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28 January 2009


Mikey McD

George, add my name to the list!



You have to first explain how the tax cuts (presumably for corporations and the wealthy) will solve the current crisis of confidence, over-leveraged, over-exposed financial entities. You might use the example of Starbucks, which just announced the closure of 300 more stores this week. How will a tax cut of say, $50 million, for Starbucks help turn the economy around? Bear in mind that Starbucks is exceedingly unlikely to do anything other than sit on the money.

And begin:

Russ Steele


Yes, please add my name.


Aaron Klein


One possibility might be a corporate tax credit to increase jobs. You could either do a one-time credit for each job created, or make salaries for any new jobs created after a certain date 110% or 115% tax-deductible. Anything that

As our new Congressman just said, the net effect of stimulating the economy with a dollar is zero, because I have to take that dollar out of the economy to do so.

What is needed are tax incentives to produce growth, investment and jobs. That's what has worked in the past.

(I do agree with you that a simple corporate tax cut for Starbucks won't create jobs in a confidence-shaken economy. You'd have to target it directly to job creation, and make it worth the company's while to tell Wall Street, "given the tax savings, this is the right place to invest capital.")


Mikey McD

I can't speak for SBUX (though if I had to vote on whether SBUX or the US gov would spend $50mil more beneficially to the public- I would choose SBUX). I can speak for myself. My unbelievably high tax liability for 2008 will be paid to Uncle Sam (Only because I have no choice). I can assure you that my wife would spend any scraps Uncle Sam leaves with us (I might convince her to invest some in real estate or stocks). I think being able to spend MY funds on clothes, motorcycle, cabin in the woods, etc would do more to "stimulate" the economy than me paying for additional government (thus fewer liberties). My extremely high taxes paid today are paying for FDR's mistakes.

What I don't pay in taxes I either save or spend- both "stimulating" the economy and providing jobs.

Let me be very clear that I dream of a capitalism without corporations (as they exist today-that is a discussion for another day perhaps).

The real issue is liberty. What gives the gov the right to loot my earnings?

Mikey McD

"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
-Frederic Bastiat


Mikey -

ahh, a tax cut aimed at you or me would I think add some direct "stimulus." The CATO guys usually like to think a bit bigger unfortunately. The ostensible reason that the government is involved is that it is the only entity "big" enough to recapitalize the banks, absorb trillions (on paper) in mortgage backed derivatives, etc., the private sector having failed to do so. I don't think high level tax cuts achieve anything until the financial institution solvency question is answered.

BTW, if you are living on "scraps" that Uncle Sam leaves you, I think you're filling out the forms wrong. Tax rates are at historical lows. And, uh, what liberties do you lose when the government spends $50 million rebuilding a bridge that you don't when it gives $50 million to Starbucks?

Aaron -

I've seen these types of proposals floating around and am not sure how that's more efficient or effective than direct spending aimed at job creation. Ideally, the stimulus program leaves you with something of value such as a rebuilt bridge, while the tax cut to Starbucks leaves you with… Starbucks. The scenario I foresee is that Starbucks takes the tax credit or whatever, creates the job, sales continue to fall, and then what? In the end, both the tax cut and the stimulus spending cost the government (us) money; I'm really not so sure that tax cuts would have the desired/advertised effect in this context. It doesn't help that this is the one and only economic policy prescription you will ever hear from outfits like CATO, regardless of economic conditions.

Mikey McD

Wade; "Tax rates are at historical lows" is BS. I will pay over 43% between federal and state income taxes (before property tax, sales tax, gas tax, permits, business licenses, mandated continuing education, etc etc....). A tax or law/regulation by definition is a revocation of liberties. How much of my hard earned money should I be fortunate enough to keep after taxes (10%, 50%, 90%..)?

I would not pay taxes if it were not for a gun to my head? You cannot ask a question about a tax funded bridge without first establishing the morality of the tax. The end does not justify the means.

The great farce of the French Revolution was the phrase "liberty AND equality." Under your question hard working, intelligent, wealth generators (and thus taxpayers) pay for the bridge that the rest of society gets to use. The wealth generators give up liberty to provide perceived equality.

I don't care about the big banks or the crappy assets they engineered and sold/own.

Would you pay taxes if they were collected under the honor system?


While neither is the lowest ever, both top and bottom brackets are way at the low end compared to the last hundred years.


Mikey McD

Brackets mean nothing without including each years tax laws (deductions etc). I pay 15% self employed tax in addition to the 35% tax shown on the table (different name, still a tax on my income). Our tax system today bears no resemblance to the tax system of decades past. Tax Freedom day AVERAGE was April 23 in 2008. My tax freedom day is June 29th 2008 (Tax freedom day was January 1st in 1915). I work six months a year just to pay my taxes!

Tax freedom day: "Americans, AS A WHOLE, work a significant number of days each year to pay for things other than government, but nothing else is so expensive. Americans will work longer to pay for government (113 days) than they will for food, clothing and housing combined (108 days)."

AS A WHOLE (average) is BS- Socialists use averages, take Mikey's 50% and the teacher who pays zero and the average is a 25% tax on "society." BS. Mikey pays 50% and the teacher pays zero. Where's the equality in that?

Would you pay taxes if they were collected under the honor system?


"Would you pay taxes if they were collected under the honor system?" is a Prisoner's Dilemma question. http://en.wikipedia.org/wiki/Prisoner%27s_dilemma

The proper strategy for a single round is to not pay taxes. However this changes with either n rounds or infinite rounds. Taxes are an n/infinite round game.

"Socialists use averages," is your best line to date. Made me laugh out loud.

I'm pretty sure even Socialists don't use averages calculated from 2 data points, Mikey.

So your taxable income, after deductions and exemptions, is $357,000.00+? I'm not feeling that sympathetic about your tax problems. Sorry, man...

Mikey McD

Of course "you" are not sympathetic- "you" pay much less because I pay much more (yet "you" receive far more benefits). "You" gain a great value at my expense. "You" feel a sense of equality while I feel like a slave.

"If you plan to rob Peter to pay Paul you can always expect the full support of Paul."

Kudos for a creative dodge of question "Would you pay taxes if they were collected under the honor system?"

Perhaps I should have said "socialists can manipulate averages" instead of "Socialist use averages". I laughed when I re-read it too. Use all the data points you want, the argument still holds water. Top (10%) pay 90% of taxes, the bottom (90%) pay 10% and the tax rate is averaged and quoted as 25%, 35%... BS.

The discussion must be liberty vs equality. Liberty is God given (perfect), equality (shared misery) is government engineered (imperfect).


I'm sorry you feel like a slave. That must really suck.

However, we are now at the crucial point of the discussion: benefits derived from taxes. Please explain how I receive far more than you do.

How did I dodge the question? It's a classic of game theory and the winning strategies have been well tested. And that is assuming no communication, no morality, etc. Just pure self interest. This infinite iteration of individual self interest may explain why we don't after all live in a Randian society... the Randian strategy is only good for a single round.

10% and 90% are relevant only in the context of percentages of total income going to each.

You're veering into the spiritual and I fear that may be a minefield. Not touching it...

Mikey McD

The "Paul's" receive more benefits/per dollar paid into the system than the Peter's. Paul Uses the same roads, schools, military force, bridges, courtrooms, jails, etc. etc. as Peter does, yet Peter has pays more (taxes and liberty) into the system.


I'm glad you mentioned courtrooms. Which do you think uses more court hours, a million dollars? or 10 grand?

Unless that 1 million is gold bars in a hole in the ground, it wins. And that goes for all public infrastructure, not just the courts.

Outside of the Northeast, it is generally considered inconvenient to keep track of who uses what road when and charge accordingly. Where reasonable assumptions of heavy use can be made (trucking companies) taxes are charged accordingly. So we tax income and wealth instead under the reasonable assumption that more of it uses more of the public infrastructure.

Mikey McD

I disagree.

Just looking at the largest budget items SS, Medicare, Military and education it is irrational to conclude that high tax payers reap more benefits.

In reality higher tax payers tend to be self insured (thus don't use medicare) and choose private education (thus don't benefit directly from public schools), reap the same benefit from the SS and Military as any other citizen.

Instead of courtroom maybe I should have used Justice system (which would include prison$)- do you think there are more Peter's or Paul's in prison? What the low income crooks give up in size of courtroom cases they make up for in volume.

Again, it comes down to Liberty vs equality.

Aaron Klein

Wow...lots of comments since I was last here. I wish I had more time to blog. :)

Wade, I'm not sure if I understood your comment, "Ideally, the stimulus program leaves you with something of value such as a rebuilt bridge, while the tax cut to Starbucks leaves you with… Starbucks."

Having the new bridge is nice, but will do very little or nothing at all to stimulate the economy. The actual stimulus comes from the job created to rebuild that bridge. Problem is, that job ends as soon as the bridge is finished.

In contrast, jobs created by the private sector are created to become sustainable, through the generation of ongoing profits. And in my mind, that makes this kind of job -- even one at Starbucks -- infinitely more valuable to the economic recovery than the "Government Bridge Builder" job.

Starbucks is but one example, and there are a variety of types of blue and white collar jobs that would be created with the tax incentive concept that I outlined. You would also have a lot more Microsofts, Apples and Amazon.coms, too. (And incidentally, they would need to build new office buildings, so the private sector "bridge builders" would get employed too.)

The bottom line: the market is always better at generating sustainable value from the deployment of capital than government ever can be.

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