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The only way to pay the government's ballooning bills and reduce the budget deficit during an economic downturn is to tax the bejeezus out of the rich. The alternative is to borrow more money, thus making things worse. Realistically, cutting government spending is a worthy goal, but it won't get us where we need to be. So I have a suggestion. It's impractical, of course, but you wouldn't be reading this blog if you didn't enjoy noodling about impractical ideas.

Suppose the government passes a law requiring all relatively wealthy people, defined in some practical way, to buy extra crap they don't need from local providers. The relatively wealthy could dine out more often, buy some extra shirts, get a flat screen TV for the garage, whatever.

The result would be a stimulus to the economy that would lift all boats and fill the government coffers. The relatively wealthy wouldn't feel so bad about this form of tax because at least they end up with more shirts and flat screen TVs. This is the same principle as the $600 tax rebates, in terms of fiscal stimulus. But it wouldn't increase the deficit.

I know, I know, you will point out that our shirts and TVs are made overseas. But the local merchants get their markups, and that helps.

The best part of this clearly impractical plan is that the rich would have lots of options on how to spend their money. There is a lot of science supporting the idea that having freedom of choice is essential to happiness. I would be happier spending $100 on two shirts I don't need versus paying $50 in taxes and having no control over how it is spent. Everyone wins.

The hard part is figuring out how to measure this "extra" spending compared to the baseline, so you can be sure the relatively wealthy are complying. So perhaps it needs to be voluntary, like recycling.

I can imagine a new sort of credit card that is used only for the "extra" purchases, provided by the usual banks and credit card firms, but with one important feature: Everything you use the card for is public record, on the Internet.

I am convinced that the main reason people comply with recycling is that their neighbors can see who is being a good citizen on trash day. Peer pressure is important.

Obviously you wouldn't use the special credit card for beer and condoms, because the neighbors would be watching, or could be. I think this would induce people to buy harmless additional consumer items, or take extra domestic vacations, or buy extra birthday presents for friends.

Yes, this idea isn't practical. But how are the other plans looking?
 
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Oct 2, 2008
The reason some of us who aren't making huge amounts of money quallify to the democrats as rich is because we DON'T buy extra things we don't need. We scrimp and save and work extra jobs so that we can afford the occasional trip and maybe retire in relative comfort someday. So bite me and screw your liberal I have more than I need so fleece the rich mindset. How about we only allow the government to do what the constitution says it can? How about we make voters pass a simple literacy test (like "Name two canditates their stand on at least one issue.") before !$%*!$%* things up for the rest of us who pay attention? Arg.. don't get me started.
 
 
Oct 2, 2008
The purchase reports should only list the dollar amounts, not what the items were. Beer and condoms are big sellers, especially together.

The most important part of this will be competition. "Oh, you put $200,000 back in the economy this month? I put $2 *million* back in! Beat that!"

I expect to see more frivolous high-end services in the next few years. Let's figure out ways for the rich to blow their money, people!
 
 
Oct 2, 2008
I'm not in favor of giving government more money any more than I am in favor of giving grenades to drunk angry teenagers. Either way it isn't good news for the rest of us. Let the government go bankrupt.
 
 
Oct 2, 2008
Is "Not Practical" a nice way of saying "Retarded"?
 
 
Oct 2, 2008
The Fraser Institute (a Canadian think-tank) used to have a contest where students could submit their best new ideas for government. If I recall correctly, one of the past winners had an idea very similar to yours. They basically suggested that instead of taxes on income, taxes should be based on the portion of that income that you *don't spend*. Forget about defining "extra purchases" or "wealthy people." Just let everyone write off any expenses made within the country (and adjust your tax rates if necessary). All of your receipts become tax receipts.

It's very progressive, since poor people spend all of their money on food/shelter and would have 0 taxable income. Even middle class people probably spend most of their income. The extremely wealthy would either have to pay a lot of taxes or dump a lot of their money into the national economy.

(I don't necessarily agree with this idea, but I think it's neat to think about.)
 
 
Oct 2, 2008
actully scott this has been floated around in great detail aready, see neil boortz's fair tax plan....
 
 
Oct 2, 2008
We can solve the "is it extra spending" problem by restricting the purchases to things rich people don't normally buy, particularly things which are good for our other social goals. Only accept purchases on these cards of things like high mileage vehicles, alternate energy sources (like your solar panels), or perhaps buying houses that have been foreclosed on.

And putting it on the internet means that the government can show a running tally of how much was spent. Then you can tell those top 1% who qualify "If you don't spent $X billion dollars on these cards by Jan 1, your taxes go up Y%. The rich could track how close they are getting and make an informed decision about if it was cheaper to pay extra taxes, or buy the extra stuff.

I can see Bill Gates sitting there on December 31st trying to figure out how many hybrid cars he has to buy to avoid paying more taxes. Heck, that could be a reality TV show.
 
 
Oct 2, 2008
already did my patriotic duty!

while most people were spending their Chinese $ (a.k.a. "stimulus checks") on asian electronics, middle-eastern oil and/or paying down existing debt we, who didn't see a dime of it because of our evil, high earning ways, spent $1,600 of OUR OWN, AFTER-TAX $ on a Made in USA Lobster Elite 3 tennis ball machine (though a coworker pointed out it was probably made w/illegal labor since their factory's in LA).
 
 
Oct 2, 2008
If you can show me 3 good federal government programs that runs efficiently and without Congressional corruption (i.e., earmarks) then I would be inclined to listen otherwise it will be just another legalized theft of one's productivity to benefit the poor.

Dream on Scott. You have very creative ideas but our government can destroy any good idea with their normal mode of implementation (i.e., corruption laden ed).

 
 
Oct 2, 2008
This wouldn't be a problem if we just charged property tax to churches.
 
 
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Oct 2, 2008
Let me apologize in advance for a long post.
In engineering we study concepts called "first principles". These are things that can be proven conclusively, like F=MA. The importance of these is that when you are working on complex problems you can sometimes get turned upside down in your thinking. However, if you go back to first principles as a firm footing you stand a better chance of coming to the right conclusions.
A prevailing concept these days that occurs often on this blog and everywhere it seems is that we need to make the rich somehow pay for <enter your cause here>.
I'd like to go back to first principles of this country for a second (a little different than engineering first principles, I realize): the USA was founded on the belief that people do not have the right to make other people do anything. In fact, freedom means you are able to do what you like with your money, property, and time as long as it doesn't infringe on anyone else's rights to the same. The reason for the constitution's bill of rights is that people can get caught up in ideas and lose sight of first principles. It happens in the US from time to time: prohibition was popular enough to get a constitutional ammendment. Lynchings and slavery had their time as socially acceptable behavior. Joseph Stalin was a pretty bad guy by most accounts. But in Russia, he was bigger than Lenin (John, I mean. I don't mean to say he is greater or better than John, er, you get the idea). Even today, when his crimes are public knowledge, he still enjoys a pretty big fan base in some former USSR countries. The point to this is that just because a lot of people think something is ok, doesn't mean it is. The constitution is supposed to prevent one group of people in this country from getting some crazy idea in their collective heads and forcing something on other groups.
Does it work perfectly? Well, no, but I maintain it works better at protecting people from each other than anything else man has come up with to date.
Here is my whole reason for posting: the great thing about the USA is that anyone who wants to buy local crap is welcome to do it! Anyone who wants to pay for someone else's mortgage or health care or <enter your cause here> is welcome to put their money or time where there mouth is. It is wrong to force "the rich" to do anything, though.

P.S. The fact is, most people want to help (even the horribly rich, believe it or not!). Look at Warren Buffet and Bill Gates charity donations. Most rich and / or famous people give money, time or both to causes they believe in - that is their right!
 
 
Oct 2, 2008
Even better idea:

The rich buy stuff for the less wealthy.

Scott you may start by purchasing for me a new car (nothing too fancy please, I'm practical).

This will snowball, I just know it!
 
 
Oct 2, 2008
Dave Ramsey's common sense fix is simple, elegant, 1/10 the cost of the $700B proposal, and benefits mainstreet as much as wall street.
http://www.daveramsey.com/common_sense_fix.txt
With one change it is also fair: extend government backed mortgage insurance to lenders who re-write ALL subprime mortgages immediatey to 6% fixed rate. This extends favorable terms to the homeowners who acted responsibly in addition to those who were irresponsible.
Eliminating the captial gains tax completely would also flood the market with liquidity and capital as investors take advantage of tax-free profits. This return to liquidity would cost the tax payer nothing.

 
 
Oct 2, 2008
Spending too much time on this one. I thought of an improvement. In addition to issuing the "tax" on a government-issued credit card, restrict the purchases to things such as improved efficiencies on the houses, alternative energy, and the like. This accomplishes several things. The rich spend money on themselves (something they like to do); since they tend to have the bigger houses and are the larger polluters/energy consumers, this goes toward reducing that problem; since much of alternative energy and energy efficiency is labor-based, it is guaranteed to create local jobs; and who knows, it might save an iceberg somewhere.
 
 
Oct 2, 2008
OOOooohhh, SCOTT!!

I like the way you think!
I am in just the right kind of business to profit handsomely from this idea.

Now, let's see. I'd like to start with Hank Paulson. I recently read that he'd gotten paid over $100 MILLION dollars for a three year period during his chairmanship of Goldman Sachs.

I could install so many ' Henry Paulson Community Gardens to Feed the Poor' that we'd feed all of Washington D.C.! I could accept the job as a charity, but he'd have to pay me to get his name all over town. I bet he'd like that since as soon as America wakes up his name is going to sound like poop to the ears.
Then I'd have enough money I'd install 'KT Bell Community Gardens to Feed the Poor' and feed all of lil' ol' Aubrey, Texas.

I tell you, you have inspired me!
 
 
Oct 2, 2008
Forgive me but I'm a little confused. The problem appears to be that the banks refuse to lend to each other because they don't know who's holding how much bad debt. It would appear that the rescue/bailout plan will relieve them of the bad debt, which means that they can obviously identify it in order to offload it to the government.

There appears to be a much cheaper solution for the US taxpayer. If a law would be passed saying that on a given date every bank with dealings in the US must publish their balance sheets listing all assets good & bad. Failure to comply or any error greater than 2% will result in the bank’s board doing 1 year mandatory jail time.

In order to value the bad debt, the Government will produce a list of bad debt categories & value them in a similar manner to the reverse auction that they hope to use in the bailout plan.

As far as I can see, this will sort out 2 issues:

1) Banks will be able to see who deserves to survive & who needs to be weeded out (capitalism & market forces asserting themselves)

2) The confidence will return to the intra-bank loan market as the surviving banks will know that the others are equally as worthy of risk as they are.

Best of all, the US taxpayer gets to keep their $700 billion for another rainy day.
 
 
Oct 2, 2008
"I am convinced that the main reason people comply with recycling is that their neighbors can see who is being a good citizen on trash day. Peer pressure is important. "

Bah. I recycle because they take that particular garbage away for free! Why pay somebody to haul away empty juice bottles and newspapers when I can save money and look like a good citizen.

That's a win-win, and I get both wins.
 
 
Oct 2, 2008
People like their privacy. Therefore, there must be some way to make the wealthy spend yet keep their privacy. One alternative, building off of your credit card idea is to "tax" the wealthy, but "return" the tax as a government issued credit card. At that point, the credit card holder is free to buy whatever crap they want, as long as it is within the U.S. (or their state, or a zip code, etc.).

This approach serves three purposes: 1) since it is really not a tax, but a compulsory spending requirement, the money charged from the credit card is taxable, thus pumping needed taxes into the government to pay down debt; 2) since the assumption is that the wealthy would otherwise save this money, it basically frees up cash taken out of circulation, thus increasing the overall money supply and reigniting the economy; and 3) since it is a government credit card, the government can mandate the time period within which it can be spent, thus ensuring the money is put back into the economy within a specified period. The penalty for not doing so is to assess a "non-use" tax on the credit card. Hence, an additional incentive to zero that sucker out.

As for some of the comments about how much more could the wealthy buy, it doesn't matter. They can put it out for a garage sale or on eBay if they want. Indeed, that would stimulate the economy even more (although it may result in the "non-wealthy" going into debt further to buy some really great crap on the used market).
 
 
Oct 2, 2008
As usual, you are basing your ideas on incorrect assumptions.

First, the only way out of a budget crisis is to cut spending. Getting money from any source, be it borrowing, taxing, or printing more of it, doesn't solve the basic problem. The basic problem is spending more than you're making. Whether it's government or individuals, the income isn't the problem; spending within your income is. Taxing people more simply removes money from productive use in the economy. This causes job losses, business failures and economic stagnation. Not good.

Taxing the rich, so called, is a straw man. The rich already pay far more than their fair share of taxes. The top 5% of wage earners pay over 53% of federal income taxes; the top 10% pay almost 65%. At the same time, the bottom 50% of wage earners pay less than 4%. If you taxed the rich (those earning over $1M/year) at 100% of their earnings, you'd increase the federal revenues by less than 10%. It's easy for those who don't have to pay taxes to vote for those who will tax other people and give the money to them. This is one part of what the government calls "fairness."

Taxing the rich always has been a way to get the poor middle-class schlubs to accept tax increases, by saying that even though they're getting a tax increase, look what we're doing to those rich bastards: we're taxing them even more! That's where the money is; in the gap between the top 5% and the bottom 50% of tax payers. Where does the break come? The bottom 50% of tax payers are those earning less than $26,000 per year in adjusted gross income. So if you're earning more than $26,000, you're one of the folks they're really addressing when they talk about taxing the rich.

Furthermore, 2/3 of our economy is based on consumer spending. The rich, by definition, are not that many people. The middle class, however, is oodles and oodles of people. It's the middle class that needs to spend more money, to keep on with Scott's scheme.

Gee, how do they get more money to spend, I wonder? Maybe go tell their bosses to pay them more? No, that probably won't work. What to do; what to do. . . Oh, wait a minute, here's an idea - let's cut taxes, so the people have more money to spend! And then, let's cut government spending, in order to bring down the debt, strengthen the dollar, and funnel more money into the economy.

Gosh, what a radical idea! Let the people keep more of their own money so they can spend it. Why didn't I think of that??? Why didn't Scott?

Liberals feel in their heart of hearts that all money is really owned by the government, and that the government allows us to keep some of it out of an excess of kindness. The rich, therefore, are thwarting the government by somehow holding on to more of the government's money than they should. This is considered unfair, because since it's the government's money, the only way the rich could get it is to somehow cheat the government out of it. Therefore, the government has every right to go "take it back" from them.

In day-to-day commerce, this is called "robbery." In terms of the government, it is called "fairness." So let's make sure that we never go to something like a flat tax with exemptions for low wage earners, because then the politicians could no longer engage in class warfare and get elected on the backs of pretending to tax the rich while in reality !$%*!$%* the people out of jobs and the chance to get ahead. But hey, isn't that the American Way?
 
 
Oct 2, 2008
There is another way...legalize and tax marijuana and prostitution. We would rake in so much money it would make a real difference to our economy. And we could do it without raising taxes and the average American would be unfazed.

Also, the stimulus package could have worked if it were done differently. Instead of mailing out checks the government could have mailed out gift cards that must be used to buy things.
 
 
 
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