japan's large public debt at the moment i because these taxes are so low, and in fact the consumption tax will be doubled in coming years. social programs are completely funded by the government, though interestingly a person can only claim unemployment benefits for a limit of 6 months. this makes sense to me along with the employment law - because employers have to employ a certain number of people, they can't complain that they still can't find a job after 6 months. education is also funded by the government, even privately-run schools get at least half of their funding from the government, the rest in fees. there are no school fundraisers, eg about $10 per year from every student's fee is allocated to the student council, which also makes sense to me as the council benefits everyone whether you support it or agree with it or not.

        there might be a charity for these problem but that doesn't mean there will be awareness or appropriate support. for example more money is spent around the world on curing hair loss than eradicating deadly disease. i'm not saying we should force society to be more compassionate, i'm saying that everyone needs to be aware that they don't understand the depth of every issue, and so we need to defer to organisations that do. i don't have the time or the money to gather a panel of experts to do 10 year studies so i can't judge fairly myself.
      • Apr 22 2013: sorry about the additional comment, but i should point out that japan is quite a special case. japanese are quite insular and prefer to buy japanese and keep their money is japanese banks, and also there is a strong feeling of solidarity, so for example when a company does well, everyone gets a bonus not just the board of directors - no-one would dream of not giving the employees their due, which is why the system works very well here and there's little tax evasion. i don't really think it would matter if it were the income tax or the sales tax that was increased, the point is that everybody is paying their share and the money is getting to where its needed.
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          Apr 22 2013: Ben, reading your, Anna's and other people's comment, it seems to me that things are the way they should be. There are natural forces in place in society that maintain balance between compulsory and voluntary charity. From individual point of view, it's not so obvious, because we are always on one side of the debate or the other, being a part of the forces pulling to one side or the other maintaining the balance. But, as a whole, the balance seems to be maintained, with slow progress towards "social justice", whatever the current understanding of the term is.
      • Apr 22 2013: would be interested to get your reaction to this report:
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          Apr 23 2013: That's the thing. When you force people to pay income tax, and they disagree, they will move money, investments, and jobs out of the country. But if you tax consumption, there will be no reason to hide income, move investments out of the country, or track these activities. "The rich" can just stop buying those yachts or jets as we have seen in the video and think of a different use of their money - that's a different problem. But hiding money will make no sense. At least, that's how it seems to me.
      • Apr 23 2013: it's not about disagreeing it's about hiding income which is illegal. if it were changed to consumption tax they'd be hiding the amount they spend (eg by using 'gifts' so they don't have to pay for goods, buying in other countries with no tax, or misreporting the amount spent as they do now with amount earned) instead - it'd be the exact same problem. this is my original point - it doesn't matter if its income tax or consumption tax, the problem is that it's quite easy for the super rich to not pay even the minimum amount they are legally obligated to pay, and they routinely do to the tune of hundreds of billions of dollars a year as the report found.
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          Apr 23 2013: Yes. The more I read the answers to my question, the more I realize: "it does not matter".

          I recall the final punchline from the movie "The Untouchables" where Kevin Costner playing the cop who busted Al Capone for failing to pay taxes on illegal alcohol operations was asked by reporters "What would you do if they lift the prohibition?" "I'd go have a drink." The point being, it does not matter what the law is and regardless of our personal attitude towards the law, it needs to be obeyed. On the other hand, regardless of what the law is, there will be people who violate it. I agree with that.
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        Apr 23 2013: Ben and Arkady - just some thoughts while still trying to stay within this thread...

        "tax isn't for wealth distribution, it's for citizens to pay their fair share towards the running of the country"

        It should be for both really - first to redistribute some of the wealth, hopefully accordingly, towards the government so that the government has means to redistribute the wealth further towards the rest and a better future. Hopefully better for everybody, not only the government or those who are able to provide most of the means.

        "The rich need the roads. If government doesn't build them, people who need them will. "

        True, but (1) do they have enough means and competence, or means to acquire competence to make the roads good enough? (2) if they do - isn't there a fair chance that without proper, valid, general and fair legislation the road-builders (equals road-owners) will take advantage of the road-users? Especially when they have the proper means and competence to influence the legislation to their own favour? The point I'm trying to make is that no matter who and why builds the roads, there is always a risk of financial abuse of those without means/competence. The problem becomes even bigger when the latter is actually the governerns themselves.

        Bail-outs and subsidies...
        You cannot put all bail-outs and subsidies in one basket that you call "the rich won again". Bail-outs and subsidies can both help save and create new jobs while driving innovation. Still - those in charge who need a bail-out at one point should take responsibility, not just say "It's not our fault, it's the economy" or "We've found/will find the/a scapegoat."

        "the only way to fix tax is to make it uniform world-wide so no-one can avoid paying their fair share by shifting overseas, and to completely and forever end subsidies and tax breaks."
        A beautiful dream. But uniform in what sense? I would propose fair first... "The opposite of poverty is justice." - B. Stevenson (I think...)
        • Apr 23 2013: how do bail-outs help save and create new jobs while driving innovation? save jobs i get, but on the contrary they don't create any jobs because the money used for bail-outs is not used to instead support emerging businesses, and also contrarily they prop up failed models rather than allowing better ones to succeed them.
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          Apr 23 2013: Roads, education, police, fire department, military - no matter who provides these things, we still heavily depend on the integrity of those people. Hidden agendas and self interests would always harm society.

          Regarding bailouts, I tend to agree with Ben. When an old tree does not grow and produce fruit any more, it is cut down, and the new tree is grown in its place. Businesses are like trees. They need to be pruned, and the ones that don't produce fruit and take the space under the sun, need to fall. Supporting and fertilizing them is a waste.

          Regarding non-uniformity. An analogy with physics comes to mind. In electricity, one needs a potential difference for current to flow and something useful to happen. In thermodynamics, one needs thermal energy to flow from hot areas to cold areas for something useful to happen (like Carnot cycle). I've read in a book by Roger Penrose "The Cycles of Time" that the Sun does not simply provide energy to Earth. The Earth, on average, does not heat much. It dissipates as much energy as it gets from the Sun. The Sun "lowers the entropy" on Earth. Because the energy comes from a small hot spot in the sky and dissipates into large cold space. This makes the highly organized matter on Earth possible without violation of the second law of thermodynamics.

          I'm getting carried away here. The point is: can non-uniformity be useful for economic and social progress? There must be equivalents of energy and entropy in economics.
      • Apr 23 2013: thanks for the discussion arkady, i like your conclusion too!
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    Apr 18 2013: After reading, there seem to be additional benefits of consumption tax vs. income tax:

    6. Drug dealers, hookers, and illegal immigrants will have to pay consumption tax

    7. Decision to give to charity would be made based on the cause and only the cause. Elimination of tax deductions will take hypocrisy out of charity.

    Those who are concerned that people who spend as much or more as they earn will pay a larger share than those who spend a small fraction of their income (the "rich"), please, pay attention to the "prebate" idea on I think, this idea has the potential to replace social security, child, and dependent tax credits.
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    Apr 17 2013: Honestly they seem to be tied together, Sales taxes are in some senses a direct result of Income, and sales can be reflected via the Income taxes of the majority. Inflation comes to mind as an example of this concept. Without one you have a deregulation of the other. If I wasn't to have any sales tax on a product then in essence my income got bigger. But if I wasn't to have an income tax, my sale wasn't going to be such a bargain, ( since sellers would know this and want to cash in on such, happens now, prices rise with ebs and flows of profit losses and gains) which counteracted the income tax.

    In some sense I think what we need is a tax on excess. You don't really need to hold onto anything more than 5 million dollars do you? If you aren't investing it, using it, or really putting that money to good use, then why isn't that money going to help various things in the local infrastructure? Not like all your money after a certain amount is taken as a tax, but after a certain amount you have a much higher taxation, called the " Excess Tax " or " Gluten Tax " Be a fellow human being and not just you. Since there would of been no possible way for anyone to make money without all of us here doing what we do as well, so you saying you made yourself rich is a lie, we all helped you too.
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      Apr 17 2013: Michael,

      Regarding your first point, I agree that, at the end of the day, the government takes our money either from the income or at the point of sale, or devaluing what we have by printing more money. In that sense, yes, sales or income does not matter much. However, I believe, that sales (or consumption) tax is much more straightforward than income tax. E.g. if you increase taxes on gas, people start buying less or start buying alternative fuels. The economic effect of such change is easily measured. Whereas if you increase income tax, people, for sure, cut spending somewhere, but the exact impact on economy is very difficult to determine or predict. E.g. I don't see how reducing corporate income taxes can be correlated with increase in hiring. It's a speculation and wishful thinking that reducing income taxes helps economy growth, with little data to show for.

      Regarding "excess tax". Its seems to be impossible to have money without any impact on the economy regardless whether you use it or not. If you have 5 million that you don't use, you can hold it in the bank or hold it "under the mattress". If you hold it in the bank, the bank uses it by lending to other people. If you hold it "under the mattress", you withdraw 5 million of cash from circulation, thereby reducing cash supply and increasing the value of the cash in circulation.

      "Excess tax" seems like a tax on savings. It seems like a bad idea to me. It will cause people to spend as much as they can. Besides, federal government can't tax property without apportionment or enumeration. It violates constitution. It's the whole reason for the 16th amendment. Back in XIX century, income taxes were argued to be "direct taxes" as taxes on property (Pollock case). 16th amendment put an end to these arguments in 1913. These days, the government position is that income tax is "in the nature of an indirect tax", because it is a tax on transactions - a different topic.
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        Apr 17 2013: Interesting and insightful, I agree with much, as for the excess tax, I can see how it's even mention can cause frowns, and maybe it's not fruitful. But something in it's same context needs to happen, not to increase spending and stop saving that's what the 80s were for. But something to say " Hey, you really have a lot of money, and well you live in this Country, and this country needs repairs, and funding for other such things that allowed you to even get to having such a wealth. So by the ability to even acquire wealth, you've accepted the help of the very same government many say they didn't need in the 1st place. In many aspects, the wealthy owe money in some sense to go back to the country to allow for continued people to gain wealth.

        A tax on the wealthy needs to come in some form, and of course it's going to be more than people who barely make it by, but that is half the point, we need to slow the economic divide of the rich and the poor. Already our companies continue to grow both physically and economically while actually decreasing the amount of people it employes. Maybe a tax on profit with a deduction via employees like already is but maybe more revamped is a better necessity. How can we have such wealth when our own government continues to amount so much debt?
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          Apr 18 2013: Cyprus had a suggestion to tax large bank deposits to pay for the bail-out. You know what happened, right? People rushed to withdraw money from the banks and seek to transfer cash out of the country now.

          Holding cash is like burning it due to inflation, even without tax. Rich know it better than anyone else. Telling people what to do with their money seem to be an infringement on freedom.

          What do you think of the suggestion on
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    Apr 17 2013: Regarding 5th.:
    If said millionaire lived the life of an avg person thered be even less reason for him to hold on to a large portion of his money. Why would we tax him lesss another point is that this DEFINATELY would lead to a spread of wealth, because inorder to get the same amount of tax back youd have to do an enourmous increase in sales tax, the point being that someone with less income will spent a larger portion of his income (for the avg citizen i guess itd be more then 100% of their income, if you also look at debt) whilst the rich wouldnt have to tax 99% of their income (which stays at the bank because its never even needed would accumulate more and more money)

    I have got no idea at all how you can expect this to be an in any way fair system! Your basically going to fund schools and infrastructure things which are equally important to each citizen and thus each citizen should allocate the same percentage (tax progression for higher income makes sense too, but for simplicity ill go with same percentage of income in this example) of their ressources to funding those projects. What your proposing would be funding said projects through the 99% mainly whilst leaving the 1% free to use 1% of their income (in an extreme case) on funding those.

    So no i absolutely reject the idea of pure income tax thank you for making me think about how ridiculous this system is.
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      Apr 17 2013: I believe, the concerns that those who spend all or more of what they earn would pay larger percentage in taxes than those who spend a small portion of their income making the tax regressive is the main objection to the sales tax as opposed to income tax. Initially, I thought that exempting basic necessities from taxation would solve this problem. However, this page points out that this would lead to all kinds of lobbyists pushing exemptions for taxes on their products while allowing the rich to gorge themselves on expensive delicacies. How about the idea of "prebate" (see the same link)? The idea is that everyone would receive a monthly "prebate" from the government for spending "at the poverty level". This way, people spending at the poverty level would pay no tax at all, people spending below would have "negative tax" or income, and people spending above the poverty level would pay progressively larger percentage. Are there any obvious "gotchas" for such system? I'd say, such system eliminates even the need for social security. It seems to be fair for everyone because it does not allow preferential treatment of any group of the population.
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    Apr 16 2013: Jim,

    I don't see your point. You seem to disagree with something Pat and I have said. What is it? This is the whole reason I made this thread - to hear opinions. I'm especially interested in opinions which are different from mine. Otherwise, I will not learn anything.
    • Apr 16 2013: Arkady, manufacturing made America great. It raised the standard of living for the whole nation. As it did, gov wages, perks, healthcare and retirements were some of the most lucrative, considering the whole package. When our so called leaders gave away all our good paying, manufacturing jobs, all the taxes those workers were paying went bye bye. The manufacturers have also been on a robotic craze, that eliminates even more jobs, while those robots and manufacturers don't pay taxes on those robots.

      Now, we have highly paid government workers, their perks, healthcare and pensions forcing this gov to cut the social net in America to subsidize the gov jobs and all their retirements and healthcare, but wait, that's not near enough to make up the difference, so our gov has been borrowing about a trillion a year to make up for all the jobs lost in manufacturing and the ha ha, leaders of America refuse to hurt those gov workers pay, because they are the voters that vote en mass, for the fully corrupt, bribe taking, voter sucking, people, that have ruined not only America, but they are dragging down the rest of the world, as the world is so dependent on selling to America, the vast amount of what's made in the world. We also force the world markets to keep propping up our economy.

      The housing bubble was planned years before it happened, just as was this propping up of our economy, as the so called leaders, now try to make up for their conniving, greedy, stupidity, that has forced the global economy they created, to deal with it.
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        Apr 17 2013: You don't seem to hear what I said. I think, freedom made America great - freedom of ideas and freedom of enterprise. This is what caused the boom of manufacturing years ago and attracted scientists, entrepreneurs, artists, and work force. And this freedom also causes people to move manufacturing and money to places where there are better opportunities and fewer regulations.

        Re: "Robotic craze". How else do you suggest to compete with Chinese manual labor at $5 a day? Would you support a modern version of Luddism and advocate maximizing manual labor to maximize jobs at the expense of productivity? When did manual labor make anybody great?

        Yeah, democratic government is bad. Politicians are corrupt. What's the alternative? Dictatorship? How about the people - you and me? Are we free of corruption? Who voted for these leaders that you despise? Yeah, they spend more public money than comes in. On what? Look up a pie chart of government spending. The biggest chunks are entitlement programs - for everybody, not just government employees. Who voted for these "security" programs? Would you vote for a politician who would suggest to do away with entitlement programs or for one who promises to expand them? There is always a tendency to see corruption in other people. It's hard to recognize corruption in our own heart.

        You call leaders greedy and stupid. Who was taking all these equity loans for more than the property's worth and buying expensive cars? People tend to blame many things for the woes of modern society. But neither government, nor "the rich", nor religion seem to have monopoly on greed and stupidity. Freedom which made America great has a flip side - responsibility for our choices.
        • Apr 17 2013: Hahahaha hahahaha, I like you Arkady, truly I do. You're not only a fighter, but your use of the foil is most exciting, but your parry needs work. I posted this once to you already, perhaps you didn't get it.

          Would you feel that if you had a patent in America, that your patent would be safe?
        • Apr 17 2013: By the way Arkady, just because I don't force the issues you refuse to address, doesn't mean others don't see or care.
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        Apr 17 2013: Re. patents. It's a whole different topic. Patent wars don't make sense to me. I don't think, one can "own" knowledge any more than one can own air. You can try to create a system to own air, but I don't think, it's going to work. The best way to make knowledge safe is to conceal it. Then using it without revealing it becomes another challenge.

        I'm a fan of open source model where ideas are free and the money is made by providing the service of making it accessible, convenient, and usable.
        • Apr 17 2013: From watching how you seek to parry what I say by changing the subjects, you don't want to understand. You say you do, but when I make claims, you don't ask, you change the subject, weather its because the system has favored you or you fear reprisal by seeking the real truth, only you know. You will never find enlightenment in that manner, because the only way to know, is to live the tyranny in your own country.

          For many of us, the businesses and gov steal from us, to give to the poor immigrants. Have a nice day Arkady.
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        Apr 17 2013: Re: "they are dragging down the rest of the world, as the world is so dependent on selling to America, the vast amount of what's made in the world."

        I thought, you condemn buying stuff from China. How about the proverbial "dependence on foreign oil"? Isn't it the source of most evils from international terrorism to global warming?

        But if you really want to realize the full depth of depravity of the "democratic system", you may enjoy reading these two wonderful books.

        What's written there is, certainly, one of the many sides of what people call "truth". Although it's worth to be familiar with these views, I wouldn't fully embrace them.
        • Apr 17 2013: You're funny Arkady, but ignorant. You say you want to know, yet you change the subjects. Its ok, most on line don't want to know they help the gov to steal from the hardest and smartest workers. They remain blissfully ignorant, so they can suck the marrow from our children's bones, just like you.

          You and this gov create the terrorists. Have a nice day Arkady.
        • Apr 17 2013: The terrorist storm is coming because of you and those just like you. Most claim to be Americans. They are mainly ignorant, because they choose such, it favors them. It shows their stupidity and their children's, because they profit from their chosen ignorance. Its called theft, just as all the gov workers help to steal from all the laborers, of course, with the help from those just like you.

          Pretend your an American Arkady, just like them, you'll fit right in, while you and they are the cause of the deaths from terrorism.
        • Apr 17 2013: Don't give it another thought Arkady, the blacks claim to have suffered under the yoke of oppression for a century or better and yet, when they gain a voice, the ones with a voice, sell out their own people for 20 pieces of silver. You're in good company Arkady.
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        Apr 17 2013: Sure, blame it all on me. I told you from the start that I'm the one to blame for the evil in this world. That's what she says too, so I'm used to it :-). How come you exempt yourself? You say you don't pay taxes to fund the wars and don't vote to elect those "leaders" you despise or receive any benefits from the government in one form or another?

        Nice day... Are you kidding? After reading your posts, I don't think I would be able to sleep at night. This picture of sucking marrow from my children's bones is now stuck in my head forever...
        • Apr 17 2013: I'm surprised Arkady, on the last site I was on, they wouldn't give what I said another thought. Did I say I blame it all on you? No, I blamed it on this gov and likely most gov's around the world. I also blamed it on the blacks with a voice, religion and the law itself. I even included congress. Yet you claim I blame it ALL on YOU. You is a metaphor for the public at large, you know, the public that has not been taught to think for itself!

          What school did you go to and tell us, how were you taught to think for yourself in school? You can't say, because you were not taught in any school, to think for yourself and yet, when I made claims, you ignored them and made other claim, until I pressed you. If children aren't taught to think for themselves, do tell us why you expect them too.

          I exempt myself from this, because I am doing what I can to awaken people that they are destroying America and they, you, refuse to help. My gov stole from me for over 42 years now, helping my industry and then this gov gives some of what it steals from me and gives it to immigrints, so the immigrints will vote for them.

          Did you know my industry is the only one to ever have the AT+T yellow pages, taken out of alphabetical order? Now if you can think for yourself, you should be able to tell why. Can you?

          If you can think for yourself, you will be able to tell what the biggest contributing factor was in the housing crises and it has nothing to do with the official claims. School has taught us all to do nothing more than cut and paste and follow the leader so to speak.

          Most all of you write your resume's in the exact same manner, because as time goes on, you must be as no one, so that the gov, courts and law can read you all, just as if you are all the same person, that depends on the gov to tell you what to think, do and say.

          Ask all your friends, have you ever offered something to the world, that no one else has ever offered. Then come back here and tell us how many.
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        Apr 18 2013: As a rule of thumb, I don't believe blaming and finger pointing does any good to anyone. So, with all due respect, it may be time to stop doing it. You can blame me for avoiding or changing the topic. I can leave you at this activity if it makes you feel better :-).
        • Apr 18 2013: You obviously believe that you can discuss one thing, even though so much more that you hadn't thought of is involved. Your words are not an island.
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    Apr 16 2013: Jim

    Reciprocity is exactly the thing to avoid.

    I don't hope that people find me intelligent I know they find me intelligent when I walk around on my hind legs, that proves it.

    I learnt a couple things from Ridley's talk not the least of which is comparative advantage, that and he is not disses us neanderthals which is good cuz I was starting to feel self conscious.
    • Apr 16 2013: Why avoid reciprocity?
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        Apr 16 2013: Read about the Smoot Hawley act
        • Apr 16 2013: Would you say Smoot, Hawley act defines reciprocity?

          The practice of exchanging things with others for mutual benefit, esp. privileges granted by one country or organization to another.
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        Apr 16 2013: Typically reciprocity is used in a negative sense. Which is what Smoot Hawley illustrates. The idea that is typically used regarding the positive sense is comparative advantage.
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        Apr 16 2013: Jim, I guess, Pat is saying that imposing mutual import tariffs is the kind of "negative reciprocity" that will do more harm than good.

        The main idea of Ridley's talk seems to be that specialization and exchange make humans more productive. With this in mind, a country with excessive population specializing in manufacturing of products requiring lots of manual labor seems to be a natural consequence of the emerged capability to communicate and deliver goods overseas. I don't think, it's either good or bad. It's the way it is. It does not seem that this process can be avoided or reversed.

        I agree, U.S. must provide something else in exchange. What is it?
        • Apr 16 2013: I understand your points. I would add, that as our leaders gave away so many of our jobs in manufacturing, they also gave away all the new technologies that will be discovered, from using the older or present technology, doubling and tripling our actual losses.

          China got all of the American job losses and it has been going through the roof so to speak. The losses are immense, from all I see. Of course it was done in the name of a global government, while china buys up as much foreign good will, property and goods, by comparison, while America looses.
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          Apr 17 2013: Jim

          The U.S. is the biggest manufacturer in the world by far it does a little over 3 trillion per year.

          This is because we make stuff that you don't see in Walmart like aircraft and tractors turbines etc

          In another 2 years or so the economic advantage of going to China because of labor savings will be gone. That does not necessarily mean that the work will come back here but some of it will.

          But a worker would be wise to put himself in a position to increase the productivity of the company he works with. E.G. if you can run a back hoe you are more valuable than a guy who can run a shovel. A guy who can use CNC equipment is more valuable than one who can only do the work manually. In the future it will be nano something or another. But making a company more productive is the key.
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        Apr 16 2013: Jim,

        I think, we are in agreement regarding what is happening - most of the low-skilled manual manufacturing labor is done now in Asia. We seem to differ in understanding of why. I believe, this process is a logical consequence of technological progress and world demographics. I don't think, there is a "global government" conspiracy. The government did not "cause" this with any policies.

        I've heard an opinion that bringing manufacturing back into the U.S. would not create many jobs. Manufacturers can buy a whole day of labor in China for the cost of minimum hourly wage in the U.S. To compete with the cost, the labor performed by many low-skilled workers in China, in the U.S. will have to be done in a highly automated factory where multiple machines will be serviced by a single skilled worker.

        I have little worries about China. I feel good when others live well and get rich. I'm happy for them. The process will slow down. I've heard that the following is already happening in China: there is so much manual work imported from the rest of the world that manufacturers have to compete for the work force. This means that manufacturers have to increase wages to attract workers. This means two things: 1. labor cost goes up reducing the incentives to export more work to China; 2. Chinese people have more money to spend on the products they make - more Chinese products are consumed internally leading to reduction in exports from China which, in turn, balances the "trade deficit" with the rest of the world. A few more decades and it will make no sense to "export jobs to China" any more.

        I don't think, the current economic situation in the Western countries have much to do with export of jobs to China. It seems to me that we are falling victims of our own consumer mentality - spending money we don't have on things we don't need. Instead of milking the government and "the rich" to buy more stuff made in China, we need to produce and sell our products.
        • Apr 16 2013: It's good to hear from you again Arkady. I'll try this in another way. What made America great?
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        Apr 16 2013: I'd say, a few things: freedom, in general - freedom to speak your mind, freedom to create ideas, free enterprise, freedom to create and sell products wherever you want. Part of this freedom is freedom to manufacture your product wherever you want.

        Also, a fairly unique geographical position - access to 2 oceans - a big advantage in the times when most goods were transported by sea. Only 2 land neighbors - U.S. did not have any major wars on its soil for quite a while now. Large territory with moderate climate and variety of natural resources, plenty of land for everyone. I'd say, freedom, lack of persecution or wars attracted a huge amount of immigrants and talent from all over the world. U.S. has been a magnet for talent and a fertile soil for innovation and productivity - that's my understanding.

        This seems to be changing now. The advantage of access to the sea is going away as more and more stuff is shipped over the air. But, more importantly, the freedom is being restricted by government regulations. The focus of social justice is shifted from equal opportunities to equal entitlement. The right to prosperity is understood as the right to consume, not as the right to produce. Freedom is given away for a sense of security - social security, job security, homeland security, financial security. One cannot grow without taking opportunities, without taking risks. And that becomes increasingly difficult here in the U.S. Other areas of the world are proving to be more attractive for entrepreneurs, scientific, and engineering talent.

        Remember, America is a democracy. Even if you blame the government for poor policies, who elected the government?

        I'm not sure where you are heading with this and I don't know whether my answer is what you expect.
        • Apr 16 2013: We all do what we can. Have a great day Arkady.
        • Apr 16 2013: Arkady, if you patent something, will you feel your patent is safe in America?
  • Apr 13 2013: ME Tariffs sound good to me as they would accomplish other things.