And here is the reason we should simply cease to discuss this. Neither of us is going to budge. Personally, I do not trust Wikipedia as a source (especially because I have noticed that some of the info you get from it is different than the info I get from actual government websites). Nor will you be able to convince me with math, because I have seen you do it and I have seen economists do it and the two are different. I am not good enough at this sort of math to figure out why the two are different; and so I am fundamentally unable to be swayed (unless somebody could explain it). I have to lean towards the economists, and so assume that you are making some sort of error of which I am not aware.
At the same time, I do not have the math skills to convince you with evidence; and your attitude suggests that you trust neither me nor my sources because I and they have "emotional investment" in the result.

Therefore I withdraw from the subject, conceding nothing but the uselessness of further debate.

I'm having difficulty finding figures. According to electoral commission figures, the Conservative Party recieves about half again as much funding from individual donors than the Labour Party, but that's a bit of a stretch to turn into a general trend. I'll keep looking.



But the point I was making was just that rich people tended to be less left-wing, so that if being rich gives you political power, it gives more power to the right.

Where has that been proven, anyway?

What about a consumption-based tax system, and abolish income tax altogether?

As I understand it, all income tax goes buh-bye. Taxes on food, clothing, and luxury items basically go through the roof to cover the gaping hole. The only way for it to be fair is in how something gets classified. Essentials have a tax rate that is only slightly higher than current, but non-essentials, such as that really slick Ferrari, get taxed out the wazoo. Poor people end up paying less tax than they do now, rich people pay more than they do now, and the middle folks make out in direct proportion to their tendency to live outside their means.

I've heard only a little on this idea, but am curious to see what you guys think.

The whole FairTax mess that's been discussed at great length is a consumption tax; it's just got a lot of bells and whistles, turning it from a bad way for the government to raise operating funds into a bad way for the government to raise operating funds with a lot of bells and whistles. Not too dissimilar to what we've got now, in other words; though what we've got now could conceivably be fixed.

What you seem to be aiming towards isn't really a consumption tax, though; it's a luxury tax. That's not a bad way to raise some loose change, as long as it really targets luxuries; but it would never raise enough to get by on. The rich don't spend enough on anything, and the rest of the folks don't spend enough on luxuries.

Classification of some items will be a nightmare. Does all food fall under essentials? Including caviar and expensive wines? Or where are you going to draw a line. Similiar with clothing. You have a continuum from no-name jeans over brand jeans to armani suits.

In rural areas you have a very hard time without a car. In a more urban area this is not the case. For whom is a car an essential and what sort of car?

Should there be taxes on services such as hirering a constuction company.

Some rather poor farmer builds a new shack for his pigs. A millionaire builds a large mansion on some land he owns. If there are taxes, then it will be hard for poor farmers to maintain or expand their buisnesses. If there are none, then a big part of consumption of the rich and ultra rich will go untaxed.

Oops. I sincerely wish I'd recognized it, not least because that would increase the net amount of Monty Python I've watched in my life, which would probably make for an improvement.

quote="Niftyboy"]Your other point about the rich becoming powerful politically can be a problem, I ask if this takes into account the fact the not all rich people have the same political objectives?[/quote]Yes, it does. Because while not all rich people have precisely the same political objectives, the rich collectively have certain objectives and desires that don't match up with what the general public needs. Not all rich people are going to agree about stem cell research, because being rich doesn't automatically change your opinion on that issue. But all rich people's interests lean the same way on the estate tax (it's a tax that impacts the rich much more than the poor), or on welfare (it's a program that directly benefits the poor but not the rich). Therefore, there are a lot of issues, mostly economic ones, where rich people will be throwing their weight on one side of the issue and not on the other. Or where rich people that make money in a specific industry throw their weight on one side (like oil executives spending money to make sure that no effective action is taken against global warming).

And yet the ads have an effect.And yet the Republicans won in 2004.

But not all special interests have the same amount of money. Environmentalists have less money than oil executives. Poor people (the direct beneficiaries of welfare) have less money than rich people. And so on.

Unless they don't have more money, or unless there's no small group that cares intensely about the law.

And this is called 'campaign finance reform' and I specifically advocated it in my previous post.

That'd just make it harder for anyone but the rich to have anything considered "luxury". Like an Xbox 360. Definitely luxury. Had there been some obscene tax on it, I couldn't have afforded one.

The basic problem with consumption based taxes is this: the value of a dollar is not constant across the population. We all know the value of a dollar varies in time (and usually gets smaller). This idea is similar, but stems from the inequal distribution of wealth.

Suppose I have, each year, forty thousand dollars*. Now, that's a lot of money. A dollar of that pile o' cash represents a small fraction of the total. Suppose someone else, vbb for example, makes twenty thousand dollars**. Again, a dollar of that salary represents a small fraction, but it does represent twice the fraction that it represents in my pile. In effect, each of vbb's dollars are worth twice as much to him than they are to me, because they are twice as scarce.

Now, suppose there is a consumption tax that amounts to X% of the goods and services we both need to operate on a daily basis. That percentage is based on the cost of the goods and services and, assuming we are buying roughly the same things, is more or less constant. But to vbb, that tax burden is twice as dear as it is to me, because a dollar is twice as scarce for him.

This basic fact, the counterintuitive notion that money has different values for different people, is the reason consumption taxes try to differentiate between staples and luxuries***. Most people consider it unseemly to raise the basic cost of living on the poorest. Accomodating this and keeping a consumption tax leads to the luxury tax and all the problems inherent in declairing this item a luxury and that item a staple****.

All consumption taxes have this problem. They are ultimately regressive and there is no fix for this problem. It was this very difficulty that led the country to create an income tax in the first place. Leading us back to the age old observation that for every complex problem, such as funding the government, there is an aswer, such as consumption taxes, that is clear, simple and wrong.

An aside: the logic of money having different values also arises in tournament poker and is the primary strategic difference between ring games and tourneys. People who fail to grasp this point are doomed to a brief life of many rebuys.

------
* Not waffle's real salary.
** Not vbb's real salary.
*** Not to mention sin taxes - heavy tax burdens on activities frowned on by the society.
**** A modern and interesting instance of this occurs in insurance. Some plans were marking birth control pills down as a luxury and refusing to cover them (making them very expensive). Meanwhile, erectile disfunction pills were marked as a staple (making them very cheap). Odd, considering birth control pills are commonly used to control endometriosis, a painful condition common in women over thirty where, at last check, a lack of erection has yet to cause a debilitatingly painful physical condition.

Oh how I wish I made that much.

True, but Frederich Hayek did a much better job of dealing with the issue, and in a modern setting.

In the end though, it doesn't matter. The whole idea of "the Invisible hand" is that the market is complex enough, and the information in it is so distributed, that it acts as a spontaneously self-organizing system. The fact that there are monopolies (efficient or inefficient) is irrelevent. The market still self-regulates, just to a different level. To use a metaphor, if a massive object enters a gravitationally stable solar system, it doesn't tear everything apart. The system adjusts to a new stability point.

The only useful thing you can get out the "Invisible Hand" is that it's impossible to compile enough info to run a command economy, so the minimum number command economic measures are preferable. What those economic control should be (and where they should be) is another question entirely.

On the issue of Fair Tax...

Everything I've read on it leads my to believe that Malice's position is more accurate. In fact, there is probably a Pareto optimization for a Fair Tax system.

However...it will never fly. Psychologically, few people would be inclined to accept it, no matter how much better it may objectively be.

As many have noted, it puts the entire tax burden on the consumption end (as a sales tax), rather than the production end (tax on earnings). It requires a huge administrative overhead to manage all the exemptions and rebates - particularly for things like tourists. It's also normally calculated as an inclusive rate but collected as an exclusive rate.

I.e., a 23% Fair-Tax means that out of a $100 purchase, $23 goes to the goverment and $77 to the business. Fine, that's good. Except that everyone thinks of sales taxes as exclusive. Which tranlates into "I'm paying $23 tax on a $77 purchase. That's 30% tax!"

Most of the benefits of the Fair-tax could also be generated using Negative Income Tax or a similar social credit scheme, with or without a minimum guaranteed income.

Negative income tax has it's potential pitfalls as well (would a guarteed wage reduce the incentive to work?) but the major psychological barriers of a Fair-tax could probably be avoided.


Taxation does seem to be "find the lesser evil" sort of thing...that's for sure.


It hasn't been proven. It's essentially a rule-of-thumb, and wrong like most rules-of-thumb when over generalized. Rich-right, poor-left is a vast and misleading simplification.

The first-generation wealthy will tend to be more right-wing. Mainly because their the ones who went out and earned all that money, no one's goign to tell them what to do with it, etc, etc.

Following generations tend to be more liberal. Not the least of which comes from the tendency of academia to promote a liberal bias.

Geography and background also tend to play into it, as does occupation. hence all the poor appalachian farmers who happily spit on democrats and the rich California Actors who propose massive social welfare programs to help the "downtrodden" (even if they don't know who the downtrodden are)


Again, that's an oversimplification that doesn't provide any value. Except to political pundits who want to roll economic, political and social strata divisions into a single talking point because anything else confuses their audience. Or liberal academics who really believe the world can be divided into two groups (the chosen ones who believe their theories and the evil, unwashed remainder)

You're trying to have it both ways at once here. When it's convenient for you, you maintain that a mass of people will always and reliably make choices based on their perceived collective self-interest. But when it's awkward for you, you maintain that the very same behavior is nothing but a conspiracy theory hatched by some low rent boogeyman.

Needless to say, I'm not convinced.

The Fair Tax implementation would also have other consequences regardless of whether it is a good idea or not. First any switch from the current tax system to a fair tax system would have to involve a long transition period switching from one tax to the other (I think a quick switch would result in serious economic problems and downturn). I think it would take several years for the economy (whether because of psychology and even rational fear of what would happen in the new system).

Also in even theory if the consumption tax would raise more money, you have a tax on the consumption end rather than the production end (as old crow pointed out), and that would most likely reduce the amount of consumption. And the over-consumption of goods (spending more than saving) is one of the driving forces of our economy and why our economy is much less stagnant than European Countries (although it is sometimes a detriment when it comes to reinvestment and research and development).

The best solution is to just fix our current tax system. Starting with the removal of many of the tax loopholes that exist where corporations can escape taxes they are supposed to pay and if you removed these barriers you could probably even lower the corporate tax and still get more revenue and have a more equitable tax between the richer corporations and smaller corporations. There are also many other solutions that could be achieved in our current system.

Switching system just has too many transition costs even if that system is theoretically better (which I don't think it is).

Instead of driving, you could look at it as coasting towards a cliff with no brakes.

I am wondering where the comparison to European countries comes in.

Which of these countries are so very stagnant compared to us? Ireland?

This was edited. I originally retracted my statement because I hadn't checked this year's data.

Well obviously the problem of a generalization is it doesn't apply to every country.

For 2003:

https://www.cia.gov/cia/publications/fa ... 3rank.html

Greece (3.6), Spain (3.6), Ireland (5.2), and several Eastern European countries have higher growth rates, which isn't surprising, as many of them have developing economies, although Ireland is a little better established.

EU as a whole is 2.8 as compared to U.S.'s 3.4.

Luxembourg very high as well (5.7) and Sweden (4.2)

Norway (3.2), Austria (3.2), Switzerland (2.9), Netherlands (2.9) UK (2.6) are too close to be much of a difference. (US = 3.4%)

France (2.3), Germany (2.2), Italy (1.6), Portugal (1.2)

I am pretty sure that the US as been higher than most of that group besides Eastern Europe, Spain, Ireland, and the Benelux counties. But I will look for this data.

Also Wikipedia has 2004/2005 data
http://en.wikipedia.org/wiki/Economy_of ... pean_Union

US 3.4 in 2006
http://en.wikipedia.org/wiki/Economy_of_United_States

Here is GDP Purchasing Power Parity -
https://www.cia.gov/cia/publications/fa ... 1rank.html

US is higher than the overall EU and far exceeds the other European countries. Although I don't see the relevance of this stat, I think per capita is a better indication.

Thanks for the quick response.

The numbers I would be most interested in would be GDP per capita, in terms of purchasing power, so I wouldn't find much use for GDP growth rates anyway.