Flat Tax & VAT, Jack (Hudson)

[c1ue]

Re: Flat Tax & VAT, Jack (Hudson)

Facts or opinions. All I've heard from you so far is the latter along with some empty rhetoric and name calling. It is hardly persuasive.

Amusing - when you have thus far presented zero facts but a mountain of epithets and stereotypes (and whining).

People seem to forget that total tax revenue went up after the Bush tax cuts

It should be noted that tax revenues are normally expected to increase during a recovery from a recession. The Y2K boom in 2000, followed by the real estate bubble in 2005 clearly track with the tax revenues.

The key point, however, is that when times are good there is supposed to be 'saving'.

More importantly, Bush increased spending dramatically even above and beyond the supposed revenue increases due to tax cuts (as opposed to normal economic recovery).

[ThePythonicCow]

Re: Flat Tax & VAT, Jack (Hudson)

Has anybody ever changed someone's opinion on an internet message board?

I've seen it happen.

For example, just last week, I switched my view on the "missile" that was seen "'launched" in the sunset light off the California coast. That switch happened right here, on iTulip, in public view, in good part as the result of some enjoyable discussion and back and forth, leading me to find a preponderance of evidence favoring the view I initially had thought wrong.

But, far more importantly, the Web has provided evidence and discussion that has led many of us here to dramatically change and evolve our views over time. Big changes to a person's view don't usually happen in a flash, obvious even in the passing of single discussion thread. Rather such changes take place over longer periods of time.

For a long running analysis of the profound affect that the Web has had on our human understanding of ourselves and our civilization, read The Daily Bell for a while. They rank the Web up with the Printing Press for its degree of impact on civilization.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

Yes, they could. This scheme is sometimes called chartalism or modern money theory.

Taxes are then used in such a system to create a demand for such currency, and to modulate the quantity in circulation (avoid inflation.)

Death and taxes -- there's no escaping them.

Direct taxes could be avoided if the government is wise and spends money productively through development and natural monopolies. The increases in efficiency and natural turnover in the population would the offset inflationary tendencies. Of course responsible governments are in short supply.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

There are millions who need a better future; arguing about what is wrong provides no solution. Look up and see the future. It can, indeed, must - be better than today.

I agree with your sentiment and sympathize with your frustration. But if it wasn't a venture capitalist telling you no, it would be some politician who would likely be even less receptive if you lack connections. At least bankers can be lured by profit. Judging by the number NSF proposals that end up in the rubbish bin the government is no better. Sometimes the military is willing to fund long-shot ideas. They gave the polywell guys a round, but then again the had Bussard pulling for them.

If you have ideas then most people are willing to listen, but keep in mind if they are radical you will need to provide an usual body of evidence in order to persuade anyone to investigate further. It is the nature of the beast.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

A concentration of untaxed wealth at the top leads to stagnation as it become easier to get free money than earn it by setting up companies and creating jobs. See EJs latest investment idea for confirmation.

I read EJ latest investment idea. I also read about a possible bubble forming in EM/commodities. There was another discussing the likelihood of China's bubble popping in the near future. These last two things seem to contradict one another and so I'm not sure what he is thinking at this point other than that stagflation is a likely outcome.

As the the rest of it. Why are the poor that way and how will taxes change that? The current argument I keep hearing is that they are poor because they are being charged excessive rents and that the solution to this is force wealth redistribution thorough tax increases and social services. I know this is simplified, but it is a core argument that keeps repeating. I will expand a bit on one of my objections to this line of reasoning, I have others, later on in the post.

Hudson is predicting a return to Feudalism as labour/land renters (ie workers and home "owners") are paying all the taxes. A serial entrepreneur like EJ deciding that becoming a rentier is the best way of staying rich is solid evidence that Hudson is right. Buying land and houses does not create wealth only maintain and concentrate it.
If the average worker can't afford stuff because his outgoings on non-discretionaries (income-tax, sales tax, housing, food, health cover, transport, heating) use up all his income then capitalism breaks down because there is no market for your goods, hence no point in being an entrepreneur.
This is where we are now. Lowering the tax burden on workers would stimulate economies as they may then be able to afford something they don't already have which would create a demand.Giving tax breaks to the super rich doesnt stimulate anything as they don't need TWO Lear Jets to get around. Instead they will just buy more land and property.

What kind of feudal society would it have been in the past if there was no need for peasants. That is what the future holds. For instance when you automate picking/pallet building in a warehouse and fire the fork lift drivers those jobs disappear forever. 10 years from now it will be the truck drivers, and so on... People talk about structural change. We are starting a big one and many of the people left jobless can no longer be retrained for something productive.

This issue is that the cost to automate many things is below that of an employee, and it's getting cheaper every decade. This trend, reducing the demand for unskilled/semi-skilled labor, is compounded in America because labor is relatively expensive. But even if it wasn't the trend will still continue because value of labor is falling less rapidly than the cost to automate.

You cannot give all these people real economic value by messing with the tax structure. You might as well break windows and pay them to clean up the mess. The poor are poor because there is little for a large portion of America to to that is competitive on a cost basis.

This is the future. It is a vast army of unemployed no longer suitable to produce anything of economic value in an era of dwindling resources, and we need a different model entirely if we want to avoid a great deal of human suffering.

The rich verses poor and evil bankers rubbish is just a political smokescreen to motivate the 80% of voters that pay no significant taxes whatsoever to vote to expand the size of the central bureaucracy and hasten their own bankruptcy.

It is the wrong solution to the wrong problem.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

That is the problem that financial claims tend to run ahead of and outstrip the non-exponential growth of GDP. Care to explain what's ideological about that? Seems pretty rational to me.

I never claimed that there was anything ideological about it. The previous comment was about the slice of the pie. I'm claiming that it is about to get smaller as real growth stalls because of the cost, due to scarcity, of energy and industrial feed stocks. When that happens everyone will get a smaller slice whether FIRE is still around or not. Furthermore I believe this isn't something that will happen in the remote future, it is something that your children or grandchildren will live through.

But you miss the point of my post (I'm hoping intentionally): I'm simply saying, nice deflection there buddy.... So I still want to know whether you think that the Wall Street ploy of creating a massive housing bubble with Fed sponsorship, riding it up to the top of the roller coaster and then creating a way to short it all the way down (weeeeee!) was a productive form of private enterprise or a vile example of free enterprise run amok. When you have depressed cities crawling with mortgage brokers eager to produce product for their banking masters by fraudulently signing up people without (and I quote) "a pot to piss in" all in order to boost bonuses in investment banks... AND TO TOP IT ALL OFF, FOR THOSE NOT QUICK ENOUGH TO GET SHORT THROUGH CDS, THEY GET BAILED OUT BY THE GOVERNMENT WHOSE DEBT IS NOW BUSTED BY THE BURDEN AND SO THE VICTIMISED TAX PAYER NOW HAS TO FUND THE APPARENTLY INVIOLATE BONUSES OF BANKERS BY SACRIFICING THEIR SOCIAL SECURITY INTO WHICH THEY HAVE PAID THEIR ENTIRE WORKING LIFE.

THAT'S CLASS WAR.

Now what were you saying?

Which taxpayers are those. The 50% that paid no taxes at all. They are probably the quickest to claim that others don't pay their fair share. And let's not ignore the billions of dollars spewing out of the federal reserve.

As I said before there was an entire ecosystem of fraud. The buyer, the loan officer ,the appraiser, the RE agent, the bankers, local governments, federal regulatory bodies all had a hand in it. I'm not exonerating anyone, least of all bankers, but I am pointing out that there are thousands of people who made out like bandits during this time who are not rich. They are also not in jail.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

Just wanted to say I'm really enjoying this discussion. It's about time we had a really good punch up here. The times demand it.

I second that! Cheers!

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

Amusing - when you have thus far presented zero facts but a mountain of epithets and stereotypes (and whining).

Pot, Kettle

At least I've linked a few charts underscoring my point while you have done nothing whatsoever.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

I've seen it happen.

I've done it as well. An example of it on this forum was the discussion about 9/11. In fact it was one of C1ue's arguments that persuaded me to reverse my position.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

All bankrupt banks could be temporarily nationalized, shareholders wiped. All existing mortgage debt annulled giving full title of ownership to the old mortgage holders. Bondholders would then be given shares in the bank equal to their old bonds and the bank would open for business again using its existing deposits.

I would go even farther and not nationalize them at all. Let them go bankrupt the old fashion way. FDIC insurance pays their depositors and the rest of the asset sold off to responsible banks at whatever the market will bear. Unfortunately since our regulators were asleep during the 90's when bank consolidation was so fashionable this has become impossible without taking down the entire system.

Freddie and Fanny would be closed down and all existing mortgages annulled.

A debt holiday? I was tinkering with the idea of what would happen if debt suddenly became nontransferable. I'm sure banks et al would be careful about lending if they were forced to hold the loan. There would be many undesirable problems as well but at least it would kill the collection agency business.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

Yea dude you're projecting.

I can only read what he writes. When something starts off promising and then degenerates into a discussion about evil white bankers and class warfare I'm not going to be left with a favorable impression. Maybe other don't mind separating the wheat from the chaff.

You think trickle down economics works? Really? So why are corporate profits through the roof right now but unemployment is also still high then? Shouldn't those rich people be making more businesses and buying more stuff, trickling down all those profits throughout the economy? You're also right about a central bureaucracy being bad about allocating capital, but I never said they were good either, just that we (and "we" is as a whole country BTW, not an individual) would be better off.

You claimed that it is a myth that taxes, federal I was assuming, divert money from the productive economy. I raised the inefficiency of centralized bureaucracy as a counterexample. This is where the money from federal income tax ends up. It was never my intention to imply anything about trickle down economics. Only that you tax dollars have a long journey from the rich to anyone outside of the government who might benefit.

Like I said, I'm pessimistic.

I can relate to that. Myself I am confident that no matter how much money the government has they will spend it on the wrong things and then borrow more.

[llanlad2]

Re: Flat Tax & VAT, Jack (Hudson)

This issue is that the cost to automate many things is below that of an employee, and it's getting cheaper every decade.
.

That's essentially a Luddite argument which may well be right in the long run. But thus far it hasn't been true. in the last 200 years cheaper goods has led to increased demand which requires extra manpower.

This trend, reducing the demand for unskilled/semi-skilled labor, is compounded in America because labor is relatively expensive.
.

You need to ask yourself why the cost of labour is so much greater in the West than in China? If all the FIRE overheads are reduced US labour wouldn't have to be comparatively expensive. The issue for labour in the US is that 4/5ths of earnings goes on paying debt, insurance and taxes. Shelter costs the average American $10000 a year in a country with a population density a third of China's. Reduce those overheads and the US can compete with China on labour costs as without doubt China is not as efficient as the US. Wouldn't you agree?

The poor are poor because there is little for a large portion of America to do that is competitive on a cost basis.
.

See previous answer, without off-shoring there would be a lot more jobs. China has managed to employ millions of people selling stuff to the US market.

Germany is an example of how important tax structure is. In Germany there is no distinction on the tax rate between capital gains and income. It avoided a property bubble and maintained low housing and commercial rents. This encourages high inward investment and leads to much lower unemployment rates.

The rich verses poor and evil bankers rubbish is just a political smokescreen to motivate the 80% of voters that pay no significant taxes whatsoever to vote to expand the size of the central bureaucracy and hasten their own bankruptcy.

Granted an increasing bloated central bureaucracy will lead to bankruptcy but the bankers have got to sell their debt somewhere if they won't write it down haven't they ?

[Starving Steve]

Re: Flat Tax & VAT, Jack (Hudson)

Bureaucracies in government are astonishingly good at wasting money precisely because the rent on money is ZERO. Savers get one-cent of interest per month on their savings while government gets to finance its spending at zero-cost.

Government bureaucracies piss-away money precisely because money has no rent. But in the end, the jobs governments create tend to be non-productive. Hoover Dams are not produced, but mountains of paper-work and needless studies, needless meetings, needless branches of the bureaucracy flourish--- and branch-out further.

When money has no-rent, government flourishes. Not only that, debtors flourish, and dead-beats have a holiday.

Then comes the inevitable end-result of zero-interest rates: accelerating inflation and de-valuation of the currency. That hurts everyone, especially the poor who have to pay the stealth-tax of inflation caused by loose monetary-policy.

These Marxists are way off-base on this argument. And who benefits from zero-interest rates? McMansion owners and the landed-gentry benefit, of course. Corporate-farmers benefit, too. Government bureaucrats benefit too, and they are the gentry. They are the richest of the rich.

[oddlots]

Re: Flat Tax & VAT, Jack (Hudson)

I never claimed that there was anything ideological about it. The previous comment was about the slice of the pie. I'm claiming that it is about to get smaller as real growth stalls because of the cost, due to scarcity, of energy and industrial feed stocks. When that happens everyone will get a smaller slice whether FIRE is still around or not. Furthermore I believe this isn't something that will happen in the remote future, it is something that your children or grandchildren will live through.

Well you certainly claim that there is something ideological about Hudson if not about "it," so I don't understand your point. To reiterate and perhaps amplify I find Hudson rewarding because his analysis explains my experience of the last 30 years better than any other single commentator. He is particularly devastating when it comes to the housing bubble - e.g., The New Road To Serfdom. That article and EJ's amplification of its themes is perhaps the single most rewarding "find" I've ever had on the internet. If you find his arguments unconvincing, particularly with regard to this analysis, I'm all ears.

The previous comment was about the slice of the pie. I'm claiming that it is about to get smaller as real growth stalls because of the cost, due to scarcity, of energy and industrial feed stocks.

No the previous comment was about pie-shrinking activities versus pie-growing activities. Sort of like stocks versus flows. My point was that one of Hudson's main contributions - perhaps in my own cartoonish description - is the revival of the notion of economic rent from classical, liberal economics. I have found this an incredibly illuminating concept in the current circumstances: that is at peak-credit. The take-away for me is that not all profitable private enterprise is actually growing the pie, the foundational concept underlying the sense of the west's legitimacy, at least in economic terms. Some activities, particularly in finance, can be wildly profitable, can actually "fund" (at least temporarily) boom decades and be ultimately massively net-destructive. I swear the dazed look one gets when one talks about economics at let's say a dinner table can be put down to this faith that the market was validating this behaviour so how could it end in this disaster?

My intention was not to doubt your assertion that we are facing massive issues regarding scarcity in all sorts of things (size of pie) but to to both question why you would suddenly bring this up to seemingly deflect the question of whether or not some private enterprise can be very, very destructive, the point of the pie-shrinking metaphor. So let me just ask: do you not look out on western economies and see the results of a lot of profitable activities that have been ultimately disastrous?

I see pie-shrinkers.

Which taxpayers are those. The 50% that paid no taxes at all. They are probably the quickest to claim that others don't pay their fair share. And let's not ignore the billions of dollars spewing out of the federal reserve.

What I see is Buffet saying its ridiculous that he pays less tax than his secretary. Again, as has been noted above, you're fixated on income tax while the real show is happening with FICA and capital gains and phony depreciation on real estate assets.

The joke is that in my experience those that pay no taxes at all are too full of shame at the poverty that accompanies this status to throw stones at others.

[Chris Coles]

Re: Flat Tax & VAT, Jack (Hudson)

What kind of feudal society would it have been in the past if there was no need for peasants. That is what the future holds. For instance when you automate picking/pallet building in a warehouse and fire the fork lift drivers those jobs disappear forever. 10 years from now it will be the truck drivers, and so on... People talk about structural change. We are starting a big one and many of the people left jobless can no longer be retrained for something productive.

This issue is that the cost to automate many things is below that of an employee, and it's getting cheaper every decade. This trend, reducing the demand for unskilled/semi-skilled labor, is compounded in America because labor is relatively expensive. But even if it wasn't the trend will still continue because value of labor is falling less rapidly than the cost to automate.

You cannot give all these people real economic value by messing with the tax structure. You might as well break windows and pay them to clean up the mess. The poor are poor because there is little for a large portion of America to to that is competitive on a cost basis.

This is the future. It is a vast army of unemployed no longer suitable to produce anything of economic value in an era of dwindling resources, and we need a different model entirely if we want to avoid a great deal of human suffering.

The rich verses poor and evil bankers rubbish is just a political smokescreen to motivate the 80% of voters that pay no significant taxes whatsoever to vote to expand the size of the central bureaucracy and hasten their own bankruptcy.

It is the wrong solution to the wrong problem.

In this case, in part, I have to agree. There is indeed an ongoing push to automate when dealing with large production. But there is a solution; we have to return to small. No, I am not suggesting we break up existing production, I am instead taking the debate back to the origins of our industrial success.

If you always think in terms of reducing cost, and thus price, you are constantly reducing the ability of competing product to compete. That statement does not sound logical; but the logic is to step away from a constant reduction in price, slicing to the nth degree until you reach the lowest common denominator and look at the overall problem from the point of view that we have a large population and no aiming point.

If all furniture from now onwards is flat pack; and everyone always buys from the one supplier at the lowest cost, then where is the future market for high quality hand made furniture? Yet, go to a high status auction house and watch the prices paid for ancient hand made furniture.

And that simple observation brings us to the nub of the problem. If you wanted to design and make hand made furniture, you have to have a prosperous customer - before you even go out to buy the saws, planes, chisels and workbench; let alone rent the workshop and purchase your first stock of raw timber.

The underlying problem is not the automation, but the lack of underlying prosperity that might drive the creation of new products. What we need is a way of replacing that underlying prosperity so that the many who might add to the products on offer, addressing a much higher level marketplace than "Cheap"....... have a clear route to take that enables their first start and permits them time to reach stability and long term profit.

But if that decision is predicated by the question "Is it more profitable"? and rejected as being less profitable; then the core roadblock is that created by the funding being credit based, rather than equity based. You cannot achieve that with credit, you must use equity capital. And that is why, when I set out to design a new set of rules for such equity investment, I introduced two things generally not accepted today. Take the decision out of the hands of the funding source, and leave the recipient of the invested equity capital in complete control of their new business.

Ergo; you have an idea for a product or service that might be able to address any perceived new market; you just get on with addressing it; that you do not have to ask anyone for permission to proceed, or for the investment. That the investment is at "Arms Length" and is completely independent.

History shows us that if we simply continue along the road we are on, we will fail. We have to try something new.