Hards facts and Simple Math Equal Tough Choices and Small Government

[Demo24]

If you understood how averages worked, or what no deductions meant, then we'd be on the same page. What makes an item "untaxable?" Tax codes. Since we're talking about changing tax codes, it seems appropriate to use the system I proposed rather than making up a different one if you want to get my same numbers. The reason this problem exists seems to be the inability of the average person (or congressperson) to see beyond the current mess.

So you want to tax someone for an input into a retirement fund and then tax them again when they take it out as their income. You need to go read the glossary section of the BEA, the personal income number includes more things than just wages paid.

I'm fully aware of averages and what deductions meant, don't be stupid. You took a number, took 20% of it and came up with basically the same amount of revenue we have right now and called it a new found brilliant idea.

 

[CycloWizard]

I take it you're tlking about CRA loans. That's beyond ignorant- it's willful blindness & misattribution.

http://www.ourfuture.org/makingsense/factsheet/community-reinvestment-act

http://www.cepr.net/index.php/blogs...l-spreads-some-lies-about-the-economic-crisis

Democrats? Democrats are guilty of being naive & half blind, particularly when dealing with Wall St & their Republican allies. They're not the perps, not the driving ideology of the whole smaller govt deregulated finance sector to cut red tape so you can buy the house of your dreams using a teaser rate agency ARM, at all. Democrats are the guys who realized that the worst neighborhoods are all rentals, owned by absentee landlords, & that homeownership improves neighborhoods. They set out to encourage that with the CRA- have banks lend to people who could afford to live there, who had jobs & decent credit, who'd often pay less every month to buy a house in their neighborhood, mostly minority neighborhoods, rather than to rent one, if somebody would lend 'em the money. It's been going on for 30 years at a fairly constant rate, unlike ARM's, whose ascendancy delivered the collapse we're experiencing today.

Chanting "they're Just as Bad! They're Just as Bad!" doesn't make it so, no matter how much you want it to be that way...

It's unfortunate that having lenders in a halfway house inconveniences people who deserve better treatment. I mean that. OTOH, if the govt hadn't put 'em through rehab & sent 'em there, you wouldn't have anybody to borrow from, at all, but you'd still be paying the balance on your former dwelling, if only through the bankruptcy trustee... The only reason they're still in existence is because soft headed liberals knew they had mouths to feed & obligations to fulfill, lots of 'em.

As an aside to the central topic, you may be able to rent the house you've contracted to buy during the interim, if it's vacant. Too many variables to say, but that may be an option. If you have the right references, you may be able to get a house-sitting job, live rent free until the deal closes. Your new employer may be able to assist you. Maybe more possibilities, dunno.

Your "soft-headed liberals" are costing me a house sale and purchase both because of a knee-jerk response that doesn't address the fundamental issues. These issues exist because everyone ought to be able to be able to buy a house because they want to, not because they can actually afford it and have demonstrated that they can pay for it (FHA loans). The price I pay for my new house will be artificially inflated by MHA (the thread I supposedly got owned in before) and other chicanery. All of the problems arising from these programs are easily foreseeable by anyone who believes in causality, the fundamental underpinning of all science which liberals claim to champion. They are the "unforeseen" consequences of feel-good legislation meant to address all of the malfeasance of the private sector.

While there is more than enough malfeasance, adding more hoops for consumers to jump through doesn't address the problem. Making it more difficult to buy or sell a home does not help equalize housing prices or decrease unemployment, as both labor and real estate become less liquid. The reason this approach is taken is to change the appearance of these markets not by changing the equilibrium value, but by slowing the transient period. Thus, as people pump more and more money in, thinking we're at equilibrium, they are going to be in even worse shape when things really do bottom out.

 

[CycloWizard]

So you want to tax someone for an input into a retirement fund and then tax them again when they take it out as their income. You need to go read the glossary section of the BEA, the personal income number includes more things than just wages paid.

I'm fully aware of averages and what deductions meant, don't be stupid. You took a number, took 20% of it and came up with basically the same amount of revenue we have right now and called it a new found brilliant idea.

I didn't say it was brilliant - I said it was simple and would work. 20% was a number pulled out of my ass that could easily be adjusted whatever the numbers happen to be. I grabbed a number and gave the source. What is the real number - $8.4 billion? You already have it somewhere apparently, so if I assume you know middle school algebra, you should be able to tell us the rate needed to reach the same level of revenue using my system.

edit: Not that I doubt your ability to do basic math, but... If the true taxable value is $8.23 trillion and the required taxation rate goes to 34.87% to raise the same revenue, this simple plan still gives the following results for rates:

In other words, it's better for everyone except the guys with really high income, and they end up the same as before (except before they were making their money from capital gains, taxed at a lower rate, minus crazy deductions, right?). So, with all the loopholes gone and no more 15% capital gains rate, we would see higher revenues by a lot using this method.

edit #2: Here are the actual total tax rates for a given income level using the same assumptions as before.


Raw Income Current Proposed
$5,000.00 6.2% 0.0%
$10,000.00 10.5% 0.0%
$14,200.00 12.2% 0.0%
$18,077.00 14.1% 0.0%
$30,000.00 16.9% 13.9%
$40,200.00 18.0% 19.2%
$50,000.00 23.2% 22.3%
$60,000.00 24.5% 24.4%
$70,000.00 25.5% 25.9%
$80,000.00 26.2% 27.0%
$89,300.00 26.7% 27.8%
$100,000.00 36.1% 28.6%
$250,000.00 42.2% 32.3%
$500,000.00 49.6% 33.6%
$750,000.00 44.7% 34.0%
$1,000,000.00 42.3% 34.2%
$5,000,000.00 36.5% 34.7%
$10,000,000.00 35.7% 34.8%
$50,000,000.00 35.1% 34.9%
$100,000,000.00 35.1% 34.9%
$500,000,000.00 35.0% 34.9%
$1,000,000,000.00 35.0% 34.9%

 

[Demo24]

These issues exist because everyone ought to be able to be able to buy a house because they want to, not because they can actually afford it and have demonstrated that they can pay for it (FHA loans).

, ideology like that is what got us into trouble in the first place. "oh..thats expensive, I'll just find a way to lease xxx for 60 months to make it affordable". Simple measures to be put in place to prevent people from racking up huge amounts of debt until they can no longer pay for things, especially if a interest rate hike occurs, is sadly necessary.

I didn't say it was brilliant - I said it was simple and would work. 20% was a number pulled out of my ass that could easily be adjusted whatever the numbers happen to be. I grabbed a number and gave the source. What is the real number - $8.4 billion? You already have it somewhere apparently, so if I assume you know middle school algebra, you should be able to tell us the rate needed to reach the same level of revenue using my system.

I was under the impression you had worked this all out. However to get to your 19k figure you'll need a percent of 35. Only the top portion in today's system pays that.



Edit: your system now works, but really all you had to say was up the capital gains tax, put it at 20% or so instead of the 12 or 15 it is now. Put that too high and normal people won't want to invest either, which doesn't help anyone.

 

[CycloWizard]

, ideology like that is what got us into trouble in the first place. "oh..thats expensive, I'll just find a way to lease xxx for 60 months to make it affordable". Simple measures to be put in place to prevent people from racking up huge amounts of debt until they can no longer pay for things, especially if a interest rate hike occurs, is sadly necessary.

So the solution is to sell a house to people who have no down payment or have government offer loans to people who can't get them from a bank because they don't have good enough credit? How does that make sense, exactly?

I was under the impression you had worked this all out. However to get to your 19k figure you'll need a percent of 35. Only the top portion in today's system pays that.

See the edits above. Everyone except the most wealthy still pay a lower overall rate under my system.

 

[Demo24]

So the solution is to sell a house to people who have no down payment or have government offer loans to people who can't get them from a bank because they don't have good enough credit? How does that make sense, exactly?

See the edits above. Everyone except the most wealthy still pay a lower overall rate under my system.

No I didn't say that. Not everyone should buy a house, they should live within their means. Having bad credit is in a lot of cases people living outside their means and getting hit with defaults.

 

[Engineer]

I didn't say it was brilliant - I said it was simple and would work. 20% was a number pulled out of my ass that could easily be adjusted whatever the numbers happen to be. I grabbed a number and gave the source. What is the real number - $8.4 billion? You already have it somewhere apparently, so if I assume you know middle school algebra, you should be able to tell us the rate needed to reach the same level of revenue using my system.

edit: Not that I doubt your ability to do basic math, but... If the true taxable value is $8.23 trillion and the required taxation rate goes to 34.87% to raise the same revenue, this simple plan still gives the following results for rates:

In other words, it's better for everyone except the guys with really high income, and they end up the same as before (except before they were making their money from capital gains, taxed at a lower rate, minus crazy deductions, right?). So, with all the loopholes gone and no more 15% capital gains rate, we would see higher revenues by a lot using this method.

edit #2: Here are the actual total tax rates for a given income level using the same assumptions as before.


Raw Income Current Proposed
$5,000.00 6.2% 0.0%
$10,000.00 10.5% 0.0%
$14,200.00 12.2% 0.0%
$18,077.00 14.1% 0.0%
$30,000.00 16.9% 13.9%
$40,200.00 18.0% 19.2%
$50,000.00 23.2% 22.3%
$60,000.00 24.5% 24.4%
$70,000.00 25.5% 25.9%
$80,000.00 26.2% 27.0%
$89,300.00 26.7% 27.8%
$100,000.00 36.1% 28.6%
$250,000.00 42.2% 32.3%
$500,000.00 49.6% 33.6%
$750,000.00 44.7% 34.0%
$1,000,000.00 42.3% 34.2%
$5,000,000.00 36.5% 34.7%
$10,000,000.00 35.7% 34.8%
$50,000,000.00 35.1% 34.9%
$100,000,000.00 35.1% 34.9%
$500,000,000.00 35.0% 34.9%
$1,000,000,000.00 35.0% 34.9%

Ah, but under your revised plan, my ass would now be kicked.

Old plan: $12,530 including 6.2% FICA after standard deduction, 4 person exemption, 1 child tax credit and $12,200 of retirement deferrals.

New plan at 34.87%: I now pay 26823.05 after the only deduction of $18,077.

Well, that's not as nice now, is it?

Damnit, I knew it was too good to be true!

 

[Darwin333]

I take it you're tlking about CRA loans. That's beyond ignorant- it's willful blindness & misattribution.

http://www.ourfuture.org/makingsense/factsheet/community-reinvestment-act

http://www.cepr.net/index.php/blogs...l-spreads-some-lies-about-the-economic-crisis

Democrats? Democrats are guilty of being naive & half blind, particularly when dealing with Wall St & their Republican allies. They're not the perps, not the driving ideology of the whole smaller govt deregulated finance sector to cut red tape so you can buy the house of your dreams using a teaser rate agency ARM, at all. Democrats are the guys who realized that the worst neighborhoods are all rentals, owned by absentee landlords, & that homeownership improves neighborhoods. They set out to encourage that with the CRA- have banks lend to people who could afford to live there, who had jobs & decent credit, who'd often pay less every month to buy a house in their neighborhood, mostly minority neighborhoods, rather than to rent one, if somebody would lend 'em the money. It's been going on for 30 years at a fairly constant rate, unlike ARM's, whose ascendancy delivered the collapse we're experiencing today.

Chanting "they're Just as Bad! They're Just as Bad!" doesn't make it so, no matter how much you want it to be that way...

It's unfortunate that having lenders in a halfway house inconveniences people who deserve better treatment. I mean that. OTOH, if the govt hadn't put 'em through rehab & sent 'em there, you wouldn't have anybody to borrow from, at all, but you'd still be paying the balance on your former dwelling, if only through the bankruptcy trustee... The only reason they're still in existence is because soft headed liberals knew they had mouths to feed & obligations to fulfill, lots of 'em.

As an aside to the central topic, you may be able to rent the house you've contracted to buy during the interim, if it's vacant. Too many variables to say, but that may be an option. If you have the right references, you may be able to get a house-sitting job, live rent free until the deal closes. Your new employer may be able to assist you. Maybe more possibilities, dunno.

The repeal of Glass-Steagall is the single largest contributing factor to why we are in the mess we are today. Don't get me wrong, there are a ton of other things that helped as well but without that single piece of legislation we would not be having this discussion.

 

[CycloWizard]

No I didn't say that. Not everyone should buy a house, they should live within their means. Having bad credit is in a lot of cases people living outside their means and getting hit with defaults.

Agreed. Government programs are currently encouraging the opposite, which is what I spoke out against.

 

[CycloWizard]

Ah, but under your revised plan, my ass would now be kicked.

Old plan: $12,530 including 6.2% FICA after standard deduction, 4 person exemption, 1 child tax credit and $12,200 of retirement deferrals.

New plan at 34.87%: I now pay 26823.05.

Well, that's not as nice now, is it?

Damnit, I knew it was too good to be true!

If I had the actual data for income for individual households, I'm sure the percentage would go down, but not sure how far of course. No free lunch. The government is currently taking $2.16 trillion per year from $8.23 trillion in personal income (according to Demo), or 26% of all personal income. I may be neglecting corporate contributions or something else, but I don't really care anymore - point is, there's a simpler way to achieve the same result. I can list a hundred similar plans that maintain marginal rates, use a simple formula to compute a continuously variable rate, or any number of other things that will be simpler, easier, and more effective than the currently-broken system. I just wrote the simplest before because it was the simplest.

 

[Engineer]

If I had the actual data for income for individual households, I'm sure the percentage would go down, but not sure how far of course. No free lunch. The government is currently taking $2.16 trillion per year from $8.23 trillion in personal income (according to Demo), or 26% of all personal income. I may be neglecting corporate contributions or something else, but I don't really care anymore - point is, there's a simpler way to achieve the same result. I can list a hundred similar plans that maintain marginal rates, use a simple formula to compute a continuously variable rate, or any number of other things that will be simpler, easier, and more effective than the currently-broken system. I just wrote the simplest before because it was the simplest.

Point taken but in general, it's very easy to skyrocket someone's tax rate very easily.

Oh, and from your links, $1.764 Trillion is raised from individuals on SS and general income taxes so the rate would be lower unless you are in favor or replacing the corporate and other income taxes and throwing them on the shoulders of the workers!

 

[CycloWizard]

Point taken but in general, it's very easy to skyrocket someone's tax rate very easily.

Oh, and from your links, $1.764 Trillion is raised from individuals on SS and general income taxes so the rate would be lower unless you are in favor or replacing the corporate and other income taxes and throwing them on the shoulders of the workers!

$1.764 trillion from $8.23 trillion can be had at the low, low price of 28%.

 

[Fern]

Outstanding, someone who wants to discuss actual numbers instead of spouting the same bullshit ideology that their party tells them to.

If you don't mind I would like to add a few more numbers to the mix that I think are relevant to the discussion.

Total Fed expenditures FY2011: $3.82T (approx 25.5% GDP)
Total Fed revenue FY 2011: $2.173T (approx. 14.5%GDP)
Total GDP FY 2011: $150T


Historically the Feds have been able to consistently extract approx 18-19% of GDP in revenue. Lets assume that we can snap our fingers and magically get back to that historical average but before we I would also like to point out that we have never been able to sustain 20%+ revenue/GDP (3 years during WWII was the only time in recent history we could even get consecutive years). So our "hard cap" is 20% regardless.

Revenue based on 19% of GDP FY2011: 2.85T

So that is the absolute most that we can reasonably expect out of any and all tax increases. We might get another half percent or so but it doesn't make a spectacular difference. So after raising taxes to their historical average and close to historical max we are still roughly $1T in the hole for FY2011.

That means that after we raise taxes to their historical norms and very close to the historical max we still must cut spending by almost 25% in order to get to a balanced budget.

To add insult to injury, GDP must contract as the .gov removes the deficit spending which makes the numbers even worse but for the sake of this discussion it is probably best to deal with the raw numbers.

Good post IMO.

Demonstrates from another angle/perspective that serious cuts, tough choices, are going to have to be made. Either that or a massive explosion in our GDP, which seems terribly unlikely (if not impossible).

I'd add that pulling that additional tax money ($700 billion) out of the private sector will also decrease demand thus further harming our (and China's ) economy.

$1 trillion less government spending plus $700 billion less in private sector spending seems suicidal to me.

Bottom line: There are no 'good choices', only tough ones (when they're eventually forced on us).

Fern

 

[werepossum]

The repeal of Glass-Steagall is the single largest contributing factor to why we are in the mess we are today. Don't get me wrong, there are a ton of other things that helped as well but without that single piece of legislation we would not be having this discussion.

Agreed. With that wall of separation, the mortgage crisis would not have grown so quickly (less money chasing the derivatives) and would have taken down only one sector of our banking. It would have been painful, but nothing at all like what we suffered, and probably over by now.

And it's still not back in place, because megabanks need its dissolution to be internationally competitive. (Which is apparently code for free taxpayers' money.)

 

[werepossum]

Good post IMO.

Demonstrates from another angle/perspective that serious cuts, tough choices, are going to have to be made. Either that or a massive explosion in our GDP, which seems terribly unlikely (if not impossible).

I'd add that pulling that additional tax money ($700 billion) out of the private sector will also decrease demand thus further harming our (and China's ) economy.

$1 trillion less government spending plus $700 billion less in private sector spending seems suicidal to me.

Bottom line: There are no 'good choices', only tough ones (when they're eventually forced on us).

Fern

This is true. One thing though - that extra $700 billion may hit China proportionally more than us, depending on whether people cut back more on imported Chinese goods or on homegrown things like housing. If we cut our import-export deficit by several hundred billion, that would have good as well as bad effects. Of course, it could also go the other way as taxpayers, being more squeezed, can't afford and/or justify spending the extra on American-made goods and proportionally step up Chinese goods consumption.

 

[Infohawk]

The rich do NOT transfer wealth to themselves. The poor and middle class GIVES them their wealth in return for services.

Not really. Don't confuse upper middle class with the rich. Doctors, lawyers, and engineers (who these days aren't really rich) perform services, but after that it's about investing capital. (And doctors and lawyers benefit from anti-competitive protections that keep their services artificially pricey.)

 

[piasabird]

Rich people can leave. Can you?

Just build a few more American Automobiles, but build them in the USA with no more foreign suppliers. Just cut down on import numbers of foreign cars.

Just round up all the illegals working for cleaning companies, in Hotels, In restraunts, etc and kick people off of unemployment. People can take the lousy jobs or starve.

 

[CycloWizard]

Rich people can leave. Can you?

Just build a few more American Automobiles, but build them in the USA with no more foreign suppliers. Just cut down on import numbers of foreign cars.

Just round up all the illegals working for cleaning companies, in Hotels, In restraunts, etc and kick people off of unemployment. People can take the lousy jobs or starve.

That requires enforcing existing laws rather than passing new ones. Current laws are not enforced because it allows passing new, more restrictive laws, thereby giving the government more power. Once they have this power, they can choose to enforce all of them and run things however they choose.

 

[MooseNSquirrel]

The chart is bogus.

Here is what the Washington Post says:
http://www.washingtonpost.com/blogs...e-bush-tax-cuts/2011/05/09/AFxTFtbG_blog.html
Over the 10-year period, the overall size of the tax cut dropped about 5 percent, or $65 billion, to $1.285 trillion. Some people might call that a rounding error in the context of a ten-year federal budget.

So $128 billion a year.

As per usual, you are confused. That chart has nothing to do with what the WAPO has to say.

But I guess according to you cutting taxes while increasing the deficit over an 8 year period was sound fiscal policy?