10 Planks of The Communist Manifesto

[Lagboltz]

I'm always a little amazed at this claim. Economic principals have parallel effects everywhere they are tried. You can look at any country and see the effects of taxation on that economic system, and see it has the same effect here, or there, or anywhere else.

A total of nine countries from the former Soviet Union, all adopted a flat tax over a progressive tax, and in each and every single case, the economic result was the same... massive economic growth.

Yet, somehow that will not work here. Even though we have adopted a progressive tax, and even though it has stifled economic growth just like in the Soviet states... but yet moving to a flat tax here will not have the same effect it had over there.... why? Just because.

This is a bit of US history of GDP vs. tax rate.
As taxes were lowered over the last few decades, the US GDP also dropped.

Does this show the GDP goes down when taxes go down? No. There are too many other dynamics involved. For the same reason, one cannot compare relationships of US tax and GDP data with that of Latvia or Bulimia.
What the graph does say is that for the US, lower taxes is not a necessary nor sufficient condition to imply a higher GDP.
Let's move on.

Are we not reading the same article? They want to remove the tax deferral outright. As in, you will pay full tax on all money put into 401Ks, and on all money taking out of 401K. It won't be Roth, or traditional. It will simply be the new 'your screwed' scheme.

Further, if you read the article carefully, they do want to change the scheme more... and make it worse. Under the democrat plan, you will be forced to invest 5% of your 401K contributions to Social Security government bonds, that pay only 3% per year, or less than inflation. This is an all around disaster.

Again, classic liberal vs. conservative argument. Right now anyone can invest their 401K in bonds if they wish. But that's not good enough. Now government is going to remove your freedom, and force you to invest the way they want.

What's worse, is this is an attempt to stave off the failure of Social Security. Instead of government being fiscally responsible, and paying off their debt, they are going to make it law that you have to invest in bonds, so they can use the money you were forced to give them. OF course this is trying to borrow yourself out of debt. All those bonds will have to be repaid, so in reality, we're increasing our debt more.

No, we are not reading the same thing. For a detailed account of Ghilarducci's testimony before the Committee on Education and Labor, see the site,
http://www.house.gov/ed_workforce/testimony/2008-10-07-TeresaGhilarducci.pdf

She gets into details of the background behind IRA type plans. This is very worthwhile reading for those planning for future retirement. It is 10 pages and is an easy read. As far as your concerns, read the paragraph starting at the bottom of page 9.

Breaking a licensing agreement, and having a monopoly are two very different things. If Microsoft had a monopoly, then Google would not have been able to make Chrome.

Please name the software that would not exist if not for the suit? The anti-trust suit, not the License suit.

US DOJ suit: Microsoft backed down and settled.
EU suit: Microsoft lost and paid a fine.
Let's move on.

 

[Lagboltz]

I looked through those posts and I'm still no closer to understanding exactly what your moral code is and how it is followed.... Which reminds me of another conversation I had about torture... I asked people to lay out exactly what specific actions were torture and the best I could get as a reply was a definition of torture and the assertion that they knew torture when they saw it - this of course is totally inadequate for application in the concrete world of realism where definitions must be crystal clear and the actions of individuals must be spelled out to the letter, lest there be "gray" area that allows wiggle room.

I looked though those posts again and saw that I was just hinting at a few moral areas that I thought should be of concern. You are right in that there were no clearly defined moral principles. I don't actually want to disclose their basis here because it may lead this thread to distractions (from others.) However, in general I have a strong compassion for the people who will be caught in an oncoming storm.

You said something about "abject poverty" being a concern for you in America... I just don't see it. We have the fattest, safest and most well off poor people in all the world. Some of our "poor" live in better conditions than those of the lower middle class in Europe - More personal space, more cell phones, more cars, more microwaves, more of everything! Not to mention the fact that poverty was reduced more dramatically before the advent of the War on Poverty and its actually exacerbated poverty since its inception.

OK. "Abject" is a wrong (premature) adjective. I certainly was not clear (to myself either) that I was thinking of the future. I do really want to get into this, and I made a post in "Free-Market Capitalism never looses." Post #17 has further hints about my concerns, but I still did not state my personal moral basis.

Your comment about why you are a democrat, because we need social programs, better education etc. was preceded by a comment about how you don't trust the government to come through on its promises.... Where is your justification for continuing the same course of our failing schools and our bankrupt and failing social programs, all administered by our inept, incompetent state beauracratic system?

Yes, it is an oxymoron. And also a dilemma that was brought about by both parties -- a bi-partisan screw up. The elimination of most government social programs will lead to problems as I discussed in Post#17.

You may not see the solution being in the free market and capitalism but as someone who's been there, I can tell you where the solution begins: When an individual hits rock bottom and has to make the choice between life or death.

Social programs that put up a safety net for people so that they never have to land on the craggy rocks below protect them from ever coming to the realization that they have to help themselves by changing their attitude and working hard every single day of their life, so, instead, they just wait for more government help.

Again, I strongly agree with you. Let's just hope there are enough jobs to go around for that rather large sector. Those people have got to shape up. However, elimination of most social programs leaves the following questions quoted from Post #17 that I cited above.

(Lagboltz) There are problems with the aging of the population. The elderly are taking a disproportionate amount of medical care, but are less able to pay for it. How do we handle it? What are our moral or financial obligations to this sector?

(Lagboltz) What do we do with the destitute {with severe disabilities} who are unable to work and have no relatives that will put up with them? single parent households with an unmanageable number of children? ne'er-do-wells hopelessly addicted to alcohol or drugs? and those not quite insane enough to be to be institutionalized? -- is there any moral obligation to this sector?

Some of the problems may seem to be solved by imprisonment, but that shifts the problem from providing Social Security to the problem funding increasingly larger prisons. (Prison population is now 1 out of every 130 people.)

I was not trying to be an alarmist and I wasn't trying to use wordplay...

My big problem is that people do not recognize Socialism as being "Socialism" until its too late... A couple examples:

AIG: We bailed them out and the Governemnt owns 80% of the company... From my perspective, thats 80% Socialism... From the Democrat perspective, its not socialism at all until the Government owns 100%.

Big 3 Auto: Democrats want to include in their bailout package 50% Government ownership of the companies... that to me is 50% socialism, to Democrats - the real people who are using wordplay - its 0% socialism since the "definition" is government ownership and anything less than 100% fails to meet that criteria...

So you accuse me of wordplay but I see it as the Democrats playing with words here... using an "all or nothing" definition of socialism, to avoid admitting that the actions being taken are, indeed, socailist - even if only 50-80%.

I felt that you were stretching the manifesto scores unfairly in a number of cases by using two different definitions for the two different contexts. However, I have no problem with your "gray scale" definitions of those pockets of Socialism in AIG and the Big 3. I agree that Democrats are averse to having some things they do being labeled Socialism. As far as the bail-outs, they could be considered as bi-partisan socialism, if that phrase makes any sense.

 

[GenSeneca]

I looked though those posts again and saw that I was just hinting at a few moral areas that I thought should be of concern. You are right in that there were no clearly defined moral principles. I don't actually want to disclose their basis here because it may lead this thread to distractions (from others.) However, in general I have a strong compassion for the people who will be caught in an oncoming storm.

If I understand what your saying here, you don't care to divulge exactly where you derive your moral code from nor do you care to give specifics because it may derail the thread... which is fine... but I ask that you give it some thought and post it somewhere for us to discuss.

I am genuinely interested in where you get your moral code and the specifics tenets to following it... I'll be glad to share mine as well.

I made a post in "Free-Market Capitalism never looses." Post #17

I discussed in Post#17.


the following questions quoted from Post #17

I'll take my comments on those over there.

I felt that you were stretching the manifesto scores unfairly in a number of cases by using two different definitions for the two different contexts.

I can accept that, its truly a matter of opinion and mine is based on my perceptions, you on yours.

However, I have no problem with your "gray scale" definitions of those pockets of Socialism in AIG and the Big 3. I agree that Democrats are averse to having some things they do being labeled Socialism. As far as the bail-outs, they could be considered as bi-partisan socialism, if that phrase makes any sense.

Makes perfect sense and I don't care who initiates or propagates socialist policy, we need to recognize the historical fact that they don't work and prevent both parties from pursuing such suicidal policies.
------------------------------------------------------

Something you might be interested in reading and contributing to:

The National Debt

Please read the whole thing (at least the constructive posts) and give us your take.

Another thread you may be interested in browsing:

City Planning Exercise

That thread deals with practical solutions to real problems faced by people of lower incomes.

And finally, my thread about Reform:

Reform America

That was one of my first threads and it also happens to be where something special happened:

Don't like how the two major parties, private entities, do it? Found your own party then, and do it the way you want.

My reply:

={CaLiCo}= Party
GenSeneca Founder
Now all I need is a few billion dollars.... Anyone spare some change?

If you do take the time to read through those threads, I'd like you to keep in mind that some people here regularly accuse me of neither talking about "real" issues nor dealing with "facts"... that way the next time you see one say something to that extent, you can remember their conspicuous absence from those threads.

 

[Andy]

This is a bit of US history of GDP vs. tax rate.
As taxes were lowered over the last few decades, the US GDP also dropped.

Does this show the GDP goes down when taxes go down? No. There are too many other dynamics involved. For the same reason, one cannot compare relationships of US tax and GDP data with that of Latvia or Bulimia.
What the graph does say is that for the US, lower taxes is not a necessary nor sufficient condition to imply a higher GDP.
Let's move on.

I am a bit baffled by this positions. Yes, there are many more dynamics involved, but they all revolve around the same basic concept that removing resources from the market hurts the market.

This graph of yours is truly amazing, in that it shows absolutely nothing of value, but incredibly, you use it as a support. It attempts to cover 45 years, with a total of 10 data points, ignoring the near hundreds changes in both taxes and the economic performance between data points. It doesn't take into account the Alternative Minimum Tax, nor the Capital Gains Tax, both of which have massive effects. This graph at best is useless, and at worst, is deliberately misleading.

I'll give just one of hundreds of examples, to show how absolutely useless this graph is. You have 2 data points, first in the early 80s, and another two in mid-late 90s. Both show a 3.1% growth in GDP, while a drop in top marginal rates from 50% to 40%.

However, prior to '83, there was a massive recession. The growth rate rose from a negative to a positive 3.1%, not fell like the graph would lead you to believe. Further, the The growth rate in 1984 was 4%, and in '85 was 7%. After '86, growth rate fell to 3.5% - 4%. What happened in '86? They raised taxes slightly. Then in 90 and 91, GPD fell to a -1%. What happened? There was a tax hike. In the late 90s, there was another large tax hike, which cause a slowing of the economy which continued until the 2000 recession.

In every single case, tax cuts spur economic growth, which is logical to begin with. And every single tax hike shows a drop in economic growth, which is logical as well. It's simple basic economics. If you raise the price of doing something, that amount of that thing done will be reduced. Even Bill Clinton's own economic advisor said the Reagan tax cuts were very effective.

At least I understand how people can think this way. With such shoddy data to base economic policy on, I see why our economy is in the gutter, while former soviet states and China are booming.

No, we are not reading the same thing. For a detailed account of Ghilarducci's testimony before the Committee on Education and Labor, see the site,
http://www.house.gov/ed_workforce/testimony/2008-10-07-TeresaGhilarducci.pdf

She gets into details of the background behind IRA type plans. This is very worthwhile reading for those planning for future retirement. It is 10 pages and is an easy read. As far as your concerns, read the paragraph starting at the bottom of page 9.

I guess I'm more interested in the stated goals by the actual people on the Committee, than I am about someone who merely testified before the committee. That's fine that Ghilarducci said that, but when the people actually in the position to make changes say what their plans are, I tend to weight that more heavily.

US DOJ suit: Microsoft backed down and settled.
EU suit: Microsoft lost and paid a fine.
Let's move on.

Meaningless.

 

[Lagboltz]

I am a bit baffled by this positions.........

Yes, I agree you are. You have no intuitive understanding of formal logic. You most likely don't know what that means, and you don't need to. Anyone who is functionally intelligent has an intuitive feel for logic as they go through the daily problems of life. My conclusion about tax vs. GDP was unassailable and had nothing to do with dynamics. Your thinking in almost every post is non causa pro causa. If you don't understand how to think, we don't have any basis for communication.

 

[GenSeneca]

Yes, I agree you are. You have no intuitive understanding of formal logic. You most likely don't know what that means, and you don't need to. Anyone who is functionally intelligent has an intuitive feel for logic as they go through the daily problems of life. My conclusion about tax vs. GDP was unassailable and had nothing to do with dynamics. Your thinking in almost every post is non causa pro causa. If you don't understand how to think, we don't have any basis for communication.

No need to be nasty.... Would you mind sourcing the graph?

As taxes were lowered over the last few decades, the US GDP also dropped.

Your "unassailable conclusion" is incorrect and not supported by the graph you provided. I agree with Andy, having the tax rates plotted along with the GDP growth is misleading.

What your chart purports to show is that GDP has not dropped as taxes have been lowered but, according to your graph, the GDP percentage of growth has slowed, as taxes have been lowered but the two are not connected as they are made out to be.

That's misleading because as the GDP gets higher, the percent of growth must slow. In 1965, where your chart begins, the GDP was around 800 and a growth rate of 4.4% would put the GDP at 835.2.... In 2005 your chart shows a growth of "just" 2.6% but the GDP was around 12,000 - so the GDP added 332.8 - that's almost 10 times the actual growth that took place in 1965, despite the 1965 percentage being higher.

Your chart also makes it look like between 1982 and 1996 the GDP growth rate was flat at 3.1% but during that period GDP doubled from 4000 to 8000.

http://www.economics-charts.com/gdp/gdp-1929-2004.html

It would be disingenuous of me to plot the rise of real GDP with the lowering of taxes but if I did so, it would appear that as taxes were lowered, the real GDP rose. That would be disingenuous because GDP has continually risen over time and its based more on population growth than other factors - more people, more workers, more growth.

However, if I did plot out actual tax rates vs Total GDP, such a graph would look like an "X" with the tax line going from the top left to the bottom right and the GDP line going from the bottom left to the top right over time. I find the graph you posted to be equally disingenuous and I question the accuracy of the GDP growth information that it provides, as it doesn't seem to match the actual numbers.

 

[Lagboltz]

No need to be nasty....

Yeah, I know. I couldn't help myself. I did not give the usual thoughtless flame; I was serious. I can't get him to understand he is making a logical fallacy non causa pro causa. (I learned about this in a Philosophy class; not Math) This concept is extremely important to understand complex fields such as medicine and economics. Here is a example from nutrition: Suppose a study shows that,

"It is proven that eating candy causes heart attacks."

Suppose another deeper study shows a strong correlation with depression and heart attacks. And suppose that depressed people in the study group also eat candy as a solace for their depression. It may be that it is the depression that causes both heart attacks and eating candy. So now candy is an effect of the depression cause, and heart attacks are also an effect of the depression cause. So eating candy and heart attacks only have a secondary link, but not necessarily a link of causality. Therefore, this statement is false: "It is proven that eating candy causes heart attacks"

Back to the example of tax and GDP:
A popular claim is "Trickle-down theory is good for the economy"
A few posts ago, I stated something to the effect, "It could be that it seems that way only because we have a serious ongoing budget deficit." That was an example of what may break an apparent causal relationship. That idea was dismissed by Andy without understanding what I was getting at.

If you find a strong counterexample that breaks a correlated relationship, then you also break or falsify any statement of causality of that relationship. So I next gave a strong counterexample with the graph, but I immediately dismissed the strong (and false) statement of causality. Andy didn't understand that it was only meant as a counterexample and claimed that there weren't enough points, etc. Actually only two points were necessary for a counterexample: data at 1966 and 2006.

With the counterexample I did not say: "It is proven that when taxes drop the GDP drops."
That is what the graph apparently shows, but I was careful not to claim it because of the same "non causa" that Andy used. However, this weaker statement is true: "It not a not necessarily true that a drop in taxes implies a rise in GDP." It is unassailable because a single counterexample will break any strong statement.

Would you mind sourcing the graph?

I am working with a Professor of Macroeconomics. The data for the graph came from the yearly Economic Report of the President, which is a book that he orders from the government. I don't know how much sliding average is in each point. The book is chock full of historic and current data on the all aspects of the US economy. The professor prefers to use raw data from that government resource when possible, otherwise he uses only non-partisan web pages that ends with ".gov". He gets ideas from the media, WSJ, etc., but does not use "facts" they might have, he goes right to the government source. I trust him.

The professor actually advocates the stronger statement, that trickle down theory is a failure and furthermore a progressive tax does bring about a stronger economy. I can't defend that point here because I don't understand the 28 economic-health variables the professor is using, or how he correlated them.

This post is too long, but it explains why Andy has lost credibility with me. It explains my loss of reserve (i.e. my minor flame.) I also wanted to explain to anyone else who happens by (and all members of government if any would read this) that there are too many dogmatic arguments that violate non causa pro causa here and in the government.

I don't have time to digest the rest of your post, I will look at it later. Gotta run.

 

[Andy]

Yes, I agree you are. You have no intuitive understanding of formal logic. You most likely don't know what that means, and you don't need to. Anyone who is functionally intelligent has an intuitive feel for logic as they go through the daily problems of life. My conclusion about tax vs. GDP was unassailable and had nothing to do with dynamics. Your thinking in almost every post is non causa pro causa. If you don't understand how to think, we don't have any basis for communication.

I was waiting for this

I have not met a democrat yet who, when confronted with facts and evidence, doesn't resort to ad homin attacks. You are no different than any I have met, to date.


In 1964, the economy grew by 5.8 percent -- followed by 6.4 percent growth the following two years.

The increasing tax revenues following from the surging economy led to a balanced budget by 1969 -- the last time that the government was able to balance its books.

Hmmm... but of course the action and results, had absolutely no connection, despite what JFK thought. Similar booms after tax cuts in the 1920s, the 1980s, and 2000, of course all of which are just random coincidences. Of course the drops in the economy after tax hikes of the 1930s, the 1950s, and 1990s, are all just coincidences as well.

In fact we can only trust your graph with 10 data points for a 45 year time span. Any college level course in statistical analysis would deny the usefulness of that information. Oh... but I'm the one not using logic... right? lol

 

[Lagboltz]

I was waiting for this

Be sure to read the post on the logical fallacy, non causa pro causa.

 

[Andy]

Back to the example of tax and GDP:
A popular claim is "Trickle-down theory is good for the economy"
A few posts ago, I stated something to the effect, "It could be that it seems that way only because we have a serious ongoing budget deficit." That was an example of what may break an apparent causal relationship. That idea was dismissed by Andy without understanding what I was getting at.

Trickle-down economics is the system by which the economy works. Federal deficits are how much the federal government spends over how much money it collects. The two are not related.

Non Sequitur: "We have a serious ongoing budget deficit" therefore "Tickle-down may not be good for the economy". True statement X, is unrelated to statement Z. Therefore true or false of Z can not be determined via X.

If you find a strong counterexample that breaks a correlated relationship, then you also break or falsify any statement of causality of that relationship. So I next gave a strong counterexample with the graph, but I immediately dismissed the strong (and false) statement of causality. Andy didn't understand that it was only meant as a counterexample and claimed that there weren't enough points, etc. Actually only two points were necessary for a counterexample: data at 1966 and 2006.

Ok, you did not find a strong counterexample that breaks correlated relationship.
The only tax rate given, was the top marginal rate. This ignores the Alternative Minimum Tax, and the Capital Gains Tax, both of which effect the same group of people. Further, most of those in the top marginal rate, hide their income in tax shelters somewhat negating the effects of the tax.

Therefore, using only the top marginal rate, while ignoring other directly effecting factors, can not be used as counter to the relation of taxes and the economy. The data set is too limited to make any conclusion at all.

Moreover, the growth rate only showed the percentage rate at that time. This ignores that prior to 1964 and 1984 there was a massive recession, and after both there was a massive boom. No one would suggest that the growth rate dropped to 3.1% in 1984, when it was in the negatives the prior 2 years. Nor could anyone conclude that the growth rate was flat from 1984 to 1996, when the four years after the tax cut, the growth rates were 4.8% or higher.

Not to mention that even if you could make a case for stagnate growth rates between 1984 and 1996, that still doesn't take into account the other taxes raised during those times.

Therefore, the growth rate data is far too limited to be of any value for determining the effects of tax rates. The entire graph is absolutely pointless and irrelevant.

With the counterexample I did not say: "It is proven that when taxes drop the GDP drops."
That is what the graph apparently shows, but I was careful not to claim it because of the same "non causa" that Andy used. However, this weaker statement is true: "It not a not necessarily true that a drop in taxes implies a rise in GDP." It is unassailable because a single counterexample will break any strong statement.

Right, and I didn't say that is what your graph proved either. I said, your graph proves nothing at all. It doesn't provide a single counterexample. It provides nothing. The graph serves absolutely no use whatsoever, other than to show how limited statistical data can be manipulated to show whatever one wants.

Consider... prior to 1964 the highest marginal rate was 91%. Now it's 35%. What if during that time, they put in place the Alternative Minimum Tax (which they did), or increased the Capital Gains Taxes (which they did)? Then, whatever economic changes shown, could not be show to prove anything, in relation to tax rate. The AMT and CGT, both negate the effects of a lower top marginal rate.

Further, the top marginal rate only hits 1% of wage earners. What if the other 99% have a tax hike on them (which they have)? Then the effects on the growth rate would be shown in the graph. This would taint the results, making the information, once again, meaningless.

I am working with a Professor of Macroeconomics. The data for the graph came from the yearly Economic Report of the President, which is a book that he orders from the government. I don't know how much sliding average is in each point. The book is chock full of historic and current data on the all aspects of the US economy. The professor prefers to use raw data from that government resource when possible, otherwise he uses only non-partisan web pages that ends with ".gov". He gets ideas from the media, WSJ, etc., but does not use "facts" they might have, he goes right to the government source. I trust him.

Well if he buys what conclusion you are trying to make with that meaningless graph, then that explains the poor education found in some of our schools. One wonders what they do with those tuitions.

The professor actually advocates the stronger statement, that trickle down theory is a failure and furthermore a progressive tax does bring about a stronger economy. I can't defend that point here because I don't understand the 28 economic-health variables the professor is using, or how he correlated them.

He's an idiot then. Trickle down is how all economies work. How anyone can not know this, is beyond me. What college is this, so that I know where not to send me kids?

I've lost credibility to a self proclaimed democrat because I used facts and figures, instead of ad hominem and dogmatic denials of the truth. Well darn...

 

[Andy]

Be sure to read the post on the logical fallacy, non causa pro causa.

Which is worse? To base an argument on data and figures, and make conclusion based on such, or to base an argument on "you are using a logical fallacy!"?

I've backed up my points with data. You have backed yours with a completely irrelevant graph and accusation of using a logical fallacy which you can't prove.

Been a blast Lagboltz, but I highly doubt I'll get any more logical, fact-based, arguments from you, so I bid you good day.

 

[Lagboltz]

My apologies guys, for having you do wheel-spinning in answering my post #16. The graph I showed in that post was captioned incorrectly as GDP. What I labeled and discussed as the GDP was, as you point out, a percentage change of "something". The "something" is not just the rate of change, because the GDP is roughly exponential, and that also makes rate of change exponential.

As you point out, it becomes meaningless to compare the rate of change against tax rate. So what is a meaningful measure? The rate of change of the exponent would be a better measure, I think the second curve in the reference you cited,
http://www.economics-charts.com/gdp/gdp-1929-2004.html.
perhaps did that, but it is very noisy. The chart I used is an average over several years. That is why the sampling on the graph was sparse.

The next issue is that a rate of change is a subtraction of adjacent time intervals. To be meaningful, the data at each interval should be inflation adjusted. There isn't enough discussion to see if that was done in that second graph at economics-charts.com. However adjusting for inflation in comparing GDP would ordinarily be very misleading, for the following reason.

"Core inflation is a measure of price fluctuations in a sub-set of the broad price index which excludes food and energy prices. The Federal Reserve Board uses the core inflation rate to measure overall inflation, eliminating food and energy prices to mitigate against short term price fluctuations that could distort estimates of future long term inflation trends in the general economy."
http://en.wikipedia.org/wiki/Inflation

So it is inaccurate to adjust GDP of all economic sectors of growth using a subset of the factors the FRB uses, especially when they eliminate two very large factors - food and energy. The professor I'm working with who gave me the data for the chart said, inflation used in the graph that I furnished put back food and energy into the inflation equation, and the extended time averaging overcame the FRB's fluctuation problem.

With all that said and done, the graph in post #16 makes more sense, and I hope it answers the objections you guys rightfully made.

 

[Andy]

Ok, I do see the assumed logic behind the graph now. I also follow the basic line of thought about GDP. And the growth rates listed I couldn't find a reference to anywhere, so I'm glad you cleared that up. I was starting to think you fabricated the whole thing.

That said... I'm still having a huge issue with the top marginal rate being the base comparative data to any economic factor. You can swap in whichever economic factor you wish to compare to the top marginal rate, but I still have an issue with the top marginal rate being the baseline to compare to.

Why? Because the question I wish to answer is, what effect does taxes... all taxes, not just one specific tax, have on the national economy. Because if we can determine this, then we can know generally what effect all taxes have relative to their size.

The problem is, the top marginal rate is only one specific tax of a dozen, all of which can have a staggering effect.

Example: What if the top marginal rate was lowered, but the bottom marginal rate was increased? A tax rate hitting 1% of wage earners was decreased, while a tax hike hitting all wage earners was increased.

Based on this, if one simply plotted the top marginal rate, it would appear taxes were lowered, when in fact they were raised. A resulting dip in the economy, no matter which economic factor was used, would appear to be related to a drop in taxes, when in fact it was due to a hike in taxes. By the way, this exact situation did occur.

Another Example: Let us say all marginal rates were dropped, and a economic boom occurred. However, four years later, another tax was raised, that effected all taxpayers, and an economic decline occurred.

If one simply plotted the top marginal rate, it would appear taxes remained low after being cut, while in fact they were raised. Further, if one simply averaged a seven year time span, the resulting high economic growth after the tax cut, would end up averaged with the resulting low economic growth after the tax hike. For the record, this exact situation happened as well.

Finely: Let us say that top marginal rates were dropped alone, yet at the same time, the Alternative Minimum Tax, the Capital Gains Tax, and the amount of top marginal rate deductions were reduced. The effects of increasing the taxation through these other means, would effectively reduce and near eliminate any real reduction in tax.

If one simply plotted the top marginal rate, it would appear taxes decreased, when in fact they effectively did not. Thus any information gleaned from a comparison to economic factors would remain meaningless.

 

[Lagboltz]

... the question I wish to answer is, what effect does taxes... all taxes, not just one specific tax, have on the national economy. Because if we can determine this, then we can know generally what effect all taxes have relative to their size.

Now we are on the same page. That is similar to our foundation's quest. However we are more narrowly focussed on the question of whether supply side economics has validity.

The problem is, the top marginal rate is only one specific tax of a dozen, all of which can have a staggering effect.

Based on this, if one simply plotted the top marginal rate, it would appear taxes were lowered, when in fact they were raised. A resulting dip in the economy, no matter which economic factor was used, would appear to be related to a drop in taxes, when in fact it was due to a hike in taxes. By the way, this exact situation did occur.....

Those are a good but separate questions. We were not interested in total taxes being raised or lowered as we were the progressive vs. recessive tax rates. These can be computed as ratios, and not dependent on the total government revenue. However one important factor in our objective that I left out, is analysis of the Social Security tax.

The top marginal rate has a decreasingly progressive history, while the SS tax has an increasingly regressive history. The top marginal rate dropped from 80% to 35%, while the SS tax increases from $144 to $7,459, as seen in the chart below. That is a 5200% tax increase for the lower income groups and is a significant percent of their take home pay! A person making a million a year pays only 2.1% SS tax because of the $97.5K current tax base limit. That is significantly lower than the current 7.65% for lower classes.

SS Rate X Tax Base = SS Taxes Paid
_Year __ rate __ Tax base _ SS tax paid
1960's | 3.00% x 4.8K = $144
1970's | 4.80% x 7.8K = $374
1980's | 6.13% x 25.9K = $1,588
1990's | 7.65% x 51.3K = $3,924
2000's | 7.65% x 97.5K = $7,459

This chart is misleading for a number of reasons: it was not adjusted for inflation, and not everyone in the lowest income groups are actually paying as high as $7,459. So just how bad is the SS regressive tax? I.e. just how much less should the apparent 5200% should be dropped? Even a factor of 100 overestimate would still make SS a significant regressive factor, but a fair estimate requires a formidable collection and processing of data and I have not found that done anywhere.

What makes the SS tax even more regressive is that any yearly excess is put into the general fund and spent. These are taxes largely from the lower earners. Since the SS trust fund was dismantled in 1965, $6 Trillion was taken away from peoples' retirement and spent. (Damn guvmint. Leave us alone!)

So, a fair characterization of what should be on the tax part of the chart I presented is difficult, but whatever anyone puts there is bound to show the relative tax burden for the wealthy is decreasing and/or the relative tax burden for the lower classes is increasing.

If one simply plotted the top marginal rate, it would appear taxes remained low after being cut, while in fact they were raised. Further, if one simply averaged a seven year time span, the resulting high economic growth after the tax cut, would end up averaged with the resulting low economic growth after the tax hike. For the record, this exact situation happened as well.

Finely: Let us say that top marginal rates were dropped alone, yet at the same time, the Alternative Minimum Tax, the Capital Gains Tax, and the amount of top marginal rate deductions were reduced. The effects of increasing the taxation through these other means, would effectively reduce and near eliminate any real reduction in tax.

If one simply plotted the top marginal rate, it would appear taxes decreased, when in fact they effectively did not. Thus any information gleaned from a comparison to economic factors would remain meaningless.

As I mentioned, my perspective is how the regressive nature of taxes might affect the GDP. I understand your perspective, and it may be an interesting exercise to compare the GDP trend with the total taxes you are discussing. Your job would be much easier in that the total taxes paid each year is a simple number given in the IRS website. It is an exponentially increasing number, so you would have to go through some type of analysis of adjusting for inflation and time averaging, etc. to be able to make a comparison.

Now, back to the question of non causa pro causa. The economy in the US has eras of bubbles, recessions, differing ratios of service to manufacturing jobs, rising consumerism, and lower savings rates, an increasing import to export ratio, a rising national debt, a migration from rural to urban areas, a shift from small farms to large corporate farming, to name a few. These factors could all contribute as primary causes of the raising and lowering of the exponent in the GDP rate over time.

To sort out just what are the important causal factors would require a model of all the above factors in the economy - very difficult and subject to opinion. So the chart that I presented can only say that trickle down theory, (decreasingly progressive taxation) has not been proven to improve the economy. I cannot claim the stronger statement that the graph shows trickle-down is false.

 

[Andy]

What makes the SS tax even more regressive is that any yearly excess is put into the general fund and spent. These are taxes largely from the lower earners. Since the SS trust fund was dismantled in 1965, $6 Trillion was taken away from peoples' retirement and spent. (Damn guvmint. Leave us alone!)

So, a fair characterization of what should be on the tax part of the chart I presented is difficult, but whatever anyone puts there is bound to show the relative tax burden for the wealthy is decreasing and/or the relative tax burden for the lower classes is increasing.

Of course the politicians would claim this isn't a tax, it's an insurance contribution. Further, they'd claim this is the way it should be since the rich will not qualify for any Social Security benefits when they retire.

Of course the conservative constitutional view is thus: Social Security is unconstitutional, and should be eliminated. And Social Security is a socialist policy, and an abject failure as all socialism is. Finely Social Security is nothing more than a tax, and a huge burden on the economy. Increases in social security taxation is always, and I do mean always, followed by a slowing of the economy.

What I don't get is why your surprised government stole the money? This is how all socialist governments act when given cash. They steal it, blow it on political supporters to solidify their backing, while claiming to benefit the populous. The raiding of the social security 'trust' fund, is a natural and expected result of giving money to government.

House Majority Whip James Clyburn (D-S.C.) earmarked $3 million for "The First Tee" in the defense appropriations bill. He spent $3 million on a golf program, in a bill to fund the military. You trust these people with your retirement? Why? There were over $17 Billion in pork spending in 2008 alone. Why do you think Bush and conservatives supported privatization of social security?