Sounds like a steep cliff to me

[SEA]

It doesn’t matter how much they increase tax rates– they won’t collect any more money.

They could cut the entirety of the Federal Government’s discretionary budget– no more military, SEC, FBI, EPA, TSA, DHS, IRS, etc.– and they would still be in the hole by a quarter of a trillion dollars.  Sounds like a steep cliff to me


http://www.sovereignman.com/expat/i-apologize-for-what-youre-about-to-read-9397/

[Admin]

It doesn’t matter how much they increase tax rates– they won’t collect any more money.

They could cut the entirety of the Federal Government’s discretionary budget– no more military, SEC, FBI, EPA, TSA, DHS, IRS, etc.– and they would still be in the hole by a quarter of a trillion dollars.  Sounds like a steep cliff to me


http://www.sovereignman.com/expat/i-apologize-for-what-youre-about-to-read-9397/

He glazed over a few important things to make his point.  He wrote that the tax rate that we have historically collected has been a near constant in relation to the GDP but then stated a range of over 6%.  6% of the GDP is a Trillion bucks.  If we collected 6% more tax in relation to GDP and did nothing to lower spending (and hopefully we will do something there as well) we could pay off the debt in short order.  

Otherwise, I agree with him.  In fact I think he might be pirating content from the zone

http://www.standupzone.com/forum/index.php?topic=17715.msg166283#msg166283

[Admin]

The Fiscal Cliff (love that) is proving to be hysterical to watch.  You have the Dems in a position where everyone's taxes will soon rise with absolutely no action required on their part (which in truth, they want), and the plausible deniability that the uncompromising Republicans forced them into a position of manifest inaction.  Would the Dem leadership prefer that they could have these increases affect only the rich?  Ostensibly yes, but if the Repubs are willing to play the uncompromising force that will not protect the middle at the sake of the rich...oh well.

The catbird seat?  What?

[PonoBill]

Underlying most debates about taxes is the idea that increasing taxes automatically and inevitably stops investment and decreasing taxes increases investment and commerce. It's stated as a maxim even though history says otherwise and the tax rates are currently skewed in ways that make nearly no sense and have everything to do with political favors bought and sold.

How this makes sense to people eludes me. I understand this is anecdotal, and people like to use the broader sweep of generalized economics, but my investment choices have to do with whether or not I think I can make money from something, not what the resulting taxes will be. Small(ish) businesses work like that. I don't know anyone who has significant money to invest that is restrained by tax rates until those rates approach the bad old days of the 70's or the insane confiscatory practices of some European countries. Even then, investment and effort is skewed by the tax, not stopped by it.

The government could easily increase taxes by 10 percent without having a significant effect on commerce. Just as it could easily decrease entitlement and defense spending by 10% (270 Billion) without significant impact. But they won't. I expect the administration to screw this up royally. I don't think the next four years are going to make us stronger and better. I think the Republican party is going to completely screw up the opportunity to make the democrats looks as stupid and greedy as the unions do right now with hostess Twinkies all over their jobless faces. I don't expect the dems to do anything about entitlements since that's how they buy a lot of votes (Romney was RIGHT about that but STUPID to say it). Lots of opportunity to fix broken things, but just like the Twinkie problem, the idiots are in charge. 

[JeanG]

I don't know anyone who has significant money to invest that is restrained by tax rates until those rates approach the bad old days of the 70's or the insane confiscatory practices of some European countries. Even then, investment and effort is skewed by the tax, not stopped by it.

Effective tax rates on income, in high tax states such as CA/NY/MA/etc, are similar or higher than in the 70's. Many loopholes and lax enforcement in the 70's, despite high headline rates.

Compared to almost every Continental European nation, effective taxes are significantly higher in the US high tax states - for the rich. The US taxation system is dramatically more progressive than the Continental European countries (high VAT, fuel, and less progressive income tax brackets). Top tax rates - especially effective tax rates - are far higher in the US than the EU norm.

Also note that a wealthy German or Frenchman may simply spend much time in Switzerland/Dubai/Monaco/etc and avoid paying almost any tax at all. US citizens are taxed on all income regardless of residence and where the income was earned/accrued. This is quite unusual amongst other nations.

US tax enforcement is far stricter than other OECD nations, further raising US effective tax rate.

Many EU nations also have zero estate tax.

Overall, US is considered to have amongst the most progressive taxation regimes in the OECD, and is amongst the most highly taxed jurisdictions for wealthy individuals - particularly for those earning income and not capital gains. For those whom do earn capital gains, the US is still on the higher end, as the US corporate tax rate is quite high.

Outside of CA/NY/MA/etc, US taxation for wealthy is middle of the road amongst OECD nations.

[headmount]

What I have a hard time understanding is why Lindsey Graham and John McCain are still ranting about the Benghazi affair, distracting from the issue at hand which is this budget crisis.  Automatic spending cuts will take place across the board unless there is an agreement on what cuts should be prioritized.  

In S.C., Grahams' state, if defense cuts are made in a state whose economy is almost dependent on military spending, his seat might be threatened next time around. You think he'd be in the pulpit ranting about how we need to keep defense strong.  And maybe he could have made this his point with this Benghazi affair... that we were too weak to defend our consulate.  

Instead, on Meet The Press this morning, Graham was ranting on how Obama manipulated the narrative on the Benghazi affair in order to maintain his image of the tough-on-terror guy... protecting his image for the election.  Then, immediately after the Benghazi discussion, Graham, a republican, gave Romney a tongue lashing for Romneys' recent comments on how the election was won, essentially crying over split milk about how Obama won by buying votes.   It's OK for Graham to whine about foreign policy but not Romney about the economy?  

Graham appeared puffy faced this morning on Meet The Press, like he'd been on a bender since the election results came in and went on a vehement rant and had to be stifled by Gregory.  After the election Graham was quoted as saying that the GOP didn't produce enough angry white men.  On MTP he definitely showed that he was still holding that banner.  One thing that he  conveniently avoided  discussing was why congress had turned down extra security funding for these consulates.  

And even if it's true that Obama distorted his image for the sake of reelection, it wouldn't be the first time that's ever been done.  Isn't that what always happens in elections?  In any case it's not an impeachable offense so it seems that the time has come to move on.  But Graham and McCain are doubling down and looking like loons doing so.

McCain is really going off the deep end and it feels crappy to say that.  I remember what he went through in Hanoi along with many other POW pilots.    Earlier in his political career he seemed even keeled but now... he's just not making any sense.   From the input I've heard from other republicans, Graham and McCain seem to be out on their own limb.  Many bright young entries in the GOP want to address this budget crisis and stop the focus on looney tunes from either Graham, McCain or Romney.  Distraction from this budget issue isn't what we need right now.

[Admin]

Automatic spending cuts will take place across the board unless there is an agreement on what cuts should be prioritized.

There are many who want the current cuts to expire with no additional tax cuts at all.  Course there is no benefit to saying that aloud as inaction will reap exactly that result.  The term Fiscal Cliff appeared on November the 7th.  Whose creation was it?  Why were the Dems silent about this Cliff before then?  The Republicans want to maintain tax the current tax breaks for the rich but does the dem leadearship really care if the Republicans force them into a position of allowing a higher tax rate for the middle?  Hardly, it is perfect for them (especially with the deniability of the minority position and an opposing majority leadership that has publicly stated that it is their goal to block minority efforts).  I am wondering what kind of leverage Boehner, etc feel like they are bargaining with.  

The perfect scenario for Dem leadership right now is for them to vociferiously (and without compromise) defend the platform that they ran on and then lose.  Losing this fight (but not compromising) puts them in and ideal spot both to fulfil a major promise and it offers a great argument to gain back the majority in two years.  In the meantime they can collect some extra revenue.

[headmount]

Current tax cuts or spending cuts?  The quote you used from me was about spending and I think  they're two different battles.  But yes I agree with you about the cagey-ness of the battle.  On taxes I thought what PBill wrote was right on.

[Admin]

Current tax cuts or spending cuts?  The quote you used from me was about spending and I think  they're two different battles.  But yes I agree with you about the cagey-ness of the battle.  On taxes I thought what PBill wrote was right on.

Both.  It would be unpopular for a dem minority to advocate a 10% cut to discretionary defense spending or a medicare reduction (all of which will be cut from providers) but how upset are they?  This has fallen into their laps and I would expect only the necessary resistance.

The whole concept of this Cliff and its immediacy is awesome in it's rediculousness.  It should be put to music, same as Mel Brooks, The Inquisition.  The fiscal cliff, the fiscal cliff...

How long have we had to see this cliff coming?  Oh wait, we have known this imminent danger was coming since 2001 (OK, part of it from 2003).

[PonoBill]

Effective tax rates on income, in high tax states such as CA/NY/MA/etc, are similar or higher than in the 70's. Many loopholes and lax enforcement in the 70's, despite high headline rates.

Yes indeed, and in fact in many ways the loopholes were the source of a lot of investment. Of course some of the truly bullshit loopholes didn't actually work out so well. But that was more late 80/early 90's than 70s.

What we can actually expect to happen is exactly what Randy posits--the democrats have a lovely opportunity to make the hole a lot bigger without being blamed for it. And I expect that they will.

[PonoBill]

Also note that a wealthy German or Frenchman may simply spend much time in Switzerland/Dubai/Monaco/etc and avoid paying almost any tax at all. US citizens are taxed on all income regardless of residence and where the income was earned/accrued. This is quite unusual amongst other nations.

Well, there is a $92,500 exclusion for non-resident citizens, but that may (probably won't) not be continued in next year's tax code.

[SEA]

I understand and even agree with some of the tax ideas...... however it is all a mute point our house is completely bankrupt.  Does anyone comprehend the magnitude of the debt the US government owes.

Cutting out and ending EVERY federal agency and administration would still leave us in the hole by a quarter trillion dollars this year !!   Then lump in the trillions and trillions we owe for mandatory spending obligations like medicare and SS and this whole conversation about what the dems and repubs will do seems completely pointless.

If you owed a 100,000,000 and your annual  income was 7,000,000 but your annual expenses were 12,000,000, even if you cut your expenses by 5,000,000  you will still owe the 100,000,000  with no possibility of ever paying it off.  There is no difference between that scenario and the one the United States Government faces....... It is amazing to me how people can't see this and continue to bicker and argue about how much taxes we should increase or cut or how much spending we should cut back on !!!! My 12 year old daughter understands the big picture why can't americans face the real truth of the matter. We can never pay of the debt , it is a mathematical fact. If you took the top 2 percent richest people and took ALL they owned..  100%  (property, bank accounts ,businesses, all assists) it won't even cover the annual cost of running this government !! 

we are in deep SHIT !!!  no other way to put it.

Of course the Government will keep us distracted with the whole fiscal budget, debt ceiling increase , Iran, Syria, Gaza, sex scandals.... and PRINT more money. But eventually the chickens will come home to roost and we will suffer in a major way for our foolishness.

[Admin]

We can never pay of the debt , it is a mathematical fact.

Hi SEA,

The 6% swing that I mentioned above from the article that you posted (6 % swing in tax percentages of GDP that have been collected in recent history) would pay off the debt in short order.  A combination of tax increases and spending reductions would do it with less individual pain, but it will still be painful.  Individuals, companies, countries, can exist with debt (even lots of debt) but at a certain point it becomes crippling.  We are getting there.  This last election showed us again, however, that no one wants to pony up.  Not personally.  This time around it was more like, who's gunna pay the bill...it's them! 

[PonoBill]

US GDP is 13 trillion, public debt is about 11 trillion, total debt (including instruments like the SS trust fund) is 16 trillion. Your math is off by a factor of ten, which would indeed be untenable. Medicare and Social Security are not mandatory spending obligations--every statement for SS I get from the government says right on the statement that it's going away, not going to be there, don't count on it buddy.

The debt to GDP ratio was substantially higher than now in the 50's. It can be corrected. But I'm pretty sure we've hired the wrong guy to do it.

[Admin]

http://www.usdebtclock.org/

GDP is 15.5 Trillion.  6% of that is just under 1 Trillion.  Put that back in the kitty and you have no debt in 15 years.  Now, what the Pres is actually proposing in regards to the rich will only add 1.5 trillion back in over 10 years.