jerseyhoya wrote:I really don't know if McConnell actually believes that or if it just sounds better out loud to him than the truth would. I also don't know if it's better if he's lying to protect a "bigger truth" that the tax cuts were on the whole good for the economy (just not for the deficit) or if he thinks there's a Laffer curve argument to be made here. I'll always prefer the lying to outright stupidity, but reasonable folks may disagree.

Economics is a complicated subject, one I know more about than the average American, but still feel completely overmatched if I try and discuss it in any detail. As far as my understanding of what the Republican argument should be, it is that the tax cuts reduced revenue, but by less than would otherwise be expected in a static model due to their spurring additional private sector growth, leading to more taxable income. Clearly a top tax bracket of 39.6% isn't the point at which government revenues are maximized; the federal government could raise its rates pretty substantially and see increased tax revenues and the deficit shrink.

I guess I don't get why the maximization of government revenue is held up as a good in all these arguments, and why the GOP doesn't attack that premise more regularly. Probably because it's easier to just pretend tax cuts=increased revenue, and figure regular people aren't smart enough to dig too deeply into that, which is probably true.

The problem with 2001 through today, economically, can be pretty simply put:

In early 2001, Bush enacted a Keynsian economic measure to combat the recession that was happening, but in reverse. Rather than increasing government spending, he enacted a whole bunch of tax cuts without cutting spending particularly. The net effect, in theory, is the same as holding taxes steady but increasing government spending during a recession: the government goes into deficit by returning money into the economy. The questions are about to whom it is returned, and to what effect.

Of course, Bush then also got involved in a big hike in spending - the Iraq war - so, in essence, he both lowered taxes and hiked spending, a sort-of double Keynsian solution.

Then, in 2008, we get our next recession. Problem is, taxes have never been re-raised to pre-2001 levels, and there is precious little room to cut them further without also severely cutting services. So, we go in the opposite direction, but towards the same effect: hold taxes where they are, but spend more. First we get TARP while Bush is in office, then we get Obama's economic stimulus package.

The problem, of course, is obvious: Keynes only ever recommended short-term deficit spending during the height of economic turbulence. The problem is that Bush's 2001 tax cuts, which were supposed to be phased in over nine years but were accelerated by further legislation in 2003, were not repealed by the time the next crisis hit. In essence, we were still running the economy like it was in recession from 2001 when the 2008 recession hit. With taxes already perilously low from the standpoint of maintaining government services, the only thing left to do was deficit spend and, if needs be, print money ("quantitative easing", ha ha) to try to stem the impending disaster.

What SHOULD we have learned from all of this? The Keynisan model works, especially in not-so-severe circumstances, like we had in 2001, but, for a variety of reasons, both policy-wise and politics-wise, increasing spending for a short period of time is preferable to lowering taxes for a short period of time.

Why? Politics-wise, the answer to that question is in precisely what has happened. Lowering taxes is easy. Raising them is hard. They haven't been raised since 2001 to pre-2001 levels because you basically need Democrats controlling the Senate, House, and White House, and you need all of those folks not to care much about retaining their jobs, particularly the guy in the White House. If Obama makes it to a second term - really iffy at best at the moment - look for him to push for a tax hike that the Republican-controlled House will not allow. once you cut that revenue that comes from taxes, in other words, it's hard as fuck to get it back.

Conversely, while no one likes to cut government spending, under the right circumstances, such measures can be sold to the public, under the rubric of being more "efficient" and not wasting "your money," i.e., all the shit George Bush said in 2001, and Americans, a generally conservative, government-hating, tax-loathing people will sympathize; this means even Dems can push for spending cuts and not lose their jobs, so long as they are from districts that aren't predominantly affected by said cuts.

Policy-wise, the answer to the question is more nuanced: when you cut taxes for the top brackets, that money does not "trickle down," as the supply siders so glibly put it all those years ago. If Government wants to increase its contribution to the economy over a defined short-term period in order to artificially inflate demand during a down-period for demand, it also needs the ability, and has the right, to target exactly where those funds will be applied in the immediate-term so that not only will they do the most good, but so that they also will be used with the maximum degree of efficiency. If, for example, the government wants to create 1,000 construction-sector jobs, for example, it might need to deficit-spend on a highway to the tune of $5M to create those jobs; a pretty cold calculus can be used to maximize the dollar-to-jobs created ratio. However, in order to create the same 1,000 jobs through tax cuts, how much money will the government have to give up? There is no way to tell, directly. Clearly, a lot of the money returned in cuts to top-tax-brackets is saved by the rich who receive it; therefore, it's more than likely that the dollar-to-jobs-created ratio achieved through tax cuts is significantly higher than it is for direct government spending, and at any event probably creates the wrong kinds of jobs: the people who need work are the people who are your "working poor," the people who live pay check to pay check. Jobs for these people simply are not created, in any direct (and therefore efficient) way by cuts to the top tax brackets.

Tax cuts, in plain English, cost more to create the same number of jobs as deficit spending creates. And, once enacted, tax cuts are difficult to repeal, poltiically; whereas you can almost always get a group of senators and representatives from a bunch of places to enthusiastically support cutting government "waste" in another place, the other place be damned.

The major lesson, here, then, is this: Republicans, because of their increasingly rightward bent that has brought to a fervor the ideological opposition of the most conservative wing of their party to the very notion of federal taxes, cannot be trusted with running the economy. Their knee-jerk reaction will always be to cut taxes when possible and oppose any hikes; so the tax revenue continue to shrink, shrink, shrink, to unsustainable levels. Unfortunately, they have the ear of the American people on this point (everyone wants something for nothing, right?), and so the political will to do anything to increase tax revenues is non-existent, but particularly under a Republican regime.

We need Democrats to preserve the tax revenue we currently have!

Werthless wrote:Let's play a game: Count the Fails.

Woman sentenced to life in prison

Michelle Lyn Taylor, 34, is attracting considerable debate. Taylor was convicted of lewdness with a minor under 14 after kissing a friend’s 13-year-old child, putting his hand on her breast, and offering to have sex with him. Her sentence? Life in prison.

She gets a longer sentence than if she killed him.

Watch the excruciating sentencing:
[youtube]http://www.youtube.com/watch?v=grygYI737ZQ&feature=player_embedded[/youtube]

It seems like even the judge was saying WTF. While what the woman did was reprehensible, it does not even remotely warrant a life sentence especially considering all of the mitigating factors. If I were her attorney I would be scouring every one of that prosecutor's cases to try to prove some kind of prosecutorial misconduct.

I found it pretty interesting as well that the prosecutor claims (according to the blog post) that the woman declined to plead guilty to avoid registering as a sex offender but that the defense claims they never made a plea offer. Who is lying?

I'd have to know more about the case, but I've got to say I'm all for throwing the book at sex offenders.

jerseyhoya wrote:I guess I don't get why the maximization of government revenue is held up as a good in all these arguments, and why the GOP doesn't attack that premise more regularly. Probably because it's easier to just pretend tax cuts=increased revenue, and figure regular people aren't smart enough to dig too deeply into that, which is probably true.

Nobody's saying "We have to maximize government revenue." They're saying that we have to start living within our collective means. Dimisishing revenue would have been fine were it the case that we also cut spending. But between the wars, Medicare Part D and other expenditures of choice, we--by which I mean the Bush administration and Republican Congresses--put ourselves in a hole that threatens to constrain growth over the long haul.

As I've written here before, I don't think tax hikes alone can or should get us there. It's tax reform/enforcement--which, yes, probably should include a new top bracket, but could mean effective cuts for most Americans while increasing revenue overall and cutting negative externalities (my favorite tax idea I read recently: since we want people to work and businesses to hire and want to reduce emissions, kill the payroll tax and replace it with a carbon tax)--defense reductions, entitlement adjustments/cuts and process reform.

dajafi wrote:

jerseyhoya wrote:I guess I don't get why the maximization of government revenue is held up as a good in all these arguments, and why the GOP doesn't attack that premise more regularly. Probably because it's easier to just pretend tax cuts=increased revenue, and figure regular people aren't smart enough to dig too deeply into that, which is probably true.

Nobody's saying "We have to maximize government revenue." They're saying that we have to start living within our collective means. Dimisishing revenue would have been fine were it the case that we also cut spending. But between the wars, Medicare Part D and other expenditures of choice, we--by which I mean the Bush administration and Republican Congresses--put ourselves in a hole that threatens to constrain growth over the long haul.

As I've written here before, I don't think tax hikes alone can or should get us there. It's tax reform/enforcement--which, yes, probably should include a new top bracket, but could mean effective cuts for most Americans while increasing revenue overall and cutting negative externalities (my favorite tax idea I read recently: since we want people to work and businesses to hire and want to reduce emissions, kill the payroll tax and replace it with a carbon tax)--defense reductions, entitlement adjustments/cuts and process reform.

I think fewer brackets (I'm thinking two, three at the most) and no exemptions save for those making less than $35,000. No loopholes.

A lefty version of a "flat tax." Something like:

17% from dollar $35,001 to dollar $250,000;
35% from dollar $250,001 and over;
17% from dollar $1 to dollar $250,000 if income exceeds $1M in a calendar year.

No exemptions.

Simpler is better, Republicans are right about that.

That's a very thorough post, mozart, and you're right on target with a number of points. The double Keynesian solution to the 2001 recession (combined with the monetary response) juiced the economy out of that recession, and pretty spectacularly too. But then you also point out that Keynesian policy prescriptions would work if only the policymakers were disciplined enough to stay the path, and raise taxes once the economy turned around. It's seems to me you've highlighted one of the practical problems of Keynes short-term policy recommendations to attack recessions; it requires policy philosopher-kings to know when to raise taxes and cut spending back to "normal" levels. Otherwise we may be left arguably worse off than if we hadnt cut taxes and raised spending to juice GDP.

What SHOULD we have learned from all of this? The Keynisan model works, especially in not-so-severe circumstances, like we had in 2001, but, for a variety of reasons, both policy-wise and politics-wise, increasing spending for a short period of time is preferable to lowering taxes for a short period of time.

I understand your point, that tax rates are more downward sticky than spending is upward sticky. And I don't mean to dispute your assertion that tax rates, once reduced, are then considered to be the "new normal" level. But I have a hard time understanding how you cannot see the same entrenchment in spending. The few large spending cuts I've seen have either involved A) slowing the growth rates of spending,which shouldnt even count as a spending cut or B) cutbacks made while reacting to an unsustainable fiscal deficit. Basically, I'm skeptical that your assertion is empirically true, but I'd be interested to hear the truth.

Lastly, your numbers for how much spending is required per job is optimistic. Why guess at the numbers when a numberof other peoplehave made educated guesses? (The last link includes a number of hyperlinks to BLS and Whitehouse releases)

The major lesson, here, then, is this: Republicans, because of their increasingly rightward bent that has brought to a fervor the ideological opposition of the most conservative wing of their party to the very notion of federal taxes, cannot be trusted with running the economy. Their knee-jerk reaction will always be to cut taxes when possible and oppose any hikes; so the tax revenue continue to shrink, shrink, shrink, to unsustainable levels.

Mozart, one last question for you... What amount of federal government revenues is unsustainable, below which we won't be able to operate?

mozartpc27 wrote:I think fewer brackets (I'm thinking two, three at the most) and no exemptions save for those making less than $35,000. No loopholes.

A lefty version of a "flat tax." Something like:

17% from dollar $35,001 to dollar $250,000;
35% from dollar $250,001 and over;
17% from dollar $1 to dollar $250,000 if income exceeds $1M in a calendar year.

No exemptions.

Simpler is better, Republicans are right about that.

Simpler is better politically, I agree. For policy? I'm not sure. What's the justification for taxing someone who makes $40k a year at the same last-dollar rate as someone who makes six times that? Ditto for someone who makes $300k a year and a billionaire. I'd put in a top rate at something like $5 million--a number above which, to get to one of the points you made above, you can guess that they're probably going to save additional dollars.

That said, if you're also positing reform of the payroll tax and implementation of an adjusted VAT (which would bang buyers of luxury goods, but not necessities), I could see something like what you're proposing.

mozartpc27 wrote:I'd have to know more about the case, but I've got to say I'm all for throwing the book at sex offenders.

As a father I am too but it seems a bit unbalanced to throw War and Peace at a woman who was drunk and/or high at the time of her incident (not excusing it at all) while a convicted murderer may only have to suffer Green Eggs and Ham. I am exaggerating a bit, obviously, but the Nevada law just seems like something that was not thought through.

Werthless wrote:I understand your point, that tax rates are more downward sticky than spending is upward sticky. And I don't mean to dispute your assertion that tax rates, once reduced, are then considered to be the "new normal" level. But I have a hard time understanding how you cannot see the same entrenchment in spending. The few large spending cuts I've seen have either involved A) slowing the growth rates of spending, or B) reacting to an unsustainable budget deficits. Basically, I'm skeptical that your assertion is empirically true, but I'd be interested to hear the truth.

Basically just quoting for emphasis and agreement--if we're going to be honest with ourselves, this seems an important truth to recognize, especially in consideration of how interest groups work to defend/entrench any new/increased expenditure. (Though did he actually make the assertion that spending levels are less sticky than tax rates?)

dajafi wrote:What's the justification for taxing someone who makes $40k a year at the same last-dollar rate as someone who makes half that?

Make twice as much money, pay twice as much tax. Is that really inherently unfair? Ask that question in a different time and age, and you'd get looked at very oddly. Numerous states and local governments also consider a flat tax rate to be fair. I feel like you should be the one to justify taking a higher percent.

dajafi wrote:

Werthless wrote:I understand your point, that tax rates are more downward sticky than spending is upward sticky. And I don't mean to dispute your assertion that tax rates, once reduced, are then considered to be the "new normal" level. But I have a hard time understanding how you cannot see the same entrenchment in spending. The few large spending cuts I've seen have either involved A) slowing the growth rates of spending, or B) reacting to an unsustainable budget deficits. Basically, I'm skeptical that your assertion is empirically true, but I'd be interested to hear the truth.

Basically just quoting for emphasis and agreement--if we're going to be honest with ourselves, this seems an important truth to recognize, especially in consideration of how interest groups work to defend/entrench any new/increased expenditure. (Though did he actually make the assertion that spending levels are less sticky than tax rates?)

That's the thesis of his post, explained in the paragraphs after "What SHOULD we have learned from all this..."

To sum up: The problem with Keynesian economics is regardless of its economic merit, politically it is easy in bad times to cut taxes and raise spending, but impossible to raise taxes and cut spending during periods of economic expansion.

Some spending, however, automatically decline during periods of economic expansion, as fewer people require things like unemployment, food stamps, and medicaid. That's probably somewhat offset by the need to spend more to recruit soldiers and hire other government workers.

Thanks for the kudos, Werthless.

In answer to this point:

Werthless wrote:Lastly, your numbers for how much spending is required per job is optimistic. Why guess at the numbers when a numberof other peoplehave made educated guesses? (The last link includes a number of hyperlinks to BLS and Whitehouse releases)

This was all my "economics lite" post where I threw out some made-up numbers to make a point; I am not an economist by profession, or even by hobby, just an informed outsider with a limited amount of time who didn't know where he could quickly get the real numbers. My point was simply that it seems obvious to even cursory, amateur examination that direct government spending on projects specifically geared toward generating not only jobs, but certain kinds of jobs, is going to be a cheaper way to bring targeted stimulus to the economy than broad, top-tax-bracket tax cuts whose "hope" is that they trickle down to the most afflicted areas of the private sector. All my reading in economics and policy over the years has verified this suspicion. In other words, whether it costs $5, $500, or $500,000 to create a job through government spending, the point is that, whatever the amount, it is cheaper to do it that way, on a per job basis, than to try to do it through top-tax-bracket cuts. I'll have to take the time to read the links you've provided and run some numbers to come up with a better, more reality-based projection.

In anwer to this question:

Werthless wrote:Mozart, one last question for you... What amount of federal government revenues is unsustainable, below which we won't be able to operate?

I can only say that there is no "magic" dollar figure at which taxes can no longer be cut. What I can say is that the way the government ordinarily does business is by compartmentalizing its budget, so that some things are funded even while others are being run by deficit spending (Social Security used to be an example of this). It is better, for a lot of reasons, IMHO, to leave funded things funded; so, if, in order to stimulate the economy, you've got to either cut taxes and thus un-fund once funded programs, or raise spending in other areas and leave funded programs as ring-fenced self-sufficient items, I think you go with the latter, if only because once you take something from funded to un-funded, you increase the cost of an already in-place, budgeted program because of the long-term costs that go up due to the borrowing needed to finance the budget gap created down the line.

And dajafi, yes, I was asserting that lower tax rates are stickier than higher spending. I realize it isn't easy to eliminate a spending program once enacted, but it is easier to cut its budget than it is to raise taxes from whatever the perceived "norm" is. Take highway work as an example. When a project is done, it's done; the government need not promise that just because we provided this set of jobs from year x to year y doesn't mean that we will immediately replace that project with a new one when the old one is completed. There are all kinds of short-term projects like that the government can fund over a one to two year period during the worst of a recession; that kind of spending is easier to see "cut," because it isn't so much "cut" as it is "finished" - a rare concept for many highway project in Philadelphia, I realize, but I swear in other places they become "finished."

Except mozart says the problem is not with Keynes' theories, the diffuculties of implementation, and how it overlooks long-term negative effects. No, the major lesson is that Republicans, because of their increasingly rightward bent that has brought to a fervor the ideological opposition of the most conservative wing of their party to the very notion of federal taxes, cannot be trusted with running the economy.

I feel like it's not the right lesson.

Werthless wrote:

dajafi wrote:What's the justification for taxing someone who makes $40k a year at the same last-dollar rate as someone who makes half that?

Make twice as much money, pay twice as much tax. Is that really inherently unfair? Ask that question in a different time and age, and you'd get looked at very oddly. Numerous states and local governments also consider a flat tax rate to be fair. I feel like you should be the one to justify taking a higher percent.

Is it really that hard to understand that the first 50K or so is more needed than the next 50K?

Throw in the regressive elements of sales tax and the sweet deals cap gains taxes get (which I'm fine with by the by) and there "needs" to be a bump on the higher brackets to re-establish tax rate equilibrium.

dajafi wrote:

mozartpc27 wrote:I think fewer brackets (I'm thinking two, three at the most) and no exemptions save for those making less than $35,000. No loopholes.

A lefty version of a "flat tax." Something like:

17% from dollar $35,001 to dollar $250,000;
35% from dollar $250,001 and over;
17% from dollar $1 to dollar $250,000 if income exceeds $1M in a calendar year.

No exemptions.

Simpler is better, Republicans are right about that.

Simpler is better politically, I agree. For policy? I'm not sure. What's the justification for taxing someone who makes $40k a year at the same last-dollar rate as someone who makes six times that? Ditto for someone who makes $300k a year and a billionaire. I'd put in a top rate at something like $5 million--a number above which, to get to one of the points you made above, you can guess that they're probably going to save additional dollars.

I could see adding a third bracket, and, to answer at least one of your points, notice that in the provisional scheme I just floated, all people someone making less than a million dollars are exempted from the first $35,000 of tax liability, but anyone making $1M and over is taxed for every dollar earned - so, in other words, someone making $300,000 gets, in essence, a $35,000 tax credit not extended to the "billionaire."

I think we must remember, even as lefties, that the point of a percentage, after all, is to get more money from people based on how much they earn. A percentage system is inherently fair; a straight flat tax of 17% has me pay $0.17 if I make a $1.00.

It's not evil in and of itself. Of course, I am sympathetic to - and even agree with - the argument that $0.17 to the person making $1 is a lot more important than, say, $170,000 to the person making $1,000,000. Therefore, there should be a floor before which you are not taxed, and probably a grade or two or three where "surplus" dollars are taxed at a higher rate: no one needs $10,000,000 annually to get by, with the possible exception of Allen Iverson.

However, the tax system has become such a bloated mess, and the systems for those looking to cheat it so sophisticated - enabled by the arcaneness of the rules - that the tax system no longer does what it was designed to do. We've all heard stories of millionaires who use fancy accounting and foreign bank accounts to pay pennies on the dollar of their tax liabilities. That's easy to do when there are 8 billion ways to write exemptions: you can keep auditors busy for YEARS trying to track just one person's tax form, if it is sufficiently complex.

A simple system is better because it makes it harder for rich people to use their fiduciary advantage to cheat by hiring an accountant or two and coming out ahead on the deal. If the tax code is simple, and there are no exemptions, it's harder to hide money to get around it. That means it will be easier and less labor-intensive for IRS agents to catch the cheats. Simplicity, therefore, should be the goal - not for its own sake, but for the sake of better enforcement of the tax code.

dajafi wrote:That said, if you're also positing reform of the payroll tax and implementation of an adjusted VAT (which would bang buyers of luxury goods, but not necessities), I could see something like what you're proposing.

I don't like VATs, as a rule; they punish poorer people.

Werthless wrote:

dajafi wrote:What's the justification for taxing someone who makes $40k a year at the same last-dollar rate as someone who makes half that?

Make twice as much money, pay twice as much tax. Is that really inherently unfair? Ask that question in a different time and age, and you'd get looked at very oddly. Numerous states and local governments also consider a flat tax rate to be fair.

You seem to have changed what I wrote there. Since Mozart's point was that no income is taxed until dollar 35,001, I'm not sure what you're asking.

If voters of certain states and localities choose a flat tax--and can manage their expenditures such to live within their means after making that choice--that's swell. I'm not sure I get the value of the "wisdom of certain crowds" argument, as it's pushing against a door I didn't close, but no matter.

Werthless wrote:I feel like you should be the one to justify taking a higher percent.

No offense, but our having an argument over the merits of progressive taxation seems like a particularly exquisite waste of time. You know "my" talking points and you've drawn your conclusions about their (lack of) merits. I know "yours" and likewise. I definitely have better things to do than act out this script, and I hope you do.

moz, I take the point about the fiduciary advantage of the well to do in potentially gaming the system. (And I say that as a guy who hasn't done my own taxes in probably eight years.) But I think you'd agree that there's probably a middle ground between the excessive complexity of the current tax code (itself a product of interest group politics, of course) and a system that sacrifices other values for simplicity.

mozartpc27 wrote:

dajafi wrote:That said, if you're also positing reform of the payroll tax and implementation of an adjusted VAT (which would bang buyers of luxury goods, but not necessities), I could see something like what you're proposing.

I don't like VATs, as a rule; they punish poorer people.

I'm far from an expert on this, but my understanding (per the parentheses in my original) is that a VAT can be structured in such a way that it isn't regressive in its effects. And if it in some sense replaced the payroll tax, which disincentivizes work, that still might be a net plus.

mozartpc27 wrote:My point was simply that it seems obvious to even cursory, amateur examination that direct government spending on projects specifically geared toward generating not only jobs, but certain kinds of jobs, is going to be a cheaper way to bring targeted stimulus to the economy than broad, top-tax-bracket tax cuts whose "hope" is that they trickle down to the most afflicted areas of the private sector. All my reading in economics and policy over the years has verified this suspicion. In other words, whether it costs $5, $500, or $500,000 to create a job through government spending, the point is that, whatever the amount, it is cheaper to do it that way, on a per job basis, than to try to do it through top-tax-bracket cuts.

You're right. When the goal is guarantee the creation of jobs, having the government create them directly is the cheapest way to guarantee it. Because trying to incentivize a private company to create a job, yes, it will help on the margin and create jobs. But plenty of jobs that would have been "created" in our fluid economy without the incentive will still cash in on the incentive. So it's hard to estimate exactly how many private jobs were directly created, and we will generally have a difficult time discerning which jobs were truly the ones on the margin. It gets even more difficult when one considers whether a job is truly created when the job was simply created 6 months ahead of the time when it ordinarily would have been created (ie. temporal shifting). If someone buys a car 6 months ahead of when they would have ordinarily, does that count as a cash-for-clunkers success story?

But are jobs the only policy measure we should use? I mean really, if it costs $500,000 to create a job (it doesn't cost this much, but it helps to crystallize the tradeoff), is that something we should be doing? Because that $500,000 either comes out of other citizens' pockets, or it comes out of other spending we could be doing. In both situations, there is a significant tradeoff. In my opinion, if a job costs too much to forcibly create, we should be using money in some other way to help the citizenry. Providing health care for unemployed, or job training for the unemployed, or yes, just letting the people keep more of their earned income, these are all probably better uses of money than spending X money per job if X is very large number. From an economics perspective, I can assert that savings (corporate savings in retained earnings, private savings in the form of bank deposits, and public savings) are the sources of investment. And if we fail to invest in our economy, or spend too much money on inefficient jobs, we'll find ourselves in a huge competitive hole in 20 years. You think China will spend $500,000 to create one construction job? European countries would. But I don't think we should.

Werthless wrote:Mozart, one last question for you... What amount of federal government revenues is unsustainable, below which we won't be able to operate?

I can only say that there is no "magic" dollar figure at which taxes can no longer be cut. What I can say is that the way the government ordinarily does business is by compartmentalizing its budget, so that some things are funded even while others are being run by deficit spending (Social Security used to be an example of this). It is better, for a lot of reasons, IMHO, to leave funded things funded; so, if, in order to stimulate the economy, you've got to either cut taxes and thus un-fund once funded programs, or raise spending in other areas and leave funded programs as ring-fenced self-sufficient items, I think you go with the latter, if only because once you take something from funded to un-funded, you increase the cost of an already in-place, budgeted program because of the long-term costs that go up due to the borrowing needed to finance the budget gap created down the line.

And dajafi, yes, I was asserting that lower tax rates are stickier than higher spending. I realize it isn't easy to eliminate a spending program once enacted, but it is easier to cut its budget than it is to raise taxes from whatever the perceived "norm" is. Take highway work as an example. When a project is done, it's done; the government need not promise that just because we provided this set of jobs from year x to year y doesn't mean that we will immediately replace that project with a new one when the old one is completed. There are all kinds of short-term projects like that the government can fund over a one to two year period during the worst of a recession; that kind of spending is easier to see "cut," because it isn't so much "cut" as it is "finished" - a rare concept for many highway project in Philadelphia, I realize, but I swear in other places they become "finished."

I'll just disagree with your general point, and say that even temporary types of spending are not more easily cut, and I'll leave it at that. But my question was more pointed at the causes of the structural deficit. We've had a period of time where steady-state revenue and spending has been around 18-20% of GDP. It's been higher in the past (WWII) and lower in the past (everything pre-16th amendment). We'll never return to less than 15% of GDP because, as I would put it, the people have grown accustomed to higher spending. It would be politically impossible, in this climate, to cut spending to that degree. So the question that we should be asking ourselves is this: What is the best way to raise 18% of the GDP in taxes? A business-friendly tax structure would do well to attract multinational companies, which could be a huge source of long-term growth and employment. A VAT has huge compliance fees. Our business tax rates are at or near the highest in the world (see below, based on 2005). If we want to create jobs, make it easier and cheaper for businesses to operate here.

dajafi wrote:

Werthless wrote:

dajafi wrote:What's the justification for taxing someone who makes $40k a year at the same last-dollar rate as someone who makes half that?

Make twice as much money, pay twice as much tax. Is that really inherently unfair? Ask that question in a different time and age, and you'd get looked at very oddly. Numerous states and local governments also consider a flat tax rate to be fair.

You seem to have changed what I wrote there. Since Mozart's point was that no income is taxed until dollar 35,001, I'm not sure what you're asking.

Half or double is just easier to write than 6 times. I'm just pointing out that I don't see how a flat tax is intrinsically more unfair than a progressive system. I suppose I should have just said it in those words. When you asked for a justification, I felt that you were arguing from the status quo, as if that makes it morally correct. Whereas I believe that the duties of citizenry (voting, taxes) should be equally applied where possible.

I agree, that this line of argument is not worth following.