We don't need no stinking taxes

[imagep]

...
That printing money instead of taxing it doesn't solve any problems.

Solves some problems for everyone who complains about taxes. Doesn't resolve inflation, or the fed debt, but do we really need to resolve either?

Fed government borrowing, except when it borrows from the fed who uses printed money to purchase treasuries, isn't inflationary itself, because it does nothing to increase our money supply. The portion that the gov would have to borrow from the fed, with the exception of the part that is just rolling over debt, would be inflationary, but only to the extent that it exceeds the growth of goods and services that we produce.

I think we would have to reduce the federal government by about 75% (just my guess) in order to have a government that is so small that it didn't need to tax, and it funded itself by either printing or borrowing, and didn't cause more than the 3% target rate of inflation. I could deal with 3% inflation as long as my income kept up with inflation, and if it was in-leu of all current taxes. It would be a cheap price to pay, call it a "hidden tax" if you like, but it would only be a tax on money that is hoarded non-productively (as in cash sitting in a tin can), and that may be a good thing as no one should be rewarded for being non-productive.

Seems to me that this tax-less government should be a libertarians dream world, and that libertarians would be figuring out ways to make it work, instead of figuring out ways why it wouldn't work.

 

[imagep]

According to Inflation 2012, our inflation rate for 2012 was either 1.74% or 2.07%. I think thats a reasonably acceptable inflation rate, about as close to zero as we can expect.

According to 2012 United States federal budget - Wikipedia, the free encyclopedia, in 2012 we collected $1.165 trillion in income taxes. Now assuming that we keep all other forms of revenue, other than the personal income tax, we would need to cut about $1.165 trillion from our budget in order to do away with income tax totally (which I don't completely support, but let's go with it). So here's a breakdown of what we could cut:

Military by 70%, saving $545 billion
Income Security by 70%, saving $405
Social Services by 100%, saving $139 billion
Commerce and Housing Credit by 100%, saving 79 billion
International Affairs by 50%, saving $28 billion


Bam. It's done. An income tax-less government.

 

[AlabamaPaul]

According to Inflation 2012, our inflation rate for 2012 was either 1.74% or 2.07%. I think thats a reasonably acceptable inflation rate, about as close to zero as we can expect.

According to 2012 United States federal budget - Wikipedia, the free encyclopedia, in 2012 we collected $1.165 trillion in income taxes. Now assuming that we keep all other forms of revenue, other than the personal income tax, we would need to cut about $1.165 trillion from our budget in order to do away with income tax totally (which I don't completely support, but let's go with it). So here's a breakdown of what we could cut:

Military by 70%, saving $545 billion
Income Security by 70%, saving $405
Social Services by 100%, saving $139 billion
Commerce and Housing Credit by 100%, saving 79 billion
International Affairs by 50%, saving $28 billion


Bam. It's done. An income tax-less government.

You have conveniently left out the deficit, and actually, you could eliminate entitlements (not counting SS and Medicare) and achieve the same savings...

 

[Lakryte]

"Yes, but I'm now going to ignore it and claim something contrary, as if I didn't read anything."

When anyone is talking about supply and demand, and they say something like "higher demand results in higher prices" they are assuming "all else remaining equal." That is generally understood by all economists who use that language. Of course, multiple factors can be occurring at once that have differing effects on prices (such as both an increase in supply and demand). A way of clarifying that is to say that upward or downward pressure is put on prices, and the combination of those pressures dictate the direction prices move. In your example, there is both an increase in the supply of goods (which puts downward pressure on prices) and an increase in the supply of money (putting upward pressure on prices). So prices wont necessarily rise depending how the competing factors play out. But what is certain is that the resulting prices would be higher than they would be absent the increase in the money supply.

So no, I am not ignoring your post. I just assumed you understood more than it appears you do. Sorry for giving you the benefit of the doubt.

Oh, so now taxes are good for the economy?

How about that debt ceiling and default crises? Those really get the job done, right?

Did I say that? No--not even close. How you could think I said that is beyond me. You wrongly criticize my reading, and to top it all off you then make a strawman argument. I am arguing that printing money to fund our current government is no better than taxation.

 

[imagep]

You have conveniently left out the deficit, and actually, you could eliminate entitlements (not counting SS and Medicare) and achieve the same savings...

I didn't deal with the deficit because we have a deficit regardless. The deficit can be handled with borrowing and printing, just as it already is. I did point out that regardless of the deficit, our current inflation rate is quite modest.

And yes, we could eliminate entitlements, except for SS and Medicare. I would have done that first, except the spending breakdown that I was looking at didn't classify entitlements. There were lots of things that we could have cut to achieve a cut large enough to eliminate income taxes.

Income taxes really isn't the bulk of our revenue by any means. Far less than half. I think that people for some reason believe that our guberment is mostly funded from income taxes, and thats the reason why they will complain about the poor and working poor not paying any income taxes, but don't bother to complain about someone who doesn't pay the tobacco tax or the alcohol tax.

If we taxed capital gains at the same rate we tax earned income, we could eliminate the bottom 4 income tax brackets, and still be revenue neutral. A single person could make up to $187k without having to owe a penny of income tax, and without the budget even being cut. That would drop something like 93% of us from the IRS rolls.

 

[Lakryte]

Solves some problems for everyone who complains about taxes. Doesn't resolve inflation, or the fed debt, but do we really need to resolve either?

Fed government borrowing, except when it borrows from the fed who uses printed money to purchase treasuries, isn't inflationary itself, because it does nothing to increase our money supply. The portion that the gov would have to borrow from the fed, with the exception of the part that is just rolling over debt, would be inflationary, but only to the extent that it exceeds the growth of goods and services that we produce.

I think we would have to reduce the federal government by about 75% (just my guess) in order to have a government that is so small that it didn't need to tax, and it funded itself by either printing or borrowing, and didn't cause more than the 3% target rate of inflation. I could deal with 3% inflation as long as my income kept up with inflation, and if it was in-leu of all current taxes. It would be a cheap price to pay, call it a "hidden tax" if you like, but it would only be a tax on money that is hoarded non-productively (as in cash sitting in a tin can), and that may be a good thing as no one should be rewarded for being non-productive.

Seems to me that this tax-less government should be a libertarians dream world, and that libertarians would be figuring out ways to make it work, instead of figuring out ways why it wouldn't work.

Inflation is simply a hidden tax. People complain about taxes because they have less money to spend. They complain about inflation for the same reason--they have less money to spend in terms of its real value. And inflation is regressive, harming the poor the most, making it potentially worse than taxation. A hidden tax that hurts the poor the most is not a libertarian dream. Reduce the federal government by 75%? Absolutely. Finance the remaining 25% by printing money? Absolutely not. That is no better than taxation, and is arguably worse precisely because of its "hidden" nature.

 

[gavinfielder]

But what is certain is that the resulting prices would be higher than they would be absent the increase in the money supply.

Now you're pulling complete bull**** out of your ass. None of what you said prior can conclude to that.

Did I say that? No--not even close. How you could think I said that is beyond me. You wrongly criticize my reading, and to top it all off you then make a strawman argument. I am arguing that printing money to fund our current government is no better than taxation.

And you do it again. You're not ****ing reading at all. You wanted a reason why printing without taxes is better than taxes, and I gave you two. You completely ignored it and restated your original idiotic "point".

 

[imagep]

Inflation is simply a hidden tax. People complain about taxes because they have less money to spend.

It's not really a hidden tax, except for those who hoard money, and don't bother to seek a ROI.

When we have inflation, income is one of the things that get inflated, and it pretty much keeps up with inflation, thus, if we have 3% inflation during a given period of time, and our wages also go up 3%, we haven't lost any purchasing power, and thus if "having less to spend" is the definition of a tax, inflation isn't really a tax.

 

[Lakryte]

Now you're pulling complete bull**** out of your ass. None of what you said prior can conclude to that.

It quite plainly concludes to that. If an increase in the money supply would increase prices by 10%, and an increase in the supply of goods would decrease prices by 15%, prices would fall 5%. If there was no increase in the money supply, prices would have fallen 15%. So due to the increase in the money supply, prices are higher than they would have been absent such an increase. I don't understand what you are missing.

And you do it again. You're not ****ing reading at all. You wanted a reason why printing without taxes is better than taxes, and I gave you two. You completely ignored it and restated your original idiotic "point".

I did not say taxation is good, as you claimed. I restated my point because you refuted a strawman.

 

[Lakryte]

It's not really a hidden tax, except for those who hoard money, and don't bother to seek a ROI.

When we have inflation, income is one of the things that get inflated, and it pretty much keeps up with inflation, thus, if we have 3% inflation during a given period of time, and our wages also go up 3%, we haven't lost any purchasing power, and thus if "having less to spend" is the definition of a tax, inflation isn't really a tax.

Prices do not rise uniformly, so there will definitely be a negative effect on people, including those that do not hoard money. You are not taking the effect of time into consideration. The chances are that prices of goods will rise before wages.

Who gets the money first also matters. Inflation essentially redistributes wealth from those who get the money last to those that get the money first. The increase in the money supply would be given to government. Say government is spending on the military. The companies that produce goods for the military would get the new money first, as would those employed by the military. They would then spend that money, and in doing so prices would rise where they spend their money.

 

[gavinfielder]

It quite plainly concludes to that. If an increase in the money supply would increase prices by 10%, and an increase in the supply of goods would decrease prices by 15%, prices would fall 5%. If there was no increase in the money supply, prices would have fallen 15%. So due to the increase in the money supply, prices are higher than they would have been absent such an increase. I don't understand what you are missing.

Demand-pull inflation can't happen unless the maximum productive capacity has been reached. An increase in the money supply now would only increase production, and there's nothing to suggest the money supply can't be controlled in the future. I don't know where you're even getting this crap.

I did not say taxation is good, as you claimed. I restated my point because you refuted a strawman.

I gave you two valid points and you ignored them. I'm not giving you more just because you're incapable of thought.

 

[Lakryte]

Demand-pull inflation can't happen unless the maximum productive capacity has been reached. An increase in the money supply now would only increase production, and there's nothing to suggest the money supply can't be controlled in the future. I don't know where you're even getting this crap.
I gave you two valid points and you ignored them. I'm not giving you more just because you're incapable of thought.

Increasing the production of goods tends to lower prices, not raise them. There is a serious problem with the notion of demand-pull inflation--it conflates real demand with nominal demand (real and nominal having the same general meaning as they do when referring to real and nominal wages).

"Demand" consists of the desire plus the ability to purchase something. People can only demand and purchase something by paying for it. They pay for it by exchanging other goods that have been produced; money is simply the medium of exchange. Thus, production is the source of real demand.

The issue here is assuming that the creation of money leads to increased real demand. It does not--it only increases nominal demand. When the medium of exchange — money — is increased, and that money is spent and used to "demand" products with, the price of the product being purchased will rise (all else remaining equal). Such a rise is not due to an increase in real demand; it is due to an increase in nominal demand. Real demand can increase only by way of an increase in production, which in fact lowers prices. Nominal demand is increased by an expansion of the money supply, which raises prices since you have more nominal units of money chasing the same level of goods. In reality, the increased demand resulting from the creation of more money is simply is increased nominal demand, not real demand.

Thus inflation can very well happen if maximum productive capacity has not been reached. In fact, there will be even more inflation if the economy is not increasing production.

 

[imagep]

Prices do not rise uniformly, so there will definitely be a negative effect on people, including those that do not hoard money. You are not taking the effect of time into consideration. The chances are that prices of goods will rise before wages.

Who gets the money first also matters. Inflation essentially redistributes wealth from those who get the money last to those that get the money first. The increase in the money supply would be given to government. Say government is spending on the military. The companies that produce goods for the military would get the new money first, as would those employed by the military. They would then spend that money, and in doing so prices would rise where they spend their money.

Good thing I suggested cutting military spending by 70% then!

Back in the early '80's, during the "good ole days" when Reagan was POTUS and when we had 10%+ inflation, my parents were both getting two cost of living raises a year just to keep up in inflation. Inflation is an inconvenience, but nothing more.

Can you point to any period of time where wages didn't keep up with inflation? Please provide links.

 

[Lakryte]

Good thing I suggested cutting military spending by 70% then!

Back in the early '80's, during the "good ole days" when Reagan was POTUS and when we had 10%+ inflation, my parents were both getting two cost of living raises a year just to keep up in inflation. Inflation is an inconvenience, but nothing more.

Can you point to any period of time where wages didn't keep up with inflation? Please provide links.

Does inflation happen only twice a year? No. The reason they got a cost of living raise was because the cost of living had gone up before they got the raise.

A period in time where wages didn't keep up with inflation? All the time. Your error is looking at things from year to year and ignoring the order of events within that year.

Want a link? Here you go:
http://www.businessinsider.com/real-wages-decline-literally-no-one-notices-2013-6

Real wages are 14% below what they were in 1972. In fact, real wages have not risen above the 1972 level in the past 39 consecutive years. This is despite production increasing significantly during that same time frame.

 

[gavinfielder]

Increasing the production of goods tends to lower prices, not raise them. There is a serious problem with the notion of demand-pull inflation--it conflates real demand with nominal demand (real and nominal having the same general meaning as they do when referring to real and nominal wages).

"Demand" consists of the desire plus the ability to purchase something. People can only demand and purchase something by paying for it. They pay for it by exchanging other goods that have been produced; money is simply the medium of exchange. Thus, production is the source of real demand.

The issue here is assuming that the creation of money leads to increased real demand. It does not--it only increases nominal demand. When the medium of exchange — money — is increased, and that money is spent and used to "demand" products with, the price of the product being purchased will rise (all else remaining equal). Such a rise is not due to an increase in real demand; it is due to an increase in nominal demand. Real demand can increase only by way of an increase in production, which in fact lowers prices. Nominal demand is increased by an expansion of the money supply, which raises prices since you have more nominal units of money chasing the same level of goods. In reality, the increased demand resulting from the creation of more money is simply is increased nominal demand, not real demand.

Thus inflation can very well happen if maximum productive capacity has not been reached. In fact, there will be even more inflation if the economy is not increasing production.

Oh, so if people don't spend money, there will be inflation. Yeah, that's exactly how MV=PY works.

And you were the one talking about all other things being equal. You're seriously a joke.

 

[Lakryte]

Oh, so if people don't spend money, there will be inflation. Yeah, that's exactly how MV=PY works.

And you were the one talking about all other things being equal. You're seriously a joke.

Another strawman. No, if people don't spend less of their money than before, then that signifies an increase in the demand for money. An increase in the demand for money puts downward pressure on prices. So all things would not be remaining equal. My post dealt with nominal vs real demand. Did you understand that distinction? You didn't address it at all.

 

[gavinfielder]

No, if people don't spend less of their money than before, then that signifies an increase in the demand for money.

I think you're backwards there, but that really isn't important since you're wrong either way.

Another strawman. No, if people don't spend less of their money than before, then that signifies an increase in the demand for money. An increase in the demand for money puts downward pressure on prices. So all things would not be remaining equal. My post dealt with nominal vs real demand. Did you understand that distinction? You didn't address it at all.

Because it's complete bull****, and I mentioned why, but I'll explain it more clearly for you. If people didn't spend money, that's a clear decrease in V to counter M. So you can't say P increases in that situation at all.

 

[imagep]

Does inflation happen only twice a year? No. The reason they got a cost of living raise was because the cost of living had gone up before they got the raise.

A period in time where wages didn't keep up with inflation? All the time. Your error is looking at things from year to year and ignoring the order of events within that year.

Want a link? Here you go:
Real Wages Decline Again

Real wages are 14% below what they were in 1972. In fact, real wages have not risen above the 1972 level in the past 39 consecutive years. This is despite production increasing significantly during that same time frame.

So was it really inflation that was the issue, or is it the fact that more and more income is going to the top few percent?

And surely you noticed that the beginning number was cherry picked. It was the peak of earnings, not a typical year. If the author would have picked 1980 as the starting point, then our incomes adjusted for inflation would have grown.

The issue here isn't inflation, it's the growing income disparity. this was CLEARLY noted by the author:

But, if you've been paying attention, you know the drill: higher productivity plus lower wages = greater inequality.

Read more: Real Wages Decline Again

 

[Lakryte]

So was it really inflation that was the issue, or is it the fact that more and more income is going to the top few percent?

And surely you noticed that the beginning number was cherry picked. It was the peak of earnings, not a typical year. If the author would have picked 1980 as the starting point, then our incomes adjusted for inflation would have grown.

The issue here isn't inflation, it's the growing income disparity. this was CLEARLY noted by the author:

Inflation is what causes the income disparity, to a large extent. This is obvious once you understand that inflation does not effect all prices uniformly. The people who get the newly created money first benefit, because the effects of inflation have not yet been realized. And the people that get the newly created money first tend to be the rich.

As for the data I listed, you have to look at the trend, which has clearly been downward. The peak year is used to show how that trend has reversed. 1972 marks the best year for American workers in terms of real wages. The low-point in that same period is 1992. We have gained some ground since then, but we are still worse off than any recorded year in the 1960s and 1970s (when such recording began).

http://www.gpo.gov/fdsys/pkg/ERP-2013/pdf/ERP-2013-table47.pdf

So your assumption that wages always keep up with inflation is simply false.

 

[gavinfielder]

Inflation is what causes the income disparity, to a large extent. This is obvious once you understand that inflation does not effect all prices uniformly. The people who get the newly created money first benefit, because the effects of inflation have not yet been realized. And the people that get the newly created money first tend to be the rich.

Rentier finance.

There's something to that.

 

[a351]

The need for public deficit that I mentioned is a matter of sectoral balances and has everything to do with trade balance. With a trade surplus, capital flows into the private sector without the need for public deficit.[/B]

Perhaps in the prior decade and a differing set of financial circumstances, yes. The past 3 fiscal years however have seen total trade deficits total less than half of annual deficits. The scenario in which we would realize a swing large enough to offset current fiscal imbalances is unlikely at best, even when disregarding your tax proposal.

U.S. International Trade in Goods and Services (FT900)

 

[imagep]

Inflation is what causes the income disparity, to a large extent. This is obvious once you understand that inflation does not effect all prices uniformly.

So inflation only effects the stuff that the median income earner purchases and it doesn't effect the stuff that the rich purchase? Bullcrap!

The people who get the newly created money first benefit, because the effects of inflation have not yet been realized. And the people that get the newly created money first tend to be the rich.

The people who get newly created money first are often those who are getting welfare freebies. I wouldn't consider them rich. Anyhow, inflation deflates the value of everyones dollar, whether you are rich or poor. Most government transfers are indexed to inflation, so those on welfare are not really effected by inflation, not at least as much as the rich miser who hoards money in a tin can.

As for the data I listed, you have to look at the trend, which has clearly been downward. The peak year is used to show how that trend has reversed. 1972 marks the best year for American workers in terms of real wages. The low-point in that same period is 1992. We have gained some ground since then, but we are still worse off than any recorded year in the 1960s and 1970s (when such recording began).

http://www.gpo.gov/fdsys/pkg/ERP-2013/pdf/ERP-2013-table47.pdf

So your assumption that wages always keep up with inflation is simply false.

From 1980 to date, wages on average have exceeded the inflation rate by just a tad. Income has far exceeded the inflation rate (not all income is from wages).

I don't know what was up with the late '60's and early '70's, maybe that had something to do with the fact that we were involved in a fairly major war.

 

[Lakryte]

So inflation only effects the stuff that the median income earner purchases and it doesn't effect the stuff that the rich purchase? Bullcrap!

That's not what I said. Inflation effects where the new money goes, no matter who is spending the money. Prices generally don't rise until after the money is spent. So the rich who get the money before prices rise will not be effected much by rising prices.

The people who get newly created money first are often those who are getting welfare freebies. I wouldn't consider them rich. Anyhow, inflation deflates the value of everyones dollar, whether you are rich or poor. Most government transfers are indexed to inflation, so those on welfare are not really effected by inflation, not at least as much as the rich miser who hoards money in a tin can.

No, the banks are given the newly created money. And they also create the bulk of the new money themselves, and I guarantee they are no handing it out to the poor.

From 1980 to date, wages on average have exceeded the inflation rate by just a tad. Income has far exceeded the inflation rate (not all income is from wages).

I don't know what was up with the late '60's and early '70's, maybe that had something to do with the fact that we were involved in a fairly major war.

During the 1980s, real wages decreased almost every year. You criticized me for using 1972 as cherrypicking, so why are you now using 1980? And there was a rational reason for using 1972--it was the high point of real wages in recorded US history. And wages in the years prior were similar, so your original contention that it was unusually high was not correct. It is also interesting to note that it was at the end of 1971 that Nixon fully took the country off the gold standard. Since then, we have not recovered the real wages we once had.