Devising the best taxation

A progressive income tax with no exemptions or deductions, because it would be the most fair. People with a large income would pay more taxes, people with small incomes would pay a smaller proportion of their income as taxes, and people in the smallest bracket would pay no taxes.By eliminating exemptions and deductions, taxes would be extremely simple. The reason that our tax code is so complicated is because people have to try to figure out which exemptions and deductions apply to them, and how much the various exemptions would be.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Indeed. I often see "socialism" used to refer to the Scandinavian countries, although the proper term, I believe, is "Social Democracy".Since I consider myself to be a socialist in the "true" (that is, your) definition, I'm also not too happy about it.Edited by Chiroptera, : Oops! Edited the link, but forgot to remove a reference to the first link.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

As is often the case in any natural language, a word can have a variety of different meanings, and confusion can result when some of those meanings are rather close and related. I was trying to keep the thread from bogging down due to an argument on semantics, or from becoming confused through equivocation.Socialism can have a broad sense of meanings. One is designation for a very broad range of types of social organization, from your social democratic Scandinavia to anarchism. In that sense, you would be a socialist.In a more narrow sense, socialism refers to a society where the means of production is managed and controlled by the workers themselves. Instead of land, factories, and distribution networks and the like being owned by individuals or investors, they are controlled by, say, cooperatives and communes or worker elected councils. With this meaning, Scandinavia is definitely not socialist.Socialism can also refer to a social theory that the economy be managed not in order for individuals to make personal profit, but in order to provide for the general welfare of everyone in society -- it is in this type of state-owned enterprises and heavily regulated capitalist corporations have a role.Me, I will often use each of these different meanings depending on context while trying to be careful to avoid equivocation.By the way, despite my know-it-all attitude, I really don't know that much about political economy. I find most political theory too utopian to be very useful -- like Marx, I have a distaste for utopian thinking.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Actually, I think the main responsibility of the government is to make sure that resources are distributed in a fair and equitable manner.But then, I am a socialist.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Heh. That's why I tend to be an extreme democrat -- democracy seems to me to be the most reliable (or perhaps the least unreliable) method to ensure that the systems in place adapt to new viewpoints and new situations in as fair and equitable way as possible.- The main difference is in who is considered to have the greatest vested interest in the land or factory. In more traditional socialism, it is a tenet that the workers themselves should have control over the goods and services that they produce, and so the concern should be under the direct control of the workers in that concern.In the case of a contemporary social democratic economy, consideration is given to the fact the very large factories or even entire industries have a great effect on the nation as a whole, and so the entire nation should have a say in how it is run, either indirectly through regulation by the democratically elected government, or directly through directors appointed by the democratically elected government. In either case, the interests of the workers are watched over by strong unions.If I understand the ideology behind social democracy (and there isn't any guarantee that I do -- or it may be different in different instances), the idea isn't so much to recognize efficiencies of the market as it is to recognize the interests of the population as a whole in the managing of the economy.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Well, the same thing could be said for a progressive tax structure. What makes our current tax code so complicated is all the deductions and exemptions that need to be figured out. Remove those, and a person's income tax could be figured out in 20 seconds with grade school math.I think I've said this before (probably the last time you or someone else brought this up), in no time at all a flat tax will end up just as complicated as our current system because all of the deductions are going to end up creeping back in. In fact, one reason I'm opposed to a flat tax is how it's being marketed as this "simple" solution.On the other hand, if combined with a negative income tax, a flat tax could simplify both income taxes and welfare payments in one fell blow. "Take your income and subtract $50,000. Multiply this by 30%. If the result is positive, this is what you owe. If it is negative, this is what you get."

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Yeah, I realized that when I was writing. I didn't want to clutter my post with things like, "I know you said this, and jar mentioned that, and the kook said the other thing, but I am going to say...."By the way, I wouldn't necessarily be against a flat tax. With a high enough exemption and a high enough tax rate, it would be marginally progressive anyway, especially if the money were used to fund services available to all and income adjustments for the poor.- I'm not necessarily advocating a negative income tax, either -- just throwing stuff out there.Anyway, it doesn't quite work out that way. The idea is that the marginal rate is always 30% (using the numbers I just made up). So for every dollar earned, 30 cents of benefits is lost (or 30 cents is paid as taxes), but 70 cents always goes into your pocket -- so you always have that incentive to make that next dollar.Using the numbers I made up randomly:Someone with no income at all would get 0.3*50000= $15000.
Someone earning $10000 would get 0.3*(50000-10000)= $12000 from the government, for a total income of $22000.
Someone earning $40000 would receive 0.3*(50000-40000)= $3000 for a total income of $43000.
Someone making exactly $50000 would have an income of exactly $50000.
Someone making 75000 would pay a tax of 0.3*(75000-50000)= $7500, for a net income of $67500.So the more you earn productively, the more you take home -- so there is always the incentive to increase one's income. And, so say the advocates, since there is no cut-off where benefits are suddenly lost, there is no incentive to work up to a sudden point and then stop.Anyway, I just mention it because a negative income tax seems to go naturally with a flat tax.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Well, banks do increase the money supply by loaning it out.If you borrow $100,000 from the bank to buy a house, you don't just get a briefcase full of cash which you take to the realtor. They cut you a check which you then sign over to the realtor. The realtor just deposits it in her account, against which she writes checks.So, by loaning that amount of money, the bank has effective added $100000 to the economy. Basically, all bank and credit card loans are like this -- banks are only required to have a certain percentage of their outstanding loans available as cash.I can't remember the exact figure, but I think I read that a huge majority of the money "in circulation" is basically this non-existent (in the sense that it's not represented as physical cash) money. Most of the money in circulation exists only as numbers on our bank statements, and has been created by the banks. (I'm guessing that is how those old "bank notes" got into circulation -- when people taking loans really did get a sack of "bank notes" from the bank -- to be redeemed by the bank later.)Of course, unless Buz would try to outlaw bank loans, his scheme isn't going to do much in this regard.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Sorry. The second post was written to avoid negative numbers.Actually, I'm surprise that when I said that if the answer is negative this is what you get, no pedant pointed out that "getting" a negative amount would mean that you're actually paying!

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

That would do the trick!- Or consumer debt. For the first time in my life, I carried over part of my credit card bill to this month -- that means a vendor somewhere has $300 that didn't exist a month ago. (That will disappear, though, when I pay it all off this month.)

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

That's what I get paid for!Added by edit:In retrospect, I may not have been very clear, either.Edited by Chiroptera, : No reason given.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

They must keep a certain percentage of their outstanding loans on hand (or deposited with the Federal Reserve Bank in their district). That percentage is determined by the Federal Reserve. If, for example, the Federal Reserve requires that you have on hand (or deposited) the cash to cover 25% of outstanding loans, and if you have $100,000 deposited with the Federal Reserve, then you can lend up to $400,000.This is what makes bank panics so dangerous, and why so many banks failed during the depression when there were no requirements at all. If the bank has loaned out $400,000, which it acquires though, say, savings deposits, and it has only $100,000 on hand, and suddenly all the savings depositors want their money back all at once, the bank is short $300,000 and goes bankrupt. This is what FDIC (in the U.S.) is for, to make sure all the depositors get their money back if the bank goes bankrupt.Edited by Chiroptera, : typos

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

I guess I don't understand your post.People deposit a total of $100,000 in a bank. The bank then loans out $400,000. To me, that says the bank has created $300,000 -- out of "thin air" as you put it.Am I not understanding what you are saying?

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Pretty much the first one. Except lets modify it.Our economy has 10 people in it. Bill runs the mint, so he prints off $1000 and gives everyone $100. Sally runs the bank, and everyone deposits their money with her. So the bank is holding $1000, but everyone gets to write checks on the money in their accounts, so there is $1000 in circulation.Now everyone (including Sally herself) decides to borrow $400. Sally just adds the $400 to each person's account. If everyone just writes checks, then each person has an account containing $400 and their original $100, so each person has $500 to spend. In other words, there is actually $5000 in circulation (I made an error in my earlier example). So, Sally created, out of thin air if you will, $4000.Now suppose that when Tom, Mary, Edith, and Larry take out their loans, they decide to each take $250 in cash and $150 credited to their accounts. So each person still has $500 - the $400 in loan and their original $100 -- except it is all on deposit in their accounts, except for Tom, Mary, Edith, and Larry, who have $250 in their accounts $250 in cash.But Sally now has no cash on hand. So when Greta decides to withdraw her money, Sally tries to stall -- to no avail, Greta demands cash now! So now Sally goes bankrupt. She can try to stall until someone makes their loan payments, but if the payments aren't enough to cover Greta's $100, or if too many people default, then that's it for Sally. If no one buys the loans, then suddenly $4000 disappears, and only Tom, Mary, Edith, and Larry have any money left.Real life is a bit more complicated than this, but this is essentially how it works.Edited by Chiroptera, : No reason given.

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If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe