Tag Archive: Tax Policy

A recent discussion on the TradeKing forums prompted me to respond with some questions that I never hear anyone answer intelligently.  With the hot topic up for debate in the upcoming Presidential election being the Economy, the answers to these questions are important.

I don’t have the answers, and I wouldn’t expect the general reader to have the answers.  However, those in power to make decisions that impact the U.S. Economy should have the answers.  Unfortunately, either they don’t have the answers, or they do have the answers and choose to act for their own benefit rather than for the benefit of the nation’s Citizens.  Or perhaps their answers are just flawed, or they are simply ignorant on economic matters (?!).

You be the judge.  And you be the jury with your upcoming votes.

Here are just a few questions I’d like to hear discussed in the upcoming debates.  They pertain to proposed Government spending cuts and the myriad topics that are related (tax reform, revenue generation, etc.).  The forum post was drafted in direct response to another forum member (“incubus”) that posted the following, “A country can’t disconnect itself from liability for constituents like a company can, the citizen is always a citizen, an ex employee finds a new job.  A citizen is either going to be a contribution to GDP or a liability, an executive doesn’t have this problem, his hands are wiped clean after layoff.”

I welcome an intelligent discussion on this matter, private and/or public.  From the thoughtful meanderings of one of my other internet identities:

“So the crux of the matter is how to minimize the liability of those who either are not capable of contributing or are not willing to contribute to their skill level.

Is there less liability by creating redundant government jobs to keep people busy and somewhat productive?  Or is there less liability putting these folks out on the street to either find private employment (assuming they have the necessary skills) or draw SSI payments from the government?

What if SSI payments were discontinued in conjunction with eliminating government positions?  Would that create less liability considering that desperate people will often resort to crime to survive?

Is it better to have the less fortunate die off rather than live a menial life drawing government payments?

Someone put some calculations to work.

Give a man a fish, teach a man to fish, hope the man can find a job at a fishery, hope the man will buy a boat and start his own fishery, or feed the man to the fish?

On the surface, it sounds noble to say that laid off government employees will make better for themselves by starting their own business or advancing in private industry.  The truth of the matter is, though, that it takes a special individual to have the drive, intelligence and common sense to start a business and successfully maintain and grow it.  Only a small percentage will try and only a small percentage of those that try will succeed.  Transitioning into the private sector as an employee is easier, but are the number of open positions sufficient to support the number of laid off job seekers plus those entering the workforce?

Talking heads make it sound so simple to solve, so cut and dry, so black and white.  It’s not.  We live in shades of gray, and the cost/benefit shifts on a sliding scale.”

Bridges need crossed in our near future. Is this one of them? [Photograph by I Am Janosik@Riverhills Design, LLC]

In response to all the varied discussions regarding income inequality:

This is the actual U.S. pre-tax income distribution for individuals (not families or households – there’s a huge difference) taken from the U.S. Census Bureau. I plotted the chart on a logarithmic scale to better show the attenuated distribution characteristics (typically descreasing number of individual earners as income increases). The dashed line represents a best fit curve for the data, which would reflect a smooth logarithmic distribution of income per population in a perfect world (you wouldn’t want 1 CEO for every receptionist – we wouldn’t be able to afford anything – and why be a CEO if you only earn as much as a receptionist).

Strictly mathematically speaking, if your income is below the yellow dashed line, then you should be earning more to maintain a smooth distribution. Above the yellow dashed line, and you should be earning less to make the distribution curve smooth. The data show some skew at and over the $100k range. The high percentage of no income earners is misleading, since it includes anyone over age 15. I couldn’t find the raw data from the Census Bureau for those age 18 and over.

Again, this is pre-tax income. A progressive tax policy could consider targeting tax rates to provide a smoother distribution curve. This is only one slice of data. Take it for what it’s worth. In my opinion, it shows a fairly good distribution, with only slight skew at the upper range. It’s also unfortunate that the Census didn’t provide a better breakdown above $250k. I’d like to see that data to incorporate into my Excel tables.

The lower chart is normalized to better compare the highest incomes with the lowest.  This better shows where the income skew is.  Really not so bad, in my opinion.  Now, what we actually value as a society (translated as what we award the greatest income) is certainly skewed.  This is the major issue, not the actual income distribution.
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