Fixing Social Security

In your proposal, who pays Social Security for the Baby Boomers if it is completely privatized. As I've said before, just give me the monet I've paid in for 32 years with 5% interest and I'll be happy. Where is that going to come from? </font>[/QUOTE]The fact is that while the Dems controlled Congress for 40 running years the time probably came and went when Social Security could have been dealt with effectively. Bush's idea, while better than nothing maybe, would have worked 20 years ago to avoid the baby boomer problem.

I was born in '64 and have never really expected to draw one dime from SS. I think the reality of the boomers will force it to become another "needs tested" entitlement.

Ironically, 40 million+ people who might have helped cover this expense were aborted by the very people who will be expecting to get paid.

 

Cause it to go up.</font>[/QUOTE]That is not all that will happen.

Actually, I think paying "up front" is a better way. I think one reason why people don't understand how much they pay in taxes is because they never see it. Their employers just take it out. If every American had to write a check every week or month for their tax bill, I think there would be a revolt not unlike the Revolution. I don't think people realize how much they pay because they don't write the check for it. </font>[/QUOTE]If you really feel that way, then I can respect that. But even you cannot deny that a national sales tax will ensure that you pay the tax at the point of sale on every single purchase. Whether it is now or later, it will still have to be paid.

It doesn't work that way. They are either going to get it now or later, but they are still going to get it. Your "instant raise" will be paid back in the form of a national sales tax.

 

Cause it to go up.</font>[/QUOTE]That is not all that will happen.</font>[/QUOTE]When there is an influx of money into the markets, the market rises typically. That was the boom of hte 90s. More people investing than ever before.

Not sure what "even me" means, but with a national sales tax you can actually control how much in taxes you pay, to one degree or another. No one disputes that taxes will have to be paid. But with a sales tax, it will be fairer tax system.

Not sure why you would say it doesn't work that way. That is exactly the way it works. Your employer would quit withholding the taxes, meaning you get an instant raise. You would be paying more at the register. Taxes still have to be paid. But several things will happen.

1. The tax system will be made more fair since all will be paying the same.
2. People can control, to some degree, the amount of taxes they pay.
3. People will find out how much they actually pay, which they likely don't realize now since they are not writing a weekly check to the government. I suspect it would not be long until there was a tax revolt.

 

Bush's plan either:

1) Makes the Baby Boomer problem worse by taking tax money out of the system just when it's needed the most, or

2) Dramically increases an already huge debt (he estimates by $2T) with the government picking up the shortfall.

Those are the only two choices. Otherwise you can increase the payroll taxes which nobody likes or start reducing the benefits which nobody likes. The first thing we must do is to stop spending the SS surplus on other things. Of course that will drive up the debt as well.

 

Yes, this is a reiteration of your prior statement. Once again, that is not all that happens. The "influx of money" also produces something else.

Fairer?

Again, it is not an instant raise. The tax is still collected, the only difference is that it is paid on everything you purchase, rather than simply being withheld from your check. That "raise" will be offset by the taxes you will now be paying on every transaction you make.

So, instead of paying a graduated tax scale, everyone will get taxed at the same percentage? That is fair? What about low-income Americans? Many of them are not currently paying the same percentage of their income as they would under a national sales tax.

I would say that they will be forced to pay a tax on every purchase. To what degree can that be controlled? I hope you aren't suggesting that a cutback in consumption is a valid way to control income taxes.

You said this in your previous post, and I have already responded to this. Again, people do in fact realize this if they look at their pay stubs.

By the way, how will this not translate into more taxes? A national sales tax will be paid on every single transaction at the point of sale.

 

Well, then enlighten us as to what you think will happen.

Yes fairer, because everyone will be taxed at the same rate. Right now, the rich pay a disproportionate share of income taxes. In a fair system, everyone pays the same. WE can debate whether or not that is the right way, but it is certainly a more fair way.

It is also fairer in that you are taxed only on what you spend, not on what you make. So if someone doesn't want to pay taxes, they don't have to. They can save their money, which in the long run is a boost to the economy.

Most people judge a "raise" by whether or not their take home pay goes up. They don't consider it not a raise because the ARM went up at the same time and took all the extra money. Nor do they consider "not a raise" if they take that extra money and go buy a new car with it. It is still a raise because take home pay went up. In this, the take home pay goes up.

Most sales tax plans do not charge tax on everything that is purchased. There is usually, to my knowledge, an exemption for certain things like basic living necessities. How all that works out in the end is yet to be seen (if it is ever seen).

But the fact that take home pay goes up means it is a de facto raise.

Yes they will pay the same percentage. Yes that is fair. The rich will still pay more in taxes because they spend more. But they will not be punished just because they went out and made money. Many plans exempt the first X number of dollars in the form of rebates or some such, thereby meaning low income Americans are helped.

As I say, many plans exempt some things. But yes, cut back on consumption is a way to control taxes. Right now, I cut back on my airline travel consumption because I don't want to pay the high taxes involved in it. I cut back on my gas consumption for the same reason. When I eat out, I don't order the most expensive thing on the menu because I cannot afford it. We all control consumpetion for the sake of money. It is no different just because we call it a tax.

I think the reality of writing a check and putting it in the mail is a lot different than seeing some numbers. I know the numbers are there, but never seeing the money makes it different I think. I think that is one reason why credit debt it so high ... People just don't see the money they are spending. If you had to put down a cash deposit to use your credit card, credit spending habits would change in a hurry, I think.

Already answered several times. First, all transactions will probably not be taxed. Second, the money that you will pay that tax with will come home in your check. Third, quit buying stuff.

 

"Accounting wise it doesn't go into the same pot."

Yes, and I can take money from my left pocket and invest it in my right pocket.

Used to be that only statisticians lied. Contageon has spred to accountants.

 

The proposed national sales tax works out to over 40%.

 

It’s called inflation. When there is an infusion of new capital in a particular financial market, the prices rise, but it also causes inflation. You may have a gain on a particular position; however, the rise in prices also translates to higher prices for reinvesting those gains, thus reducing your buying power. And just think: I spared you a long-winded synopsis on the topic of disintermediation.

On the contrary, we can absolutely debate whether or not it is “a more fair way.” So, it is not fair to have someone pay a larger percentage of their income should they make more? That is an interesting concept.

 

Part II

So, do you really think that the tax burden will be reduced? I suppose that the government will simply figure out how to provide more for less in terms of services from revenues.

 

Part III (Last one)

You have started a different discussion with this statement. IMHO, the reason why credit debt is so high is based upon two factors: availability and greed. I will leave this at that, unless you want to start another discussion.

This is simply proof that the power to tax is the power to destroy. If people “quit buying stuff,” the economy will stall, plain and simple. Moreover, if people “quit buying stuff,” the tax rates will have to be increased to compensate for the drop in tax revenue. Therefore, if people “quit buying stuff,” we will begin paying more on less.

Have you even considered the effect on the municipal finance markets? Once the income tax has been eliminated, why would anyone want to invest in a municipal bond issue. What would be the incentive for these financial products? After all, the appeal of these instruments will be eliminated. As a result, the yields on muni’s would have to be increased to compete with all fixed-income products in the industry. Not only the new issues, but the effect on the secondary markets will be just as substantial. All existing bonds would begin trading at a substantial discount in an attempt to provide a yield comparable to the prevailing market. Oops, so much for sparing you the concept of disintermediation……………

Or had you considered this?

 

Part III

You have started a different discussion with this statement. IMHO, the reason why credit debt is so high is based upon two factors: availability and greed. I will leave this at that, unless you want to start another discussion.

 

Part IV (the last one, and I won't do this again.)

This is simply proof that the power to tax is the power to destroy. If people “quit buying stuff,” the economy will stall, plain and simple. Moreover, if people “quit buying stuff,” the tax rates will have to be increased to compensate for the drop in tax revenue. Therefore, if people “quit buying stuff,” we will begin paying more on less.

Have you even considered the effect on the municipal finance markets? Once the income tax has been eliminated, why would anyone want to invest in a municipal bond issue. What would be the incentive for these financial products? After all, the appeal of these instruments will be eliminated. As a result, the yields on muni’s would have to be increased to compete with all fixed-income products in the industry. Not only the new issues, but the effect on the secondary markets will be just as substantial. All existing bonds would begin trading at a substantial discount in an attempt to provide a yield comparable to the prevailing market. Oops, so much for sparing you the concept of disintermediation……………

Or had you considered this?

 

Actually, Ken: you are absolutely right. I will limit my posts to this topic going forward.

Hope this post finds you well,

BiR

 

Rather than having the government fund "personal accounts" why not start paying off the IOU's? This would start to build up a real rather than paper surplus. Also, let's start saving the surpluses from now on rather than spending the money on other government programs, specifically growing the Defense expenditures to $500B by 2010 which is the current plan. We're spending more on defense then the next ten largest defense spending nations combined. I don't think the reason is national security. The Japanese and the Germans seem to be relatively secure. We need to determine what the real driver for huge defense expenditures really is.

 

Huge expendatures are pennies compared
to the huge dollars spent on entitlement
programs. Fact is that that Congress
that is supposed to approve ALL EXPENDATURES
lets 58% of the budget go to people on
demand. This is unconstitutional (i sure
can't find it there, only Congress can
approve IN ADVANCE expendatures.

Again: I am in favor of of ending
all entitlements except that to which
I am entitled. Herein lies the problem:
we are all beholden to the US Government -
over 88% of us. We can't "afford" to
operate with out our unconstutional government
entitlement.