Possible tax raise...?

[Achilles2]

Yet another Amerocentric topic from me. Yay

Will Congress have to raise taxes to get us out of this debt? I say yes.

You can't cut taxes without cutting spending. Former President George W. Bush cut taxes but increased spending, and the national debt rose from $6 Trillion to $10 Trillion.

The only way to stimulate the economy right now is to stimulate businesses. This will obviously require an increase in spending. In order to pay off the debt, taxes must be raised regardless of if you want them to or not.

This debt is going to get bigger and bigger and bigger until taxes are raised and spending is cut. Granted, President Obama can't really cut spending for the reason said in the above paragraph, but he can raise taxes.

And before ultra-Conservatives say "OLOLOLOL I TOLD U OBOMBA WOULD RAISE TAXES SHOULDA VOTED MCCAIN!!11ON EON1", I'm going to say that under McCain, the national debt still would've been the same and McCain still would've had to raise taxes to pay off the debt.

This debt can either be payed off now or in the next few decades. The only problem is that if you pay it later, there'll be much more to pay.

[n64kid]

Why can't we just cut spending without raising taxes during a time of economic turndown. Better yet, raise taxes on the 40% of people employed people who don't pay any. Or force states to spend up to 99% of what they collect and have the states pay their share of the national debt.

Haha forced budgeting, I'm so evil =D

[Musician]

At 1/29/09 04:04 PM, n64kid wrote: Why can't we just cut spending without raising taxes during a time of economic turndown. Better yet, raise taxes on the 40% of people employed people who don't pay any. Or force states to spend up to 99% of what they collect and have the states pay their share of the national debt.

Haha forced budgeting, I'm so evil =D

Typically the government won't cut spending or raise taxes during a recession. Repaying debt is usually best left for when the economy is stable.

[n64kid]

At 1/29/09 04:11 PM, Musician wrote:

Typically the government won't cut spending or raise taxes during a recession. Repaying debt is usually best left for when the economy is stable.

You realize that we pay roughly 250 billion dollars each year on our debt's interest, and that number is only going to get larger and more problematic with this stimulus? The "reinvestment" of this money into the economy will never reach figures that will allow revenue to increase at such a rate to pay off the debt.

[Musician]

At 1/29/09 04:15 PM, n64kid wrote: You realize that we pay roughly 250 billion dollars each year on our debt's interest, and that number is only going to get larger and more problematic with this stimulus?

Oh I definitely realize this, but increasing taxes or decreasing spending during a time like this would only worsen our current situation. We have debts we need to pay, there's no getting out of that, but it's better to pay them when we can afford to pay them.

The "reinvestment" of this money into the economy will never reach figures that will allow revenue to increase at such a rate to pay off the debt.

How are you so sure? I'd like to hear your reasoning.

[Conspiracy3]

Taxes will probably not be raised for anyone earning less than $200k/year. For those earning more than $200k/year taxes will probably increase.

[n64kid]

At 1/29/09 04:21 PM, Musician wrote:

How are you so sure? I'd like to hear your reasoning.

The 250 billion was on a 9.6 trillion dollar debt.

Let's say the average interest has an effective APR at 2.66% on our debts. The 817 billion dollars is the increase in spending. For an amortized loan, that is, the loan is paid off after all payments have been made, if we want to make the money back, it will depend on how many years we choose.

Here is a list of how many years and how much each installment will be annually.
10 years/94.12 billion (rounded down)
20 years/53.20 billion (rounded down)
50 years/29.73 billion (rounded down)
75 years/25.26 billion (rounded up)
100 years/23.43 billion (rounded up)

That means that the 817 billion dollar investment, that the government needs an increase of revenue of 29 billion dollars, starting from year one, that is reaped from this isolated stimulus package, that needs to last for 50 years. To collect 29 billion dollars, let's say that wages must go up by 116 billion dollars and stay there for 50 years. That means that the increase must be a constant 14.2% return on that inital 817 billion dollars spending, just to pay off the stimulus package over 50 years.

Now that's on an amortized loan. Odds are that revenue for the first year or so will not increase enough to really make the payment and as such, less principal means more interest and higher payments in the future to pay it off in that time.

I'm skeptical of total wages going up on everyone at that high of a rate given that the bill is only 817 billion dollars, and that this debt cannot be paid off even given 50 years to pay it off. As you can see payments don't go that much down when we expand the year to 75 because it's harder to pay off the principal that way. Therefore, it is impossible for the bill to pay itself off, and that's why I laugh when people call it "reinvestment".

[Achilles2]

At 1/29/09 04:04 PM, n64kid wrote: raise taxes on the 40% of people employed people who don't pay any.

About that, I say that people definitely shouldn't get back more than what they pay in taxes, but unfortunately this is happening. At the very most, these people should just get back what they payed and no more.

[Musician]

At 1/29/09 05:10 PM, n64kid wrote: That means that the 817 billion dollar investment, that the government needs an increase of revenue of 29 billion dollars, starting from year one, that is reaped from this isolated stimulus package, that needs to last for 50 years. To collect 29 billion dollars, let's say that wages must go up by 116 billion dollars and stay there for 50 years. That means that the increase must be a constant 14.2% return on that inital 817 billion dollars spending, just to pay off the stimulus package over 50 years.

Still not seeing how you can be absolutely positive that the US will never be able to pay off the debt. First of all, it's not like income tax is the only form of government revenue, and even if it was wages don't necessarily have to go up. Increased employment generates more income tax, there's also sales tax and payroll tax (both of which would generate higher income with less unemployment). Second, revenue doesn't necessarily need to increase. Spending could be cut in other areas in order to free up funds to put towards paying back debt.

Just out of curiosity though, do you feel similar outrage at Bush's contribution to the national debt? He added several trillion just with the war alone, and that didn't have the same economic benefits that Obama's package has.

[Christopherr]

At 1/29/09 11:24 PM, Musician wrote: Increased employment generates more income tax, there's also sales tax and payroll tax (both of which would generate higher income with less unemployment).

Uhh, we're talking about the national government's debts. The state sales taxes are state taxes, and the federal government isn't entitled to sales tax revenue.

Also, the payroll tax is the income tax with social security and Medicare taxes tacked on. Can you guess what social security and Medicare taxes are spent on, leaving the income tax money to be spent?

Second, revenue doesn't necessarily need to increase. Spending could be cut in other areas in order to free up funds to put towards paying back debt.

I submit that we cut frivolous spending. The issue is where to define frivolous. For example, the eco-bullshit that keeps getting slung around. Why should a stimulus package even provide for this?

[n64kid]

At 1/29/09 11:24 PM, Musician wrote:

Still not seeing how you can be absolutely positive that the US will never be able to pay off the debt.

I showed that in the event that the economy gets better from a 817 billion dollar package, paying off the debt in the future isn't very likely given that it is improable that the bill can pay for it's initial 817 billion even if it had 100 years to do so. When we look at an investment, you cannot say that 800 billion dollars of spending, of which 300 billion is recovered from economic stimulus that it will pay for itself. If money comes later from activity in the economy that would have happened had this bill not been passed, then it should not be attributed to the stimulus package, and not considered when talking about if the bill pays for itself.

Let's talk conceptual here. I have a business with 2 operations. One is dry cleaning and one is selling books. I make $500 off dry cleaning and lose $100 a day off books, totalling a $400 gain. Does selling books get justified because I can use additional revenue from by dry cleaning business?

First of all, it's not like income tax is the only form of government revenue, and even if it was wages don't necessarily have to go up. Increased employment generates more income tax, there's also sales tax and payroll tax (both of which would generate higher income with less unemployment).

Uhm, we're talking federal government. Payroll/FICA by law cannot go to paying off debt, they go straight to welfare/social security. Sales tax/excise tax goes to the state, not the federal government.

Think federal revenue and think income tax and tariffs.

But that 116 billion dollars, more specifically, means that gross national income must go up by that much for the US government, and that's using an average of a 25% tax bracket, so the total can be higher.

Second, revenue doesn't necessarily need to increase. Spending could be cut in other areas in order to free up funds to put towards paying back debt.

I agree, but as you said "decreasing spending during a time like this would only worsen our current situation"

But how do you eliminate nealry 280 billion dollars of spending a year?

Just out of curiosity though, do you feel similar outrage at Bush's contribution to the national debt? He added several trillion just with the war alone, and that didn't have the same economic benefits that Obama's package has.

I don't think the increase of "defense spending" or the difference between spending on our military at times at peace and war even after these 8 years have reached 1 trillion, albeit close. Many of those spendings also happen to be because of baby boomers retiring, and programs Clinton signed in that took effect during Bush's presidency. But if you criticize Bush for having such large deficits and out of control spending, why don't you have a problem with an 800 billion dollar, over 100% of the deficit of 2004 and 2005 combined.

You still haven't addressed my concern about how the 817 billion dollars with interest can be recovered DIRECTLY and ATTRIBUTED to the stimulus package.

[Musician]

At 1/29/09 11:48 PM, Christopherr wrote: Uhh, we're talking about the national government's debts. The state sales taxes are state taxes, and the federal government isn't entitled to sales tax revenue.

Depends on the state and the product. The feds may very well have their own sales tax on goods. Just look at gasoline for example; that's taxed by the federal government and the state.

Also, the payroll tax is the income tax with social security and Medicare taxes tacked on. Can you guess what social security and Medicare taxes are spent on, leaving the income tax money to be spent?

Even so, I'm assuming it would free up funds from other sources of revenue.

I submit that we cut frivolous spending. The issue is where to define frivolous. For example, the eco-bullshit that keeps getting slung around. Why should a stimulus package even provide for this?

I haven't seen a break down of Obama's stimulus as of yet, so I don't know what you mean when you say "eco-bullshit". Still, I'm generally opposed to cutting spending or raising taxes until the economy has re-stabilized. Afterwards though, I definitely agree, we have to cut the flab off of our budget.

[Musician]

At 1/30/09 12:35 AM, n64kid wrote: I showed that in the event that the economy gets better from a 817 billion dollar package, paying off the debt in the future isn't very likely given that it is improable that the bill can pay for it's initial 817 billion even if it had 100 years to do so. When we look at an investment, you cannot say that 800 billion dollars of spending, of which 300 billion is recovered from economic stimulus that it will pay for itself. If money comes later from activity in the economy that would have happened had this bill not been passed, then it should not be attributed to the stimulus package, and not considered when talking about if the bill pays for itself.

So what are you getting at? We're 9 trillion in debt, another trillion is a drop in the bucket, we basically only been paying interest for years. In other words, our debt has been "un-payable" for quite a while now. Also try considering gains vs losses. Assume that if we hadn't passed the stimulus that the economy would have crashed, unemployment would have skyrocketed, and tax revenue would have went way down. Depending on how badly the economy crashed, we may very well have made back our 800 billion just by avoiding the economic collapse.

Let's talk conceptual here. I have a business with 2 operations. One is dry cleaning and one is selling books. I make $500 off dry cleaning and lose $100 a day off books, totalling a $400 gain. Does selling books get justified because I can use additional revenue from by dry cleaning business?

I'm afraid I don't understand the metaphor.

Uhm, we're talking federal government. Payroll/FICA by law cannot go to paying off debt, they go straight to welfare/social security.

Well like I said to Christopher, one would assume that any money that went into medicare would free up income from other areas of the federal budget.

Sales tax/excise tax goes to the state, not the federal government.

Another point Christopher brought up that I'm confused by. There is such a thing as a federal sales tax, albeit it is less common. Sorry for the confusion.

I agree, but as you said "decreasing spending during a time like this would only worsen our current situation"

I didn't mean to imply decreasing spending right now. However, a couple of years from now after our economy has a bit of time to heal, I don't think it would be a bad idea to start cutting/privatizing some non-essentials out of the budget.

But how do you eliminate nealry 280 billion dollars of spending a year?

Well I don't assume that it would be done entirely by cutting the budget, there would also have to be some additional revenue coming in (this is assuming we plan to pay the loan off anytime soon). The US could see some immense profits if it becomes a leading exporter of alternative energy, especially near the end of the next few decades when oil prices start skyrocketing.

I don't think the increase of "defense spending" or the difference between spending on our military at times at peace and war even after these 8 years have reached 1 trillion, albeit close.

Oh you're definitely right if you're only including things like how much it costs to replace tanks we've lost, or what we've spent in ammunition and supplies etc. The real expenses come from things like casualties, where you have to pay families when a soldier dies, or pay for treatment when a soldier gets maimed etc. Some NGOs have calculated how much it all tallies up to, and the vast majority of them put total expenses anywhere from 1.5-3 trillion dollars.

But if you criticize Bush for having such large deficits and out of control spending, why don't you have a problem with an 800 billion dollar, over 100% of the deficit of 2004 and 2005 combined.

Mostly because it's responsible spending that's reinvests in the economy. It builds things that are viable even during a total economic collapse, like power lines and roads. I'm not sure if Obama's plan specifically includes power lines and roads, but what I'm saying is it builds infrastructure.

You still haven't addressed my concern about how the 817 billion dollars with interest can be recovered DIRECTLY and ATTRIBUTED to the stimulus package.

I'm not sure I ever claimed that it would pay the debt back. There's no way to be sure about something like that. That's why I'm so surprised that you seem 100% certain that this package will fail.

[n64kid]

At 1/30/09 01:11 AM, Musician wrote:

So what are you getting at? We're 9 trillion in debt, another trillion is a drop in the bucket,

That's almost a 10% increase on an already colossal number. I disagree that it's just a "drop in the bucket". I went over that the stimulus paying for even itself is unlikely given 50 years.

we basically only been paying interest for years. In other words, our debt has been "un-payable" for quite a while now.

Given our debt expense from 2007, I believed a surplus could still be possible with the elimination of many programs. Given a caluclated debt expense with interest at 2.66% (about the average), I don't see a surplus ever happening now if the stimulus is passed. Assuming we don't heavily devalue our currency.

Also try considering gains vs losses. Assume that if we hadn't passed the stimulus that the economy would have crashed, unemployment would have skyrocketed, and tax revenue would have went way down. Depending on how badly the economy crashed, we may very well have made back our 800 billion just by avoiding the economic collapse.

I did consider that. The difference of 817 billion dollars being "pumped into the economy" vs the status quo, given a worst case scenario doesn't matter. It's screwed vs screwed but 817 billion can only employ so much and bring so much revenue to the government that I don't see the package ever paying for itself. If it's passed or not, it will not be the difference between economic collapse and stability; the number is too low and not going to the right places. Try looking at this thread to see where the distriution lies and see for yourself that:
1. won't be the thing that prevents economic meltdown
2. couldn't pay for itself, even considering the difference between revenue without it and revenue with it. I don't see it as a "reinvestment" because of this point.

I'm afraid I don't understand the metaphor.

Should you justify spending money on something that will end up hurting you MORE in the long run for a quick fix that may or may not work?

Well like I said to Christopher, one would assume that any money that went into medicare would free up income from other areas of the federal budget.

FICA is not income tax, although it's taken from your income. It's earmark spending, the tax is for the purpose of social security and medicare. Income tax by law cannot go to fund social security and medicare, and FICA taxes cannot go into the income tax fund. HOWEVER, when social security and medicare "runs out" of funding, they "borrow" money from income taxes. Technically, any money "freed up" is an illusion. FICA revenue cannot free up income tax revenue for federal spending and vice versa.

Another point Christopher brought up that I'm confused by. There is such a thing as a federal sales tax, albeit it is less common. Sorry for the confusion.

Federal sales tax as in tariff? The only federal sales tax I can think of is a gas tax on fuel consumption. Once again, it is not even close to a leading source of federal revenue.

I didn't mean to imply decreasing spending right now. However, a couple of years from now after our economy has a bit of time to heal, I don't think it would be a bad idea to start cutting/privatizing some non-essentials out of the budget.

I love privatization =/

Well I don't assume that it would be done entirely by cutting the budget, there would also have to be some additional revenue coming in (this is assuming we plan to pay the loan off anytime soon). The US could see some immense profits if it becomes a leading exporter of alternative energy, especially near the end of the next few decades when oil prices start skyrocketing.

I like the idea of exporting algae oil, but exports of electricity would basically go to Canada or Mexico, and the demand/profit to be gained really isn't there.

Oh you're definitely right if you're only including things like how much it costs to replace tanks we've lost, or what we've spent in ammunition and supplies etc. The real expenses come from things like casualties, where you have to pay families when a soldier dies, or pay for treatment when a soldier gets maimed etc. Some NGOs have calculated how much it all tallies up to, and the vast majority of them put total expenses anywhere from 1.5-3 trillion dollars.

The 1.5 trillion is a little of a stretch, but I'll buy it to it for the sake of argument. I'm not going to accept anywhere near 3 trillion.... but atleast war spending goes right back into our economy, hiring private contracters, soldier salaries and benefits, boeing, halliburton energy, weapon manufacturers, all American companies employing American workers. I mean, we did have something unheard of, record lows in unemployment with low inflation for 7 of George's 8 years.

Mostly because it's responsible spending that's reinvests in the economy. It builds things that are viable even during a total economic collapse, like power lines and roads. I'm not sure if Obama's plan specifically includes power lines and roads, but what I'm saying is it builds infrastructure.

I believe in reinvesting, I just don't see how the bill is a viable reinvestment. It looks to me like a near trillion dollars in deficit spending for revenues that the government will most likely never realize. I don't want Budget 2030 to be 30% Social security and 70% interest from the debt, coupled with a 4 trillion dollar deficit.

I'm not sure I ever claimed that it would pay the debt back. There's no way to be sure about something like that. That's why I'm so surprised that you seem 100% certain that this package will fail.

I came up with numbers showing that revenue would have to go up by a certain amount, which is over a 14% investment, which is basically impossible coming from government spending. I feel that this specific stimulus bill is UNLIKELY to stimulate the economy and WILL NOT pay for itself, inferring that it cannot even pay a portion of debt besides this one. Even if the economy does a 180, if the bill cannot pay for itself, that's just more debt, more interest, and harder times for the future.

[Christopherr]

At 1/30/09 12:38 AM, Musician wrote: Depends on the state and the product. The feds may very well have their own sales tax on goods. Just look at gasoline for example; that's taxed by the federal government and the state.

You have your terminology wrong. A government tax on a good such as gasoline isn't called a sales tax, but an excise tax. You've got to get them right if you want people to understand you.

Even so, I'm assuming it would free up funds from other sources of revenue.

I was just pointing out that it's pointless to say that the payroll tax is an alternate source of revenue from the income tax, is all.

I haven't seen a break down of Obama's stimulus as of yet, so I don't know what you mean when you say "eco-bullshit". Still, I'm generally opposed to cutting spending or raising taxes until the economy has re-stabilized. Afterwards though, I definitely agree, we have to cut the flab off of our budget.

It's loaded with random costs such as spending a few hundred thousand dollars on making federal buildings more energy-efficient, things almost completely irrelevant to helping the current state of the national economy. You can be sure that this was positively loaded with many wasteful costs, being the federal government.

[Al6200]

At 1/30/09 10:37 PM, Christopherr wrote:

You have your terminology wrong. A government tax on a good such as gasoline isn't called a sales tax, but an excise tax. You've got to get them right if you want people to understand you.

The idea behind a stimulus package is that it forces money to flow through the economy, and not get hoarded by rich people. A tax cut isn't a stimulus, as Der Lowe has pointed out time and time again, because people will save most of the money that they get from the government.

The real issue is that while I agree with the idea of a stimulus package, I don't think that Obama is spending the money very efficiently. Let's look at where the money is going:

BBC wrote:

Tax cuts: $27bn

As I've already explained, tax cuts are largely going to be saved or used to pay off debts.

Increased federal funds for Medicaid: $87bn

Decent move, although I wouldn't really consider it stimulus.

Moves towards clean, efficient energy: $54bn
Rebuild roads, bridges and buildings: $90bn

Can't really disagree with this.

Modernise education: $141bn

The problem here is that most of the education spending is going towards need based college grants and subsidized government loans. The problem with need based college grants is that they enable kids to make bad economic decisions (like getting 6 years of education in a topic that they will never use).

The problem with subsidizing student loans is that it enables colleges to become more expensive, because the students aren't footing the bill. For example, my university (WPI, 3000 students) is building a 50 million USD recreational facility. I don't see how this sort of spending could be possible without the government subsidizing college education.

If I were in control of that 140 billion USD:

1. Create a Merit Grant program that gives any student who scores above a 2100 on the new SATs a 140k USD scholarship (costing 7.6 billion USD per year) and any kid who gets a 5 on the AP Physics/Calculus/Chemistry/Statistics test a full college scholarship to any state flagship university of their choice to pursue a technical topic (costing somewhere on the order of magnitude of 5 billion USD per year).

Note that the costs of those programs are quite small, because only a handful of students perform at that level on math and science tests. I'm not an order of magnitude off.

2. Sign a law that would make it possible for any student to default on any student loan. This would make lenders think twice about giving a 100k loan to someone getting a degree with no real career opportunities, and it would make the size of our education spending more closely reflect the real value of education.

3. Create a national tier system of BS, MS, and Ph.D. degrees based on the candidates going into the schools and their performance outside of the schools. This would make college less expensive by stopping the endless rat race of colleges outspending each other to get ahead on the USNews rankings.

4. Create a system of magnet high schools that allow kids to get specialized education at the primary and secondary levels. That's where the building comes in.

5. Give students a stipend for doing well on subject and AP tests, relative to their learning level (in practice, this is probably just what school they're at). This will allow bright young students to work fewer hours and still support their family. Kids from upper middle class backgrounds already have the luxury of not having to work during their adolescence. In effect we're just leveling the playing field.

Help for workers, unemployment benefit and training: $102bn

Fair enough. But it seems like for $102bn you could create a lot of new jobs, as opposed to providing funds for unemployment benefits and worker retraining.

It's loaded with random costs such as spending a few hundred thousand dollars on making federal buildings more energy-efficient, things almost completely irrelevant to helping the current state of the national economy. You can be sure that this was positively loaded with many wasteful costs, being the federal government.

Yes. What's kind of ironic and disturbing to me is that for all the rhetoric the left has thrown out about stopping global warming and achieving energy independence - the stimulus package isn't focused on building nuclear power plants.

Interestingly enough, building more nuclear power plants through federal funds is a universal win-win proposition. The demand for construction workers would reduce unemployment and give more wealth to the working class. The demand for nuclear engineers would drive up engineering salaries across the board and stimulate American education in science and technology. And finally, the reduction in CO2 emissions would improve America's reputation with hippies among the world. Or maybe not, they might oppose nuclear anyway.

[Christopherr]

At 1/31/09 12:14 AM, Al6200 wrote:

At 1/30/09 10:37 PM, Christopherr wrote:

You have your terminology wrong. A government tax on a good such as gasoline isn't called a sales tax, but an excise tax. You've got to get them right if you want people to understand you.

The idea behind a stimulus package is that it forces money to flow through the economy, and not get hoarded by rich people. A tax cut isn't a stimulus, as Der Lowe has pointed out time and time again, because people will save most of the money that they get from the government.
The real issue is that while I agree with the idea of a stimulus package, I don't think that Obama is spending the money very efficiently.

Agreed. I don't even understand why you are telling me this... I never said anything about tax cuts, and I even said myself that this was inefficient spending.