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Taxes & US Developers' Ability to Compete Globally

Interesting Read:

"Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else"
by David Cay Johnston

http://www.amazon.com/exec/obidos/tg/detail/-/1591840198/qid=1075312877//ref=pd_ka_1/103-9397972-5039803?v=glance&s=books&n=507846

*  *  *  *  *  *  *  *  *  *  *  *  *  *  *

Carly Fiorina, chief executive of the Hewlett-Packard Co. stated:

>> "There is no job that is America's God-given right anymore, we have to compete for jobs."

Seems to me that if I weren't paying half my money to subsidize fat-cat executive golf games in Hawaii, I might be able to compete a little better in a global market.  I would absolutely *love* to see Carly's tax return; wonder how much she's chippin' in for her God-given right to enjoy the benefits of living in this country?

Adam N
Wednesday, January 28, 2004

Speaking as somebody who used to live in Hawaii, the golf courses aren't that great.  They've been pulling the sugarcane farms and processing plants out for a while though, so maybe they'll build a few decent golf courses over the remnants.

K
Wednesday, January 28, 2004

The rich pay more taxes then anyone else. The top 1% wage earners pay 34% of all income tax in the states according to this article.

http://abcnews.go.com/sections/2020/2020/myths_john_stossel_040123-6.html

Maybe you should be thanking Carly for chipping in so much :)

Gerald

Gerald
Wednesday, January 28, 2004

Except that's only half the story.  How much of the total wealth do those 1% control?

MikeMcNertney
Wednesday, January 28, 2004

"The top 1% wage earners pay 34% of all income tax in the states according to this article."

Interesting, but it begs the question of how much income the top 1% wage earners are earning.  For example, if they're pulling in 40% of all income but only paying 34% of all income tax, they're getting off easy.

I recall several studies (can't provide citations, sorry) that found that the _total_ tax burden is generally rather flat across income brackets.  Once you factor in sales taxes, property taxes, employment/Social Security taxes, etc., the poor and middle class tend to pay about the same amount of tax, as a percentage of income, as the rich.  (Obviously, this will depend heavily on each particular state's tax structure.) 

Not that I'm defending this this outcome -- IMO taxes ought to be progressive, with the wealthy contributing more.

Robert Jacobson
Wednesday, January 28, 2004

> Except that's only half the story.  How much of the total wealth do those 1% control?

According to page 17 of http://www.levy.org/2/index.asp?interface=standard&screen=publications_preview&datasrc=f73a2041da in 1998 the wealthiest 1% controlled 38% of the wealth.

Christopher Wells
Wednesday, January 28, 2004

>> "The top 1% wage earners pay 34% of all income tax in the states according to this article."

The IRS only knows what income is reported.  One of the points of the book is that what the extremely rich report to the IRS is but a mere fraction of their total compensation.

Adam N
Wednesday, January 28, 2004

People on this thread are talking about many incompatible things.  There is a huge difference between the percentage of wealth the top 1% control and the percentage of income they earn.  My guess is that the higher your net worth goes the less money you get in income and the more you are sitting on in terms of investment.  You might realize capital gains every so often but these are taxed at a lower rate.

In truth, despite the favoritism the really rich get, the higher incomes have been paying a progressively higher percentage of the income taxes taxes over the years.  They keep earning more money though and I have seen no evidence that redistributive tax policy actually serves to redistribute the wealth over the long term.  My suspicion is that such policies have large effects the year they are implemented but that the free market ultimately sorts it out.

Me, I favor the elimination of all income based taxes (including FICA) and just having a consumption tax.  We should have only one tax.  Fewer tax laws means fewer tricks.

name withheld out of cowardice
Wednesday, January 28, 2004

>> "My guess is that the higher your net worth goes the less money you get in income..."

Absolutely.  Not only that, but consider the power that the very rich wield.  One of the favorite tactics of the upper .1% is to start a foundation.  This is money they ostensibly give to 'charity', but which, in reality, they themselves control.  You can create quite a corps of loyal minions controlling that kind of capital - tax free.

Adam N
Wednesday, January 28, 2004

I should dig up my post regarding destructive envy, because it's running at full-tilt in this thread.

It doesn't matter to many of you that the wealthy are paying the way for a lot of people - so long as they have money left over, you want them to pay that as well.

Points worth considering:
1) I'd wager that every single poster on here would classify as "rich" in an absolute sense. If you make $60k a year you are making twice the annual income of the average *family* in the US. So when you say that "the rich should pay more" you're asking for a tax hike.
Of course what you mean is "anyone richer *than me* should pay more."
2) Instead of focusing on who's paying, why don't you focus on why the bill is so high? How about cutting some spending instead of trying to continue taxing the rich?
3) "From those who can provide, to those who need" as controlled by the government is socialism. If you're okay with that, fine. Just wanted to make sure. :)

Finally, a parable about tax cuts:
http://www.victorboc.com/PostRestaurantTaxStory.htm

Philo

Philo
Wednesday, January 28, 2004

There was an interesting article in Forbes (or maybe Fortune) recently about the Pritzkers and how they are able to take advantage of all kinds of loopholes, which were closed years ago (like, in the sixties), because they started them when they are legal and they are "Grandfathered in".

Once again, switch to a single tax, one that is consumption based and all these benefits go away.

The people who really get screwed, BTW, I think are people who earn in the low six figures.  The politicians call them rich but really they are upper-middle class.  They can't start foundations...

name withheld out of cowardice
Wednesday, January 28, 2004

>> "3) 'From those who can provide, to those who need' as controlled by the government is socialism. If you're okay with that, fine. Just wanted to make sure. :)"

I'm a libertarian - in Europe, a classical liberal - so I'd wager I'm in the top one percent of people on the planet who find socialism to be morally reprehensible.  I'd love a free-market system!  Please, however, do not confuse what exist in America today as a free-market system.  The whole point of the book is that the very rich are corrupting the market based economy that America once had, and supplanting it with a self-destructive economy stacked in their favor thus unfairly eliminating competition. 

Adam N
Wednesday, January 28, 2004

where that story falls short, philo, and therefore to me loses any sense of purpose, is that no one would complain about eating for free!

I'm intrigued by flat tax and consumption tax ideas. 

"less taxes" sanmou
Wednesday, January 28, 2004

"no one would complain about eating for free!"

So you think the phrase "don't look a gift horse in the mouth" was created for nothing and has endured for centuries for no reason? ;-)

Philo

Philo
Wednesday, January 28, 2004

Its much easier to control people (a population) when you create need.

apw
Wednesday, January 28, 2004

To look a gift horse in the mouth is "To be critical or suspicious of something one has received without expense"

That's different than complaining about getting something for free.


Wednesday, January 28, 2004

Retail sales tax, pros and cons

http://www.salestax.org/

apw
Wednesday, January 28, 2004


"%34 of income tax".

Stossel is being deceptive.

"Income" does not include dividends and capital gains.

"Income tax" does not include FICA (i.e. SS withdrawals). Note that the SS "tax" is capped (so after a certain wage, its contribution to the total tax burden decreases).

Anyway, what's a bigger burden?

25% tax on 100k or 34% on 10 million? In your answer, consider a cheap nice house in NYC area (~500k).

Consider that the average CEO gained a 16% increase in salary last year while low level employees got nothing.

njkayaker
Wednesday, January 28, 2004

Just to provide some practical input on this topic, when I gained a very high paying job at a company run by a very wealthy man I insisted on paying the correct tax.

The pay office could not believe I really wanted to do this. They had an adviser whose job was to help high paying executives avoid paying tax through dodgy investments and all sorts of sham arrangements.

I told them I was quite happy to pay for schools, police and hospitals, and did not want to avoid paying tax.

It happens.

.
Wednesday, January 28, 2004

The problem isn't the tax scale.

The problem is that the tax laws are too complicated. This complication leaves all sorts of loopholes, that mean the very wealthy, with their highly paid lawyers and accountants, can avoid paying their fair share.

In my opinion, the simpler the tax system, the fairer it is in general, because it gets a lot harder to game the system.

If you went for straight income tax, with all earnings (including investments) considered income, and no concept of deductions, then it'd be a hell of a lot harder to cheat the system. Not to mention a lot easier to find out when people are cheating and punish them for it.

Sum Dum Gai
Wednesday, January 28, 2004


In Australia our tax scale is...(based on annual income)

Income        Tax Rate
$0 - $6k          0%
$6k - $20k    17%
$20k - $50k  30%
$50k - $60k  42%
$60k +          47%

On top of this we pay 10% on top of every good or service we buy.

How does this compare You?

Naturally, I feel cheated.

Ch 10
Wednesday, January 28, 2004

I remember your destructive envy post, Philo.  I thought it was a good one.  It really chafes me that too much time is wasted griping about "tax cuts for the rich" when the real issue on the table is "tax cuts we can't afford".

The rich pay the most taxes.  They will receive the most benefit from ANY fair tax cut.

One thing I've noticed -- any yahoo can preach about how spending should be cut.  Very few have any specific ideas about WHAT to cut.  Common-sense waste reduction saves a few hundred million dollars a year.  Draconian cuts in services people rely on can save tens of billions a year.  But these are a drop in the bucket compared to the $500 billion a year deficit the US is running created primarily by three things: less income due to the recession, tax cuts we couldn't afford, and increased spending on defense and homeland security.

Over half of US discretionary spending is in the military, a vital service that few would want to see gutted.  Non-discretionary spending is a much larger fraction of the budget, but it's in things like Medicare and Social Security which REALLY can't be done away with, nor could they be privatized.  (If you think Washington is short-sighted when it comes to the long-term viability of SS, just imagine the mismanagement tempations the profit motive would induce).

I don't see anything wrong with a redistribution of income provided it's not done to a self-defeating excess.  In fact, I believe the US is a prosperous nation because we have not let the rich rest on their laurels, but rather we subsidize and empower the lower classes so that more of them will have the opportunity to succeed.

Alyosha`
Wednesday, January 28, 2004

As an Australian, I don't feel cheated at all.

We pay a bit more tax than the Americans, but we have a hell of a lot better health care system to show for it. Our education system is much more affordable too (20 grand Australian HECS debt sucks, but it's nothing compared to 100+ grand US university loans).

Should I ever be unemployed for an extended period of time, I appreciate the fact that I wont be out on the street, but rather I'll continue to be paid a minimal amount that will allow me to at least eat. I also appreciate that if I need to go back into education full time for some reason, the government will give me a similar allowance.

The extra tax really does buy us a lot that we tend to take for granted, but is important.

Sum Dum Gai
Wednesday, January 28, 2004

Enough of the "tax cuts we can't afford" BS. If you want to say something to the effect that you disagree with tax cuts in the absence of cuts in spending, fine. But phrasing it the other way sounds as though every penny we earn is the rightful property of the government. Only through their benevolent grace have we been allowed to keep the difference.

As Philo said earlier...all of you working guys who want more taxes for the rich: you're rich. Those of us who earn more than $60k would have our taxes raised big-time if the Ted Kennedys and Dick Gephardts in Congress had their way.

And on the subject of Social Security: It is doomed. It's already too late to save it (not that I would advocate that anyway), because the "trust fund" is a mountain of funny money. The Social Security Admin. party line is that the "trust fund" won't run out until 2034 or something; but the reality is very different. In a few short years, Social Security will start redeeming that pile of U.S. Treasury bonds that they've accumulated, and U.S. taxpayers are the people that will have to buy them back. Or maybe we can just issue even more bonds, and put it all off for another generation...sure, that'll work.


SS and Medicare together are projected to consume 60 or 70 percent of the U.S. Federal budget in a decade or so. I doubt that members of the "echo boom" generation will accept the kind of taxes that would be necessary to support that. Those programs are going to have to change drastically, or collapse under their own weight.

Rob VH
Wednesday, January 28, 2004

Heh - don't know if this would work, or even make much difference, but it certainly might prove entertaining:

Each year, with your tax forms you have to send in, you have an additional form that lists the budget items for whatever level of gov't you're filing taxes for. i.e. - federal budget with federal tax return, state budget with state tax return, etc. Obviously, the budgets would have to be presented in a highly collapsed manner to keep them manageably short.

Ok, so you have your two-page (let's say) list of stuff the feds plan to spend money for in front of you, right next to your tax forms telling you how much you're paying the feds. Now, you go down your budget list and put percentages next to the things you want your money spent on. The rules would be:

1) if you specify nothing, the feds will decide where your money goes (roughly like happens now anyway)
2) for each budget item next to which you specify a percentage, the IRS applies that percentage to the final amount of money you're paying for the year and that's how much goes to whatever budget item you indicated.
3) you can assign as much or as little to as many or as few budget items as you wish.
4) if the total of all the percentages is less than 100%, the feds assign whatever's left as they wish.

Imagine how all the politicians would dance around in a mix of coronary arrest and general vapor-lock... sweating out whether their pet pork project was going to get the ax based on what the public actually thought of it instead of how much back-channel influence peddling and vote-buying/trading they had managed to do!

Interesting concept -- the people actually having some direct control over where money gets spent.

As I said, it might be useless, it'd probably be chaotic, but it's almost certainly be fun to watch.

not really serious, but still...
Wednesday, January 28, 2004

Rob ... "tax cuts we can't afford" is an accurate statement.  As I said before, if you want a two trillion dollar tax cut, then you should propose at the same time a two trillion dollar spending cut.  I'm furious because our current administration hasn't got the balls to do that and wants to have it both ways.  I would rather forgo a tax cut (which I didn't really need) rather to see the US make a beeline for a Latin America-style fiscal meltdown.

Alyosha`
Wednesday, January 28, 2004

"Please, however, do not confuse what exist in America today as a free-market system."

Amen.

Listen up American citizens: it's sugar subsidies and expensive private healthcare that you should be worrying about. Do you think companies offshoring jobs to other countries are paying health insurance for their foreign employees? Big saving right there because those governments chose to provide national healthcare instead of subsidising sugar growers (who in turn fund re-election campaigns, so effectively the U,S, politicians approve themselves election funding in the name of American industry).

Re: the Australian tax system: GST has been implemented clumsily and a simpler (cheaper) tax system would mean trimming layers of inefficiency would be possible (i.e. not having to pay for accountants to handle tax returns). Still, Australia does provide fairly good public services on a state and national level, the "most compelling" argument the Australian PM has for scaling back public schooling is that public schools are "wasting time" by informing students that he lied to the the public (repeatedly).

Walter Rumsby
Wednesday, January 28, 2004

Also, as an earlier poster stated, some people who oppose tax cuts don't mind paying their taxes.

I certainly don't.

Another thing to keep in mind (as a roommate of mine has pointed out repeatedly to me): the tax law is, in general, complicated due to figuring out what you EARN not what you OWE. And, in general, most people want those complications to stay around (as they generally boil down to tax incentives for various things -- owning houses, having children, etc).

Lastly, in regards to the Australian college education comment -- in most states, attending a (very decent) public university shouldn't run you more than ~14k a year, counting room and board. Considering you can get jobs during the summer and school year to help pay your way, and there is a fair bit of need based aid around, most people who can get into university should be able to get out with no more than $20-30k in debt.

This presumes, of course, that you are not attempting to attend a high priced private school without financial aid or wherewithal. THAT is a good way to end up with $100k in debt.

Steve C.
Wednesday, January 28, 2004

>> "Rob ... "tax cuts we can't afford" is an accurate statement."

America's been in debt since WWI.  Don't really think we'll ever be out of debt... Don't even think it would be wise to waste resources to get out of debt.  What do you think you're doing when you buy a government bond?  You're causing the government to go into debt!  Horrors! 

What really cracks me up is that Democrats are, all of a sudden, *so* worried about the debt, and Republicans are, all of a sudden, spending like drunken sailors.  Just illustrates the point that America has a one party system:  The Bitch-at-the-Other-Guys-Long-Enough-to-Fill-Up-the-Twenty-Four-Hour-News-Channels party.

But that's not really the point of the thread.  The are two points:

(1) If I could keep some of my money, maybe I could compete with foreign developers.

(2) Carly Fiorian and her ilk scream, "Free markets!  Free markets!", when, really they are sycophants, contributing nothing to this nation, and sucking the life out of our middle class.  By systematically DESTROYING our market economy using the insanely convoluted, and unfair tax code, she'll make a quick buck, and eventually leave HP in ruins.  Another great American success story will lay on the junk heap of history so that she can retire in style - probably laughing at you, the disgusting vermin of the former middle class.

Adam N
Wednesday, January 28, 2004

"What really cracks me up is that Democrats are, all of a sudden, *so* worried about the debt"

Uh... Clinton...  balanced budget.... consistently.

Walter Rumsby
Wednesday, January 28, 2004

>> "Uh... Clinton...  balanced budget.... consistently."

Uh... The bubble economy of the 1990's balanced the budget.  Politicians couldn't balance a budget without an economic boom if their lives depended on it.

Adam N
Wednesday, January 28, 2004

"Politicians couldn't balance a budget without an economic boom"

But then shouldn't the puported recovery the U.S. is in (aka "Jobless Recovery") make it easier for Dubya to balance his books?

Walter Rumsby
Wednesday, January 28, 2004

>> "But then shouldn't the puported recovery the U.S. is in (aka "Jobless Recovery") make it easier for Dubya to balance his books?"

I'm sure it will.  The recovery is still young.  (Although it's not 'purported'; the last quarter is the best in a quarter of a century - check the growth rate.)  And Bush will get in front of the nation and proclaim that he engineered the elimination of the deficit.  In other words, he'll lie, just like Clinton did. 

The only thing politicians can do is destroy a market economy - they can't help.  The best thing they can do is to stay out of the way, but then, how would they finance their campaigns and how would they wield their power?  What fun would that be for them?

Adam N
Wednesday, January 28, 2004

Walter Rumsby, it's very naive of you to interpret discussion of offshoring as applying just to America. Offshoring is hitting Australia, the UK and other countries just as much as America.

In fact, it and visa abuses are probably hitting Australia more because it's a lot easier to get a 457 visa than an H1-B and Australia has no limits. Absolutely incredible.

Ch 10, many middle and high income earners in Australia pay much less than the rates you quote through negative gearing and through lying on their tax returns, such as claiming large renovations on investment properties.

I like beaches
Wednesday, January 28, 2004

Yawn,

The biggest visa abuse happening in Australia is English backpackers not going home once their visas expire (and no, they're not getting IT jobs, well maybe IT recruitment jobs - every job agent in Sydney seems to have a cockney accent - they're working on building sites, in factories, taking advantage of the difference between the Pound and the Australian dollar and lazying away in Byron Bay, etc).

There is a lot of inefficiency in the Australian economy that could be trimmed. Yes there is a move towards outsourcing and it's happening in Australia, but Australia is still a lot cheaper than the U.S. (explaining the proliferation of Australian officies of U.S. dot coms in 1999/2000). Based on other discussions of outsourcing here I doubt that an Australian firm outsourcing product development to an Indian firm would achieve any cost savings. Maybe call center costs will be reduced, but that's opening a can of worms (cultural/language differences, poor comprehension) - I think a move from Sydney business districts to Adelaide, regional centers or maybe New Zealand would achieve savings with less potential compromise in terms of quality of service.

As an Australian worker I was in-sourced to India for two months last year. The firm I worked for was happy to pay more for Western workers and house us in expensive hotels.

Finally, I donate to you all my plan for making huge amounts of money. According to a friend who has been living in China, the [mainland] Chinese knowledge of popular music is limited to (for the most part) the Beatles. Money making plan is: form a good looking covers band to plunder the last 40 years of [Western] popular music and corner the market for downloadable music in China.

Walter Rumsby
Wednesday, January 28, 2004

Clinton managed to balance the budget, but it took a combination of a strong economy and a lot of prodding from the right to do it.  Balanced budgets were a focal point of the 1994 Contract With America.

But the Republican Party has all but repudiated that plank in their platform, and now I think that if there's any hope of getting control over our budget, it's with the Democrats.  Ironic but true.  I am especially impressed with Howard Dean's ability to balance Vermont's budget 11 years running (even though it's not required by law there) ... while being able to cut income taxes twice.  Although it looks unlikely now, I'm hoping he gets the nomination because I think he can get a lot of support from real fiscal conservatives and independents who are looking for a more straight-talking leader than Bush.

Alyosha`
Wednesday, January 28, 2004

Walter, there is extensive outsourcing by Australian businesses. And there is extensive visa abuse. Don't you read the papers? You don't live in Sydney or Melbourne, obviously.

I like beaches
Thursday, January 29, 2004

> Those of us who earn more than $60k would have our taxes raised big-time if the Ted Kennedys and Dick Gephardts in Congress had their way

Just to get things in perspective, you might like to enter your income at http://www.globalrichlist.com/index.php and find out how rich you really are comapred with the other 6 billion or so people on the planet. (Not just Rob VH, I mean "you" generally.)


Thursday, January 29, 2004

"You are in the top 0.783% richest people in the world.
There are 5,952,966,827 people poorer than you. "

Big freakin' deal...


On balanced budgets:  the only time you'll have them is when the opposite party controls Congress....i.e. congressional/presidential stalemate that happened in mid 90's.

apw
Thursday, January 29, 2004

Anon@globalrichlist.com:

While I will cede the point that we in the U.S. are incredibly rich by the standards of developing/third-world nations, I won't even dignify that site with a criticism of their methodology...aw hell, I can't resist.

Purchasing power/FX rates are obviously not taken into account, along with form of government, national vs. private health care, etc., ad nauseum.

Those guys are selling a product called "liberal guilt" along with a liberal guilt hangover remedy, a.k.a. a donation to their charity.

Rob VH
Thursday, January 29, 2004

Anon@globalrichlist.com:

Punching the numbers made me feel good. Now, only if they would show what percentile is my 4$ StarBucks coffee and my 2000$ rent.

coresi
Thursday, January 29, 2004

Walter, the english and the australians just swap backpackers. I suspect we have the same problem over here. I believe it's relatively easy for a backpacker to convert to full time immigrant (why? the lifestyle certainly looks better in Oz).
I believe a lot of teachers in UK schools are folks on the "backpacker" visa scheme.

The description of the church in http://www.bugeurope.com/london/eatdrink.html is about right. Except they've forgotten it started when sunday drinking laws were much more restricted. I did the crawl with some backpackers once around the only places that were open during the "dry" hours. Still I see the "young colonials" out for a good day and evenings drinking as I drive past so it's still popular.

Peter Ibbotson
Thursday, January 29, 2004

i like beaches,

You're right I don't live in Sydney _anymore_, but up until August I lived and worked in Sydney for 4+ years.

Yes, I'm sure there is visa abuse of the IT worker kind, but during the time I worked in Sydney I saw many examples of firms that were poorly managed; provided low quality solutions; could not do their job (web design companies who have no staff who understand HTML, even vaguely - this still bugs me a lot really :)); who acquired work because people who didn't know what they were doing let them be taken along for a ride; talked but never delivered; hired the cheapest possible _Australian_ workers via dodgy training schemes that had taught said workers next to nothing, etc, etc.

On the other hand some of the best stuff happening in the Java world is coming out of Australia or Australians: Rod Johnson's Spring framework and J2EE book, Gavin King's Hibernate project, Atlassian's JIRA; in the blog world: Simon Hill and Charles Miller rate as amongst the best Java bloggers I know of. Jon Vissilides (spelling?) of GoF was _working_ for IBM in Australia when Design Patterns was written, but I'm not sure if he is Australian. I just wish I'd met some of these switched on fellows when I was in Australia (I didn't follow up an offer to have a beer with Atlassian, so I was remiss).

Talented Australians can succeed - the sky is not falling (but perhaps it's a bit closer to the ground these days :)).

Walter Rumsby
Thursday, January 29, 2004

"let themSELVES be taken along for a ride"

Walter Rumsby
Thursday, January 29, 2004

Philo:

I don't think listening or reading Victor Boc is such a great idea.

Right wing attitude is sadly instilled in his brain. His analogy to explain tax situation is ridiculously shallow and irrelavent.

In other words, I stay way away from people with *agenda*.

cosmo kramer
Thursday, January 29, 2004

"In other words, I stay way away from people with *agenda*."

You're a hermit with a net connection? There's a neat trick.  :)


Thursday, January 29, 2004

"In other words, I stay way away from people with *agenda*"

Uum...  everyone has an agenda, Einstein. 
888

anon
Monday, February 02, 2004

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