Where is the US economy headed?

this is somewhat off topic and you may want to ignore it .

about forty years ago the canadian government of the day appointed judge porter to review canada's tax system and suggest simplifications to the system . out of it grew the "porter commission" that worked on this and submitted their findings and recommendations to the government .

the main point of their suggestions was that " a-buck -is-a-buck-is-a-buck " .
in other words ALL monies received by an individual form part of the taxable income : worked for it , inherited it , won it at the gaming table , stole it ... whatever , it all was to be part of the taxable income .

aside from some basic exemptions there were to be no exemptions for such things as : retirement savings , education etc .

dividend income and capital gains were to be taxed like regular income .

they suggested that the annual income tax return might be short enough to fit on the back of a postcard !

the outcry from all kinds of groups was , of course , immense !
talk about pigs squealing when slaughtered.

nothing ever came of it and the canadian income tax act and its regulations , court rulings (there is even a separate tax court !) , interpretations etc would probably fill an average size office .
legions of tax accountants , tax lawyers , estate planning specialists , revenue canada employees are being kept busy twelve months a year to read , interpret and rule on it - and some cases have even been referred to the supreme court of canada !
a wonderful way of reducing unemployment imo Laughing

i think the fellows in the white coats had to carry off judge porter eventually !
hbg

0 Replies

parados wrote:

Oh, he did? Which book of "Wealth of Nations" does he talk about personal wealth?

Your first clue, Parados, is to read the title which includes the term, "wealth," not "income." The name of the book is not "Income of Nations." You can't talk about wealth of nations without considering the wealth of the people living there.

"What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable."
The Wealth of Nations, Book I, Chapter VIII

That from 5 minutes of research, so I am sure there is lots more.

And, hamburger, the income tax system has so many special interests embedded into it now, I think it will be virtually impossible to eliminate it or overhaul it completely for a more efficient and simpler tax system. Politicians have spent decades handing out favors to their special interests back home in the form of this little deduction or incentive for anything and everything. Going through the tax forms are pathetically hilarious to read some of the provisions. I am in favor of the fair tax, a progressive sales tax, but I doubt very seriously that such would ever see the light of day in Congress, or if it does, the old income tax will also live on. When is the last time the politicians in Washington voted to eliminate any tax? Right now, they are figuring out ways to tax the internet, after all they are missing out on some big ways to bring in more money.

If Adam Smith could see what is going now, he would turn over in his grave.

0 Replies

Actually, okie, you really should quit while you're ahead. One of the key revelations of Wealth of Nations is that the wealth of nations consisted of what that nation produces, not its cash reserve. This was, at the time, a revolutionary concept - that to make your nation richer, you needed to make it more productive, not just hoard all the gold you could lay your government's hands on. So basically, you have it as completely backwards as it's possible to be!

That said, looking to 18th century writers on economics is not the way to go in order to analyze applicability of modern taxation regimes. Smith wouldn't roll over in his grave from the complexity (or not just from that) so much as the sheer AMOUNT; the idea that someone would have to pay half their income in various taxes would have been tantamount to tyranny. We had a revolution over what amounted to a LOT less. (Ironically, Wealth of Nations was published that year...)

Okay, okay, I have History of Economic Thought this semester and my professor threatened to fail anybody who showed up for class without Smith. It's fresh in the mind!

0 Replies

okie is always consistent in that he's usually wrong. But we must give him credit for his stubborness. It just makes one wonder where he gets all his screwy ideas from.

0 Replies

That's not an argument about wealth okie. It's an argument for a living wage. Let's look at the entire paragraph with the closing sentence highlighted.

Quote:

Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.

The section is titled

Of the Wages of Labour

The first sentence defines produce of labour in the sentence above.

Quote:

The produce of labour constitutes the natural recompence or wages of labour.

Your claim that Smith's work must be about personal wealth because personal wealth makes up national wealth is really quite funny. Do we judge the US economy by personal wealth or by production? What is the GDP?

0 Replies

Avatar ADV wrote:

That said, looking to 18th century writers on economics is not the way to go in order to analyze applicability of modern taxation regimes. Smith wouldn't roll over in his grave from the complexity (or not just from that) so much as the sheer AMOUNT;

Which is one of Smith's maxims on taxation, the government should not take more than it needs.
It's been a while but I believe Smith was also against governments borrowing large sums of money. As to the taxation level or the borrowing, it is hard to say which Smith would be more against.

Quote:

the idea that someone would have to pay half their income in various taxes would have been tantamount to tyranny.

The half their income in taxes idea is one that is oft repeated but impossible to show. No one pays 50% of their income in taxes unless they try to pay that much. I have yet to see anyone provide actual numbers to show how they can pay 50% of their income in taxes. I did a spreadsheet a number of years ago and the maximum tax I could get someone to was about 43% and that was back when the highest income tax bracket was at 38.5%. The most common mistake people make to get to that 50% is they assume they pay sales tax on every dollar they earn. You can only pay sales tax on every dollar you spend. You don't pay sales taxes on dollars that go to pay income taxes or real estate taxes. The second mistake is they try to apply the highest income tax bracket to every dollar earned. Tax freedom day is pretty accurate for what most people pay in taxes.

Quote:

We had a revolution over what amounted to a LOT less. (Ironically, Wealth of Nations was published that year...)

Another oft repeated canard is that the size of the tax was the reason for the protest. The size of the tax wasn't the problem so much as the tax was levied without any say by those being taxed. That is the reason for the saying "Taxation without representation."

Quote:

Okay, okay, I have History of Economic Thought this semester and my professor threatened to fail anybody who showed up for class without Smith. It's fresh in the mind!

0 Replies

parados, Good points; people pay sales taxes on what is spent, not earned. Also, variations in income is a fact of life for any society; except during communism when wages were made equal no matter what one's skill level. Even Russia's economy is based on merit; the professionals now earn more. It wasn't so only six years ago.

0 Replies

Avatar ADV wrote:

Actually, okie, you really should quit while you're ahead. One of the key revelations of Wealth of Nations is that the wealth of nations consisted of what that nation produces, not its cash reserve. This was, at the time, a revolutionary concept - that to make your nation richer, you needed to make it more productive, not just hoard all the gold you could lay your government's hands on. So basically, you have it as completely backwards as it's possible to be!

I agree with that, although not the first sentence. Where I got into trouble was to go down the road with Parados wherein he uses Smith to proclaim his definitions of progressive, regressive, and flat taxes, and as you say, I think we should use more contemporary and more applicable definitions pertinent to today's circumstances. Question, would you hold to the idea that progressivity is always defined by comparison in terms of percentage of tax paid as compared to income? My point here in bringing up wealth is that lurking behind the income is that part of the reason for government to institute progressivity into any tax system is to redistribute wealth. Of course, ability to pay is the other factor, but this is also determined not only by income, but by wealth. I guess my assessment of taxes in regard to progressivity, I agree that an income tax can be judged according to progressivity, solely by income, but would it also be fair to judge the relative progressivity of a sales tax for example, only on the basis of income? I am not an economics professor, but I would like to know what the various ideas may be on that, currently, not Adam Smith.

I enjoy debating these issues from a common sense perspective. I admit I have not read Adam Smith, but with time, that is on my list of things to do.

Quote:

That said, looking to 18th century writers on economics is not the way to go in order to analyze applicability of modern taxation regimes. Smith wouldn't roll over in his grave from the complexity (or not just from that) so much as the sheer AMOUNT; the idea that someone would have to pay half their income in various taxes would have been tantamount to tyranny. We had a revolution over what amounted to a LOT less. (Ironically, Wealth of Nations was published that year...)

Agreed.

Quote:

Okay, okay, I have History of Economic Thought this semester and my professor threatened to fail anybody who showed up for class without Smith. It's fresh in the mind!

I would also like to read it, given time, and if I would quit wasting my time debating Parados and his splitting hairs on every issue, maybe I would have time. I am not taking the class you mention, so I won't flunk the class.

This whole debate with cyclops, and now Parados, revolves around a handful of basic issues, the latest being that Parados says a sales tax cannot be progressive. No, I have not read Adam Smith, but I believe I am correct to say that it can be made to be generally progressive in nature, at least progressive in the income or wealth brackets that are important, and that most modern economists would agree with that.

One last point, my common sense question about a progressive tax always having to be judged according to income, I think it need not be, and should not be. Take an inheritance tax. It would be considered to be progressive, would it not, wherein wealth is taxed above certain thresholds. This is obviously based on wealth, not income, simply by virtue of the fact that the tax is taxing wealth. In the case of income tax, it is taxing income, hence the degree of progressivity is judged by percentage of income. So I submit the logic here that the progressivity of a sales tax should be judged based on "buying power," which is perhaps a combination or result of both wealth and income. I am not an economist, but I approach these matters from a perspective of common sense.

0 Replies

parados wrote:

That's not an argument about wealth okie. It's an argument for a living wage. Let's look at the entire paragraph with the closing sentence highlighted.

Quote:
Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.

The section is titled

Of the Wages of Labour

The first sentence defines produce of labour in the sentence above.

Quote:

The produce of labour constitutes the natural recompence or wages of labour.

Your claim that Smith's work must be about personal wealth because personal wealth makes up national wealth is really quite funny. Do we judge the US economy by personal wealth or by production? What is the GDP?

It isn't funny at all. GDP and wealth are intertwined, one feeds the other, and they feed each other. I do not think you can talk about one and not consider the other. Common sense, without Adam Smith, would tell you this much. Wealth also can be defined in terms of other things, or things that it includes, one of which is capital, without which no business is going to succeed. Wealth, in terms of property or land, is also vital to any economy. Wasn't that one of the favorite methods of Smith in terms of raising tax money, by taxing property? Without it, no tax money. For you to state there was no consideration of wealth in the writings of Smith, or any book on basic economics, has to be wrong.

I am continually amazed at the statements of supposedly learned people here.

0 Replies

One point perhaps more on point of this thread. How come the Democrats are not celebrating the Dow hitting 13,000? How can such a sick economy, as imposter keeps saying it is, hit such a new high?

http://www.foxnews.com/story/0,2933,268287,00.html

0 Replies

okie wrote:

One point perhaps more on point of this thread. How come the Democrats are not celebrating the Dow hitting 13,000? How can such a sick economy, as imposter keeps saying it is, hit such a new high?

http://www.foxnews.com/story/0,2933,268287,00.html

The Dow hitting a new high during an expansionary period is nothing to crow about. It happened all the time under Clinton, for years.

It is also non-reflective of the average American's wealth or income whatsoever, but reflects the ever-growing advantage of the wealthy and super wealthy.

Cycloptichorn

0 Replies

Quote:

="okie"No, I have not read Adam Smith, but I believe I am correct to say that it can be made to be generally progressive in nature, at least progressive in the income or wealth brackets that are important, and that most modern economists would agree with that.

Which modern economists? I have asked you a couple of times to cite your sources for your economic theory. You don't seem to have any other than to claim you haven't read anything but you believe you know what they said in spite of not reading them.

0 Replies

Parados, before tackling that, to follow up on what I asked Avatar, a couple of questions.

Is an estate tax, which exempts tax up to an amount to a certain threshold, considered to be a progressive tax, yes or no?

Is the estate tax based on wealth or income?

Do you consider the property tax to be a progressive, flat, or regressive tax, and according to what reasoning?

0 Replies

okie wrote:

One point perhaps more on point of this thread. How come the Democrats are not celebrating the Dow hitting 13,000? How can such a sick economy, as imposter keeps saying it is, hit such a new high?

http://www.foxnews.com/story/0,2933,268287,00.html

Through an increase in the money supply & credit.

0 Replies

The estate tax has graduated rates. When I last looked at it, the top bracket is taxed at 55%.

0 Replies

Yeah, but it's not due to an increase in the money supply - else we'd be seeing inflation running out of control, which it ain't.

Admittedly, credit is significantly easier to get these days. However, a lot of that was inevitable - the advent of large computer networks means it's a lot easier to evaluate someone's creditworthiness than it was back in the day.

You could argue that we'd be better off with a cap on interest rates - it's easier for a poor person to accumulate funds and improve their social situation if they're not burdened by a huge pile of high-interest debt, after all.

0 Replies

Dow Jones broke 13,000.

What a sucky economy.

0 Replies

McGentrix wrote:

Dow Jones broke 13,000.

What a sucky economy.

Something tells me you think the economy is all peaches & cream

0 Replies

Avatar ADV wrote:

Yeah, but it's not due to an increase in the money supply - else we'd be seeing inflation running out of control, which it ain't.

Admittedly, credit is significantly easier to get these days. However, a lot of that was inevitable - the advent of large computer networks means it's a lot easier to evaluate someone's creditworthiness than it was back in the day.

You could argue that we'd be better off with a cap on interest rates - it's easier for a poor person to accumulate funds and improve their social situation if they're not burdened by a huge pile of high-interest debt, after all.

You dont think the DJIA going up is from easy money?? What do you think it is then?

0 Replies

Securities in retirement funds, obviously. ;p

Look - there's been a massive shift of pension and retirement funds from things like bonds into equities in the last 20 years. Part of this is due to the rise of the mutual fund, part of it is due to the prevalence of individual investors with their 401ks, part of it is due to people just plain living longer and needing to invest more to cover ten, fifteen years of retirement rather than five.

That's not saying that there's no productivity gains or similar involved in the general run-up of stock prices. But the current level of the Dow just isn't explicable through efficiency or a larger economy. P/E ratios, especially, are now significantly higher than they were even fifteen years ago. By historical standards, EVERY Dow stock is a bad deal for return on investment!

But all the additional retirement money hitting the stock market serves to push up the prices on stocks; there's a limited number of corporations out there with business plans solid enough to put your retirement money IN. Sure, more crop up, and it's easier to get equity financing these days for the same reason, but at the end of the day there's more money chasing more or less the same amounts of stock. This is good for people who already hold that stock, naturally - their stock increases in value more rapidly and is worth more when it comes time for them to sell. It also makes stocks look like a better investment, because of the relatively larger returns reflected by the increase in prices.

However, we also have a demographic bubble to deal with. The boomers will need to start retiring fairly soon. You can't eat a stock certificate or use them to pay for your house, so those stocks will be sold. (More accurately, once they retire they can go ahead and sell without taxes biting them in the butt!) Even the securities that aren't needed for day-to-day expenses are likely to be moved into safer investments as retired boomers transition to living from their savings rather than accruing more.

At some point, the rate that money leaves the market (to pay for boomer retirement) will exceed the amount coming in (from relatively fewer younger-than-boomers saving for retirement), and the push behind stock prices will cease or even reverse. Of course, we can expect an initial crash, as hordes of boomers about to retire realize that having 95% of their investments in volatile stocks is not a winning strategy when you're 64. The lucky ones will get out before the crash, and park their cash in a safer environment to await developments; there will, however, be a lot of people who have a 401(k) lose most of its value right before they need to actually draw money from it.

It's not like it's all doom and gloom - there's still productivity advances to look forward to, and foreign markets opening up and becoming affluent enough to afford our exports, and the future's notoriously hard to predict; it may be that something drastic happens in the geopolitical future to make this a moot prediction. But I mean, the demographic trends are there for anyone who's prepared to look, right?

0 Replies

Where is the US economy headed?

Related Topics

Quick Links

My Account

able2know