Fed Officials Mull Inflation as a Fix

[phattonez]

For the US to ever get any where near a balanced budget, it will have to be a combination of spending cuts and increasing taxes. Given the three largest spending areas for the US governemnt are the military, SS and medical costs, they will have to face spending restrictions as well. There will not be enough money found in other departments to be cut, in order not to have to cut from the military SS and medical costs

Can we safely assume that higher tax rates would lead to more revenue though?

 

[Lord Tammerlain]

Can we safely assume that higher tax rates would lead to more revenue though?

Depending on how high the taxes go up.

Given the US federal government tax rate is about the lowest of any major country, I dont see low to mid size tax increases driving invesment out of the US and into Europe or Canada. Tax rates in the US are not the general reason why investment in China is going on ( it is the low wages low cost structure). A significant tax increase most likely would see revenue increase for a couplee of years then decrease dramtically


I suspect the L curve is rather flat in the middle regarding tax rates and increases or decreases in tax revenues due to economic growth, derived from tax rate changes. Only at the more extreme ranges would it have a visiable effect

 

[washunut]

How can you claim that when it is ready to go broke? Someone is going to have to pay for it.



We've forgotten how to have an economy that produces wealth, not just borrows it.

Please remember that social security is currently in a surplus position of about $5 trillion. People like to forget that and only talk about when we will start paying more than we collect. Social security is essentially set up as an annuity. Going forward there will have to be and will be changes in the age of eligibity as there have been changes in the past. Also the cap and rate have been adjusted in the past.

The government that wants to essentially steal monies that should be set aside talk about social security going broke.

 

[phattonez]

Please remember that social security is currently in a surplus position of about $5 trillion. People like to forget that and only talk about when we will start paying more than we collect. Social security is essentially set up as an annuity. Going forward there will have to be and will be changes in the age of eligibity as there have been changes in the past. Also the cap and rate have been adjusted in the past.

The government that wants to essentially steal monies that should be set aside talk about social security going broke.

Currently, but social security funds have routinely been gutted for general budget purposes. It was never an annuity, just another income tax under the guise of some kind of savings program. It will go broke because we just can't handle the baby boomers. There will be more of them than we can afford to give them what they expect in social security.

 

[phattonez]

Depending on how high the taxes go up.

Given the US federal government tax rate is about the lowest of any major country, I dont see low to mid size tax increases driving invesment out of the US and into Europe or Canada. Tax rates in the US are not the general reason why investment in China is going on ( it is the low wages low cost structure). A significant tax increase most likely would see revenue increase for a couplee of years then decrease dramtically

Umm, just because other countries have higher rates doesn't mean that raising taxes wouldn't bring lower revenue. It's not related at all.

I suspect the L curve is rather flat in the middle regarding tax rates and increases or decreases in tax revenues due to economic growth, derived from tax rate changes. Only at the more extreme ranges would it have a visiable effect

Great, you may suspect it, but why risk it when you know that it will have a negative impact on the economy?

 

[washunut]

Currently, but social security funds have routinely been gutted for general budget purposes. It was never an annuity, just another income tax under the guise of some kind of savings program. It will go broke because we just can't handle the baby boomers. There will be more of them than we can afford to give them what they expect in social security.

Your statements are simply not true. It is not an income tax. You are semi-correct when you say the money may have been squandered. You may also remember that Al Gore who got the majority of votes in the 2000 election talked about setting up a lock box so that greedy people would not have the ability to steal these funds.

 

[Lord Tammerlain]

Umm, just because other countries have higher rates doesn't mean that raising taxes wouldn't bring lower revenue. It's not related at all.



Great, you may suspect it, but why risk it when you know that it will have a negative impact on the economy?

It most certainly is related. Imagine if you have two countries nearly identitical in most regards from a business standpoint in costs, etc including taxes. Then one country decides to increase taxes by 20%, in the future companies will see the higher cost of taxes in the one country and most likely invest in the one with the lower taxs and overall costs

 

[Missed AB]

It most certainly is related. Imagine if you have two countries nearly identitical in most regards from a business standpoint in costs, etc including taxes. Then one country decides to increase taxes by 20%, in the future companies will see the higher cost of taxes in the one country and most likely invest in the one with the lower taxs and overall costs

You seem to be under the impression that companies actually "pay" taxes... I am not talking about subsidies, taxes are passed on to the consumer. The company does not really pay taxes... you do.

The price of the item is not a random number. It is calculated by the R and D, materials, electric, rent, wages and income taxes, sales tax on purchased items used to make the product, and all other expenses/total number produced over the period of time=break even point.

EDIT: in other words, imagine if over night there was a new law which stated companies were NOT required to pay any taxes on anything. Would you imagine the competitive nature to keep the price of products the same or decrease the price of the product? If you can agree that the price would be less, then you understand the above...

 

[Missed AB]

Can we safely assume that higher tax rates would lead to more revenue though?

The tax structure vs revenue is an inverted U shaped curve. Imagine the Y axis to be gov't revenue, and X axis to be tax rate. A 100% tax rate would yeild no output so no gov't revenue. This would be as effective as a 0% tax rate which would run the economy at full steam but have no ability to tap the economy for revenue. At some point there is a range which would be optimal for federal revenue.

The tax structure needs to consider the speed at which the economy should run. Higher taxes is a way to break the economy from overheating, while lower taxes will stimulate growth.

The taxation SHOULD run counter to the economic cycle similarly as the fed attempts to use the fund rate to smooth the economic cycles.

As to the direct question, depending on where we are on that curve, higher taxes "could" raise revenue. But it is hard to imagine a situation where we need QE AND increased taxes, as each seems to offset the other.

 

[Lord Tammerlain]

You seem to be under the impression that companies actually "pay" taxes... I am not talking about subsidies, taxes are passed on to the consumer. The company does not really pay taxes... you do.

The price of the item is not a random number. It is calculated by the R and D, materials, electric, rent, wages and income taxes, sales tax on purchased items used to make the product, and all other expenses/total number produced over the period of time=break even point.

EDIT: in other words, imagine if over night there was a new law which stated companies were NOT required to pay any taxes on anything. Would you imagine the competitive nature to keep the price of products the same or decrease the price of the product? If you can agree that the price would be less, then you understand the above...

Going by your theory I dont pay taxes those that pay for my services (ie labour do)

Yes I know about how an items is costed out to include everything from labour to cost of materials, to electricity to transportation, even taxes are added to the number. Which is why if everything else is equal but taxes in one jurisdiction is reasonably higher a company would most likely choose the lower tax area to make further investments in.

 

[Missed AB]

Going by your theory I dont pay taxes those that pay for my services (ie labour do)

Correct. To look at it another way, if you did NOT take into account those expenses, then you would run the risk or not making any money. Or if a company needs to make a certain eps, and all the calculations to price the products do not include taxes, then they will fall short of expected earnings.

Yes I know about how an items is costed out to include everything from labour to cost of materials, to electricity to transportation, even taxes are added to the number. Which is why if everything else is equal but taxes in one jurisdiction is reasonably higher a company would most likely choose the lower tax area to make further investments in.

Not exactly. There are other issues to consider as well. Transportation costs are a big one as well as currency ratios.

For example, Audi wants to sell cars in the US, but it is harder for them to make money due to EU:USD ratio and remain competitive with pricing. It is a better financial choice for them to build a plant in Atlanta pay USD wages and lower transportation costs, then to pay EU wages and transportation to gain access to the US market at a competitive price.

 

[b.larset]

I cant invest what I dont have. I cant help out spending by placing pressure on the small revenue stream thats now running partly because of Stimulis money not from the free market.
The cash they keep talkin about freeing isnt small business cash. The private sector capital and venture money is either following prior investments, China , Mexico etc. or it is going after government revenue by investing it into the political capital of new enviornmental changes by the party in power.Thats all any of this is. Our economy now is based on being consumers- if not for all the hand outs bail outs try outs shoot outs and all the other outs we would have reached this bottom sooner. So welcome to the third world war being fought in the new Millenium and being lost by the worlds democracies.

 

[Lord Tammerlain]

Correct. To look at it another way, if you did NOT take into account those expenses, then you would run the risk or not making any money. Or if a company needs to make a certain eps, and all the calculations to price the products do not include taxes, then they will fall short of expected earnings.

Just to note, if everyone else is paying everyone else's taxes who actually pays the tax?

Not exactly. There are other issues to consider as well. Transportation costs are a big one as well as currency ratios.

For example, Audi wants to sell cars in the US, but it is harder for them to make money due to EU:USD ratio and remain competitive with pricing. It is a better financial choice for them to build a plant in Atlanta pay USD wages and lower transportation costs, then to pay EU wages and transportation to gain access to the US market at a competitive price.

Notice I said " everything else being equal". I understand that the other costs are generally not equal. But to make the issue simple the idea that other costs being equal is important

 

[Missed AB]

Just to note, if everyone else is paying everyone else's taxes who actually pays the tax?

Tax is built into the product, so the end user pays the tax.

If you can see why they need to incorporate healty premiums and wages into the product costs, why would the company neglect to include their portion of the income tax they need to pay?

Example, something simple like a poster. Maker buys paper pays sales tax. Maker buys ink pays sales tax. Pays real estate tax on the building. They pay income tax on the 3 workers. They pay sales tax on the boxes. None of this is free. This is calculated onto the cost per unit. If it there were no taxes and the item was 5 dollars/unit, but with the added tax costs, it is 6 dollars/unit. Now the owner wants to make a proffit on the sale, the sale must be for more than 6 dollars. You buy the poster for 10.80 dollars including state sales tax... which you paid.

If you agree that if ANY of the other input variables to the cost per unit were lower, that would decrease the final sale price, then you must agre that you the end user paid the taxes on the item, just like you paid the wages and shiping cost.

Just like if you now want to resell that poster you paid 10.80 dollars for you need to sell it for more than 10.80 to make a proffit, so who is paying YOUR tax? the buyer.

Notice I said " everything else being equal". I understand that the other costs are generally not equal. But to make the issue simple the idea that other costs being equal is important

If there was equal currency valuation, equal wage payments, equal education, energy costs... Then you would build the item closest to the place it is needed.

That imaginary world will never exist.

Many companies prefer to be located in countries of stability so someone like Chavez does't come around and claim the compay for the state.

There are a lot of variables.

 

[phattonez]

Your statements are simply not true. It is not an income tax. You are semi-correct when you say the money may have been squandered. You may also remember that Al Gore who got the majority of votes in the 2000 election talked about setting up a lock box so that greedy people would not have the ability to steal these funds.

If it takes a proportion of your INCOME, and that money is routinely gutted instead of given back to you wholely, then it what sense is it not an income tax?

 

[phattonez]

It most certainly is related. Imagine if you have two countries nearly identitical in most regards from a business standpoint in costs, etc including taxes. Then one country decides to increase taxes by 20%, in the future companies will see the higher cost of taxes in the one country and most likely invest in the one with the lower taxs and overall costs

We're not dealing with one or the other though. There are tax havens where companies run to so that they can get away from our tax rates. When we raise taxes, those tax havens will be getting even more money.

 

[washunut]

If it takes a proportion of your INCOME, and that money is routinely gutted instead of given back to you wholely, then it what sense is it not an income tax?

No, auto insurance that is gutted from your income. Is that income tax? Is money you put in an IRA income tax.

Not sure why this is hard to understand. Social security was set up to be a kind of imposed annuity to lessen poverty for reitred prople. That is why the tax is segregated from ordinary income tax.

 

[phattonez]

No, auto insurance that is gutted from your income. Is that income tax? Is money you put in an IRA income tax.

Those things aren't forced.

Not sure why this is hard to understand. Social security was set up to be a kind of imposed annuity to lessen poverty for reitred prople. That is why the tax is segregated from ordinary income tax.

Except that money is taken from the program and used just like income tax money.

 

[washunut]

Those things aren't forced.



Except that money is taken from the program and used just like income tax money.

So what is different than what Madoff did to his investors. It should still be considered a crime.

 

[phattonez]

So what is different than what Madoff did to his investors. It should still be considered a crime.

Do you even know what you're arguing now? You've lost all semblance of coherent thought. Madoff has nothing to do with this discussion. Social security is money taken away from your income and the funds are routinely used for general government budgets instead of being given back to you completely. How can that not be construed as a tax? Especially considering that you are forced to enage in the program.

 

[washunut]

Do you even know what you're arguing now? You've lost all semblance of coherent thought. Madoff has nothing to do with this discussion. Social security is money taken away from your income and the funds are routinely used for general government budgets instead of being given back to you completely. How can that not be construed as a tax? Especially considering that you are forced to enage in the program.

There are some people not worth debating with. I can't deal with this lack of knowledge anymore.

 

[phattonez]

There are some people not worth debating with. I can't deal with this lack of knowledge anymore.

Couldn't figure out a good response then?

 

[washunut]

Couldn't figure out a good response then?

There is no good response to a fundementally incorrect position.

 

[phattonez]

There is no good response to a fundementally incorrect position.

If it is fundamentally incorrect, then just point out how it is.

 

[Missed AB]

We're not dealing with one or the other though. There are tax havens where companies run to so that they can get away from our tax rates. When we raise taxes, those tax havens will be getting even more money.

There are benefits of paying taxes to certain countries. Any vessel flying the American flag as the full support of the US Navy and is one reason why there have been very few pirated US ships. It may cost more to get license to drill for oil in the US, but at least the US won't seize the company as property of the state (see Chavez). You could probably get away without paying any taxes in Afaganastan or Somolia too...

Just a thought.