patrick.net

Kevin says

The cold war had just ended, china wasn’t open yet

The trade deficit with China actually started getting rolling ca. 1995.

1993 $22B
1995 $33B
1997 $50B
1999 $70B
2001 $83B
2003 $124B
2005 $200B

I think this trade deficit was certainly a hidden stimulus of the Clinton-Bush economy. It came with the rise of the big-box retailer -- thanks to imports a lot of things got cheaper to procure in the 90s and retail got more efficient too. This was a significant boost to the overall economy, counterbalanced by the outsourcing involved started shutting down what consumer manufacturing we still had. The import boom benefitted everyone, while the offshoring of labor liquidated a much smaller population (the needs of the many outweigh the needs of a few).

Also, I think one dynamic that is missing in the economic analysis of the 70s through 90s is the baby boom passing through.

In 1975 the peak BB cohort was 20. In 2000 it was 45. I was in Fresno for part of that time and the city expanded right along with this boom, and I think there was some causation here, not just correlation.

Troy says

I think this trade deficit was certainly a hidden stimulus of the Clinton-Bush economy

Two sides to it. Loss of income due to outsourcing, effecting some, but stimulative benefit of nearly slave labor making many consumer goods. I think it is especially noticeable in clothing and electronics.

Troy says

the city expanded right along with this boom, and I think there was some causation here, not just correlation

I agree, and I think the stock market was effected too, with all of the 401K and other money from boomers entering their peak earning years.

CaffeineAddict says

I know I personally will be less inclined to work more hours for “more” pay if I only see 30 cents of that last dollar I earn (after federal, state, city taxes…). I’d rather work less even if my total income is less.

Except high income workers don't usually work by the hour. There are exceptions, such as doctors. But even there, there is a reason for calling it a "practice." If you are in a high income job that requires a lot of hours, decreasing your hours may mean that you are failing. That is, working less is often not an option.

I know I personally will be less inclined to work more hours for “more” pay if I only see 30 cents of that last dollar

Great, with 20% unemployment that will mean more work for somebody else who needs it.

Raising taxes is the answer to unemployment . . . who knew??

CaffeineAddict says

How do you “pay yourself in capital gains and dividends?”

Doctors do this by funneling their wage income through shell S-Corps. It was one of the tax reforms that got lost in the big battle earlier this year, thanks to Senator Snowe refusing to vote against the Republican filibuster with this tax change (on shell corporations) in it.

The IRS is of course on to this tax evasion but people with S-Corps and C-Corps have a wide latitude to determine what is their wages and what stays in their company. As long as they pay themselves a fair wage from the corporation everything else can be left in the corporation, for withdrawal at dividend tax rates at their leisure.

Troy says

CaffeineAddict says

How do you “pay yourself in capital gains and dividends?”

Doctors do this by funneling their wage income through shell S-Corps. It was one of the tax reforms that got lost in the big battle earlier this year, thanks to Senator Snowe refusing to vote against the Republican filibuster with this tax change (on shell corporations) in it.
The IRS is of course on to this tax evasion but people with S-Corps and C-Corps have a wide latitude to determine what is their wages and what stays in their company. As long as they pay themselves a fair wage from the corporation everything else can be left in the corporation, for withdrawal at dividend tax rates at their leisure.

Were doctors well known to do this, because a number of posts specifically mentioned that profession?

Anyway I personally know of any practice that did this (limited n of course) and in fact knew 1 physician who said his group was told about some sort of loophole (which I'm guessing was this) that their accountant tried to convince them to set up, but they didn't.

The S-Corp thing wasn't that big a deal -- just requiring more payroll tax payments from small professional S-Corps -- but it rankled enough people to get pulled from HR 4213, the erstwhile bolus of tax benefits and changes that has been broken up and passed mostly individually now.

"Specifically, the provision targets S corporations engaged in a “professional service business,” which it defines as “any trade or business if substantially all of the activities of such trade or business involve providing services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services.”

“There is the potential for taking out smaller salaries subject to payroll tax, and taking out the rest as distributions,” noted Rick Thompson, a tax partner at Sikich LLP.

“Years ago, some S corporation shareholders were being really abusive by not taking any salary and claiming everything as a distributions,” he added. “If the IRS saw no officer compensation on a return but saw distributions, it would send a notice telling the shareholder to pay the payroll tax. The fact that the new provision targets smaller S corporations indicates that the perceived abuse is primarily at lower levels. It’s unusual to see people playing around with salaries at higher levels.”

http://www.webcpa.com/news/Tax-Extenders-Bill-Provokes-Controversy-54402-1.html

Most doctors go to c corp and s corp to limit liability not for tax reasons. The s corp doesn't get double taxed so most prefer that structure.

The IRS ALWAYS has the option of disallowing any practice it considers abusive. You have to go to court and prove it's not.

Simplification of the system would be nice but wouldn't last anyway. Simplification of taxes was a big, big part of the Reagan 1986 tax bill. Reagan really did an amazing job cutting down the tax code considering how virtually everybody at the time had tax breaks in the old tax code. The amount of opposition and lobbying were intense, but he pushed it through anyway.

Unfortunately after 25 years the tax code is more complicated than it ever was completely negating Reagan's efforts. The big problem is if there is even one special tax break in the tax code everyone else demands one too and they multiply like rabbits.

I am currently living in NZ where there are 4 tax brackets and no deductions. FYI the top rate of 38% starts at 70,000 nz. The entire tax return is a couple of pages and you only file if you have a business of some kind. If you just have salary then you don't file a tax return return at all. However it costs me $1500 every year to have an accountant prepare my 20+ page US return. This is after I have gotten out of almost everything financial in the US except a couple rental properties and a very small stake in a family business amounting to a couple thousand a year. Pretty sad state of affairs.

And YES, this is the most fiscally irresponsible government in US history. We've incurred an additional 50% debt load in just the last 18 months, as we accumulated since the beginning of our country.

You can't solve a debt problem by incurring more debt - well DUH.

Marcus .... I hate to say it (not really, I actually enjoy it) but, I told you so. The guy is a complete fraud that was, a little over 5 years ago, a back bencher in the lowly Illinois State Senate. He's a creation by the ruling elitists that are pulling his strings to accomplish their big money agenda.

Troy .... I didn't intend to single out Obama as a tool of the elitists. McCain, both Bushes, Clinton, etc. were too (along with Al Gore, John Kerry, Bob Dole, etc.). JFK was probably the only President in my lifetime that was not controlled by the elite. Example: in late 1963 he actually had the Treasury print Treasury Notes in order to circumvent the all powerful Federal Reserve (the ultimate elitists). Was this the primary reason for his murder? I don't know, but it sure looks like a motive to me. When it comes to presidential elections, in reality, we have two candidates running but the choice is pretty much the same. The rhetoric sounds drastically different, but governing on all the major issues (foreign policy, deficit spending, illegal immigration, etc.) they are pretty much the same. Without their support, a person couldn’t realistically run for president and have even a remote chance of winning. IMO, since LBJ, they have all fallen in line with the mega banksters' & Wall Street agenda.

Well, I didn't think the Michael "MooreFood" comment was productive at ALL. So, I guess he is guilty too. My read, however, is that he is NOT a FOX fan. He sounded closer to you than you may think. But....he can speak for himself.

I feel almost depressed when you say that writing your congressman is futile. I do this sometimes. Hoping against hope that the voices become loud enough that they listen...

People are catching on. Give the masses more credit. Keep it out there. The truth floats. Good ideas fly. What is the alternative? Accepting status quo?

If you haven't read the alterNet articles about our Kleptocracy that patrick shared today, you should.

A lot of nonpartisan truth there. Both articles (same link) excellent.

http://www.alternet.org/story/148038/are_we_a_kleptocracy_and_what_does_that_mean_anyway_?source=patrick.net

bob2356 says

Are you angling for the position of RayAmerica’s liberal alter ego?

Congratulations! You've just defined the little Duckie Dude's life purpose.

RayAmerica says

bob2356 says

Are you angling for the position of RayAmerica’s liberal alter ego?

Congratulations! You’ve just defined the little Duckie Dude’s life purpose.

Thanks. Sometimes I agree with some of your positions, but I don't agree with your methodology either. Why don't either of you just make an honest argument with real facts? It's not that hard.

Nomograph says

Paris Hilton is blonde, promiscuous, is a heavy drinker and drug user

Sounds like a member in good standing of the Democratic Party.

BUT! it’s hard to cite Irony for Obama’s fiscally reckless policies to date

What was fiscally reckless was this country borrowing $5T against the bubble values of their houses, and spending it on consumption. This money-debt was churned into cash and is now in stronger hands -- the 中国人民银行, OPEC, and all the other skimmers who got out when the getting was good 2004-2007.

This is fun to watch: 2 Liberals going at it in an all out brawl. It appears Kevin has the little Duckie Dude on the ropes, but the Duck is very effective at his "rope a dope" technique. Is Howard Cosell still alive? He should be here to call the action ... I can hear it now: "Look at these two monkeys going at it!"

sorry, even by that accounting you won't ever even get a 50 percent marginal rate. The 28 percent bracket is already beyond the ss cutoff.

But if all we care about is the gross injustice of marginal rates and want to pretend that marginal rates are what matters, why aren't you crying fowl about the fact that $5k in income is tax free but $5k in capital gains is taxed at 15 percent, and that's only at the federal level?

Let's have an honest discussion about taxes, like how the capital gains tax is lower than income priimarily to encourage business reinvestment rather than dividends, oe how big tech companies avoid paying any taxes on foreign income, or how our tax policies are actually regressive due to the flat fica rates. But please stop lying about people claiming that 50 percent of anyones income is going to the government.

RayAmerica says

This is fun to watch: 2 Liberals going at it in an all out brawl. It appears Kevin has the little Duckie Dude on the ropes, but the Duck is very effective at his “rope a dope” technique. Is Howard Cosell still alive? He should be here to call the action … I can hear it now: “Look at these two monkeys going at it!”

I just see two intelligent people on the interwebs having a discussion. But then again, I don't operate on the assumption that everything is a liberal/conservo issue.

You're mixing up your animals, rayray. Are they monkeys, or are they a duck and something else? Since my icon is a female dog, do you refer to me (privately) as a bitch? Oh- I forgot, you just skirt around this issue... So using your logic, you're a cross dresser.

yawn.

elliemae says

Are they monkeys, or are they a duck and something else?

If you knew anything about Howard Cosell, you would know he made a famous reference to a "monkey." Obviously (yawn ... again) you've missed the point. But thanks for trying to sound relevant.

I have to agree with the duck - the "hidden" FICA match is pure BS the way it is presented. If the person wasn't working, there would be no tax... What's next, they are going to tax the employee for the tax the company pays on the employee's behalf?

Depending on where you live, 50% is probably pretty accurate considering the total tax burden for "middle" income earners. FICA, the lovely state and federal income tax, property taxes, sales tax, gasoline tax, the "universal access charge" that they say isn't a tax but you have to pay, etc, etc...the list goes on forever and ever. Every time you turn around a government entity has their hand out. This IS, by the way, one thing I do agree with the Tea Party on...the average Joe already pays enough. No deductions and a flat tax is the way to go but it'll never happen as it will remove all of the social engineering capabilities of the government ... as well as ...how are they supposed to get their kickbacks if they can't massage the tax code for their buddies?

RayAmerica says

If you knew anything about Howard Cosell, you would know he made a famous reference to a “monkey.” Obviously (yawn … again) you’ve missed the point. But thanks for trying to sound relevant.

You're correct, rayray. Relevance is everything. For instance, revering a man who died in 1995 who described himself as "Arrogant, pompous, obnoxious, vain, cruel, verbose, a showoff," gives insight into your psyche, just like your adoration of Hitler.

FYI The racist "little monkey" comment of which you're so fond ended his career on Monday Night Football.

http://en.wikipedia.org/wiki/Howard_Cosell#.22Little_monkey.22_comment

elliemae says

revering a man

Actually, you didn't have to be an a**hole to enjoy listening to Howard Cosell. He was especially famous for his coverage of Mohamed Ali.

AdHominem says

The only way to balance the budget is to cut expenses. Let’s start with DOD.

Every $100,000 you cut there will make one local job somewhere go bye-bye.

Cut $10B and that's 100,000 jobs, about what the private economy is adding right now.

And of course that's just government payouts directly. Thousands of local communities have been entirely dependent on Uncle Sugar's paychecks getting cycled into the local economy. Cut off the checks coming from DC and the slaughter will double.

The PAYGO system inherited by Clinton and held to by the Republican Congress of the 1990s worked reasonably well. Hold gov't spending nearly constant (Fed spending grew by ~$50B per year in the 1990s). Raise taxes on the wealthy until things come into balance. Then have some bad operators get elected and watch them tear the whole thing down in four short years.

I can name several ceos who only get paid in the form of capital gains. Eric schmidt, steve jobs, larry ellison are all obvious examples.

What's wrong with the system though is not the tax rates, its the income disparity. Want to make my ceos income a more modest 200x mine or so? You're going to need a tax rate of 96 percent. That just isn't going to happen.

No, what we need is to stop free trade with countries that don't give a shit about long term consequences of their actions. We need to tear down industries that are controlled by one or two companies (who are colluding most of the time anyway).

Big corporations inevitably will do what is in their best interest financially. Occasionally that aligns with what is good for people, but the rest of the time the only thing keeping them in check is government regulation.

marcus says

elliemae says

revering a man

Actually, you didn’t have to be an a**hole to enjoy listening to Howard Cosell. He was especially famous for his coverage of Mohamed Ali.

I recall listening to Cosell calling an Ali fight, he said something to the effect of, "This is the most exciting fight I've ever seen..." in his deadpan voice. The words didn't mesh with the delivery, and it was hilarious. We used that line for years.

My point was that rayray used the most controversial quote that Cosell made in an attempt to rile the masses. It was a discussion, certainly not a fight. I'm not sure that he knows the difference.

BTW, if my recollection serves me, Howard Cosell had the rare blessing of possessing a photographic memory. The ability to pull up facts on the spot made him great.

Nomograph says

Kevin says

Companies like microsoft, google, and apple are all sitting on $30b a piece, unwilling to spend it out of fear, unwilling to pay dividends because it isn’t what investors want. That is a totally broken model.

At first I was tempted to agree, but then I realize that would entail calling three of the most successful companies in American history “totally broken”. I can’t bring myself to call Google’s business model “broken”.

The business models aren't broken, but it is broken that these companies are sitting on so much cash and not putting it to productive use. people at these companies are generally in agreement about this. I'm not saying that they need to change their business models, only that something needs to change to encourage them to spend more.

Troy says

We shouldn’t tax assets in transfer, just actual cash incomes.

Why? What economic benefit is there in large sums of money simply changing hands through generations?

The worst possible state of an economy is for wealth to sit idle. This is exactly what happens in a recession. When factories aren't producing goods, when people are putting money under a mattress instead of buying things with it -- this is all idle wealth.

Me giving a million dollars to my child serves no economic benefit for anyone but my child. The economy as a whole is much better off if a large portion is redirected to productive use.

I definitely think it's better to let the person who earned the money voluntarily decide what to do with the money (employing people, investing in new technology, etc.), but when that isn't happening I see nothing wrong with letting the government decide how to deal with it.

Taxing rents is too indirect. For most building types (particularly residential), "property" is an extremely wasteful use of wealth. A house provides shelter, and intangible emotional value (I'm not saying the value is irrelevant, just that it's intangible). A factory, on the other hand, produces new goods, and provides employment.

There are a finite amount of resources available to us. It makes much more sense to discourage the hoarding of them, and to encourage making better use of them. Inheritance does neither of these things.

we have $X
what amount over $X will be "RICH"
what amount under $X will be "POOR"
now, once we have those amounts we can find out what $X is.
What is $X?
See why forced wealth transfers between citizens are wrong?

ofcourse there will be a big,huge,monster sized issue when Politico-"A" decrees that $X is $A. For the obvious reasons of it being absolutly ridiculous to use a forced wealth transfer system to take for +$X and freely give to -$X and the arbitrary whim of Politico-A...... and it doesn't matter if $X is $A or $B or $C .... it is a very stupid system.

Hahaha, "taxing the rich" always end's up soaking everyone. So ever their lies are lies. Many of you should keep your nose out of other peoples business, AND NOT TELL THEM HOW THEY SHOULD LIVE THEIR LIVES. Cooperation NOT force. Opps, that doesn't fit into your incessent need to manipulate and control others. Sorry if I stated the obvious, my bad.

Bap33 says

we have $X
what amount over $X will be “RICH”
what amount under $X will be “POOR”
now, once we have those amounts we can find out what $X is.
What is $X?
See why forced wealth transfers between citizens are wrong?
ofcourse there will be a big,huge,monster sized issue when Politico-”A” decrees that $X is $A. For the obvious reasons of it being absolutly ridiculous to use a forced wealth transfer system to take for +$X and freely give to -$X and the arbitrary whim of Politico-A…… and it doesn’t matter if $X is $A or $B or $C …. it is a very stupid system.

It's not that complicated really. We have that problem today. It will be no different if we return to a more progressive tax structure like we had until Reagan took over...

And I've said this before--you don't do this out of any sense of fairness. You do it because you can't have a strong economy with a huge wealth disparity.

I've noticed over and over again that liberals never advocate what is really needed; a drastic reduction in government spending. Their only answer is the same old "tax the rich" blah, blah, blah. Why not got to the root of the problem which is the bloated, spending machine that is government (government as in ALL levels)?

RayAmerica says

I’ve noticed over and over again that liberals never advocate what is really needed; a drastic reduction in government spending. Their only answer is the same old “tax the rich” blah, blah, blah. Why not got to the root of the problem which is the bloated, spending machine that is government (government as in ALL levels)?

Really? I don't consider myself a liberal, but I'm pretty sure you do. And I have advocated a substantial reduction in military spending on several threads here. I'm pretty sure that many others have as well.

tatupu70 says

I have advocated a substantial reduction in military spending

Is that the only area you would recommend a "substantial reduction in .... spending?" If there are others, please list them.

RayAmerica says

tatupu70 says

I have advocated a substantial reduction in military spending

Is that the only area you would recommend a “substantial reduction in …. spending?” If there are others, please list them.

I'd also advocate a substantial reduction in campaign finance. It's not direct government spending, but it will inevitably lead to a reduction in Federal spending.

Kevin says

I definitely think it’s better to let the person who earned the money voluntarily decide what to do with the money (employing people, investing in new technology, etc.), but when that isn’t happening I see nothing wrong with letting the government decide how to deal with it.

In ancient Israel the Israelites understood that land was a finite resource and how valuable it was to have control over it. So they divided the land roughly equally between all the families. Then they let the free market take over (people were free to buy and sell) but at the end of every so many years they had a Jubillee where all the land had to be returned to the original owner (or his descendants). This system would be way more productive than simply having government confiscate wealth. Because as you said Kevin idle or misallocated wealth is the bane of an economy. We need to put wealth to work in order maintain prosperity as a nation. Unfortunately most every allocation of funds by the federal government and intervention in markets is either wasteful, unproductive/detrimental to the economy or both.

tatupu70 says

You do it because you can’t have a strong economy with a huge wealth disparity.

I don't agree ... but not like you think ... you see, I think that the very nature of winning and losing is what creates wealth ... so, we cant really have growth without some poor sap taking a beating on a bad gamble (insert country for sap as needed). There is very little logic in our desire to have more piles of green paper, or gold rocks, or diamonds, than anyone else. In the actual process of life those things have zero natural value. And yet we kill each other for more and more and the divide gets bigger and bigger between those that are willing to kill themselves for more green paper and theose that are happy to live on whatever the GOV can take from the workers and hand over to them. The system relies on failures. I would guess this is why God suggested a national "reset button" every generation (50 years I think it was) - as mentioned by AH it was called Jubilee. A time when all debts were forgiven and all personal property returned. Plus, folks turned in old clothes and blankets and such for those that had none. That would keep everyone kinda close. And it takes away "some" of the drive to gather as much $X as possible, without destroying the drive to succeed and without "rewarding" those who are less productive or have bad luck. It limited greed by limiting the value of being lucky/agressive/gambler (wall streetish) and it limited how far down the crap chute a lazy puke would slide. I don't know how we could get this going, but after it was set up it would work pretty well. With my luck, I'd get a chunk of land as hard as granite in northern Idaho .. it would be my chunk, but dang it.