Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

[FreshFish]

There are enough argumentative political threads....every now and then, someone posts a really good idea or offers a thoughtful insight that gets drowned out by the more raucous elements there.

I hope there is enough interest to maintain a non-partisan, non-political thread devoted to business, economics, and tax policy.

Some of it I imagine will be "wow, that's really cool, I never knew that." Other parts I hope will be "gee, thanks, that was really helpful."


I have a few ideas for specific posts that could generate some nice discussion and conversation.
> the history of cell phone pricing plans. It is really interesting to see how they evolved as capacity increased and technology advanced.
> the tax that brought in $0 in revenue and nearly bankrupted an entire industry before it was revoked
> various creative ways that people have developed to cope with the "free rider" problem or the "problem of the commons"
(for example, I read somewhere that when commercial fishermen were given power to manage fishing hauls to promote long-term sustainable harvest, they produced far better results than any governmental agency)
(the way state hunting permits are issued each year in Wyoming is pretty interesting too)


I think I'll stay away from any comments upon tax policy until next Wednesday at the earliest

 

[French Rage]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

I say your aluminum tax goes too far!

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

One of the most under-appreciated innovations in US commerce was standardized time zones.

When the transcontinental railroads started running in the 1860s and 1870s, everyone kept "local" time, and the timetables were hideously chaotic. (local time means that when the sun is directly overhead, it is noon there. Every four degrees of longitude is one minute; 15 degrees of longitude is one hour).

To quote from a longer article at http://www.webexhibits.org/daylightsaving/d.html

Standard time in time zones was instituted in the U.S. and Canada by the railroads on November 18, 1883. Prior to that, time of day was a local matter, and most cities and towns used some form of local solar time, maintained by a well-known clock (on a church steeple, for example, or in a jeweler's window).

Standardized time zones made it much easier to implement reliable schedules across a widespread network.

The use of standard time gradually increased because of its obvious practical advantages for communication and travel. Standard time in time zones was established by U.S. law with the Standard Time Act of 1918, enacted on March 19. Congress adopted standard time zones based on those set up by the railroads, and gave the responsibility to make any changes in the time zones to the Interstate Commerce Commission, the only federal transportation regulatory agency at the time. When Congress created the Department of Transportation in 1966, it transferred the responsibility for the time laws to the new department.

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

OK, I'm curious... what tax brought in $0 in revenue and nearly bankrupted an entire industry before it was revoked?

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

OK, I'm curious... what tax brought in $0 in revenue and nearly bankrupted an entire industry before it was revoked?

The federal luxury tax on yachts, passed in 1990. What were they thinking, that the US was the only country that sold yachts? Rich people just bought their yachts elsewhere, so that the US collected $0 (almost literally!) but the entire US boatbuilding industry nearly went bankrupt before the tax was repealed.

PBS did a documentary on it in 1992, and they updated it in 1996:

http://www.pbs.org/newshour/bb/government_programs/jan-june96/budget_01-01.html

The theory behind the luxury tax sounded simple enough. Congress believed anyone willing to spend $100,000 or more on a new boat surely would be willing to pay an additional 10 percent to the federal government. But that didn't happen. Rather than pay the tax, many people in the market to buy a boat either didn't buy one, or bought one overseas. As a result, the luxury tax didn't bring in much money at all, and the customers' reluctance to buy put the boat-building business, particularly here in Rhode Island, out of business. We first visited Rhode Island in June of 1992. The luxury tax had been in effect for 18 months. Tens of thousands of jobs had been lost across the country, thousands in Rhode Island alone.

...

I don't know anybody in the Marine industry that didn't know that there was a total disaster to start, and it's still amazing to think how somebody could come up with an idea that would shut off a business, and everybody that was in the business knew this would happen, and yet it floated right through.


....

It took a relentless grassroots lobbying campaign by the boat builders, but Congress finally did repeal the federal luxury tax on boats in August of 1993.

 

[5mn_Major]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

There are enough argumentative political threads....every now and then, someone posts a really good idea or offers a thoughtful insight that gets drowned out by the more raucous elements there.

I hope there is enough interest to maintain a non-partisan, non-political thread devoted to business, economics, and tax policy.

Some of it I imagine will be "wow, that's really cool, I never knew that." Other parts I hope will be "gee, thanks, that was really helpful."


I have a few ideas for specific posts that could generate some nice discussion and conversation.
> the history of cell phone pricing plans. It is really interesting to see how they evolved as capacity increased and technology advanced.
> the tax that brought in $0 in revenue and nearly bankrupted an entire industry before it was revoked
> various creative ways that people have developed to cope with the "free rider" problem or the "problem of the commons"
(for example, I read somewhere that when commercial fishermen were given power to manage fishing hauls to promote long-term sustainable harvest, they produced far better results than any governmental agency)
(the way state hunting permits are issued each year in Wyoming is pretty interesting too)


I think I'll stay away from any comments upon tax policy until next Wednesday at the earliest

Ah, so youre starting a political thread.

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Ah, so youre starting a political thread.

...only if you're Larry Kudlow, who typically says during his show: "Free market capitalism is the best path to prosperity."

 

[manurespreader]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Well here's a tax policy post. We currently subsidize peanut farmers big time. Why do we do that? Shouldn't we eliminate the Peanut subsidy?

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Ah, so youre starting a political thread.

well, how about we include political science but not current events political discussion, is that a fair compromise?

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Well here's a tax policy post. We currently subsidize peanut farmers big time. Why do we do that? Shouldn't we eliminate the Peanut subsidy?

Seems that we should eliminate all government production subsidies, no?

Of course, such a blanket statement can quickly become problematic*: what about direct purchases of goods and materials by the government, is that a "subsidy" or not? how would the price be set? (monopsony is the technical term in which there is only one buyer, it is the complement of monopoly in which there is only one seller. However, when the government is the only buyer, all sorts of political complications enter into the picture...normally a monopsonist can demand low prices just as normally a monopolist can charge high prices, but when either entity is the government then typical market-clearing mechanisms won't work...)




*I was sorely tempted to include "the law of unintended consequences strikes again" as a subtitle to this thread.

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

In a thought-provoking essay, one of the earliest members of the Libertarian Party in 1972 now wonders if the idea of a Libertarian Party, given the way the US electoral system works, was a mistake:

Unlike a parliamentary system in which governments are formed by coalitions of large and small parties, our electoral system is a first-past-the-post, winner-take-all one in which a winning presidential candidate just needs to get more than 50% of the vote. This means each contending "major" party is itself a coalition that needs to assemble enough diverse voting groups within it to get to 51%. Hence the need to appeal to the so-called moderates and independents rather than the more "extreme" elements within.

To the extent that a third party is successful, it will drain votes from the coalition party to which it is closest and help elect the coalition party that is further removed from its interests. [emphasis added] The Libertarian Party's effort will, if effective, attract more libertarian voters away from the candidate who is marginally less hostile to liberty, and help hand the election to the candidate who is more hostile to liberty.

....

Some have defended the LP by saying it is an expressive outlet for political libertarians, as distinct from more intellectual or policy types. Here too the LP has been counterproductive. By drawing libertarian politicos from both major parties, the LP makes these parties less libertarian at the margin than they would otherwise be. In each major-party coalition, the libertarian element is weaker precisely to the extent that libertarian politicos are expending their energies on behalf of the LP.

Libertarian activists should choose whichever party they feel more comfortable working within. That's what Ron Paul did. Likewise, Rand Paul has brought his libertarianism inside the GOP tent. The small-"l" libertarians in the tea party movement identified the Republican Party as the coalition closest to their concerns about fiscal responsibility and the growth of government power, and they have gone about making the GOP more libertarian from the grass-roots up. They have moved the party in a libertarian direction, as has the Republican Liberty Caucus.

The bolded text is a good example of what happened with Ross Perot's 1992 third-party candidacy, he drew more votes away from the moderate Bush I so that the much further left wing 1992 Clinton won. Fortunately for us, Clinton had the genius in 1994 to pivot to the center, from which he became a very effective President, who completely repudiated the 1992 Clinton along the way to reforming welfare, ratifying NAFTA, running budget surpluses, and saving Bosnian Muslims from genocide.

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

In a thought-provoking essay, one of the earliest members of the Libertarian Party in 1972 now wonders if the idea of a Libertarian Party, given the way the US electoral system works, was a mistake:

The bolded text is a good example of what happened with Ross Perot's 1992 third-party candidacy, he drew more votes away from the moderate Bush I so that the much further left wing 1992 Clinton won. Fortunately for us, Clinton had the genius in 1994 to pivot to the center, from which he became a very effective President, who completely repudiated the 1992 Clinton along the way to reforming welfare, ratifying NAFTA, running budget surpluses, and saving Bosnian Muslims from genocide.

Now is their chance to shine. The GOP is in shambles, and needs to fold.

 

[joecct]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Now is their chance to shine. The GOP is in shambles, and needs to fold.

There was a Canadian election in the last 20 years where the ruling Progressive Conservatives were reduced to (I believe) 3 seats in the House of Commons. They came back all the way.

They may have to recycle the leadership, but that's the price that usually has to be paid. Status quo ain't going to cut it.

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

The characters in The Wizard of Oz (the book, not the movie) can be seen as allegorical representations of the issues and people of US politics from the 1896 Presidential election campaign.

Background: The Depression of 1893 was caused by a severe monetary contraction. The money supply was linked to gold. As economies grew and the amount of gold in circulation was fixed, the contracting money supply led to serious deflation and severe economic hardship.

The Democrat solution was to increase the money supply (which actually came about, although not as a result of deliberate policy choices). Gold and silver were interchangeable as currency in a fixed ratio of 1:32; their proposal was to change this ratio to 1:16, effectively doubling the money supply and thereby bringing an end to the deflationary pressures.

Cyclone = winds of change
Dorothy = “everywoman” your archetypal American citizen
Scarecrow = agricultural worker
Tin Man = industrial worker
Cowardly Lion = William Jennings Bryan, the Democrat candidate for Presidency in the race vs William McKinley. Lion rhymes with Bryan, and also he was noted for his oratory. Called “cowardly” perhaps because he opposed the Spanish-American War?
Wicked Witch of the East = Wall Street bankers (who else? )
Wicked Witch of the West = land barons who owned or controlled huge swaths of land
Good Witch of the North = farmers of upper midwest
Good Witch of the South = southern Populist Party, an influential regional political party at that time
Yellow Brick Road = Gold standard
Silver slippers (in the book, changed to ruby for the 1939 movie) = issuing silver coins as official currency
Oz = Ounce, the “wizardry” being the changed ratio between silver and gold
Emerald City = “greenbacks” paper currency not backed by any metal (in the book, all visitors to The Emerald City had to put on glasses whose lenses were tinted green. The Emerald City was an illusion of prosperity, just as the promise of paper currency was seen as an illusion of sound money which, without backing, would merely lead to ongoing cycles of inflation without any “real” economic growth to show for it)
Toto = the Prohibition Party (a small but vocal third-party at that time), a pun perhaps on Teetotaler
Flying Monkeys = Native Americans, a once-proud and free people, now enslaved

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

You know, there's just a small part of me that hopes no deal is struck and Taxmageddon occurs, not to mention gridlock occurring on the debt ceiling. Perhaps then, this country will realise that these entitlement programs don't work.

 

[Timothy A]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

You know, there's just a small part of me that hopes no deal is struck and Taxmageddon occurs, not to mention gridlock occurring on the debt ceiling. Perhaps then, this country will realise that these entitlement programs don't work.

Yeah, but it's just after an election, so after 2 & 4 years go by everyone will have forgotten about the Taxmageddon, there will be no ramifications (getting voted out) to the elected officials who allowed this to happen. And the financial hit to the middle class will be catastrophic because 90% of them don't have enough financial flexibility to pay for the higher taxes. I know that bump will blow my budget I have set up right out of the water. I have it set up to last to last another 3 years, before things change and I can re-work it.

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Tax reform is being talked up again. Secretary of the Treasury Henry Morgenthau in 1941 had a superb proposal that was perfect for WWII and also perfect for today's needs; it barely did not make it through (due to a misinformation campaign, naturally. ).

This idea would eliminate the distinctions between personal income tax, dividend tax, capital gains tax, gift tax, and estate tax, and replace them all with a very neat, tidy structure (this is for personal income tax not corporate tax)

1) List all cash that flows into the household, from any source:

> earned income
> investment income
> asset sales
> withdrawals from savings
> insurance claims
> gifts received
> inheritances
> loan principal
> scholarships
> government benefits
> etc.
​

2) Subtract from # 1, any of the following:

> asset purchases
> deposits to savings
> insurance premiums
> healthcare expenditures
> charitable donations
> tuition payments
> gifts made
​

3) Pay tax on the difference in a graduated rate structure, perhaps with a standard deduction and personal exemptions



The concept is simple: anything that contributes to capital formation is not taxed.

The simplicity is nice too, we do away with all sorts of special rules and special rates; we have one set of rates across the board.


This kind of tax structure also would have ancillary benefits for the environment; fancy packaging would become less attractive as people would want to get more value from their purchases.

 

[Almington]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Tax reform is being talked up again. Secretary of the Treasury Henry Morgenthau in 1941 had a superb proposal that was perfect for WWII and also perfect for today's needs; it barely did not make it through (due to a misinformation campaign, naturally. ).

This idea would eliminate the distinctions between personal income tax, dividend tax, capital gains tax, gift tax, and estate tax, and replace them all with a very neat, tidy structure (this is for personal income tax not corporate tax)

1) List all cash that flows into the household, from any source:

> earned income
> investment income
> asset sales
> withdrawals from savings
> insurance claims
> gifts received
> inheritances
> loan principal
> scholarships
> government benefits
> etc.
​

2) Subtract from # 1, any of the following:

> asset purchases
> deposits to savings
> insurance premiums
> healthcare expenditures
> charitable donations
> tuition payments
> gifts made
​

3) Pay tax on the difference in a graduated rate structure, perhaps with a standard deduction and personal exemptions



The concept is simple: anything that contributes to capital formation is not taxed.

The simplicity is nice too, we do away with all sorts of special rules and special rates; we have one set of rates across the board.


This kind of tax structure also would have ancillary benefits for the environment; fancy packaging would become less attractive as people would want to get more value from their purchases.

No, because it would basically be a consumption tax which would be painfully regressive.


My idea would eliminate the distinctions between personal income tax, dividend tax, capital gains tax, and replace them all.

1) List all cash that flows into the household, from any source excluding inheritance, insurance payouts, and personal gifts:

2) Subtract from # 1 an amount based roughly on the Federal Poverty guideline:
$12,000 per adult
$4,000 per dependent child

3) Pay tax on the difference at a flat rate of ~20% to ~25%.

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

No, because it would basically be a consumption tax which would be painfully regressive.

Acutally, depending on the definitions used, no one would pay any tax at all.

 

[Almington]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Actually, depending on the definitions used, no one would pay any tax at all.

True, depends on what you consider an asset purchase.