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CKA Elite
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PostPosted: Wed Aug 10, 2011 10:04 am
 


Wada wrote:
I would think what matters is the difference in the price of goods. Yesterday I paid $3.89 for a loaf of ordinary (big Bakery) whole wheat bread. I'm betting that no where in the US is the price of bread this high.

I've never seen it that high, but the US does heavily subsidize food production.


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PostPosted: Wed Aug 10, 2011 12:53 pm
 


fifeboy wrote:
Canadian_Mind wrote:
Wow, I usually tip 20%, up or down depending on service...
Same here. 20% if service is good.

Ditto, even if the service isn't very good.



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PostPosted: Wed Aug 10, 2011 2:17 pm
 


Before I get back into the economic modeling, I want to reiterate a few things for clarity's sake. A GST of about 7% would, depending on what is exempted, almost certainly close the US deficit for the foreseeable future. It can work, no question. So would cutting $500 billion per year in spending. So would raising taxes on the rich, or closing loopholes in income and corporate taxation to the tune of $500 billion per year. My favorite plan is a combination of cutting spending and closing tax loopholes, but any of them would work. Given these statements (all of which I've stated before in this thread), I think the economic modeling is interesting, but not really furthering the debate.

Now, on to the modeling.

Canadian_Mind wrote:
So in your chart, the 41.42% ratio would lead to the most revenue from a service tax.
This number isn't very important. I was more interested in showing the shape of the revenue curve, especially the fact that the peak leans toward lower tax rates.

Canadian_Mind wrote:
the ideal level drops significantly. I don't have a scientific calculator handy, but I'd guess somewhere in-between 20-30%.
26.49%

Canadian_Mind wrote:
Say the government gets 20% revenue from sales through income taxes of workers, fuel taxes, tariffs, etc, before a sales tax. [...] The other 20% has to come from elsewhere. say half comes from exports of goods, and half comes from the government (the other 10% goes towards who knows what)
You seem to have two different definitions for what that 20% means. I'm gonna assume it's always the government's take on money in the economy through means other than sales taxes.

20% is just a guess, right? It's a good one. Comparing US federal tax revenue to GDP, I find that it peaked at 20% at the end of the 90s. Bush's 2001 tax cuts dropped it to about 16%, then the deficit reduction attempts around 2006 brought it back to 18%. The stimulus cuts (Bush and Obama both cuts taxes as part of their stimuli) dropped just under 15%.

If 15% is used instead of 20% in your model, it raises the revenue optimum sales tax rate from 26.49% to 30.38%. Lower tax rates mean less interference between taxation methods. If that remains true in the real world, then using a federal sales tax to rescue the federal budget would undermine the effectiveness of state and local sales taxes and, in essence, pass the deficit to the states (or at least a big part of it). That theory is confirmed by JJ's statement that the Canadian version did just that at the start of the thread. Spending cuts are not subject to such mutual interference, so they make for a better "the buck stops here" solution.

Canadian_Mind wrote:
But as [sales tax rates go up], revenue [in the economy] goes down, and even if the government returned half the taxes to the economy, and exports were increased to match this, there is still that unspent money.
Assuming I understand you correctly, you're right, taxation removes money from the active economy by either sending it to be aged in government hands or by putting it into the private savings accounts of folks who aren't willing to spend it on bad deals. Neither of those are inescapable financial black holes; government eventually returns money to the economy, and banks invest some fraction of their customers' savings in order to make money for themselves. But both of them are a step down from actively being spent or invested immediately and entirely. If you think of the economy as water moving through a series of tubes, giving money to government is a bit like pouring in some Jello powder. It gums up the works, but it eventually washes away.

Canadian_Mind wrote:
I actually don't know if a point of equilibrium would be reached or not. I think at lower tax levels, like 5% there would be, but at higher levels, not so much. but again, I'm not 100% sure, and I'm hoping you could do the calculations for that, if you're willing.
I'm not sure how to do the calculations for that. Maybe if we talked about what your looking for in a little more detail (maybe in private, since this is kinda off topic and probably a little annoying to disinterested parties) we can figure it out.

Canadian_Mind wrote:
It wouldn't be a problem if people spent all their excess money, or the savings could be taxed in another fashion, but unfortunately that isn't always the case.
Savings are sorta, kinda taxed in that banks often use some part of others' savings to invest. That's how they're able to offer tiny interest rates for savings accounts; they pass some of the investment earnings on to their customers. But that return on investment is taxable as capital gains. That's the economic difference between using a savings account and hiding money in your mattress: a fraction of savings is invested into the economy, and a fraction of that becomes tax revenue. Cash in a mattress is out of the economy entirely.

Canadian_Mind wrote:
the export side of things has to become more competitive. You guys have to buy more american within your own country to keep the monies in, and sell more american abroad to bring dollars. One easy way to do this is to devalue your dollar.
Oh, I think the devaluing of the dollar is already happening on it's own.

Canadian_Mind wrote:
you'll start having surpluses again.
If we started having surpluses, I can almost guarantee government spending would go up to compensate. Very small deficits that grow the debt more slowly than the economy are probably the best case scenario that is actually sustainable.


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PostPosted: Wed Aug 10, 2011 2:31 pm
 


Wada wrote:
I would think what matters is the difference in the price of goods. Yesterday I paid $3.89 for a loaf of ordinary (big Bakery) whole wheat bread. I'm betting that no where in the US is the price of bread this high.
There are a few bakeries who pride themselves on quality that get that expensive, but it's not typical. Super value cheapo bread can be less than $1 a loaf, though.

fifeboy wrote:
Canadian_Mind wrote:
Wow, I usually tip 20%, up or down depending on service...
Same here. 20% if service is good.
I don't usually have to think about tipping because we eat fast food or make our own 99% of the time. On those rare occasions when a tip is necessary, 20% is my rule of thumb. At buffet restaurants, where you get your own food and waitresses at most bring drinks, 10-15% makes more sense.


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PostPosted: Wed Aug 10, 2011 8:11 pm
 


quote="Psudo"]Before I get back into the economic modeling, I want to reiterate a few things for clarity's sake. A GST of about 7% would, depending on what is exempted, almost certainly close the US deficit for the foreseeable future. It can work, no question. So would cutting $500 billion per year in spending. So would raising taxes on the rich, or closing loopholes in income and corporate taxation to the tune of $500 billion per year. My favorite plan is a combination of cutting spending and closing tax loopholes, but any of them would work. Given these statements (all of which I've stated before in this thread), I think the economic modeling is interesting, but not really furthering the debate.[/quote]

That's why I'm up for doing this modelling with you, I'm curious to see if there would be an ideal GST/VAT range for you guys. Anyways, a PM will eventually be inbound. ;)


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