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1 andres  Sun, Oct 9, 2011 8:39:25pm

Excellent analysis. It goes to show that every problem has a simple, clean and wrong solution.

2 RoadWarrior  Sun, Oct 9, 2011 9:51:26pm

A few comments.

1st, low marginal rates and simple tax systems have their advantages: less evasion, low compliance cost, small changing of behavior

2nd, everyone who votes should pay a tax

3rd, the payroll "tax" is not a "tax". It is a contribution to one's own retirement. If your earnings are small, your expected rate of return, actuarially, is high. If your earnings are high, your expected rate of return, actuarially, is low. Therefore, the social security / medicare system is also a system for redistribution.

4th, yes, the employers contribution toward social security / medicare would, in equilibrium, be paid in full to employees, were the employer's share cancelled--it would not be up to the employer. Competition would see to that. Only where employees are already paid above-market wages, due to unionization, would this not occur due to competition. Rather, in that situation, it would instead occur due to union bargaining power. This is not an example of a tax where we do not know precisely how its impact gets divided up, which can occur, for example, with an oil tax, where it does, indeed get divided between consumers and producers (more borne by producers when OPEC is restraining supply, as they currently are, and more borne by consumers when OPEC is not restraining supply, as in 2002).

5th, it sets a dangerous precedent to have payroll taxes subsumed by income and sales taxation.

6th, it sets a dangerous precedent to open the door to a national sales tax.

7th, Herman Cain cannot guarantee that we will not end up with the worst of all forms of taxation, including a 17% VAT and payroll tax and income tax after he leaves office.

8th, if he could guarantee all of the above by making 9/9/9 (or at least equality of all those forms of tax) a constitutional amendment, then his plan might be OK.

9th, I disagree that the appropriate statistic is the effective tax borne by the billionaire. I believe the appropriate statistic is how much tax he is paying as a percentage of his consumption, which is more than 100%. Whatever he is not consuming is still a resource available to society. If he burns the savings, it is like a tax on the whole thing--i.e. it goes back to society in full. If he invests it, it produces growth--and productivity--for the economy...and remains for the benefit of society...until he spends it...and pays the sales tax...or wills it and pays an estate tax.

10th, the whole bit of "ha, ha, I found an inconsistency, so you're either a liar or a d-a" is getting a little tired. Keep the political discussion respectful and don't be an assassin of character. Whether you agree with Herman Cain or not, he is in this at considerable personal expense, because he does care and I respect him for that. He is, if anything, much more than professional politicians, someone who does speak from the heart.

3 mikiesmoky2  Sun, Oct 9, 2011 9:57:47pm

re: #1 andres

Excellent analysis. It goes to show that every problem has a simple, clean and wrong solution.

LOL.
Is the glass 1/2 empty?

I believe it is 1/2 full.................., i.e., every problem has a "best" solution.
Either our "leaders" are not as analytical as they should be OR they have some "interesting" agendas.

Thanks for your response.

This is critical stuff.
I would like to see more get involved in a dialog.

Why haven't the "talking heads", who do these interviews, counter his rhetoric with pragmatic and rational questions and responses???

best,

mz

4 mikiesmoky2  Sun, Oct 9, 2011 10:30:53pm

re: #2 RoadWarrior

Whereas I appreciate the time you have taken to offer your comments, if you were being questioned, in a court of law as a witness, regarding this piece, I would object that you are being "non-responsive".

I would appreciate any offering you have to refute anything I have stated, i.e., respond to specifics.

Having requested that, I will respond to a few of your comments:

REGARDING: 1st, low marginal rates and simple tax systems have their advantages: less evasion, low compliance cost, small changing of behavior
RESPONSE: Simple is not always good nor fair. A flat tax as offered by Mr. Cain is extremely regressive. Did you read and/or understand the examples? If you disagree with the examples, please offer your rationale for such disagreements.

REGARDING: 2nd, everyone who votes should pay a tax
RESPONSE: This may be a shocking concept for you, but ALL COSTS OF THE PRODUCTION OF GOODS AND SERVICES are paid at the "point of purchase".

REGARDING: 3rd, the payroll "tax" is not a "tax".
RESPONSE: The SS and Medicare taxes are taxes upon income, with the maximum wages taxed for SS being $107,600 and with no limitation for Medicare taxes.

REGARDING: It is a contribution to one's own retirement.
RESPONSE: Actually, that is not valid, i.e., not true. The SS and Medicare "income taxes" are isolated "income taxes" to pay for obligations of the federal government.

REGARDING: 4th, yes, the employers contribution toward social security / medicare would, in equilibrium, be paid in full to employees, were the employer's share cancelled--it would not be up to the employer. Competition would see to that.
RESPONSE: Are you interested in a bridge? I can and will act as the agent for your purchase.

REGARDING: 9th, I disagree that the appropriate statistic is the effective tax borne by the billionaire. I believe the appropriate statistic is how much tax he is paying as a percentage of his consumption, which is more than 100%.
RESPONSE: Therefore you must believe that the less he spends would benefit the economy, since you, apparently, believe he should pay taxes on "consumption" only.

REGARDING: If he invests it, it produces growth--and productivity--for the economy...and remains for the benefit of society
RESPONSE: How does it produce growth if he invests these funds in buying existing apartment buildings, commercial buildings, stocks, bonds, et cetera?

REGARDING: ...until he spends it...and pays the sales tax...or wills it and pays an estate tax.
RESPONSE: Under his "plan", there would be no estate tax.

REGARDING: 10th, the whole bit of "ha, ha, I found an inconsistency, so you're either a liar or a d-a" is getting a little tired.
RESPONSE: What "bit of ha, ha" are you referring?
What has stimulated you to call me a liar?
What is a "d-a"?

REGARDING: Keep the political discussion respectful and don't be an assassin of character. Whether you agree with Herman Cain or not, he is in this at considerable personal expense, because he does care and I respect him for that. He is, if anything, much more than professional politicians, someone who does speak from the heart.
RESPONSE: I am not being disrespectful to anyone.
I am stating an "either/or", i.e., either he is an outright liar or he has been misled.
Do you agree with him that an employee pays (has withheld from payroll) 15.3% of his or her wages to SS and Medicare?

CONCEPT: A little knowledge can be confusing.

mz

5 freetoken  Sun, Oct 9, 2011 10:39:11pm

re: #2 RoadWarrior

Therefore, the social security / medicare system is also a system for redistribution.

Fortunately.

4th, yes, the employers contribution toward social security / medicare would, in equilibrium, be paid in full to employees, were the employer's share cancelled--it would not be up to the employer. Competition would see to that.

Nonsense. As for the "equilibrium" and "competition" thing - when there is an inherent disequilibrium due to labor cost differentials across borders employers can always find ways of outsourcing labor, or, failing that, of brining cheaper labor in.

Whether you agree with Herman Cain or not, he is in this at considerable personal expense, because he does care and I respect him for that. He is, if anything, much more than professional politicians, someone who does speak from the heart.

And glory, don't forget the glory part.

And, anyone who runs for a political position is a politician, and that makes Cain a politician.

6 freetoken  Sun, Oct 9, 2011 10:40:43pm

The regressive, and mean-spirited, idea of a sales tax on food ought to disqualify anyone for office.

7 mikiesmoky2  Sun, Oct 9, 2011 11:08:33pm

re: #6 freetoken

The regressive, and mean-spirited, idea of a sales tax on food ought to disqualify anyone for office.

Is there a difference between saying that your comment is empirically obvious or that I agree with you.

mz

8 RoadWarrior  Sun, Oct 9, 2011 11:12:13pm

Mikiesmoky2 and Freetoken,

Thanks for your replies. We are way to far off from each other to go back and forth too many times on this...that would never end and add little value at each iteration.

Mikiesmoky2, I will respond to just a couple of your comments, and feel free to respond if you wish, but we should call it a day after that.

I did not call you a liar...I put quotations around the statement and was paraphrasing your calling Herman Cain a liar.

As for d-a, it is a two word expression, the first being the word dumb. Again, I am not calling you that. I am stating that that is your alternative for Mr. Cain to his being a potential liar.

Regarding the estate tax, fine. So he doesn't have an estate tax in his plan. So the billionaire's heirs will pay the sales tax if and when they spend the money, and so on. In the meantime, it will generate wealth.

How does purchase of existing assets contribute to growth? Two ways. (1) it increases liquidity, thereby making illiquid investments safer and (2) it requires the buyer to pay more than the next bidder, raising asset values, and inducing more real direct investment to occur. i.e. it doesn't matter where on the chain from early-stage investment to flipping you step in...all investors are an important part of the investment life-cycle (that's not to say that bubble-investing adds value--bubbles are a small part of investing and an unavoidable price to pay--information cannot always be perfect)

I disagree with your argument about regressivity, as I do not believe income is the distributionistly relevant denominator but, rather, consumption, in which case, flat is flat, not regressive. There is only one problem with progressive (well, two, in that the maximum rate must increase) and that is that no degree of progressivity is ever enough for the majority of voters to whom it will never apply...so the tax system ends up almost continuously increasing the upper rates and class warfare never ends.

9 mikiesmoky2  Mon, Oct 10, 2011 1:05:44am

re: #8 RoadWarrior

Mikiesmoky2 and Freetoken,

REGARDING: Thanks for your replies. We are way to far off from each other to go back and forth too many times on this...that would never end and add little value at each iteration.
RESPONSE: Never is a long time. A rational discussion should end in a best conclusion.

REGARDING: Mikiesmoky2, I did not call you a liar...I put quotations around the statement and was paraphrasing your calling Herman Cain a liar.
RESPONSE: I think I said that he was either a liar or was the agent of lies. I don’t know the answer.

REGARDING: As for d-a, it is a two word expression, the first being the word dumb. Again, I am not calling you that. I am stating that that is your alternative for Mr. Cain to his being a potential liar.
RESPONSE: Then you were making up thoughts that were not in my mind. Of course, if it turns out that he knew he were lying, then he could be characterized as a “D-A”.

REGARDING: Regarding the estate tax, fine. So he doesn't have an estate tax in his plan. So the billionaire's heirs will pay the sales tax if and when they spend the money, and so on.
RESPONSE: I suggest that you go back and re-read the writing. Don’t skip over anything and when you come to something with which you disagree, please offer the reasons for your disagreement. That’s called a discussion and enables us to learn.

REGARDING: In the meantime, it will generate wealth.
RESPONSE: What does that mean? A healthy economy requires demand energies. Wealth, either static or growing in nominal value usually is a shift of energies from the middle-class to the top 0.1%, e.g., raising rents doesn’t create economic demand; it mitigates the demand energies of the middle-class.

REGARDING: How does purchase of existing assets contribute to growth? Two ways. (1) it increases liquidity, thereby making illiquid investments safer and
RESPONSE: How does it increase liquidity, since the buyer has less funds and the seller has more funds. There has been a transfer of an asset. How does it make the asset purchased “safer”?

REGARDING: (2) it requires the buyer to pay more than the next bidder, raising asset values,
RESPONSE: How does that affect economic demand? Cosmetically, it can have a psychological affect upon confidence.

REGARDING: and inducing more real direct investment to occur. i.e. it doesn't matter where on the chain from early-stage investment to flipping you step in...all investors are an important part of the investment life-cycle (that's not to say that bubble-investing adds value--bubbles are a small part of investing and an unavoidable price to pay--information cannot always be perfect)
RESPONSE: Now, it sounds like you are talking yourself into a correct answer, i.e., prices going up can create overvaluations, which can lead to economic trauma.

REGARDING: I disagree with your argument about regressivity, as I do not believe income is the distributionistly relevant denominator but, rather, consumption, in which case, flat is flat, not regressive. There is only one problem with progressive (well, two, in that the maximum rate must increase) and that is that no degree of progressivity is ever enough for the majority of voters to whom it will never apply...so the tax system ends up almost continuously increasing the upper rates and class warfare never ends.
RESPONSE: You might consider re-writing to make this intelligible.

mz

10 [deleted]  Mon, Oct 10, 2011 8:27:12am
11 Daniel Ballard  Tue, Oct 11, 2011 6:37:58am

I'll go out on a limb here and declare this man will not be President. So none of this matters much. On the main question, he may well be fooling himself, and not lying at all.

12 mikiesmoky2  Tue, Oct 11, 2011 6:51:54am

re: #11 Rightwingconspirator

I'll go out on a limb here and declare this man will not be President. So none of this matters much. On the main question, he may well be fooling himself, and not lying at all.

I didn't say that he was lying.
I said that it is an "either/or".
If I were forced to offer my best guess, I would be forced to suggest that he is lying. Keep in mind, that one of his degrees is in math, thus he should possess the wherewithal to understand his 9-9-9 is foolish, at best, and his statement that an employee pays 15.3% for SS and Medicare taxes is a black and white falsehood.

The following e-mail was sent to me, yesterday:

"Your detailed and insightful dissection of Herman Cain's 9-9-9 concept verified the true facts of the concept. I recently saw a part of an interview with Herman Cain where the interviewer had to repeatedly ask Mr. Cain over and over to just get one name of an economist who Mr. Cain claimed had worked on or devised the 9-9-9 concept for him, while he kept repeating he wasn't at liberty to give many of the other economist names who devised his 9-9-9 concept. Not at liberty to give their names? Maybe since he has divulged all the alleged economist who worked on this concept, but just the fact he ran from the question and said he was not at libery to give their names. can only make one suspicious. I must believe Mr. Cain knows the invalidity of this concept . Politicians or anyone trying to push a particular agenda have learned, sadly enough , that if you repeat a lie enough, the people listening , who have neither the knowledge or ability to investigate and determine the validity, accept whatever they hear in the media or by their so-called leaders, as being the truth. History ,of course ,teaches us and reminds us seldom is this the case."

13 Buck  Tue, Oct 11, 2011 10:01:45am

In Canada we have a VAT (called the GST or now sometimes called the HST) of 5%. It started at 7% but was reduced.

It was reduced, in part, because it brought in more tax revenue than any one thought it would.

There are exceptions for some food items (mostly food that has not had a value added ie uncooked).

In the OP post I can see the point where it underestimates the Billionaires costs. A person earning a billion does not spend only 50 million. I just mean that no one seems to put 500 million dollars a year into a savings account. They spend it.

Also I suspect that commercial property will not be exempt from the tax. Even if it is existing.

I know it seems like it would depress new home construction, it really doesn't. People still want a brand new house, and will pay to get get it.

That is what happens here in Canada.

14 Buck  Tue, Oct 11, 2011 10:05:23am

Also... and probably most importantly... the poor get GST rebate cheques. I can't remember the threshold, but basically the government refunds the GST spent by anyone who earns a low amount.


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