Plan B Forum

What we need to keep in mind is that both 'entitlements' and tax breaks which selectively advantage the highest income earners are both ways of redistributing income.

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http://jaredbernsteinblog.com/um-about- ... n-thingie/

Um…About that Redistribution Thingie…

Sep 21, 2012

Update: Nice WaPo editorial on this: “To tax is to redistribute. To govern is to redistribute. Benefits from government spending flow in different amounts to different individuals and different states.”

Lots a words flying around about who is and isn’t a “European-style-five-year-planning-redistributionist.”

Let’s look at some facts.

First, from some work by my CBPP colleagues, here’s a picture comparing shares of the population by income with shares of entitlement benefits, including Social Security, Medicare, Medicaid, UI, EITC, and a bunch of other stuff. The bottom fifth receives a larger share of benefits than their income share and visa-versa at the top, which is what you’d expect in a system where some, though not all, benefit receipt is conditional on income.

The middle class benefit share is proportionate to its income. All told, clearly some redistribution here but not anything that would lead to stark divisions between “makers and takers.”



But what if we look at another type of entitlement in our system: tax expenditures? Those are the credits and deductions you subtract from your tax liability for favored expenditures and income types, like capital gains or the mortgage interest deduction.



Those tax benefits are redistributed upwards. Two-thirds go to the top 20% and 24% of the benefits go to the top 1%.

Finally, here’s a disturbing little picture from Goldman Sachs reseachers about whose incomes get whacked by the tax increases (and loss of UI benefits) associated with the fiscal cliff. One point is of course the contractionary impact of income losses next year—if we go over and stay over the cliff*—that range from 9% for low-income households to 7% for high income ones.

THE FISCAL CLIFF EFFECT BY INCOME GROUP



Source: GS Researchers

But another thing you see here is who’s fighting for whom. If, like Congressional R’s, you’re fighting to get rid of UI benefits but preserve the high-income tax cuts, you’re an upward redistributionist. If, like some of the D’s, you’re ready to finally let the high end tax cuts sunset in the interest of deficit reduction (about $1 trillion over ten years), while preserving UI for the long-term unemployed, you’re trying to steer more benefits to the low end.

So let’s be clear about this. In a system like ours with so many tax and benefit cross-currents, there’s always a lot of redistributing going on. And it goes both ways.

*If we go off the cliff but reverse course quickly, reinstating, e.g., the middle-class tax cuts, extended UI benefits, and payroll tax cuts, this picture looks a lot less bad at the middle and low-end of the income scale.
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yrs,
rubato

So a tax cut (aka didn't take in as much money) is considered an "expenditure"? So if I bring home less money this week it means I spent it?

How about the gov (all levels) spend less than what they take in.

oldr_n_wsr wrote:So a tax cut (aka didn't take in as much money) is considered an "expenditure"? So if I bring home less money this week it means I spent it?

Well, if you decide to work a little less and earn, say, $100 less this week, it has exactly the same effect on your budget as if you decided to spend an extra $100 this week.

And if you were deep in debt, deciding to forgo that $100 of income would be just as irresponsible a decision as deciding to spend the extra $100--maybe even more irresponsible, if the extra $100 expenditure was one that was necessary and unavoidable.

It is positively amazing the conclusions you can draw when you completely separate from reality. A tax deduction is an "expenditure." W. O. W.

It is this sort of "logic" by which one concludes that someone who paid almost two million dollars in federal income tax is "not paying his fair share."

oldr_n_wsr wrote:So a tax cut (aka didn't take in as much money) is considered an "expenditure"? So if I bring home less money this week it means I spent it?

How about the gov (all levels) spend less than what they take in.

Mathematically a tax cut is exactly equal to an expenditure in increasing the deficit.

If you spend $100B more it has the same effect on the budget as cutting taxes by $100B.

I would think this was obvious.



yrs,
rubato

dgs49 wrote:It is positively amazing the conclusions you can draw when you completely separate from reality. A tax deduction is an "expenditure." W. O. W.

It is this sort of "logic" by which one concludes that someone who paid almost two million dollars in federal income tax is "not paying his fair share."

He is paying a much smaller share in taxes than we do with an income which is about 1.6% of his.

You know how percentages work, don't you?

yrs,
rubato

it has exactly the same effect on your budget as if you decided to spend an extra $100 this week.

My budget may not know the difference, but if I bought something (expenditure) at least I have that "item" (asset?).

If I take home less, I cannot purchase that item nor pay down my debt. The total at the bottom of the page may be the same, but a debt is not paid or a purchase is not made, so some other column is not filled in.

If you spend $100B more it has the same effect on the budget as cutting taxes by $100B.

But now you do not have any assets to show for the "expenditure" be it labor by employees or tangible assets.

Sounds like you're agreeing that deliberately reducing your income is more irresponsible--or at least just as irresponsible--as spending more money. (Depending on what you're getting for the money you're spending.)

Taking the family budget analogy a little further: if you could earn a lot more by going back to working that overtime you decided to give up than your wife and kids could by doing odd jobs and part-time work, it would probably be a better idea for you, the high-earner of the family, to contribute the most additional revenue to pay down the family debt.

So it was irresponsible for the Republicans to cut incoming revenues (taxes) twice under Bush, and irresponsible for them to refuse to restore those revenues (even though that's what the law that lets those tax cuts expire says that they have to do) and it is irresponsible for them to now insist on reducing federal revenues even further by, say, eliminating the income tax on capital gains (even though Warren Buffet's capital gains are clearly just as spendable as a truck driver's hourly wages).

oldr_n_wsr wrote:

it has exactly the same effect on your budget as if you decided to spend an extra $100 this week.

My budget may not know the difference, but if I bought something (expenditure) at least I have that "item" (asset?).

If I take home less, I cannot purchase that item nor pay down my debt. The total at the bottom of the page may be the same, but a debt is not paid or a purchase is not made, so some other column is not filled in.

If you spend $100B more it has the same effect on the budget as cutting taxes by $100B.

But now you do not have any assets to show for the "expenditure" be it labor by employees or tangible assets.

Another way to describe it is that a tax cut (for the rich) which is added to the deficit (like Bush did) is not a tax cut. It is a tax transfer to the future. So Dales kids are fucked in the future to make Mitty's buddies richer today.

yrs,
rubato

How about spending less, then it is not a "tax transfer" to the future.

Collecting more from "anyone" is not the way to go. Sending tons of money overseas when our own are starving/uneducated is not the way to go. If the rich in this country take advantage of shelters and deductions, that's the way it is set up. Change it if it is so "unfair". I challenge anyone to show their tax return that shows they did not take advantage of any and all deductions they were allowed to take advantage of. And I am sure that more than my tax return takes advantage of things we really should not.

And yes, I do believe in working harder (longer) to make more money, however, when the gov (all levels) sucks the money that I achieved from that work, then I still am at a zero gain as far as my budget goes. But on the "back breaking" end, I am at a net loss as I worked longer and harder just to tread water. I do not deny the rich their money. Most people who I consider rich have earned every penny. They were not given anything but the opportunity. I know more than a few who were given the same opportunity who are no where near rich. As a matter of fact, they squandered that opportunity and are now on DSS.

I am not rich, I would say for my area I am middle-middle class. The gov needs to spend less. When the words "TRILLION DOLLARS" are thrown around like cents, there is a serious problem. Jobs need to be created. Less regulations on small businesses need to be implemented. I know quite a few self employed contractors and it is ridiculous hearing what they have to go through to conduct business on a daily basis.

If the rich get their money mainly from investments, more power to them. I get money from investments and enjoy the lesser tax that investment dividends pay.

I have never understood the lingo behind "tax cuts". Like it was something they were giving us rather than just not taking as much as they were. It was my hard earned money and if you take less, I don't owe that to you in the future. Any time you "cut" taxes, if you take away that cut, then to me, it raises my taxes and you should call it what it is, raising taxes.

Bottom line, spending needs to be cut. I have been tightening my belt for the last four years, still only owe what's left on my mortgage, yet the feds have gone 6 TRILLION more into debt. Something is wrong and the status quo is not the way as far as I can see.

oldr_n_wsr wrote:How about spending less, then it is not a "tax transfer" to the future.

Collecting more from "anyone" is not the way to go. Sending tons of money overseas when our own are starving/uneducated is not the way to go. If the rich in this country take advantage of shelters and deductions, that's the way it is set up. Change it if it is so "unfair". I challenge anyone to show their tax return that shows they did not take advantage of any and all deductions they were allowed to take advantage of. And I am sure that more than my tax return takes advantage of things we really should not.

And yes, I do believe in working harder (longer) to make more money, however, when the gov (all levels) sucks the money that I achieved from that work, then I still am at a zero gain as far as my budget goes. But on the "back breaking" end, I am at a net loss as I worked longer and harder just to tread water. I do not deny the rich their money. Most people who I consider rich have earned every penny. They were not given anything but the opportunity. I know more than a few who were given the same opportunity who are no where near rich. As a matter of fact, they squandered that opportunity and are now on DSS.

I am not rich, I would say for my area I am middle-middle class. The gov needs to spend less. When the words "TRILLION DOLLARS" are thrown around like cents, there is a serious problem. Jobs need to be created. Less regulations on small businesses need to be implemented. I know quite a few self employed contractors and it is ridiculous hearing what they have to go through to conduct business on a daily basis.

If the rich get their money mainly from investments, more power to them. I get money from investments and enjoy the lesser tax that investment dividends pay.

I have never understood the lingo behind "tax cuts". Like it was something they were giving us rather than just not taking as much as they were. It was my hard earned money and if you take less, I don't owe that to you in the future. Any time you "cut" taxes, if you take away that cut, then to me, it raises my taxes and you should call it what it is, raising taxes.

Bottom line, spending needs to be cut. I have been tightening my belt for the last four years, still only owe what's left on my mortgage, yet the feds have gone 6 TRILLION more into debt. Something is wrong and the status quo is not the way as far as I can see.

The economic collapse, caused by BushCo, has caused most of the spending increases.

1.
When people lose their jobs more of them get unemployment. costs more.

2.
When people lose their jobs more of them get food stamps. costs more.

3.
When the economic collapse (caused by Bush Co. policies which Mitty has promised to repeat) causes a reduction in total income, tax collections are reduced. Reduced tax collections = higher deficits.

4.
BushCo era tax cuts for the rich were not allowed to expire because Obama could not pass any legislation otherwise.
More deficits.


When you eliminate the effects which are purely due to the collapse Obama has a better spending record than any Republican president, ever.



yrs,
rubato

Blame Bush. And Bush could blame Clinton (remember the dot-com collapse) and Clinton can blame Bush 1 and Reagan can blame Carter. But each of those people actually did something. Obama has done nothing. Remember green energy investments? Where is Solyndra (sp?) So feeding the rich and their cronies is not just a republican mantra.

All I know is the economy is the worst I have seen since Carter. Remember 14% interest rates? Unemployment in the stratophere. Infaltion running rampant. I suppose that was Nixan/Fords fault. But of course it was because no democrat ever has caused a problem for the economy.

I had just entered the workforce for real and jobs were scarce. Now 36 years later we are in the same thing. Blame is useless. Seems every president inherets some kind of problem. Obama had the house and senate for his first two years, and here two years after that, what do we have? Less median income, less equity, less of everything but taxes and fees. And in January, watch out.

You may hate republican "en mass" but I hate no one. I look at my situation and those around me and four years ago we all were much better off.

We need a leader who will say, "I can fix this" and actually do it. Obama is the best talking head I have seen (heard?) but he does nothing but blame the situation he got himself into. He willingly campaigned for the job and once he got it all I have heard is, "it's worse than I thought" well ldidn't you check that out before hand?, or "those shovel ready jobs weren't as shovel ready as we had thought" well didn't anyone check that out ahead of time? and in the mean time, where did that money go that was supposed to go for shovel ready jobs?

I don't believe Romney is the answer, but judging on the last four years, Obama is not the answer. I am scared for the future of this country.

you forget about the saving of the domestic auto industry? If Mittens would have had his way there would be no Domestics left (and severly hobbled international companies) THe Obama Administration worked that one out far better than I had hoped (the auto industry is a complex beast yet people love to force it into a square hole (to mix a metaphor))

I don't believe Romney is the answer, but judging on the last four years, Obama is not the answer. I am scared for the future of this country.

You really want to get depressed oldr?

Consider the fact that it's a traditional truth of modern times that a President's second term is less successful than his first....

So if you want to imagine what a second Obama term would be like think of the first one, only not as good.....

(Okay, now don't go reaching for the bottle... )

(Some would argue that Clinton's second term might be considered an exception to this...the first two years of his first term were pretty much a waste...though it's tough to call a term where you manage to get yourself Impeached "successful"...)

But don't most economic recoveries (and crises for that matter) come about during a president's second term? As i recall, the bulk of the recovery in the 80s was during Reagan's 2nd term, ditto for FDR (although it might have more been his 3rd term too). I think it's a coincidence, but I do think that's been the experience.

Crackpot wrote:you forget about the saving of the domestic auto industry? If Mittens would have had his way there would be no Domestics left (and severly hobbled international companies) THe Obama Administration worked that one out far better than I had hoped (the auto industry is a complex beast yet people love to force it into a square hole (to mix a metaphor))

This is a liberal talking point, with little basis in reality. Dales has already posted an article showing how bad the condition of GM is after the Obama bailout. Note that Ford, which went its own way, is much stronger than GM or Chrysler. What would have happened to GM and Chrysler, without the special bailout, is that they would have gone through reorganizing bankruptcy, and in that well-established procedure, would have dropped unprofitable dealers, models, plants, executives, contracts, etc., and kept its good performers; certain unsecured debt would have been reduced or eliminated; and the companies most likely would have ended up more competitive as a result. Oh, and the U.S. taxpayers would not have spent at least $25 billion propping up these inefficient companies.

Long Run wrote:What would have happened to GM and Chrysler, without the special bailout, is that they would have gone through reorganizing bankruptcy, and in that well-established procedure, would have dropped unprofitable dealers, models, plants, executives, contracts, etc., and kept its good performers; certain unsecured debt would have been reduced or eliminated; and the companies most likely would have ended up more competitive as a result. Oh, and the U.S. taxpayers would not have spent at least $25 billion propping up these inefficient companies.

Except that, absent the bailout, they would not have had the resources to continue operating through a bankruptcy reorganization, and thus they would have had to shut down. Which would have meant that they would have pulled down their entire network of suppliers with them, which would have meant that the ENTIRE U.S. auto industry, both foreign- and domestic-owned, would have collapsed.

The notion that creditors were prepared to carry GM and Chrysler through a prolonged Chapter 11 is ridiculous. That is why the government had to, and did, step in.

What Scooter said. THe sheer Havoc Bankruptcies at Both GM and Chrysler would have destroyed the Global suppler network. Ford which Made it trough unscathed without the bailouts would have definitely been pulled under and all major Foreign Automates would have been pulled to the brink (if not gone under as well).

Do you really think the thousands of global suppliers that would have been affected by the bankruptcies could have afforded to take a roughly 30-40% loss of new and existing work and still continue to function?

Do you think other automakers could deal with losing approximately 25-30% of their suppliers?

Like it or not there was a lot more at stake with the Automotive bailouts than much repeated and completely bullshit "handout to the unions"