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Author Topic: Tax rebates to reflate the economy.  (Read 94 times)
Kuffy
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March 10, 2020, 11:47:30 AM
Merited by Cnut237 (2)
 #1

Governments are constantly trying to reflate economies by rewarding the bankers. This may help the yacht builders, but it doesn't really help the bulk of the population. I've always thought that the simplest way to rebuild an economy is to provide an earned income tax refund. If they based it on earning from the tax period of a couple of years ago, and restricted it to people who are current residents, then that should benefit the most important part of the population. A 10% refund would be cheaper than supporting the failing banks and stock markets.
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March 10, 2020, 03:30:28 PM
 #2

We will have a fresh round of bailouts as Coronavirus hits the economy. Expect airlines to be first in the queue (although the UK government have allowed Flybe to collapse due to previous issues). It's yet more privatisation of profit and socialisation of debt and risk.

I think a wealth tax (as proposed by Thomas Piketty) might be the answer. Modern capitalist democracies are set up in such a way that inequality is a feature, not a bug. Once we hit the situation where the rate of return on capital exceeds the rate of economic growth, then existing wealth become more relevant than actual earned income.

The money derived from that tax can go back to people in any form, perhaps as you suggest as an income tax rebate - but a wealth tax is a solid mechanism for governments to acquire the funds to then give out.

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March 10, 2020, 04:09:35 PM
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We will have a fresh round of bailouts as Coronavirus hits the economy. Expect airlines to be first in the queue (although the UK government have allowed Flybe to collapse due to previous issues). It's yet more privatisation of profit and socialisation of debt and risk.

I think a wealth tax (as proposed by Thomas Piketty) might be the answer. Modern capitalist democracies are set up in such a way that inequality is a feature, not a bug. Once we hit the situation where the rate of return on capital exceeds the rate of economic growth, then existing wealth become more relevant than actual earned income.

The money derived from that tax can go back to people in any form, perhaps as you suggest as an income tax rebate - but a wealth tax is a solid mechanism for governments to acquire the funds to then give out.

Where in the world did you come up with that screwball economic ratio?
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March 10, 2020, 08:34:42 PM
 #4

the 2008 crisis didnt impact the little guy much
there was still bake beans, bread and toilet roll on the shelves.

the biggest impact was the mortgage sector
the stupid thing though is while people lost their houses because banks demanded them back after realising the residents couldnt afford the homes. the banks actually already had months/years of prior payments. and ontop of that they got to sell the house. so banks didnt lose out

by throwing more money at banks was a big waste off cash.
what should happen. is that if a bank fails. then that is the bank breaching its contract. and thus people should get to have their house mortgage free and cleared.

then ofcourse they can sell their house when thy like and improve the economy from citizens selling the house. not banks

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March 10, 2020, 08:39:26 PM
 #5

Once we hit the situation where the rate of return on capital exceeds the rate of economic growth, then existing wealth become more relevant than actual earned income.

Where in the world did you come up with that screwball economic ratio?

When return on capital exceeds the growth rate, inequality rises. This is because "normal people" rely on wages for their income. The people who have invested capital are already rich. If the returns here are higher than the growth rate, then the rich get richer relative to the poor.

Not my theory, I'm just taking one of the basic arguments from Thomas Piketty's famous book... it's a great read by the way Smiley

https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century


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March 10, 2020, 08:57:47 PM
 #6

In general, if welfare is inevitable, then things like the earned income tax credit are the best ways to do it. IMO it makes sense for libertarians to be willing to to trade expanding EITC for reducing regulations and other forms of welfare.

EITC expansion wouldn't address the current problem causing the economy/market to freak out, though: people are "cocooning" because they're afraid of getting coronavirus. If the government just gives people money through EITC, tax reductions, bailouts, etc., then people will probably just put the money under their mattresses. If the government's goal is to pump up the stock market, they should borrow a ton of money with low-rate 100-year bonds and use it to give everyone a special sort of insurance where if you get coronavirus, then 100% of your medical expenses and lost income related to this (up to a cap) are covered, and you also get some fixed life insurance coverage. (I don't support this, but I think it'd be most effective way to artificially prop up the economy.)

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March 10, 2020, 09:45:27 PM
 #7

All this talk about income tax rebates is making me sick. How can I get a tax rebate when I have volunteered out and don't pay taxes in the first place?

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March 10, 2020, 09:54:23 PM
 #8

In general, if welfare is inevitable, then things like the earned income tax credit are the best ways to do it. IMO it makes sense for libertarians to be willing to to trade expanding EITC for reducing regulations and other forms of welfare.

EITC expansion wouldn't address the current problem causing the economy/market to freak out, though: people are "cocooning" because they're afraid of getting coronavirus. If the government just gives people money through EITC, tax reductions, bailouts, etc., then people will probably just put the money under their mattresses. If the government's goal is to pump up the stock market, they should borrow a ton of money with low-rate 100-year bonds and use it to give everyone a special sort of insurance where if you get coronavirus, then 100% of your medical expenses and lost income related to this (up to a cap) are covered, and you also get some fixed life insurance coverage. (I don't support this, but I think it'd be most effective way to artificially prop up the economy.)

This is the theory that instead of having massive bureaucracies to handle welfare (on the federal, state, and local level) that you'd just be able to have a negative income tax, right? This actually does sound like a MUCH better idea then having the government have a massive bureacracy to handle the program. Removes a lot of the issues when people think about the amount of time, paperwork, and other bullshit they go through when applying for benefits.\

My biggest thing is wanting to incentivize work alongside welfare programs. I know I've said this before on this board, but I think that the current welfare system is like a cliff, see example below:

If you make something like $25,000 a year as a single person, you're entitled to $15,000 in benefits. But if you make a dollar over $25,000 a year, then you're entititled to nothing. So if someone doesn't think they can make more then $40,000 a year there's no incentive for them to want to work any harder.

So yeah, that's my two cents on this.




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theymos
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March 11, 2020, 12:45:13 AM
 #9

This is the theory that instead of having massive bureaucracies to handle welfare (on the federal, state, and local level) that you'd just be able to have a negative income tax, right? This actually does sound like a MUCH better idea then having the government have a massive bureacracy to handle the program. Removes a lot of the issues when people think about the amount of time, paperwork, and other bullshit they go through when applying for benefits.\

My biggest thing is wanting to incentivize work alongside welfare programs. I know I've said this before on this board, but I think that the current welfare system is like a cliff, see example below:

If you make something like $25,000 a year as a single person, you're entitled to $15,000 in benefits. But if you make a dollar over $25,000 a year, then you're entititled to nothing. So if someone doesn't think they can make more then $40,000 a year there's no incentive for them to want to work any harder.

Right, things like the EITC and UBI do welfare with much less government overhead and better incentives for the recipients.

EITC is basically like increasing the wages of low-income people, so it doesn't disincentivize work. Under the current rules, if you have 2 children and your income is in the best range for EITC, the government gives you a refundable tax credit (ie. it's identical to the government just writing you a check) equal to 40% of your earned income. So if you earn $8/hr, after EITC it's like you earned $11.20/hr. The income limits are phased, so it's never rational to avoid earning more income. In addition to being a welfare system, this is also a subsidy for businesses, since they can pay lower wages while having their employees receive a higher effective wage; due to this, EITC is the most popular type of welfare among Republicans.

The payout rates and income limits for the current US EITC weirdly depends entirely on how many children you have. It has pretty low income limits across the board, and for childless people it has especially low rates and limits.

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March 11, 2020, 01:25:29 AM
 #10

This is the theory that instead of having massive bureaucracies to handle welfare (on the federal, state, and local level) that you'd just be able to have a negative income tax, right? This actually does sound like a MUCH better idea then having the government have a massive bureacracy to handle the program. Removes a lot of the issues when people think about the amount of time, paperwork, and other bullshit they go through when applying for benefits.\

My biggest thing is wanting to incentivize work alongside welfare programs. I know I've said this before on this board, but I think that the current welfare system is like a cliff, see example below:

If you make something like $25,000 a year as a single person, you're entitled to $15,000 in benefits. But if you make a dollar over $25,000 a year, then you're entititled to nothing. So if someone doesn't think they can make more then $40,000 a year there's no incentive for them to want to work any harder.

Right, things like the EITC and UBI do welfare with much less government overhead and better incentives for the recipients.

EITC is basically like increasing the wages of low-income people, so it doesn't disincentivize work. Under the current rules, if you have 2 children and your income is in the best range for EITC, the government gives you a refundable tax credit (ie. it's identical to the government just writing you a check) equal to 40% of your earned income. So if you earn $8/hr, after EITC it's like you earned $11.20/hr. The income limits are phased, so it's never rational to avoid earning more income. In addition to being a welfare system, this is also a subsidy for businesses, since they can pay lower wages while having their employees receive a higher effective wage; due to this, EITC is the most popular type of welfare among Republicans.

The payout rates and income limits for the current US EITC weirdly depends entirely on how many children you have. It has pretty low income limits across the board, and for childless people it has especially low rates and limits.

Yep, I know I did that whole post on UBI on here maybe a year ago or so now. Talking about how using that instead of using all the other welfare systems would not only save the country money, but would incentivize people to work. Not as easy as just 'FREEDOM DIVIDEND' but, it'd be more effective then the current system.

I'd have to go read into EITC and increasing it a bit. Not a big fan of it being tied to your amount of children -- seems like that could cause a pretty large issue as kids are expensive and the government is practically telling people to have more kids if they want more benefits. Sounds like a way to get dumb people to keep making more kids and to not give them the best shot at life. As I think the 1st or 2nd reason for financial issues are children.

Any thoughts on the children part of this thing Theymos?




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March 11, 2020, 10:47:47 AM
 #11

My idea is to reflate the economy, and to help the working population. I guess it is my version of helicopter money, and will provide general growth, and not just the expansion of the super yacht industry.

A wealth tax can't work when the world's richest people don't even appear in the rich lists.
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March 11, 2020, 03:06:55 PM
Last edit: March 16, 2020, 08:22:24 PM by BADecker
 #12

My idea is to reflate the economy, and to help the working population. I guess it is my version of helicopter money, and will provide general growth, and not just the expansion of the super yacht industry.

A wealth tax can't work when the world's richest people don't even appear in the rich lists.

Wealthy people are supported by the poor people, through product and service sales.

When the rich are taxed, they simply pass it on to the poor people by raising prices. So, it is the poor who pay the taxes of the rich.

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March 15, 2020, 06:14:58 AM
 #13

This sounds pretty simple as an idea how to handle this program would be a problem. Tax refund won't help to eliminate inequality.
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March 15, 2020, 07:04:07 AM
 #14

Inequality is a different problem. A start would be to raise interest rates, and nationalise the central banks. We are no longer in capitalist economies, but we are closer to totalitarian communist regimes. You can't have capitalism without capital, and most capital has been transferred to a few dynasties. Getting rid of Big Pharma so that people can be fit and healthy again would help as well.
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