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12 Responses

  1. October 17, 2011 at 12:33 pm |

    Larry,

    Unfortunately, you’ve made some very large mistakes here.

    If the 999 Plan is revenue neutral, and taxes are cut for businesses and the wealthy, then some other class of citizens must be paying a lot more taxes.

    That’s not necessarily true. Only people who use static scoring come to that conclusion (which is a model that biases toward higher tax rates). Lowering taxes can actually drive an increase in revenue to the Federal government for many reasons, a few of which being less evasion, lower unemployment and an increased tax base.

    Claiming that lower taxes for one group shifts the burden to another assumes that all other factors in revenue collection remain stagnant, which is an impossible assumption to make.

    Did you also happen to factor in that illegal aliens, drug dealers, and pimps will be paying taxes under 999; three groups of many more who currently don’t pay any taxes into the system? Claiming the poor will take the hit is a nice appeal to emotion, but lacks factual basis.

    Middle class RETIREES will be devastated by this “fair” tax plan. For those who consume more than they earn–think retirees living off savings–the national sales tax will create a huge tax burden where none existed before.

    This is also untrue. In fact, they pay more of a burden under the current system. The average price of every product they buy in retirement is inflated 22% by embedded taxes. 999 simply replaces invisible embedded taxes with a visible tax. Embedded taxes will drop and be replaced with the 9%. Retirees will suffer no additional burden in this regard.

    Their savings have already been taxed when originally earned under the income tax, and now the sales tax would tax the same earnings again when consumed!

    If they saved in a retirement vehicle, their income saved was not taxed. This is false. Let’s use the example of an IRA: the money they set aside in the IRA was never taxed. And under 999, when they withdraw it, it still won’t be taxed. I don’t see how this hammers retirees. Not to mention that when they spend the money, the price of the product they buy will have an embedded tax far less than the current 22%.

    Those retirees who scrimped and saved during their careers to fund retirement rather than buying expensive cars and vacations will find themselves forced back into the work force to fund the shortfall.

    Yet another meaningless and blatant appeal to emotion.

    Advocates of the 999 Plan will argue that because the corporate income tax is also reduced to 9%, corporations will reduce prices as embedded taxes are lowered. But pricing depends on many factors, and no one can predict the impact on any family’s budget based simply on a possible drop in embedded taxes. First, the tax reduction only applies to profits, and profit margins vary across products and industries. Profits may be 10% or less than price, so reductions in income tax rates will have far less impact on price than a direct sales tax.

    Profit margin is 10% or less in many industries but a product goes through multiple channels of 10% margin before it gets to the consumer. The accepted average amount of embedded taxes in any good is 22%, not 10% as you propose.

    Corporations will not necessarily pass along tax savings to customers, and the law cannot require it.

    As soon as one company lowers the price, the others will follow suit. You think WalMart, who competes with thousands of different companies across many industries isn’t going to pass on the reduction? In just a few months, through competitive market forces, we will experience a total price reset that negates any 9% tax.

    Keep in mind that all of the “999 Debunked” articles are based on a static analysis and not a dynamic analysis. For decades it has been shown (through real world results compared to the static analysis) that static modeling is inherently flawed. The only way to truly and effectively analyze economic ideas is through dynamic scoring. Unfortunately, static scoring is biased toward higher tax rates and thus people who support higher taxes prop up static scoring as legitimate when, in fact, it’s not.

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  2. October 17, 2011 at 3:46 pm |

    Larry,

    Both of our arguments are speculative. Unfortunately, only one of them is realistically speculative.

    Your argument speculates that every other factor BESIDES the tax rate will remain the same: Consumer behavior, corporate behavior, GDP, unemployment, compliance costs, etc. And it speculates that the market is inefficient and competition isn’t a large influencer on economic activity.

    My argument speculates the opposite: that all of those factors will change.

    Which is the more probable outcome?

    (1) wealthy taxpayers will pay a lot less tax under the 999 Plan, and (2) poor and middle class citizens, many of them retirees, will pay more direct taxes under the 999 Plan.

    1. The wealthy paying less than they do now is not a pro or con of the plan unless you’re a class warfare strategist or think taxation is zero sum. What’s your prerogative for making that an argument other than appealing to emotion?

    2. I’ve already debunked how retirees will pay more under the plan. They’ll pay more on paper, but they’ll pay less in reality. This is because they’ll be paying a 9% VISIBLE tax instead of a 22% INVISIBLE tax. If you are truly concerned about retirees, you’d be lobbying for 999. If you were concerned only with protecting the status quo, you’d falsely argue that retirees will “pay more” under 999. Which side do you choose to be on?

    Also, not every business is subject to corporate tax rates (sole proprietorships, partnerships and professionals), so even if embedded tax reductions were perfectly matched by price reductions, many products and services purchased by consumers would be unaffected (or less affected, depending on the embedded taxes of their inputs).

    Which brings us back to your “the rich paying less is bad” theory. If a small business owner operates an LLC and the taxes pass through and he makes $250k a year, he’s in a much higher tax bracket than a 9% bracket. Those are “costs” that still get passed on in the form of lower wages or embedded in higher prices.

    Guess what? Under 999 his tax burden is not so high and he is able to drop prices, raise wages, or hire more workers: all bonuses for the entire population.

    Lastly, ALL businesses pay payroll taxes for all employees. Those are embedded regardless of whether or not you pay corporate taxes. So pretending that some prices won’t be effected by 999 because some businesses aren’t affected by 999 is not correct. Every business is impacted by 999.

    The benefit of price reductions will be under the control of business interests who will have every incentive to NOT pass along price reductions until forced by competition.

    Which in reality, happens in about 30 seconds. Gigantic corporates, like Wal Mart, who thrive on offering the lowest price will lead the pack. Competitive market forces are unstoppable. Assuming business owners can just not change the price assumes that business owners have control over the price, which is not correct. The price is set by the market, not the “business interests” as you put it.

    This is ESPECIALLY true for the commodity items that people keep demagoguing saying “Milk will be 18% more expensive”. It won’t be. Market pressures influence commodity items in a heartbeat. If you’re talking about an Apple Macbook Pro, yes, that price may take much longer to come down or it may never come down because Apple has done such a great job of positioning their brand. But that’s where 999’s no tax on used items policy comes in so handy. Buy a used Macbook Pro and pay no tax. Done.

    Please reconsider your notions. Read “Basic Economics” by Thomas Sowell so you can understand how complex the reality is and how absolutely efficient markets actually are.

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  3. October 17, 2011 at 5:37 pm |

    Larry,

    You’re clearly avoiding the debate now. But I’ll bite:

    The economy did just fine under the present system, with higher marginal tax rates for the wealthy, in the Clinton years, among other boom periods.

    The Clinton boom had nothing to do with tax rates and all to do with the dot com tech growth explosion.

    Defending this system is not class warfare.

    It absolutely is. You’re defending a system where the top 10% of wage earners pay 70% of the tax burden and the bottom 50% pay 3%. It’s an anti-wealth, anti-growth, anti-success system. And you have the nerve to say the wealthy don’t pay their “fair share.” What a scam.

    Introducing a new system with clear benefits for the rich and speculative (maybe even unlikely) benefits for the middle class and poor is continued class warfare waged by the privileged class.

    You’re supporting keeping a system that only benefits those who pay nothing. The alternative option (999) benefits everyone by making the tax code more transparent and fair, replacing a system where the government picks winners and losers based on nothing but lobbyist money and votes and levels the playing field by discarding decades of preferential treatment for the most influential.

    The 1% enriched itself with the Bush tax cuts and led the entire country into an economic disaster while widening the gap between the rich and the rest.

    And now you show your true colors: wealth envy. And your history is wrong. The government altered the playing field and banks took advantage of it. You should be protesting the government, not the banks. They did exactly what the government (Democrats, by the way) incentivized them to do. That’s why we need to protect our system of Capitalism from becoming a system of Corporatism. Some of us learned the lesson and some of us (you) are still misplacing blame.

    You want to recite Sowell and efficient markets to explain the real estate bubble, monopolies and cartels?

    Yes. Because there has never been a monopoly in the United States that didn’t form without the help of government. If you can name one, I’ll be impressed.

    Markets lose efficiency when government involves itself, which has been the point of small government activists from day one. The housing bubble bust was DIRECTLY caused by government intervention in the market. You think the government relieving banks of the risk of high risk loans had nothing to do with the bust? You’re comical.

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  4. October 17, 2011 at 7:31 pm |

    Come on Larry, let’s be real here.

    The imbalance in income tax allocation results from the imbalance in income.

    It’s not the amount that we’re disputing. The wealthier should pay a higher dollar amount because they’re taxed on more income. But that’s not where the status quo stops. The biggest imbalance is due to the progressive nature of the current income tax code. Paying more dollars is fair if the percentage is the same. Paying a higher percentage than someone else is not fair, no matter how you slice it.

    No, the inventor of the better toilet bowl cleaner should not control unlimited wealth while children go without food.

    This is unrealistic. Children will always go without food somewhere. There is no fix for poverty. However, the greatest hope to end the MAJORITY of poverty lies in the free market system that you oppose. The progressive, statist ideals you support have resulted in more deaths and oppression than all the world’s wars combined.

    Besides, even Communist systems have a severe unbalance of wealth. The leaders of Communist and Socialist countries live in mansions while the people live in shacks. No system is perfect; Capitalism is simply the best possible system.

    I’m not saying “a plasma tv in every house!” but a decent breakfast and health care would be nice.

    Then you have no principles because your belief requires the slavery of another human being. Who should provide the health care for less profit than they would like? Who are you going to economically enslave to garner that outcome?

    Food isn’t free, so who are you going to economically enslave to feed every human being? Your answer is to pillage the wealth of others. That’s not a system I want to be a part of. Your solution is just as disgusting as the situation you’re trying to cure. The only viable solution is to give charity (not by force) to those in bad situations and provide them optimal OPPORTUNITIES for them to escape it. The free market does that. Socialism does not.

    The middle class and poor benefit from lack of transparency?

    Nobody benefits from a lack of transparency except government. 999 is transparent. The current tax code is not.

    It’s more fair to impose a regressive tax than a progressive one?

    A flat tax is not regressive or progressive. Hence the appeal.

    The government unfairly “picks” winners and losers by adding progressivity to the tax code?

    I was referring to the loopholes and deductions for certain industries over others. Why is the majority of products now made with the chemical “High Fructose Corn Syrup” instead of real sugar? Because the government subsidizes the corn industry making it cheaper to use than real sugar. The poor, who can’t afford higher quality products made with real ingredients suffer more under this system. In fact, the poor suffer under the weight of thousands of well-meaning government policies that your party has instituted over the last few decades.

    The wealthy need the playing field leveled against those influential poor folks who live in squalor and can’t feed and educate their children?

    Playing fields aren’t leveled “for” or “against” anyone. Thus the term, “level.” Are you feeling okay?

    No wealth envy here, I’m just in favor of a fair distribution of it.

    The fact that you use the term “distribution” is menacing. No freedom exists where private property is “distributed.”

    Criminally negligent corporate risk management by the big banks is the biggest, followed closely by criminally reckless loans made by small mortgage brokers. Without the careless and reckless behavior, there is no crisis.

    And why didn’t that recklessness happen in decades prior? Why did banks suddenly have a logic lapse and start making loans to people who couldn’t meet the risk analysis? Could it be perhaps because THE GOVERNMENT TOLD THEM THERE WAS NO RISK!!!! The government effectively said, “Make the loans so everyone can live the American dream; if they default, we’ll cover your back!”

    BLAME GOVERNMENT!

    There’s no assumption that an unregulated system is better than a regulated one. I don’t think you’re arguing for absolutely no regulations (no police, military, contracts, patents, property rights), you’re just against regulations that adversely effect you.

    I took you to be educated, but I’m starting to second guess myself. Are you really confusing regulations with police, military, patents, and property rights? I’ll give you a chance to redeem yourself…

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  5. October 17, 2011 at 10:28 pm |

    Larry,

    Why would I read another one of your articles? Your first one was blatantly false and misleading, as I’ve clearly pointed out.

    Progressivity in the income tax is not “unfair.”

    How is it not unfair to confiscate a higher percentage of wealth from one person vs another?

    999 is as transparent as mud. You don’t have a clue what it will do to prices.

    Sigh. That’s not what transparency means.

    A level playing field would suggest everybody has the same opportunities at the beginning of the game. Do you really want to argue this point?

    Sure. And no, that’s not what it means. A level playing field means that everyone has the same opportunity and are not treated differently. It has nothing to do with starting points.

    No country has or wants a pure capitalist system that concentrates great wealth in the hands of a few.

    You just blatantly misdefined Capitalism. You’re intellectually dishonest and that discredits you and your articles.

    Why would a majority of people enslave themselves to enrich a few? They’d be better off with a smaller pie and a fair share of it.

    The fact that you’re using a pie as an example shows that you believe success is zero sum. That’s a rookie mistake.

    And, no, the government did not tell mortgage brokers to issue loans without collecting financial data and lay off those risky loans the next day.

    You’re right, in many instances they threatened to SUE them if they DIDN’T make the loans. It’s even worse than I first mentioned. Thanks for reminding me.

    We’ve created governments because on the whole we’re all better off with rules that allow us to create and protect property; we’ve all agreed to be bound by those laws because they create a more efficient and fair distribution of property than the lawless jungle would.

    Funny that you’d talk about protecting property when ALL you’ve done thus far is suggest that property should be stolen from one group and redistributed to another. The nerve of you progressives is laughable.

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