Friday, July 27, 2012
I think I hear a helicopter warming up--Benron version of "growth."
The US dolla is about ready to be taken to the woodshed (again).
What can you do with a mentality like that?
Unless we change corporate income tax to at least match Canada's, the best place to invest new plant and equipment in North America will be Canada, not the US.
US corporate tax rate : 35%
( states charge their own rates)
Canada's corporate rate: 16.5%
( and provinces can't tax corps!)
Fred Smith of FedEx has talked about this many times, and its impact on job creation in the US.
I'm thinking of a word that begins with the letter P.
Nope. Drawing a blank here. ;)
It puts us right on the "new normal" trend. Yay. Sigh.
Real GDP Growth per Capita
The new normal, crappy as it looks to us, is really an illusion itself. Without very strong growth trends, we can't even maintain the new normal. Achieving strong growth trends can only be accomplished by cutting a lot of our spending and raising taxes.
Furthermore, we are running out of time to adopt that agenda.
We can "take the US dolla to the woodshed" all we want, but it's not going to generate growth in the near term - too much of the economy is consumer-oriented, and as commenters have been pointing out, we can't maintain our current per capita consumption.
Beyond that, everyone who has ever been in business knows that as your tax rates go up, your ability to incur risk goes down. Your losses are yours and may put you out of business, and if your gains become crimes against the people which must be confiscated, how can anyone incur the risk of loss?
You might ask Wonder Dummy the Tax Attorney why he thinks credit standards for mortgages are so tight about now, and why people are willing to buy ten year bonds yielding less than the inflation rate! Maybe he'll ponder the great underlying mystery of loss reserves. Maybe not.
Mark - I'm thinking of the Illusion of Stagflation right about now. The 70s couldn't have persisted; this won't persist either.
I hear that. If I had it all to do over again then I would have picked Stagnationary Mark as my name.
Although stagflationary investments have done well since I turned bearish in 2004 (oil, gold, silver, and so on), so have deflationary investments (treasuries).
Right. I have a business, my wife and I, and we found ways to stop bringing in more money. If our income rises anymore we lose free health insurance [Medicaid] for our entire family and also end up in a higher tax bracket. We don’t usually have federal income tax due and often get a refund because of the credits, child tax credit, etc.
To overcome the losses of making more money we would have to make quite a bit more money. It’s sort of an insurmountable obstacle for us so we stay where we’re at. There’s really no incentive to go any further.
It’s hard to imagine making more money that you’re not going to see. Right now we’re benefiting from someone else’s tax burden, I suppose, with the freebies that have worked to increase our own income. I don’t feel especially good about that; yet, to be honest, I don’t want to lose the any of the free stuff that we’re used to getting.
I thought I would write this here just to put some meat on your quote above. And frankly, I don’t think the direction we’re going in is going to change. This is the way it has been trending for years and any politician who bucks the trend is ultimately not going to succeed.
“Half of all U.S. wage-earners pay no income tax.
Yet that half and their families receive free education
K-12, Medicaid, rent supplements, food stamps,
earned income tax credits, Pell grants, welfare
payments, unemployment checks and other benefits.
Why should poor, working- and middle-class Hispanics,
the vast majority, vote for a party that will reduce taxes
they don't pay, but cut the benefits they do receive?
The majority of Latinos, African-Americans, immigrants
and young people 18 to 25 pay no income taxes yet
enjoy a panoply of government benefits. Does not
self-interest dictate a vote for the party that will let them
keep what they have and perhaps give them more,
rather than the party that will pare back what they now
Are the graphs based on paycheck numbers? Because that would leave out property taxes and sales taxes. Property taxes are a huge takeaway suggesting disposable income is overstated. And the leftover "disposable" income doesn't go as far even if one makes hedonistic adjustments - buying 80% ground beef at the same price as 85% ground beef was two years ago doesn't cover the fact that the sales tax on that purchase is now higher than two years ago.
If you want less of something, tax it. So we get less sales, less income, less property.... When a Tobin Tax is enacted we'll get less investment, too.
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