The country is getting forced by markets into realizing pain for overspending, and only congress can manage this pain. Manage the pain, not remove it is key here. Manage it.
Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse.
That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to play hard for your voters.
Inflation. The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.
There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation.
If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality.
"Markets" should not have a veto on policy in a democracy.
Making it non-zero is a policy choice. Inflating away this debt is also a policy choice. There is nothing accidental about this.
What will not be inflated away is personal debt. That will remain linked to inflation even after the currency is revalued, and will be captured from personal assets wherever possible.
Europe has repeatedly tried to soak the rich, and the results are always the same: the rich move their wealth somewhere else and you end up breaking even or even reducing your tax revenue.
Explain to me the benefit of attracting the wealthy if they don't pay tax?
Come to our country - have our police and courts and soldiers protect you wealth - all for free.
Oh - and because you are not paying tax - can I borrow some of that wealth please so I can pay for the stuff I'm providing for you free - I'll give you a healthy return.
The rich benefit the most from civilisation - and it costs - you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Oh and in terms of the charts where you increase a particular tax and revenue goes up in the short term and down later - that's because people adapt - they find new ways to avoid tax ( yep including to pretend to have left the country ).
Just bwcause they run, that's not a reason to stop pursing them.
> Explain to me the benefit of attracting the wealthy if they don't pay tax?
You've fallen victim to the false dichotomy. I don't see anyone argue the wealthy shouldn't pay any tax at all.
This renders the 2nd paragraph wrong. And then 3rd paragraph wrong too.
> you can't just keep running from country to country hollowing it out for ever - eventually there will be nowhere left you can free ride.
Depends how much time it takes to run from one country to another, and what you mean by "for ever" - if it takes you a year to move from one country to another and you live for 100 years, you need 100 countries. Pardon my humorous remark, I know this is not the point; but the actual argument is easier to counter: we don't have a single government for the Earth. We don't have a united dominating force to unify taxes in one civilization and sanction or isolate from the other civilizations for hosting the rich.
IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
They should pay in proportion to the amount of value they capture - having in effect, much lower margin rates the wealthier you are doesn't help pay the bills or maintain some sort of meritocracy.
And sure - while you could move from one country to another like a parasite finding a new host, and cycle around as the original host recovers - the key questions is whether that results in a few people owning more and more as a result, and paying a lower and lower marginal rate until civilisation collapses. ( or the rich decide to take the rains of power instead to keep the society they benefit from so hugely afloat ).
> IMO the education is poor, producing stupid societies electing the governments which are incompetent, corrupt and largely sympathizing with the rich.
I think you underestimate the level to which the rich judicously share their wealth in order to influence people and policy.
Until they lobby hard enough to have a reduced VAT on luxury goods as it happened in France. The argument being, you guessed it, otherwise they would buy stuff elsewhere.
Your "Swedish" source appears to conclude that the wealth tax is effective, but suffered from loopholes and lack of enforcement. Why not fix those rather than follow your "real plan"?
Also your UK link does not support your argument:
> Weaker-than-expected tax liabilities from additional rate taxpayers are not necessarily an indicator of an unexpectedly low yield from the 50p rate. Incomes for those earning above £150,000 could be depressed for other reasons. For example, high income earners are more likely to derive a higher proportion of income from savings, dividends and other investments – and these have been much weaker in recent years than employment income.
>Europe has repeatedly tried to soak the rich, and the results are always the same:
Yes, the results are always the same: Europe consistently runs lower budget deficits, yet provides greater benefits to their citizens. How awful for them.
They spend less than the US as a percentage of GDP, yes, but they don't spend zero: 2.5% or so vs our 4%. But who's to say they aren't right and we're wrong? Think about the cost of the Iraq and Afghan wars. Good investments?
Isn't it a 50% inclusion rate for capital gains in Canada? That works out to a maximum tax rate of 27% in the top tax bracket. And they canceled the proposed increase to a 66% inclusion rate, which is probably smart considering how a ton of rich Canadians already move to Florida.
The corrolay of this would be that as soon as money enters a "rich-only" ecosystem, it's essentially gone forever for the wider population. I don't see how this would be a desirable outcome.
It creates rich-people dollars and poor-people dollars. The poor people can still afford a buy a few necessities because rich-people money is tied up in useless vain endeavors, at least to some extent. If rich were to direct all their purchasing power toward real goods they could drive up the prices and make it unaffordable for regular people. As happens with the housing market to some extent.
All demand is not created equal. The rich buy more houses than they need for shelter, in order to produce income. This essentially creates an artificial shortage of homes for purchase by actual homeowners. I believe that is what the commenter was referring to.
> Europe has repeatedly tried to soak the rich, and the results are always the same: the rich move their wealth somewhere else and you end up breaking even or even reducing your tax revenue.
Why can't they tax something that _cant_ be moved elsewhere, like property ownership?
Raising taxes generally raises money. In some cases it can lead to capital flight but that’s hardly some universal economic rule.
But besides raising capital, taxation reduces wealth inequality, which is itself beneficial as it makes society more democratic. Reducing wealth inequality reduces the concentration of power, which is better for everyone (except for the 1%).
Still, when redistributing wealth, it’s prudent to address the risk of capital flight. It’s not an insurmountable challenge. Policy can address it through: 1) financial controls 2) coordinated international efforts to raise taxes on the wealthy, and 3) harsher measures like nationalization and capital levies.
Something to point out also is that more equality is actually better even for the 1%. They are just too short-term-focused and greedy to see that. There is nothing they can get today that they wouldn’t be able to get tomorrow if we taxed them appropriately. In return, they would live in a more stable and safe society, a less brittle economy, and wouldn’t be as reviled socially. But they are just too focused on their net worth to see that.
Your links are 2 about speculation on how business will react, and one real paper that discovers that rich people lie more to avoid taxes when your tax rate increases.
Nothing at all supports that "the rich move their wealth somewhere else"
That's because, as a singular planetary species, that story is a myth. The rich only maintain wealth by exploiting people against each other, thus deterring actions against the rich who likely caused the issue in the first place.
Lack of housing because it's a profitable investment class that rises in value due to lack of supply? Obviously it's the fault of NIMBYs alone and not political policy pushed by lobbying groups.
Healthcare too expensive? Totally not the fault of private equity bleeding care networks dry and public health insurance companies denying coverage to fund share buybacks and CEO raises, so it must be nurses striking for pay or the government for paying too little on Medicare.
The point is that if enough rich countries said "fuck this shit, pay up and fuck off out of politics forever", the rich can't leave. They're stuck here, on Earth, with the poors. That's not going to change anytime soon, so the only thing stopping these countries from reigning the issue in is cowardice.
But do you have actual evidence that we need it? (Instead of just "nice to have".) Because everybody just repeats that without evidence, like the OP.
There are plenty of reasons to expect the OP's prediction not to hold. I don't know how things play out in practice, and I don't think I've ever seen anybody that knows it.
The IRS taxes americans no matter where they are or where they take their money. The US is only one of two nations in the world with citizenshp based taxation. And if you want to renounce your citizenship, 35% exit tax. The only solution is to make a foreign corporation (Apple keeps its income in Ireland for example) and hide your money there (The City of London does a brisk business setting up corps in their old colonies - when the IRS comes knocking, the City of London plays dumb)
It's also not that simple for an individual. If you own more than 10% of the corporation you get hit with CFC rules, a base 37% tax on gains. Or PFIC rules if it's passive.
Basically unchanged for 70+ years, and far lower historically. Meanwhile significant growth in real GDP per capita and therefore real government receipts per capita.
The change isn't that the government is collecting less money. They get more than ever. But growth in government spending has outstripped it, and it has been getting worse rather than better.
Hence the propensity to sink growing amounts of GDP into paying an ever-heightening stack of middlemen to provide medical care at market prices... instead of simplifying the stack and saving money.
The US government created a mandate, then allowed it to metastasize as health care became more technical and expensive, and is now in the business of sticking its fingers in its ears and pretending there’s not a financial problem.
> The change isn't that the government is collecting less money.
The government is collecting less spending relative to taxes. A deficit is a difference between the two. Logically addressing either side would improve the deficit. However the ruling class prefers hoarding wealth, financing wars, and cutting social programs.
Whether you measure it as nominal dollars, real dollars or real dollars per capita, the US government's tax revenue has only increased over time, so the only explanation for why there are huge deficits now and not before is that its spending has increased by even more. Moreover, a major proportion of that spending increase did go to social programs, and the top 50% of incomes pay 97.7% of the federal taxes.
The actual problem is that even a lot of the "social programs" don't ultimately go to the poor. They require specific services that divert the money to contractors or landlords, or go to affluent retirees who don't really need the money. And, of course, the defense budget is entirely out of hand as well -- but why should we extract more from the economy to fund things that ought not to be funded?
I disagree that wealth is a better measure to use here. As programmers should know better than anyone, most of the wealth in the world is in the form of people and their capacity to work on teams that solve practical problems, but the wealth stats you want to use dont even try to estimate that form of wealth.
In economics terms, wealth is a measure of capacity to save, taxes come from that capacity too, so I use it as a better estimate of how much a particular demographics can contribute to taxes.
I think that's fair in the context of this thread, given the present distribution realities, the bottom 50% can't contribute to tax revenue. Conversely and a bit more subtle, the top 50% ability to save doesn't seem to be impaired by their >97% contribution to revenue.
> As programmers should know better than anyone, most of the wealth in the world is in the form of people and their capacity to work on teams that solve practical problems
I'm looking at this as a practical matter, I'm far from moralism and moral philosophy so I can't really relate to your argument above.
> There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation.
There is obviously both - as you say it's the difference between two numbers - and sure how you portray that differences is often politicised - just as you are doing now.
Also remember there is borrowing in the equation - it's not just money in the system, but the ability to spend made up money today based on future promises, the with the rich benefitting from the interest on that debt.
ie those with assets benefit twice from a gap between spending and taxation - they get to not pay their way, and also get a nice return on lending the money then didn't pay in tax to pay for the necessary spending!
I'm not even sure if this is a serious post, but it indicates a significant misunderstanding.
There is an asymmetry between a government's revenue and its expenses. Revenue can increase arbitrarily if the government is allowed to take out unlimited debt. The amount a government can tax is limited first by the size of its country's economy. There is a maximum amount of revenue you can collect via taxation, and after a certain point increasing taxation decreases revenue. Countries also exist in the context of the rest of the world and there is a market for business. If the tax rate is not competitive businesses and people will leave, although this is over a longer time horizon.
In terms of the possibilities overspending is far more likely than undertaxing because you can spend an infinite amount, but you can only undershoot your optimal tax rate by a finite amount. Both are probably happening right now. The amount that the US government is undertaxing compared to its theoretical optimum might not even balance the current budget.
Why is the default to tax more and not spend less? Is there really no limit to the amount of spending the government should do? You see no possible use of resources that would be wasteful?
Problem is, there’s a lot of needs that private industry will not fill (or cannot be trusted to fill well). We’ve seen this play out repeatedly. If you want a functioning society, a certain degree of government spending is unavoidable.
Now there is something to be said for making sure that spending is effective, but this must be engaged with in good faith; that is, changes should be made with a scalpel after gathering plenty of data supporting the change in question. Proclaiming ineffectiveness without data to ground the claim and then using that as an excuse to make broad cuts is a great way to make any dysfunction even worse.
FY2024 federal spend 6.75 trillion. FY2019 was 4.4 trillion. FY2009 was 3.1 trillion. Twice the growth in half the time.
Was there so much more that private industry "will not fill" in 2024 vs 2009? How about vs 1999? (1.7 trillion budget). We can't attribute the difference to inflation: the US government's inflation calculator says 1.7 trillion in 1999 is 3.3 trillion today.
No one is arguing that the federal government doesn't need to spend some money. But this truth has no relevance to the absurd out of control spending we're witnessing today.
I don't think _deficit_ is at all a useful metric about the appropriate level of spending by the federal government-- Outside of emergencies deficit is merely a measure of gross financial incompetence in our elected officials.
It's a neoliberal scam. Claim government programs are ineffective, destroy the institutions behind those programs, and point to the resulting chaos as proof that the initial claims are true. Rinse and repeat.
I'm sure some of it is wasteful, but that last guys who tried to find it where scam artists. And then, despite gutting multiple services including Medicaid for US citizens, we're raising the deficit. By 2 Trillion dollars.
So the whole "cutting wasteful spending" thing... ssss yeah... not really working out I'd say.
It's because of the effects of technological progress on wealth accumulation.
Tech allows winner-takes-all effects in many different markets (and runaway situations where labor cannot catch up at all) - you either have to have very strong antitrust (which is still not possible in some places), or basically strong redistribution (i.e. taxation of wealth in order to redistribute) to maintain a reasonable (note: not equal, but a reasonable degree of inequality - closer to the model that existed from the 1940s-1970s) distribution of wealth in society.
You think that Bezos and Musk have billions in their own personal bank account?
So what do you mean be "extreme wealth"? Companies? Dividend payouts? House? Yachts?
I agree that luxury items that are out of reach of the middle class (eg sport cars etc...) should be taxed highly, but a toy that a rich person can buy vs a rich person investing money into his own or other companies is a problem if you want to tax that since no-one will then create new companies and invest in R&D.
While I'm all for it, the real impact of this would likely be on the order of a few billion dollars, if that.
Most regular people could sit down and cut a billion dollars of dumb shit out of the budget in a few hours (every Congress person has their little pet projects they slide in to omni bills).
The fixes needed for this are massive, and the pain will be felt by everyone. Even taking the harshed path against the 1% will still leave plenty of pain for average folks.
> While I'm all for it, the real impact of this would likely be on the order of a few billion dollars, if that.
The collateral loan -> invested -> growth, collateral loan -> invested -> growth cycle doesn't just result in tax avoidance on a one-time basis. It's a way to indefinitely grow capital at a higher rate, by pushing taxes further and further into the future.
And when any wealth gains are finally accounted for as taxable income, it's a one time tax that doesn't reflect all the compounding. So a huge time-value of money break.
So there is a compounding of the tax that is avoided over time, despite actual liquidity accessed and deployed all along.
This is one of the primary loopholes that lets wealth gains made from capital get taxed far below wealth created by labor (which gets very reliably taxed, and at higher rates). The percentage of wealth growth that actually gets taxed as a running number keeps growing, despite the ability to make those gains liquid via loans.
Imagine if you could do labor, then instead of taking your income and getting taxed, accept loan proceeds against your "delayed" salary, and invest the net gain from not being taxed. Indefinitely. (With interest on your loan, cancelled out by the "interest" on your delayed salary.)
That would be like being able to choose to pay your own IRA instead of paying taxes.
That's how the unrealized (but real) wealth gains -> leverage (the practical and very real realization) cycle works.
Significant loans on collateral are liquidity events.
In general, any loan that was taxed up front as income, could be paired with counting loan payments on the principle as an expense against income. (And if the loan was for business, not personal, interest would also be an expense.)
This would make loans tax neutral vs. other ways of getting money out of assets.
It would eliminate the practice of cycles of leverage that lets the rich grow their wealth, use that to grow more wealth, over and over, while pushing taxation into the future indefinitely.
And it would make loans less attractive to take out (the upfront tax), and yet much easier to pay off (symmetric tax break for paying down debt). Which would result in a much less leveraged, more resilient, economy.
"If extreme wealth was taxed, the debt would be zero"
Do you have numbers for that? Even ignoring the issues with lots of wealth being paper wealth that cannot be translated into any kind of realized gains, and any 2nd order effects, the wealth (stock, can be depleted once) is not even in the same ballpark esp. given the deficit (flow, keeps happening).
>"Markets" should not have a veto on policy in a democracy.
capitalism is meant to be organic thing like a bacteria. a self-organizing network. one cannot legislate nature, one cannot legislate human nature. Imagine making crimes illegal and then nobody committing crimes. Imagine making it illegal to change lanes without using your turn signal.
a democracy can give an antibiotic by dr. democracy to clear the infection, that is the nature of control here .. but if it's a nasty bug.. the bug will veto the doctor
We have a system of laws that undergird the economic system - the legal protection of private property being the main one. Private property requires a monopoly of violence to enforce.
When capitalism colonizes a legal system, it necessarily creates the incentives for the legal system to adopt laws to maintain itself. If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground.
It was probably meant in the manner of: "the purpose of a system, is what it does"...
I.e. regardless of how it evolved (system of laws written with good intent, or system of laws organically grown out of corruption and lobbying...) what capitalism does now is its purpose, and we shouldn't expect it to be meant to do anything different.
> capitalism [...] necessarily creates the incentives for the legal system to adopt laws to maintain itself
Agree
> If for some reason private property was not legally enforceable, capitalism wouldn't get off the ground
I think this makes as much sense as saying: "if money wasn't a thing, capitalism wouldn't get off the ground".
Technically true, neither capitalism nor feudalism would be able to get off the ground, but "private property not enforceable" evokes images of thugs stealing your property... The truth is that the first few people (or group thereof) who accumulate a commodity (grain, livestock, widgets, etc.) would also be the first who would be able to bribe/pay thugs with a small share of their commodities, to help protect from (deny access to) others in the community.
The monopoly of violence (and legal authority) would grow out of the initial group.
In the same way, even if money was going to be abolished, any other commodity would just take its place, and rebuild capitalism with it. It is tricky to wrestle democratic control back, and move on from capitalism.
The issue is that all governments are in roughly the same situation, so there is no alternative other than maybe gold. The US doesn't need to be great or even good, it just needs to be better than the alternatives.
The issues facing China and the EU make America's spending problem look mild. (And I agree by the way: America has a massive spending problem.)
That's not necessarily true - it's possible for all governments to fail. The winner might be something that doesn't even register as a government today, maybe something like privatized micro-nations out of Snow Crash, city-states, or a crypto-economy.
There are times in history when a government fails, and then there are times when all governments fail, and the world re-organizes (usually after a long and bloody period of multiple wars) into a new system of social organization. The idea of a modern nation-state is only about 150 years old, dating from a series of wars (the U.S. Civil War, the German and Italian wars of unification, the Franco-Prussian War, the Meiji Restoration) in the 1860s-1880s. Before then, the early nation states and concept of nationalism arose out of European Wars of Religion in the early 1600s. Someone who lived under high-Medieval feudalism c. 1300, when the divine right of Kings was a given, would've found the world of the late 1600s quite alien.
EU government debt to GDP ratio is 81.8% with a deficit of 2.9%.
US current debt to GDP is 124%, and Trump’s big beautiful bill is projected to increase the deficit to 7% next year.
America has long benefited from a more dynamic and attractive labor market than Europe, but the current administration is actively trying destroy that advantage by driving out the immigrants that were fueling it.
To be clear, I think US spending is too high. But I would take a bit more debt and thriving economic growth vs a bit less debt and zero economic growth every time.
>Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.
I.e. people who need to work, which means it disproportionately affects the young.
This is what has to happen in a democratic society with a flattened and eventual top heavy population pyramid that will not vote to reduce old people benefits.
> I.e. people who need to work, which means it disproportionately affects the young.
In general currency devaluation causes nominal wages to increase along with the price of everything else.
The people who get screwed are creditors, especially creditors who issued debt at a fixed interest rate. Which is kind of not that bad, except that creditors tend to have a lot of political power and then use it to either get bailed out by the taxpayer or get policies put in place to prevent inflation from eroding existing debts even if those policies have harsh consequences for other people.
It’s not regardless of government intervention. There have been numerous bailouts and interest rates deductions specifically to backstop SP500.
It is a stealth tax that targets the young (or those too poor to be beneficiaries), because leaders need to maintain purchasing power for their voters’ benefits (the vast majority going to the old) and the solvency of taxpayer funded defined benefit pensions.
> The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.
There is also the chance of capital flight - and hyper inflation.
The debt holders could also lose out remember - if the dollar becomes less valuable then any holdings in the dollar ( including debt ) become less valuable.
Those are based on what the government says the inflation rate is, not on what the inflation rate is. The CPI is published by the BLS. Did you know that? Erika McEntarfer probably knew that.
Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse.
That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to play hard for your voters.
Inflation. The US will be forced, it will not decide, but be forced, to inflate away its debt. Which means that people who cannot bury their wealth in (non-treasury!) assets will pay off the debt.