The Return to Normalcy Budget

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Jason Kuznicki

Jason Kuznicki is a research fellow at the Cato Institute and contributor of Cato Unbound. He's on twitter as JasonKuznicki. His interests include political theory and history.

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145 Responses

  1. Avatar North says:

    I’d sign on in a heartbeat Jason.Report

    • Avatar ThatPirateGuy says:

      We need to inspect Jason’s counter-tops and check his house for arugula.

      Something is turning him into a class-warring liberal.Report

    • Avatar Simon K says:

      Third. Unfortunately I think you might have a wee problem with the House majority. And the Senate for that matter.Report

  2. Avatar Superluminar says:

    Ha! I knew I liked you for a reason. I would agree to everything here. Sadly, too few politicians do, but it’s certainly a start.Report

    • Avatar Jason Kuznicki says:

      I would agree to some of the things only grudgingly, but I’m more afraid of long-term insolvency than I am of raising taxes to where they were in the 90s. If those really are my two choices, then I know which one I’m choosing.Report

      • Avatar Superluminar says:

        Question: why would you be “afraid” of the Clinton-era tax rates? It seems to me they didn’t really have a negative effect on growth at all. I’m genuinely curious why you would use those words to describe those rates.Report

        • Avatar Jason Kuznicki says:

          I regard taxation as a necessary evil, with an emphasis on “evil.”

          If I could run government entirely without taxes, I’d do it. I’m not naive enough to think I could, but still — I like incremental moves in that direction, and I dislike incremental moves in the other. Given a highly constrained choice set, yes, I accept some of a necessary evil. I’m a theorist in theory, and a pragmatist in practice.Report

          • Avatar Superluminar says:

            I liked that last sentence! But seriously, “necessary evil”? Why are taxes evil? Excessive taxes (of course everyone’s MMV here) I can understand, but all taxes? I just can’t go there. I expect to pay some taxes, no matter what, and I don’t find that an unreasonable proposition. I think my main problem with you is trying to get why you have a different opinion on this stuff…Report

            • Avatar Jason Kuznicki says:

              Assuming that our society instantiates at least roughly just rules of acquisition and transfer, I think the presumptive owner of an income is the person who earned it. Taxation compromises on this.

              We might justify taxation on the grounds that we don’t have sufficiently just rules of acquisition and transfer, and many taxes are justified on precisely these grounds. Even here, though, the optimum solution isn’t taxation. It’s finding a better ruleset for acquisition and transfer.

              We might also justify taxation as a way to solve collective action problems. But if I could solve those problems without coercing anyone, I would do it. I don’t think we will necessarily ever find sufficient methods of doing this. But I admire efforts in that direction — and have a lot more respect for them than I do for taxation.Report

              • Avatar BSK says:

                Couldn’t an argument be made that taxation is a charge for services rendered? Even before you were born, the government took many actions that allowed you to come in to being in the state that you are. They created a system that allowed you to achieve what you’ve achieved. As such, a tax is due.

                Of course, for those who were hampered by the government (blacks, women, religious minorities, non-land owners), perhaps the government owes them money.

                I realize this circumvents the possibility (likelihood) that things might have been better without a government or a smaller one. But what might have been matters not… only what was. The government build roads that allowed your mom to get to the hospital to birth you, presumably in a safer environment than she might have otherwise. This led to better health as a child which allowed you to thrive and avoid developing issues that would have precluded your later success.

                (I don’t necessarily subscribe to this argument and it may be FULL of holes, but it does seem a reasonable counter)Report

              • Avatar Scott says:

                BSK:

                Dems already like the death tax so why not a birth tax as well, how brilliant! As for those who were as you put it “hampered by gov’t” why not just tax white males more and then transfer the money to the those unfortunates as we all know that white males are racist misogynistic oppressors?Report

              • BSK: I’ve made a similar argument to this in these parts before:

                https://ordinary-times.com/blog/2010/07/21/moral-agency-not-an-agency-of-morals/

                I believe there’s other instances where I’ve been more explicit about it, but don’t have the time to look right now.Report

              • Avatar Jaybird says:

                I’m not a fan of doing work for someone else that they haven’t asked you to do, charging them for the service, then throwing them in jail if they don’t pay.Report

              • Avatar BSK says:

                All reasonable counter-arguments. As I said, it isn’t necessarily what I believe in, but it seems that someone smarter than I (and perhaps Mark has done this; I haven’t clicked through yet) could make a reasonable argument in favor of this. It does seem to be an important part of the conversation though.Report

              • Avatar Michael Drew says:

                People asked for the work to be done by causing majorities sufficient to overcome significant minority protections in our legislatures to enact laws that would do the work. The government was most certainly asked to do these things.

                The requirement for sufficient protection of the minority (i.e. those who didn’t ask, or asked that the work not be done) against tyranny of the majority has now become the necessity of unanimity?

                You simply can’t say that the government wasn’t asked to do these things. It was. It wasn’t asked individually by every person alive when the government agreed to do them. So?Report

              • Avatar Pat Cahalan says:

                I’m pretty sure, “I’m not alive yet” puts you outside the window of “people with whom you can contract”.

                I’m just sayin’, on the one end, you’ve got, “They’re dead, the contract is now voided”, and on this other end you’ve got, “They’re not alive yet, we can’t encumber them”.

                So if you want to give roses and puppies to every newborn person in the U.S., more power to you. You don’t get to give them a bill at the same time.Report

              • Avatar Superluminar says:

                Okay I just read through both your links, and I have to say I’m unconvinced, as both seem question-begging. I can see why people might be convinced, but you’ll need to do better to get some of us to take this seriously.Report

              • Avatar Superluminar says:

                Guess that’s a way of saying I don’t think those articles say anything about tax being “evil”, I just think you’re being stangely obtuse about this; and that is the impression I get from your posts, that I disagree with 90% of them but I don’t have a problem with them as they deal with reality, the other 10% I can’t fathom as I really don’t understand where they’re coming from.Report

    • Avatar Superluminar says:

      Actually, to add to that, it’s not even like left and liberaltarian are talking different ballparks on tax here, it really is a relatively small increase that’s needed to go a great deal towards plugging the deficit (sure some on the left want higher, but I think this is a longer term project). Anyway, good post.Report

  3. I aggree with 99% of this. My only caveat would be that I would like us to explore the tax revenue increase created by closing all tax loopholes before we talk about actually raising tax rates above current levels. The current disconnect between the actual tax rates and the effective tax rates for both the middle and upper classes is embarrassing. There’s a lot of money that is escaping tax obligations because the tax code is so complex it creates hundreds of loopholes.Report

    • Avatar Superluminar says:

      Okay, count me as a lefty who’s on board with this alsotoo.Report

    • Avatar BSK says:

      I think this is an issue that is often missing from the conversation. And I would move beyond just “loopholes” and eliminate all the deductions and credits and stuff. All that is is the government subsidizing what they consider “good” behavior. Deducting mortgage interest is the government’s way of promoting home ownership. Credits for solar panels is the government’s way of promoting green energy. Even things like medical spending or child care… while we all may agree that it is a good thing to take care of your health or to care for your children, this encouragement is achieved through taking more money from other people. Eliminate all this crap and, across the board, people will be paying at a lower rate. Certain individuals will probably have a higher total tax bill, but on the whole, my hunch would be that most people save.Report

      • Avatar Jaybird says:

        Even things like medical spending or child care… while we all may agree that it is a good thing to take care of your health or to care for your children, this encouragement is achieved through taking more money from other people.

        This is not exactly the argument that I use to get rid of Medicare, but it’s close. I’m 100% on board.Report

      • BSK,

        I’m on-board with eliminating all deductions as well. If we did so we could all pay a lower rate and decide for ourselves what is a good investment. If your example of solar panels create a long-term energy savings then I shouldn’t need the government to motivate me to make that investment. And how many people have bought them on credit with the justification that there would be a tax break the following year, only to blow that tax return on something else? It actually incentivizes long-term debt in many cases.Report

        • Avatar BSK says:

          I didn’t even think of it in that way, but you are absolutely correct. And as soon as the credit is ended, people will stop doing it and you may end up with fewer total people doing it then you would have if people simply had more money and did it of their own volition. All in all, a fail.Report

        • Avatar Pat Cahalan says:

          > If your example of solar panels create a long-
          > term energy savings then I shouldn’t need the
          > government to motivate me to make that
          > investment.

          Yes, well, people aren’t rational actors. But I’m on board with correcting this without arguing about that.

          > And how many people have bought them on
          > credit with the justification that there would
          > be a tax break the following year, only to
          > blow that tax return on something else? It
          > actually incentivizes long-term debt in
          > many cases.

          That’s a valid point.

          So rather than a tax credit, give them a recouped subsidy. You want to install solar panels on your house? Okay, for long-term sustainability of the country and the electrical grid, that’s actually a win for everybody. However, you might not have $20K to spend in liquid cash right now to put up solar panels. Rather than give you a tax credit, which only gives the people with $15k spend right now enough of a bonus to put them over the top, how about a $20K loan with a ten-year term where the interest rate is low enough that you can pay for it out of your energy savings?Report

  4. Avatar BSK says:

    Logical… sensical… reasonable…

    Basically… FAT CHANCE!

    I like it. I’d call for an even stricter restriction on military spending and a refinement and further reforming of the “welfare state”.

    Ideally, we simplify the tax code (making everyone (and corporations are a someone now, right???) pay their fair share), eliminate any subsidies to private industries (I’m looking at you, corn!), reform welfare/medicaid/medicare (I don’t have the details on this, but there is a ton of waste in the system), and then we could probably lower taxes across the board. But I suppose that’s a pipe dream…Report

    • Avatar Jason Kuznicki says:

      If you click through to the Times, you’ll find that I did a bunch of those things without any comment on them, except that I left social welfare programs alone, to prove my point.

      Tax code reform is a subject I’d prefer to tackle separately. My preference there is for a flat tax, but the Times didn’t give that option, and I knew it would peel off the redistributionists from the coalition I was trying to build on this one issue.

      As a policy, eliminating farm subsidies would have all kinds of good effects, but the effects on our budget would be minor, and in that context, hardly worth the breath.Report

      • Avatar BSK says:

        JK-

        To the best of your ability (either you already know it or you could make a reasonable estimate), what would the flat tax need to be to match current levels of tax income? What would it need to be for this plan? I think one of the hardest things about analyzing a flat tax proposal is there is rarely a % attached to it.Report

    • Avatar Jaybird says:

      I don’t think that you get to jump from yelling “fat chance” at someone else’s idea to saying that we need to reform medicaid/medicare.Report

  5. Avatar Mike Schilling says:

    Cap Medicare spending at GDP plus 1%

    Am I misreading this? It looks like “Spend the entire GDP on Medicare, plus a bit more.”Report

  6. Avatar BSK says:

    http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=w7trg9p8

    Here is what I ended up with. I might have gotten a little over excited…

    I wasn’t trying to gain support though; just make decisions I believe in.Report

  7. Avatar Jesse Ewiak says:

    My plan – Less cuts and more taxes! Especially for polluters and banksters.Report

  8. Avatar Chris says:

    I’m with the others. This sounds about right, given the current political climate. I second the call for closing tax loopholes for both individuals and corporations. I might also throw in a law taxing corporations where they make their money, not where they put their headquarters so that they don’t just put an office in Switzerland or somewhere in the Caribbean while they make a few billion here near tax free, if not completely tax free. Oh, and I’d throw in single payer health care, too, since it will ultimately save money as well. OK, now I’m getting more and more politically infeasible.Report

  9. Avatar RTod says:

    I’m in agreement with most of what you state, Jason. Though the cynic in me wants to say that everyone can get on board with “Cap Medicare spending at GDP plus 1%;” it’s the deciding what that GDP plus 1 will and won’t pay for in a world where costs have been spiraling upward at 7-12% annually since the 90s that make it this hard to see happening.Report

  10. Avatar Kolohe says:

    Serious question: does raising the cap on income subject to the SS FICA result in a higher payout upon retirement in either your scenario or the option in the Times calculator? That’s the way it would work now unless the benefit calc was altered concurrently. (for the website, at least, it’s seems at first glance to raise the payout, as half the deficit reduction over 20 years is in the first five years)Report

  11. Avatar Simon K says:

    Cap Medicare spending at GDP plus 1%. This is a doozy, I know. Can we do it? We’ll probably have to, like it or not, in any balanced budget plan.

    This is the “then a miracle occurs” bit, though, isn’t it? You can’t cap spending on something and also guarantee a given level of service to all comers. You have to reduce service levels somehow. The main question seems to be whether you directly control the amout of money you pay out per patient per year, or whether you control the availability of treatment and set this actuarially to control the ultimate cost. Very approximately, it seems like liberals prefer to control available treatments, because its scrupulously fair and has plenty of scope for panels of experts and extremely wonkish discussion, where conservative prefer to control available cash, for more or less exactly the opposite reasons. The trouble is they both have scope for “granny died while waiting on a gurney because XXX” stories, where XXX is the consequence of whatever system of rationing you’re using.

    There’s also the business in the Ryan plan about the government paying out money that’s then used to buy private insurance. This does have the advantage of being fairer than simply limiting payouts. The downside is that the only way to make a government program less efficient is generally to involve the private sector. Whatever magic free market fairy dust private companies may bring to the show when operating in a free market environment tends to disappear immediately if their customer is the government.Report

  12. Avatar Koz says:

    Let’s just do 3 & 4 and talk to your Demo buddies and see if Obama will propose that. By now it should be pretty clear what the scarce resource is, the willingness of libs or Demo’s to cut expenditures, of any kind, anywhere. There’s no point in putting revenue increases on the table. There is no tax regime that funds the current expenditure path. And there’s no point in giving the D’s any money to find out. Like Johnny Hooker in The Sting, they’d just blow it.

    I think you have a time frame issue here. The Bush tax cuts are going to expire at the end of 2012 anyway. They can be renewed (or not) after the Presidential election. You might not necessarily be pitching this plan to Team Red, but if you are, what are you offering that’s better than the possibility of defeating Obama in Nov 2012 and taking the D’s completely off the negotiating table? Ie, something that looks completely plausible at this point (and something that you should support fwiw).Report

    • Avatar North says:

      Judging by the current crop of GOP presidential contenders; the current trajectory of unemployment and the economy; Obama’s high personal favorable ratings and the natural bonus’s that accrue to a presidential incumbent your optimism strikes me as impressively deluded.

      On the other hand you have at least admitted that increasing revenue is a way to balance the budget so on net I’d say you’ve made significant progress. Well done.Report

      • Avatar Robert Cheeks says:

        North, it appears Jason isn’t cutting any discretionary spending, eliminating wasteful programs, agencies, and sundry fed spending redundencies. I don’t have a problem with defensive cuts but tax hikes merely put more money into the hands of commie-dems in the various committees to increase spending on their favorite programs, etc. while expanding the parasitic welfare state.
        I like Alan’s comments.
        I like the RSC proposals and I thought CATOistas did too?Report

        • Avatar Jason Kuznicki says:

          Or you could read the first paragraph. Might help!Report

          • Avatar Robert Cheeks says:

            I must confess to missing something in the first paragraph. My criticism is that your budget proposal is in fact placing more tax dollars, removed from the economy, and placed in the hands of the commie-dems. I would suggest that that’s not helpful given Barry’s record of ineptitude.
            Cato’s Mr. Mitchell seemed to praise (feel free to correct) the RSC recommendations as do I.Report

      • Avatar Koz says:

        What trajectory is that? Obama’s approval ratings are mediocre and heading down. The economy is in trouble and he’s taking more of the blame for it every day.

        http://www.realclearpolitics.com/epolls/other/president_obama_job_approval-1044.html

        In general, people do like the President more than they approve Demo policies. But think about Election Day 2012: I think people are going to want real answers from whoever they vote for. I don’t think people are going to be as invested in Obama’s persona as before. Do you disagree?Report

        • Avatar North says:

          That trajectory would be stock prices up, profits up, GDP up, unemployment down, Obama’s approval ratings improving rather than declining.Report

          • Avatar Koz says:

            That’s ridiculous. Unemployment is high, and at this point of his Presidency, it’s Obama’s fault. I think in a lot of ways John McCain would have been a bad president. The crankiness, cultural disconnect, sense of entitlement do not speak well for him. But in spite of that unemployment would be less that 8% TO-DAY if John McCain were president and people like you need to start taking the blame for that.

            And look at Obama’s recent approval from Gallup, he’s 8 points in the whole. Get a grip already.Report

            • Avatar RTod says:

              “But in spite of that unemployment would be less that 8% TO-DAY if John McCain were president”

              why?Report

              • Avatar Koz says:

                We wouldn’t have the stimulus bill (of the magnitude that Obama got), the health care bill and the rest of the Obama Presidency which has made investment and business development a nearly hopeless proposition.Report

              • Avatar RTod says:

                Still not tracking. How do the stimulus and healthcare bill make business development hopeless?

                Not challenging you, just not understanding.Report

              • Avatar Koz says:

                Because the income flows that represent the successful return on an investment occur a loooooong time in the future, think like 10-50 years.

                Therefore those income streams must be perceived to have real value. That cannot happen where the future economic product is going to be confiscated some arm of government, or be denominated in worthless currency. This isn’t something that might happen in the future, it’s what’s going on now. Ie, corporate profits are good, harvesting the investments made a long time ago. But, nobody is freely choosing to invest capital in a way where it can’t be quickly taken back.

                To change this course of events, we need to cut government expenditures.Report

              • Avatar North says:

                Yes, but the canard that we can -only- cut expenditures to fix the problem is patently false and electoral poison.Report

              • Avatar Koz says:

                Forgive me for repeating myself, but I’m really hoping that you can grok a fairly basic cause and effect here.

                That which isn’t borrowed is taxed, that which isn’t taxed is borrowed. In neither case is it available for return on investment. This isn’t the only issue in the economy but it’s a necessary one to get through.Report

              • Avatar North says:

                Yes and again you’re trying to change the subject from the deficit to the size of the government. It’s admirably on message much like the GOP has been in general lately but it’s a canard. If you want to debate the deficit then you debate the deficit. If you want to debate the size of the government then you shouldn’t try dressing it up in deficit clothes and smuggling it into a budget crisis.
                Well you can try, but not even Obama is milquetoast enough to let the right get away with it.Report

              • Avatar Pat Cahalan says:

                > That which isn’t borrowed is taxed,
                > that which isn’t taxed is borrowed.

                I know I have mentioned this elsewhere: the Fed prints money. Which, at the present time, is actually a bigger problem than either revenue or spending, iff’n you ask me, but there you go.

                > In neither case is it available for
                > return on investment.

                If I borrow money from you, and invest it in my business, it is by definition available for return on investment. Twice. I get a return on investment, if my business does well, and you get a return on loaning me the money. If all works well, we both win.

                If I pay money to the government in taxes, and they spend it on something, it winds up in somebody’s wallet. Either a government employee (who can spend it on something, thus generating profit for somebody), or in the hands of a government contracting agent, who hopefully turns a profit.

                In any case, it’s money. As it moves through the economy, it generates return on investment for *somebody*. By definition. Liquidity is what makes the economy work.

                What actually contracts the economy is paying down the deficit -> that’s taking money *out* of the economy. It’s like cutting up one of your credit cards and not using it any more.

                Not saying that this isn’t important, mind you, but cutting the deficit and shrinking the economy sort of go hand-in-hand.Report

              • Avatar Koz says:

                “I know I have mentioned this elsewhere: the Fed prints money. Which, at the present time, is actually a bigger problem than either revenue or spending, iff’n you ask me, but there you go.”

                Yeah, that’s a third alternative but it doesn’t change anything. That which isn’t taxed is borrowed, that which isn’t borrowed is taxed, that which is neither is printed. In no case is it available for return on investment.

                As you mentioned, in many situations that’s the worst alternative of the three.

                “In any case, it’s money. As it moves through the economy, it generates return on investment for *somebody*. By definition. Liquidity is what makes the economy work.”

                Not at all. I think you’re confusing the parties here. If I’m Motorola, and I’m building a plant to make widgets, hiring employees, contractors and all the rest of it, the money they use to do it is investment capital whether it’s borrowed or part of Motorola’s equity capital. If it’s government, who spends the money on sugar price supports, or NCLB or whatever, it’s not investment capital. The government is not Motorola. The beneficiaries are not going to pay anything back.

                Therefore the money required to fund those programs has to be taken out of the private sector, therefore it’s not available for return on private investment. As this happens more and more often, investment becomes impractical and employment suffers. That’s where we are now.Report

            • Avatar North says:

              You’re starting to froth, did I hit a nerve? Come now, you and I both know that while employment is high now it was higher before and it’s been headed downward. You can whistle as hard as you like but it remains true.
              I’ll give you the approval rating, it is down right now, but it’s a long time until the elections and you’re still leaving out GDP and prices in general. The economic consensus is we’re in a slow recovery.

              As for McCain, I have no idea where you’re imagining this scenario where the old fella somehow would have made unemployment under 8%. Unless you mean he’d have drafted a couple hundred thousand people for his invasion of Iran.Report

              • Avatar Koz says:

                http://www.weeklystandard.com/blogs/morning-jay-make-no-mistake-economy-problem-obama_556853.html?nopager=1

                Check this out from Jay Cost, especially the first chart. Like here, his tie-in has to do with President Obama’s reelection chances but that’s pretty much irrelevant.

                Most of America has internalized that chart, though there probably isn’t one in ten who’s seen it. It’s a matter of grave uncertainty whether the US economy will ever return to a postwar 3% growth path. One thing some of you need to realize is that we’re not in a recession, in fact we’ve been in a business cycle expansion for 18 months or so. Our problems are much worse than a recession.

                It’s not a matter of whether we’re in a recovery, it’s a question of what we’re recovering to. If we cannot vote Republican and/or control government expenditures, the good times are now.Report

              • Avatar North says:

                Yes well now you’re getting into how the right wing see’s it. Whether that is reality or not is an entirely different debate than the one about the election.Report

              • Avatar Koz says:

                Well, they’re not the same thing but they’re kinda related. You know, I just realized that I just went over most of this with you in particular on the last thread.

                You’re trying to bury your head in the sand a bit North. Frankly, it’s hard to figure out what you (or the center-left in general) are hoping for, except to win some political battles.

                I hope you do realize that the public sphere is public. No matter how much political strength you have, you’ll never control all of it.Report

              • Avatar North says:

                We went over this in the last thread, yes, I recall where you tried to write the revenue side of the equation out of the deficit debate. It wasn’t plausible then, isn’t plausible now and certainly isn’t plausible now that Obama’s actually kicking up a fuss on the subject (wonder of wonders).

                I’m certainly not trying to bury my head in the sand; American politics are just too much fun! Us center lefties are generally hoping for market liberals to be in charge, a return to the Bush I and Clinton years would be nice.

                I hope you someday realize that your mental image of the political left is about 20 years out of date, how old are you anyhow (full disclosure, I’m 31)? Few to nobody in the actual Democratic party wants to nationalize much or control the entire public sphere, nor, for that matter do you seem aware of how much the right wants to do the same. Hell, if the Dems wanted to control the public sphere they had the chance handed to them on a silver platter. The entire financial sector turned into a pumpkin in case you missed it. If Obama et all had desired they could have nationalized the whole shebang and half country would have applauded (while the other half hid under the bed).Report

              • Avatar Koz says:

                I’m 41 fwiw.

                I don’t think you’ve quite got the context of this nationalization business. It’s not enough that President Obama is not the Hugo Chavez of North America.

                That which isn’t borrowed is taxed, that which isn’t taxed is borrowed. In neither case is money committed to government expenditures available for return on investment. It’s not that difficult a concept to understand when you put your mind to it.Report

              • Avatar North says:

                Yes yes, I understand that but now you’ve changed the subject from deficit reduction (which much of the country and especially the centrists and swing voters are rightly very concerned about) to the more esoteric question of the size of the government in general (which greatly exercises only libertarians and the right). It’s a nimble switch, I’ll give you that, but it’s a topic change all the same and besides the point.Report

              • Avatar Koz says:

                Good, maybe we can get somewhere. As it happens, I think that most of the political controversy over the deficit is really about expenditures.

                Whether it is or isn’t, the key point is that this is not just a political issue. Regardless of whether the voters care about expenditures, investors certainly do. Look this shit up if you don’t believe me.

                Nobody wants to be invested in place where they can’t get their money out. Anybody who has any choice in the matter is on the sideline (not everybody does). Without the willingness of investors to put capital at risk, long term unemployment is not going to go down.

                If the voters don’t care about expenditures, they certainly care about employment and our team has the way out.Report

              • Avatar Jesse Ewiak says:

                In other words, Koz, if we don’t destroy the social welfare net now, the BOND VIGILANTES~! will come and destroy the country.

                Despite ya’ know, no evidence that investors have stopped investing in American debt.

                However, yes, there is a long-term deficit problem. The good thing is we can solve 75% of it by doing nothing – (http://www.nytimes.com/2011/04/13/business/economy/13leonhardt.html?_r=1&hp).Report

              • Avatar Koz says:

                Forgive me Jesse, but you are not exactly the quickest draw in West. If you could actually think for a minute without spazzing, we might be better off.

                “In other words, Koz, if we don’t destroy the social welfare net now, the BOND VIGILANTES~! will come and destroy the country.”

                That was the 1994 version of this problem, we’re in much worse shape right now. The reason that investors are continuing to invest in Treasuries is that there is still available capital in the world to be invested and that’s the safest place for capital of the amount that has to be stored. If either of those change (and they won’t stay this way forever) we’ll be in a much different place. I think we should cut government expenditures so that we’ll be okay when that happens.Report

              • Avatar Jesse Ewiak says:

                Except of course, conservatives have been crowing about the coming hyperinflation since Obama finished saying the oath of office. So, that dog won’t hunt anymore. We aren’t Greece. We aren’t Spain.

                But like I said, there’s a simple way to fix the long-term debt problem. Do nothin’. That fixes 75% of the problem when the Bush tax cuts expire and other such things and for the rest, fix some loopholes like the mortgage interest deduction, do some cuts in defense, and the problem is solved.

                Unfortunately, this doesn’t hurt the poor and middle class like conservatives and the Beltway love to do so much, so of course it won’t happen.Report

              • Avatar North says:

                Mmm yes Koz, I’ve heard this argument before and I won’t say there isn’t salience but again once you get to this level of the discussion the urgency eases. The US remains, among the big economies, one of the best places to invest. The Canadians and the Netherlands (those big government failed states), Singapore and debatably Brazil are ahead of the US but they’re too small to be an alternative. The Europeans have their own problems and China’s a great place to invest so long as you don’t mind being robbed blind of your IP and then ending up nationalized. So relative to the rest of the world the US is doing fine. Obviously, of course, things are going to have to be tidied up with the deficit but I think Americans can be relied on to do the right thing eventually (my 2 cents a bunch of cutting all over the place coupled with tax increases/loophole closing)… … once they’ve exhausted all their other options.Report

              • Avatar Koz says:

                “I’ve heard this argument before and I won’t say there isn’t salience but again once you get to this level of the discussion the urgency eases. The US remains, among the big economies, one of the best places to invest.”

                I think you have quite a bit more salience than you’re supposing. I think you’re confusing a couple of things. Any store of value capital is going to be denominated in some currency except for physical commodities, and there are limits to how much can be stored that way. And for that, the US is as good a place as any and better than most.

                However, Treasuries and the like aren’t investments in the sense of capital known to be at risk intended to generate return. And if you look at that sort of investment by any kind of reasonable proxy, the news is very bad. PE ratio compression, VC capital flows, unrepatriated corporate earnings, small business starts, whatever metric you want to use, there’s not very much doubt that whoever has liquid capital available to deploy is choosing to stay on the sidelines in the current environment.

                The short story is, people have to have their capital denominated in some currency. They don’t have to invest, and they’re not.

                And North, ask yourself why unemployment should be between 9-10% if not that. There really is no reason.Report

              • Avatar Koz says:

                “But like I said, there’s a simple way to fix the long-term debt problem. Do nothin’. That fixes 75% of the problem..”

                What problem is that?

                I don’t think you’ve been following the exchanges on this thread close enough. Perhaps you could describe in a complete and coherent way what you think the nature of the long term debt problem is, and we can go from there.Report

    • Avatar Simon K says:

      Really Koz? With what candidate? Are you running? Because yo may be their best hope. Mitt’s the only guy with any kind of chance whose hat is even in the ring, and he has an unfortunate record of agreeing with Obama about almost everything, apart from that business about Jesus visiting America after the Romans nailed him to a tree. Not exactly tempting for those red-blooded evangelicals y’all have been pander to. Pawlenty and Daniels are so boring even people who know they are tend to forget about them, and the others are all too nutty to win.Report

      • Avatar North says:

        Don’t forget, Simon, that Pawlenty barely has even odds of carrying his home state if he runs. There’s little love lost on T-paw in Minnesota.Report

        • Avatar Simon K says:

          Yeah. I know some Minnesotans. Didn’t want to get into that, since I don’t really know what the problem is, but I know they don’t like him very much.Report

      • Avatar Koz says:

        Yes, really.

        I don’t know if you’ve looked at map recently, but there’s an interesting datum I checked on the Internet a couple of days ago: for 2012, the GOP wins in a scenario where Obama carries the Kerry states plus Ohio, and the GOP candidate carries the Bush states minus Ohio.

        The upshot is, Obama must carry all of the industrial midwest, Great Lakes, Rust Belt that’s remotely competitive: Pennsylvania, Michigan, Ohio, Wisconsin, Minnesota, Iowa. This should inform the context of the recent events in Wisconsin, or the possibility that Gov Pawlenty will win the nomination. Obama is maneuvering to keep the race competitive, the GOP is looking to put it out of reach.Report

        • Avatar Mike Schilling says:

          the GOP wins in a scenario where Obama carries the Kerry states plus Ohio, and the GOP candidate carries the Bush states minus Ohio.

          Which follows pretty clearly from the fact the Ohio would have put Kerry over the top. (And that the latest census didn’t change things much.) Now, if only the Democrats had a much more compelling candidate than Kerry, and the GOP weren’t running an incumbent in war-time.Report

          • Avatar Koz says:

            Yeah. I don’t know if this wasn’t clear but my point was that Ohio doesn’t put Obama over the top in the same scenario.

            The industrial midwest is EV goldmine. Obama needs them all. With a little luck, our team can win without any of them. And look for a sec at the 2010 election. That was the underreported good news for the GOP. The GOP was very successful in the Rust Belt.

            There’s a lotta lotta frustrated, underemployed white people in those states who are going to be looking for real answers in this economy. They are not going to be easy votes to reelect Barack Obama.Report

            • Avatar Robert Cheeks says:

              People in the Mid-west have suffered under Commie-Dem socialist policies for to long. It may be that this time, even the unwashed get it.Report

            • Avatar North says:

              This of course assumes that the rest of the country stays static which is assuming a lot. The Southeast barely stayed red last election. The mountain west is hardly a lock in for team red and the electorate will presumably resemble the last presidential election group from 2008 rather than the protest vote group of 2010.

              And this all presumes the GOP doesn’t nominate a dingbat.Report

              • Avatar Koz says:

                That’s true, but it doesn’t help. Barack Obama isn’t going to finish within 5 points of any Confederate state.

                The traditionally Republican presidential states that might be available to him, (New Mexico, Nevada, New Hampshire, Colorado, Ohio) can’t do anything in comparison to the EVs he’s hemorrhaging in the Rust Belt.Report

              • Avatar North says:

                We’ll see Koz, but I’m skeptical. I live in the Midwest myself and I haven’t heard much huge groundswell of rage against Obama. Note, also, that he did oversee the (so far) successful bailout of the auto companies and that carries significant positive weight in the Midwest for a lot of voters who otherwise might be leaning against him.Report

        • Avatar Simon K says:

          Yeah, Ohio doesn’t flip it any more. But Obama won more states than Kerry – what he got last time would do fine. And it seems the GOP will run a non-entity or a crackpot, which won’t help.Report

          • Avatar Koz says:

            Right, and if George W Bush changes the constitution, earns the nomination and wins the states he won in 2004 he’ll be the next President of the United States.

            The point being, the world has changed since 2004 and 2008. It’s ridiculous to think the 2008 scenario is in play when BO is underwater instead of 80% approval or whatever.Report

            • Avatar North says:

              None of us get to freeze time. The left can’t stop the clock at 2008 and the right can’t do it at 2010.Report

              • Avatar Koz says:

                Exactly, which is why we’ve got to look at the state of play now. The GOP has a few things going for it, the D’s have some, but the main one is that our team is owning the debt issue.

                We are the ones who have come to grips with the depth of the economic problems facing America and we have the way out, while the President is still filling out his NCAA brackets or something.Report

              • Avatar North says:

                As an aside Koz who do you want to win the GOP nod and who do you think will get it? I am honestly curious.Report

              • Avatar Koz says:

                There was a piece in The New Republic maybe a month ago about how Pawlenty was going to get the nom. That’s probably as good a guess as any.

                My preference would be any of Pawlenty, Daniels, or Ryan. Mitt might be ok. After that, it gets worse quickly. Though I don’t think there’s any of them with no chance to win a general election.Report

              • Avatar North says:

                Are Daniels or Ryan actually running?Report

              • Avatar Koz says:

                I think the latest buzz is that Daniels is, but Ryan isn’t. I think Daniels is a great candidate for the GOP.Report

            • Avatar Jaybird says:

              The problem with the GOP is that, even today, they have among their group a decent Vice-Presidential candidate (Romney) but no decent Presidential candidates.

              Huckabee? Trump? Pawlenty? Johnson?

              Obama would win against any except *MAYBE* Huck.

              Jeez, *JEB* would have a shot in a universe less absurd than this one.Report

              • Avatar Koz says:

                Any of them Jay, any of them. Really.

                When a plurality of America is determined not to reelect President Obama under any circumstances it really doesn’t matter.Report

              • Avatar RTod says:

                Not an Obama fan, but me thinks you are going to be deeply, deeply puzzled and saddened in about 18 months.Report

              • Avatar Jaybird says:

                When a plurality of America is determined not to reelect President Obama under any circumstances it really doesn’t matter.

                Remains to be seen.

                Obama is currently running against “Generic Republican”.

                When the Republicans finally unveil their nominee “Dan Quayle!” (with the tagline “Tanned, Reseted, Ready”), they will see that “Generic Republican” is like some theoretical Intervention in Iraq. “We’ll be greeted with flowers, we’re removing a tyrant!” but the actual nominee will be like the actual intervention. “What do you mean we killed a family driving through a checkpoint?”Report

              • I’m praying for Mitch Daniels, I’ll settle for John Huntsman and terified we’ll get Mike Huckabee.Report

              • Avatar Mike Schilling says:

                The big question is what shape their birth certificates are in.Report

              • Avatar RTod says:

                You’ll get Donald Trump, and you’ll like it.Report

              • Avatar North says:

                Mike, are they running and do they have a shot at the nod? I try and follow GOP primary politics but I just don’t have the knack for it.Report

              • Avatar Mike Schilling says:

                It’s easy – the smart ones have to pretend to be stupid and the sane ones have to pretend to be crazy. By election time, they’ve become what they acted like.Report

              • North,

                I am sad to say I think Daniels will bow out and wait for 2016. I think Huntsman will run based on his recent actions. Huckabee polls well (I scratch my head on that one) so I assume he will, although I’ve heard he has a big deal with Fox and might not want to leave.

                It’s starting to feel like a Dole/Kerry year, which is embarrassing. If we punt on 2012 then 2016 is going to be one crazy ride on both sides of the aisle and I wouldn’t be surprised if total spending reached $1.5 billion or more.Report

              • Avatar Jaybird says:

                I worry that Huckabee has the skillz to do it.Report

              • Avatar North says:

                Mike, yeah Huntsmen is in but how does the administration’s former ambassador to China win the GOP nod?

                And I agree, assuming Obama gets two terms 2016 is unpredictable (but it makes me feel old just thinking that far ahead)Report

              • North,

                Huntsman would have a tough road ahead of him – he’s not super-well known. Plus he smells like Team Obama due to his last job. I like him on paper which means he probably has zero chance of winning.Report

              • Avatar RTod says:

                Can I just say I for one love the current term “intervention?” It calls all of these images of Obama, Sarkozy, Napolitano, et al. surprising Kadaffi in some Holiday Inn business suite and explaining, no there won’t be any strippers or Jack Daniels, we’re here because we love you and we’re worried.Report

              • Avatar Jaybird says:

                Euphemisms are among my favorite devices. There is so much bundled in a tiny package of “poetic truth” (aka “lies”) that it almost shames the dullness of reality.

                Almost.Report

              • Avatar Koz says:

                Yeah, but I think you’re assuming that at present the GOP is getting the benefit of being generic Republican at the moment. I don’t see it. If anything, people are making fun of Donald Trump, Sarah Palin, Huck, or whoever. And then if the nominee is Mitt or Tim Pawlenty they’ll have to find a new playbook. Ie, “look at that idiot who didn’t get the nomination” doesn’t cut any ice.Report

              • Avatar North says:

                Well Mitt is the bloody Kerry of the right, and most likely destined for the same fate. Is there any issue the man hasn’t reversed himself on(without even going into how his Mormonism or dog bothering plays into the dynamic)?
                Pawlenty on the other hand is an empty suit. I know him pretty well, he was my state’s governor and I really don’t think he’s going to be able to cut it in national elections. Outside of those two the rest of the field are either refusing to run or joke candidates.Report

              • Avatar Koz says:

                “Pawlenty on the other hand is an empty suit. I know him pretty well, he was my state’s governor and I really don’t think he’s going to be able to cut it in national elections.”

                I dunno, I think he’s a great candidate. He won reelection in 2006 (a horrible year for Republicans) in a medium-blue state. I think it’s pretty likely he’d carry Minnesota at least (they did vote for Walter Mondale after all), which is huge win for the GOP.Report

              • Avatar Jesse Ewiak says:

                On Pawlenty winning Minnesota –

                Not so much.

                http://tpmdc.talkingpointsmemo.com/2010/12/ppp-poll-pawlenty-trails-obama-in-minnesota—-and-romney-does-better.php

                Obama carried Minnesota by a 54%-44% margin against John McCain in 2008. The state has not voted Republican at the presidential level since the Nixon landslide of 1972. It was the only state to vote for its Democratic native son Walter Mondale in the Reagan landslide of 1984, but in fact he won it only narrowly.

                In this poll, Obama leads Newt Gingrich by 51%-38%, leads Mike Huckabee by 50%-40%, and trounces Sarah Palin by 54%-36%. As it turns out, he leads Pawlenty by 51%-43%, but only leads Romney by 47%-42%.

                The poll also gives Pawlenty an approval rating of only 43%, with a disapproval of 53%.Report

              • Avatar North says:

                Koz, Pawlenty is -not- loved here. He won his assorted victories not so much on a basis of personal strength but on the basis that his opponents were weak. Minnesota has a viable third party in state politics (you’ll recall Jesse Ventura) that complicates things and Pawlenty has been able to eke out only the narrowist of wins because his opponents were lackluster.
                It is possible that the GOP could win the presidency in 2012, it’s possible they could get the Senate. But I would be quite astonished if they carried Minnesota and even more astonished if Pawlenty made the ticket let alone won the overall election.Report

              • Avatar Koz says:

                More soon but for now let’s just note that unless the lay of the land changes a lot GOP control of the Senate is already baked in the cake, it’s a question of how much. The D’s have too many seats to defend in and they’re not all in good places.Report

              • Avatar North says:

                The Senate seems tilted the GOP’s way, I agree, but only slightly 55% maybe? It’ll depend on the electoral climate but I doubt they’ll get a filibuster proof majority.Report

              • Avatar Koz says:

                Of course not. But they don’t need one. The GOP doesn’t need to make statutory policy changes to do what it needs, it just needs to defund this or that, and a simple majority is sufficient for that.Report

              • Avatar Jesse Ewiak says:

                Again, you’re pretty much wrong Koz. GOP control of the Senate is not a fait accompli. See Nate Silver –

                fivethirtyeight.blogs.nytimes.com/2011/04/14/rumors-of-the-democrats-demise-in-the-senate-are-slightly-exaggerated/Report

              • Avatar North says:

                I hate to disagree Jesse but even Nate puts the odd of the GOP getting control as north of 50%. Now it’s only slightly north of 50% so it’s not like it’s locked in but that’s still not good news for the Dems.Report

              • Avatar Koz says:

                Well I have a decent amount of respect for Nate Silver, on the other hand he admits his opinion on this subject is a little contrarian. The biggest quibble I have is that whatever competitiveness the D’s have in 2012 is tied up in Mr. Obama personally in ways that aren’t likely to be carried over downticket relative to 2008.

                Think about this. Of all the liberal complaining about Obama selling them out over this or that, who are the hypothetical primary opponents? Howard Dean, Hillary, and Dennis Kucininch, ie only one member of Congress. Who really wants to take a bullet for Jon Tester or Mark Pryor or whoever has to run next cycle?Report

              • Avatar Jesse Ewiak says:

                I was responding to Koz when he said, “More soon but for now let’s just note that unless the lay of the land changes a lot GOP control of the Senate is already baked in the cake.”

                If I only have 50% chance of getting a girl in bed, I’m not saying it’s baked in the cake. 🙂Report

              • Avatar ThatPirateGuy says:

                I fail to see how republicans are going to do well in 2012 after voting to voucherize/end as we know it Medicare today.

                Don’t bother going into details because the attack ads sure won’t unless they make the republicans look worse.Report

              • Avatar Koz says:

                “I fail to see how republicans are going to do well in 2012 after voting to voucherize/end as we know it Medicare today.”

                This could be a problem but there’s some reasons to think it’s less of one than you think.

                Have you heard of seniors ganging up Ryan or any other Republican telling them to get their hands off Medicare? Your team still hasn’t learned any lessons from the PPACA fallout. The government can represent that a government program is going to do this or that, but they can’t force anybody to believe it.

                The Obama bill weakens Medicare, the Ryan plan changes Medicare. That’s not the same thing.Report

  13. Avatar Allen Lanning says:

    How about we overhaul the income tax code on wages, converting it to a straight salary deduction like social security and medicare? Make it the same % for every wage earner. Eliminate the need for a huge chunk of the IRS. Eliminate annual filing for most people. Just issue them a report of their tax payments on an annual basis. Make sole proprietors pay themselves wages. And tax corporate profits at a higher percentage.

    Tax accountants would take a hit. Tax laws would cease being used as policy devices to promote this or that.

    Buut federal government would be simpler. Sounds cool, huh?Report

    • Avatar Simon K says:

      Yup. Basically replace the income tax with a payroll tax. Its economically equivalent to replacing it with a sales tax or VAT but somewhat easier to administer. Has the benefit of not taxing deferred income (ie savings) twice. It has the same problem as sales tax, though – its hugely regressive, so poor people end up paying a relatively large portion of their income that rich people. Americans are accustomed to a Federal tax system that’s extremely progressive, and generally seem to want it to be even more progressive. So such a change would be a big shock for many people. You can fix the regressivity problem by giving everyone a prebate on the taxes they’ll pay that year at the start of the year, but its still open to charges of unfairness, especially if the prebate comes under pressure from conservatives as an entitlement, which it probably would.Report

    • Avatar North says:

      If simplification was your aim you’d have to do away with the corporate tax rate alltogether. Best way to pay for that would be to either reduce or eliminate the special treatment of capital gains at the same time.Report

    • Avatar David Cheatham says:

      While I’m utterly against making it a flat %, as that would be very regressive, it would be trivial to do what you said and leave it progressive.

      Remove all deductions, remove everything except ‘If you make X, you pay Y’. That’s it. And then turn it into something like sales tax, where it’s entirely the job of business to keep it and turn it in.

      The only people who’d owe any extra taxes would be people working multiple employers, because they’d end up getting taxed at the wrong tax bracket by one of them. And no one would have to ‘file’ anything…if that happened, the IRS would send them a bill.

      And I don’t mean a giant bill the next year, I mean, the minute the IRS gets two of the monthly tax payments for the same social security number, it mails out an explanation of what’s going on, that they are undertaxed, and lets them set up a direct deposit for the extra amount. (I was about to say ‘or have it taken out of one of the paychecks’, but, hell, let’s keep this simple. Having it taken out extra requires complicated back channels from the IRS back to the employer, which has to keep special information to tax to take a little extra money from that guy. No. Either direct deposit, or the taxpayer can mail in a check every few months.)

      If we actually want to incentivize behavior, if we must still have some ‘deducatables’, we can have forms people can fill out and turn into to get cash or whatever, but this would have nothing to do with actual income taxes. We want to reward people for putting up solar panels, they can turn in a receipt and government rebate form and get a check in the mail. (Not that I’m saying that’s a good idea, but I think we’d be a lot clearer about ‘deductions’ if we treated them that way.)

      In fact, we’d almost certainly want to set up something for retirement investments. Although, instead of getting a ‘deduction’, how about we just have the government provide a matching percentage that basically exists to offset taxes? Save $100 in an account you can’t get to until you’re 65, the government puts in $2. Which you obviously have to pay back if you get it out early. Stop trying to do it on the ‘income tax’ side, just have the government subsidize the investments.

      As a bonus, it suddenly becomes much easier to incentivize some stuff we never could before without weird deductions, because now that businesses are doing income tax, we can have different tax rates for different _fields_, because we can selectively lower the rate for each. How about a slightly lower tax rate for medical general practitioners, or registered nurses, for example, considering the shortage of them? A business just sends in a tiny bit of documentation saying it employs someone in that field, and the IRS say ‘Okay, you can tax them at these rates instead:’.

      This is much easier than trying to have weird deducatibles on medical school loans for practicing doctors, which is, IIRC, how that happens now. That requires documentation from _at least_ three sources…the doctor, the medical school, and the place they’re employed at.Report

      • David,

        Your proposal is way to logical and common sense. Washington will never adopt it.

        Too bad we can’t it up as a federal ballot proposition.Report

      • I’m mostly on board with this as well. A few slight objections, though:
        1. Some of the biggest existing deductions, especially the mortgage interest deduction, would need to be phased out over a very long period of time. You can’t do it in a short period without causing massive economic instability because of the fact that people have already entered into arrangements in reliance on those deductions. There’s also the issue of home prices dropping, of course, creating even more underwater mortgages. So long as those deductions exist and are being phased out, you can’t go to a straight payroll tax system.

        2. This “bonus” is something that I view as a major concern and a future fount of making the system just as bad as the existing system:

        As a bonus, it suddenly becomes much easier to incentivize some stuff we never could before without weird deductions, because now that businesses are doing income tax, we can have different tax rates for different _fields_, because we can selectively lower the rate for each. How about a slightly lower tax rate for medical general practitioners, or registered nurses, for example, considering the shortage of them? A business just sends in a tiny bit of documentation saying it employs someone in that field, and the IRS say ‘Okay, you can tax them at these rates instead:’.

        First, a generalized objection to this is that it will be especially prey to the calculation problem. But much more problematic is that those different rates will get entrenched just like existing deductions have become entrenched. Once the shortage or other problem that the lower rate was intended to solve has been corrected, all the people who have entered that field in reliance on the lower rate (along with the businesses that have benefited therefrom), often investing substantial sums to do so, will be able to form an extremely unified and powerful lobby against any increase in the rate. They will even have some very good and legitimate arguments on their side, hinging on the instability that would be created if you normalized their tax rates, not to mention the injustice of penalizing people for the decisions they made in reliance on the existing tax structure. Without a normalization of the rate, though, there will eventually be an overproduction of that field and it may even become a burden on the federal budget as well.Report

        • Avatar David Cheatham says:

          Yeah, the major problem is existing deductibles, which, by the way are utterly insane. I don’t just mean how many there are, I mean the _structure_, which is idiotically _regressive_.

          Let us say I make $30,000 a year and you make $300,000 a year. And we both install $1000 worth of solar panels on our house, and the government wants to reward that behavior for this, so has a 50% deduction for it. Well, they’ve now knocked $1000 off our income, which saves me 15% of $500, or $75, and saves you…33% of $500, or $167? And let’s not even talk about the guy who makes $5,000 a year, who gets no reward at all.

          Can anyone pretend that makes any damn sense at all? Shouldn’t they at least get _equal_ reimbursement for doing what the government wants them to do? (An argument could even be made that the poor should get more, because it’s more costly, opportunity-wise, but we can just leave it at ‘equal’ for now.) If we’re going to pay people to do things, let’s just pay them to do things, it would be a hell of a lot more transparent. You get 10% of the solar panels back, period.

          You’re right that we’ll have to phase the deductions out slowly, but we _really_ need to just utterly change the system.

          So for a while we’d have to switch to a payroll system and yet have people keep filing a tax return to get money back from imaginary ‘deductibles’, as we slowly got rid of them. Each year less and less people would bother. If we do it the other way around, if we try to phase them out first, we will be here forever.

          As for the ‘field’ bonus, it certainly should _only_ be short term. What I would actually like to see is some sort of automatic system set up that triggers when there’s 3% less unemployment for people qualified in that field, vs. general unemployment, that stops being in effect as soon as there are more job seekers.

          Somewhere in that vast US government is a place where every single field of employment has ‘job seekers’ vs ‘open positions’ statistic, and it should be possible to vary tax rates based on that.Report

          • Avatar David Cheatham says:

            Actually, tying _all_ income tax to unemployment levels wouldn’t be that crazy. It’d result in us doing automatically sane things like raising taxes when the economy is good, and cutting them when it’d bad.

            So all you have to do is have some percentage of the tax rate based on general unemployment, and some percentage based on ‘that specific job’ unemployment, on a sort of running average where it didn’t jump around too much but did follow trends. Like instead of a 15% tax bracket, we had a 20%-(general unemployment/3)-(specific unemployment/10).

            But that’s way too clever an idea to actually do.Report

      • Avatar Mike Schilling says:

        This works for people who earn a paycheck. What about the self-employed and all sorts of capital gains and investment income?Report

        • Avatar David Cheatham says:

          I don’t see why that would be hard. In fact, taxing capital gains and investments would be trivial, and, again, we could use the entity providing them to do the taxes. They know how much money goes to which people.

          The only thing that would be _slightly_ hard is taxing the self-employed, and, duh, we just give them a trivially simple form, an big ‘amount of income’ space and nothing else. As that’s still _much easier_ than the existing setup, I don’t see what’s hard about it.

          Incidentally, I’d also be in favor of getting rid of the sole proprietorship model of businesses. If you want a ‘business’ that is just you selling things, or contracting yourself out, whatever.

          But if you want to only pay taxes on profits, and not on all income, you have to set up a separate legal identity for it, period, no more running that through your personal finances and deducting business expenses.

          We can make ‘setting up a business legal identity’ an even simpler process than it is now, but it does need to be separate from you, and it pays taxes, including the ones on your income. (Like all other businesses would pay on their employees’s income.)Report