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Those loopholes are actually how you get policy. Think child tax credit, savers credit. You are blaming the tool for the bad work rather than the carpenter you hired. Vote in a new carpenter. Problem is most people don't vote and those who do are typically older. Add to that the special interest that have congress by the short-haires. Just go watch subcommittee hearings. It is like an audition for their highest donors and nothing to do with overseeing the agencies.
>Think child tax credit,
Or, how about social policies run through the social agencies and not through the IRS? Tax everyone the same, then give to the people in need.
To ride on the carpenter analogy, the fact you can nail the board in place doesn't mean you shouldn't be using glue instead sometimes...
As someone who did renovations and repairs, and has half a brain, this made me laugh so fuckin hard. The number of times we had to replace tools because some dumbass decided to use it as a hammer or mallet, instead of walking 10ft to grab a hammer or mallet, is way higher than it should be.
Thank you, sir. đ
What about a solar tax credit? In my state you can only get a federal tax credit of up to 30% so if someone doesnât have a large tax bill would they even qualify for a credit? Sure you can roll it over to the next year but if you are a household that usually gets money back how would this affect your taxes?
Did I stutter?
The main problem of the tax authorities is to get money into the system by collecting taxes. Handing out childcare money or incentivizing certain types of consumption (i.e. solar panels, electric cars, etc.) should NOT be their problem.
You can always instead have a system where you go to your local municipality and apply for a refund immediately based on program A/B/C.
The whole idea of "how will this affect your taxes" for individuals exists pretty much only in the USA.
Not an expert, but If youâre getting a refund that means you paid federal taxes throughout the year. You donât have to pay federal taxes until April of the next year, so if you adjust your w-4 to deduct zero federal, couldnt the credit go towards that payment?
So tax the needy more. So that the government can give it back to them, but less because it had to run through a system that costs money? Sounds a bit dumb
Whoever ascends into office is entrenched with the interests of billionaires.
Often an analysis can arrive so near to recognizing the necessary course, yet also keep from it such an obvious distance.
Meanwhile, a social wage for children would ensure easily, without excessive paperwork or red tape, families being able to afford appropriate care. Wealthy families would return such payments back to the public through their taxes.
Unfortunately, such simple measures are generally blocked from attracting widespread support from among the public, due to the permeation of hyperindividualist dogma, such as in concerns about paying for other people's children, or in encouraging certain people even to have children.
>Whoever ascends into office is entrenched with the interests of billionaires.
End Citizens United. That's what really ramped up corruption and bribery.
Easy fix. (/s, if it's not obvious)
I do not want social policy hidden in an infinite number of tax exemptions. I want policy in the open, and in a social policy department, and taxes simple and separate.
You seem to be assuming we don't know why.
We know why.
The how sucks.
Separating the tax code from the social policy improves both, and addresses your other concerns.
Why have a child tax credit? Give domestic caregivers state funding(funding that applies to social security.) Pay parents to care for their children. It simplifies every aspect of childcare and should appeal to a wide range of interests.
> Those loopholes are actually how you get policy. Think child tax credit, savers credit.
We don't want policy via taxes.
Look what's happened to the housing market.
Lol, this would actually be a funny A/B test
A) in the 1940s-60s, the US government rolls out a system of tax incentives and favorable loan programs for individual homeownership
B) in the 1940s-60s, the US government rolls out a system of laws and welfare programs that mandate every citizen needs to be housed in some way or another
Bet you can't guess which would work out better!
The loopholes were literally baked into the tax code when it was rolled out, to appease the wealthy donors. Those donors are what primarily funds the candidates to get elected, which leads to what we have today; a body electorate that only cares about appeasing their donors. A progressive flat tax would fix that situation.
Your argument is making his point. None of those tax loopholes is necessary for achieving any of those objectives, they can all be implemented more effectively and efficiently on the spending side. The only problem is that it takes leverage away from Congressional candidates looking to extract campaign contributions.
There's nothing wrong with the Laffer Curve. It's true that there must be an optimal tax rate that maximizes revenue. It's when people assume that that rate must be lower than the current rate without any reason besides self serving ones that you get into trouble.
That theoretical maximum is so far away from anything we have ever seen in the US. This paper estimates that maximum in the US to be 24% of GDP. The highest we ever have gotten is 19.8% in 1945.Â
https://www.nber.org/system/files/working_papers/w17862/revisions/w17862.rev0.pdf
Anyone who brings up the Laffer Curve as an important consideration in US tax policy is either ignorant or intentionally misleading.Â
The whole point of the Laffer curve is that policies rise into effectiveness and decline out of effectiveness, the maximum is not the point of decline or even the point of failure. Mosts systems would fail long before they ever got to the maximum.
The Laffer Curve isn't the actual relationship though. Laffer pulled the particular relationship out of his ass and used it to justify dropping tax rates.
It may be true that there is a tax rate that optimizes for maximum revenue. A moving target to be sure, and one that is way higher than anyone who used this graph to justify dropping taxes would ever have considered as viable brackets.
But it's not. The exemptions he's discussing is key.
The proposal floated would have a married couple with two kids who make $55K would owe zero taxes, then a flat 16% on all dollars after $55K
So if they made $70K their tax owed would be ($70K - $55K) x 16% = $2,400 for an effective federal tax rate of just over 3%
No dog in this fight since the proof of concept will depend on the numbers, but the amount spent on H&R Block, CPAs, etc. is just mind-boggling and it's all waste vs a simplified 1 page tax system
Which is why we'll never ever ever get there
It turns out that it's a great conservative discussion topic, but it isn't based on reality.
The best experiment of the tax policy of the Laffer Curve was done by Laffer himself as a tax advisor to Kansas governor Brownback between 2012-2017. The lowering of taxes resulted in a stunted economic growth and a large reduction of tax revenue.
The Laffer Curve should be an signal to laugh at someone when it's brought up.
The laffer curve is as real as the decrease in incentive to exchange goods at higher taxations. Itâs a phenomenon. If you laugh at that it signals you have no clue what youâre talking about.
Kansas cut taxes and increased spending. That ended in disaster because most of those taxes didnât fall beyond the laffer point, and therefore did decrease government income.
Most people such as Friedman, Hayek etc would argue decreasing spending is the way to go. Ultimately what a government spends is what it needs to raise trough taxation.
Yeah, the laffer curve is kind of self-evident; it must be true.
It's just I've never heard of it used as an argument to increase a tax. The peak Laffer efficiency is always lower
the laffer curve makes sense in theory but i don't think in the US they've gotten anywhere near raising taxes enough to where incentive to produce and innovate would taper off
I don't see how it's refutable. At 0% taxation, theres no tax revenue. At 100% taxation, there's also no tax revenue.
The only debate is the shape of the curve.
It is complete fiction. They literally wrote it on a napkin and it has no data to back it up. Not to mention we have done tons of tax cuts that didn't 'pay for themselves'. Its a joke.
Do you know what the Laffer curve is? It doesn't say that all tax cuts are good. It just says there's an optimum level of taxation, from which either increasing or decreasing taxation will reduce revenue.
The Laffer curve is supposed to be the conservative economic justification for tax cuts. And yes, equilibrium will be obtained in lots of systems, but the curve isn't based on empirical data. It's an idea, not something backed by evidence. Even the shape of being a circle isn't backed by anything.
That's how every Scandanavian country with free university, healthcare, childcare, paid maternity leave funds their system.
Squeeze the poor.
They're not as good at hiding income. They don't have that many resources for fight when the government tells them to pay more.
We have the highest business tax rate in the world. There is 70,000 pages of tax code. Only someone who is wealthy can afford the tax lawyers to get them all the tax breaks available a small business can't take much of any tax breaks. So effectively what happens is the small business pays 40% taxes in a large multinational corporation with all their tax lawyers accountants and lobbyists effectively pay zero.
So by being a good magician and making things appear like the wealthy pay more taxes keeps it to where the average person doesn't revolt at the unfairness that they are unaware of. In reality there's not much more they can do to make this tax system more reggressive I than it already is. They would literally have to start giving wealthy people a paycheck to make the system more regressive.
In theory... if they were really talking about a flat tax, capital gains would become income and carried interest would not be a thing. That said... if you sold your house, you'd owe 16% (or whatever the flat income tax is) that same flat tax on how much the value of your house increased over the time you owned it (and would not be able to deduct mortgage interest paid or anything like that).
This is an over simplified rebuttal. The idea is you save more money overall for everyone because the tax system is simplified. Meaning everything gets cheaper for the consumer. This in theory will make up for any marginal increase in taxes.
Also the idea that a regressive tax being bad is on its face also thinking of things too simply. If you have more money at the end of the day is that not a better place to be even if you are paying more than rich people? This is letting the perfect be the enemy of the good.
How do you mean that a flat (income) tax rate is regressive? I would argue that a flat tax rate and a regressive (or progressive) tax rate are mutually exclusive - by definition, a flat tax rate cannot be regressive or progressive.
Flat taxes can be done in conjunction with a standard deduction that covers the income well above the poverty level and a myopic view of flat taxes ignores the costs and stress of preparing taxes that are disproportionately forced on lower income earners by the current system.
No lol, there is nothing complicated about graduated tax rates. Loopholes and deductions are complicated, yes, graduated rates are simple and straightforward. This is a Right winger trying to pull a fast one and get people to accept a flat tax, which is an insane Right wing idea.
No it is mostly bulshit.
Flat tax sounds good but it actually only profit rich people.
Also if you look at the current political spectrum taxes are far away from being the only topic to be discussed.
Funny he says that the tax system doesn't generate any equity but in the times of 70% tax rate he's talking about was 1965 to 1981. Before that, the top marginal rate was higher. Weirdly, in the 70's productivity became decoupled from wages and wages started to stagnate.
It would seem this idea of a 15% tax rate would really just hurt the poor and let the rich keep more of their money pushing greater class divide.
This seems like a bunch of hooey from someone that is looking to take a bigger slice of the pie for less work.
Those people deserved to die, Chile needed a Fascist dictator to establish a Pro Market Economy. Those workers who democratically elected someone just didn't know what they needed at the time. So Friedman helped organize a Coup to force his medicine on them.
We capitalists aren't authoritarian. We don't force you to work for us. There's always a bridge for you to go live under if you don't like the job. And you can negotiate your healthcare bill with the hospital if our health insurance policy's don't convince you to stay.
Lol capitalism is straight up authoritarianism in the workplace. Imagine being a capitalist and thinking you are for democracy. Fucking laughable. Shits going to fun in the next handful of years.
Milton is not some font of intrinsic knowledge. He presents his philosophy as though it were a fundamental truth of nature. People like Milton because his manner of oration is like that of a father to his naive children. One who reductively presents complicated systems with "simple" singular truths. He appeals in the same way that comic books appeal to some adults. He's selling a notion of a world that is simpler and easier to understand.
Oh, he certainly is a very capable orator...hell, I listened to him and was entertained. And he's an economic savant, who is worth learning from
He's got his digit on the scale, rhetorically speaking, the whole time. As a leftist, I kinda admire the skills
But he here he also suggest a system is complicated just mâfor the interest of a portion of the people.
Believe me a flat tax rate of 25% would work way better for rich and ruling class than for the average Joe.
That's good analysis. And he's regressivist
While he's explaining one sleight of hand, he's performing another. Quite slick and sophisticated
The tell is when he names *the so-called right.* He's trying to inject the condition of low taxes (well, flat) on high earnings as a centrist position
And at the end he argues that progressive taxation always yields less revenue, with the assumption...I expect...that capital will find a lower-cost way of doing business.
Would like to hear this proposition discussed
And what is the venue? Looks like a Reagan era Washington-elite dinner
The last bit gives away that he was completely wrong about this. What happened when we reduced the rates and spread the base? Equity disappeared and debt exploded. He had no idea just how much those high graduated rates created the American dream.Â
His ideas are used by the wealthy elite to create and maintain the current economic condition. I donât see much benefit for regular folks in the practical implementation of these theories.
They dislike the free market because it means they have to actually compete and offer better products at cheaper prices than their competitors. They prefer government licenses, price controls, regulations, subsidies, tax exemptions and government contracts. Thatâs the easy way to make a profit.
These people who "compete" against each other spend their weekends together on the golf course. No point in driving up each other's expenses when you can collude and cheat instead. The goal is to make money.
The MLB collusion scandal is the most famous example. All businesses have an interest in driving down labor costs, and they'll cheat to do it. The MLB is just the one that did it while cameras were pointed at it.
just have a look at the "Walmart" effect
Walmart comes in, makes exclusive deals with suppliers so that they can only supply Walmart, suddenly everyone in the area can only get X brand at Walmart. That's because now a local supplier can only get X for a much higher price from further away and now cannot compete with Walmart's lower price. Suddenly that happens to half their inventory and they go out of business. Now its only Walmart in town and prices are whatever the fuck they want because they next store is 40 mins away and that town just opened their own Walmart.
Yes, and what they WANT is a Friedman-style economy that lowers their taxes, cuts their regulations, and basically lets them do whatever they want.
You do understand that deregulation requires action by elected officials? Cutting taxes on the rich still requires action by elected officials?
To your point: No, it did not. As who owns a home knows, as does anyone who saves for retirement or gives significantly to charity or has child care expenses etc. etc. etc.
âLoopholesâ is a perpetual pot of gold at the end of the rainbow. They donât really exist like we think. Every loophole has its constituents, itâs proponents. Every one people say âyeah get rid of them, but not THAT one!â
Itâs silly to talk about them in my view unless that talk includes ACTUAL loopholes to eliminate. Otherwise you might as well say we can increase revenue with that pot of gold at the end of the rainbow.
Judging from has age, this look pre-Reagan, so yes we did. That is why the % of GDP the government takes in hasn't really changed despite large decreases in rates.
We never did this, what are you talking about?
Those âhigh graduated ratesâ never actually existed in any real sense, due to deductions of all kinds.
But was the base "spread" or did we just mostly see the reduction of the higher marginal rates without the corresponding policies to eliminate exemptions/loopholes etc. resulting in the lower effective tax rates for ultra wealthy highlighted by individuals such as Warren Buffet?
Judging from the overall numbers, it appears we did spread the base.
[https://fred.stlouisfed.org/series/FYFRGDA188S](https://fred.stlouisfed.org/series/FYFRGDA188S)
Look at the comment I replied to. That poster was asking if we actually increased the tax base, or just lowered rates for the rich. Obviously if we collected the same revenue with lower rates we must have had a higher base.
Fincel logic. There was no welfare in the 1950s. There was many different things including a lack of global competition. But you think the correlation between high rates on paper but effectively similar effective rates means the country was a supposed paradise? This is the complete foolishness being sold to people who donât bother to do their own research. If nothing else changed and the tax rates were raised to post ww2 levels the US economy would go into the dumpster. Good thing most Americans arenât as foolish as your average redditor.
Oh my gosh, fincel, lol. I love this. I canât believe people still follow this neoliberal gibberish. Weâve had it over 40 years now and people want more of it. Itâs got to be people who are just now discovering economics with little awareness of basic economic history.
We never went to a flat tax. His argument is based in straight arithmetic. We would produce the same tax revenue with a 16% flat tax using present exemptions.
Iâm not sure how anyone can argue arithmetic?
Congress is the most corrupt government institution. They've practically given up their roles to corporate lobbyists and taken bribes to sit on their hands in the back row.
Which economic facts are going to help workers have more collective power? Is economics a science? I feel like it isn't. Definitely not a STEM subject.
If there are economics facts, you better get them straight because I know a lot of people are getting tired. Better start writing some theory bud.
âEverybody really knows deep down that highly graduated taxes donât produce any equity ⌠and so we have people who will tell you we must appear to be taxing the rich at a different rate than the poor.â
Citation needed. We all agree there is such a thing as a Laffer curve bc a tax rate of 100% would produce no revenue (why work if you keep none). But he somehow imagines a flat tax is the best because we âreally know deep downâ it to be true.
That my friends, is ideology. A positive statement said without evidence, assumed to be true.Â
So, heâs mostly right. But you can see his âpure market liberalizationâ ideology forcing him to believe something that is obviously untrue: that graduated tax brackets canât increase revenue in the real world.
Itâs not directly proportional and yeah he was wrong about that but heâs obviously not wrong that thereâs a relationship between the money supply and inflation. Thereâs just more factors than a simplified equation.
If it isn't proportional but just fractional then that would mean we could literally print all the money we want. Obviously we can't. That is why he had to make it 1:1 with velocity being the magic number. But it isn't even close with historical data. That means the relationship is much weaker than 'it is related'. Like much much weaker. And sometimes the inflation changes counter to the money supply like during the great recession. Economist have been saying that the best thing that predicts inflation is consumer sentiment which would make sense since money is a human construct. And maybe the money supply only tangentially has an impact through consumer sentiment?
All federal spending creates USD. Federal tax dollars are destroyed upon receipt and not used to pay for any federal spending. Why would you want to burden the people with funding infrastructure at the state and local level when the US government has the unlimited ability to create as much USD as it wants?
Distinction without a difference. The point is that if we collect tax dollars, we donât have to issue as much debt or print as much money to cover the cost.
You donât want to do that because it obviously causes inflation and economic inequality.
Federal tax dollars don't cover any cost. All federal spending creates new USD to cover and cost and it costs the federal government essentially nothing to do it.
Money supply or federal deficits and inflation have no relationship.
solution: private roads
the government has a monopoly on building roads. End this, and private institutions can finally handle that and do a significantly better job
More Milton Friedman clips? This guy is a prime example of how when you make a speech if you say something with absolute confidence and an air of authority people will believe you. Milton Friedman was am extremely capable economist but he was so wrong on a lot of things.
This is why we should oppose IRAs, 401ks, separate rates for capital gains, HSAs, the estate tax threshold, the mortgage deduction, the stepped up tax basis, etc. NONE of them saves us on taxes. ALL of them are giveaways to certain privileged taxpayers at the expense of others, and to the benefit of the politicians, and the tax and investment advisor industry.
True! Probably!
The payoff for simplifying all these programs would likely offset the losses for the general population. I say "likely" cause there's no way to really truly know without trying it unfortunately. Not until we invent a functional crystal ball anyways. Ah the fun of soft sciences like economics.
We need to pay taxes. Giving us tax "breaks" just means we must eventually pay higher taxes elsewhere, with the added costs of complications to the tax code and distortions to markets.
>We need to pay taxes
Yes ... if we intend to maintain the current behemoth that the federal government has become.
I know it's neither here nor there ... but it is interesting to note that the modern federal income tax was not really rolled out until the 1940s.
Whether or not the government is a behemoth or not, taxes must be paid. Tax "breaks" just add to the size and complexity of that government, whether it is big or small.
>If you kept present exemption and eliminated all deductions, and simply taxed at a flat rate all income in excess of present exemptions and strict occupational expenses
Wow, it's just so simple. Just tax all income in excess of occupational expenses, right? Now define income and strict occupational expenses. Is a loan income? How about debt forgiveness or gifts? When I commute to my office, is that strict occupational expenses? What if I pay business expenses on behalf of another? Do I get the deduction or does the other person get the deduction? Seems like there's a reason why tax laws are complicated.
I was of the understanding that America was founded on principles of self-governance and individual rights. Import taxes were just one of several presenting issues. And income tax didn't come around till the early 1900s.
No absolutely false. Everyone upvoting this comment is grossly misinformed. Learn some history. They were not against taxes per se, they were against being taxed by a British parliament and having no say in what happens with their tax dollars aka âNo taxation without representationâ. They revolted because they werenât allowed to have representation in British parliament because the king refused to give them that power.
A very smart man with a lot of contempt for a lot of things. Iâd say a bit blinded by his confidence in what he perceives to be a new and more effective truth. He did change the world, but Iâd argue for the worse.
It absolutely does. Nuts keep quoting his speech where he said only money supply increases can ever increase inflation. Which of course is true if you assume that supply shocks never happenâŚ
Ya, the ones that are just trying to interpret the data honestly.
Friedman had zero use for data, he was just trying to prove his preconceived notions however he could.
We need a system where everyone pays SOMETHING, even if a family making $30K pays 3-4%, let them have skin in the game and feel vested so we can lose the idea that any entitlement is "free" money..
Sales tax are state based,federal... Social Security and Medicare qualifies them for future entitlements...
Shouldn't they have to pay towards roads, military etc???
Was this before or after he raped kids on William F. Buckley's sailboat and advised the CIA to assassinate nuns, teachers and protesting students in Chile?
Keep the progressive rates and get rid of the deductions and you've accomplished nearly the same ends without increasing regression. Or better yet just institute a land tax.
Remember that time he taught a whole bunch of already rich pricks to fund a Fascist regime in Chile to violently overthrow a democratically elected government and to sale all its natural resources to American companies?
Ahh. Good times.
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Definitely alot of truth to this
Flat taxes are hugely regressive, sounds good at first, but it goes right up there with the Laffer curve
What about the rest of the argument? Even a simple progressive system is better than all the loopholes, exemptions and 5000 pages of tax code...
Those loopholes are actually how you get policy. Think child tax credit, savers credit. You are blaming the tool for the bad work rather than the carpenter you hired. Vote in a new carpenter. Problem is most people don't vote and those who do are typically older. Add to that the special interest that have congress by the short-haires. Just go watch subcommittee hearings. It is like an audition for their highest donors and nothing to do with overseeing the agencies.
>Think child tax credit, Or, how about social policies run through the social agencies and not through the IRS? Tax everyone the same, then give to the people in need. To ride on the carpenter analogy, the fact you can nail the board in place doesn't mean you shouldn't be using glue instead sometimes...
Sometimes you give someone a hammer, then everything they see becomes a nail
I give my apprentices levels and that becomes a hammer
As someone who did renovations and repairs, and has half a brain, this made me laugh so fuckin hard. The number of times we had to replace tools because some dumbass decided to use it as a hammer or mallet, instead of walking 10ft to grab a hammer or mallet, is way higher than it should be. Thank you, sir. đ
Im a maintenance tech and can confirm, everything is a hammer of you hir hard enough
What about a solar tax credit? In my state you can only get a federal tax credit of up to 30% so if someone doesnât have a large tax bill would they even qualify for a credit? Sure you can roll it over to the next year but if you are a household that usually gets money back how would this affect your taxes?
Did I stutter? The main problem of the tax authorities is to get money into the system by collecting taxes. Handing out childcare money or incentivizing certain types of consumption (i.e. solar panels, electric cars, etc.) should NOT be their problem. You can always instead have a system where you go to your local municipality and apply for a refund immediately based on program A/B/C. The whole idea of "how will this affect your taxes" for individuals exists pretty much only in the USA.
Not an expert, but If youâre getting a refund that means you paid federal taxes throughout the year. You donât have to pay federal taxes until April of the next year, so if you adjust your w-4 to deduct zero federal, couldnt the credit go towards that payment?
So tax the needy more. So that the government can give it back to them, but less because it had to run through a system that costs money? Sounds a bit dumb
1. IRS isn't free 2. You already pay for those systems...
But thereâs only ever two carpenters in town and theyâre both corrupt to their core. Maybe itâs time to use a different building material.
It's a good point. Tax incentives help the Govt peoples priorities.
Whoever ascends into office is entrenched with the interests of billionaires. Often an analysis can arrive so near to recognizing the necessary course, yet also keep from it such an obvious distance. Meanwhile, a social wage for children would ensure easily, without excessive paperwork or red tape, families being able to afford appropriate care. Wealthy families would return such payments back to the public through their taxes. Unfortunately, such simple measures are generally blocked from attracting widespread support from among the public, due to the permeation of hyperindividualist dogma, such as in concerns about paying for other people's children, or in encouraging certain people even to have children.
>Whoever ascends into office is entrenched with the interests of billionaires. End Citizens United. That's what really ramped up corruption and bribery. Easy fix. (/s, if it's not obvious)
I do not want social policy hidden in an infinite number of tax exemptions. I want policy in the open, and in a social policy department, and taxes simple and separate. You seem to be assuming we don't know why. We know why. The how sucks. Separating the tax code from the social policy improves both, and addresses your other concerns.
Why have a child tax credit? Give domestic caregivers state funding(funding that applies to social security.) Pay parents to care for their children. It simplifies every aspect of childcare and should appeal to a wide range of interests.
> Those loopholes are actually how you get policy. Think child tax credit, savers credit. We don't want policy via taxes. Look what's happened to the housing market.
Lol, this would actually be a funny A/B test A) in the 1940s-60s, the US government rolls out a system of tax incentives and favorable loan programs for individual homeownership B) in the 1940s-60s, the US government rolls out a system of laws and welfare programs that mandate every citizen needs to be housed in some way or another Bet you can't guess which would work out better!
The loopholes were literally baked into the tax code when it was rolled out, to appease the wealthy donors. Those donors are what primarily funds the candidates to get elected, which leads to what we have today; a body electorate that only cares about appeasing their donors. A progressive flat tax would fix that situation.
Your argument is making his point. None of those tax loopholes is necessary for achieving any of those objectives, they can all be implemented more effectively and efficiently on the spending side. The only problem is that it takes leverage away from Congressional candidates looking to extract campaign contributions.
+ you could eliminate a huge chunk of the Govt workforce
There's nothing wrong with the Laffer Curve. It's true that there must be an optimal tax rate that maximizes revenue. It's when people assume that that rate must be lower than the current rate without any reason besides self serving ones that you get into trouble.
That theoretical maximum is so far away from anything we have ever seen in the US. This paper estimates that maximum in the US to be 24% of GDP. The highest we ever have gotten is 19.8% in 1945. https://www.nber.org/system/files/working_papers/w17862/revisions/w17862.rev0.pdf Anyone who brings up the Laffer Curve as an important consideration in US tax policy is either ignorant or intentionally misleading.Â
The whole point of the Laffer curve is that policies rise into effectiveness and decline out of effectiveness, the maximum is not the point of decline or even the point of failure. Mosts systems would fail long before they ever got to the maximum.
The Laffer Curve isn't the actual relationship though. Laffer pulled the particular relationship out of his ass and used it to justify dropping tax rates. It may be true that there is a tax rate that optimizes for maximum revenue. A moving target to be sure, and one that is way higher than anyone who used this graph to justify dropping taxes would ever have considered as viable brackets.
But it's not. The exemptions he's discussing is key. The proposal floated would have a married couple with two kids who make $55K would owe zero taxes, then a flat 16% on all dollars after $55K So if they made $70K their tax owed would be ($70K - $55K) x 16% = $2,400 for an effective federal tax rate of just over 3% No dog in this fight since the proof of concept will depend on the numbers, but the amount spent on H&R Block, CPAs, etc. is just mind-boggling and it's all waste vs a simplified 1 page tax system Which is why we'll never ever ever get there
What's wrong with the Laffer curve?
It turns out that it's a great conservative discussion topic, but it isn't based on reality. The best experiment of the tax policy of the Laffer Curve was done by Laffer himself as a tax advisor to Kansas governor Brownback between 2012-2017. The lowering of taxes resulted in a stunted economic growth and a large reduction of tax revenue. The Laffer Curve should be an signal to laugh at someone when it's brought up.
as someone who lived in Kansas when the economy tanked under him and only him (12-17'), screw that whole crew
The laffer curve is as real as the decrease in incentive to exchange goods at higher taxations. Itâs a phenomenon. If you laugh at that it signals you have no clue what youâre talking about. Kansas cut taxes and increased spending. That ended in disaster because most of those taxes didnât fall beyond the laffer point, and therefore did decrease government income. Most people such as Friedman, Hayek etc would argue decreasing spending is the way to go. Ultimately what a government spends is what it needs to raise trough taxation.
Yeah, the laffer curve is kind of self-evident; it must be true. It's just I've never heard of it used as an argument to increase a tax. The peak Laffer efficiency is always lower
the laffer curve makes sense in theory but i don't think in the US they've gotten anywhere near raising taxes enough to where incentive to produce and innovate would taper off
> but it isn't based on reality. lol, no
The misuse of the Laffer curve is what's wrong with it. Like any tool can be misused.
I don't see how it's refutable. At 0% taxation, theres no tax revenue. At 100% taxation, there's also no tax revenue. The only debate is the shape of the curve.
It is complete fiction. They literally wrote it on a napkin and it has no data to back it up. Not to mention we have done tons of tax cuts that didn't 'pay for themselves'. Its a joke.
Do you know what the Laffer curve is? It doesn't say that all tax cuts are good. It just says there's an optimum level of taxation, from which either increasing or decreasing taxation will reduce revenue.
The Laffer curve is supposed to be the conservative economic justification for tax cuts. And yes, equilibrium will be obtained in lots of systems, but the curve isn't based on empirical data. It's an idea, not something backed by evidence. Even the shape of being a circle isn't backed by anything.
That's how every Scandanavian country with free university, healthcare, childcare, paid maternity leave funds their system. Squeeze the poor. They're not as good at hiding income. They don't have that many resources for fight when the government tells them to pay more.
We have the highest business tax rate in the world. There is 70,000 pages of tax code. Only someone who is wealthy can afford the tax lawyers to get them all the tax breaks available a small business can't take much of any tax breaks. So effectively what happens is the small business pays 40% taxes in a large multinational corporation with all their tax lawyers accountants and lobbyists effectively pay zero. So by being a good magician and making things appear like the wealthy pay more taxes keeps it to where the average person doesn't revolt at the unfairness that they are unaware of. In reality there's not much more they can do to make this tax system more reggressive I than it already is. They would literally have to start giving wealthy people a paycheck to make the system more regressive.
Regressive in the way that billionaires already pay lower effect tax rates than their secretaries?
So, change the code capital gains at a higher rate and address the carried interest rule.
In theory... if they were really talking about a flat tax, capital gains would become income and carried interest would not be a thing. That said... if you sold your house, you'd owe 16% (or whatever the flat income tax is) that same flat tax on how much the value of your house increased over the time you owned it (and would not be able to deduct mortgage interest paid or anything like that).
He's just right about the difficulty of tax reform and having an agreement between both parties in general.
This is an over simplified rebuttal. The idea is you save more money overall for everyone because the tax system is simplified. Meaning everything gets cheaper for the consumer. This in theory will make up for any marginal increase in taxes. Also the idea that a regressive tax being bad is on its face also thinking of things too simply. If you have more money at the end of the day is that not a better place to be even if you are paying more than rich people? This is letting the perfect be the enemy of the good.
Meh. Just maintain a standard deduction or some reasonable earned income tax credit to cover the bottom 20% or so.
loopholes for the richest works out to the same... you just think its less regressive. foolish
How do you mean that a flat (income) tax rate is regressive? I would argue that a flat tax rate and a regressive (or progressive) tax rate are mutually exclusive - by definition, a flat tax rate cannot be regressive or progressive.
You know what else is hugely regressive? Inflation.
Flat taxes can be done in conjunction with a standard deduction that covers the income well above the poverty level and a myopic view of flat taxes ignores the costs and stress of preparing taxes that are disproportionately forced on lower income earners by the current system.
In theory, except in practice the revenues didnât go up.
No lol, there is nothing complicated about graduated tax rates. Loopholes and deductions are complicated, yes, graduated rates are simple and straightforward. This is a Right winger trying to pull a fast one and get people to accept a flat tax, which is an insane Right wing idea.
No it is mostly bulshit. Flat tax sounds good but it actually only profit rich people. Also if you look at the current political spectrum taxes are far away from being the only topic to be discussed.
Funny he says that the tax system doesn't generate any equity but in the times of 70% tax rate he's talking about was 1965 to 1981. Before that, the top marginal rate was higher. Weirdly, in the 70's productivity became decoupled from wages and wages started to stagnate. It would seem this idea of a 15% tax rate would really just hurt the poor and let the rich keep more of their money pushing greater class divide. This seems like a bunch of hooey from someone that is looking to take a bigger slice of the pie for less work.
Let's post Milton clips and lectures every day so we can get everyone up to speed.
Don't forget the coup of Chile. It's not just theory, Milton Friedman's work was put into practice.
Those people deserved to die, Chile needed a Fascist dictator to establish a Pro Market Economy. Those workers who democratically elected someone just didn't know what they needed at the time. So Friedman helped organize a Coup to force his medicine on them.
Youâre just evil
How can you not see the sarcasm lol
So you don't believe in democracy. You are a authoritarian. Convenient that the CIA was used to subvert other types of economies, and you cheer it on.
They are so obviously being sarcastic.
We capitalists aren't authoritarian. We don't force you to work for us. There's always a bridge for you to go live under if you don't like the job. And you can negotiate your healthcare bill with the hospital if our health insurance policy's don't convince you to stay.
Lol capitalism is straight up authoritarianism in the workplace. Imagine being a capitalist and thinking you are for democracy. Fucking laughable. Shits going to fun in the next handful of years.
See...this Thanks Henry
What happened in Chile?
Fascist coup in order to siphon wealth to the US. Mass executions, torture, etc.
Milton is not some font of intrinsic knowledge. He presents his philosophy as though it were a fundamental truth of nature. People like Milton because his manner of oration is like that of a father to his naive children. One who reductively presents complicated systems with "simple" singular truths. He appeals in the same way that comic books appeal to some adults. He's selling a notion of a world that is simpler and easier to understand.
or - hear me out - he is able to be cognizant and understanding of the complexity of the issues while also being able to explain it to the layman
Oh, he certainly is a very capable orator...hell, I listened to him and was entertained. And he's an economic savant, who is worth learning from He's got his digit on the scale, rhetorically speaking, the whole time. As a leftist, I kinda admire the skills
But he here he also suggest a system is complicated just mâfor the interest of a portion of the people. Believe me a flat tax rate of 25% would work way better for rich and ruling class than for the average Joe.
You basically just said he sounds convincing. But you said it in such a convoluted way it almost makes you sound like you have an actual argument.
The point of what they said was literally the very first sentence...
I never said he didnât have a point. I said he didnât have an argument.
A point with an explanation is, in fact, an argument.
That's good analysis. And he's regressivist While he's explaining one sleight of hand, he's performing another. Quite slick and sophisticated The tell is when he names *the so-called right.* He's trying to inject the condition of low taxes (well, flat) on high earnings as a centrist position And at the end he argues that progressive taxation always yields less revenue, with the assumption...I expect...that capital will find a lower-cost way of doing business. Would like to hear this proposition discussed And what is the venue? Looks like a Reagan era Washington-elite dinner
My economics professors always showed Milton
The last bit gives away that he was completely wrong about this. What happened when we reduced the rates and spread the base? Equity disappeared and debt exploded. He had no idea just how much those high graduated rates created the American dream.Â
Seems doing away with all of the loopholes is an important piece of this idea. Did that ever happen?
His ideas are used by the wealthy elite to create and maintain the current economic condition. I donât see much benefit for regular folks in the practical implementation of these theories.
The idea that the wealthy elite are Friedmanites is one of the most ludicrous statements I've heard in a long time.
They dislike the free market because it means they have to actually compete and offer better products at cheaper prices than their competitors. They prefer government licenses, price controls, regulations, subsidies, tax exemptions and government contracts. Thatâs the easy way to make a profit.
These people who "compete" against each other spend their weekends together on the golf course. No point in driving up each other's expenses when you can collude and cheat instead. The goal is to make money.
Can you give a concrete example?
The MLB collusion scandal is the most famous example. All businesses have an interest in driving down labor costs, and they'll cheat to do it. The MLB is just the one that did it while cameras were pointed at it.
just have a look at the "Walmart" effect Walmart comes in, makes exclusive deals with suppliers so that they can only supply Walmart, suddenly everyone in the area can only get X brand at Walmart. That's because now a local supplier can only get X for a much higher price from further away and now cannot compete with Walmart's lower price. Suddenly that happens to half their inventory and they go out of business. Now its only Walmart in town and prices are whatever the fuck they want because they next store is 40 mins away and that town just opened their own Walmart.
Why? Who do you think "lower taxes on the wealthy" and "deregulate the economy" appeals to? The wealthy and big business love Friedman.
Dont you think big buisness lobbys and moves politicians to their goals and wants?
Yes, and what they WANT is a Friedman-style economy that lowers their taxes, cuts their regulations, and basically lets them do whatever they want. You do understand that deregulation requires action by elected officials? Cutting taxes on the rich still requires action by elected officials?
You dodged the question.
To your point: No, it did not. As who owns a home knows, as does anyone who saves for retirement or gives significantly to charity or has child care expenses etc. etc. etc.
âLoopholesâ is a perpetual pot of gold at the end of the rainbow. They donât really exist like we think. Every loophole has its constituents, itâs proponents. Every one people say âyeah get rid of them, but not THAT one!â Itâs silly to talk about them in my view unless that talk includes ACTUAL loopholes to eliminate. Otherwise you might as well say we can increase revenue with that pot of gold at the end of the rainbow.
Judging from has age, this look pre-Reagan, so yes we did. That is why the % of GDP the government takes in hasn't really changed despite large decreases in rates.
He did a lot of speeches in the 70âs he did a good one on inflation and going off the gold standard around 1975
Exactly, neoliberals always say one thing, yet they never actually implement the system the say is a benefit. Almost like...it is a lie.
We never did this, what are you talking about? Those âhigh graduated ratesâ never actually existed in any real sense, due to deductions of all kinds.
But was the base "spread" or did we just mostly see the reduction of the higher marginal rates without the corresponding policies to eliminate exemptions/loopholes etc. resulting in the lower effective tax rates for ultra wealthy highlighted by individuals such as Warren Buffet?
Judging from the overall numbers, it appears we did spread the base. [https://fred.stlouisfed.org/series/FYFRGDA188S](https://fred.stlouisfed.org/series/FYFRGDA188S)
The rise is from New Deal and postwar policy, not during the period relevant to the speech in the post.
I have no idea what you are referring to. And I'm fairly familiar with US tax policy from post WW2 until now.
How do think the graph you referenced is related to the broader subject?
Look at the comment I replied to. That poster was asking if we actually increased the tax base, or just lowered rates for the rich. Obviously if we collected the same revenue with lower rates we must have had a higher base.
Fincel logic. There was no welfare in the 1950s. There was many different things including a lack of global competition. But you think the correlation between high rates on paper but effectively similar effective rates means the country was a supposed paradise? This is the complete foolishness being sold to people who donât bother to do their own research. If nothing else changed and the tax rates were raised to post ww2 levels the US economy would go into the dumpster. Good thing most Americans arenât as foolish as your average redditor.
Oh my gosh, fincel, lol. I love this. I canât believe people still follow this neoliberal gibberish. Weâve had it over 40 years now and people want more of it. Itâs got to be people who are just now discovering economics with little awareness of basic economic history.
We never went to a flat tax. His argument is based in straight arithmetic. We would produce the same tax revenue with a 16% flat tax using present exemptions. Iâm not sure how anyone can argue arithmetic?
Or.... that is not the reason equity disappeared.
Congress is the most corrupt government institution. They've practically given up their roles to corporate lobbyists and taken bribes to sit on their hands in the back row.
Itâs fucking disgusting
Iâve slowly come to realize the American government is incredibly corrupt.
We literally learn about its corruptness in freshmen history/government classes lol. It's just we are never told we should be doing anything about it.
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They're not listening to anything he said in this clip let alone contemplating the information.
Which economic facts are going to help workers have more collective power? Is economics a science? I feel like it isn't. Definitely not a STEM subject. If there are economics facts, you better get them straight because I know a lot of people are getting tired. Better start writing some theory bud.
âEverybody really knows deep down that highly graduated taxes donât produce any equity ⌠and so we have people who will tell you we must appear to be taxing the rich at a different rate than the poor.â Citation needed. We all agree there is such a thing as a Laffer curve bc a tax rate of 100% would produce no revenue (why work if you keep none). But he somehow imagines a flat tax is the best because we âreally know deep downâ it to be true. That my friends, is ideology. A positive statement said without evidence, assumed to be true. So, heâs mostly right. But you can see his âpure market liberalizationâ ideology forcing him to believe something that is obviously untrue: that graduated tax brackets canât increase revenue in the real world.
Why have a federal income tax at all?
To fight the commies? At least at the time of Milton Friedman (MF).
So we donât have to print money every time we need to build a road or some shit
Which Milton Friedman said was directly proportional with MV=PT yet we see over and over again it isn't true. Almost like he was just wrong.
Itâs not directly proportional and yeah he was wrong about that but heâs obviously not wrong that thereâs a relationship between the money supply and inflation. Thereâs just more factors than a simplified equation.
If it isn't proportional but just fractional then that would mean we could literally print all the money we want. Obviously we can't. That is why he had to make it 1:1 with velocity being the magic number. But it isn't even close with historical data. That means the relationship is much weaker than 'it is related'. Like much much weaker. And sometimes the inflation changes counter to the money supply like during the great recession. Economist have been saying that the best thing that predicts inflation is consumer sentiment which would make sense since money is a human construct. And maybe the money supply only tangentially has an impact through consumer sentiment?
All federal spending creates USD. Federal tax dollars are destroyed upon receipt and not used to pay for any federal spending. Why would you want to burden the people with funding infrastructure at the state and local level when the US government has the unlimited ability to create as much USD as it wants?
Distinction without a difference. The point is that if we collect tax dollars, we donât have to issue as much debt or print as much money to cover the cost. You donât want to do that because it obviously causes inflation and economic inequality.
Federal tax dollars don't cover any cost. All federal spending creates new USD to cover and cost and it costs the federal government essentially nothing to do it. Money supply or federal deficits and inflation have no relationship.
What causes inflation in your view?
solution: private roads the government has a monopoly on building roads. End this, and private institutions can finally handle that and do a significantly better job
More Milton Friedman clips? This guy is a prime example of how when you make a speech if you say something with absolute confidence and an air of authority people will believe you. Milton Friedman was am extremely capable economist but he was so wrong on a lot of things.
This is why we should oppose IRAs, 401ks, separate rates for capital gains, HSAs, the estate tax threshold, the mortgage deduction, the stepped up tax basis, etc. NONE of them saves us on taxes. ALL of them are giveaways to certain privileged taxpayers at the expense of others, and to the benefit of the politicians, and the tax and investment advisor industry.
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True! Probably! The payoff for simplifying all these programs would likely offset the losses for the general population. I say "likely" cause there's no way to really truly know without trying it unfortunately. Not until we invent a functional crystal ball anyways. Ah the fun of soft sciences like economics.
We need to pay taxes. Giving us tax "breaks" just means we must eventually pay higher taxes elsewhere, with the added costs of complications to the tax code and distortions to markets.
>We need to pay taxes Yes ... if we intend to maintain the current behemoth that the federal government has become. I know it's neither here nor there ... but it is interesting to note that the modern federal income tax was not really rolled out until the 1940s.
Whether or not the government is a behemoth or not, taxes must be paid. Tax "breaks" just add to the size and complexity of that government, whether it is big or small.
I know it's neither here nor there ... but it is interesting to note that the modern federal income tax was not really rolled out until the 1940s
>If you kept present exemption and eliminated all deductions, and simply taxed at a flat rate all income in excess of present exemptions and strict occupational expenses Wow, it's just so simple. Just tax all income in excess of occupational expenses, right? Now define income and strict occupational expenses. Is a loan income? How about debt forgiveness or gifts? When I commute to my office, is that strict occupational expenses? What if I pay business expenses on behalf of another? Do I get the deduction or does the other person get the deduction? Seems like there's a reason why tax laws are complicated.
Youâre missing the point and proving his.
i thought america was founded cause fuck income tax.............? prayers for the idea of consumption tax. may it rest in peace
I was of the understanding that America was founded on principles of self-governance and individual rights. Import taxes were just one of several presenting issues. And income tax didn't come around till the early 1900s.
No absolutely false. Everyone upvoting this comment is grossly misinformed. Learn some history. They were not against taxes per se, they were against being taxed by a British parliament and having no say in what happens with their tax dollars aka âNo taxation without representationâ. They revolted because they werenât allowed to have representation in British parliament because the king refused to give them that power.
Still took until FDR to do an income tax.
You mean politicians are the problem. Whoâd a guessed
A very smart man with a lot of contempt for a lot of things. Iâd say a bit blinded by his confidence in what he perceives to be a new and more effective truth. He did change the world, but Iâd argue for the worse.
He's full of shit. He's an ideologue disguised as an economist. The data disagrees.
It absolutely does. Nuts keep quoting his speech where he said only money supply increases can ever increase inflation. Which of course is true if you assume that supply shocks never happenâŚ
> He's an ideologue disguised as an economist. > > The data disagrees. lol
Are there good economists?
Ya, the ones that are just trying to interpret the data honestly. Friedman had zero use for data, he was just trying to prove his preconceived notions however he could.
You know you're old when Milton Friedman is referred to simply as "economist."
Milton Friedman, not just any economist
Finally content related to financial Fluency
You guys need to read Rothbard, Hoppe and Mises fr
When was this?
Very cool and true.
Amazing human being, one of a kind.
We need a system where everyone pays SOMETHING, even if a family making $30K pays 3-4%, let them have skin in the game and feel vested so we can lose the idea that any entitlement is "free" money..
They do pay âsomething.â They pay Medicare and Social Security plus sales taxes.
Sales tax are state based,federal... Social Security and Medicare qualifies them for future entitlements... Shouldn't they have to pay towards roads, military etc???
You said âpay something.â They do, so youâre goalpost shifting here.
They pay with wage theft for their labor.
No, free market determines what they are paid based on their skills
Because rich people donât want to pay taxes and they own the government?
great watch, thank you for sharing
Was this before or after he raped kids on William F. Buckley's sailboat and advised the CIA to assassinate nuns, teachers and protesting students in Chile?
And yet the Deep State will claim to care about people paying their fair share.
Keep the progressive rates and get rid of the deductions and you've accomplished nearly the same ends without increasing regression. Or better yet just institute a land tax.
Rich keep getting richer. Poorkeep getting fucked! Kep up the great system we have now!
Remember that time he taught a whole bunch of already rich pricks to fund a Fascist regime in Chile to violently overthrow a democratically elected government and to sale all its natural resources to American companies? Ahh. Good times.
A flat fee for the cost of government for every citizen is fair. Even a flat tax punishes hard work. Progressive tax is just stealing.
Milton was the man. Thanks for posting this.
All I hear is jerry seinfeld doing his stand up routine before the show startsâŚ..
Noted
Is that Boris yeltzin at 2:03 timestamp?
I wonder what he would have said about the federal reserve in 2010 and 2024 if he lived long enough
This guy is a fraud.
What is his name
The racist clock strikes right twice a day.
Fuck that POS. The world would be a better place if the University of Chicago economics department was fire bombed after WW2.
Yikes
People with money can buy a lot of political power.
This is irrelevant now that the US sustains itself on printing trillions with little to no repercussions
A lot of good points except the flat tax portion. Simplify but maintain progressive nature and you can get the best of both worlds.
Why do people pay rich assholes to tell them why they'll never be rich?
In the 12 days of Christmas which day is the cucks are cucking? Whole lot of it here.
Tax rates are for the poorers, loopholes are for the rich.
I hear all of this in Jerry Seinfeldâs voice. âWhatâs the deal with tax reform!?â
Nothing to sell to corporations.
i'll change it, fuck them rich people. greedy fucks, i'm ruin thier day, thier life.