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Same size or bigger, we are on the right track and just need the people with money to poney up additional taxes? 19 20.88%
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Old 07-13-2011, 10:06 AM   #121
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I can see how raising the tax rates at the higher income levels can lead to job and therefore economic growth. It comes in 2 parts.


For the 1st part, consider an example of a business owner, who owns a non-corporate business or a single owner LLC (which files profits/losses on the owner's personal tax return) that employs multiple people. Fortunately for this business owner, s/he is expecting a large net profit from his/her business this year. This business owner has a decision to make, s/he can choose to 1) use that net profit to expand the business this year. This expansion would be done by either upgrading/buying additional equipment or hiring more employees (or both) which makes said profit tax deductible (by eliminating it) and increases the value of the business. Or 2) not expand the business and therefore realize the profit on his/her 1040 schedule C, pay income taxes on said profit and then either spend or save what is left. I suggest that the higher the marginal income tax bracket rate is for this business owner the more likely s/he will reinvest that year's profit back into the company, so as to avoid those taxes and make the company more valuable, hoping to cash in on the CG laws. This reinvestment will create jobs at this company and/or the companies that build the equipment used by this company.


For the 2nd part, consider the higher income taxes paid to the federal government. All else being equal this additional tax collected will offset with an equal about of debt and therefore our public debt will be lower. This means there will be less interest paid by our government and therefore there will be more effective use of those tax dollars (again all other things being equal). More effective use of tax dollars (via less interest paid) should help the economy grow.

To me there is a huge flaw in this logic...

The business owner will only invest to grow his business if there are customers.... putting money into a business that is not attracting a lot of new customers is wasting money....

A good busines owner will expand his business when he/she can expect to make a profit on that expansion, which includes taxes... raising taxes will make a lot of marginal expansions not happen...
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Old 07-13-2011, 11:18 AM   #122
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If economy picks up and a business owner sees opportunity to grow the business, is he not going to expand because the marginal rates are a couple of percentage points higher?

I guess the potential for higher revenues and profits would have to exceed the higher tax bite to make it worthwhile.
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Old 07-13-2011, 11:23 AM   #123
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Do you think there will be any clarity then?

There will always be another election 2 years away.
Maybe I am naive about the American people, but it would be nice to see someone try something new instead of the same old narrow minded polarized rhetoric from politicians, media, special interests and the electorate. Wonder what would happen if Obama tried it in prime time, and stuck with the theme until the media and the electorate faced it? Decades of kicking the can down the street has gotten us nowhere but further in the hole. Wishful thinking I guess, but what's the saying 'insanity is doing what you've always done and expecting different results.'

BTW, the proposals I mentioned in the post above aren't useless, but none of them alone solve the problem.
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Old 07-13-2011, 11:29 AM   #124
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How many people on this forum wants SS or Medicare cut?

Is it possible to keep the current level of benefits without raising taxes?

To shrink govt. SS, Medicare and the military will have to be cut. Do people who want to RE expect not to count on Medicare at least?
I assume this is tongue in cheek. Of course everyone wants the status quo, but I'd like to see a balanced budget that realistically balances the budget without increasing revenues (some could come from an economic expansion, but some will have to come from taxes IMO), reducing Soc Sec, reducing Medicare and reducing defense spending - all four. Interest won't go away, in fact it'll get worse when interest rates rise (and they will). And the rest can be on the table, but eliminating all other spending only makes a dent in the deficits we're running. The big four can't be avoided as far as I can see.

I am planning on a lesser Soc Sec and Medicare benefit. Anyone who is about to retire or retired in the last 10 years or so who didn't has been asleep at the wheel IMO.
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Old 07-13-2011, 11:43 AM   #125
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Medicare will probably devolve into something where end of life care is modest. So rather than spend really big bucks on those that have little chance to make it, spend the available money on those that can benefit from it.

If they do something like that then Medicare can be made much more affordable.

I have seen in my own extended family, how outrageously expensive and (arguably) wasteful Medicare can be.
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Old 07-13-2011, 12:03 PM   #126
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It wasn't tongue in cheek because the poll shows most people here want smaller govt.

But smaller govt. implies cuts to SS and Medicare, two things which presumably a lot of people here rely on for ER planning.

As far as waste in Medicare, how much would the care have cost through private insurance, assuming private insurance would cover the elderly who have preexisting conditions?

Or would the "waste" have been eliminated by not providing care for people of a certain age?

My father just had major surgery. Medicare covered most and he is paying several thousand out of pocket for hospital stay and tests before and after. He has resources but without Medicare, his savings would be destroyed.

He's been paying premiums for supplemental coverage for over a decade. Now if he had had to pay private insurance premiums for that time, before really making claims for a serious condition, would he still have resources?

Or would the insurance company cover the surgery and other associated care?
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Old 07-13-2011, 12:14 PM   #127
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It wasn't tongue in cheek because the poll shows most people here want smaller govt.

But smaller govt. implies cuts to SS and Medicare, two things which presumably a lot of people here rely on for ER planning. With all due respect, anyone who is planning retirement or retired in the last 10 years or so counting on no change in entitlements has not been paying attention IMO.

As far as waste in Medicare, how much would the care have cost through private insurance, assuming private insurance would cover the elderly who have preexisting conditions?

Or would the "waste" have been eliminated by not providing care for people of a certain age?

My father just had major surgery. Medicare covered most and he is paying several thousand out of pocket for hospital stay and tests before and after. He has resources but without Medicare, his savings would be destroyed. Who ever proposed eliminating Medicare or any other existing program? We're talking about reducing benefits and/or reducing the rate of increased spending. When politicians talk "cuts", they are usually talking reducing projected spending.

He's been paying premiums for supplemental coverage for over a decade. Now if he had had to pay private insurance premiums for that time, before really making claims for a serious condition, would he still have resources?

Or would the insurance company cover the surgery and other associated care?
By and large health care costs what it costs. Premiums are a small part of the cost, they don't necessarily translate to the actual cost of the health care. If "premiums" are lower, it's largely because they're subsidized by taxpayers, not that they are cheaper. So while your "premium" may be less, you (or the rest of us) are paying the rest of it through taxes, Medicare isn't really cheaper.

As for waste, it's been shown over and over that the health care costs in the US are (much) higher than the rest of the world. Look at the charts below, or Google your own, they're all over the place. The first argument that we have better health care here is not borne out by longevity, infant mortality or any other metric that I know of. The arguments used against universal health care (long waits/poor access, inferior care) have also been largely disproven, not hard to find that information.

We can argue forever about how, but let's get on with it and do something. It's not going to get better through inaction...
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Old 07-13-2011, 12:28 PM   #128
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Well one of the politicians talking about changes to Medicare is essentially talking about eliminating it in favor of vouchers to buy private insurance.

So that's more than just a few cuts.

They did do something but a big part of the electorate wants it repealed before it's fully implemented and we have a chance to see if it improved things or not.
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Old 07-13-2011, 01:12 PM   #129
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Well one of the politicians talking about changes to Medicare is essentially talking about eliminating it in favor of vouchers to buy private insurance.
That would be Paul Ryan. However, he is suggesting an insurance exchange where ALL private companies could be on the platform and the public decides who gets their business, that is a FAR CRY from Obamacare.

My feeling is Obamacare will be fully implemented, will not do what we think, but by then it will be an entitlement program that is so large and complex it can't be repealed or changed, and will hasten our rush to implementing austerity measures of our own, but that's just me.........
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Old 07-13-2011, 02:04 PM   #130
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I'm not clear that those vouchers would be workable without some of the changes required in Obamacare.

If Obamacare is repealed, the insurance companies will just cherry pick the healthiest seniors and take their vouchers, while leaving the sicker seniors without coverage.

Insurance is not a particularly good model for paying for health care. Those that are deemed high risk get priced out of the system. This is only going to get worse, as insurance companies get better and better at determining who is going to be expensive and who will not. I wouldn't be surprised if in the future some genetic testing at birth made people uninsurable.

Using private insurance as the payment method is going to require a mandate that insurance companies take all comers, and that requires a mandate that everyone buys insurance. ie the basic premise of Obamacare.


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That would be Paul Ryan. However, he is suggesting an insurance exchange where ALL private companies could be on the platform and the public decides who gets their business, that is a FAR CRY from Obamacare.

My feeling is Obamacare will be fully implemented, will not do what we think, but by then it will be an entitlement program that is so large and complex it can't be repealed or changed, and will hasten our rush to implementing austerity measures of our own, but that's just me.........
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Old 07-13-2011, 03:39 PM   #131
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After thinking about it for a bit.... I wondered how we were paying 20% of our budget toward interest... so I looked it up myself.... and we are FAR from paying 20%... it shows 6%.

Now, this is not from a gvmt site, so the split might not be the same as other would have.... who knows what is in that 12% welfare..


Now if I used the number below... I would cut as follows, the percent is based off of 100% of the budget.....

Education 3% (should be paid for by state an local)
Welfare 10.0% (sorry, can't afford this at this time)
Defense 10.0 (get us out of these wars and cut back our military)
Health 8% (this probably includes all sorts of items, so it can be any of them)
Transportation 3% (same as education for the most part)
Pensions 6% (sorry, your checks just got smaller as we can not afford to pay them)


Again, once revenue starts to come back you can increase some of the spending here and there.... but it will not come back anywhere close to what we are spending now...











US Federal Budget Pie Chart for FY12 - Charts
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Old 07-13-2011, 03:42 PM   #132
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After thinking about it for a bit.... I wondered how we were paying 20% of our budget toward interest... so I looked it up myself.... and we are FAR from paying 20%... it shows 6%.
It depends on how you count interest.

6% of total spending

or 20% of discretionary spending
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Old 07-13-2011, 04:00 PM   #133
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For FY2010 total federal spending is roughly 3.5 trillion dollars. That number, less tax revenue, leaves a deficit of 1.3 trillion, just under 2/5 of the total spending.

If we look at the spending pie, we can slice it up roughly as:
1/5 non-defense discretionary spending
1/5 defense
1/5 Social Security
1/5 Medicare (less than that now, much more than that in 10 years)
1/5 interest (which will be growing) plus smaller bits of entitlements

Now, nobody wants to touch the defense slice.
Not paying the interest is Bad. Really Bad. Greek Default bad, only it's the largest economy in the world, not something the economic size of Connecticut. You really want to zero out your retirement savings to make a political point?

Balance the budget without tax increases by removing 2/5 of the spending without touching any sacred cows.
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It depends on how you count interest.

6% of total spending

or 20% of discretionary spending

Not what was posted earlier..

And interest is not considered discretionary spending...
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Old 07-13-2011, 05:01 PM   #134
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Another fine mess.

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Old 07-13-2011, 07:26 PM   #135
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After thinking about it for a bit.... I wondered how we were paying 20% of our budget toward interest... so I looked it up myself.... and we are FAR from paying 20%... it shows 6%.




US Federal Budget Pie Chart for FY12 - Charts
M Paquette took some liberties (to put it mildly), see post #26 for 2010 actual. Much like this 2012 projection. And interest is non considered discretionary anywhere I've ever seen...
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Old 07-13-2011, 08:39 PM   #136
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M Paquette took some liberties (to put it mildly), see post #26 for 2010 actual. Much like this 2012 projection. And interest is non considered discretionary anywhere I've ever seen...
I DID say that 20% was interest and assorted smaller entitlements.

My goal was to slice the budget into reasonably comprehensible, easily grasped chunks. People have a hard time dealing with 3%, here, 1.82% there sort of figures. Five pieces, or fifths, is about as small as most folks can intuitively grasp. Less if one is a congresscritter, apparently.
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Old 07-13-2011, 10:28 PM   #137
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Yes. Example: If the business owner decides to buy bonds from another company rather than invest the money back in his own business, it follows that he expects a greater risk/adjusted return.
i doubt you are truly considering the difference in funds being invested (i.e. 100% of net profit in his business or [100% of net profit - taxes] in bonds of another company) as well as the current prevailing interest rates and the fact that if he has a large net profit (as i stated in my example many posts ago) he has a reasonably thriving business. i can see that it is tough for you to give in to my logic, probably due to your dogged belief in your position but i think i have done what you have asked i.e. give an example of how raising personal income taxes could produce growth. if you really think that your refutation of my example is the way things would happen in the majority of cases then lowering tax rates wont help small businesses one little bit, it would only give that small business owner more money to buy other companies bonds. also if your refutation was true, by now there would be no small businesses left since their owners arent investing in their own businesses. are you really making that arguement?
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Old 07-13-2011, 10:58 PM   #138
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To me there is a huge flaw in this logic...

The business owner will only invest to grow his business if there are customers.... putting money into a business that is not attracting a lot of new customers is wasting money....
in my example the business owner does have customers otherwise s/he wouldnt be "expecting a large net profit from his/her business this year".


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A good busines owner will expand his business when he/she can expect to make a profit on that expansion, which includes taxes... raising taxes will make a lot of marginal expansions not happen...
s/he wont pay taxes on an expected profit if said profit has been reinvested in the business (as i said in my example) because then it is expensed and is then no longer a profit. so i submit that higher tax rates will actually make more of the marginal expansions (that you mentioned) make sense to do and therefore they will actually happen.
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Old 07-13-2011, 11:20 PM   #139
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I am planning on a lesser Soc Sec and Medicare benefit. Anyone who is about to retire or retired in the last 10 years or so who didn't has been asleep at the wheel IMO.
that isnt reality. 10 years ago we were coming off a year where the fed government had run a surplus and there was talk that soon, the entire national debt would be owned by the SS trust fund. the federal government's finances looked pretty good thus giving the impression there wasnt anything unsure about SS or medicare. why would anyone retiring then (and for some years after then) not expect to receive them both in full?
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Old 07-14-2011, 09:44 AM   #140
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in my example the business owner does have customers otherwise s/he wouldnt be "expecting a large net profit from his/her business this year".

Just because someone is expecting a large net profit from business this year does not mean that investing more will bring a comensorate of profits... I work at a small company and can tell you that we are expecting the best year ever.... but if we invested that profit, it would go to waste as there are not any more 'current customers'...



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s/he wont pay taxes on an expected profit if said profit has been reinvested in the business (as i said in my example) because then it is expensed and is then no longer a profit. so i submit that higher tax rates will actually make more of the marginal expansions (that you mentioned) make sense to do and therefore they will actually happen.
Or the exact opposite occurs.... they decide not to generate those profits in the first place as the work/reward ratio is no longer in their favor... laying off people and making things worse....


If you never get profits out of a business, then the business will eventually fail...


Again, if you reinvest you are doing so to GET MORE PROFITS than what you invest.... so the taxes hit you harder.. and at some point you do not get more profits than you invest and you are throwing away money.... it just does not add up....
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