YESSS!

Think of it like this:

Taxes are bad.  PERIOD!  They are a necessary evil.  They are the government stealing money from you and redistributing it.  You may see that money put into things you take advantage of (like roads); you may be more safe because of it (like police in prisons); OR, and this is where Republicans and Democrats differ, it may be redistributed to those who did not earn your money (basically, the government playing Robin Hood).  In the latter case, it becomes a compulsory charity in which you have no say, and thus cannot benefit from generosity or use the money to help people the way you want, which might include your family.

But beyond this, there is a far greater effect macroeconomically.  The higher taxes that are being paid, then the more money that is going out of the economy and into the black hole of government, which proves time and again that it cannot efficiently use the money.  (As I previously explained, government funding is the opposite of private funding.  Corporations try to maximize profits by minimizing expenditures; the government tries to maximize expenditures to increase its budget and visibility.)

So the more money you take out of circulation in the economy, the worse the economy becomes, which again has been proven time and again.  The flip side is making the government a Communist country, where the government just controls all the money and tries to give everyone what they need, but they have no incentives to do better.

Here's an example:
True example: When the Luxury Tax was first imposed, the rich did not buy as many yachts.  This caused the yacht-making business...engineers, carpenters, etc...to take a huge nose dive.  Many people in that industry lost jobs.  The government didn't get any extra money really because people just stopped buying yachts and things.  So it didn't really do much good in that respect, but a lot of harm.

Let's take it down a notch.  Say right now you have to pay an extra 5% of your salary to taxes.  So perhaps you buy $100 less of stocks each month and $100 less of eating out at restaurants.  Now the companies that would have had capital investment from your buying stocks have less capital, and the restaurants get less business.  On a macro scale, this could mean huge job losses in service industries (not as many tips or business), in the retail industry (putting factory workers out of work and others along the retail chain), and not getting corporations the capital they need to create a more vibrant economy (and give jobs to people within the corporation, leading to layoffs).

We are seeing some of this happen right now with the gas prices, and my guess is that this is not even a 5% amount of most people's salary.

BUT HEY, under Obama's plan, everyone would have welfare and health care, right?  So what if they can't get a job, those who produce will be subsidizing the lives of those who don't.
This message was last edited by the GM at 16:30, Fri 15 Aug 2008.

The government isn't a "black hole."  The money spent by wasteful government programs go back into the same economy as the money spent by efficient private companies (unless the companies happen to spend their money in different countries, which they often do).  Also, I would say private companies try to maximize profit in anyway possible, whether it minimizes expenditures or not. Usually minimizing expenditures maximizes profits, but often not (ie, advetising, you need to spend money to make money, etc.) And doesn't "minimize expenditures" mean not spending the money, which sort of counters your whole position, anyway?


But again, taxes don't take money out of the economy.  The money that gets taken out gets put right back in when the government spends it.


Except that all the money that you don't spend on eating out or buying stocks is now being spent by the government on something else (even if it's just some buearocrat eating out and buying stocks).  The money isn't gone, it's just being spent elsewhere in the economy.

I'm not saying taxes for the sake of taxes are a good thing, just that the idea that taxes only do harm the the economy ignore half of the equation.

As one who has worked with the government and sued the government, I 100% disagree with this statement.  There is (1) a lack of accountability that is equal to the private sector, and (2) the money poured into the government does not go into the economy...it goes to the government.  You are trying to say that the government itself is an invigorating economic factor.  I am saying that you are comparing David and Goliath in that fashion.

For example:
WHen I was young working for the government, we were short several screws.  I had to get a signed order allowing me to go to Home Depot and buy screws.  I had to then go to Home Depot and buy screws.  I also had to have forms signed and filled out by the manager at Home Depot.  By the time all was said and done (including my salary), the 4 screws cost about $32 (this is mid 1980's, so probably $50+ today with inflation).  (THAT'S A BLACK HOLE THAT BENEFITED ONLY ONE PERSON, MY WAGES, WITH A MINIMAL, INFINITESSIMAL BENEFIT TO SOCIETY/THE ECONOMY.)  And that was just one example.  The government is laden with such examples.

Take private sector:  You avoid the paperwork to get the screws.  You send someone out for supplies to get other things AS WELL AS the screws.  You see that it would be helpful to buy a whole box of screws to avoid a shortage in the future (and avoid just buying 4 screws), and ultimately, the cost is lower for the same amount of benefit, and without wasting someone's time as much.

So I don't buy any argument that says the benefit to society is just as good with the government as it is with the private sector.  The accountability is NOT there, the money is not as expeditiously used, and the ultimate benefit is extremely low compared to the cost.


No, you are incorrect.  Minimizing expenditures mean increasing profits.  Profits to companies are "capital."  Capital is money that the company can reinvest to make a better, bigger company.  So minimizing expenditures increases the overall benefit to society by keeping in check what is unnecessary.


Wrong again.  This is only true to a small extent.  The government spends the money on many programs which do not benefit the economy at all, in addition to the wasteful spending mentioned above.  An example of this is a lot of the EPA studies and things like that.  They are not a company getting profit (and thus helping the economy).  The only help they do is by paying for salaries, and a private company could employ more people with the same money by using it more wisely.


But no, it's not necessarily going into the "economy."  I think you have this notion that money going into the government comes back out.  It doesn't.  It goes into programs and projects.  If you hire a scientist to go out and do earthquake studies, you are not going to have the same effect as a private company using that money as capital and creating more jobs for more people and putting the money right back into the flow of the system.

The government is like a dam.  A lot of money gets all backed up behind it, while only  a small stream flows out the other side compared to the river flowing into it.

I didn't say they only do harm.  I said that taxes as a principle are taking another person's property against that person's free will, which is wrong.  Yet they are necessary to make our society work:  thus, a necessary evil.

Only a person who pays the taxes and thinks that neither he nor his children (God forbid) will ever be sick can think like that.



If they are necessary how can you talk like that?



Can you call Sweden a failed state?



Yeah, right.



And the fact that all other civilized countries in the world have similar system makes no difference?

hey are the government stealing money from you and redistributing it.

Taxes are the rent you pay for the privilege of living in your country. They are no more stealing from you than my landlord is stealing from me when he cashes the checks I give him.

BUT HEY, under Obama's plan, everyone would have welfare and health care, right?  So what if they can't get a job, those who produce will be subsidizing the lives of those who don't.

As opposed to what? A system where the needy in society have their suffering maximized by an uncaring government? The purpose of a government is to protect its citizens, and that protection is not just limited to those in the middle class and above.

I'm sorry, but I don't see how that logically follows.  I think, Tzuppy and Falkus, that you're confusing the issue of socialized medicine with taxes in general.  Perhaps we should go into the health thread and discuss socialized medicine there, since we've already discussed it a lot there.

And then you took that money you earned and burned it?  Buried it in your back yard?  I'm guessing you went and...wait for it...spent that money!  Perhaps on stuff in the private sector?  The only thing this system seems to have done is allowed you, the government worker, to make that money, instead of the stock holder.


The cost is much lower to whom?  To the person who bought the screws.  The economy still benefits from people making money, even if they earn it doing something inefficient, because they spend their money after they make it.


It does?  Because the private sector never creates anything unnecessary?  I would say the vast majority of the private sector's output is unnecessary, and significant money is spent on convincing people they need unnecessary things.  The private sector tries to maximize profits, not necessarily minimize expenditures.  Often those two go hand in hand, but not always.  In many cases, you make more money by spending more money.  If the goal were only to minimize expenditures, then you'd have no advertising, no excess packaging, etc.


Where does the money spent on these programs go?  Do EPA scientists cash their paychecks and then burn the money each month?  The only difference between a government employee spending their paycheck, and a stock holder spending their dividends check is that the government employee is probably likely to have less money, and thus spend what they earn quicker.  You keep play up this idea that money spent by the government just disappears, and is removed from the system, never to be seen again, but that's simply not true.  The government isn't stockpiling money (in fact, the US is doing just the opposite).  It's spending all the money it takes in.  It might be spending it on the "wrong" stuff, but it's still spending it, and putting the money back into the economy.


Yes, I do have this notion that money that goes in comes out.  What happens to all money given to scientists?  I'm guessing they spend it.  Which means, it's back in the system.  You also seem to think private companies create jobs but government projects and programs don't.  But in the same breath you talk about EPA scientist.  That sounds like a job to me.


If so, the government should have an ever increasing pile of money.  But in fact, it has just the opposite: an ever increasing debt because it's spending more than it takes in.  Doesn't sound like a particularly effective dam to me.

Not really. I was using health care only as an example.

Let's take roads instead. They are a great example of what government spends money on.

Roads are such that no individual who uses them really needs them so badly to pay for them without some sort of government compulsion. Also, even those who do need them (industrials and capitalists for instance) cannot afford to build and maintain them. But! overall society does need them rather badly and that is why it's forcing everyone to pay for them. It is similar case with defense, environment, education, social care etc. and health care is just one of the reasons why taxes are good for you.

I think the issue is that you believe all money is created equally; I don't.

For example, businesses are in the business of making money.  Therefore, they generate new money through labor (i.e. jobs) investment of capital (i.e. helping the economy).  The government does not generate new money...typically...except through taking people's money through taxes.  So it is not the creation of new wealth; it is the redistribution of wealth.  And not only that, but it's not even redistributed with much efficiency or oversight, making it all the worse.

So it doesn't matter how the scientist spends his money.  The fact is that the scientist is NOT CREATING NEW WEALTH, just redistributing it.

Private companies do not create new money either, they just distribute it.  "Profits" don't come out of thin air, they come from someone else's pocket.  Every penny a share-holder earns is money that some other person no longer has.  Just as every penny the government spends is money that some tax-payer no longer has.  In both cases, money is redistributed.

Wealth is slightly different from money.  And both governments and companies can increase wealth, and do so by redistributing money.  If I buy something from you, we're both slightly better off (if not, I wouldn't have bought it or you wouldn't have sold it), so our total wealth increases.  If the government takes X dollars from Bob, and gives it to Joe, then Bob is worse of, but Joe is better off.  But if Joe's situation improves more than Bob's gets worse, than the total wealth is increased.  The private sector has the advantage that all un-coerced trades are beneficial for both parties (ie, a positive change in wealth for both parties), but the disadvantage that changes in wealth tend to be minimized, since both are trying to get the most they can out of the other for the least possible in return.  Thus, both sides tend to end up just slightly more wealthy.  In the tax case, though, the goal is (or at least can be, and should be) to maximize the summed total of wealth, not just one side's or the other's.

Here's an example:  Say I have a magical machine which takes pennies and turns them into quarters.  Unfortunately, due to it's magical nature, the person who puts in the penny doesn't get the quarter.  Instead, the quarter instantly appears in someone else's pocket, at random.  Now, this would clearly increase the wealth, not just redistribute it.  But it's not in anyone's best interest to put pennies in, so if it's left to the private sector, no one will ever put any pennies in the machine.  The government, though, can look at it from the sum total, and compel people to put pennies in, because it's trying to maximize the total wealth, not just one person, or one small group's wealth.

Taxes are a bit like that.  $1 to a millionaire isn't worth the same as it is to someone struggling to pay their rent.  $1 might have 25 times the importance/value to the latter person than to the former.  If so, the government forcing the first person to give $1 to the latter is like the magic penny machine.  The total wealth has been increased simply by redistributing the money.  Yes, one person suffers, and someone else benefits.  But if the benefit outweighs the suffering, then the total wealth is increased.  By compelling behavior that is not in your best interest, but is within the best interest of the economy as a whole, governments can increase wealth using taxes.

In the specific case you mention, I'm not sure why you feel a scientist working for the government isn't creating wealth, but one working for the private sector is?

I think we are cross talking.  Where does the government build wealth?  It can print money (and increase inflation), or it can distribute money.  It does very projects that actually generate wealth (as opposed to simply money, which it generates through taxes).

Let's take Microsoft as an example.  It started off as just a few people and grew, creating both wealth (including jobs and the production of value that translated to wealth) and improving people's lives.  It was focused on activities that improved the use of wealth instead of squandering it (as the government is wont to do).

The government doesn't really create wealth because that's not the government's job...not under our constitution anyway.  Companies are their to create wealth, so they use the money most wisely...plant the seeds, so to say.

Companies do not simply redistribute wealth.  Example:  If a company buys $50 in spare part, hires someone to assemble them, adds in its own software, and then distributes a piece of equipment worth $2000, then it has created wealth...improved upon its existing resources to generate more income (and thus more jobs, more capital, etc.).  To create this same piece of equipment, the government is likely to spend $4000 or $5000 worth of wealth, thus depleting wealth instead of expanding it.  (That's the typical trend anyway.)

In short, wasting resources hurts the economy; maximizing the use of resources helps the economy.  Maximizing resources = generating wealth.

I think you are thinking of wealth in terms of dollar bills...that green stuff.  Most of the world's wealth has nothing to do with the pushing of green bills across a countertop.  It is in real estate, buildings, equipment, an effective labor force, trademarks and intellectual property, etc.  These are what drive the economy, not the movement of the paper money.

Distributing money can increase wealth.  Wealth is how well-off a person is.  As you say, it's not just dollar bills, it's their overall well being.  If redistributing money makes people overall better off, that increases the total wealth.


Okay, and let's take the cigarette industry.  It was focussed on increasing its own wealth as well.  But has it increased the overall wealth of the population?  I'd say that no, it hasn't, despite making very large profits.  Making profits doesn't necessarily mean increasing total wealth, it only means increasing one group or companies wealth.


The government makes roads, which make people more wealthy.  The government creates police forces, and regulatory groups which prevent abuses, and thus also increase our wealth.  The government helps people in need of help, which makes us all more wealthy.  If we switch to a government health care system, that will increase our wealthy by giving more people access to health care.


Do you see how this doesn't make sense?  You say that if a company creates a job, that's increased wealth, but if the government creates a job, then it doesn't.


I think we have different ideas of wealth, then.  I'm using it to mean how well off people are, in the most general sense.  It's not a physical item.  It's not just money, or goods, or land.  It's overall well being.  If you're better off for the government being around, then it's increased your wealth.

What about the "life, liberty and pursuit of happiness" part? Or you don't consider that a part of your constitution?

Though I'm not necessarily agreeing with Heath on this, I would imagine his answer to your question would be that those are rights that constitution guarantees rather than wealth that it creates.

Tycho, we apparently are crossing streams here with very different ideas of what wealth and "Creation of Wealth" means.  I'm not introducing anything controversial or even disputed.  I think both liberals and conservatives understand what I've typed as being the truth behind economic theory...I think even Obama recently admitted something similar.

Instead, I'd just refer you to read some books on economics and finance.  "Creation of wealth" has a very special meaning.  Just distributing wealth cannot "create" it.  Something has to be done with the wealth to increase its value.  In any case, a good starter book for anyone interested, written in easy to understand terms is "Rich Dad, Poor Dad."  I recommend this book to anyone who has grown up thinking that going to school and becoming an "employee" ever leads to true "wealth."  This book explains what true wealth is and how to create and develop it.

As an aside, the definition of "wealthy" is not a term of money.  It is a term of expressing that a person spends less than the person makes, and thus increases the person's value.  For some people, it might be $100k, for others $1 million.  The same is true of corporations and how they create and handle wealth.  If they (or the government) redistribute all their wealth, they are not wealthy because they do not improve upon the wealth to stay liquid (and have no capital).  If they (or the government) go into debt, the situation can be even worse, even if there are short term gains.
___
Yeah, as for Tzuppy's comment, I agree with Tycho.  I'm not sure how that's relevant to this discussion.  In fact, if you bring the Constitution into it, there are fair, if erroneous, arguments that "taxes" actually take away from our right to "life, liberty and the pursuit of happiness."  They take our property, which is our means to attain those ends.  This is why there is a strict "takings clause" under the constitution requiring due process and compensation if the government takes property from you.  Except that taxes get around this clause due to the right of congress to raise taxes to pay for its constitutionally mandated rights.  So there is always a conflict there.

In essence, though, with Tzuppy's point, taxes are the necessary evil even though they take away from our right to "life, liberty and the pursuit of happiness."  This, by the way, is an individual right, so it has nothing to do with the government stepping in.  Certainly, the government does not try to create wealth because of this, except to the respect of national security.  Otherwise, we are looking at social welfare...i.e. take from those who produce and give to those who don't produce...and that's actually a Marxist philosophy, not the capitalist philosophy that gave rise to our constitution.

Okay then Heath, explain why a government worker making a road isn't creating wealth, when the guy in a factory making a car for the private sector.  Explain why a scientist working for the government isn't creating wealth, but if he went to work for a private company doing the same thing he would be.  Explain how you working as a private lawyer (I think?) creates wealth, but a public defender doesn't create wealth.  Explain how a private security guard creates wealth, when a police officer doesn't.  Or how the insurance industry creates wealth, but socialized medicine doesn't.
This message was last edited by the GM at 19:00, Tue 19 Aug 2008.

Are you so absorbed by your own "philosophy" that you actually believe that this is what I was arguing??? My point is actually the opposite -- I'm claiming that without a certain degree of wealth, or for simplicity's same money, one is unable to exercise his or her right to life, liberty and pursuit of happiness. Now, if person's family cannot or chooses not to provide that, where can it come from?


And by the way, I fully agree with Tycho's last post.

Because the guy making the road is making infrastructure while the guy in the factory is creating a product.  Everyone uses the road but it's not bought and sold and traded between people like a car can be.*

As for the rest, I don't think you're really understanding where he's coming from on that point.

*Well, unless you live in a state that allows toll roads to be built. :p

But roads are necessary for industry (and economy in general) to grow.

But "wealth" doesn't mean "product."  If Heath had said "the government doesn't make products," I'd have came up with a different example.  If your point is just that the road isn't bought and sold, I would counter that taxes, in a sense, are how people buy roads.

Keep in mind that Heath isn't just saying/didn't just say that the government isn't as good at creating wealth, he's saying/said that it creates no wealth at all.  He's called it a "black hole" and implied that all the money that goes to the government disappears from the economy altogether.

Heath seems to view "wealth" to mean "how much more money you earn than you spend," but that is not what I consider wealth to me.  If there's a finite amount of money in a system, the total wealth cannot increase in that case, because for every unit of wealth one person achieves, someone else has to lose one.  The sum total of that type of wealth has to be zero unless there's new money constantly being added to the system.  Wealth, in my view (and in most economists, I would wager), is not just a dollar value of what you own or earn, but rather a reflection of your overall well-being.  Heath's "spend less than you make" definition of wealth implies a "whoever dies with the most money wins" mentality, which I don't agree with, and I don't think the government should encourage because hording money hurts the economy.

I'm happy to agree that the government doesn't horde all it's money, but rather spends everything (and, unfortunately, more on top of that) it takes in, and thus isn't becoming wealthy in the process.  However, I don't care if the government becomes wealthy or not, but if the people do.  And not Heath's kind of "I've got $10k under my bed" kind of wealth, but the kind of wealth that reflects that they're better off that they were before.  If a person earns and spends the exact same amount of money, but now they have health care they didn't used to have, then they're more wealthy in my view.  The government can create the kind of wealth I'm talking about.

Interestingly, I just read today that one of the major factors leading to the fall of Rome was in fact overtaxation.  Higher tax rates for the sake of government programs (namely defense and also bread and circuses for the poor) squeezed out the middle class, who are the primary source of significant income for the empire.  No middle class means a significant loss in tax revenue, and the empire found itself unable to afford those services at all any longer.

But higher tax does not necessarily mean less middle class. Often it's actually the opposite. Higher tax rate means bigger state apparatus and it by definition consists of middle class. It's how one taxes. If the state taxes to provide welfare (education, social support, health care etc.) then it helps middle class. If it taxes just to make rich richer, as it did in Milošević era and I suspect in Nero's as well, then it is a recipe for disaster.

One theory I've heard is that it happened due to over reliance on food imports, the other because of spread of Christianity and yet another that it happened because citizens and army started placing the loyalty not with abstract concept of state or the republic, but with its leaders personally.

What is interesting to me is that every time attributes fall of Rome to challenges they are facing and offer solutions which are reinforcing their ideologies.

To be sure, there were several causes leading to the fall of Rome, however high taxation has been quoted several times as one of them (and unquestioningly the cause of Rome shrinking.  Leaving Great Britain and parts of Spain was completely a financial decision.)

Your suggestion about the middle class only works if the government is hiring people to do 'normal' middle class business as well, such as trade and create goods.  The US government doesn't do that.  So for instance, if you taxed all of the people who traded corn to hire more people to regulate or support the trade of corn, even though you might have a net gain of middle class people, eventually that business segment will collapse.

There's a lot of talk about taxes in the news today (understandable, given the date!), and a lot of coverage of the "tea party" tax protests going on.  The desire to not pay taxes (or not as much taxes) seems to be as high as it's been in a long time.  I was curious to hear what people here (especially those who think taxes are too high) would consider a "fair" amount of tax to pay?  How much would taxes need to be reduced before tea party-goers (the BBC editorials seem happy to call them tea-baggers, but I think that's probably not their preferred descriptor!) would say "Okay, that seems about right?"

Another question:  do people think objections to taxes is less an issue of the amount of the taxes, and more an issue of what the taxes are being spent on?  Or perhaps is it more do to the fact that the people benefiting from tax-funded programs often aren't the ones paying for them with the most tax dollars?

Also:  do people here think the tea-party-goers want the military shrunk (or at least military spending?), as that is the largest chunk of the spending in most years.  Cutting taxes significantly would seem to require a reduction of military spending, but I get the impression most anti-tax proponents also tend to be the most pro-military spending.  Can these two positions be reasonably held at the same time?

1) I think the tea-party does want lowered taxes, but the best way to effect this is by making it clear what we are spending money on and why (and eliminating that). Paying trillions to the banks seems like a very poor idea; it's a band-aid solution, and it ultimately fixes nothing, while saddling our children with an unpayable debt burden (and I do think that's an important note - our debt is something like 350% our GDP - it is basically unpayable - we have created a situation which everyone knows is going to explode, and it's going to take the country down with it. No amount of raising taxes can change that at this point.)

If we stopped spending money on silly things, the tax burden would be lowered. I don't think most of them would object to the same tax rate, as long as it's going to something responsible like paying off our debt.

2) The people who pay the most taxes are the middle class, while most of the benefits go to either the poor or the very rich. I don't care which side of the political spectrum you fall on, but that is going to seem very wrong.

3) I think the party-goers would like military spending reduced (if we can do so safely), but military magnitudes smaller than Obama's 'give money to bankers' program. Obama's program has spent ridiculous amounts of cash. I don't think the two are even comparable.

A fourth point you didn't bring up is the complexity of the tax code. Currently the US spends something like $3b just in getting people to do our taxes. It's at the point where most intelligent people are unable to figure out their own taxes, and it's effectively added a +$150 tax to everyone in the form of 'support the accountant industry' fee. The tax code is so large that no one has read all of it. It's tens of thousands of pages, oftentimes with contradictory or undefined pieces. Paying taxes oftentimes isn't as painful as figuring out how much needs to be paid (I can say that myself - having just figured out my wife's tax with-holdings for her small business, in which she owes either $0, $740, $740 + social security and medicare, or some other unspecified amount).