Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 09-08-2010, 10:44 AM   #21
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
I did it
I had to raise taxes
and cut spending even more
and we can still do a trip to Mars
__________________

__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-08-2010, 11:30 AM   #22
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
Quote:
Originally Posted by samclem View Post
Thanks for the link. It's an interesting calculator. Observations:
- I'm fairly sure there's no dynamic modeling going on here (e.g. cutting tax rates doesn't increase economic activity and possibly produce higher net govt revenue, etc).
This is not an issue of dynamic modeling. This would take magic fairy dust. Business tax rates in the USA are so low that you cant self finance a tax cut

"The countries with most potential for self-financing tax cuts are the welfare states in Northern and Western Europe. At the other end of the scale, with transfer-adjusted tax rates well below ten percent, we find the United States, Iceland, and Korea, where public transfers are modest fractions of private consumption."

On the analytics of the dynamic Laffer curve*1

ScienceDirect - Journal of Monetary Economics : On the analytics of the dynamic Laffer curve*1
__________________

__________________
Emeritus is offline   Reply With Quote
Old 09-08-2010, 12:12 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,617
Quote:
Originally Posted by Emeritus View Post
This is not an issue of dynamic modeling. This would take magic fairy dust. Business tax rates in the USA are so low that you cant self finance a tax cut

"The countries with most potential for self-financing tax cuts are the welfare states in Northern and Western Europe. At the other end of the scale, with transfer-adjusted tax rates well below ten percent, we find the United States, Iceland, and Korea, where public transfers are modest fractions of private consumption."

On the analytics of the dynamic Laffer curve*1

ScienceDirect - Journal of Monetary Economics : On the analytics of the dynamic Laffer curve*1
Thanks, that's an interesting study and the authors are very clear that their work has limited application, that more work is needed, and that previously published work (Ireland, 1994) reached different conclusions (esp about the impact on govt revenues in the US from a decrease in taxes). Modesty is becoming in an academic, we should see more of it.

I am curious as to why you bring up business tax rates in particular. Surely you're not claiming that US corporate tax rates are low by OECD standards.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 09-08-2010, 12:43 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Didn't care much for the options presented, or the assumptions/implications made...

I would support drastic spending cuts, and higher taxes, in the longer-term, but neither seems wise in the short-term, due slow economy/high unemployment...
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 09-08-2010, 01:37 PM   #25
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
Quote:
Originally Posted by HFWR View Post
Didn't care much for the options presented, or the assumptions/implications made...
LOL I thought the same thing, but still played the game

tax cuts should create jobs (which pay taxes) and that type of pull through only had a net cost, but not a net benefit in increased tax revenues.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 09-08-2010, 02:02 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by jIMOh View Post
LOL I thought the same thing, but still played the game

tax cuts should create jobs (which pay taxes) and that type of pull through only had a net cost, but not a net benefit in increased tax revenues.
I think tax cuts creating jobs depends upon the starting point. If people are finding it difficult to make ends meet and the tax cuts allow for disposable income and the people spend (instead of saving); the cuts should create jobs. I don't think we are there in the USA.

I also, don't think the '86 Reagan tax cuts of the 80s created the bull market and economic prosperity. We were coming out of the down business cycle with which the cuts coincided. Some of the cuts were good, but we probably would be better off now with a lower national debt and budget deficit.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 09-08-2010, 02:48 PM   #27
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
Quote:
Originally Posted by dex View Post
I think tax cuts creating jobs depends upon the starting point. If people are finding it difficult to make ends meet and the tax cuts allow for disposable income and the people spend (instead of saving); the cuts should create jobs. I don't think we are there in the USA.

I also, don't think the '86 Reagan tax cuts of the 80s created the bull market and economic prosperity. We were coming out of the down business cycle with which the cuts coincided. Some of the cuts were good, but we probably would be better off now with a lower national debt and budget deficit.
In my state (Ohio) consider the following from a "self employed" person making 500k before taxes

off the top is
35% fed tax
5.5% Ohio tax
6.2% SS tax (employee)
6.2% SS tax (employer)
1.45% medicare tax (employee)
1.45% medicare tax (employer)

The fed tax bill alone is $175,000 if I did that math right
just drop that tax to 32%.

If that person can hire a contractor for $15,000 to make him more money, then the government wins...

They can tax the 15.3% socialist taxes again AND a small amount of federal taxes, plus take one person off the unemployment payroll.

If there are 60 million people on unemployment payroll, can we drop taxes on the the 60 million richest people, in hopes they hire someone to make them more money?

I am being faced with this decision now- at one point do I hire someone to help me make more money? If I make 120k now, would I hire someone to earn me 15k more money? Maybe. 20k? almost. 30k? for sure.

If the tax I was paying at 120k was lower, the probability I would hire someone to help is higher (because I get to keep more of it and break even points are lower- so it lowers my risk).
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 09-08-2010, 02:56 PM   #28
Moderator Emeritus
 
Join Date: Oct 2007
Posts: 4,929
Quote:
Originally Posted by dex View Post
I think tax cuts creating jobs depends upon the starting point. If people are finding it difficult to make ends meet and the tax cuts allow for disposable income and the people spend (instead of saving); the cuts should create jobs. I don't think we are there in the USA.
Right now the US (and much of the rest of the world) is coming off of a structural economic problem, a 'credit crunch', and a good bit of income that might normally go to discretionary spending is instead going to debt reduction, which produces less economic activity than spending.

Now, paying down debt is not a horrible thing for individuals or businesses to do. It does mean that we will see less economic activity, and less growth, for the near term than if that money were flowing into new goods and services. That means that fewer jobs are being created.

The gotcha is that in the US, an average of roughly 120,000 new would-be workers enter the workforce every month. In order to just tread water on unemployment, we would need to create 120,000 new jobs every month, which would require more economic growth than we currently have.

We won't see that sort of growth until we worked off a good bit of our structural 'hangover.'
__________________
M Paquette is offline   Reply With Quote
Old 09-08-2010, 03:01 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by jIMOh View Post
In my state (Ohio) consider the following from a "self employed" person making 500k before taxes

off the top is
35% fed tax
5.5% Ohio tax
6.2% SS tax (employee)
6.2% SS tax (employer)
1.45% medicare tax (employee)
1.45% medicare tax (employer)

The fed tax bill alone is $175,000 if I did that math right
just drop that tax to 32%.
I think the 175K is off some - the 35% is the marginal rate and the state and employer taxes are subtracted to get to the adjusted gross income subject to tax - but check me on that. It has been awhile since I read the income tax laws.

Quote:
Originally Posted by jIMOh View Post
If that person can hire a contractor for $15,000 to make him more money, then the government wins...

They can tax the 15.3% socialist taxes again AND a small amount of federal taxes, plus take one person off the unemployment payroll.

If there are 60 million people on unemployment payroll, can we drop taxes on the the 60 million richest people, in hopes they hire someone to make them more money?

I am being faced with this decision now- at one point do I hire someone to help me make more money? If I make 120k now, would I hire someone to earn me 15k more money? Maybe. 20k? almost. 30k? for sure.

If the tax I was paying at 120k was lower, the probability I would hire someone to help is higher (because I get to keep more of it and break even points are lower- so it lowers my risk).
When working I would have been all in favor of a flat tax or national sales tax in place of the current income tax. Now that I'm ER, I think the current income tax works in my favor.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 09-08-2010, 06:11 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,451
Quote:
Originally Posted by jIMOh View Post
In my state (Ohio) consider the following from a "self employed" person making 500k before taxes

off the top is
35% fed tax
5.5% Ohio tax
6.2% SS tax (employee)
6.2% SS tax (employer)
1.45% medicare tax (employee)
1.45% medicare tax (employer)

.
Well to start off SS tax only applies to the first 106K so once you get over the figure the marginal tax rate drops to just over 40% since the Ohio tax is deductible. It is also a very rare self employed person who doesn't take advantage of company cars, cell phones, computers, as well entertainment. I suspect most have capital gains and depreciation expenses also.

I think there are definitely times and tax rates where cutting the top marginal tax rates will create more jobs and increase economic activity that will result in higher revenue for the government and more prosperity for all.

However, I don't believe that at the current tax rates and the current situation that cutting taxes will do much other than increase the deficit.


As for the simulator, I thought it was ok. I reached the end having only cut 1/2 of what was need and didn't feel like going back and re-doing.
__________________
clifp is offline   Reply With Quote
Old 09-08-2010, 08:34 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,617
In 2007, the federal budget (incl SS expenditures) was $2.8 trillion. The CBO estimated that Iraq and Afghanistan war-related expenses added another $115B, so we've got a total of approx $3 trillion in spending for 2007. (Source--Wikipedia)

As far as I recall, the government seemed to be accomplishing its required functions in 2007. Adjusted for inflation, the 2007 federal budget would have been approx 3.1 trillion today

Now, here it is 2010 and the federal budget is $3.5 trillion. We're wringing our hands about the terrible choices we must face if we are to get the expenditures down. Hmmm.

I know chopping out $400B to get to the 2007 federal spending level won't get us a balanced budget, but it's a move in the right direction. Yes, we've added some folks to the Social Security and Medicare rosters since then, but I know that the administration has found some heretofore unknown/unexploited efficiencies to be had in Medicare that can go toward meeting that tab.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 09-08-2010, 08:44 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by samclem View Post
I but I know that the administration has found some heretofore unknown/unexploited efficiencies to be had in Medicare that can go toward meeting that tab.
soylent green?
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 09-08-2010, 09:20 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,617
Quote:
Originally Posted by dex View Post
soylent green?
It's a natural fit. We know the administration has proposed funding for "green jobs" and "green energy", this could be the big secret.

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 09-08-2010, 09:56 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by samclem View Post
It's a natural fit. We know the administration has proposed funding for "green jobs" and "green energy", this could be the big secret.

I liked that movie. I think it didn't do well because it was lumped in with all the other disaster movies made in the '70s
Considering that movie was made in '73 (based upon a book written in the early '60s) it was pretty good. It hits upon many of the issues we have today.

There was talk about a re-make but I don't know what the hook would be today.

That poster looks as if it is from Mad Magazine - another favorite of mine.

The movie is set in 2022 - 12 years to go.

__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 09-08-2010, 10:57 PM   #35
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
Quote:
Originally Posted by samclem View Post
Thanks, that's an interesting study and the authors are very clear that their work has limited application, that more work is needed, and that previously published work (Ireland, 1994) reached different conclusions (esp about the impact on govt revenues in the US from a decrease in taxes). Modesty is becoming in an academic, we should see more of it.

I am curious as to why you bring up business tax rates in particular. Surely you're not claiming that US corporate tax rates are low by OECD standards.
Nominal Business tax rates have little or nothing to do with the actual taxes businesses pay
http://www.oecd.org/dataoecd/30/16/41069272.pdf

"Federal plus state corporate income tax revenues in 2004 totaled $225.8 billion, or 2.1 percent of GDP. Corporate income taxes are also a
major source of revenues in other countries. For members
of the Organization for Economic Cooperation and Development
(OECD), corporate income tax revenues in 2002—the most recent year for which data are available— averaged 3.4 percent of GDP"

http://www.cbo.gov/ftpdocs/69xx/doc6...rporateTax.pdf
so

So if we increased corporate taxes by 50% we would be at the OECD average.

Yeh--I'll call that low
__________________
Emeritus is offline   Reply With Quote
Old 09-09-2010, 10:17 AM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,617
Quote:
Originally Posted by Emeritus View Post
Nominal Business tax rates have little or nothing to do with the actual taxes businesses pay
http://www.oecd.org/dataoecd/30/16/41069272.pdf

"Federal plus state corporate income tax revenues in 2004 totaled $225.8 billion, or 2.1 percent of GDP. Corporate income taxes are also a
major source of revenues in other countries. For members
of the Organization for Economic Cooperation and Development
(OECD), corporate income tax revenues in 2002—the most recent year for which data are available— averaged 3.4 percent of GDP"

http://www.cbo.gov/ftpdocs/69xx/doc6...rporateTax.pdf
so

So if we increased corporate taxes by 50% we would be at the OECD average.

Yeh--I'll call that low
It's questionable whether it is appropriate to compare the taxation burden experienced by businesses in different countries by using "corporate taxes as a % of GDP."

An appropriate metric is the "effective corporate tax rate", and it's not an easy statistic to find (obviously, it will be subject to some degree of subjectivity, especially concerning what constitutes "income"). Here's one private study by the American Institute of CPAs with data from 2007. The information came from the actual review of the records of thousands of companies, and the ETR includes taxes paid to sub-national entities and even to foreign countries (when applicable). Due to the various ways the tax codes exclude income, etc, there's a big difference between the statutory highest marginal rate (the US clearly has among the highest statutory marginal rates, at 35%) and the effective taxation rate. But, hey, hey, the US still come out near the top with an effective rate of 29%. From the study:

Quote:
Also consistent with expectations, U.S.-based companies pay an effective rate of approximately 29 percent, three percentage points above the worldwide average of approximately 26 percent. However, a few countries pay even higher effective rates: Argentina, Japan, Italy and Russia.
Here's a direct link to the table of statutory and effective corporate tax rates in the study: link
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 09-09-2010, 10:23 AM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by Emeritus View Post
Nominal Business tax rates have little or nothing to do with the actual taxes businesses pay
http://www.oecd.org/dataoecd/30/16/41069272.pdf

"Federal plus state corporate income tax revenues in 2004 totaled $225.8 billion, or 2.1 percent of GDP. Corporate income taxes are also a
major source of revenues in other countries. For members
of the Organization for Economic Cooperation and Development
(OECD), corporate income tax revenues in 2002—the most recent year for which data are available— averaged 3.4 percent of GDP"

http://www.cbo.gov/ftpdocs/69xx/doc6...rporateTax.pdf
so

So if we increased corporate taxes by 50% we would be at the OECD average.

Yeh--I'll call that low
So, if we increase corporate taxes 50% we'll lower unemployment and fix the economy? Uh, not really...........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 09-09-2010, 10:25 AM   #38
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
Quote:
Originally Posted by samclem View Post
It's questionable whether it is appropriate to compare the taxation burden experienced by businesses in different countries by using "corporate taxes as a % of GDP."
Here's a direct link to the table of statutory and effective corporate tax rates in the study: link

Its a totally correct measure if you are trying to figure out how much of the social burden is borne by corporations, which is the underlying policy question.

Tax revenues are directly related to GDP. any laffer style claim has to show an increase in GDP
__________________
Emeritus is offline   Reply With Quote
Old 09-09-2010, 10:32 AM   #39
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
Quote:
Originally Posted by FinanceDude View Post
So, if we increase corporate taxes 50% we'll lower unemployment and fix the economy? Uh, not really...........
Not the question. The short term USA economy is clearly suffering from a lack of consumer demand due to high unemployment and poor job protection. The long term economy is much more complicated.

Corporate taxes are an excise tax on the benefits of the corporate form of governance. Those benefits are provided by government and are substantial. They are also always a matter of choice. No one needs to pay corporate taxes. Organize your business as a sole proprietor or a partnership and you pay no corporate taxes. If you want the benefits, pay the fee.
__________________
Emeritus is offline   Reply With Quote
Old 09-09-2010, 10:56 AM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,295
We have gotten onto taxes more than what I think the OP wanted... but I will throw in an issue that seems to be left out...

My boss is one who makes over the $250K... and guess what... he says all the time he gets screwed... he had people do research for the research credit... but did not get to use them because after a SMALL amount of credit he hit the AMT tax... IIRC, he has over $60K of credits that he can not use...

So, any tax break they come up with, he will not do anything because HE will not get the benefit of it... you will need to change the AMT before someone like him will do anything...
__________________

__________________
Texas Proud is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
The five spice challenge tuixiu Other topics 34 05-16-2010 09:27 PM
Iron catfood challenge calmloki Other topics 5 08-19-2009 07:21 PM
Need ideas for photo challenge Webzter Other topics 21 07-26-2007 07:56 AM
Secured debt (HELOC) vs Unsecured debt (credit card) Sue J FIRE and Money 6 03-07-2007 11:02 PM
Good Debt vs Bad Debt Tommy_Dolitte Young Dreamers 7 09-13-2004 10:37 PM

 

 
All times are GMT -6. The time now is 12:53 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.