Flat Tax(ish)

Gabriel, you have either been doing post-doc research in this area or you have been playing with your own money.

You're right this is an extremely complicated question. My own knowledge is a tad sketchy, but here's how it was explained to me by someone who is a lot smarter than I am...

When Rubin became President in 1992... oh, I mean when President Clinton appointed Mr. Rubin as Treasury Sec, the US economy had bottomed out, but Japan was still tanking and the rest of the Asian Tigers weren't roaring very loud (sorry). Plus, the Mexican crisis was just over the horizon.

One of the first things that Rubin did was follow up on the Bush I tax increase with additional tax increases. Despite any evidence that tax increases actually reduce deficits, the bond market liked it cause it showed that Congress could indeed actually raise taxes. The improved bond market lead to lower interest rates and a stronger dollar.

Sec. Rubin then primed the pump by encouraging Western countries to lend money to the Asian Tigers. At the same time, the US's strong dollar policy created import demand for the goods (primarily tech products) being made by the Asian Tigers. To manufacture these goods, these same Asian Tigers would have to use their borrowed funds to buy the intellectual know how from US companies, who would then buy more tech toys from the Asian Tigers in order to develop more intellectual property, which would then be sold to the Asian Tigers to manufacture still more tech toys and the road goes on forever.

Sounds convoluted, but it worked, except for Japan which could not match the low cost producing capiabilities of the other Aisan Tigers.

Well, it worked up until, I think, about 1998 when the inflationary pressure of too much money chasing too few goods shot the Aisan Tigers in the foot. (Anybody remember the Malayisan monetary crisis? This also the same time that the billionaire communist, I forget his name, made all his money. He's the one giving all this money to Democractic candiates. Wonder why?)

In the US, Y2K fears keep the party going way too long. People kept buying tech even though the predicted productivity gains never materialized. (We are now just starting to see these gains.)

This brings us to the crash of 2000/2001. (And, of course, by this time, Mr. Rubin is now long gone.)

In 2001, President Bush wins the election (Notice that I said win. He did not "steal" the election. He won it. Geeze, get over it.)

His new Treasury Sec, Mr. Simon, immediately starts talking down the dollar and the dollar has been tanking ever since.

Of course, a cheap dollar helps US exports and is supposed to keep UNION jobs at home. (Always look for the union label.)

When Sec. Simon didn't sign up for Bush II tax cuts, President Bush fired his ass and got one who would. However, this time, the bond market didn't freak and interest rates started falling. In fact, some souls were even talking about De-flation. Imagine that!

President Bush then invites ole Putin over to the ranch for a chat. I wasn't a fly on the wall, but the word is that the talk went something like this:

"Putin, I heer that you gotta a lot of that der oil you wanna sell"

"Das right, Comrade, uh, I mean, fellow citizen of the world, only problem are ROC (Russian Organizied Crime) types in my country who have stolen our entire infra structure for pumping oil."

"Well, Putter, ole boy, have I gotta a deal for you. Howza bout you agree to buy a whole lot of oil field stuff from the U-S-of-A, and we'll buy all the oil you can pump. Meanwhile, we'll help you put a major hurt on your ROC guys. In return, you can help us do a number on those darn camel jockeys."

"Comrade President, you have a deal!"

In the meantime, we have 9/11, Iraq, North Korea, SARS, Mad Cow, and Dr. Howard Dean. But somehow, we keep on keeping on and things start looking better and better. I know that this is complicated, but we live in interesting times. Because I think that I'm over my 20-page limit, I'll stop flapping my fingers and give you a chance to give your explanation. I'm really interested to hear your thoughts.

DrTax

 

A flat tax must BE THE SAME for all income levels or it is not a flat tax...get it ???

I would support say a 15% maximum tax rate........with NO DEDUCTIONS of any kind whatsoever. And a law forcing government to balance budgets and repay debt while maintaining certain ratios.....just like shareholders (voters) holding CEO's (The TreasSec and others) responsible.

The problem is that people who vote Democrat would never support this because the "trough of entitlement" would empty overnight.

Now....unfortunately, that would also probably put DrTax and a few others out of business due to the simplicity of filing returns and for that I apologize....

 

Hey Babe, freedom just another word for nuthin left to lose...

DrTax as he heads for the bread lines...

 

TOP. Some of you have not been doing your homework! With all the international and financial guys on this list, I thought that this would get more responses. Again, I am curious about your thoughts as I am truly an amateur in this area. To repeat, if a strong dollar was a good idea during the 90s, why is a weak dollar the answer for the new millennium?

Thx, DrTax

 

couple things:

treasury sec simon? ya mean paul o'neil?

that communist currency trader you refer to is george soros. he made a billion plus betting against the bank of britain. don't remeber of any large publicized wins in asia. (of which he has been and is currently betting against the dollar)

as far has the plummeting dollar is concerned. no country has ever devalued it's way to prosperity. this is just one of the many "prime the pump" activities to get the old USA back to work and bush re- elected.

it's pretty hard to tell the average american that "wage wise" he is over paid and then get them to vote for you.

 

Yes, sorry bout dat, I did mean O'Neil.

I really like your comment about devaluing to prosperity. My support area was economics and one professor told me that the historical records show that every country that has ever existed has always devalued its currency over time, e.g., the Romans used to dilute their gold.

So please continue. I have moved this question over to another thread on the dollar. I'm still a student at this stuff and appreciate your thoughts.

DrTax

 

What services would you be willing to give up though?

I remember a while ago on here someone said that he worked for the gov't and he could remember when guys didnt come in for months at a time and still got a paycheck. It'll never happen, but if this could only be stopped, then yout tax cuts could happen with out any service cuts.

If you dont like paying 42% (is that the highest bracket?), just be thankful you dont live in the netherlands. They pay twice that.

 

beware when these politicians start bringing up what tax rates are like in other countries.

not only is there lax enforcement but many countries have loop holes gallore as far as whats taxed and at what rate. generally speaking earned income (wages) are taxed at higher rates but they have significantly or no taxes on investment income, cap gains etc.

as far as what services would i be willing to give up: all but these

defense
federal law enforcement / judicial system
regulatory agencies

medicare and social security (while good policies in principle) have been utterly, completely exploited and mismanaged buy the govt since inception and shoul have been managed and controlled privately. both have done tremendous harm to the lower/middle class in the name of their "safety"

 

I second henryr 110 %.

 

Looking back, maybe now you can appreciate what the Reagan tax bill of 1986 did, i.e., lower the top rate to 28% for EVERYTHING! This bill also wiped out tax shelters, particularly real estate (don't ask me how I know this ;( )

If only, the Democratic Congress could have left this alone. We might not have the mess we have today.

Henry, I don't know how old you are. (I'm only 22, and I don't mind dying.) But there is a huge problem on the horizon. Namely, there were roughly 90 million Baby Boomers. There are only roughly 60 million Gen Xs. You do the math. It ain't gonna work.

Personally, I'm cool with all this because I have come to the realization that I'm never going to retire. I'll be just like my granddad and work till the day I die.

But there's even better news. If I'm not going to retire, this means that I don't have to save for retirement, yes/no/maybe? And if I'm not going to save for retirement, this means that I can spend more money now! Great gawd almightly, where's my Ebay account?

DrTax

 

correct, there is a huge problem because government has once again failed us.

social security should have been setup as follows (instead of employees paying fica taxes to the government in return for their future benefits):

employees should have been required to put 6% (or whatever rate) into a private account on their behalf managed by a mutual fund or such just like IRAs. now before all these dems start howling about how u cannot let people "risk" their retirements in the mkt, the treasury could establish investment criteria for these accounts. say two types: 1) that invests 100% solely in US govt debt 2) 80% US debt 20% Sp500 index

the above combined with a govt guarantee to provide a min payment based on the option 1's return to people that qualify for social security early for disability and such would have accomplished the following:

constrained govt spending
provided a vast pool of capital for private sector investment
increased our saving rate
provided increased benefits
an inheritance to pass along when u die.
among others

plus, theres not one downside.