First the Revolution | 45 comments (45 topical, 0 hidden)
I hope not... (none / 0)

Nationalizing the banks is a bad idea.  First, it is very difficult to know what you mean by "nationalize the banks," which means that at best it is an unclear idea.  Thus I cannot express how it is a bad idea with any degree of specificity.  Second, in general it is a bad idea.  We need banks to seek profit.  Here, the profit motive can work to benefit us all.  We need banks to discriminate between worthwhile investment opportunities (i.e. loans) and bad investment opportunities.  If we turn this function over to the government, this function is likely to be corrupted by politics, hurting us all.

(This is in marked contrast to health care or the prison service.  The profit motive corrupts these functions.)

Eliminating cash would help tax gathering but I would not waste an ounce of political capital on that issue. 

Simplifying the tax code is worthwhile, but a tax on all financial transactions is hideously regressive.  Also, tax code is not created in a vacuum.  Our code cannot be too distinct from other nations, or it will create international capital distortions.

Global currency is not a good idea.  At the moment the US has two levers with which it can affect economic activity: fiscal and monetary policy.  If the United States used an international currency, it would have to set interest rates in tandem with other nations to stop unwanted massive capital flows.  It would not be able to lower interest rates for the sake of the national economy.  Also, the US is in a convenient position where it denominates all of its debts in US dollars.  As long as the US denominates its debts in dollars, it can always make good on those debts.  That means, in a pinch the government can always deficit spend.  If the US started denominating its debts in some other currency, deficit spending would be very risky.  The US would find itself in California's shoes the first time it ran into a recession.  This is a lot to lose just to promote trade and minimize firm exposure to currency drifts.

by MGriebe on 03/09/2010 02:55:58 PM EST

on point (none / 0)
…other than the banks. We need to nationalize the banks and then break them up, as well as separate out the brokers.

I also think we would be better off refunding social security by lending against the surplus until the debt has been paid back. Banks only becomes risky when they are for profit and unregulated. The GSE’s were fine until the greed of the BOD took over and the bankruptcy reform bill was passed.

We need to return to a 90% upper tax bracket to deter the greed and corruption that has engulfed DC and NY. FDR showed us that a long time ago, among other things. I think just going back to the framework he laid out would be a good start.
I like the direction of the thread, the solutions are just not thought out. What about trade and energy?
 


by sisco66 on 03/09/2010 07:33:26 PM EST

[ Parent ]
Thanks for reading and commenting (none / 0)
The ideas are more thought out than they appear to be. I kept the OP as short as possible, because most users of this blog don't read posts with more than 200 words. The shortness also gives the readers more opportunity to post their own ideas. I was hoping for critical comments, so i have the opportunity to explain the aspects in more detail.

I only agree partially with you on the banks. As I pointed out to MGriebe the banks should still be for profit, but they should be highly regulated and the profits should be for the good of the whole populus. If the banks make high profits the taxes could be lowered. It would still be important that the banks are no longer responsible to shareholders, but the "the people". It would be much easier to regulate the banks, whenthey are a branch of the government. Sure their would be corruption, but I'm sure all in all they would cause less harm than they are currently.
I also defended my ideas about the flat-tax on my reply to MGriebe, if you wish I can go into more detail and I seriously ask you to attack me on it. Only opposing views can show how good my ideas are.
What about trade?
What about it would you like to discuss?
What about energy?
As I explained, the only other taxes apart from the flat-tax would be taxes on things that are harming health (like drugs) or the environment. The taxes for harming the environment have to be high enough to create insentive to invest in sustainable energy. The more you raise that tax the more motivated will companies be to go green.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/10/2010 07:50:16 AM EST

[ Parent ]
energy and trade (none / 0)

I agree 100% on taxing based on the negative residual effect on the environment and overall health, including imported items with lower standards.

That said, a flat consumption tax is regressive as Mc pointed out. I did not read your response.  We have to have an upper tax bracket to deter greed and recoup all the money that has been stolen.

I don't quite understand your idea on banks. They can't be a mix. It's either private or public. If the money is going back to the people, then it's public. If the money is going back to the shareholders, it's private.
One thing I would support would be making bank deposit interest tax free up to the FDIC deposited level.

The job of the government is to incentivize sustainable growth and development while discouraging short sighted greed. We have been doing the exact opposite for the last 30 years, if not longer.

by sisco66 on 03/10/2010 04:49:20 PM EST

[ Parent ]
Greed (none / 0)
Sorry if I have been unclear.
I meant the banks should definitly be public. However the managers should get bonuses based on how much money the bank makes. Thereby you still have greed as a motivator, but the consequences of that greed would benefit the public.

I might sound nice to have an upper tax bracket of 90%, but the problem is that rich people usually find ways to avoid those taxes.

It's not a consumption tax, but a financial transaction tax. Loans, wages, everything that involves the exchange of money would be taxed.
However this tax would be lower than the current taxes. Who pays only 25% tax? Nobody who makes money (if you don't want the basic income the tax could probably be about 10-15% and still generate more revenue than the current system). Why are lower taxes regressive? They are a great incentive for people with money, or businesses to come to America.

If greed benefits the people, it's a good thing.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/11/2010 12:32:36 AM EST

[ Parent ]
supply side economics (none / 0)
is what you are proposing, and it does not work. Greed is an addiction, just like gambling.  Giving bonuses to managers and traders is exactly what just caused this meltdown. The reason rich people don't pay taxes is that they payoff politicians to change the rules. You sound like Bush on that one. If that were the case they would not keep asking for more tax cuts.

Working class people pay between 23 and 35% when you included the payroll tax (social security). Which then gets used to offset the tax cuts for the rich.

Tax cuts promote looting and greed. Consumption taxes target the people who spend the greatest percentage of their money, the poor.

You must have a supply sider for an economics teacher. Stick a knife in him.

by sisco66 on 03/11/2010 05:35:26 PM EST

[ Parent ]
Who's worse of (none / 0)
The working class people would pay the same. And in contrast to now the rich would pay. Rich people have so many ways to avoid paying taxes that they often pay less than working class people.

Assuming that Americans will need at least another 100 years to understand the merits of unconditional basic income the tax could be about 15%, which would mean tax cuts for the working class, too. Of course if you would couple that with the unconditional basic income their situation would be immensely better.

It seems that nobody here understood what unconditional really means, otherwise I would have expected an outcry. This basic income would be payed to working people and millionair. How's that for demand side economics? You shouldn't concentrate on on side, but on both.

PS: You really can't blame my economics teacher, because I never had one.:-)

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/12/2010 12:26:39 AM EST

[ Parent ]
value added tax (none / 0)
Thom Hartman always call for a value added tax, but I am not sure how it works. However, he is a pretty smart guy.

Anything that leaves the rich to runamuck won't work. We have proven that time and time again. Everything was fine until the 1980's.  The 1970's were just the fallout from nam and our first run in with middle east oil control.

The rich pay 15% not and it still ain't good enough for them. You need to understand how greed and power combine together like Crack & Herion.


by sisco66 on 03/12/2010 06:14:01 AM EST

[ Parent ]
VAT (none / 0)
I'm not asking for a value added tax, as it is common in Europe. That would be just another added tax.

My idea is that everytime you pay for something (product, wages, sevices, etc.) 15% (25% if you have the unconditional basic income) will go directly to Uncle Sam. This would indeed require that no more cash is used, but then it would be no problem, especially when the banks are nationalized. No other tax would be necessary (except the health and environment taxes I mentioned).
Nobody would be required to "do the taxes" anymore, it will be done whenever money changes the owner.
There would be no way to cheat this tax. Even prostitution, drugs, illegal firearms etc. would automatically be taxed.

If you start a company that would make it much easier, because you don't have to worry about taxes. All calculations would be more simple. If you combine that with single payer starting a new company would be extremely easy. There is no way to overestimate the effect that would have on small and medium businesses.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/12/2010 06:48:40 AM EST

[ Parent ]
back to the regressive tax (none / 0)
I was just mentioning the VAT.


 I guess you don't understand what a regressive tax is.  Taxes should be based on income, all income. And people earning more than 3 to 5 million a year should be taxed very heavily after that. If you want to simplify it by getting rid of deductions that's fine by me. 

I get how a consumption tax will hit small time crooks but it won't get the big timers.  You do know that there is a bible prophecy about having to be marked in order to purchase goods and services.

I use my credit card for everything for the rebates, but I would never want to live in a cash free world. That would be the ultimate big brother.

by sisco66 on 03/12/2010 04:53:31 PM EST

[ Parent ]
Finally (none / 0)
You arrived at the point where I have problems with my own proposal. I would indeed be very big brotherish. On the other hand the amount of data would be so immense that it would probably create anonymity by default. Still there should be certain restrictions to guarantee anonymity, you definitly don't want the government to know more about you than the friendly banker next door.
This could lead to a situation where mugging (and many other crimes) would become impossible, because it would be just too easy to find out, who forced you to transfer money on their account and arrest that person.
What would you do with all those empty prisons and the crooks who would generate wealth outside prisons, instead of wasting it inside? Would there be enough space for all the people who wouldn't be killed in robberies? What to do with all the money that would be saved?

The tax would not be regressive, it would be progressive. Everyone would have to pay the same percentage, but you get a certain "bonus" at the beginning. If the tax would be 25% and the unconditional basic income would be 15,000 you wouldn't pay taxes, unless you earn more than 60,000. That is the break even point where the amount of taxes you pay catches up with the unconditional basic income (which even Bill Gates would receive).

Another thing that bothers me: I was thinking that my ideas were rather creative and original, but when I did some research I came up with a name of someone I really didn't want in my camp: Milton Friedman for a Keynesian like me this is a guy you don't expect to be in your camp when you consider giving money to everybody. He did some research on the basic unconditional income, but called it negative income tax he even lobbied to Nixon to impement the NIT, but ended up fighting against it, when he found out that it would be an added tax and not a replacement for the current system.
He proposed a flat tax of 25%, which made me think about my numbers. He wanted to tax only income, not every exchange of money, he obviously didn't want to nationalize the banks or legalize prostitution, drugs and gambling, this and many other details considere I have to assume that a realistic number for my system would be a tax of about 15% (max.). This means everybody who is currently paying taxes would pay less and still the revenue would be higher. Nobody would pay more than 15% tax. In fact everybody would pay less, because they get the unconditional basic income(even though that would be a very small amount of money compared to what people like Bill Gates would have to pay).

All this means your critique basicly boild down to two points:

  1. Jealousy: You just want rich people to pay a higher percentage, based on principle, not economics

  2. Privacy: This would be worth discussing, because I totally see your point, on the other hand you already have to tell the government how much you make, it would only be much easier to control it.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/13/2010 06:11:21 AM EST

[ Parent ]
getting somewhere (none / 0)
I am on board with what most of what you are suggesting, at least in theory. Other than the currency of course. So people making less than 60k would get a check at the end of the year for an approximate amount paid on consumption taxes?  That sounds ok, but I think you are going to find some difficulty with it being applied equitably. Are you going to tax mortgage payments and stock sales, as well as car purchases? What I am getting at is that the tax will greatly influence what people buy. 

In order to maximize income, people will buy as little and as small as possible, which in itself is regressive. It may turn out to be more complicated than the current form.

Apparently you don't understand how greed works or the part it played in the current economic meltdown. This is not about jealousy this about the facts on the ground and a long and well documented history of what happens when wealth and power accumulate to a small number of people.

The greed and corruption in this country exploded when Regan repealed the 72% tax bracket in the 1980’s. The 72% bracket was the modified version of FDR’s 90% bracket done under Kennedy/Johnson that removed loop hole while appearing to cut taxes. Once that protection was removed, the looting began. Pension plans were raided; companies were bought up and dismantled selling off the parts and destroying jobs. We have had 30 years of greed based polices. I think that’s enough.

FDR figured out that the only way to control the sort of greed and corruption that led to the first Republican Great Depression was to eliminate the ability for people to keep the money they stole. John Maynard Keynes understood that government plays an important part in shaping economy through monetary policy as well as incentive and disincentives.
 
An upper tax bracket that targets reckless speculation and looting of companies is a very important disincentive. Unfortunately, most people don’t understand what Keynes was advocating. He was not advocating for the government to continual pump money into the economy just to keep people working.  He advocated targeting growth industries that would provide long term return on investment, while in the meantime keeping people working. What the Chinese are now doing is closer to the Keynes than anything we have done since the space program started. I would count the internet but the capital gains tax cut under Clinton gave it a black eye.

By the way, we are pretty well off, so it’s clearly not jealousy. However, I am very pissed that my home has been devalued.


by sisco66 on 03/14/2010 10:21:10 AM EST

[ Parent ]
Of course it's all theory (none / 0)
Step one would be nationalizing the banks, then everybody would need to have a bank account. They would get 1250$ every month.
Then, when they pay something the tax gets deducted. For example if I buy a new jacket for 100$ the store owner would get only 75$ and his tax is already paid,
Mortgages would mean that the money is going to the banks/state, so it wouldn't matter if any tax gets paid. It would just be the state paying a tax to the state.

"In order to maximize income, people will buy as little and as small as possible,"

You're trying to tell me that this would be a change, to what is already happening? I for one, always try to spend as little money as possible.

The rich people couldn't get any money, without the tax being paid, because if money gets moved from one person's account to another person's account the tax gets deducted.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/14/2010 10:51:14 AM EST

[ Parent ]
Big Brother Indeed (none / 0)
Ya that's probably not going to fly.

As far as crime goes. What's to stop people from going back to the barter system and/or robbying people for jewelry. What about gold and silver or other fairly easy to value commodities?

I don't think it is going to have the results you want to stop crime. Criminals are very resourcefull. Just look at what goes on in the prison system.

by sisco66 on 03/14/2010 11:07:13 AM EST

[ Parent ]
If Big Brother would be controlled? (none / 0)
I admit that it would not have those extrem influences on crime that I would be hoping for. Well at least they would pay taxes.

However, when you want to ignore the crime fighting, all informations could be handled anonymously. If the banks would just have a finger print and an identification number, it would be even more anonymous than nowadays.
How the privacy issues are going to be handled can really be talked about. With some thinking we could get to a solution.

The main problem is that it would require a revolution, because the system would be so fair that the big cats wouldn't stand for it. No matter how much the people on this forum say, when nothing changes or things get worse, there's going to be a violent revolution, I don't believe the people in America, or Europe are still capable of revolution.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/15/2010 04:48:26 AM EST

[ Parent ]
sad but true (none / 0)
I don't believe the people in America, or Europe are still capable of revolution.

by sisco66 on 03/15/2010 06:30:47 AM EST

[ Parent ]
Very good points (none / 0)
By nationalizing the banks I meant that the final responsibility should be the state's. The state should employ managers who get bonuses according to the success of the bank. This means the profit element would not be eliminated. The difference would be that in the end the banks don't aswer to the shareholders, but to the people. (I am aware that this is an oversimplification)

Tax code: The American tax code is already very different from the tax code of other countries. Most countries have a value added tax (vat) of well more than 10%. If I'm not mistaken Greece is currently raising theirs to 22%. The reason that this doesn't generate an enormous amount of tax is that they still have cash and thereby possibilities to get around paying taxes. Without cash it would be impossible to avoid paying your taxes, as soon as you receive or spend (depends on how you look at it, as I said for every financial transaction,including getting paid for anything) any money. This number is a vat that can easily be enforced and it would lead to a situation where gangsters, prostitutes, junkies and people who don't even have a residency permit pay taxes. The tax would still be much lower than the current taxes and far away from the 90% for rich people some users of this forum demand. Lower taxes would only create distortions in favour of the country in which you have to pay less. I can't stress enough that this would mean getting rid of all other taxes, except dterrent taxes for anything that's disproportinatly bad for the environment (Like fossil fuels ore extreme waste production)or the health (basicly: drugs).
This would support entrepeneurship on a gigantic level. If you start your own company you don't have to worry about taxes or health care for your employees and if the company fails you still have the basic income to fall back on, which minimizes the risk.

Global currency: you are right that America currently borrows its money in $ and could in theory just print enough money to pay its debts, but that would only work once and after that the $ would be all but worthless and America would have to pay enormous interest for further credits that it wouldn't be able to afford. You are right that America would have to set the interest rates in accord with all other states, but that would create a currency stability that would encourage real business instead of speculation. this security would very probably be good for international economy.
America can not set the interest rates or the amount of money without considering the reactions of other countries. A little to much insecurity and the speculators and China would be over the $ like crazy. Other countries (and speculaters) have nearly as much power over the $ as the US government. It is by far not as secure as you might think.
Just assume new credits and oil prices would be swapped to the €. within months America would see the worst inflation in its history. The US economy would collapse. This is just one additional danger that the $ faces, another one, about as dangerous would be Credit Default Swaps. If China would use its $ reserves to invest in American CDS they could ruin the economy within the blink of an eye.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 03/10/2010 07:33:26 AM EST

[ Parent ]

First the Revolution | 45 comments (45 topical, 0 hidden)