The Tax Cut coalition?

[retiredgrunt45]

Heres one for you I had emailed to me, about how we are taxed to death. literally.

Tax Truth open

Tax Truth
Tax his land,
Tax his bed,
Tax the table
At which he's fed.
Tax his tractor,
Tax his mule,
Teach him taxes
Are the rule.
Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his ties,
Tax his shirt,
Tax his work,
Tax his dirt.
Tax his tobacco,
Tax his drink,
Tax him if he
Tries to think.
Tax his cigars,
Tax his beers,
If he cries, then
Tax his tears.
Tax his car,
Tax his gas,
Find other ways
To tax his ***
Tax all he has
Then let him know
That you won't be done
Till he has no dough.
When he screams and hollers,
Then tax him some more,
Tax him till
He's good and sore.
Then tax his coffin ,
Tax his grave,
Tax the sod in
Which he's laid.
Put these words
upon his tomb,
" Taxes drove me to my doom..."
When he's gone,
Do not relax,
Its time to apply
The inheritance tax.
Accounts Receivable Tax
Building Permit Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Excise Taxes
Federal Income Tax
Federal Unemployment Tax
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax (42 cents per gallon)
Gross Receipts Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
Revenue Canada Interest Charges and Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medical Tax
Personal Property Tax
Property Tax
R eal Estate Tax
Service Charge Tax
Social Security Tax
Road Usage Tax
Sales Tax
Recreational Vehicle Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, Provincial and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Non-recurring Charges Tax
Telephone Province and Local Tax
Telephone Usage Charge Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
STILL THINK THIS IS FUNNY?
Not one of these taxes existed 100 years ago, and our nation
was the most prosperous in the world.
We had absolutely no national debt, had the largest middle
class in the world, and Mom stayed home to raise the kids.
What happened? Can you spell "politicians, economists
and universal healthcare!"
And I still have to "press 1" for English.
I hope this goes around Canada at least 100 times
__________________________________________________________________________

 

[Cdn Blackshirt]

The Yanks are on track to at least eliminate their annual deficit by 2012; it's shrinking faster than forecast.  Is it because revenues are up or spending is down?

That's not actually true.  The 2012 projections are based on two things that the Administration isn't mentioning.
1)  "Balancing the Budget" is dependent upon the Bush Tax Cuts expiring in 2012 which the law currently has them doing.  Without that expiry, the United States will continue to run "reported" deficits of more than $300 billion per annum.
2)  The figures they release as "budget deficits" do not conform to GAAP rules.  In short, the rules the SEC forces all U.S. corporations to follow are completly ignored by the government itself.  Specifically, they show reciepts for Social Security and Medicaid as "revenues" which they use to reduce the stated budget deficit, when in fact they are pre-paid liabilities that should be held in trust.  The result is if you use GAAP of any sort, the reported deficit from August of $158 billion, very quickly turns into about $478 billion. 

It's actually sad to look at the CBO documents.  Whereas both Canada and Australia have done a great job to make everything very transparent and near-identical to a corporate annual report with details financial reports, the U.S. version appears intentionally as an attempt to hide just how much trouble they're in.

I've had U.S. friends moving money into Euros, CAD's, Rubles and commodities for the last three years because they're in so much trouble.  They simply are on a path of unsustainability.  They have two choices:  Either they need to raise taxes to pay for the programs they've promised themselves, or both Old Age Security and Medicare/Medicaid/Bush Pharma Plan need to get dramatically reformed.  Either way, their economy is in serious poop. 

As a side note for those that follow the markets, as you know the United States is currently experiencing foreclosure rates that are 96% higher year-on-year than '06, and it's all being blamed on subprime mortgages.  If you want the horror stories on what actually constitutes a subprime or Alt-A mortgage, I'll gladly explain it, but more importantly, only about 10% of total subprime mortgages have even had time to be re-set at higher rates, and work their way through the foreclosure process (minimum of 150 days).  There's still 90% of those mortgages that are due for interest rate resets (the biggest tranche in November), and as those resets hit the U.S. economy, it's going to get really ugly. 

If anyone wants any more details on this, just let me know....


Matthew. 

 

[Cdn Blackshirt]

I didn't express an opinion one way or the other about the tax cuts only that "amongst the most fiscally irresponsible actions ever taken by any government at any time" was over the top. Mugabe's "actions" were "fiscally irresponsible" as shown by the current ruined state of Zimbabwe's economy. Lowering taxes really isn't in the same league. 

Since you asked, my take on tax cuts is: Cutting taxes should spur economic growth leading to increased total revenues in the future but likely requires more borrowing to finance current expenditures. Doing so while also increasing spending seems an awful gamble but some say it has paid off in recent history. Reagan's presidency and Japan from 90's to today are examples. To me it feels like doubling down on a bet. A lot seem to agree and heap scorn on the other side of what they think is best of increased spending or lower taxes as leading to disaster.

For debt financing I compare US Treasury Recent Note, Bond, and TIPS Auction Results with GDP in current dollars (not adjusted for inflation). It's around 5% interest rate for recent debt vs. 6.7% current dollar GDP growth. These aren't really directly comparable but instead show that just servicing new debt currently won't drive up the Debt to GDP ratio. If they could stop taking on new debt the ratio would slowly go down on its own given similar interest rates, GDP growth and inflation. With unfunded liabilities like Old Age Security spending is going to go up in the future which either taxes or borrowing will have to fund. Seems the plan is to grow the GDP to get out of the crunch the wisdom of which is debatable.

I would argue the plan for the last 4 years has been to intentionally devalue the $USD dollar as quickly as possibly to accomplish a couple of key objectives.
1)  Reduce the real value of current government debt.
2)  Reduce the real value of future obligations such as OAS.
3)  Reduce the real value of current consumer debt.

The first big red flag was when the Treasury suddenly decided they no longer were going to provide M3 money statistics.

RE:  Debt Growth vs GDP Growth as a safe metric? - Whew.  Boy, I wouldn't use that.  Especially, when as mentioned above the "Deficit/Debt" statistics exclude unfunded liabilities.  Regardless, if you're running a 2% of GDP debt per annum, and for argument's sake, lets say GDP Growth is 2%, (0% inflation for the example) all you're doing is treading water at whatever your tax rate is.  The problem is if other nations have moved towards to SWF model I propose, and start using that to subsidize their tax rates (in essence allowing citizens to receive service partially funded by the returns on their national equity investments), then the debt-ridden nations fall behind on a tax competitiveness basis.  My  real fear around this is that you could see (and I predict you will see in the United States over the next 10 years), a fairly significant brain drain of your highest productivity workers to low-tax jurisdictions....leaving behind the debt accrued by the nation to provide those individuals with 5 good years of Bush Tax Cuts....and it's those without global skills or mobility who are left behind to pick up the tab.

I think as a principle, we should be striving to cut spending every year to below the combined rate of population growth and inflation (in essence demand productivity growth from government as we expect from all other industries).  With that in place, pay down debt first.  I'm a firm believer in a pay-as-you-go model. If baby boomers accrued large government liabilities during their lifetimes as they demanded heavily subsidized university educations, etc., it should be their responsibility at death to pay their share.  In short, an inheritance tax with no work-arounds for trust planners.  As gross debt is reduced, 75% of interest savings are returned to citizens via income tax cuts.  Consumption taxes I don't mind as sadly because of our nations willingness to allow unreciprocal trade access, so much of what we spend our discretionary income on, is no longer made in North America at all.  The CPP should be fully funded (although with longer lifespans, I'd raise the age to qualify....as I would for civil servants to qualify for their pensions).

RE:  Tax Cuts in general - There were some interesting OECD statistics that showed the impact of tax cuts on economies.  In economies where tax cuts occurred, they outperformed for the first two years, but underperformed afterwards.  In economies where taxes were raised, they underperformed for the first two years, and then overperformed afterwards.  Frankly, the numbers seem counterintuitive to me to a point I question whether the timing of the cuts/increases in relation to the business cycle had more to do with the results than the actually cuts/increases themselves. 

Regardless, I've got some stuff I'll post tomorrow night you may be interested in....


Matthew. 

 

[a_majoor]

Matthew,

I would say that for the most part we are in violent agreement. Much of what you are decrying is government manipulation of the economy rather than a debunking of economics. More correctly, I would suggest that much of the manipulation which causes the negative effects you describe are a result of politicians and bureaucrats using Keynesian ideas ("priming the pump"; increasing aggregate demand, etc.).

Since the politicians and bureaucrats have been able to blame their failures on the market (and most people don't understand enough economics to realize the bait and switch that has just been done to them), they have been able to get away with this.

 

[DBA]

RE:  Debt Growth vs GDP Growth as a safe metric? - Whew.  Boy, I wouldn't use that. 

I don't think they are comparable figures either. The difference between them isn't a number with any real meaning. Where each number is trending over time can give some insight into near term debt accumulation. They can be an indication of how painful paying the interest on additional debt in the near term will be. When interest rates are high and GDP growth low then additional debt will be relatively more painful. When interest rates are low and GDP decent additional debt won't be as painful. This of course doesn't cover long term, if accumulating debt vs cutting spending is better or anything else really. Just that with the values of each figure in the US adding more debt is less painful currently than if the figures had different values. Kinda of like a teaser rate on a credit card when your getting yearly raises vs a normal rate card when your wage is stagnant. Adding debt in the first situation will be less painful if conditions stay the same compared to the second.

 

[UberCree]

Before I ask all you economics wizards a question I will clarify it by stating that I am 100% in favour of on reserve taxation, for a wide variety of reasons.

Now the question, most economists argue that lowering taxes boosts economies.  Why is there no evidence of this on reserves where there is substantially less taxation than elsewhere and poverty is out of control?  From an economic perspective shouldn't the lower tax bracket encourage business, trade, etc. or does this only apply to the affluent?

 

[Bruce Monkhouse]

Rama, even before the casino, was always a stellar spot for business.

 

[Shec]

Why is there no evidence of this on reserves where there is substantially less taxation than elsewhere and poverty is out of control? 

Isn't the real issue not tax rate but  governance? Business seeks certainty (ie. political stabiliy) and the perception is that this is lacking on most Reserves.  Combating poverty means creating wealth and the level of business activity needed to do that isn't going to thrive until, among other things,  business is confident that the conditions are right to risk it.

For a better  discussion I refer you to:

http://www.fiscalrealities.com/final_pdf/expand.pdf

and,

http://www.fiscalrealities.com/final_pdf/taps.pdf

 

[a_majoor]

As pointed out, there are other factors in play. Taxation is the most visible, and the most flexible tool in the tool kit. Governments can raise and lower taxes, tax income, goods and services or offer exemptions at any time.

Reservations suffer a lack of both skilled and educated people (which is also the sticking point in reconstruction work in places like Afghanistan) and a motivated workforce, which I would argue are the end results of destructive government policies offering perverse incentives to not be responsible and inefficient (or worse) reservation governments. The real or perceived shortfalls of reservation governance will take a period of years to fix, getting skilled and educated people to stay and work on reservations and the cultural changes to encourage people to become productive workers will probably take decades.

This is nothing against people on reservations, after all, in the former Iron curtain nations these problems were rampant until the fall of the USSR, and we can see the process of social disintegration happening in the UK under the social and economic policies of "New Labour"; people react to incentives in the same way in all times and places.

 

[Edward Campbell]

Before I ask all you economics wizards a question I will clarify it by stating that I am 100% in favour of on reserve taxation, for a wide variety of reasons.

Now the question, most economists argue that lowering taxes boosts economies.  Why is there no evidence of this on reserves where there is substantially less taxation than elsewhere and poverty is out of control?   From an economic perspective shouldn't the lower tax bracket encourage business, trade, etc. or does this only apply to the affluent?

I think another economist, Hernando de Soto can answer your question. He would say, I believe, that our reserves are like the third world and post-communist countries he studies in some detail to write The Mystery of Capital. It appears, to me, that the capital on reserves is, in de Soto's terms, dead. There is property and plenty of effort on reserves but because of a totally retarded system of property rights it cannot be put to good use.