America?????s Revenue Problem

[_lulu]

All good points.

Not sure I get your point. I think part of the taxation argument is does it reach a point where it becomes a disincentive to increase gross income? I think that such a point is possible.

Yeah, you're right about that, it's just that making this point in and of itself tells us nothing about why we should or shouldn't maximize tax revenues. Kevin's point seems to be that we need to eliminate the national debt. Your point seems to be that we need to redistribute as much as we can to the poor. My analogy points out that the government does have a self-serving interest in maximizing tax revenues, so you better really be sure tax policy is going to do what you intend it to do before you maximize tax revenues, and hold them at these levels.

That amount can be estimated, but economies have inumerable variables that change minute by minute

Economies for sure, but also economic theories. Kevin is an avowed Keynesian, so why is he concerned about wiping out the debt? Recall, "In the long run, we're all dead." The point Analytics makes uses anti-Keynes logic against itself: Conservatives wanted a war; war costs a lot of money; Keynes was wrong; therefore, there is no justification for paying for the war on credit, we need to tax.

If one is a true Keynesian, then it's going to be problematic to argue for long-term maximum taxes, independent of what the ends are: balanced budget, war, help the poor, etc..

Keynes advocated what has been called countercyclical fiscal policies, that is, policies that acted against the tide of the business cycle: deficit spending when a nation's economy suffers from recession or when recovery is long-delayed and unemployment is persistently high—and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays."[12]

High taxes during downturns will exasperate the downturn. Inflation was 1.7% in 2012, so per Keynesian countercyclical policy, are we really in a position to crank up taxes to the max, say, to 70%? One might skirt the issue and say the sweetspot changes as the economy changes, but that defies the whole point; fiscal policy as a Keynesian is to control the waves, not to ride them. One can believe in a mixed economy where capitalism produces the goods and government redistributes for the betterment of the poor, but without also playing lion tamer. In other words, Keynesian policy and welfare are technically two different things, even though they seem to run together in people's minds, and their ends can easily conflict.

[_bcspace]

On average, we spend 3.3% more of our GDP on the military than those countries spend. If we really “support our troops” and support that level of spending, our taxes need to be commensurately higher.

This is a false premise which assumes we must have a huge welfare state.

[_EAllusion]

Political institutions are prone to corruption, inefficiency, self-justifying bureaucratic expansion, and general incompetence. They are insulated from market failure as a natural consequence for this behavior, and therefore are dangerous.

BCSpace: Huzzah. Right on brother! Preach the Gospel!

That includes the police and military.

BCSpace: HOW DARE YOU QUESTION AMERICA!?! GET THE F*** OUT!

[_Kevin Graham]

High taxes during downturns will exasperate the downturn. Inflation was 1.7% in 2012, so per Keynesian countercyclical policy, are we really in a position to crank up taxes to the max, say, to 70%?

So long as it is marginal, on the top 1%. Why not?

[_bcspace]

Political institutions are prone to corruption, inefficiency, self-justifying bureaucratic expansion, and general incompetence. They are insulated from market failure as a natural consequence for this behavior, and therefore are dangerous.

BCSpace: Huzzah. Right on brother! Preach the Gospel!

That includes the police and military.

BCSpace: HOW DARE YOU QUESTION AMERICA!?! GET THE F*** OUT!

When did I say the police and military are immune from corruption and inefficiency etc.? If you knew anything at all about the military for example, you'd know that there is a very good argument for it's inefficiency but it's not the type you're thinking of.

[_lulu]

Political institutions are prone to corruption, inefficiency, self-justifying bureaucratic expansion, and general incompetence. They are insulated from market failure as a natural consequence for this behavior, and therefore are dangerous.

BCSpace: Huzzah. Right on brother! Preach the Gospel!

That includes the police and military.

BCSpace: HOW DARE YOU QUESTION AMERICA!?! GET THE F*** OUT!

When did I say the police and military are immune from corruption and inefficiency etc.? If you knew anything at all about the military for example, you'd know that there is a very good argument for it's inefficiency but it's not the type you're thinking of.

Did someone just fart?

[_Analytics]

On average, we spend 3.3% more of our GDP on the military than those countries spend. If we really “support our troops” and support that level of spending, our taxes need to be commensurately higher.

This is a false premise which assumes we must have a huge welfare state.

I'm not assuing we must have a huge welfare sate. Rather, I'm doing the following things:

1. I'm looking at what the Heritage Foundation claims the taxation burden is of countries that it says are more "economically free" than the United States.
   
2. I'm looking at how much our military costs compared to those countries.
   
3. I'm assuming that a benchmark taxation burden for the U.S. should be about what the taxaction burden is of those economically free countries, plus the extra cost of our military.

[_Gadianton]

So long as it is marginal, on the top 1%. Why not?

Because the Laffer Curve isn't a representation of only the top 1%. Saying the taxation "sweet spot" is where the government maximizes revenue implies that all income earners are milked for precisely for what they can be milked before their udders atrophy. We can assume the theoretical maximum tax is likely not a flat tax, and is probably progressive, so saying that we need to hit the Laffer sweet spot, but only for the top 1%, doesn't make a great deal of sense.

Further, the top 1% make about 20% (I think) of the income, and if we're serious about erasing the 16 trillion, we're going to need that other 80%. The bottom line, though, is that balancing the budget is fully out of scope for Keynesian policymaking. That's the realm of Classical and Austrian thinking.

If you want to keep the different variables more or less consistent for the liberal view, then a better justification for "taxing the rich" is Krugman's pseudo-Keynesian idea that if we gut the wealthy by whatever means necessary, and then redistribute that money to the masses, then this should "jump start" the economy. The theory is that in the Keynesian world, there is a lack of spending. Normally, the government would run a deficit and lower interest rates in order to stimulate demand, until the economy rises to full employment. However, in the same spirit, I suppose we could argue that if all the money is held by the super rich and given the rich spend disproportionately low, then if we move that money to the lower classes, we can get the same effect as running a deficit; the end goal being to bring the economy back to full employment. Increasing the debt may be avoided in this scenario, but that's just a happy coincidence, and not a driving factor.

[_Analytics]

I agree with Gadianton--the government shouldn't be attempting to set taxes to the peak of the Laffer Curve--a tax policy designed to maximize the government's revenue sounds like the approach the tyrant Prince John would have taken in a Robin Hood story. Tax policy should be set up to finance the democratically agreed-upon roles of government in the fairest and most efficient way possible.

Hopefully an amount much less than the peek of the Laffer Curve is all that is needed to do this.

Further, the top 1% make about 20% (I think) of the income, and if we're serious about erasing the 16 trillion, we're going to need that other 80%. The bottom line, though, is that balancing the budget is fully out of scope for Keynesian policymaking. That's the realm of Classical and Austrian thinking.

If you want to keep the different variables more or less consistent for the liberal view, then a better justification for "taxing the rich" is Krugman's pseudo-Keynesian idea that if we gut the wealthy by whatever means necessary, and then redistribute that money to the masses, then this should "jump start" the economy. The theory is that in the Keynesian world, there is a lack of spending....

A couple of quibbles. First, balancing the budget is certainly an objective of "true" Keynesian thinking--Keynesians are all in favor of balancing the budget, but believe it should be balanced over the economic cycle, not over the cycle defined by how long it takes the earth to go around the sun.

Second, "gut the wealthy" is an unfair caricature of what Krugman would recommend. It’s true that he argues for progressive taxes, and it’s also true that he argues for stimulus spending in the form of tax breaks to demographics that would actually spend the money, rather than to the demographic that would allow the extra money to accumulate in their off-shore accounts.

Looking more closely at Krugman, if you look at the full implications of his babysitting co-op example, he believes full employment is more important than maintaining the value of the dollar—if everybody wants to work now and spend later, then the value of a dollar now and a dollar later needs to be adjusted so that in aggregate, there is full employment both now and later.

[_Gadianton]

A couple of quibbles. First, balancing the budget is certainly an objective of "true" Keynesian thinking--Keynesians are all in favor of balancing the budget, but believe it should be balanced over the economic cycle, not over the cycle defined by how long it takes the earth to go around the sun.

I agree, sort of. The way it seems to me, a true Keynesian assumes the peaks and troughs will ultimately balance out, and the debt will be kept in control as taxing in the boom years pay back for the bust years (which was why I said taxes had to be flexible for a Keynesian). However, the long run never puts pressure on the short run, as I understand it. There's a disanalogy to a stock picker timing a stock by mean reversion; the longer the stock stays too low, the likelihood of rebound increases. If the debt is 16 trillion and unemployment is high, then deficit spending is on the table. If the situation doesn't improve and 5 years later the debt is 25 trillion, and unemployment is still high, then deficit spending is still on the table, probably in larger quantities. The short run calls the shots.

Second, "gut the wealthy" is an unfair caricature of what Krugman would recommend.

That's very possible. :)

I was mainly looking for an internally consistent way to stick it to the rich.

Looking more closely at Krugman, if you look at the full implications of his babysitting co-op example, he believes full employment is more important than maintaining the value of the dollar

I think the co-op example is excellent for explaining the paradox of thrift, but I think I'm missing the point you're trying to make.