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Old 10-18-2013, 04:36 PM  
KC native KC native is offline
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Tax Rates, Inequality, and US Deficits

Since we're seeing the canard about high taxation again....

http://www.ritholtz.com/blog/2013/10...d-us-deficits/
Tax Rates, Inequality, and US Deficits

Its Friday, after what was for me a long and annoying 17 days. But the shutdown is over, US markets are at all time highs, and Bob Shiller got his Nobel (more on this tomorrow).

You might think that I would be at peace with the current state of the world, but life is never that simple. You see, I have assumed the task of explaining things which require explaining. By some quirk of fate and an odd academic background, I find myself with skills in simplifying complex matters. Whether OCD or over-compensation for some other defect, this is my lot in life. (I made peace with it long ago).

As we discussed yesterday, amongst all of the background nonsense since October 1, the noise about the deficits was not really about budget deficits at all. Rather, it was about a decidedly narrow ideology held by a small percentage of Americans. Their belief is that government should be much smaller. This is a legitimate political ideology, one that has persisted over the centuries.

Their approach to this philosophy, however, is far less intellectually honest. Rather than having a full on debate on that subject — a debate they are likely to lose — they have chosen a very different approach. This time around, they made the deficit a proxy.

Because of what I do for a living, I found this offensive. Deficits impact fixed income, an important part of portfolio planning. They impact available credit, capital for investment, in a broad and varied way. Hence, the deficit is a genuine issue, a real problem that should be addressed in a mature and responsible way. It can be easily solved using intelligent solutions, but for the ideologues in Washington DC (and elsewhere) who refuse to treat it as the basic mathematics and accounting problem it actually is. The way the Tea Party and others have treated the deficit reminds me of the approach Meredith Whitney took to Municipal Debt. Both groups are stunningly ignorant about their subjects, while possessing the skills to allow them to exploit the topic, hog the spotlight for themselves and other tangential pet issues.

The Tea Party, like Whitney, turned an important question of debt and credit and solvency into one giant PR cluster****.

Back to our issue of taxes (next week, I will address spending). Amongst Industrialized Nations, the United States has amongst the lowest tax rates in the world, especially for those folks (like myself) who reside at the top of the income scale.

To demonstrate this, I want to point to the IMF’s World Economic and Financial Surveys: Taxing Times. It is chock full f great charts and data and other interesting results of the IMF survey.

The two below caught my eye. They are rather instructive for our discussion of taxes and deficits in the US.

The first looks at major industrial nations, and compares what the IMF calls their Revenue-Maximizing Tax Rates (blue line) versus their actual top rate (red dot).

As you can see, some countries — Denmark and Sweden — are at the top of the revenue maximizing ranges. Other countries — Canada and Germany — are at the bottom of their revenue maximizing ranges.

Then there is the United States, which is simply far off the scale, way below the bottom of its revenue maximizing range.

If your concern is deficits, than you must take notice of how much money the USA is leaving on the table. I am not suggesting that the role of government should be to maximize their tax revenues, but rather to suggest that if you want to close the deficit, you need to at least be in a defendable range. The US is not.


Not coincidentally, when we look at shares of Net Wealth held by the bottom 50% of he population versus the top 10%, the United States is off the scale. We are the most unequal nation in the world.



The inescapable conclusion presented to us by this data is that our tax policy is responsible for both the world’s greatest inequality among developed nations, and our ongoing deficits.

If you have a better explanation for our current conditions, or the net results of our tax policies, I would love to hear it.
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Old 10-18-2013, 04:38 PM   #2
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Didn't read any of that but noticed one chart comparing countries. There's less wealth gap in those places because the education achievement amongst the population is far closer than it is here. Education=income and kids born in our urban wastelands don't get quality educations and so, they're dead meat economically.


Sucks but there's not much you can do about it.
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Old 10-18-2013, 04:47 PM   #3
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People with money have more than poor people so something about deficits and tea party
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Old 10-18-2013, 04:49 PM   #4
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**** it.

Tax them more and see what happens.
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Old 10-18-2013, 04:49 PM   #5
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Quote:
Originally Posted by Prison Bitch View Post
Didn't read any of that but noticed one chart comparing countries. There's less wealth gap in those places because the education achievement amongst the population is far closer than it is here. Education=income and kids born in our urban wastelands don't get quality educations and so, they're dead meat economically.


Sucks but there's not much you can do about it.
Are you saying that say Howard Schultz has 800 times the education of a typical middle management employee?
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Old 10-18-2013, 04:50 PM   #6
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Great piece.
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Old 10-18-2013, 05:03 PM   #7
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Originally Posted by kstater View Post
Are you saying that say Howard Schultz has 800 times the education of a typical middle management employee?
There are billionaires in every country, dude.
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Old 10-18-2013, 05:30 PM   #8
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Old 10-18-2013, 05:46 PM   #9
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A smart person could understand that you could have more optimal rates of economic growth, taxes and spending.

But a lot of stupid people do not care about finding those optimal rates based on empircal results and informed projections.

The whole GOP approach now is to cry separately about taxes, debt and deficits, spending and government interfering with the economy, without any evaluation of how those things interact based on historical evidence and reasonable projections.
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Old 10-18-2013, 06:02 PM   #10
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Quote:
Originally Posted by Prison Bitch View Post
Didn't read any of that but noticed one chart comparing countries. There's less wealth gap in those places because the education achievement amongst the population is far closer than it is here. Education=income and kids born in our urban wastelands don't get quality educations and so, they're dead meat economically.


Sucks but there's not much you can do about it.
Why do you post out here if you read nothing that is posted?
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Old 10-18-2013, 06:04 PM   #11
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Great piece.
I second this.

And add me to the crowd waiting for a constructive explanation for why the conclusions are wrong.
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Old 10-18-2013, 06:15 PM   #12
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What's the point here? That deficits are caused by spending more than is taken?
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Old 10-18-2013, 06:24 PM   #13
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What's the point here? That deficits are caused by spending more than is taken?
You should read it again if that's what you took from it.
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Old 10-18-2013, 06:35 PM   #14
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Quote:
Originally Posted by Donger View Post
What's the point here? That deficits are caused by spending more than is taken?
The point is clear. The graphs demonstrate income inequality. Poor people are poor because they dont make as much as rich folk. And that then is deficit stuff. You rich ****ers are the reason for the end times. Deficits are NOT a function of spending. Get it?
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Old 10-18-2013, 06:37 PM   #15
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Quote:
Originally Posted by HonestChieffan View Post
The point is clear. The graphs demonstrate income inequality. Poor people are poor because they dont make as much as rich folk. And that then is deficit stuff. You rich ****ers are the reason for the end times. Deficits are NOT a function of spending. Get it?
You should stop posting. We really don't need any more demonstrations of the level of your stupidity.
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