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Regressive taxation: the answer to the west's qualms

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CommieScum
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Post: #1
Regressive taxation: the answer to the west's qualms

In order for the budgets to be balanced and prosperity restored, a regressive tax must be considered; lower incomers must pay a higher tax percentage than the rich of their income; the wealthy must pay 0 percent, with the other classes take on the tax burden. Such a program would lead to unbridled economic growth and long term prosperity (in the short term the lower classes would be much worse off). The economic expansion would, of course, come from the capitalists, and the influx of goods will lower prices to affordability, reducing poverty and unemployment.

03.12.2017 18:50
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Post: #2
RE: Regressive taxation: the answer to the west's qualms

I think it's more complicated than that. The whole economy is a system of people and laws. We would need to do more then shift taxation; a shift of the whole system would be required. Either would have it's own advantages and disadvantages; so I wouldn't assume a balance budget and prosperity. All depends upon the socioeconomic circumstances.

Having a consumption-based economy depends upon debt, consuming more than produced; a decrease of debt would negatively affect consumption and slow the economy. Only alternative is consume less and produce more; I'm not sure realistically if a developed nation can compete to do so.

Ideally I would prefer taxing consumption to decrease wasteful spending and simplify paying taxes (just added to price and businesses handle all else). Then eliminate taxes to increase productive investments and promoting innovation. Except the budget would be strained, further affecting mostly people who starting can't afford necessities and find sufficient work for a decent living. Even if they'd be better in the long term, I doubt people's patience to endure; it would require a cultural shift.

None the less I do belief our consumption-based economy is a waste and better system is required. I just don't know the alternative as developed nations consume and developing nations produced. How would a developed nation consume less and not suffer; other than possibly decreasing the population and increasing the per capita?

This post was last modified: 03.12.2017 23:13 by Sato.

03.12.2017 23:05
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cloudsky01
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Post: #3
RE: Regressive taxation: the answer to the west's qualms

Interesting thoughts.

CommieScum Wrote:
The economic expansion would, of course, come from the capitalists, and the influx of goods will lower prices to affordability, reducing poverty and unemployment.


One big issue with this suggestion is the assumption that the supply of new goods produced exceeds the demand for them, causing a price decrease. I think that there would be a huge increase in exports in these circumstances, as not only would foreigners have increased incentive to buy these cheap domestic goods, but they would also be more able to do so than domestic consumers thanks to the reduction in the majority of the population's disposable income. This demand increase would at least partially offset the initial decrease in demand, also offsetting price changes.

In this scenario, I think you'd end up with relatively poorer people toiling away to supply the rest of the world with cheap goods as they wonder why they are being punished for being worse-off.

I can think of lots of other arguments for and against this idea, although one thing is almost certain: a regressive tax would be very unpopular!


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04.12.2017 02:39
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CommieScum
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Post: #4
RE: Regressive taxation: the answer to the west's qualms

Sato Wrote:
I think it's more complicated than that. The whole economy is a system of people and laws. We would need to do more then shift taxation; a shift of the whole system would be required. Either would have it's own advantages and disadvantages; so I wouldn't assume a balance budget and prosperity. All depends upon the socioeconomic circumstances.

Having a consumption-based economy depends upon debt, consuming more than produced; a decrease of debt would negatively affect consumption and slow the economy. Only alternative is consume less and produce more; I'm not sure realistically if a developed nation can compete to do so.

Ideally I would prefer taxing consumption to decrease wasteful spending and simplify paying taxes (just added to price and businesses handle all else). Then eliminate taxes to increase productive investments and promoting innovation. Except the budget would be strained, further affecting mostly people who starting can't afford necessities and find sufficient work for a decent living. Even if they'd be better in the long term, I doubt people's patience to endure; it would require a cultural shift.

None the less I do belief our consumption-based economy is a waste and better system is required. I just don't know the alternative as developed nations consume and developing nations produced. How would a developed nation consume less and not suffer; other than possibly decreasing the population and increasing the per capita?


Of course, but I'm only discussing the west's woes in regard to taxation and revenue. The economy must also be shifted from interventionist democratization to liberalization, and archaic political laws, such as first past the post elections, must be replaced with more modern and liberal systems. Further, the children must be indoctrinated with Liberal ideology to ensure stability.


cloudsky01 Wrote:
Interesting thoughts.

CommieScum Wrote:
The economic expansion would, of course, come from the capitalists, and the influx of goods will lower prices to affordability, reducing poverty and unemployment.


One big issue with this suggestion is the assumption that the supply of new goods produced exceeds the demand for them, causing a price decrease. I think that there would be a huge increase in exports in these circumstances, as not only would foreigners have increased incentive to buy these cheap domestic goods, but they would also be more able to do so than domestic consumers thanks to the reduction in the majority of the population's disposable income. This demand increase would at least partially offset the initial decrease in demand, also offsetting price changes.

In this scenario, I think you'd end up with relatively poorer people toiling away to supply the rest of the world with cheap goods as they wonder why they are being punished for being worse-off.

I can think of lots of other arguments for and against this idea, although one thing is almost certain: a regressive tax would be very unpopular!


You're ignoring deflation. Demand remains constant, it is disposable income that changes. The disposable income increase puts upward pressure on the economy, leading to domestic deflation as capitalists adjust prices to affordability to maximize profits. Excess goods will indeed be sold off to market, but Capitalists typically try to sell their goods domestically first, as it is cheaper and, well, less complex. The deflation will not be harmful because it acts on consumers in a controllable fashion: they are losing disposable income, but not their jobs, or savings, or investments, etcetera. Thereby, in the long term, it is to be beneficial, and in the short term, not disastrous.

Of course, as I espoused in my previous response, this is an exercise for now, not a movement. Even suggesting regressive taxes of anything so blatant would be political suicide. On another thought, it is quite hilarious seeing the professionals scramble to save face, when they are accused of regressive taxation advocation. But, I am not a politician, and neither are you, with is a tremendous amount of freedom. What's more exciting, is that I may have developed a new ideology based upon the stipulations, with regressive income taxation being the foundation of it. I'm pondering whether or not I should start a literature.

This post was last modified: 04.12.2017 20:15 by CommieScum.

04.12.2017 19:42
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Ajay Alcos
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Post: #5
RE: Regressive taxation: the answer to the west's qualms

Assuming your OP is completely serious, I shall endeavour to counter it by outlining its failings.


CommieScum Wrote:
...lower incomers must pay a higher tax percentage than the rich of their income; the wealthy must pay 0 percent, with the other classes take on the tax burden. The economic expansion would, of course, come from the capitalists, and the influx of goods will lower prices to affordability, reducing poverty and unemployment.


In an industrial economy, that would lead to enormous long-term economic instability from such a state of being (due to the inevitable flood of oncoming industrial actions, strikes, protests and potentially more dangerous forms of militancy) and heavily deteriorate the economy by creating hordes of economic migrants (as such a policy would provide an inescapable incentive for the non-wealthy to emigrate to more economically progressive regions). As for the dwindling share of people who will be forced to take up the burden of tax, their reduced overall incomes would dwindle to such a state that the share of the domestic market which they make up would shrink to such a paltry sum and would cause consumption to dry up like a grape in the desert sun. This would obviously force firms (the ones that have survived that is) to seek other markets to compensate. In effect, such complete tax regressivity would instead increase poverty, make goods unaffordable and create waves of emigration - in effect recreating Victorian England.

CommieScum Wrote:
In order for the budgets to be balanced and prosperity restored, a regressive tax must be considered;...

...Such a program would lead to unbridled economic growth and long term prosperity (in the short term the lower classes would be much worse off).


Tax cuts have almost always shown themselves (both in distant and near past) to disproportionately affect debt ratios until deficits are stabilized by tax increases or new methodologies of accruing revenue (i.e. VAT/GST). A poignant example is during Ronald Reagan's tenure where although his tax cuts increased federal revenue exponentially, his administrations policies on taxation still ended up expanding government debt almost by 186 percent; in effect, not enough to offset losses from tax cuts.

Secondly, the prosperity which came about during Ronald Reagan's presidency from my recollection has more to do with the return of macroeconomic stability after the external shocks of the 70's and early 80's; primarily the 1973 OPEC oil embargo and Iranian Revolution which either caused or was the primary reason behind all of the recessions which occurred during that period. Of course, Reagan did lend a confidence boost to the private sector afterwards but regaining that sense of economic optimism would've occurred regardless whether or not Reagan started slashing taxation - a crab has to leave its shell eventually.

A good analogy (although still yet to be fully scientifically determined) would be whether it would be worth the cost for say Usain Bolt to increase his running speed by amputating his legs and replace them with running blades.


CommieScum Wrote:
What's more exciting, is that I may have developed a new ideology based upon the stipulations, with regressive income taxation being the foundation of it. I'm pondering whether or not I should start a literature.


There already is a school of thought encompassing those assertions, its called Elitism.

This post was last modified: 04.12.2017 21:18 by Ajay Alcos.

04.12.2017 20:40
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cloudsky01
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Post: #6
RE: Regressive taxation: the answer to the west's qualms

CommieScum Wrote:
You're ignoring deflation.

No I’m not, I’ve assumed that the external market is much larger than the domestic market, which would have at least some offsetting effect.

CommieScum Wrote:
Demand remains constant, it is disposable income that changes.


If the composition of those who are doing the spending changes, demand won’t stay constant. You need to consider the different marginal propensities to spend for the different income groups, as well as their spending preferences. I don’t believe that a tax cut will lead to a 1:1 increase in spending by the wealthy, for example (for an exaggerated example, the top 1% income earners aren’t going to buy up all the groceries that the bottom 99% can no longer afford).

commiescum Wrote:
The disposable income increase puts upward pressure on the economy, leading to domestic deflation as capitalists adjust prices to affordability to maximize profits.

I’m not sure I follow your reasoning here. An increase in disposable income would imply a demand increase, creating inflationary pressure. The “capitalists” would sell at the high domestic price and then try to export the rest to maximise profits, not lower their prices so that the goods could be sold domestically. Eventually there would be some sort of equilibrium pricing but the point of my original argument was that there would be both inflationary and deflationary market mechanisms at work.

CommieScum Wrote:
Excess goods will indeed be sold off to market, but Capitalists typically try to sell their goods domestically first, as it is cheaper and, well, less complex. The deflation will not be harmful because it acts on consumers in a controllable fashion: they are losing disposable income, but not their jobs, or savings, or investments, etcetera.


What’s to stop the wealthy spending and investing overseas, where production may well be less costly? There would be no benefit to employment, nor deflation, nor increase in production domestically. Your idea completely unravels when this is considered, and it is a highly likely scenario.


Grüße aus Australien.
05.12.2017 02:02
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CommieScum
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Post: #7
RE: Regressive taxation: the answer to the west's qualms

Ajay Alcos Wrote:
Assuming your OP is completely serious, I shall endeavour to counter it by outlining its failings.


CommieScum Wrote:
...lower incomers must pay a higher tax percentage than the rich of their income; the wealthy must pay 0 percent, with the other classes take on the tax burden. The economic expansion would, of course, come from the capitalists, and the influx of goods will lower prices to affordability, reducing poverty and unemployment.


In an industrial economy, that would lead to enormous long-term economic instability from such a state of being (due to the inevitable flood of oncoming industrial actions, strikes, protests and potentially more dangerous forms of militancy) and heavily deteriorate the economy by creating hordes of economic migrants (as such a policy would provide an inescapable incentive for the non-wealthy to emigrate to more economically progressive regions). As for the dwindling share of people who will be forced to take up the burden of tax, their reduced overall incomes would dwindle to such a state that the share of the domestic market which they make up would shrink to such a paltry sum and would cause consumption to dry up like a grape in the desert sun. This would obviously force firms (the ones that have survived that is) to seek other markets to compensate. In effect, such complete tax regressivity would instead increase poverty, make goods unaffordable and create waves of emigration - in effect recreating Victorian England.

CommieScum Wrote:
In order for the budgets to be balanced and prosperity restored, a regressive tax must be considered;...

...Such a program would lead to unbridled economic growth and long term prosperity (in the short term the lower classes would be much worse off).


Tax cuts have almost always shown themselves (both in distant and near past) to disproportionately affect debt ratios until deficits are stabilized by tax increases or new methodologies of accruing revenue (i.e. VAT/GST). A poignant example is during Ronald Reagan's tenure where although his tax cuts increased federal revenue exponentially, his administrations policies on taxation still ended up expanding government debt almost by 186 percent; in effect, not enough to offset losses from tax cuts.

Secondly, the prosperity which came about during Ronald Reagan's presidency from my recollection has more to do with the return of macroeconomic stability after the external shocks of the 70's and early 80's; primarily the 1973 OPEC oil embargo and Iranian Revolution which either caused or was the primary reason behind all of the recessions which occurred during that period. Of course, Reagan did lend a confidence boost to the private sector afterwards but regaining that sense of economic optimism would've occurred regardless whether or not Reagan started slashing taxation - a crab has to leave its shell eventually.

A good analogy (although still yet to be fully scientifically determined) would be whether it would be worth the cost for say Usain Bolt to increase his running speed by amputating his legs and replace them with running blades.


CommieScum Wrote:
What's more exciting, is that I may have developed a new ideology based upon the stipulations, with regressive income taxation being the foundation of it. I'm pondering whether or not I should start a literature.


There already is a school of thought encompassing those assertions, its called Elitism.


"In an industrial economy, that would lead to enormous long-term economic instability from such a state of being (due to the inevitable flood of oncoming industrial actions, strikes, protests and potentially more dangerous forms of militancy)"

Instability would not come from the system itself, it would come from socialist reeducation. Which is why I suggest Liberal indoctrination, as it would stabilize the nation, in theory, although even in tremendously prosperous societies it still reels its evil head.

"heavily deteriorate the economy by creating hordes of economic migrants (as such a policy would provide an inescapable incentive for the non-wealthy to emigrate to more economically progressive regions)"
To the contrary, it would lead to more useful immigration, as the only people who would be interested would be productive, with unproductive immigrants going to social democrat nations. The economy wouldn't deteriorate.

"As for the dwindling share of people who will be forced to take up the burden of tax, their reduced overall incomes would dwindle to such a state that the share of the domestic market which they make up would shrink to such a paltry sum and would cause consumption to dry up like a grape in the desert sun."
No, demand would stay about the same, as there is reason to believe that real net income would stay the same.

"This would obviously force firms (the ones that have survived that is) to seek other markets to compensate. In effect, such complete tax regressivity would instead increase poverty, make goods unaffordable and create waves of emigration - in effect recreating Victorian England."

In the long term, regressive taxes nearly eliminate poverty for working people. Saying there was poverty in the 19th century is like saying 1 + 1 is 2. You're also ignoring the value of money would increase quite a bit. - And prices are marked up several 100%.

"A poignant example is during Ronald Reagan's tenure where although his tax cuts increased federal revenue exponentially, his administrations policies on taxation still ended up expanding government debt almost by 186 percent; in effect, not enough to offset losses from tax cuts."
There were no losses from tax cuts, in the long term.


"Secondly, the prosperity which came about during Ronald Reagan's presidency from my recollection has more to do with the return of macroeconomic stability after the external shocks of the 70's and early 80's; primarily the 1973 OPEC oil embargo and Iranian Revolution which either caused or was the primary reason behind all of the recessions which occurred during that period. Of course, Reagan did lend a confidence boost to the private sector afterwards but regaining that sense of economic optimism would've occurred regardless whether or not Reagan started slashing taxation - a crab has to leave its shell eventually"

Although the tax cuts were a part of it, they were not the reason for recovery. Simply speaking, he stopped printing money, he reformed the government, and he deregulated the economy. The period of Great Stagflation occurred long before the OPEC oil embargo, and the market didn't fully recover until Obama's economic deregulation, which has caused the very cheap oil prices.

"There already is a school of thought encompassing those assertions, its called Elitism."
Elitism is not a school of thought, much like "trickle-down economics." I would call it the most radical form of supply-side economics. Personally, I don't support it; I'm a Minarchist and putting the tax burden entirely on one group, or high taxes in general, would be contrarian to my principles. But thought exercises are entertaining to say the least.


cloudsky01 Wrote:

CommieScum Wrote:
You're ignoring deflation.

No I’m not, I’ve assumed that the external market is much larger than the domestic market, which would have at least [i]some offsetting effect.

CommieScum Wrote:
Demand remains constant, it is disposable income that changes.


If the composition of those who are doing the spending changes, demand won’t stay constant. You need to consider the different marginal propensities to spend for the different income groups, as well as their spending preferences. I don’t believe that a tax cut will lead to a 1:1 increase in spending by the wealthy, for example (for an exaggerated example, the top 1% income earners aren’t going to buy up all the groceries that the bottom 99% can no longer afford).

commiescum Wrote:
The disposable income increase puts upward pressure on the economy, leading to domestic deflation as capitalists adjust prices to affordability to maximize profits.

I’m not sure I follow your reasoning here. An increase in disposable income would imply a demand increase, creating inflationary pressure. The “capitalists” would sell at the high domestic price and then try to export the rest to maximise profits, not lower their prices so that the goods could be sold domestically. Eventually there would be some sort of equilibrium pricing but the point of my original argument was that there would be both inflationary and deflationary market mechanisms at work.

CommieScum Wrote:
Excess goods will indeed be sold off to market, but Capitalists typically try to sell their goods domestically first, as it is cheaper and, well, less complex. The deflation will not be harmful because it acts on consumers in a controllable fashion: they are losing disposable income, but not their jobs, or savings, or investments, etcetera.


What’s to stop the wealthy spending and investing overseas, where production may well be less costly? There would be no benefit to employment, nor deflation, nor increase in production domestically. Your idea completely unravels when this is considered, and it is a highly likely scenario.


"I don’t believe that a tax cut will lead to a 1:1 increase in spending by the wealthy, for example (for an exaggerated example, the top 1% income earners aren’t going to buy up all the groceries that the bottom 99% can no longer afford). "
Oh no, most of it would probably be invested into bonds and accounts, both foreign and domestic.

"I don’t believe that a tax cut will lead to a 1:1 increase in spending by the wealthy, for example (for an exaggerated example, the top 1% income earners aren’t going to buy up all the groceries that the bottom 99% can no longer afford). "
How much profit will the 1% make if 99% of the population can't afford their goods? That's what I mean when I say "upwards pressure causing deflation". Unaffordability for high mark-up goods causes deflation in the long and short term. You don't get the highest profit by selling it at the highest price possible, you sell it at the best price, which isn't necessary the highest price.

"What’s to stop the wealthy spending and investing overseas, where production may well be less costly? There would be no benefit to employment, nor deflation, nor increase in production domestically. Your idea completely unravels when this is considered, and it is a highly likely scenario."
Nothing, but it is actually pretty unlikely. It's about as likely as free trade leading to domestic industry collapsing and the value of the dollar reaching zero. It could happen, but you can also be struck by lightning. Doesn't mean it'll happen, and we can do these "what-if" scenarios all night.

This post was last modified: 06.12.2017 00:35 by CommieScum.

06.12.2017 00:32
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cloudsky01
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Post: #8
RE: Regressive taxation: the answer to the west's qualms

CommieScum Wrote:
How much profit will the 1% make if the 99% can’t afford their goods?

I think you’ve either missed or ignored the point I was trying to make. The “99%” here represents only a fraction of the world population. The “best price” would not be a low price set to satisfy the domestic “99%”, because of foreign demand for these goods. Obviously, as you mentioned I’m simplifying assumptions about transaction costs, trade barriers etc but the take-home message is that the system you’ve proposed is unlikely to work as perfectly as you believe.

CommieScum Wrote:
It could happen, but you can also be struck by lightning. Doesn’t mean it’ll happen, and we can do these “what-if” scenarios all night.


There’s no such thing as right or wrong in economics, the same could be said of your argument. But, I’ll spare you my other what-if scenarios in that case Hehe


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06.12.2017 02:08
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CommieScum
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Post: #9
RE: Regressive taxation: the answer to the west's qualms

cloudsky01 Wrote:

CommieScum Wrote:
How much profit will the 1% make if the 99% can’t afford their goods?

I think you’ve either missed or ignored the point I was trying to make. The “99%” here represents only a fraction of the world population. The “best price” would not be a low price set to satisfy the domestic “99%”, because of foreign demand for these goods. Obviously, as you mentioned I’m simplifying assumptions about transaction costs, trade barriers etc but the take-home message is that the system you’ve proposed is unlikely to work as perfectly as you believe.

CommieScum Wrote:
It could happen, but you can also be struck by lightning. Doesn’t mean it’ll happen, and we can do these “what-if” scenarios all night.


There’s no such thing as right or wrong in economics, the same could be said of your argument. But, I’ll spare you my other what-if scenarios in that case Hehe


I'm not saying it will work perfectly, I'm saying you have a logical fallacy. The bottom line is that the goods people can afford is not based upon spending money, it is based upon real net productivity (post tax on productivity) and the real productive output of the economy. Money is just medium of exchange; money is not necessary a good (except on the international scale, but I am talking domestically.) Money certainly won't be a problem considering our hyper inflated economies, which are the result of a century of Keynesian economics. If anything, our problem is that there is too much money in the economy, as a result of extended massive deficits and other Keynesian policies. Money only becomes an issue when there is not enough to facilitate the exchange of productivity, and we are far off from that dystopia. Speaking from an American prospective, that problem hasn't existed in 150 years.

This post was last modified: 06.12.2017 16:45 by CommieScum.

06.12.2017 16:44
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