The economy theme park thread... featuring the stock market rollercoaster

[classicman2]

Do you seriously taxing the 'shit' out of drugs would work?

A black market would emerge where you wouldn't have to pay any tax.

[Larry C.]

why isn't marijuana legalization being considered? after being in Europe (spec. Amsterdam), it seems like this would be a perfect solution to the shit economy. first, you don't have all the people in jail for the soft-drug crimes that were committed simply based on it's illegality. beyond that, the govt could grow and tax the shit out of it. tourism would boom. hemp can be made into tons of shit clothing, food.....even energy and yet it's dismissed as a hippie ploy or something like that.

I believe I saw a statistic one time that weed is the #1 cash crop in the US. Anyone else think it's about time this country reconsiders marijuana laws? Or at least start pushing for wider hemp production?


I'm for it, but how will it look that we legalized weed under the presidency of a black president. Thats something Obama might not want on his resume.

[dick_grayson]

who gives a shit? that's the same type of reasoning it was made illegal in the first place.

[dick_grayson]

Do you seriously taxing the 'shit' out of drugs would work?


I don't know 'shit' about economics, so I just threw that in there. I think legalizing it or decriminalizing it would have the strongest effect, but taxation is what people like to hear so.....

http://blogs.reuters.com/great-debate/2008/12/03/einstein-insanity-and-the-war-on-drugs/

[dick_grayson]

also, I am bringing it up since today is the prohibition demise anniversary. I thought I should mention that.

[stp115]

why isn't marijuana legalization being considered? after being in Europe (spec. Amsterdam), it seems like this would be a perfect solution to the shit economy. first, you don't have all the people in jail for the soft-drug crimes that were committed simply based on it's illegality. beyond that, the govt could grow and tax the shit out of it. tourism would boom. hemp can be made into tons of shit clothing, food.....even energy and yet it's dismissed as a hippie ploy or something like that.

I believe I saw a statistic one time that weed is the #1 cash crop in the US. Anyone else think it's about time this country reconsiders marijuana laws? Or at least start pushing for wider hemp production?

Ok, as someone who doesn't smoke, but who is all for legalizing marijuana, let's be real. If you legalized it, the sum total that would be made into rope/paper/whatever random product that advocates say that hemp *can* be used for is almost zero. If it became legal, it would almost all be smoked or cooked. This hemp enabled utopia that advocates seem to think is just around the corner is just silly. That being said, and sin tax that I don't have to pay is all right with me. Bring on the legal dope!

[al_bundy]

i think the reason drugs were made illegal is people didn't like opium dens, the 1800's version of the crack house

[Sean O'Hara]

Do you seriously taxing the 'shit' out of drugs would work?

A black market would emerge where you wouldn't have to pay any tax.

A) You mean like the black market for tobacco products that's sprung up over the last several years as states place more and more taxes on them?

B) You assume that the taxes will make the price higher than it is now. But current prices are driven up by the dangers faced by growers, distributors, and dealers. Without that, the base price would likely be much lower, meaning you could impose sizable taxes before it increases the amount consumers pay.

C) Even if the price goes up after taxes, that doesn't mean people wouldn't be willing to pay the higher amount just so they don't have to deal with skeazy dealers.

[dick_grayson]

Ok, as someone who doesn't smoke, but who is all for legalizing marijuana, let's be real. If you legalized it, the sum total that would be made into rope/paper/whatever random product that advocates say that hemp *can* be used for is almost zero.

how do you know this?

[Dr Mabuse]

i think the reason drugs were made illegal is people didn't like opium dens, the 1800's version of the crack house

No, that's not why drugs were made illegal. In fact what you mention specifically had just about nothing to do with it.

[spainlinx0]

Weed isn't legal because Merck and Pfizer don't manufacture it. If you want to get high you go through them.

[stp115]

how do you know this?


Because you can buy hemp clothing now legally (in the US at least), and almost nobody does.

[dick_grayson]

Because you can buy hemp clothing now legally (in the US at least), and almost nobody does.

again, says who? I know plenty of people who buy hemp clothing. even patagonia makes hemp jackets. google hemp clothing and look at the results.

[Pharoh]

A) You mean like the black market for tobacco products that's sprung up over the last several years as states place more and more taxes on them?

I must have missed the multi-billion, (exact figures unavailable), tobacco black market in place prior to the increasing of taxes.

B) You assume that the taxes will make the price higher than it is now. But current prices are driven up by the dangers faced by growers, distributors, and dealers. Without that, the base price would likely be much lower, meaning you could impose sizable taxes before it increases the amount consumers pay.

Prices certainly would have to increase significantly in order for it to be a worthwhile government venture.

Relatedly, how much do you think prices would drop if marijuana was legalised? 25% is one of the highest estimates I have seen. Do you believe it would be considerably higher than this?

) Even if the price goes up after taxes, that doesn't mean people wouldn't be willing to pay the higher amount just so they don't have to deal with skeazy dealers.

Are all dealers this way? Would a government regulated system truly be easier and more convenient?

[wabio]

Is Dec expected to be even worse?

Wait till January. That's when I think the bottom is going to drop out.

[stp115]

again, says who? I know plenty of people who buy hemp clothing. even patagonia makes hemp jackets. google hemp clothing and look at the results.

You know several people who have one or two items of clothing made (at least in part) from hemp. Do you know anyone with even 1% of their clothing being even partially made from hemp? I rather doubt it. And again - it is legal to make hemp clothing now and it doesn't have noticible market share. What would change to make it a bigger player than cotton? Or wool? Or even silk? You can buy clothes made from recycled plastics now (they sold them at lollapalooza this year). You can't get much cheaper than recycled plastics, and that will never be big either.

[dick_grayson]

You know several people who have one or two items of clothing made (at least in part) from hemp. Do you know anyone with even 1% of their clothing being even partially made from hemp?
huh? I don't understand what you're asking, exactly.



I rather doubt it. And again - it is legal to make hemp clothing now and it doesn't have noticible market share. What would change to make it a bigger player than cotton? Or wool? Or even silk? You can buy clothes made from recycled plastics now (they sold them at lollapalooza this year). You can't get much cheaper than recycled plastics, and that will never be big either.

so what? recycled plastic tshirts are good too. I'm not saying we should go all hemp or that hemp is the wave of the future. My point was that you can do a ton of shit with it and it's easy to grow. You can't make milk from wool (that I know of) or run a car off it. That was my point.

[DVD Polizei]

Are all dealers this way? Would a government regulated system truly be easier and more convenient?

Well, just imagine a grocery clerk when a family presents their WIC check for milk, eggs...pot.

[wabio]

In terms of housing, if the unemployed aren't able to find jobs soon......we could see a secondary spike in foreclosures. We pretty much know most Americans didn't save squat during the last boom cycle......so they will have very little to fall back on.

[wabio]

The jobless rate would have bolted to 7 percent for the month if not for the exodus of 422,000 people from the work force for any number of reasons — going back to school, retiring or simply abandoning job searches out of sheer frustration. When people stop looking, they're no longer counted in the unemployment rate.

http://news.yahoo.com/s/ap/20081205/ap_on_bi_ge/financial_meltdown

So 533,000 people lost their jobs, and an additional 422,000 threw in the towel in a single month. That's not good news.

[X]

So 533,000 people lost their jobs, and an additional 422,000 threw in the towel in a single month. That's not good news.It is for pessimists.

[VinVega]

It is for pessimists.
It's hard to be optimistic right now.

Long term I am optimistic, but this will be a rough ride for the next year at least.

[sracer]

It's hard to be optimistic right now.

Long term I am optimistic, but this will be a rough ride for the next year at least.
I'm an "optimist" long-term too... I believe that there is an excellent chance for a complete and total meltdown of financial systems and overall economy within the next 3-4 years.

[wabio]

It is for pessimists.

Wasn't try to focus on one outlook or the other.....just trying to show a larger picture than the 533K number that seems to be grabbing all the headlines.

The problem I see, is the 422K people might be worse off. Many of them are going to lose unemployment benefits giving them even less to work with. They may have to burn through savings assuming they have any to begin with......which could be disasterous if these are older workers nearing retirement. Or they could run up debt on their CC, which could set them back for years once they regain a foothold. If enough people follow the later, we might even see a spike in personal bankruptcies which would only make it harder for the banks.......on top of the added foreclosure misery that would result. If the gov't decides to extend unemployment benefits, I'm not even sure this would aid these folks since they will already be "off" the program. IIRC, many states will only extend benefits if you are currently on the dole. Anyone know if this is true? It probably varies by state.

[RayChuang]

In terms of housing, if the unemployed aren't able to find jobs soon......we could see a secondary spike in foreclosures. We pretty much know most Americans didn't save squat during the last boom cycle......so they will have very little to fall back on.

This is all the more reason why we need to kibosh our current Federal income tax system in favor of a low-rate flat tax system or a consumption tax system like FairTax, where the tax code favors people saving and investing their money and not spending the money; this happens because of no personal income taxes, no corporate income taxes, no FICA tax, no Medicare tax, no capital gains tax and no estate tax.

Imagine being able to save up money with no tax consequences--this would allow people to actually buy a big-ticket item like a house or automobiles in cash or with a vastly smaller loan, since we can save up faster for a larger down payment on the loan.

[Sean O'Hara]

Prices certainly would have to increase significantly in order for it to be a worthwhile government venture.

Relatedly, how much do you think prices would drop if marijuana was legalised? 25% is one of the highest estimates I have seen. Do you believe it would be considerably higher than this?

A 25% price drop means the government could tax it up to 33% without increasing prices. How is that not worthwhile? Especially when the alternative is to get no income from marijuana and instead sink large sums of money into investigating, prosecuting, and imprisoning dealers?

Are all dealers this way? Would a government regulated system truly be easier and more convenient?

Go into 7-11, ask the clerk for a pack, show your ID, leave without any risk of arrest -- yeah, I'm guessing that'd be easier than the alternative.

[kvrdave]

I really feel that much of this economic horror is a self fulfilling prophesy. We hear how bad things are, so we all tighten up. Companies hear about it and see people tighten up, and lay off workers in anticipation of hard times. This just seems to feed itself. I'm guilty as well. I cut back on things, both business and personal, not because I am in any different position that I was 1-2 years ago, but because it feels like the right thing to do based on what we hear.

[Dr Mabuse]

I'm guilty as well. I cut back on things, both business and personal, not because I am in any different position that I was 1-2 years ago, but because it feels like the right thing to do based on what we hear.

I KNEW this shit was somehow your fault!

[kvrdave]

:lol: But I feel bad about it.

[X]

I really feel that much of this economic horror is a self fulfilling prophesy. We hear how bad things are, so we all tighten up. Companies hear about it and see people tighten up, and lay off workers in anticipation of hard times. This just seems to feed itself. I'm guilty as well. I cut back on things, both business and personal, not because I am in any different position that I was 1-2 years ago, but because it feels like the right thing to do based on what we hear.I think this is exactly what's happening. There is a legitimate difficulty in getting credit, but the cutback in spending with available cash is primarily psychological. There aren't that many people unemployed or fearful of unemployment to warrant the decrease in spending.

I have a theory that people will adjust to this feeling and start wanting to buy stuff again after not too long. I don't think the current mindset can last that long with our consumption-based society. I've been around during crappy economies and it didn't stop people from spending for long. But I would prefer that we make a slow amd steady transition to a more savings-based economy and let other people buy more of our (and their own) goods.

[DVD Polizei]

It didn't stop people from spending much because they actually had credit to charge when things were still psychologically bad. And credit companies were still lending money during bad economic times because it was a different economic situation. We're now dealing with the core of our economic system.

Over the decades, Americans have been slowly increasing their debt. We're getting to the point where they are maxed out. Which means less Foo-Foo money (money on paper) floating around.

Credit card companies are reducing credit limits, and even putting a hold on new credit card applications--they don't want to take risks, either. Primarily, credit cards aren't for people who have money. Without credit cards and other forms of credit for those who cannot afford a one-chunk payment, this entire economy would bust. But that's exactly what's going on. Installment plans are being re-thought by many high-APR companies.

It should be interesting too see how long these high-APR rental companies stay in business. Haven't heard much about this sector.

In order reduce the impact of this economic situation, we simply need more money in consumer's wallets. And we're talking real money. Cash. Not credit. Low gas prices are helping. However, loss of jobs aren't. Consumers won't spend that much if they think they are the next ones which could be axed. So, we need more confidence from companies. We aren't getting that, either.

This is more than just psychological. People just are not paying their debts. They have extended themselves way too far, and every sector in our economy has been based on the ability of a consumer to pay back those debts. We still don't know how much debt will not be paid back. But on top of this, you had companies which financially forecasted based on the ability of these consumers to pay back the outrageously inflated debt. So, it's a double whammy. Companies are cutting jobs dramatically because they've over-hired, over-paid, and forecasted financial earnings which were completely unrealistic.

Third, our economy will need to re-align itself for those jobs lost. Especially in the financial sectors. Because they aren't coming back anytime soon. How many jobs will be lost is still uncertain, and we won't know till middle of next year, maybe later. Which is really bad because this puts more stress on outstanding debts of firms who are hanging on, riding this thing out.

It's what I call an Exponential Recession. Where you have a "perfect storm" of the economic sectors which become so misaligned, one action will exponentially increase the damage to the other.

[sracer]

In order reduce the impact of this economic situation, we simply need more money in consumer's wallets. And we're talking real money. Cash. Not credit. Low gas prices are helping. However, loss of jobs aren't. Consumers won't spend that much if they think they are the next ones which could be axed. So, we need more confidence from companies. We aren't getting that, either.

This is more than just psychological. People just are not paying their debts. They have extended themselves way too far, and every sector in our economy has been based on the ability of a consumer to pay back those debts. We still don't know how much debt will not be paid back. But on top of this, you had companies which financially forecasted based on the ability of these consumers to pay back the outrageously inflated debt. So, it's a double whammy. Companies are cutting jobs dramatically because they've over-hired, over-paid, and forecasted financial earnings which were completely unrealistic.
Bingo. When real estate prices went above what the average person could reasonably afford, mortgage companies got creative and came up with gimmick mortgages. When car prices rose too high, personal leasing helped many people to continue to obtain new cars. All the while, credit card debt continued to creep up higher... until they reached their limits. This is the end of the road, IMO.

There is no easy or graceful way to rollback the economy to a point where things are solid and stable.


I really feel that much of this economic horror is a self fulfilling prophesy. We hear how bad things are, so we all tighten up. Companies hear about it and see people tighten up, and lay off workers in anticipation of hard times. This just seems to feed itself. I'm guilty as well. I cut back on things, both business and personal, not because I am in any different position that I was 1-2 years ago, but because it feels like the right thing to do based on what we hear.
I disagree that it is a self-fulfilling prophecy, at least from an individual's perspective. You and I are not the ones who claimed that the financial systems are so fundamentally broken that without a massive bailout there would be a total and complete meltdown. That's not psychological... that is reality. That was a real $800+ billion that went to the financial institutions. It is not psychological that the 3 domestic automakers are months away from a meltdown.

There is certainly a major psychological component to it, that was IMO directly fueled by the very thing that was supposed to fix the situation... the bailouts.

I said it before, and I'll continue to say it... the absolute worst thing we could've done was to bail out companies.

[wabio]

This is all the more reason why we need to kibosh our current Federal income tax system in favor of a low-rate flat tax system or a consumption tax system like FairTax, where the tax code favors people saving and investing their money and not spending the money; this happens because of no personal income taxes, no corporate income taxes, no FICA tax, no Medicare tax, no capital gains tax and no estate tax.

Imagine being able to save up money with no tax consequences--this would allow people to actually buy a big-ticket item like a house or automobiles in cash or with a vastly smaller loan, since we can save up faster for a larger down payment on the loan.

Not to hijack this thread....

The concept is great, the realistic implementation of it....maybe not. Again, what <i>level</i> of sales tax do you think is necessary to run the country? Does FairTax state such a number? It's easy to debate academically what would work and what wouldn't, but a 30% sales tax could be disasterous.

I'm not against the sales tax model per se, just advocating caution against completely nuvo strategies. The biggest problem with the sales tax model is it's regressive in nature, and almost completely voluntary and thus unpredictable as compared to our current system. If everybody were to coincidentally stop purchasing stuff, gov't inlays would nosedive (similar to what we're seeing in some states right now). The gov't would somehow have to ensure steady revenue or you could see huge problems with infrastructure and social services. One buffer could be to increase taxes on essentials (food, clothing, gasoline, etc.), but this would be horribly regressive.

[DVD Polizei]

Takeover the gas/oil industry and subsidize prices would be a start.

[gmanca]

Sales Taxes are regressive, period. Unless people in the top 1st quintile have more than 3 homes, all located in the US, with 20 kids, they will consume about the same amount of essentials as anyone else, which lowers Government revenue, which hurts middle class jobs because of direct or indirect purchases by the Government. And you still have a burden on people who have less income to start with and are spending more of it on essentials that do help the overall economy directly, as opposed to vacations, yachts, etc.

And the estate tax is not a reason why people don't save.

[al_bundy]

http://news.yahoo.com/s/ap/20081205/ap_on_bi_ge/financial_meltdown

So 533,000 people lost their jobs, and an additional 422,000 threw in the towel in a single month. That's not good news.


or 422,000 boomers retired

[wabio]

Another snag I just thought of. If we were to move to sales tax model.....the tax level would probably need to be in the 40% range or even higher in order to work. Think of it this way.......currently people are being taxed on their income at probably an average of ~28%. But over the course of any given year, people spend a lot <i>less</i> on taxable merchandise than they make in income.....or at least they should. I'd say most people spend a majority portion of their paycheck on rent/mortgage, car payments, utilities, servicing debt, healthcare, childcare, etc......none of which is subject to sales tax. Food, gas, and clothing are the only exceptions.

We simply (as a nation) couldn't buy enough big screen TV's to generate enough revenue for Washington unless an extreme sales tax is levied or some other form of tax is included as a supplement. There are a lot of unforseen consequences that could result from this tax model. One thing is for sure, it would mean the death of the Big 3 if they are fortunate enough to survive the current crisis. Furniture and appliance manufacturers would get hit hard too. You'd probably see a huge surge in the second hand (i.e. Craigslist) market though.

Also, any sales taxes in the proposed model would have to be <i>in addition</i> to any sales tax currently being implemented. You would also have state and federal governments competing for tax revenue. It could get ugly quick.

Again, sorry for the hijack. :)

[wabio]

or 422,000 boomers retired


or were <i>forced</i> to retire. ;)

[JasonF]

Idled workers occupy factory in Chicago
By RUPA SHENOY – 15 hours ago

CHICAGO (AP) — Workers laid off from their jobs at a factory have occupied the building and are demanding assurances they'll get severance and vacation pay that they say they are owed.

About 200 employees of Republic Windows and Doors began their sit-in Friday, the last scheduled day of the plant's operation.

Leah Fried, an organizer with the United Electrical Workers, said the Chicago-based vinyl window manufacturer failed to give 60 days' notice required by law before shutting down.

Workers also were angered when company officials didn't show up for a meeting Friday that had been arranged by U.S. Rep Luis Gutierrez, a Chicago Democrat, she said.

During the peaceful takeover, workers have been shoveling snow and cleaning the building, Fried said.

"It's a rarely used tactic," Fried said. "But we're in very drastic time and the workers have taken measures necessary to win what they're owed."

Representatives of Republic Windows did not immediately respond Saturday to calls and e-mails seeking comment.

Police spokeswoman Laura Kubiak said authorities were aware of the situation and officers were patrolling the area.

Crain's Chicago Business reported that the company's monthly sales had fallen to $2.9 million from $4 million during the past month. In a memo to the union, obtained by the business journal, Republic CEO Rich Gillman said the company had "no choice but to shut our doors."

http://www.google.com/hostednews/ap/article/ALeqM5ildwrFjwHYjvJPX2edZgBnNb8EEQD94TB9OG0

Amazing. This is the sort of thing you read about in history books. I never expected to see something like this happen today.

[Cory02]

Unemployment numbers in early 09 should be even more fun with all the season retail workers out on the street.

[RayChuang]

Not to hijack this thread....
The concept is great, the realistic implementation of it....maybe not. Again, what <i>level</i> of sales tax do you think is necessary to run the country? Does FairTax state such a number? It's easy to debate academically what would work and what wouldn't, but a 30% sales tax could be disasterous.


Go to www.fairtax.org and you can see a large number of .PDF files that explain how FairTax works.

Basically, FairTax works in this manner:

1) We kibosh the current Federal income tax system that have these taxes:

a) Personal income tax
b) Alternative minimum personal income tax
c) Corporate income tax
d) FICA tax for Social Security and Medicare
e) Capital gains tax
f) Gift tax
g) Estate tax

2) We impose a 23% national sales tax (consumption tax) on newly-produced items such as new-construction homes and new cars. Items such as currently-existing homes and used cars will not be subject to the tax. Note there are NO exceptions for taxes for newly-produced items. Note the 23% is based on the calculation of equalling the revenue to the Federal government from the current Federal income tax system.

3) To help lower-income people pay for the 23% consumption tax, they get a "prebate" payment calculated to pay for the tax up to the Federally-defined poverty level. The level of payment will depend on the marriage/registered domestic partner status and the number of dependents in the family.

While it's not completely perfect, it's certainly VASTLY easier to understand than having to deal with a frightening 60,000 pages of the current Federal income tax code. Just saving ourselves over US$265 billion per year in compliance costs (that's based on the 2006 calculation--the cost in 2008 is probably approaching US$300 billion per year) is a big incentive to get FairTax on the books. This would be a huge boon to small business, who right now have to either spend many hours calculating their tax returns on their own or pay several hundred dollars per hour to an accountant to do it for them.

Easily, the best part about FairTax is the ending of taxes on earning money. That means you don't get a paycheck where you get at times over 23% lopped off the paycheck for income tax withholding and FICA taxes and when you save your money in a bank or invest the money in equities you don't get taxed for savings account interest, dividend income or capital gains income. That means more incentive to actually build up your net worth, which makes it easier to save money for a big-ticket item purchase like a home or automobile either in a cash payment or with a vastly smaller loan because you can afford a much bigger down payment. Given that almost every economist agrees that we need to wean ourselves out of being deeply in debt, changing our tax laws to encourage saving (which FairTax does) is actually a great idea. :up:

[wabio]

Go to www.fairtax.org and you can see a large number of .PDF files that explain how FairTax works.

Basically, FairTax works in this manner:

1) We kibosh the current Federal income tax system that have these taxes:

a) Personal income tax
b) Alternative minimum personal income tax
c) Corporate income tax
d) FICA tax for Social Security and Medicare
e) Capital gains tax
f) Gift tax
g) Estate tax

2) We impose a 23% national sales tax (consumption tax) on newly-produced items such as new-construction homes and new cars. Items such as currently-existing homes and used cars will not be subject to the tax. Note there are NO exceptions for taxes for newly-produced items. Note the 23% is based on the calculation of equalling the revenue to the Federal government from the current Federal income tax system.

3) To help lower-income people pay for the 23% consumption tax, they get a "prebate" payment calculated to pay for the tax up to the Federally-defined poverty level. The level of payment will depend on the marriage/registered domestic partner status and the number of dependents in the family.

While it's not completely perfect, it's certainly VASTLY easier to understand than having to deal with a frightening 60,000 pages of the current Federal income tax code. Just saving ourselves over US$265 billion per year in compliance costs (that's based on the 2006 calculation--the cost in 2008 is probably approaching US$300 billion per year) is a big incentive to get FairTax on the books. This would be a huge boon to small business, who right now have to either spend many hours calculating their tax returns on their own or pay several hundred dollars per hour to an accountant to do it for them.

Easily, the best part about FairTax is the ending of taxes on earning money. That means you don't get a paycheck where you get at times over 23% lopped off the paycheck for income tax withholding and FICA taxes and when you save your money in a bank or invest the money in equities you don't get taxed for savings account interest, dividend income or capital gains income. That means more incentive to actually build up your net worth, which makes it easier to save money for a big-ticket item purchase like a home or automobile either in a cash payment or with a vastly smaller loan because you can afford a much bigger down payment. Given that almost every economist agrees that we need to wean ourselves out of being deeply in debt, changing our tax laws to encourage saving (which FairTax does) is actually a great idea. :up:


Is the current tax code complicated? Obviously. But the numbers simply don't add up. I'm not an accountant or an economist, but I don't see how a 23% sales tax is sufficient to replace all those kibosh'd taxes on the list. Personally, I like to spend money on just about everything. I have more hobbies than I do fingers on my hands (.....and yes I do have 10 fingers.). :eek: But I don't spend anywhere near what I earn. Not including the car, food, and gas (essentials) I probably spend about $500-$1000 monthly on fun 'n junk. That comes out to $12K a year. Would that number go up if I didn't have to pay income taxes? Probably, but not by a whole lot. Even if I increased my fun money by 50%, that would still only be $18K per year taxable. And if I were to get the "poverty level" tax deduction which you mentioned, this number would decrease by $10,400 (single). That comes out to $7,600 taxable assuming I increased my monthly spending to $1,500 monthly (not including essentials). At 23%, that means my annual tax would be $1,748. I love it! Currently I pay more in federal income tax than I'd even have <i>"taxable"</i> under the FairTax plan.

One thing is for sure. If sales tax went up by 25-50%, I'd be more choosy of what I purchased. Would I have any incentive to work harder if I didn't have to pay income tax? Probably not. I work pretty hard as it is......but that's just me.

I wonder why they decided against taxing "used" vehicles even though they are already currently taxed. :hscratch: Taxing new cars is obvious, but a tricky proposition. It's not like everybody buys a new car every year.

I agree that we should look for ways to ween ourselves off a consumption based society and be more focused on national savings. But you can do this without completely revamping the current tax code. The gov't could simply offer more incentives for personal savings (better tax shelters, higher interest rates, etc.). For instance, you mentioned saving up to buy a house. If the gov't were really concerned, they could create tax-free savings for it similar to an educational 529. If they really wanted people to save more, they could guarantee a higher interest rate on gov't sponsored personal savings accounts.

Again, I'm not an opponent of the proposed idea, just playing devils advocate. I don't think a 23% sales tax would even cover income tax and FICA.....which are only 2 of the kibosh'd taxes off your list. Let's assume there are 250 million taxpayers, and each person pays ~$2,000 like I previously calculated. This would equal $500B. That's not even enough money to cover Defense Spending for the 2008 budget, which is $583B not including Iraq and Afghanistan. It could be a very dangerous move to switch to pure sales tax model.......especially at 23%. Again, I just don't see how the numbers would add up.

[JasonF]

The Fair Tax is not only nonsense -- wabio is exactly right that a 23% sales tax wouldn't be a drop in the bucket on replacing all those taxes Ray lists -- it also shifts the tax burden squarely onto the lower and middle class.

[classicman2]

It's not as nonsensical as the flat tax. ;)

btw: If it's done 'progressively,' I don't believe it would shift the tax burder to the lower & middle class.

[RayChuang]

The Fair Tax is not only nonsense -- wabio is exactly right that a 23% sales tax wouldn't be a drop in the bucket on replacing all those taxes Ray lists -- it also shifts the tax burden squarely onto the lower and middle class.

Hence the reason for the "prebate" up to the Federally-defined poverty level.

There's been a lot of talk to exclude food and medicine from the 23% consumption tax, but then we get into the REALLY messy situation of defining what foods and medicines to tax. How do you define "prepared" food subject to tax? Or should we subject over-the-counter medications to tax and exclude perscription medications?

This is why it's better to go with a "prebate," since we want simplify taxation, not create another monster that ends up being fiddled around with at political whim. :down: The very reason for the idea of FairTax is to simplify the means of generating revenue to government, so there needs to be as few rules as possible in regards to its implementation.

In my humble opinion, most of the concerns about FairTax come from the fact we're so ingrained with how the current Federal tax system works that any alternative seems to be totally alien, to say the least.

Given the history of finances in the 19th and 20th Centuries in the USA, it's been demonstrated we are fighting a losing cause trying to generate revenue for the Federal government when we have taxation of income, which in the long run can cause serious economic fiascoes from compliance costs, driving people to go to Byzantine routes to try to keep their assets out of the clutches of the IRS, and forcing economic decisions by individual taxpayers and companies that end up causing even worse problems (like among the lowest savings rate in the world, forcing companies to "offshore" operations to keep their taxes down and being forced into deep debt for economic advancement). The current sub-prime mortgage meltdown is only the latest economic fiasco caused by the unwieldy, 60,000-plus page Federal tax code that even the IRS admits they can't figure out at times. :mad:

In my personal opinion, it it more than high time we revisit the very idea of the income tax and see should we go to a no-deduction very low percentage flat tax or go with a consumption tax like FairTax. Much of our current economic mess is because we are so deeply mired in debt to start with; why not change the taxation system so it encourages individuals and companies to save and invest their assets with little to no concerns about tax consequences? Can you imagine being able to actually plan to put away part of your earnings in a savings or investment account to build up a big "nest egg" and be able to actually buy a big-ticket item like a home or automobile (the two biggest purchases you'll make in your lifetime for the most part) either completely in cash or be able to pay a much bigger down payment so your loan size is much smaller and more manageable financially?

(getting off soapbox)

[DVD Polizei]

How about other countries pay our taxes. Seems like the US is the Vagina Clown Car of the world. They come here, do their business, reap the rewards, then leave.

[JasonF]

It's not as nonsensical as the flat tax. ;)

btw: If it's done 'progressively,' I don't believe it would shift the tax burder to the lower & middle class.

How would you make it progressive, short of having everyone submit returns that identify their income and what they brought, which would defeat the whole point of switching to a sales tax. Different rate for different categories of goods? That's a nightmare of its own.

Hence the reason for the "prebate" up to the Federally-defined poverty level.

That doesn't really solve the problem. Let's assume the poverty level is $10,000. Consider the following people:

Person 1 is poverty-stricken. He earns $5,000 per year and spends it all. On net, he pays no tax (and depending on how you define the prebate, may even get $1,150 in aid from the government if the prebate is flat).

Person 2 is lower class. He earns $20,000 per year and spends it all. He pays $4,600 in tax over the course of the year, but gets $2,300 back for a net tax of $2,3000 and an effective tax rate of 11.5% (tax paid as a percentage of income).

Person 3 is lower middle class. He earns $60,000 per year and manages to save $10,000 of it, spending the other $50,000. He pays $11,500 in tax over the course of the year, gets $2,300 back, so his net tax is 15.333%.

Person 4 is upper middle class. His annual income is $150,000. He saves a full third of his income, spending $100,000. That means he pays $23,000 in gross taxes over the course of the year ($20,700 net) and has an effective tax rate of 13.8%.

Person 5 is rich. He makes a million dollars per year. He spends $400,000 and puts the rest into savings. That means he pays $89,700 (net) in taxes, and has a tax rate of just under 9%.

Person 6 is really rich. He makes $50 million per year and spends a cool $5 million per year. That means he pays (net) $1,147,700 in taxes and his effective tax rate is a whopping 2.3% (give or take).

This is not unintuitive. The more you can afford to save, the lower your effective tax rate. And who can afford to save more? People with more income, of course.

There's been a lot of talk to exclude food and medicine from the 23% consumption tax, but then we get into the REALLY messy situation of defining what foods and medicines to tax. How do you define "prepared" food subject to tax? Or should we subject over-the-counter medications to tax and exclude perscription medications?

I agree with this (hence my response to classicman that it would be a nightmare to try to tax "luxuries" at a higher rate thaan "necessities".


Given the history of finances in the 19th and 20th Centuries in the USA, it's been demonstrated we are fighting a losing cause trying to generate revenue for the Federal government when we have taxation of income, which in the long run can cause serious economic fiascoes from compliance costs, driving people to go to Byzantine routes to try to keep their assets out of the clutches of the IRS, and forcing economic decisions by individual taxpayers and companies that end up causing even worse problems (like among the lowest savings rate in the world, forcing companies to "offshore" operations to keep their taxes down and being forced into deep debt for economic advancement). The current sub-prime mortgage meltdown is only the latest economic fiasco caused by the unwieldy, 60,000-plus page Federal tax code that even the IRS admits they can't figure out at times. :mad:

The sub-prime mortgage meltdown has nothing to do with taxes and everything to do with investors speculating on other people's mortgages. Likewise, our poor savings rate is not a result of our income tax regime; if it were, we would expect to see a relationship between savings rates worldwide and whether or not the country has an income tax (there is not such a relationship in the data). I'm at a loss to think of any kind of "serious economic fiasco" that has resulted from tax compliance.

[wabio]

1) We kibosh the current Federal income tax system that have these taxes:

a) Personal income tax
b) Alternative minimum personal income tax
c) Corporate income tax
d) FICA tax for Social Security and Medicare
e) Capital gains tax
f) Gift tax
g) Estate tax



I'm almost certain in order to eliminate all of these taxes in place of a consumption tax....the sales tax would have to be super high, not 23%. Something like 75%. The problem then becomes the "voluntary" tax conundrum. Who in their right mind will freely spend if sales tax is that high? There's no way for the state and federal gov'ts to guarantee a steady stream on income at those levels. Income tax is compulsory. You don't pay, you go to jail.

[wabio]

That doesn't really solve the problem. Let's assume the poverty level is $10,000. Consider the following people:

Person 1 is poverty-stricken. He earns $5,000 per year and spends it all. On net, he pays no tax (and depending on how you define the prebate, may even get $1,150 in aid from the government if the prebate is flat).

Person 2 is lower class. He earns $20,000 per year and spends it all. He pays $4,600 in tax over the course of the year, but gets $2,300 back for a net tax of $2,3000 and an effective tax rate of 11.5% (tax paid as a percentage of income).

Person 3 is lower middle class. He earns $60,000 per year and manages to save $10,000 of it, spending the other $50,000. He pays $11,500 in tax over the course of the year, gets $2,300 back, so his net tax is 15.333%.

Person 4 is upper middle class. His annual income is $150,000. He saves a full third of his income, spending $100,000. That means he pays $23,000 in gross taxes over the course of the year ($20,700 net) and has an effective tax rate of 13.8%.

Person 5 is rich. He makes a million dollars per year. He spends $400,000 and puts the rest into savings. That means he pays $89,700 (net) in taxes, and has a tax rate of just under 9%.

Person 6 is really rich. He makes $50 million per year and spends a cool $5 million per year. That means he pays (net) $1,147,700 in taxes and his effective tax rate is a whopping 2.3% (give or take).

This is not unintuitive. The more you can afford to save, the lower your effective tax rate. And who can afford to save more? People with more income, of course.



Interesting examples. But you forgot one thing. There's no sales tax on many things that people spend most of their monthly paycheck on.....like rent, healthcare, childcare, utilities, servicing debt, etc. So in actuality, the revenue generated would be even lower. The thought of having our federal gov't depending on consumers continually buying "stuff" is just scary.

[RayChuang]

The main reason why I mentioned the sub-prime mortgage fiasco is the fact that our current tax laws encourages people to got into deep debt just to buy a house. In my opinion, this is a terrible idea, as the any downtown in the economy will result in an explosion of foreclosures due to homeowners being unable to pay the monthly mortgage bill.

Now you know why I prefer drastic tax simplification. Under a low-percentage flat tax or the FairTax consumption tax, at least Americans will have a fighting chance to actually build up a financial "nest egg" to have the funds to buy a home either in cash or with a much smaller, more manageable loan (mostly because you can actually afford to do a bigger down payment). It's certainly economically better for Americans to be saddled with way less debt to enjoy the American dream of home ownership, something that a low-percentage flat tax or FairTax could make possible. And financial institutions will benefit, too, since they can provide much smaller loans to buy a house, which means a lot less risk for the financial institution.

[classicman2]

I'm almost certain in order to eliminate all of these taxes in place of a consumption tax....the sales tax would have to be super high, not 23%. Something like 75%. The problem then becomes the "voluntary" tax conundrum. Who in their right mind will freely spend if sales tax is that high? There's no way for the state and federal gov'ts to guarantee a steady stream on income at those levels. Income tax is compulsory. You don't pay, you go to jail.

Where do you get that 75% figure?

[JasonF]

Interesting examples. But you forgot one thing. There's no sales tax on many things that people spend most of their monthly paycheck on.....like rent, healthcare, childcare, utilities, servicing debt, etc. So in actuality, the revenue generated would be even lower. The thought of having our federal gov't depending on consumers continually buying "stuff" is just scary.

Well, I just assumed we would be charging sales tax on everything. If there are certain categories of goods and services that are tax free, you create a loophole you could drive a truck through as everyone tries to figure out how their the latest XBox 360 game is really a healthcare expense. And we're back to needing an IRS full of tax examiners making determinations about which products go in which buckets, tax inspectors making sure that when your local drug store says it sold $500 worth of non-taxable drugs and $500 worth of taxable cosmetics, that's really what happened, and so on.

[sracer]

The main reason why I mentioned the sub-prime mortgage fiasco is the fact that our current tax laws encourages people to got into deep debt just to buy a house. In my opinion, this is a terrible idea, as the any downtown in the economy will result in an explosion of foreclosures due to homeowners being unable to pay the monthly mortgage bill.
Our current tax laws aren't what triggered the sub-prime and NINJA mortgages. It was the financial institutions desire to keep the ponzi scheme going that gave birth to those gimmick loans.

Real Estate industry, the mortgage industry, and construction industry all had a vested interest in continuing the cycle. It could only work as long as they could keep it going. Once it stopped, it would crash.


Now you know why I prefer drastic tax simplification. Under a low-percentage flat tax or the FairTax consumption tax, at least Americans will have a fighting chance to actually build up a financial "nest egg" to have the funds to buy a home either in cash or with a much smaller, more manageable loan (mostly because you can actually afford to do a bigger down payment). It's certainly economically better for Americans to be saddled with way less debt to enjoy the American dream of home ownership, something that a low-percentage flat tax or FairTax could make possible. And financial institutions will benefit, too, since they can provide much smaller loans to buy a house, which means a lot less risk for the financial institution.
The ability for individuals to save is independent (barring absurd extremes) of the method used by the federal govt to levy taxes. It wasn't the govt tax policies that encouraged people to buy houses they couldn't reasonably afford.... or to max out multiple credit cards.

It is a lack of personal restraint and an unwillingness to accept the limits of their income that is at fault. No tax law changes can change THAT.

I remember when the deduction on credit card interest was eliminated. There was talk about how it would force people to charge less and save more. (even the possibility of a deep recession in anticipation of a precipitous drop on consumer spending) It had absolutely no effect. That's because most people do not consider the tax implications on their day to day purchases or earning decisions. Just like raising the tax rate on the upper income brackets isn't going to cause those people to "earn less".

[shifrbv]

Haven't checked into this thread for a long time. The lack of information on things still astounds me. The jobs report was bad, but we'll see even worse when they revise it in the next month. Most are expecting the true number to come in at 725K. The earlier months were revised upwards and those number nearly doubled.

If unemployment included the unemployed, those who work part-time but would like to work full time, and the discouraged workers, it would be at 12.5% right now. This is how it was done during the Depression to arrive at the 25% levels reported then.

The Guardian is reporting 1 million jobs to be lost in the US each month as we head into 2009. And unemployment is a lagging indicator so we can imagine just how bad things really are.

As many as a million American jobs could be lost every month by next spring
http://www.guardian.co.uk/business/2008/dec/07/recession-job-losses

This is not psychological. This is not a "self-fulfilling prophecy". This is real and serious. Things are going to get pretty bad.

[orangecrush]

I remember when the deduction on credit card interest was eliminated. There was talk about how it would force people to charge less and save more. (even the possibility of a deep recession in anticipation of a precipitous drop on consumer spending) It had absolutely no effect. That's because most people do not consider the tax implications on their day to day purchases or earning decisions. Just like raising the tax rate on the upper income brackets isn't going to cause those people to "earn less".
That is true. The only purchase where most people think about the tax implications is a home. Of course, most people look at a mortgage like some great tax heaven thinking it is much better to pay more in interest just to avoid paying a much smaller amount of taxes.

[orangecrush]

Haven't checked into this thread for a long time. The lack of information on things still astounds me. The jobs report was bad, but we'll see even worse when they revise it in the next month. Most are expecting the true number to come in at 725K. The earlier months were revised upwards and those number nearly doubled.

If unemployment included the unemployed, those who work part-time but would like to work full time, and the discouraged workers, it would be at 12.5% right now. This is how it was done during the Depression to arrive at the 25% levels reported then.

The Guardian is reporting 1 million jobs to be lost in the US each month as we head into 2009. And unemployment is a lagging indicator so we can imagine just how bad things really are.

As many as a million American jobs could be lost every month by next spring
http://www.guardian.co.uk/business/2008/dec/07/recession-job-losses

This is not psychological. This is not a "self-fulfilling prophecy". This is real and serious. Things are going to get pretty bad.
Don't worry. Obama will give us 2.5 million jobs back ;)

[wabio]

Where do you get that 75% figure?

Just a random number. I figure if 23% generates $500B using the quick and dirty calculation in my previous post, then we'd need a heck of a lot higher sales tax to reach the $2.6T the fov't currently has for budgeting. Heck, it might even be a lot higher than 75%. We could look at some state gov'ts for small-scale models. Just see how much in sales tax they levy, how many people pay into the system, and how much revenue it generates. You could start with California which has pretty high sales taxes and is home to 1/7th of the US population.

[Shazam]

Well, I just assumed we would be charging sales tax on everything. If there are certain categories of goods and services that are tax free, you create a loophole you could drive a truck through as everyone tries to figure out how their the latest XBox 360 game is really a healthcare expense. And we're back to needing an IRS full of tax examiners making determinations about which products go in which buckets, tax inspectors making sure that when your local drug store says it sold $500 worth of non-taxable drugs and $500 worth of taxable cosmetics, that's really what happened, and so on.LOL. That's what I do when I upgrade my desktop computer. See, I need really good 2D. And that's why I need a nVidia 280. And 4GB of RAM.

[RayChuang]

This is not psychological. This is not a "self-fulfilling prophecy". This is real and serious. Things are going to get pretty bad.

Then find a way to start the process of reversing this problem.

For me, the answer is simple: kibosh our current Federal income tax system and come up with a drastically simplified tax system that encourages savings and investment without having to worry about being taxed on earning money. A change like this would not only begin the process of weaning ourselves off the debt treadmill, but also means wealthier Americans won't need to "offshore" their wealth to keep it out of the clutches of the IRS and encourages foreigners to invest in the USA because we will become the world's largest legal tax haven. This would mean several trillion US dollars in new liquidity entering our financial system, which would be a huge boon to the US economy.

Otherwise, the results will be dire: we could be heading towards a repeat of the 1930's with the rise of political extremism, and we all know how that ended: a world war.

[Superboy]

The main reason why I mentioned the sub-prime mortgage fiasco is the fact that our current tax laws encourages people to got into deep debt just to buy a house. In my opinion, this is a terrible idea, as the any downtown in the economy will result in an explosion of foreclosures due to homeowners being unable to pay the monthly mortgage bill.

Not necessarily. How will dramatic changes to the tax code encourage savings in the lower class if capital gains taxes are marginal taxes right now? I don't think lower and middle class people are being discouraged from investing because of capital gains taxes. That's only the upper class. And you do realize that increased savings means lower interest rates... right? that means that people will both earn less returns but they will also be able to finance at lower rates - and in greater numbers. Being able to finance at lower rates and an abundance of liquidity IS WHAT CREATED THE MORTGAGE CRISIS IN THE FIRST PLACE, NOT THE DISINCENTIVE TO SAVE MONEY!!!!!

Now you know why I prefer drastic tax simplification. Under a low-percentage flat tax or the FairTax consumption tax, at least Americans will have a fighting chance to actually build up a financial "nest egg" to have the funds to buy a home either in cash or with a much smaller, more manageable loan (mostly because you can actually afford to do a bigger down payment). It's certainly economically better for Americans to be saddled with way less debt to enjoy the American dream of home ownership, something that a low-percentage flat tax or FairTax could make possible. And financial institutions will benefit, too, since they can provide much smaller loans to buy a house, which means a lot less risk for the financial institution.

Also, you're going to assume that prices are going to freeze where they are at now. Prices are going to go up because of increased aggregate demand, as people will have more absolute after-tax income. That sort of nullifies the whole point of a tax savings, doesn't it? and when you consider that people's wages rarely increase substantially in relation to inflation - and usually behind it time-wise, and more as a product of it than anything - savings won't dramatically go up because the cost of living will go up.

You also don't understand how home mortgages work. A greater amount of mortgages will be available if there is an increase in savings. That means that interest rates will be lower, but it also means that the absolute number of mortgages themselves will increase. That means more mortgages. That means housing prices will go up because of increased demand.

Let's say just for the sake of argument that no speculation occurs and housing price increases are going to be a product strictly of market demands. and given that not all geographic regions have the same housing availability, you'll across the board increases in places like California in New York and smaller increases in other states. That means the cost of living will go up, people will earn less on their savings, and we might face yet another mortgage crisis.

[Superboy]

I can't believe no one has said anything about the relationship between the lowering of capital gains taxes and the mortgage crisis.

[wabio]

Then find a way to start the process of reversing this problem.

For me, the answer is simple: kibosh our current Federal income tax system and come up with a drastically simplified tax system that encourages savings and investment without having to worry about being taxed on earning money. A change like this would not only begin the process of weaning ourselves off the debt treadmill, but also means wealthier Americans won't need to "offshore" their wealth to keep it out of the clutches of the IRS and encourages foreigners to invest in the USA because we will become the world's largest legal tax haven. This would mean several trillion US dollars in new liquidity entering our financial system, which would be a huge boon to the US economy.

We have different opinions of the same problem. Again, I agree we need to stop debt spending and increase savings, but I don't think our current taxation methods are responsible for it. IMO, the reason Americans aren't saving is twofold.

1) We love our junk and are our culture encourages us to buy more of it. Look at every facet or our lives and you will see it is somehow commercialized for profit.....no matter how obscure or unapparent. Every holiday, every activity, every purchase is somehow being capitalized upon.....and these corporation do their best at reminding us we should keep spending.

2) IMO, a hefty percentage of Americans aren't saving because they can't......not because of taxes. It's a myth that most people who declare bankruptcy do so because they overspent on stylish clothes, shiny cars, or fancy electronics. People are going broke because the rising essential cost of living has outpaced increases in real salaries over the past 15 years. They aren't saving because there's nothing to save. I hate to say it, but putting away a measley $100 at the end of each month ($1,200/yr), while commendable, won't really help you make any major headway. It only takes one unforseen event to eat up your savings and put you back in debt. One injury, car repair, or layoff. For the longest time, people used debt as an income supplement and cushion. When they stop, you get into trouble like we are currently experiencing.

As for offshoring money, that accounts for an extremely small percentage of the population. In my entire life, I've never met or known anyone with an offshore account.

[VinVega]

Closing for length. New thread can be found...

HERE - Part 8 (http://forum.dvdtalk.com/politics-world-events/545316-economy-recession-stock-market-you-can-find-here-pt-viii.html)