Cacto - there is little or no correlation between inflation and tax rates. I don't know where you got that idea but we have hundreds of years of data to demonstrate that they are not related.

When you let Brad keep the $100 instead, some of it he'll invest and some of it he'll spend on hamburgers -- any part he spends on hamburgers increases consumption and reduces savings.

No, it simply transfers money from one person to another based on an individual choice.  No different than what the government does except it's more efficient when it's between the citizen and the merchant than when it is between the citizen, the government, and another citizen/merchant.

I love how the market is a perfect arbiter of value when it comes to knowledge workers like bankers, executives, and import agents, but when the system rewards a lawyer with a ton of money you're all, "What did he do to deserve that?" Like you were saying in the other thread, the economy ain't just mining any more. Not only do lawyers provide a service the market values highly, they're paid by the hour -- shouldn't that make them the most sensitive to marginal tax rates of all the upper class?

No, my point is that John Edwards does not qualify for someone who should be dictating how our economy should work.

I don't have any problem with how much anyone makes as long as it is done in a free market.  

My objection to Edwards is in the context of people complaining about how much doctors make as well as pointing out that Edwards peculiar "business" is not something that gives him a very good real world understanding of how market forces actually work. 

Edwards millions are the result of manipulating a particular government system (the courts).  By contrast, Bill Gates makes his money almost completely via the private sector.

Actually, if you could get government to hold the line on spending, tax increases are good for investment. A $100 tax increase that goes to paying down debt adds $100 to the national savings rate.

That's really completely nonsensical. 

At the macro level it is simply a question of who will produce more prosperity for society with a given dollar: A successful entrepreneur or the government.

People who have demonstrated the ability to produce jobs, create wealth, and provide new products and services are a better bet for $1 of "investment" than the government whose decision makers are largely economically clueless politicians who are often at best incompetent and at worst corrupt.

Taxes are crazy. But you can't, as much as you'd like, equate withholding to taxes. If you work overtime for a period, the withholding assumes you make that much EVERY period. You don't. Therefore, you're over-withheld for that period and you get it back in a refund at the end of the year. Federal taxes work in such a way that for each bracket, you get to keep x% of the money for that bracket. When you move up to the next bracket, it doesn't recalculate the taxes - you pay the same amount for the first $20,000 of taxable income no matter how much you make after that. So, whenever you get $1 raise, you get the raise less some percentage. But it will always be higher than before.

True, jythier, but those interest free bank loans to the government are a royal pain, because the reason we accept overtime at some jobs is because we need the money NOW, not next April.

I read about it in the paper. The Howard government cut tax rates in 2002 and the Reserve Bank of Australia has warned that any further cuts will result in inflation and they will be forced to increase interest rates to compensate.

I'm not trying to say our situations are the same, but the economists all work from the same textbooks so I figured there must be something universal to this. Sorry if I have it all the wrong way around!



Apart of course from a wide variety of extremely lucrative government contracts across the world. Much of a lawyer's work is done away from the courts anyway - you probably have experience of that. How many lawyer's hours of work have you been billed for outside of court time in comparison to court time?



So you don't actually lose the money! I see now. Why not just negotiate with your employer to pay your own tax? That way you can make the decisions about how much to pay when and can make up the remainder at tax time. If it's possible to do that in the US it may well be worth it.

not

Very few employers (in my experience) want to bother with the paperwork.

Not really, but it is simplistic. It fails to take into account who is buying the government debt. Your money is going directly into the economy. Less money, less to invest. That $100 the government borrows does take from the investment - for those of us who buy the bonds. However, as we have so often been told, not all bonds are bought with US savings dollars. Many are bought with foreign money (that is a whole nother issue). So let's say $50 is taken from the US investment dollar. That means that $50 is still left.

In the end, we cannot borrow forever. There has to be a point of diminishing returns when pushing government borrowing (good for individual wealth, but hardly conducive to investment in this country) to other nations is counter productive.

And THAT is where we have to be concerned about the exchange rate and other countries bailing on us. And that will come when the US bubble (the really big bubble) bursts. And no one KNOWS what that point is. But the best speculators will guess right. It has been over 50 years now, and so far, the bubble has taken some beatings, but so far not burst. WHy? Because those foreign investors still have confidence in the US (even when the democrats and the MSM shout doom and gloom).

And the model to predict that? I may not be as complicated as the weather and GlobalWarming, but so far, no computer has been created that predict that "simple" event. Much less the more complicated ones that we are supposed to beleive on faith alone.

This has been done. But when taxes get to the point that it is costing the company more than the benefits bestowed on the employee, they figure out how to compensate them without incurring a tax burden. Like buying them a house to live in, for a paltry rent, or paying for their meals - ala business expenses, or .....

You get the picture. What all of these solutions have in common is that the government does not get squat, regardless of the rate. And the employee (often the upper crust) lives like they are getting paid a lot, when on paper, they are not.

SO go ahead and raise the taxes. There are more ways to avoid them than to pay them, and they will find those ways.

The inflation rates and the tax rates are both knowns.  They have no relation.

The US could have massive inflation at the drop of a hat by printing more money. 

Similarly, the highest inflation rates we had in recent years was in the 70s -- when taxes were very high.

We're not talking about lawyers. We're talking about Edwards in particular.  A lawyer doesn't make $20 million doing legal analysis. They do it via lawsuits.

Moreover, Microsoft's success is not due to government contracts. 

Don't get lost in intellectual minutia.  Rich lawyers are rich because of lawsuits. Edwards was a personal injury lawyer. He didn't make his money by producing anything. He made his money abusing the government legal system.

Or more to the point, Edwards made his money through NON-voluntary financial transactions. I.e. one party was forced to pay the money that went into his pockets.  No wonder he was a natural for politics.

I believe LW at one time filed exempt and paid exactly what was owed quarterly to the state and feds. As long as you don't forget to make the payment, you'll be all right.

I still don't believe the "losing out on overtime" thing. It's been five years, but I heard this complaint from my coworkers a lot and I saved paychecks with just one hour of overtime and checks with 30-40 hours of overtime. I was keeping like 83% of the no-overtime checks and 75% of the overtime checks, IIRC which I probably don't. Even if the government thinks you make $3,000 every week because you made $3000 this week... you still made $3,000 and that's enough to pay the taxes. For example if the tax on a $10 paycheck is 20% ($2) and the tax on a $1000 paycheck is 99% ($990), if you earn $1000 instead of $10, you're going to pay $990 in tax, but you still keep $10 instead of $8 -- you still come out ahead. Unless the government looked back and saw that it didn't collect $990 last week and tried to collect it twice this week... but it doesn't do that.

Draginol, I didn't realize what cacto was saying at first either, but now it makes sense. It's the Keynesian idea that the government can use fiscal policy to stimulate the economy. The government doesn't have to physically print money to cause inflation. If they lower taxes, giving people more money to spend, while spending the same themselves (deficit spending), there is more money chasing the same amount of goods -- inflation. You don't always see the inflationary effect show up in higher prices because there may be deflationary forces going on at the same time, such as a recession, or the Fed raising interest rates.

Dr. Guy, you're right. If I add an assumption that there's no trade deficit, then what I'm saying could work, because the amount of the debt repayment that goes to foreign bondholders and the amount of Brad's consumer spending that goes to foreign exporters should be exactly equal -- I hope. I'm no economist.

Moreover, Microsoft's success is not due to government contracts.

It's a real boon for liberals that Bill Gates is no longer the world's wealthiest man. People would think about him when they thought about wealth and think that all rich people were somewhat the same way. Now we have Carlos Slim, whose success is due to government contracts. Maybe that will get people thinking of all the people who do make their money with political connections: in healthcare, in the energy business, in public utilities, in telecommunications, in the airline industry, among defense contractors, in the agricultural sector -- instead of thinking about the entrepreneurs who noodle around in the undeveloped margins of our economy where the free market actually exists.

The majority of the wealth created in the United States is produced by entrepreneurs.

As for Mexico, what can you expect?

In the US' case it would probably be better to simply close the loopholes or ban riders to bills. Banning riders would enforce a little fiscal responsibility.



Exactly. Keynesianism may have been discredited to make way for neoliberalism, but it's still alive and well in most Federal Reserve Banks.

Here's the problem with that. Just as McCain Feingold was SUPPOSED to take money out of elections, the money found a way in. And closing loop holes will just open up new avenues. It is not unique to the US. In higher tax societies like Scandanavia, the big wigs get their due through non-monetary means. That are not taxed. And the simple rule is, you cant close all loopholes. The money will find a way. It will not show up in a pay stub, but then getting free rides to work from the company limo is not money the employe can report, but still helps them spend their money on other things.

Back in the 70s and early 80s, when tax rates were very high, the rich found ways to shelter their money. That was not a unique endeavor, it is the nature of money. Stupid people dont earn a lot, and smart ones dont waste it by getting large taxable paychecks.

Actually no. Keynesian is alive and well in government. The Fed is a moneterist organization (influencing the supply of money by changing interest rates).

no it was supposed to look like it was going to take money out of elections.

The majority of the wealth created in the United States is produced by entrepreneurs.

That may be true for wealth created but the majority of the income earned is wages, even in the top 0.01%. I'm going off a single table in Piketty and Saez that may not mean exactly what I think it means. But it makes sense -- how much of the economy every year is new products created by entrepreneurs and how much is previously existing institutions doing what they did last year, paying employees to find ways to do it more efficiently? Even if 20% of businesses are destroyed every year and economic growth is 5%, that only leaves 25% for entrepreneurs to work in.

How many kids did you say you have? You're a single guy, right?

The problem, as Jythier said, is with withholding, not actual taxes, but it DOES occur, noumenon.

What happens is, when you claim all of your deductions, you get very little taken out if your wage is in the sub-$10/hour range. As you get overtime, your withholding is calculated as if those earnings are the same throughout the year, and extra taxes are withdrawn. Because you paid no taxes on the base (non-OT) earnings, you're going to be paying a good chunk on the extra OT. Like I said, I'm willing to chalk it up to poor accounting, but I have seen it happen too often for it to be a fluke.

If you keep 83% of the non-OT checks, you live in a state with a low tax rate, because 6.5% automatically comes out for your SS cut. Or somewhere along those lines.

Don't assume everyone else's withholding is the same as yours. It gets stickier with dependents.

I was just going by memory. My rule of thumb was that 1/6 of my check went to withholding. I just checked my spreadsheet for how much state, federal, and FICA I actually paid and it's ranged between 17 and 22 percent even with all the deductions I take, so it seems like the withholding should have averaged more like 20%.

This March I started putting 43% of my pay in the 401(k), so my withholding is down to 1/6 of my check for real now...

Entrepreneurs pay themselves wages. How else do you surmise they're paid?

Entrepreneurs don't (as you said) "noodle around" the edges of our economy. They ARE the economy. You take away the entrepreneurs and most of the jobs disappear.

Most people work for entrepreneurs (statistically). 

Very smart thing to do. You will be pleased with the results in the long term.

The table I was looking at separated income into wages, capital income, and "entrepreneurial income" -- income from self-employment, small businesses/farming, and partnerships. It's figure 6 at this Link -- I think, I can't check it here at work.

We're going to have to hash out our definition of "entrepreneur." I'll be back later...