Interesting proposal. I like it for it's simplicity and it's "bring everyone into the fold" characteristics while still maintaining a progressive structure.
As far as your objective, what would you classify yours as? You stated revenue collection, but is there an objective to the quan y of that revenue? Or just "set it and forget it" and then adjust spending to match revenue with the occasional debt supplement?
Truly Scott I believe, as most economist do, that most economic opinions are masterbating material. It means jack. I'm more bottom-up focusing on individuals, families and small businesses.
The problem as I see it is people don't have money to spend and don't have money to save. The government can help by mini zing the tax burden, especially since taxes don't pay for anything, but just regulate the economy.
I disagree with this notion, unless I'm misunderstanding. I don't think many economists believe that the economic theories in which we've devoted our lives to studying and advancing are "masturbating material".
I agree with the first part of your statement, but the second sentence you lose me. You are right in that there is an effective "points" system - but to say our taxes don't pay for anything is false. If we had taxes of zero, for example, we could still pay for everything, but you'd quickly find yourself on the road to hyperinflation (which you stated a goal should be to have policies that are consistent with controlling inflation).The problem as I see it is people don't have money to spend and don't have money to save. The government can help by mini zing the tax burden, especially since taxes don't pay for anything, but just regulatebour economy.
Unfortunately, for the most part, there is a trade-off being increasing aggregate demand and controlling inflation.
Back in your original response:
You made these two really great policy objectives, but it's important to realize that they are often times in conflict with one another. We could boost aggregate demand almost instantly, but it would be at the expense of higher inflation. This is an important nuance that should be considered when contemplating a fiscal and economic strategy.1. Policy consistent with increasing aggregate demand
2. Policy consistent with controlling inflation
I attended a meeting with a Dallas Fed Reserve member and his words, sort of. His point is most economist are wrong but are paid to have opinions. It's how individuals react to opinions and policies that matter. Not trying to impune your work, because I appreciate economist and join in on the masterbation too
Are you saying our so called "debt" tames inflation? Because we are creating "points" using that system, not to mention QE. There's no evidence that a significant increase in our "points" would cause hyperinflation. In fact, evidence suggest it would not in light of our sovereignty. Not to say there isn't a point of dollar revulsion and hence inflation, but I argue we are far from it.I agree with the first part of your statement, but the second sentence you lose me. You are right in that there is an effective "points" system - but to say our taxes don't pay for anything is false. If we had taxes of zero, for example, we could still pay for everything, but you'd quickly find yourself on the road to hyperinflation (which you stated a goal should be to have policies that are consistent with controlling inflation).
I'm more in the John Hussman camp that believes inadequate supply is more inflationary. Hence, the need for increased employment and less underemployment.Unfortunately, for the most part, there is a trade-off being increasing aggregate demand and controlling inflation.
Not proportional IMO. Far away from demand creating inflation at these unemployment levels. Especially with how productive we can be with the latest technologies. I argue demand hasn't caught up to the productivity of technology advances.Back in your original response:
You made these two really great policy objectives, but it's important to realize that they are often times in conflict with one another. We could boost aggregate demand almost instantly, but it would be at the expense of higher inflation. This is an important nuance that should be considered when contemplating a fiscal and economic strategy.
Last edited by 2centsworth; 08-02-2012 at 01:36 PM.
I'm not sure, I hadn't really thought about the spending aspect. I think I would favor something along the lines of tying spending to GDP. I heard Ted Cruz saying he wants to fix spending at 18% of GDP. I don't know if that number is correct but it doesn't sound too far off. Although I think it would have to be structured in a way that doesn't create massive problems everytime the economy slows. Perhaps a range of 16% of 22% (if ~18% is the goal) per decade or so. So in good times the percentage of GDP spending would be lowered and in bad times it could be increased in relation to GDP.
In the other thread my objectives were revenue collection and to promote savings/wealth building. That's the reason for lowering capital gains taxes and eliminating dividend taxes. I don't know if that would work but that was the goal. Perhaps just giving the Fed a minimum interest rate would allow people to ac ulate wealth simply by saving rather than risking it in the market.
Last edited by SnakeBoy; 08-02-2012 at 01:36 PM.
Thanks. I guess the next question is - why is this a matter of tax policy and laws? Why use a set of laws that has been historically manipulated by the rich to concentrate their power to redistribute and, in essence, "enforce" equality? I'm not saying that tax laws can't aid in income equality -- just that they haven't to date. Plus, there's the further complication of translating the "goldilocks" point of just enough income (in)equality into the law itself.
I guess my overarching question is: is it better to use the tax code to enforce an economic equilibrium point or use different laws to check excesses of too much or too little economic equality?
In the professional ranks I would agree, but I would strongly disagree in the academic ranks. For that reason, I think the co-mingling of the two are dangerous (and this goes with all sciences).I attended a meeting with a Dallas Fed Reserve member and his words, sort of. His point is most economist are wrong but are paid to have opinions. It's how individuals react to opinions and policies that matter. Not trying to impune your work, because I appreciate economist and join in on the masterbation too
No, I'm saying the tax revenue (the points) is what tames inflation. If we assumed our taxes don't pay for anything, and then stopped collecting them, we'd have to finance everything through debt, which would inevitably be inflationary.Are you saying our so called "debt" tames inflation? Because we are creating "points" using that system, not to mention QE. There's no evidence that a significant increase in our "points" would cause hyperinflation. In fact, evidence suggest it would not in light of our sovereignty. Not to say there isn't a point of dollar revulsion and hence inflation, but I argue we are far from it.
I agree that inadequate supply can be inflationary (wherever we have a shortage, prices increase to ration that good or service) but higher unemployment and underemployment is not a symptom of inadequate supply. If demand were exceeding supply, then there would be an incentive for producers to employ more.I'm more in the John Hussman camp that believes inadequate supply is more inflationary. Hence, the need for increased employment and less underemployment.
Of course, supply can drive demand in some instances, as demand is created when people earn wages... so you put people to work, and that kick-starts aggregate demand. I don't disagree with this, but I'm curious as to make this happen. If I'm reading correctly, it sounds like you are proposing by getting money to the lower end of income spectrum to create demand, which will create the need for more supply, which will then create more demand (and so on)? If so, I generally agree with your idea.
Another great question, and I don't know the answer. I would ask back - what other laws can we use? To me, tax policy seems an obvious means to achieving such goals, even if that isn't how it's been used in the past (and of course we are only talking in theory here - not practicality).
Thanks for the response. Spending targets are probably a good idea. Of course tax policy does not exist in a bubble so it needs to at some point be reconciled with the rest of fiscal policy. I think balanced budget amendments go a little too far (there are times when you may need to run a deficit - WW2 was a great example) but have the right basic idea. Deficit spending cannot go on the way it has for eternity.
I think the idea of a progressive capital gains tax is a good one too, though I'm not a huge fan of treating dividends any different from normal income, as doing so tends to have regressive effects.
Without doing any research and off the top of my head - anti-trust laws could be used to prevent the concentration of (economic) power within a select group of corporations.
That obviously doesn't deal with individual concentration of wealth - maybe mandatory caps on corporate pay?
On the flip side, I'd think that more robust welfare policies could be useful.
Ultimately, I dunno.
This goes to scott's point - but I think a 100% death tax would do a lot to solve these problems.
I guess that the point of the OP (without reading the rest so far) is to get a strategic vision for tax policy. I believe Economic Growth should be the goal with tax policy. Not short term (necessarily), but long term.
My microscopic vote tends to side with policies that make a difference professionally while taking into account what the academics have to say.Btw, economics is more art than science. At least that's what I was taught and believe.
whether the fed just gives points without "debt" or they give points with "debt" money supply is the same. Hence, does "debt" tame inflation?No, I'm saying the tax revenue (the points) is what tames inflation. If we assumed our taxes don't pay for anything, and then stopped collecting them, we'd have to finance everything through debt, which would inevitably be inflationary.
two sides of the same coin. More people working the more supply. More supply equals lower prices. Right now we have a demand problem.I agree that inadequate supply can be inflationary (wherever we have a shortage, prices increase to ration that good or service) but higher unemployment and underemployment is not a symptom of inadequate supply. If demand were exceeding supply, then there would be an incentive for producers to employ more.
I like the 250 cutoff for further tax stimulus, such as further FICA reductions and elimination of cap gains, but I disagree with tax increases on anyone right now. Again, taxes regulate and don't pay anything.Of course, supply can drive demand in some instances, as demand is created when people earn wages... so you put people to work, and that kick-starts aggregate demand. I don't disagree with this, but I'm curious as to make this happen. If I'm reading correctly, it sounds like you are proposing by getting money to the lower end of income spectrum to create demand, which will create the need for more supply, which will then create more demand (and so on)? If so, I generally agree with your idea.
Last edited by 2centsworth; 08-02-2012 at 02:13 PM.
Question, in the post gold standard monetary system, what debt level is inflationary? Japan is over 200% of GDP and still has deflationary pressures. I use the yen because it's sovereign like the us dollar.
I don't think there is a direct answer to that. Inflation is directly tied to money supply, so debt levels are not inherently inflationary, but tend to eventually be as a crowding out and eventual monetary expansion occurs.
I'm not sure we are talking about the same thing here.
What's the difference between issuing a Promissory note to the Chinese while giving "points" or just giving "points"? Does the existence of a promissory Note tame inflation?
Im not suggesting zero taxes because that be would inflationary imo. What i am suggesting is the existence of a tax should only be used to tame inflation and encourage full employment, Not to make believe the taxes are paying for something.
This is where we disagree. I think you're wrong about your assumptions.Not to make believe the taxes are paying for something.
I'm not. Thats how our fiat monetary system works. I would recommend a honest look at Modern Monetary Theory. A good start is moslereconomics.com
I guess we will agree to disagree. Good luck.
That's pretty vague. Any specific thoughts on how you would acheive your goal?
How can you disagree without exploring the other side? Here's a quick interview that gets to the heart of the matter
Hir.Harvard.edu/debt-deficits-modern-monetary-theory
I know this idea will probably get poo-poo'd (been watching Blackadder lately), but I still think that when we file our annual taxes, there should be a little section that has various categories to check (military, social security, education, etc etc) that would ask the people filing where they would like to see their tax money put to use. I'd think we'd get a better idea of what the public actually wants to fund with something like that. *shrug*
That's a rather bold assumption you've made. MMT, otherwise known as Chartalism, is not as modern as the name suggests - it's been around for quite some time.
Chartalism offers a number of interesting ideas, but begins to fall apart when presented in the framework of an open economy. Moreover, it tends to ignore reality.
There is a reason Chartalism has never gained even the slightest bit of acceptance in academia and has been relegated to the world of gentlemen who are trying to sell books. I'll let the reader decide for themselves what that reason is (since you all will anyway).
Are you suggesting it just as an informative poll, or that our budget actually be dictated by responses on tax returns?
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