The U.S. Economy: Stand by for more worse news

[iceaura]

And, no, you need no state. All you need is an institution which prevents coercion and distortion. This does not need a state. - -

Is that all.

Living and learning about the rich and powerful.

Yes, in principle those in power can also do something against repressions they don't like.

Happens a lot, in my neck of the woods. It's a bit different than your description there, though - see if you can spot the difference here: We elect them to temporary power, they do something about repressions we don't like.

 

[Billy T]

... you need no state. ...

Mankind has 6 centuries of experince with that lack of liberity. (If you dad was a shoe maker, that was your only destiny too. etc. Education for 1% or less of the children.) There was a king and local "lords" were the law. A system now called "Feudalism." Only the Catholic church, placed any limit on the abuses the lord could do.

the dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord's land and give him homage, labor, and a share of the produce, notionally in exchange for military protection.

Feudalism was a combination of legal and military customs in medieval Europe that flourished between the 9th and 15th centuries

"Give the lord (and his vassals, the serf's immediate boss) a "share of the produce." That sounds a lot like taxes to me.
So, yes you are correct there is no need of a state to collect taxes and abolish all liberty for 99+ percent of the population.

As the church's power declined, states became necessary and desirable.

 

[Schmelzer]

Is that all.
Living and learning about the rich and powerful.

Yes, it is all. But it is very difficult, because the rich tend to become powerful, and the powerful rich, and the powerful like to misuse their power for coercion and distortion.

Happens a lot, in my neck of the woods. It's a bit different than your description there, though - see if you can spot the difference here: We elect them to temporary power, they do something about repressions we don't like.

This is a nice fairy tale for the sheeple. Sometime some of them do a little bit about it, to support the fairy tale.

Mankind has 6 centuries of experince with that lack of liberity. (If you dad was a shoe maker, that was your only destiny too. etc. Education for 1% or less of the children.) There was a king and local "lords" were the law. A system now called "Feudalism." Only the Catholic church, placed any limit on the abuses the lord could do. "Give the lord (and his vassals, the serf's immediate boss) a "share of the produce." That sounds a lot like taxes to me.

6 centuries? Mankind has already thousands of years experience with states. Which includes the feudal states you describe here. Of course, they have taxed the population. Heavily, it was thought at that time. The word in German for the tax at that time was "Zehnt", which tells us about the level of taxation - one tenth, or 10%. A low tax state one can only dream of today. How you got the idea that this thing rules by Kings was not a state is beyond me.

 

[iceaura]

This is a nice fairy tale for the sheeple. Sometime some of them do a little bit about it, to support the fairy tale

As I said, it happens a lot in my neck of the woods. In real life it happens - you know, that place that hasn't yet seen or heard of anything that can prevent coercion and distortion of a market besides a government.

So it's sheeple 1, science fiction economics 0, where I come from.

 

[Michael]

Former Fed President Dick Fisher admitted that “The Fed front-loaded an enormous market rally in order to create a wealth effect.” On CNBC Fisher states that “we injected cocaine and heroin into the system” to enable a wealth effect (that he admits did not work, despite its success in raising asset prices), and “now we are maintaining it with ritalin.” Fisher also confirmed his previous warning that “The Fed is a giant weapon that has no ammunition left.”


--o--
Well, the Central Planers did bailout the richest 0.1% and make a lot of SlumLords whole. Seems like their planned worked well enough. Its not like the functionally illiterate public is going to do anything about it other than pay for it all through their income tax and reduced standard of living (that and their kids, grand kids, and their kids). Other than elect a demagogue who promises to kill the former and redistribute from the later.

 

[Michael]

In a sign of "The" Economic Recovery from "The" Great Recession....

Well that's no good. No good at all. Think of all the poor SlumLords out there trying to make ends meet. Women should be moving into a cheaply built apartment with their sharemates and pooling together their savings each week, from their 9 am - 8 pm McJobs to make rent so their SlumLord can pay off his mortgage and take a nice vacation.

Oh well, I suppose 5 illegal immigrants .... errr, I mean 5 economic migrants.... errr, I mean 5 refugees, will have to do. The nice thing about refugees, is the'll sleep 5 to a room, and lack a family to live with. A win-win for the SlumLords who house them and the business owners who hire them.

Wait wait wait, what am I thinking? There's Government Welfare! Why on earth would all these women return to their parents house when they can win their independence living on Government Welfare in a nicely prepared State-run Welfare Estate - you know, for their welfare and betterment. Heck, if they can kick out a few kids by an unknown sperm donor, why, that's even better! Slummy loves him some Government welfare payments! Them's the best-est'es of all's.


And you know, I heard there were some really good deals to be had in Flint, MI.
Just say-in.



Quit your crying, the US is fine.
-- Warren Buffett, via CNBC, Feb 27, 2016

Isn't it fantastic we bailout out people like Buffett on the backs of generations of working Americans? That's the nice thing about Income Tax and Central Planning. Central Planners can use T-Bonds and other financial scams to bail out the rich, and then shoot the poor in the face if they don't work 12 hours a day at minimum wage for a few generations paying it all back.

How nice is that? Yea for Givermint!

 

[iceaura]

That's the nice thing about Income Tax and Central Planning. Central Planners can use T-Bonds and other financial scams to bail out the rich, and then shoot the poor in the face if they don't work 12 hours a day at minimum wage for a few generations paying it all back.

You are complaining about the wrong tax. Minimum wage folks don't pay much income tax.

Which is your habit, interestingly enough - the burdening of the poor always foremost in your posts, but the progressive income tax always the main evil. This is of course the standard Republican campaign bait and switch.

 

[Michael]

You are complaining about the wrong tax. Minimum wage folks don't pay much income tax.

Which is your habit, interestingly enough - the burdening of the poor always foremost in your posts, but the progressive income tax always the main evil. This is of course the standard Republican campaign bait and switch.

I agree, income tax is mainly levied on what's left of the so called middle class and lower middle class. Yet, including the working poor.

I find it interesting the very same people who wrecked the economy, then bailed out the richest 0.1% and slumlords flipping houses, are the very same people you want to fix the economy. Greenspan and the other central planners set us on this path to destruction. Now we're here. Let's see if we go belly up as BillyT as suggested. Or, as I suggest, Americans get used bowing their heads, kissing the rings of their SlumLords and to eating North Korean Special Soup. See, I'm pretty sure functionally illiterate Americans are just as weak and as prone to taking the orders of their betters as is your average North Korean. If not, more so.

The LAST thing Americans want is change. Hahaha... it might hurt their precious 401K. Which is why it was invented in the first place.

Well, then there's Trump.
LOL

Seems like a small number of Americans are happy to tear down the entire system - they have next to nothing to lose anyway. I suggest to them, a small 99% Owners Tax to their SlumLord might help things along a bit. Vote for that.

 

[iceaura]

I agree, income tax is mainly levied on what's left of the so called middle class and lower middle class. Yet, including the working poor.

It's not levied on the working poor. It's levied only a little on the lower middle class. It's levied mostly - and up until recently almost entirely - on the upper classes. This feature would be even more evident if it were returned to its earlier setup as a progressive income tax.

And yet that is the tax you consistently object to, especially in its progressive setup, far more than you object to the other taxes that are far more of a burden on the lower income classes you pretend to sympathize with. It's always the income tax that disturbs the equanimity of the rich - because it's the tax that burdens them.

I find it interesting the very same people who wrecked the economy, then bailed out the richest 0.1% and slumlords flipping houses, are the very same people you want to fix the economy.

You are simply incapable of making accurate statements about political or historical reality. Why is that?

 

[Schmelzer]

It's not levied on the working poor. It's levied only a little on the lower middle class. It's levied mostly - and up until recently almost entirely - on the upper classes.

No. The upper class knows how to hide their income from taxation.

Think about how the upper class uses most of its income. To buy bread and butter for breakfast? Not really. You buy more firms and so on. Will you do this from your taxed income? That would be stupid. You own a firm, and this firm buys all this, as part of their overall economic activity, no profit, nor income tax, nor sales tax.

The purpose of the progressive income tax is another. Together with government-made inflation it leads to an automatically tax increase for the poor and middle class.

 

[joepistole]

It's not levied on the working poor. It's levied only a little on the lower middle class. It's levied mostly - and up until recently almost entirely - on the upper classes. This feature would be even more evident if it were returned to its earlier setup as a progressive income tax.

Well, that isn't exactly true. While it is true the top 50% of income earners pay something like 97% of the income tax. But payroll taxes are also an income tax since the basis for their assessment is income, and payroll taxes are largely paid by folks on the lower end of the income scale. The US income tax and payroll taxes are roughly equivalent in aggregate dollar terms. Rich people pay the "income tax" and the middle class pay the payroll taxes and sales taxes. But here is the kicker, rich folks pay less tax as a percent of income than folks on the lower end of the income scales. Thanks to lobbying, not all income is considered income for tax purposes.

 

[joepistole]

No. The upper class knows how to hide their income from taxation.

In Mother Russia that is undoubtedly true. But outside places like Mother Russia that isn't true. It is true that in the US not all income is considered income by the tax man. Certain types of income are not treated as income and other types on income are simply not subject to income taxation (e.g. certain government bond income).

Think about how the upper class uses most of its income. To buy bread and butter for breakfast? Not really. You buy more firms and so on. Will you do this from your taxed income? That would be stupid. You own a firm, and this firm buys all this, as part of their overall economic activity, no profit, nor income tax, nor sales tax.

I don't understand what you are trying to say.

The purpose of the progressive income tax is another. Together with government-made inflation it leads to an automatically tax increase for the poor and middle class.

That doesn't make any kind of sense.

 

[Schmelzer]

In Mother Russia that is undoubtedly true. But outside places like Mother Russia that isn't true. It is true that in the US not all income is considered income by the tax man. Certain types of income are not treated as income and other types on income are simply not subject to income taxation (e.g. certain government bond income).

Nice description how they hide their income from taxation. There are a lot more ways to minimize taxes, the most important completely legal, because this is the job of all this overregulation. But you need a lot of good lawyers already to learn about the fact that they exist, and it is much easier to use them for big firms.

Don't forget, all these tax havens exist only because the US wants them to exist. They use rigorous pressure to stop Swiss from being a tax haven - and reach much better results there, if one compares this with what has been reached for a lot of small islands which are formally independent states but de facto under US military control.

I don't understand what you are trying to say.

What happens if a firm has a large income, and uses this income to buy some commodities, cars, yachts, whatever, what may be used now by the owner of the firm for vacation? Formally, all this is for the business, expenses, from point of view of taxation the same as expenses for buying raw materials, thus, untaxed. As the result, there is almost no profit to tax.

That doesn't make any kind of sense.

No? Think about what happens if you have progressive income taxation, and, with time, your nominal income doubles, together with all the prices. Your real income remains unchanged. But your taxation? You have two times the nominal income, taxation is progressive, so you pay higher taxes. But all the socialist sheeple vote for higher taxation of the rich. Probably they need a nice hyperinflation, so that they all immediately become superrich nominally, and have to pay the taxes they have voted for.

At the same time, the owner of the firm has to do a lot of business trips to the Caribean island where he has his office, travel to business conferences to Europe and Thailand, works really hard, but the firm nonetheless makes no profit to pay taxes.

 

[iceaura]

No. The upper class knows how to hide their income from taxation.

That costs them money, and nothing works perfectly if there's an income tax backstopping things.

It's the one tax that is almost impossible to hide from completely, because one cannot spend money one does not have. That's why the upper classes spend so much money and effort on getting its rates lowered, even incrementally, in the US,

and also go to so much trouble to make sure their income is from capital gains, rather than categories subject to income tax - do you think they are wasting their time and money ?

The hedge fund guys who bribed so many politicians and hired so much expensive lobbying to make sure their fund returns were legally capital gains rather than profit or executive compensation - why would they go to so much trouble and expense if they could just hide the money somehow?

The purpose of the progressive income tax is another. Together with government-made inflation it leads to an automatically tax increase for the poor and middle class

In the US that is usually - commonly and normally in the past, when the tax was actually progressive - compensated by indexing the brackets and the standard deduction to the inflation rate. So your worry there didn't happen. Instead, much money was taxed away from the higher incomes - who somehow had a more difficult time hiding it than you seem to think they would.

What happens if a firm has a large income, and uses this income to buy some commodities, cars, yachts, whatever, what may be used now by the owner of the firm for vacation? Formally, all this is for the business, expenses, from point of view of taxation the same as expenses for buying raw materials, thus, untaxed. As the result, there is almost no profit to tax

Of course it is possible - and has been observed, in the US - for the IRS to fail to enforce its rules and audit the books of the wealthy. But if the US government and the IRS is not so corrupted and negligent - and government revenue depends on them collecting these taxes - what you describe there is a violation of the law, and not only the taxes due but substantial penalties and interest charges are commonly assessed.

 

[Schmelzer]

It's the one tax that is almost impossible to hide from completely, because one cannot spend money one does not have. That's why the upper classes spend so much money and effort on getting its rates lowered, even incrementally, in the US,

I have seen studies who have claimed that in fact they spend much less than the upper class as a whole profits from the results. Because the upper class has a similar common good problem - they care more about their personal problems than about problems of the other rich. But, given that their number is much smaller, this common good problem is much less serious than that of the poor. And already a single superrich guy makes a lot of difference.

The hedge fund guys who bribed so many politicians and hired so much expensive lobbying to make sure their fund returns were legally capital gains rather than profit or executive compensation - why would they go to so much trouble and expense if they could just hide the money somehow?

If the fond is big enough, it is worth to spend a lot.

Of course it is possible - and has been observed, in the US - for the IRS to fail to enforce its rules and audit the books of the wealthy. But if the US government and the IRS is not so corrupted and negligent - and government revenue depends on them collecting these taxes - what you describe there is a violation of the law, and not only the taxes due but substantial penalties and interest charges are commonly assessed.

What is a violation of law - that the working conditions of the top personal are quite comfortable?

 

[iceaura]

I have seen studies who have claimed that in fact they spend much less than the upper class as a whole profits from the results. Because the upper class has a similar common good problem - they care more about their personal problems than about problems of the other rich. But, given that their number is much smaller, this common good problem is much less serious than that of the poor

You aren't making sense - as always when the term "common good" shows up, your thought process falls apart.

The rich spend a lot of time and money trying to get their tax burden reduced by percentages. That is proof that they are in fact subject to a significant tax burden. It is possible to tax the rich, and the US used to tax them quite heavily - that's how we paid down the WWII bonds. And that's how the most prosperous economy of the US - the most prosperity ever seen by any agriculturally based human beings in the history of the world - was set up: 90% income tax rates on the highest incomes.

If the fond is big enough, it is worth to spend a lot.

It's not worth a penny, if the income can be hidden instead. Apparently, it can't be. These guys are spending hundreds of millions of dollars just to get their income shifted into a different category for a somewhat lower tax rate, when according to you they could just hide it somehow and pay no taxes at all. Are they idiots, or are you wrong about hiding the money?

What is a violation of law - that the working conditions of the top personal are quite comfortable?

If personal expenses have been written off as business expenses, the law has been broken. That's illegal in the US, and the IRS does have audit and enforcement capabilities.

Of course businesses can write off all kinds of luxuries as corporate expenditures, and reduce their profits in that way (and their bottom line as reported to shareholders, who may have something to say about losing money in their share prices and dividends) - but we were talking about the progressive income tax applied to the incomes of rich people.

 

[Schmelzer]

You aren't making sense - as always when the term "common good" shows up, your thought process falls apart.

IMHO this is your problem, not my.

A "common good" problem appears if other people can, without contributing money, receive some advantages from what you do. If you are a rich guy, spending money to buy tax reductions for the rich, you have such a problem - because other rich guys may not spend money for buying politicians, but nonetheless get the tax reductions. Of course, not a "good" from a moral point of view, but it is the same economic problem.

The result is that the superrich spend much less on buying politicians than would be rational, for the class of the superrich as a whole.

Of course businesses can write off all kinds of luxuries as corporate expenditures, and reduce their profits in that way (and their bottom line as reported to shareholders, who may have something to say about losing money in their share prices and dividends) - but we were talking about the progressive income tax applied to the incomes of rich people.

Fine. So, instead of getting income as profit from my firm, I write off all kinds of luxury as expenditures. No profit, no income, but nice life. (Don't forget that these guys often really like to rule firms - so they often really "work" in the sense of doing business. So they do not even have to lie too much about all this luxury being "expenditures".

Note also that the same works for the most important thing the superrich buy from their real income: namely other firms and commodities and so on. All this can be done nicely by the firm, which buys all these things. Again, no profit, no income, what they really want to buy is bought. And owned by the firm, which they own.

And, don't forget, those who own 99% have no problem to afford 90% of the taxes.

 

[iceaura]

A "common good" problem appears if other people can, without contributing money, receive some advantages from what you do.

Such as with education, roads, sewer systems, medical care, and everything else.

The result is that the superrich spend much less on buying politicians than would be rational, for the class of the superrich as a whole.

So? They spend far more on buying politicians - and much of it specifically to obtain tax breaks and rate reductions - than they should if they receive no benefits from tax breaks and rate reductions.

Fine. So, instead of getting income as profit from my firm, I write off all kinds of luxury as expenditures. No profit, no income, but nice life

To repeat: that is illegal. And you can get caught - you have to be careful, and moderate your greed. Even at the current slack rates of enforcement (due to bribery and corruption of the relevant Government) the IRS makes a lot of money for the government on its fines for that kind of behavior. The IRS enforcement branch is one of the US government agencies that turns a profit.

Again: your contention that income taxes do not afflict the rich, because they can hide their income, is in conflict with the observation that the rich spend so much time and money obtaining even partial immunity to them - marginally lower rates, contrived classification of income sources, these things are worth hundreds of millions of dollars to the wealthy. According to you, they should be just hiding the money. Are they idiots, or are you wrong?

 

[Schmelzer]

Such as with education, roads, sewer systems, medical care, and everything else.

No. Education has no such common good problem. Medical care too. For roads, explicit payments for using them are already common. And for sewer system, the common good problem is a quite local one.

So? They spend far more on buying politicians - and much of it specifically to obtain tax breaks and rate reductions - than they should if they receive no benefits from tax breaks and rate reductions.

Who has claimed that they receive no benefits from lobbying? Of course, they receive. And this allows them to create many ways to avoid the progressive income taxation.

To repeat: that is illegal. And you can get caught - you have to be careful, and moderate your greed. Even at the current slack rates of enforcement (due to bribery and corruption of the relevant Government) the IRS makes a lot of money for the government on its fines for that kind of behavior. The IRS enforcement branch is one of the US government agencies that turns a profit.

Without doubt, it is the main source of income for the government. And quite arbitrary penalties for breaking tax laws one probably does not even know about (if one is not one of the superrich with a horde of lawyers checking everything) is an important part of this.

Again: your contention that income taxes do not afflict the rich, because they can hide their income, is in conflict with the observation that the rich spend so much time and money obtaining even partial immunity to them - marginally lower rates, contrived classification of income sources, these things are worth hundreds of millions of dollars to the wealthy. According to you, they should be just hiding the money. Are they idiots, or are you wrong?

First, I have never claimed any "no afflict". Of course, every tax increase for whatever, say, cigarettes, will also afflict the rich smokers. What I claim is that the effect on the rich and superrich is much lower than one would expect by looking at the tax rates. And don't forget that even a "marginally lower rate" means much more money for a superrich than the whole income of the poor. And, obviously, you don't get the simple point that such "contrived classification of income sources" are the way which allows them to hide their real income. They don't have to do illegal things, they need a good team of lawyers who know where to hide the income in completely legal ways.

Is it illegal for a firm to have a luxury office for the chief of the firm, give him luxury company cars and planes? Or to buy other firms? Or to have conferences in a luxury hotel on a Caribbean island? Sorry, but this is a line of avoiding a progressive income tax that is extremely hard to close even if you want it very much, but nobody wants to. And to avoid in a safe way taxes using offshore firms one needs, of course, good lawyers. But if you have them, all this is completely legal.

 

[iceaura]

No. Education has no such common good problem. Medical care too. For roads, explicit payments for using them are already common. And for sewer system, the common good problem is a quite local one.

All nonsense. This "common good" language has you completely baffled.

The externalized benefits from education, in particular, are enormous - especially, say, the education of girls in poor countries. Likewise medical care. Explicit road payments are always parasitic on an existing road system, taxpayer financed. And the huge common benefits of sewer systems include all the effects of one's large cities not being sources of disease and plague, the maintenance of a clean groundwater supply for the general public, etc.

What I claim is that the effect on the rich and superrich is much lower than one would expect by looking at the tax rates

Yet another reason for setting them high.

And, obviously, you don't get the simple point that such "contrived classification of income sources" are the way which allows them to hide their real income.

Except that they haven't hidden it - they have merely lowered the tax rates. It's still visible. They are spending hundreds of millions and hiring fancy lawyers simply to lower their tax rates on their visible income - which means they can't actually hide their income, as you claimed.

So when you said that high income tax rates were useless because the rich would simply hide their income, you were wrong.

Is it illegal for a firm to have a luxury office for the chief of the firm, give him luxury company cars and planes? Or to buy other firms? Or to have conferences in a luxury hotel on a Caribbean island? Sorry, but this is a line of avoiding a progressive income tax that is extremely hard to close even if you want it very much, but nobody wants to.

The topic was personal income tax - it's levied on wages, tips, and compensation. If a company gives a guy a car or a plane, that's compensation, he owes income tax. If it allows him, personally, by name, the use of a company car or plane for personal business, that's compensation, he technically owes income tax for the share of his use that's personal. And that is no way hide big money anyway, it's trivial.

None of the rest of that has anything to do with personal income - it all falls under various business accounting rules, and that's another topic, of interest to shareholders and investors as well as the tax man. Having a luxurious office does not avoid personal income tax, for example.

These are not abstruse or hidden matters. This whole business seems alien to you, for some reason.

Meanwhile the critical, central benefit of an income tax in a modern industrial economy is its effect on economic inequality - the second most serious drag on the US economy, after the health care boondoggle.