National debt limit

[rj.phila]

"I never understood this either. How have the republicans accomplished this?"

there is reading out there that can be done on this subject. interesting related factoid i came across recently:

right voting america's "breaking point" between social and economic issues-the point at which voters are no longer willing to support a candidate with their social interests(abortion, gay rights, etc) at heart but against their economic interests(labor union support, etc) is on average 50k and below. for left, its 100k.

put another way, republican americans are willing to go down to a 50k annual income cut to support social issues(before they break w/ a candidate), while democrats will only go down to 100k.

as i understand it, it has alot has to do with the aggressive marketing campaign that happened in the southern churches after 1979. before then, almost all southern churches encouraged their members not to vote at all, apparently.

[maat55]

[QUOTE]

Switching our country off the idea of income tax (which taxes productivity) and getting us on VAT (a consumption tax) or even a flat tax (it's dispicable that GE doesn't contribute anything to our country, as well as the poor should pay something) is something every American would embrace regardless of party affilation.

Where's the consistency? You want to stop punishing production with a consumption tax, yet you want to tax businesses.

Who is GE? Who pays GE's taxes? In reality, taxing corporations is only taxing yourself another way. A corporation only consists of workers, investors and consumers, all of which pay taxes.

[snafu]

New Zealand has a 25% consumption tax and it has caused a myriad of problems without solving the initial issues it was meant to resolve. If your current tax rate is 30%, imagine paying 30% more for each and every product and service you use. For example, the government could easily add a 30% consumption tax to gas at the pump. I would guess consumption would drop dramatically. It would also make public transportation more expensive. Do you have access to user friendly public transportation?

Extrapolating that to all other goods and services would likely reduce consumption and that causes business to lay off employees. GM and Chrysler offer a recent example of what happens when consumers reject your product. Layoffs shot through from the factory floor to the highest echelons. While official unemployment figures are about 9.2% [those folk are collecting or eligible for unemployment benefits]. I often see 16% presented as a more realistic figure. For those ineligible for benefit or whose benefits expired or who have been without employment for a long time or those you feel are unmotivated...what employment opportunities are you seeing? What work should they be doing? Who should be hiring them? Personally, I'm horrified about all these kids who have/are dropping out without finishing high school...should they be sent to an American style gulag? [oops I can get overly dramatic]

[maat55]

[QUOTE]

No you entirely missed my point. I would much rather see a balanced budget and an effort to reduce the national debt, but there has been no willingness to cut budget items that will actually make a difference (military and medicare) and no willingness to increase taxes. Without cuts and/or tax increases, the only option is to raise the debt ceiling or default on our debt obligations. My point was a default on our debt obligations would be a disastrous, rioting, blood in the streets type of event.

While I agree that americans do not want to make cuts and raise taxes, I do not believe that defaulting would lead to blood in the streets(not on a large scale)

I also don't think it is immoral to pass down *some* debt to our children as they are also getting a lot of free stuff along with the debt. They get a huge country still left with a lot of natural resources, a vast amount of scientific discoveries, a somewhat safer world that has not been nuked to oblivion, etc. I think giving them a world with skyrocketing inflation (loaf of bread $100 kind of thing) where the US government has collasped due to a default on their debt would be a bit more immoral.

Passing on debt for our status quo is immoral. I would argue that our current over-spending and printing are leading to inflation, not defaulting. Defaulting means we are forced to live within our means, which would be a good thing.

The right thing to do is a mix of democrat and republican ideas. Cut military and social programs and raise taxes such that we can make a meaningful effort at keeping the debt from rising past 100% of GDP. Slight problem is you can't get elected if you state you want to cut Medicare and you can't get elected if you state you want an across the board tax hike (taxing the rich only will not make a dent).

I completely agree with cutting military and social programs, while raising taxes. But, only with a balanced budget amendment, privatization of social programs and the additional taxes going directly towards debt and not deficits.

[maat55]

[QUOTE]

New Zealand has a 25% consumption tax and it has caused a myriad of problems without solving the initial issues it was meant to resolve. If your current tax rate is 30%, imagine paying 30% more for each and every product and service you use. For example, the government could easily add a 30% consumption tax to gas at the pump. I would guess consumption would drop dramatically. It would also make public transportation more expensive. Do you have access to user friendly public transportation?

The point of having a consumption tax is to eliminate the income tax. Having both would be a travesty.

[disneysteve]

How do countries with a consumption tax adjust to compensate for the poor so that they aren't wiped out by taxes on necessities?

[Mozaik]

Apology, I read the discussion incorrectly...Denmark's consumption tax is 25%, New Zealand only 12% and are Value Added Tax with the end consumer paying. Business completes paperwork for reimbursement of their in-put costs. As best I can figure only food is exempt. [formerly snafu...somehow I've been given another moniker while my laptop has been intermittently going off line]

[Snodog]

How do countries with a consumption tax adjust to compensate for the poor so that they aren't wiped out by taxes on necessities?

Not sure what other countries do but the fairtax would offer a prebate.

[shanecurran]

That being said, just lifting the tax off of productivity in of itself would be far worth it. Motivating some people to work, where they never have been motivated before. Not saying every sloth would get up and work, but I think it could serve as a tipping point in some situations.

I am not following this argument. Are you saying that the reason we have unemployment is because we have income taxes?

Moreover, it's really not about not taxing what is "essential." Anything with any cost to society involves a cost.

We need to maintain an army to protect our oil interests - tax that. If you are rich and you own a mansion, tax that. . .as it's a big sinkhole of energy. You want a greasy hamburger. . .that's fine to consume. . .but there is an associated healthcare cost with that. . .tax that.

And so on.

I think you are talking about negative externalities involved with consumption of certain goods. I agree that these should be heavily taxed (assuming we are working with the current system as opposed to starting over-I would prefer going back to the drawing board, but that is not going to happen). In New York the taxes on cigarettes are such that a pack will cost you roughly $12, I think it is a great idea. The relative cost to society of consuming a good with a negative externality brings subjectivity into the equation, and all of the problems associated with it (lobbyists, special interests etc.) Also, if your mind is perverted by excessively studying economics (as mine is) then you can imagine externalities associated with the consumption of ALL goods.

For example think about an individual consuming a cherry tomato. You say there is no negative externality associated with the consumption of a cherry tomato-it is not bad for your health, you can walk into a grocery store, buy a cherry tomato, silently and secretly pop it into your mouth and eat it. On the other hand imagine a man standing next to you on the bus bite into a cherry tomato squirting juice in your face and on your clothes.

Sorry for the tangent but you see my point?

[shanecurran]

Extrapolating that to all other goods and services would likely reduce consumption and that causes business to lay off employees. GM and Chrysler offer a recent example of what happens when consumers reject your product.

This is a poor example for a few reasons. One problem is that taxes would be levied on all goods, so that consumption would not be affected in the ways you have described.

[disneysteve]

Extrapolating that to all other goods and services would likely reduce consumption

I think that is probably true but that isn't necessarily a bad thing in the long run.

Anytime you distance the consumer from the actual cost of the product, you create problems.

For example, how many times does a patient tell me they want a certain test or procedure or medicine because it doesn't cost them anything to get it. Their insurance pays the bill. If the patient had to pay, even partially, for that service, they would think twice before getting it done.

I think the same would be true of consumer goods. Right now, we all have very little control over how much we pay in taxes. With a consumption tax, we would have a great deal of control. If we want to pay less in taxes, we can adjust our buying accordingly. I think that would be a good incentive to live a simpler life. That would impact the economy initially but over time, I think it would be a good thing - less waste, less sprawl, less debt, etc.

[snafu]

Perhaps a better example is one offered by Shane C. Have the sale of cigarettes in New York state been affected since taxes were increased substantively? Is the tobacco industry as powerful a force as it was when their principals swore there was no evidence smoking was detrimental to health? Have the number of people working at all levels in the tobacco industry been reduced?

Yes there are other factors. I've wondered if McD type foods or sweet soda were taxed at 25%, would type II diabetes or obesity figures decrease?

[disneysteve]

Have the sale of cigarettes in New York state been affected since taxes were increased substantively? Is the tobacco industry as powerful a force as it was when their principals swore there was no evidence smoking was detrimental to health?

That is a good example. Smoking has decreased dramatically in this country over the years as more and more was learned about the dangers of smoking and as the cost has risen. The highest percentage of smokers is among the poor and many of them can no longer afford to smoke like they used to. Plus, thanks to smoking bans, there are fewer and fewer places where you can smoke indoors. That has also helped a lot.

As for taxing junk food, I'm sure that would help, too. The McD Dollar menu is a terrible creation. It encourages people, again especially the poor, to buy cheap crap instead of a decent meal.

[maat55]

This is a poor example for a few reasons. One problem is that taxes would be levied on all goods, so that consumption would not be affected in the ways you have described.

Products already have hidden/embedded taxes built in. A consumption tax would eliminate those taxes and replace them with a transparent tax. The Fair Tax research has determined that goods and services, on average, have 22% embedded taxes. This is why it offers a 23% tax(inclusive to replace inclusive hidden taxes) to replace the current system which is cumbersome and costly to manage.

[disneysteve]

Products already have hidden/embedded taxes built in. A consumption tax would eliminate those taxes and replace them with a transparent tax. The Fair Tax research has determined that goods and services, on average, have 22% embedded taxes. This is why it offers a 23% tax(inclusive to replace inclusive hidden taxes) to replace the current system which is cumbersome and costly to manage.

How would it replace embedded taxes, though? The manufacturer would then be paying the 23% tax on the raw materials to make the product which would then have the 23% tax paid by the final buyer. Or would things bought in that manner, like raw materials to make another product, not be taxed?