patrick.net

The wholesale sales tax here used to go commodity by commodity, with differing rates of sales tax on each item, similar to import duty systems. The system was replaced by a 'flat', nearly universal goods and services tax (GST) pegged at 10%. The UK VAT is 17½% by contrast, which hurts a lot more as a non-progressive tax. Italy has 5 or 6 different rates, which makes more work re collection and categorisation -- one of the aims of a 'good' or efficient tax system is simplicity. Scrapping a wholesale sales tax on goods allowed the govt to take a slice of the services pie for the first time, however, similar to VAT systems everywhere -- the ratio of cost of goods vs services in society is swinging more towards services all the time... and services are more likely to recur than goods...

However, the 10% rate is 'fair' in that it is still supplemented by a progressive income tax system. It is harder to avoid such taxes, except for some 'black economy' areas in trades, etc. The tax was lifted on 'unprocessed' foodstuffs, so you could eat basic foods without being taxed.

I'm grumpy with Ozzies right now anyway. I always have to have conference calls in the middle of the damned night. Move your damned island to a more reasonable time zone already.

I'm really trying to see it your way, I promise, I just can't make the connection. I do agree with your premise in the first paragraph.

Aside from DS’ uncanny ability to alter the foundational theorems of mathematics

hmm, and how is progressive regressive? and what final outcome are you regressing to?

Ok Randy, since I know you have achieved some wealth, one could question your motive? We both seem to agree that progressive taxation is OK (I infer this by your stating my system is regressive and bad) so a wealthy person saying he supports a tax that is discretionary to him has to raise a red flag.

The other part that I struggle with is that I don't want government making a judgement call on every single thing I buy and whether it is good or bad. I think this is a blatant abridgement of basic freedom of commerce.

But nothing is absolute, I don't care about tobacco sin taxes, and all that good stuff, hell even oil taxes, knock yourself out, but it then gets to trans fat oils, and fertilizers and then it doesn't stop.

It all partly depends on whether you see a community as a bunch of atomised, disconnected individuals with only a cash nexus between them, or as an interconnected and interdependent whole, where everyone depends on someone for something. You may also want to recognise basic citizenship rights such as adequate food and clothing and shelter in a society which has a clear abundance or surplus. Once you realise that everyone depends on everyone else -- and the rich depend on everyone else to make them rich, one tiny slice of money at a time -- then the idea of the 'self made' millionaire of course becomes quite ludicrous -- the 'self made' millionaire was able to manipulate others and their economic relations in a way that disproportionately benefitted him or herself at everybody else's expense. Is this to be admired or congratulated? Not particularly, in my book. Australian Aboriginals have no strong sense of personal property, everything is the collective property of the tribe and is exchanged freely on request as the need arises to use it -- which of the two societies is actually more 'advanced'?

Both ultimately tax production if you think about it, so why not take it on the front end, and let people accumulate, and spend as they see fit. I do believe that people spending (not going into debt) is what gets things going so I don't understand why we would discourage it. Just look how people avoid sales taxes now by buying online.

Love the points DS, I was actually thinking the same thing. Gasoline for instance has a retail and wholesale use (we drive our cars, but business also transport) so the taxes just keep getting multiplied all the way up the value chain.

Or, to put it another way, given that the surrounding society made the rich rich, to the point where they have far more than they can ever use, then that society can equally well take some of the excess wealth back to give to the others, in the form of a 'progressive' tax on income. Income is the most direct measure of how socially secure you are, after all, it is the medium that secures your wellbeing. Thus, we talk about income taxes being 'direct' and VATs being 'indirect'...

I gained the same respect for the Polynesian cultures as well. Here it is generally asserted that communal type societies don't last, but for some reason those cultures have existed for thousands of years. Everyone has a place and a purpose.

Malcom says: Ok Randy, since I know you have achieved some wealth, one could question your motive?

Holy pot calling the kettle black, Batman! :o

Geez, Malcom, maybe you think a progressive tax is a great idea because you haven't (yet?) achieved some wealth?

At least VAT at a federal level isn't as discretionary as sales tax. Here in the states, the system is so silly people easily get around it. In California to stop people buying cars out of state, you pay the sales tax when you register the car.

Brand,
No, I've done OK, I was just playing devil's advocate. It doesn't seem to be a question that a progressive income tax actually taxes wealth, the issue seems to be the morality of it. Though I am honestly trying to understand how it becomes regressive in Randy's view.

From my observation I spend much less that people who are horribly poor. I own my house outright, and I have solar, so I don't even have an electric bill. That's why I know that wealthy people are wealthy (said many times here by different people) because we don't spend like other people. My trash can is almost empty when I put it out each week, and my neighbors (has always been the case) are all overflowing with boxes and all kinds of waste.

I have seen it suggested in a few places that hunter-gatherer societies are sufficiently productive that they effectively lack the concept of scarcity. This would put them somewhat outside the bounds of economic analysis.

I also submit that those cultures never came close to making it out of the gravity well, or understanding the genome. To spend eons without attempting to understand the universe is a foreign mindset to me, and one I find strangely depressing.

I've just always been the black sheep of my circles because I don't resent taxes. I feel like I get a decent value for living in a free, generally disease free, peaceful society, with decent infrastructure. People thought I was nuts when I just happily paid a ton of money in gains taxes on investment properties because I knew a 1031 was just delaying the inevitable. I've seen so many people play games with taxes and it is just not worth it.

I've thought that as well requiem, I just respect the order of the societies, but during American Indian Studies I became depressed envisioning societies with no dates or history books, just stories passed down with no reference in time. Different mindset though. At lease those societies don't go in circles God --> No God = Evolution --> Maybe God = Intelligent Design.

Malcolm Says:
Love the points DS, I was actually thinking the same thing. Gasoline for instance has a retail and wholesale use (we drive our cars, but business also transport) so the taxes just keep getting multiplied all the way up the value chain.

The GST is only levied on the final consumer, though, there's no multiplier effect -- every business carefully claims 'input credits' all the way back up the line for the GST they were charged by the preceding vendor. Naturally, the introduction of the GST required a radical transformation of accounting systems and more interaction with the Tax Office -- requiring filing a monthly or quarterly 'acitivity statement' and remitting the GST to govt -- and a lot of shopkeepers resented becoming a tax collector for the govt... Not sure how it works in US with state-based VATs, if there are any...

"Geez, Malcom, maybe you think a progressive tax is a great idea because you haven’t (yet?) achieved some wealth?"

This is inline though with my concerns that people love to stick it to someone else. That's why I get fired up during prop 13 discussions as well.

DS, sales tax works the same. I assume GST is abbreviated for retail sales tax. Anyway, yes the retailer is the tax collector for the government and files a return each month or quarter declaring the total taxable retail sales, and remits the sales tax collected. Here in San Diego (varies slightly county by county, and some states don't have sales tax at all) sales tax of 7.75% is collected on all retail sales of tangible products.

requiem Says:
I have seen it suggested in a few places that hunter-gatherer societies are sufficiently productive that they effectively lack the concept of scarcity. This would put them somewhat outside the bounds of economic analysis.

That would be said for all societies, hunter-gatherer societies the least. They had less of an abundance than our present society, which controls the production of food, etc. Note that this society type represents the last 200,000 years of human history, other types only the last 10,000 or so.

I also submit that those cultures never came close to making it out of the gravity well, or understanding the genome. To spend eons without attempting to understand the universe is a foreign mindset to me, and one I find strangely depressing.

Well, they attempted to explain the universe, as curious beings, in the form of myths, as did all other 'pre-Enlightenment' societies -- Romans, Greeks, Norse, Aztecs, Celts, etc. Widespread atheism and secularism are particularly new and alien concepts to us in our history, in fact. But certainly there is a technology and knowledge differential, and technological breakthrough has been layered upon breakthrough in an accelerative process in the last 10,000 years. Proponents of 'capitalism' here would doubtless argue that it is the judicious placement of capital that spurs many of the breakthroughs in the inexorable working of markets... I'm not sure that such breakthroughs require the existence of the very rich or a society that does not know how to redistribute, though...

As products move up the value chain they are not taxed. Businesses actually sperate out their sales for resale, and end user retail and track it the state issues resale certificates which basically exempt you from being charged tax because you are adding value or retailing it to the end user. My understanding of VAT (lived in England for a year) and it is discussed in schools here is that tax is charged on each step except for the very last one, the end user.

GST is goods *and services* tax -- the sting is in taxing intangible services, an increasingly large slice of the expenditure pie... e.g. borrowing a DVD from Blockbuster, seeing the doctor, paying the mobile phone bill, etc...

Actually DS, I'll get flack for saying this I always do among my friends, but it is government that is necessary for the society to get going. Without collective expenditures on infrastructure, and things like sanitation, and defense you can't establish commerce.

I like to use a coral reef as a visual. You need a solid infrastructure, then the free market grows all over it.

California has gotten more creative as well. Renting a car is seen as taxable because you are using up part of the value. Basically depreciating it by renting it. I also believe video rentals are taxed, probably the same reasoning, but we don't pay tax here for a plumber's labor. Some states just charge it on everything. Here in California you don't pay sales tax on groceries.

My interpretation of the 'provide for the general welfare' clause of the Constitution is basically the duty of government to build public works projects.

I wish everyone a good night.

While our present society produces sufficient food to easily feed everyone on the planet, there remain distribution issues. With a hunter-gatherer society, abundance may be less, but availability is greater. Ah, here it is: from Wikipedia, a paper by a Marshall Sahlins, suggesting "data indicated that hunter-gatherers worked far fewer hours and enjoyed more leisure than typical members of industrial society, and they still ate well. Their "affluence" came from the idea that they are satisfied with very little in the material sense. This, he said, constituted a Zen economy."

My thinking is that mobility (as is often the case with such societies) also prevents the accumulation of wealth; when I have been on backpacking trips, the tools and supplies are similarly shared out and there is a severe disincentive to carrying along bricks of gold. I suspect that when saddled with the trappings and requirements of agrarian life, such societies would lose that "Zen economy" over time, especially as they grew.

yeah, VAT progressively adds tax as value is added, and has different input and output taxes, or something... the GST here is slightly different, in that the tax is paid entirely by the end consumer, and there is only ever 1 tax rate to worry about. Not meaning to brag, but the Oz system seems to be simplest to administer for these reasons.

All income tax and GST is collected by the Federal govt, and the promise was that the GST is simply given in its entirety to the states by the Feds. Apparently the govt is 'awash with GST money', although the roads and rail are still falling apart. There are still state excises on fuel and the sin taxes as well. Somehow the Federal govt went from an $8bn deficit to a $10 bn surplus in 12 years too...

The definition of 'welfare' is to 'fare well' -- the 'general welfare' to my mind is expenditure on health, education and other transfers such as family payments, unemployment benefits, and so on. There are plenty of public works here -- new schools with too few teachers, shiny new hospitals with too few staff -- where the govt provides one-off funding for construction but does not allocate recurrent funding for adequate staff levels to provide the service that was intended...

My theory is everyone hates capitalism and free markets except when they are winning.

I exclude myself from that definition. But people who've achieved their own wealth are the exception to the rule.

Note, I don't even define "wealth" as money or material wealth. Someone who's built their own empire of anything of value to them, regardless of what form, will have a fundamentally different view on that being redistributed away from them. I'd imagine an isolated monk or a rural bio dynamic self sustainable simply living hippie are similarly offended when someone attempts to redistribute their spiritual or self esteem value away from them by granting to others who did not make the same sacrifices in life to achieve it in the first place. This doesn't indicate these people are mean, foul or amoral. It simply means they are human and wish to see their sacrifices rewarded accordingly.

After all, isn't that why so many renters on this board are so enraged by boomers and FBs? As a renter who could've and would've bought, but didn't because she sacrificed in order to save for tomorrow, isn't she right to get pissed off when the government wants to use her sacrifice to ease the suffering of those who didn't?

It's no different with taxes.

the rot set in with horticultural and agricultural societies -- theft suddenly became prominent, as it is easier to steal something than work for it yourself -- and larger and larger surpluses in increasingly intangible or proxy commodities can be accumulated. And the nomadic life meant you travelled light and often, in a subsistence lifestyle tied to the exigencies of the local environment... Sahlins is best known for his revision of the notion of plenty, which means that these societies had downgraded needs and wants compared to ours, and therefore the notion of economic 'scarcity' meant little (and seems particularly hypocritical in any advanced society to boot, and is one of the absurdities of classical economic theory). However, surplus and a fixed habitat also breeds culture, creativity and the space for invention...

DS

I'm off to bed, but let's hook up in email to discuss your friend re: our Carbon venture. Our Australian folks would like to talk to you too :)

night

sawasdee krup:

gonna ride my motorbike to the badminton courts this afternoon, then over to some friends house for a going away party... Total price: maybe 200 baht... amount of fun... priceless...

Just leave me depreciation on my rental properties in phoenix as you re-write the tax code...

Prices are dropping in phx, and the pending sales number is the smallest i have ever noticed since i started watching, less then 5500; Meanwhile, inventory just keeps climbing, past 55K now... How the F do the experts keep calling a bottom in the near future when every number that influences sales price continues to get worse? For me, the bright side is that rental prices in close are rising... I think thanks to gas prices more than anything... When rental income on a purchase passes 9% I will buy more, but that is still a long ways away right now...;

Peace all, Oh yeah, lets get a stronger dollar so i can have even more fun here in thailand.

Rob

how do you steal the mellow of a hippy? or the zen of the buddhist? do i see a flagging analogy put forth as an argument of convenience?

OK randy, sounds good... by a strange coincidence, I also ran into a lawyer who did ecology in his first degree who is a local expert in carbon trading law, but he's off to spend a year in Norway and the wilds of Africa, unfortunately...

Looks to me like the ideas here fall loosely into two categories, what might be called a virtuous or an egalitarian approach. By that I mean either a system which rewards some behaviors (or circumstances) while discouraging others, or alternatively one which treats all equally, regardless of behaviors and circumstances.

Unfortunately, I can't feel entirely at home in either one. I don't think I could have committed to work in the performing arts as readily as I did had both my Grandfathers not been reasonably well off so that I had some supplemental support when starting out. Rather than a starving artist, I was a notably slim artist.

I guess what I'm saying is that it hasn't been an easy life, but having some wealth in the family - and a family interested in making it possible to do the work I love - made it a possible life. So in self-interest, I suppose, I'm not really supportive of confiscatory estate taxes or death duties.

Not everyone ends up as Paris Hilton.

I don't hate "capitalism" or "soc1alism," except when it reaches malfunctioning results. I don't like it even when the bad outcome benefits me, though I would obviously try to take advantage of the situation.

Income Tax is only the tip of the iceberg. It's the combination of all of the other taxes that we all pay, be it directly (i.e. Sales Tax) or indirectly (i.e. unemployment insurance). That's not even to mention the mandatory fees collected from my phone company, cable company, etc.

I don’t have any quick answers on what the best fix is. If there were a nice simple solution, someone would have thought of it long ago. Weather your for capitalism or communism, the bottom line is how do you prevent those in power from abusing said power to their own benefit?

If you think Socialism/Communism is the way to go, you should have visited one of those countries. These systems essentially destroyed the human spirit in these people and will take at least a generation to recover. Comparing the US to virtually any country in europe, especially Germany/Switz/Norway is preposterous. You have very homogenous populations with the most talented people in the world. Comparatively, our fellow Americans on the street are culturally, mentally , and even physically challenged. we have been able to make strides in the US solely based on the free market/capitalist system which has been massively debased over the last several decades which has compromised our living standards. The US critically depends on the top 1-5% to make it work. contrary to Hollywood and our politicians, it is NOT the great middle class that made the US- far from it. Allowing the most talented to reach their full potential is the only way our country can be saved. and by the looks of it, it wont. There is very little motivation for an extremely motivated, talented person to leave Europe for the US at this point. The previous brain drain that we so needed is gone. Socialized medicine? Look around you 40% of Americans are obese already. Giving them free healthcare will compound the ever growing problem. We need very strict nearly fascist guidelines for the mid-low class in the US with very open liberal business rules for the top 1%. Without it, our mid class will getter fatter/unhealthier, skip school/church, engage in absenteeism, and eventually rely totally on govt largesse. This is our future sadly.

how do you steal the mellow of a hippy? or the zen of the buddhist? do i see a flagging analogy put forth as an argument of convenience?

The "zen" and "mellow" are not themselves the transferable wealth I'm speaking of. What is transferable is the social capital associated with all the accumulated experience, learning and sacrifice necessary to achieve those.

The monk is robbed when the church decides to confer equivalent status upon others who did not make the long years of sacrifice he did. Regardless of whether the church has practical or even virtuous reasons for doing so, the monk himself has his accumulated capital devalued and redistributed.

Someone will say, "but he still has his spiritual wealth". True, but it exists only in and of himself if you redistribute the outward aspects of that wealth. By the same argument, a monetarily poor person is not "poor" unless he allows himself to think of himself as such.

Inevitably, people who take this metaphysical line of reasoning have never actually been poor. And not surprisingly, it is also these same folks who are most agitated by any attempt to devalue their non-monetary social capital.

You just try to steal that hippi's mellow by declaring lots of other foods organic (even if entirely scientifically justifiably so) and see how mellow he remains. Why do you think he's spreading manure over his moldy tomatoes with a shamanic yak horn now? It's because if he doesn't then he's no more "mellow" than the typical condo-owning Marina dweller.

Very few people are truly at peace with themselves in isolation of all else. Very few. It is not human nature. We are social animals with a built-in need for comparative status, no matter how much some people try to wish that away.