[filerba]

Why does everybody assume that labor is the only cost variable to production? Logistics, research & development, capital plant and equipment, and productivity of labor are all production costs at least as important to manufacturing as the cost of labor.

Those other things are also produced by labor.

so, what's an appropriate tax rate, and why?

An appropriate tax rate would be one where the budget is balanced.

[Korimyr the Rat]

so, what's an appropriate tax rate, and why?

I don't think the numbers we're currently using are that bad at the lower end.

Right now, for singles, the tax brackets are as follows:

$0 - $8,350 = 10%
$8,350 - $33,950 = 15%
$33,950 - $82,250 = 25%
$82,250 - $171,550 = 28%
$171,550 - $372,950 = 33%
$372,950 + = 35%

I'd suggest smoothing out the transition from 15% to 25% by inserting a 20% bracket between them, then bumping 28% up to 30% and 33% up to 35%. You can push the lower ends of those tax brackets up slightly to compensate. Then, I want additional tax brackets added to the top.

So, let's say something like this:

$0 - $10,000 = 10%
$10,000 - $25,000 = 15%
$25,000 - $55,000 = 20%
$55,000 - $100,000 = 25%
$100,000 - $200,000 = 30%
$200,000 - $500,000 = 35%
$500,000 - $1 million = 40%
$1 million - $5 million = 50%
$5 million - $10 million = 60%
$10 million + = 70%

I also think that the payroll tax should apply to all wage/salary income, instead of just the first $80,000.

I've already explained the reasons why I believe tax rates should be progressive. The reason that I want tax rates to be higher at the top end is that I believe that a massive and growing disparity of wealth, such as exhibited in the United States, is a symptom of an unhealthy social structure and a major cause of social instability, unrest, and crime. I also believe that moderate social spending and heavy investment in healthcare, education, and infrastructure are necessary functions in a mature and responsible government-- and that running a budget deficit every year is grossly irresponsible.

i am grown up, and you are a traitor to freedom.

You're behaving childishly.

Yes, I do place moral order and the greater good of society as higher priorities than freedom-- especially the "freedom" to exploit taxpayers-- and I don't pretend otherwise. That doesn't mean that I do not value freedom, and it certainly does not make me a "traitor" of any kind. That kind of rhetoric serves no purpose and has no place in a civilized conversation; it disgusts me that so much of our political discourse has been reduced to this kind of idiotic tripe. It especially disgusts me that people such as Rush Limbaugh and Ann Coulter are more respected than intelligent and well-mannered conservatives such as David Frum or George Will.

[Rancid]

The reason that I want tax rates to be higher at the top end is that I believe that a massive and growing disparity of wealth, such as exhibited in the United States, is a symptom of an unhealthy social structure and a major cause of social instability, unrest, and crime.

Shifting tax brackets won't fix any of that.

I just can't see how playing around with tax brackets will ever fix social problems. This has been the trend since the income tax was started. Yet, all these problems still remain.

[Paradigm]

Discouraging consumption is essential to promoting savings, which is how the nation's pool of capital is formed.

No, you promote savings by ensuring people have money in excess of what they need for consumption. By taxing consumption, you ensure that they have less money left over to save. Certainly some demand is artificially created through advertising, but I would rather tax the advertising than tax the consumers.

[Dr House]

No, you promote savings by ensuring people have money in excess of what they need for consumption.

Anyone making more than 50% more than the poverty line (adjusted for local cost of living) can easily save without forgoing their basic necessities. The problem is that in the US even people making as much as $60,000 or more still don't save.

By taxing consumption, you ensure that they have less money left over to save.

By taxing income you do the same. The difference is that the incidence of consumption taxes diminishes when you consume less of your income. The same is not true of income taxes. Furthermore, consumption taxes are a good way to collect income without taxing savings, so even though they're regressive it's still not a bad idea to cut taxes on the poor and middle class (not the rich) while simultaneously phasing in a consumption tax.

[Paradigm]

By taxing income you do the same. The difference is that the incidence of consumption taxes diminishes when you consume less of your income. The same is not true of income taxes. Furthermore, consumption taxes are a good way to collect income without taxing savings, so even though they're regressive it's still not a bad idea to cut taxes on the poor and middle class (not the rich) while simultaneously phasing in a consumption tax.

I've already posted about how consumption taxes kill commerce. And given my economic positions, you should know that income vs. sales tax is a false choice. I will grant that targeted consumption taxes can help when you want to reduce certain types of consumption, such as products which are unhealthy for the environment(ecotaxes) or products whose production is outsourced(tariffs). But taxing overall consumption is just stupid. Savings go up when prices are expected to be lower in the future, which, by the way, is the natural tendency in a non-monopolistic free market.

[Dr House]

I've already posted about how consumption taxes kill commerce.

They kill retail distributors, which is what they're supposed to do if they're fulfilling their goal of reducing consumption. Of course retail distributors are employers too, but on balance it's better to create the conditions for production jobs to flourish rhather than entirely depending on retail establishments for this, especially considering how labor-intensive retail services are.

given my economic positions, you should know that income vs. sales tax is a false choice.

Obviously a land value tax is far superior to either a sales tax or an income tax. I know this as well as you do. However, a land value tax will not collect enough revenues to fund a government, especially a government as large as you want it, by itself, so the question of income vs sales taxes is still valid.

I will grant that targeted consumption taxes can help when you want to reduce certain types of consumption, such as products which are unhealthy for the environment(ecotaxes) or products whose production is outsourced(tariffs). But taxing overall consumption is just stupid.

I'll grant you that the increase in savings from a consumption tax is relatively small, but the increase in savings from simultaneously untaxing savings is larger

Of course, a better way to go is for a tax where people can explicitly lower their tax rate by saving, which would create a stronger psychological incentive to do so. Therefore, a great way to tax consumption is the Hall-Rabushka income tax, which can be progressive even though they proposed it as a flat tax.

Savings go up when prices are expected to be lower in the future, which, by the way, is the natural tendency in a non-monopolistic free market.

Agreed. That's why I support an inflation target a little under 0%.

[Paradigm]

They kill retail distributors, which is what they're supposed to do if they're fulfilling their goal of reducing consumption. Of course retail distributors are employers too, but on balance it's better to create the conditions for production jobs to flourish rhather than entirely depending on retail establishments for this, especially considering how labor-intensive retail services are.

And since you also favor protectionism, who's going to buy our products? Especially since we are the the world's wealthiest country, and it's impossible for every country to be a net exporter?

However, a land value tax will not collect enough revenues to fund a government, especially a government as large as you want it, by itself, so the question of income vs sales taxes is still valid.

Oh yeah?

I'll grant you that the increase in savings from a consumption tax is relatively small, but the increase in savings from simultaneously untaxing savings is larger

I would prefer simply to target the causes of dissaving, and let the free market sort it out from there.

Therefore, a great way to tax consumption is the Hall-Rabushka income tax, which can be progressive even though they proposed it as a flat tax.

That doesn't even look like a consumption tax to me. It looks like a lack of a tax on investment, which I already support.

[Zerogouki]

Or we could just impose a steep tariff on imports...

[Paradigm]

Or we could just impose a steep tariff on imports...

That's fine, except we'd have to internalize our whole economy(boost production and retail businesses), because every country would increase their tariffs too.

[Dr House]

you also favor protectionism

I favor a situational trade policy, based on a long-term strategy of export-led industrial development. For developing countries this means strategic protectionism designed not to internalize the economy, but to capture higher-level industries in order to develop. For a developed country free trade is generally positive, as long as it keeps its capital costs of production as low as possible. I do however favor protecting domestic industries against nations using neo-mercantilist economic policies to target and destroy them, the way Japan did to our electronics industry. For now in the short term I would say light protectionism against Northeast Asia and Europe is in order until we regain competitiveness against them.

Oh yeah?

I'll have to read that up and get back to you, but from the best real-World examples we have of land taxation (Hong Kong, Singapore and Taiwan) I'd say yeah.

I'm not saying I don't support the LVT, I'm just saying I'm very skeptical of the claim that it's the only tax we'll ever need.

[NYYS]

Why are we even arguing about what's fair? Who cares? Why don't we talk about what works best, which is most definitely not scaring off the wealthy. You can tax at 70%, but that basically all of a person's income, meaning that all jobs that would earn above that level (CEOs, business owners, probably some doctors) would become nonexistent. Who wants to take on all that stress and work that hard for no additional income? Why not just start a company in a more wealth-friendly environment overseas?

Our society has become so jealous and obsessed with inequality that we're going to eventually end up removing the most important people from the workforce.

[Karl_Bonner_1982]

Well why didn't the economy implode in the 1950s when the top bracket was 91%?

I don't think we need to go all the way back to 70 to fix our economy and social safety net, but I would go back up to 50 for people making more than about $3 million per year. And remove the $105,000 income cap on payroll taxes, etc.

One way to promote more saving among the lower middle class is to make them less dependent on mass consumption for day-to-day activities. That means more "smart growth" urban planning, mass transit, community gardens, and other planning designs meant to lower the real cost of living. More energy-efficient homes and cars, less dependency on cars....you get the point.

[NYYS]

Well why didn't the economy implode in the 1950s when the top bracket was 91%?

Because it affected only a handful of people. I'd actually be curious to know how much of it they actually collected, or whether those people hid it or stopped working or what.

[Paradigm]

Because it affected only a handful of people. I'd actually be curious to know how much of it they actually collected, or whether those people hid it or stopped working or what.

They did hide it. John F. Kennedy knew damn well that his family wasn't paying 91% of their income. So when he reduced the top bracket to 70%, he also closed several loopholes. Paradoxically, his "tax cut" was in effect actually a tax increase.

[ThereBeDragons]

Who wants to take on all that stress and work that hard for no additional income?

Thirty percent of forty million dollars is still twelve million dollars.

[Dr House]

Paradoxically, his "tax cut" was in effect actually a tax increase.

This isn't surprising. The Laffer curve, or at least my interpretation of it, is that the lower the top marginal tax rate is, the lower the risk-return ratio is for tax evasion and the more people will pay. I actually think that the Heritage Foundation's estimate that the Laffer optimal tax rate is less than 30% is off. I believe that Clinton hit the optimal tax rate, considering that his tax regime was the first and only to raise tax revenues above 20% of GDP... ever.

[Todd D.]

Bullshit. Tax revenues as a percentage of GDP in 2007 was 28%. It hasn't gone below 25% since at least 1975 according to this chart

[Dr House]

I'm sorry, I meant federal tax revenues.

[Zerogouki]

That's fine, except we'd have to internalize our whole economy(boost production and retail businesses), because every country would increase their tariffs too.

I'm sorry, but I don't see how that follows. Why would other countries raise their tariffs?