Read on - if you're interested in economic theory.one commenter wrote:But how do you make that the fault of the Bush tax cuts? For at least the first few years doesn't it make more sense to blame 9/11? In actual fact, I think a big part of the issue is globalization and the knowledge economy…. Globally, incomes are converging…. Secondly, the Internet and the knowledge economy are transforming us into a winner takes all economy.
EDIT: BTW, the title of this thread is taken from the lyrics of a Beatles song named "Taxman".David Cay Johnston wrote:These were: the Harding / Coolidge tax cuts of 1921 through 1926; the Reagan tax cuts of 1981; and the Bush tax cuts of 2002. The results of each one of these tax cuts was exactly the same: “all three experiments resulted in the average American becoming poorer, the real (industrial) economy in tatters, and spectacular financial crashes.”
Which should lead to the obvious question:And I explained:Why do tax cuts lead, counter-intuitively, to industrial decline, stagnant wages, and finally financial collapse?If you look under the hood of the industrial economy, you easily see why there is this counter-intuitive relationship between tax rates and economic growth . With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest. But if tax rates are low, then there is more incentive to pull the wealth out, by declaring it as profits that are taxed at what turns out to be too low a rate. In other words, low taxes create an incentive for profit taking.
This in turn creates an incentive for short-term horizons in business planning. If you’re going to be taking all the profits out of a company, and take home a few million a year, why bother to reinvest anything in the business? You’re going to be rich, and never have to work again, even if the business goes bust. Or gets packed on a boat and shipped to China. Or goes "virtual" and lets all the hard work, like, you know, actually making something, be done by the lowest bidder. Employees? Don’t need them.
But employees are also customers. If enough businesses "take profits", after some length of time, the former employees also become former customers. Meaning, they stop buying. The economy's aggregate demand generation is crippled. From the three Republican tax cut experiments this past century, it appears the length of time for this to happen is five to seven years.
If tax rates are high enough to discourage profit taking - forcing wealth created by a business to be recycled back into the business – then businesses are pushed toward longer-term planning, as they invest in new plant and equipment that will be used for many years. And you do not get the absurd situation you have now, where companies are posting record breaking profits, but are not buying new equipment, nor hiring new employees.
Low tax rates encourage taking wealth out of industrial companies; the wealth taken out must then be "put to work." That means more money chasing "investment" opportunities, leading to price increases in financial capital or real estate or some other asset. In other words, an asset bubble. The rise in prices of an asset bubble has nothing to do with the creation of real wealth. It all looks like prosperity – until the asset bubble bursts. That’s where we are now.
http://en.wikipedia.org/wiki/Federal_Reserve_ActWilson had not waited for completion of the tariff legislation to proceed with his next item of reform – banking – which he initiated in June 1913. ... Wilson declared the banking system must be "public not private, must be vested in the government itself so that the banks must be the instruments, not the masters, of business." Wilson secured passage of the Federal Reserve Act in late 1913
And lower tax rates actual promote greater tax revenue for the Federal GovernmentDuring Coolidge's presidency the United States experienced the period of rapid economic growth known as the "Roaring Twenties". He left the administration's industrial policy in the hands of his activist Secretary of Commerce, Herbert Hoover, who energetically used government auspices to promote business efficiency and develop airlines and radio.
Google "inventions of the 1920s" and you will find that the tax cuts of the 1920's gave us ...the ideal that "scientific taxation", lower taxes, actually increase not decrease government receipts.
But most importantly, the Republican Tax Cuts gave average Americans the ability to purchase products that were invented in previous decades that were only available for the wealthy, such as ..American Hammond Organ
Band Aid
Bubble Gum
Car Radio
Electric Shaver
Eskimo Pie
The basic components which led to Television
High Octave Gasoline
You mean "A logical fallacy"???dsvochak wrote:The assertions ... are worthy of inclusion in the examples section of the Wikipedia “Post hoc ergo propter hoc” entry ( http://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc ).
Domestic electric mixers were rarely used before the 1920s ...
I must have accidentally drunk "decapitated" coffee that morning.killer wrote:@robert213: High octave gasoline? Surely you mean high octane?
(playing on the word "decaffeinated")
Woodrow Wilson (Progressive/Democrat) initiated Federal Income Tax when he signed the Revenue_Act_of_1913 into law. Before 1913, the Federal Government received revenue through tariffs on imports and sales and excise taxes on large consumer items.killer wrote: Back on topic, when was income tax first introduced in the USA?
http://www.policyalmanac.org/economic/a ... tory.shtml
February: Americans think of Black History Month, Valentine’s Day, Lincoln’s and Washington’s Birthday, and Groundhog Day. But February of 2013 is especially significant, as this month is the 100th anniversary of the ratification of the 16th Amendment empowering Congress to impose the federal income tax.
Prior to 1913, the U.S. government was much smaller than today, and the taxes it collected through means other than an income tax were sufficient to finance federal government operations. For example, tariffs were placed on imports and excise taxes (similar to our modern sales tax) were placed on the sale of certain items such as horses and carriages, etc. “Indirect” taxes such as these were taxes on consumption rather than income, offering the citizen the option of controlling his tax burden by limiting his purchases. According to Article I, Section 2 of the Constitution, any type of “direct” tax, i.e., on a person directly, which could arguably include a person’s income, had to be apportioned among the states on a per-capita basis:
Representatives and direct taxes shall be apportioned among the several states which may be included in this union, according to their respective number, which shall be determined by adding to the whole Number of free Persons, including those bound to servitude of a Term of Years, and excluding Indians not taxed, three-fifths of all other persons.
So clearly any federal taxes on income would have to be applied uniformly, with each state contributing an amount proportionate to its population. That was the limitation the Constitution placed on direct taxes collected by the federal government. This limitation prevented the U.S. government from making first claim to the wealth of the people, effectively deciding how much income the people would be allowed to keep.
When the Civil War erupted, the Congress passed the Revenue Act of 1861 ...
On July 1, 1862 the Congress passed new excise taxes on such items as playing cards, gunpowder, feathers, telegrams, iron, leather, pianos, yachts, billiard tables, drugs, patent medicines, and whiskey. Many legal documents were also taxed and license fees were collected for almost all professions and trades.
By 1868, the main source of Government revenue derived from liquor and tobacco taxes.
From 1868 to 1913, almost 90 percent of all revenue was collected from the remaining excises.
Large corporations earning 2.5 billion dollars per year on revenues of 20 billion are not a threat to the average American. This is simply a "Red Herring" to cover up the fact that a Federal Government spending over 4 trillion dollars per year on tax receipts of 3.25 trillion IS!!!According to an analysis by Pulitzer-Prize winning reporter David Cay Johnston ...
Johnston is author of the 2008 book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill), and was formerly a correspondent for the New York Times.
...
In January 2009, he presented ... a point-by-point plan for dramatically shifting government policies away from favoring the rich and corporations, to working for the general welfare of all Americans. Among his points was a ruthless crackdown on tax havens such as Bermuda and the Cayman Islands, including the use of military force if that was required to overcome the refusal of the authorities of those locales to cooperate.
Looking back at history, how long did this "increased standard of living" continue?robert213 wrote:Even Wikipedia admits that the Harding / Coolidge tax cuts increased the standard of living for the vast majority of Americans.
So five to seven years after the Harding / Coolidge tax cuts of 1921 through 1926 we got "The Great Depression" of the 1930's. Coincidence?David Cay Johnston wrote:But employees are also customers. If enough businesses "take profits", after some length of time, the former employees also become former customers. Meaning, they stop buying. The economy's aggregate demand generation is crippled. From the three Republican tax cut experiments this past century, it appears the length of time for this to happen is five to seven years.
I don't where you're pulling this from. At any rate that seems irrelevant to this discussion. I don't disagree with that statement as a stand-alone comment.Large corporations earning 2.5 billion dollars per year on revenues of 20 billion are not a threat to the average American.
Edward D. Kleinbard wrote:Our political discourse today is riven by the issue of inequality. Some commentators embrace inequality as an inevitable byproduct of free markets. Others say inequality is greatly overstated. Both claims are harmful and deceptive.
Defenders of inequality begin with an incontrovertible fact: Free markets rely on inequality. It inspires those who have less to work harder. But this doesn't explain why inequality was much lower a generation ago. In 1979, chief executive officer pay was 29 times higher than the typical worker's; in 2011, it was 231 times higher. Nor does it tell us how much inequality is enough.
A film I found enlightening on this issue is: Inequality For All by Professor/Economist Robert ReichEdward D. Kleinbard wrote:Defenders of the status quo have no answer to why the U.S. is an outlier in the rate at which income inequality has grown. There is something about the U.S. that is unique, and it's not its markets, which are largely indistinguishable from those of other countries...
...Comparative data show that the U.S. offers less social and economic mobility than do many of its peer countries...
Have you seen the unbelievable crap that Obama-care is supposedly providing at humongous cost?killer wrote:You gave us the NHS, probably the best and fairest health system in the world, and now they want to privatise it. Where is sense with all this nonsense?
Graph: Marginal Tax Rates and GDP Growth from 1930 to 2009Slate.com wrote:Until a generation ago, many Americans and their representatives argued vehemently that the wealthy ought to pay more in taxes, but that position has drastically declined in popularity. Weisman sets the debate in the context of the battle between those who invoke justice—progressive taxes create equity and hence justice—and those who invoke virtue—the belief that hard work should be rewarded and taxing higher income at an elevated level creates a disincentive to the hard work we should promote.
Slate.com wrote:So where does this leave us? Probably with Weisman's conclusion—that the debate between justice and virtue will continue for years to come. But this debate may be little more than a Rorschach test—an inkblot into which we read our underlying values about income distribution and social welfare. Those who see taxes as the bane of progress will still claim that higher marginal rates are the enemy of economic growth. Those who favor greater progressivity will say there is no evidence of such a claim. They will conclude—and they will be right—that the wealthier can afford to pay more, with no harm to the nation's economic growth.
Some interesting reading there...dsvochak wrote:Since it appears Wikipedia is the source of choice, this might be worth reading:
http://en.wikipedia.org/wiki/Confirmation_bias
EDIT: Is this an example? http://sheppardpost.com/charles-krauthammer-a-history/Wikipedia re: Confirmation Bias wrote:A two-decade study of political pundits by Philip E. Tetlock found that, on the whole, their predictions were not much better than chance. Tetlock divided experts into "foxes" who maintained multiple hypotheses, and "hedgehogs" who were more dogmatic. In general, the hedgehogs were much less accurate. Tetlock blamed their failure on confirmation bias—specifically, their inability to make use of new information that contradicted their existing theories.
Since many of the folks participating in this discussion share ...dsvochak wrote:Since it appears Wikipedia is the source of choice, this might be worth reading:
http://en.wikipedia.org/wiki/Confirmation_bias
I shall present another article from Wikipedia:the belief that the Federal Government is better than the markets and private investors at deciding where and how to allocate society's financial and economic resources -- AND the accompanying belief that the Federal Government IS a positive factor in the economy,
^^^^^^dsvochak wrote:
6. There are a lot of retired GM employees, for example, who thought they would always receive their promised GM retirement checks and benefits. They were wrong. Their social security benefits continue unchanged.
I'm Irish, with no intention of becoming a US citizen, because as a "legal alien" with a green card I get my pension tax-free from abroad!dsvochak wrote:3. RBS, according to a recent post, retired in 2001. He lives in PA but he’s originally Irish. I don’t know whether he’s now a citizen of the US or collects social security.
Fortune is indeed shining down on you. While common in the past, these days a pension is a rarely provided benefit for US employees. Many union jobs have pensions, but as dsvochak pointed out, these pensions do not provide the secure retirement as in days past.Guess what?
The amount on my company provided pension check (for only 12 years of service where I contributed zero dollars) will be slightly less than my Social Security Administration check (for 40 years of having SSA contributions withheld where I contributed a significant amount of dollars).
Sad but very true indeed.GomJabbar wrote:
Fortune is indeed shining down on you. While common in the past, these days a pension is a rarely provided benefit for US employees. Many union jobs have pensions, but as dsvochak pointed out, these pensions do not provide the secure retirement as in days past.
Anything Bell System-related was a *great* place to work at one time and most of its off-springs still are...for how long is a whole another matter.My father retired from AT&T with over 40 years of service. He was only a technician, not a manager. Although he passed away nearly 20 years ago, my mother still receives monthly pension checks from my father's employer. Both my mother and father worked, my mother as a legal secretary after my brothers and I had all entered public school (K-12). My father retired at 62 and began drawing Social Security as well as his pension at that time. My father may have worked to later age, but his health was declining, and he wanted to enjoy a few good retirement years before his health would not allow.
While I agree with this train of thought in principle, I'd say that this particular (U.S.) society has already spread itself way too thin in various ways, and that the abuses of the system (not talking about Social Security here) are numerous and abysmal...something's gotta give.A CIVILIZED society should provide for those that cannot provide for themselves. A SAVAGE society turns their head - or worse.
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