engineer wrote:okie wrote:engineer, to clarify something, are you talking about income tax only, income tax plus social security and medicare, or all taxes as a percent of gdp? I do think your thread directly relates to the Laffer curve, which I have debated extensively here on various threads, but I think that needs to be considered in light of all taxation, then the decisions have to be made as to what form of taxation is the most efficient, or where in the stream of the economy do we collect the taxes, and is it more efficiently done by local and state entities to provide the services we want in return for paying taxes.
I agree, I think the key number is all taxes.
Its tough to identify the numbers that we need to look at this. It seems we are taxed in this country at around 28% of gdp according to one site, but does this include ss and medicare, state and local sales tax, etc.?
Quote: I think government spending is more or less as efficient in stimulating the economy as consumer spending providing it is local, so I don't buy the argument that tax rebates are necessarily beneficial.
tax rebates stimulate a burst of spending, but probably not capital investment in business, which is what we need longer term.
Quote: But pork government spending is only minimally beneficial and I'd rather have less taxes than pork.
Government is the least efficient player in an economy in terms of producing wealth per money spent.
Quote: I'll look up some of your Laffer curve posts. But the other question I have is "how do you know where you are on the curve?" The economy is so complex and the tax structure so opaque between the various taxing authorities that I don't think you can calculate the optimum rate on a spreadsheet. But you should be able to measure outcomes to judge where you are on the curve. For example, if the capital markets are constrained by a lack of cash, you probably have too high a tax rate. If basic infrastructure is failing to keep up with what is necessary to promote the economy, your rate is probably too low. What other variables would you look at?
I agree with that. I don't think we know exactly where the optimum point is for tax revenues, and by the way the Laffer curve concept may tell us there is an optimum point of taxing that generates the optimum tax revenue, but this still may not equal the most efficient economy, as obviously the least taxed economy is more productive.
And I think the point of the peak of the Laffer curve probably changes from time to time, depending upon other circumstances. The main thing I have argued here about the Laffer curve would be the fact that if we could just get everyone to agree that it exists, which seems intuitively obvious based on a few very simple economic and mathematical principles, then the politicians could actually become more able to deal intelligently with economic policy. Instead of arguing about the existence of the effect, we could then argue over where we are on the curve, thus helping us to generate a more nonpartisan and reasonable policy economic and tax policy, sufficient to run the government services people should get according to the constitution.
Economics is driven by mathematical principles linked with the proven tendencies of human beings, which should not have to be distorted by politicians of different political beliefs. Politicians don't argue over whether mathematical principles work, so why are they so naive as to argue over economic principles? We could debate the reasons, but unfortunately they do argue over them.
Your point of capital markets vs infrastructure is a good one.
An important point I think needs addressing is the desperate need to reform our tax systemt to enable us to better compete in the world market. We are losing businesses to offshore locations, and taxes are one area that could improve that situation if we did it right.
One last thought, I am a big believer in the fact that taxes spent and administered for services as close to the people as possible is the most efficient. This is a conservative principle, a Reagan principle, an Eisenhower principle, it goes way back. Therefore such things as sending money to Washington to improve local schools makes absolutely no sense to me, and is a total waste of money in my opinion. Much of it is lost in bureaucratic paper pushing. Incidentally, another pet peeve is Bush's prescription drug program. I have had the "privilege" of helping a person with this and the amount of paper this has generated is absolutely astounding, just in what is sent them in the mail to keep track of all of it, and it is so convoluted and confusing that to really understand it, it would take an hour or two a day just reading all the paperwork, and studying it, calling the company for clarification, etc.
