Cafe Hayek - Latest Comments in Tax cuts all around

Re: Tax cuts all around

vidyohs — Tue, 06 Jan 2009 07:12:40 -0000

"Does anyone have numbers on just how much money is spent on the IRS every year?

Posted by: Hammer | Jan 6, 2009 11:25:52 AM"

Can't speak to the exact dollar amount but I can tell you this:

The only complete audit ever done on the U.S. Government was done by the Grace Commission in the 1980s. The report came out prior to Reagan leaving office.

The Grace report says: That of the money that the IRS calculates it should be owed each year, fully one third is never collected, one third is spent on IRS costs, and the final third is sent to the IMF to pay interest on the National Debt.

So your answer is the IRS gets half of what it collects to pay its own internal operating costs including salaries.

Note that the Grace Report also states that not one penny of income taxes goes to pay toward what people consider as "services", or to build/repair infrastructure, none to the military....zip, nada. Half of what is collected goes to pay interest, nothing else.

So, send that income tax in, good people, and continue to believe that your neighbors in the ghetto will starve if you don't.

Re: Tax cuts all around

Hammer — Tue, 06 Jan 2009 06:25:52 -0000

Cheers: You pretty much nailed my point. Even if the Government is equally as skilled at investment as the private sector, they still suffer from immense inefficiencies that force them to be far superior to acheive the same results.

Does anyone have numbers on just how much money is spent on the IRS every year?

True_Lib: Well done! If the Government were better at producing than private companies, we wouldn't have taxes, we would just go to the local FedMart to pick up some Victory Coffee, and FDRii and a Volkswagon.

Re: Tax cuts all around

vidyohs — Tue, 06 Jan 2009 05:29:35 -0000

Damn, True_Lib, you nailed that one!

Re: Tax cuts all around

True_Liberal — Tue, 06 Jan 2009 04:46:10 -0000

Mike99 -

The essential difference between private spending and gov't spending is that the individual, or the private business, has an incentive to spend in a manner that improves chances for success, however he chooses to define success.

The government has no such incentive, except to improve chances for re-election, and there are no rules in that game. The government has no fear of competition, thus waste is not an issue.

Re: Tax cuts all around

vidyohs — Tue, 06 Jan 2009 01:03:55 -0000

Mike99,

This:

"Private spending is MORE LIKELY to be LESS productive then Government Spending.

...are ALL less productive then the Government building..."

Posted by: Mike99 | Jan 5, 2009 11:22:12 PM

tells me that you don't know much about what does not go on in the vast majority government buildings.

The word productive suggest that someone may actually be working, maybe even on something that would benefit people. Thats a flaw in your thinking that you can cure by hanging out in government buildings for awhile and observing all the lack of productivity.

Re: Tax cuts all around

Sam Grove — Mon, 05 Jan 2009 20:14:16 -0000

I purchase a Wii, a Starbucks coffee, a 50 HP Comaro are ALL less productive then the Government building an Electric infrastructure or repairing bridge in my state before they collapse.

The electric infrastructure, bridges, and roads so you can go to work to earn money to buy a Wii, Starbucks coffee, a Camera, etc.

What's it all for?

Re: Tax cuts all around

Stephen — Mon, 05 Jan 2009 19:02:43 -0000

"Actually, saving is a form of spending. Unless you are hoarding your money under your mattress, your savings are being loaned out to people who spend those funds on everything from capital goods purchases to automobile purchases to vacations, etc."

This is not the case in the present situation. Currently, everyone is keeping a much larger level of cash compared to their level of liabilities than in the past. As a result, each dollar in the money supply is circulating much less frequently. This is the outcome of a rapid drop in aggregate demand. We have the capacity to produce much more goods and services than people want to buy. Theory suggests that prices will drop, resulting in an increase in demand, but in reality this can take a long time and an unexpected deflation can have even more harmful effects.

Re: Tax cuts all around

Mike99 — Mon, 05 Jan 2009 18:22:12 -0000

Private spending is MORE LIKELY to be LESS productive then Government Spending.

I purchase a Wii, a Starbucks coffee, a 50 HP Comaro are ALL less productive then the Government building an Electric infrastructure or repairing bridge in my state before they collapse.

Public infrastructure spending vs. Unemployment and Welfare payments? Public Infrastructure wins again, by keeping people employed and STOPPING THE DOWNWARD SPIREL OF HOME FORECLOSURES.

Re: Tax cuts all around

vidyohs — Mon, 05 Jan 2009 14:09:18 -0000

Cheers,

I echo Jason's comment.

We can talk about the theoretical side of things, and in that case I will just quietly come in, go to the back of the room, and take a seat and listen because on that level there isn't a hell of a lot I can say. You and others are way above my head there.

Now if we talk reality, I can only tell you that I know that enculturation, conventional wisdom, and assumption are the determative factors in 99.999999% of people's lifes.

If we all step back and look at what is being done economically, call it financial if that pleases anyone, and try to draw some logical reasonable sense out of our observations we will all just go crazy. Trying to make government actions fit a reasonable template such as you and I have to work from in our ordinary lifes just doesn't work.

I do not trust govt., I do not respect govt., I do not admire govt., I no longer fear govt., and nothing said by any representative of government will ever be taken by me at face value.

So tell me about a national debt and you're left with the task of convincing me that there is actually a debt that could actually be called in or foreclosed on.

Re: Tax cuts all around

vidyohs — Mon, 05 Jan 2009 13:58:59 -0000

MnM,

Gosh mijo, I just responded in the same tone as I was reproached and denigrated.

I didn't need Robert Kaplan to tell me about leadership demanding a pagan ethos, I discovered that long ago as I studied the left and its tactics.

When at odds with a pagan one can not be timid about using pagan tactics before the pagan can.

I do not bring a knife to a gunfight, my friend

Re: Tax cuts all around

Jason — Mon, 05 Jan 2009 13:52:25 -0000

Thank you, Cheers. Your posts at Jan 5, 2009 1:09:57 PM and 1:17:59 PM are exactly right and explain it better than I could. Everyone in Congress should have to read them and come up with a response before passing any spending bills.

Re: Tax cuts all around

MnM — Mon, 05 Jan 2009 13:07:12 -0000

Damn vid, you could have just said that it was just a turn of phrase. ;o)

Re: Tax cuts all around

vidyohs — Mon, 05 Jan 2009 12:53:32 -0000

Unbathed,

Naw, couldn't care less about doing what you demand, don't give a damn 'bout you or your demands.

My offer for a bet was worded as speculation and as such can be as assumptive as I choose. Stick that in your neglected soap bar and live with it.

I am as free to speculate as I choose and my speculations may prove to be correct or they may prove to be wrong; however, at this point for you to state definitely that my speculations are wrong is just simply wrong wrong wrong.

Oh BTW, wanta bet?

Re: Tax cuts all around

Unbathed — Mon, 05 Jan 2009 12:36:16 -0000

vidyohs asks:

Anyone want to bet that within one year we will see increases in the actual tax rates on all classes of people in this nation?

In a world with prediction markets, such questions are bombast. Make your definitions concrete, create an Inkling market, and dare those who disagree with you to profit from your misperceptions.

Following Prof. Roberts' example:

You are wrong. You are wrong. You are wrong.

QED.

Re: Tax cuts all around

Unbathed — Mon, 05 Jan 2009 12:26:51 -0000

It is not a tax cut. Not a tax cut. Not a tax cut.

Proof by repeated assertion.

How would Milton Friedman grade that?

Re: Tax cuts all around

MnM — Mon, 05 Jan 2009 11:24:22 -0000

"If I spend more money and collect less, the government is promising to collect more taxes in the future. "

Phil,

You forgot the last part of his argument. If I'm reading him correctly, what he's saying is the government is necessarily spending into debt and will necessarily have to raise taxes later to cover that debt.

I'll let Dr. Roberts defend his assertion.

Re: Tax cuts all around

Phil — Mon, 05 Jan 2009 09:28:20 -0000

If spending more and collecting less is a tax increase, then is spending less and collecting more (say by increasing rates or increasing the base on which the tax is charged) a tax cut? No wonder the average person doesn't understand what economists are thinking or saying. If my local school district raises the property tax by 10% and lays off 20 teachers, while freezing all other expenses, I have a hard time calling this a tax cut. More like a tax increase and a services cut.

Re: Tax cuts all around

Stopthepresses — Mon, 05 Jan 2009 08:45:11 -0000

Chicago has a new tourist slogan that proves we need a tax cut “IF YOU THINK DALLAS TEXAS YOU SHOULD SEE CHICAGO” Read why Chicago picked this slogan at, http://stopthepresses2.blog...

Re: Tax cuts all around

michaelsmith — Mon, 05 Jan 2009 08:33:09 -0000

Bret wrote:

“To save is to spend, iff there are others who are interested in taking those savings and doing something with them (i.e., investing in production). Since short term interest rates are hovering near zero and long term rates are surprisingly low (to me), currently, few people are willing to invest. As a result, currently, to save is to not spend and we have the rare situation where the Paradox of Thrift is a factor.”

Borrowing has gone down, but it has not stopped. Housing sales have declined, but they have not gone to zero; people are still taking out mortgages. Automobile sales have declined, but they have not gone to zero, either; people are still borrowing money to buy cars. Nor have credit card purchases stopped; they may have decreased, but again not to zero.

Do not forget that due to our fractional reserve banking system, a dollar of savings can become much more than a dollar's worth of spending.

And let us not confuse ourselves about the root cause of our economic problems. The problem we have right now did not occur because people saved too much -- it occurred, because certain people were enticed to borrow too much and, in many cases, they cannot pay back what they borrowed. If, now that we have a recession, people are starting to save more, then that is an effect of the recession, not a cause of it.

Re: Tax cuts all around

Cheers — Mon, 05 Jan 2009 08:17:59 -0000

Heh, sorry Bret, looks like we're writing at the same time... I'll quickly relate my post then check out the link.

The point I'm making in the last post is that if there are idle resources, it's because of one of two reasons. Either there is no value to them being put into use or there is value that's undiscovered. If the government has a better ability to put those resources into use, why do we bother with private enterprise at all? If the economy is working at it's highest potential, and still cannot match up with the potential of government to invest, there is no purpose to an open economy. The government should decide what is built. If they are idle because there is no profit to them being put to use, then they should be idle and waiting for an investment that has a positive value. Using them when they don't have value yet simply increases the cost of labor (or whatever resource you're using) and stops growth from occurring because an investment that would be profitable tomorrow at a labor cost of $10 per hour is no longer profitable, and is not made.

Re: Tax cuts all around

Cheers — Mon, 05 Jan 2009 08:09:57 -0000

Should have left the last paragraph in the post...

The point I'm making is that any notion of a stimulus would be an illusion. Money is being taken from individuals pockets and invested by the government. If you believe that government is somehow able to invest at a marginal return higher than every other private enterprise and individual in a country, then in this case, I don't believe that you have any recourse but to argue for the elimination of private investment. If not, I don't see any recourse but to eliminate any redistribution for the purpose of stimulus. Moving money through the economy at a loss doesn't spur investment, trade or growth. It just makes it the losses more painful when they do occur.

Re: Tax cuts all around

Bret — Mon, 05 Jan 2009 08:01:16 -0000

Cheers wrote: "My assumption is that the sum of a country's fiat currency is essentially a valuation of the country's current and potential future production."

Sure. The point of a stimulus package is to increase the current and potential future production. When resources are idle as they are now, this is plausible. In which case each dollar in your pocket is not necessarily worth fractionally less.

The Skeptical Optimist has a nice post on this.

Re: Tax cuts all around

Cheers — Mon, 05 Jan 2009 07:43:51 -0000

Oh vid, you always bring a smile to my face.

I appreciate the add on, and do suppose that it could be seen as a perpetuity as opposed to a loan, which makes for some interesting valuation calculations...

I think the thing I was more concerned about is the money in your pocket. I realize this may be a bit of a stretch, but here goes:

My assumption is that the sum of a country's fiat currency is essentially a valuation of the country's current and potential future production. Any form of government spending then must be "paid for" in some way. This can be through direct expansion of the money supply (printing cash) or the assumption of liability (putting it on credit).

If the original assumption holds true, and we can assume that investors are intelligent and understand that credit must be paid for (whether through interest and principal or or perpetuity arrangement).

We have two situations. In the first, money is printed, and given assumption A, then you have received money from the government, and each dollar in your pocket is worth fractionally less based on the amount you received. In the second, a loan is taken, and the country's obligations increase accordingly, and the money you hold is worth fractionally less.

If true, this means that any payment or obligation comes out of your pocket today, right now. If this is a 1:1 ratio, then the net effect of Obama's tax cut would be a $500 tax rebate for each person, $1500 of money redirection, and an average contraction of the value of your wages/money of $2000. (Yes, the $2000 is very ambiguous, and amorphous... there are a variety of ways it would be distributed or lost, and could be ultimately accounted against currency holdings or wages, but that's another post).

Re: Tax cuts all around

Bret — Mon, 05 Jan 2009 07:06:51 -0000

piperTom wrote: "... the "stimulus" subtracts value from the economy as a whole right now."

Not if its primary effect is to cause resources that would have otherwise been idle to be utilized.

Re: Tax cuts all around

dg lesvic — Mon, 05 Jan 2009 06:59:41 -0000

It was unfair of me to have implied that the participants in this discussion were trying to save the socialist ship of state rather than what was left of the free market. But I still say that the best tax policy is none at all.