Wednesday, November 17, 2004

Interesting times

The Bush Administration's two main domestic policy initiatives for 2005 are ostensibly tax reform and Social Security. As these are among my main areas of professional interest, you can guess that I will be all over the action, as it develops, like a cheap suit. Perhaps I should say if it develops; tax reform may be headed straight for a blue ribbon commission, meeting somewhere underneath the Potomac River.
Since I consider markets and incentives to be important, although also favoring progressive redistribution, I would be a sure bet to have partial sympathy with intelligent and well-designed conservative proposals in these areas. But the Administration's track record does not inspire confidence, to say the least. These guys like to do things on the cheap in the Rumsfeld sense, if not in the budgetary sense.
Tax reform seems unlikely because, unless it loses revenue, it has to have losers as well as winners. Something like the flat tax would be a huge improvement on present law, the reduction in progressivity aside. ("Other than that, Mrs. Lincoln, how did you like the play?")
Better than that would be the X-tax, David Bradford's version of the flat tax that has more brackets. (A non-flat flat tax, although the flat tax is also a non-flat flat tax since it has a zero rate bracket.) Clintonian New Democrats should consider advocating progressive consumption taxes, a subject I and many others have written about, and that can come in several different forms.
The Administration has not studied tax reform and has essentially no expertise about it, the possibility of their consulting Glenn Hubbard aside. I suspect that they don't trust the Treasury staff any more than the CIA or State Department staffs.
[CORRECTION: Bruce Bartlett has drawn my attention to documents showing that the Treasury under Paul O'Neill did study tax reform. One more example of how O'Neill was great in many ways even if politically maladroit.]
On Social Security, the big problem is the system's $10 trillion fiscal gap. Or rather the overall fiscal gap, for all government programs, that stands at an estimated $73 trillion. What do "individual accounts" do for this? It depends on how they're done. One way of thinking about it is that you increase the fiscal gap by pulling payroll tax revenues out of the system to fund the accounts, and you reduce the fiscal gap by reducing promised Social Security benefits under the existing system. So the effect on the fiscal gap depends on which is greater. Any guesses about how the Administration is likely to handle this? ("You'll still get your cake, but now you can also save up for ice cream.")

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James Edward Maule said...

Welcome to the taxblogosphere or whatever it is called. I look forward to what you have to say on these two interesting and important topics. I think you're right; we'll be producing thousands of words of commentary for the next few years.

And, ok, you can cover whatever else comes up as long as you don't take my chocolate chip cookies. :-)

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Progressive Income Redistribution has its genesis in the thought of Marx and Engels. This "thought" includes such gems as: "Communism is the positive abolition of private property, of human self-alienation, and thus the real appropriation of human nature through and for man. It is therefore the return of man himself as a social, i.e. really human, being, a complete and conscious return which assimilates all the wealth of previous development. Communism as a fully developed naturalism is humanism and as a fully developed humanism is naturalism." I suggest that is not "thought" but rather the ramblings of a mad man, and denies the fundamental nature of the beast: WE ARE SELFISH. And that rational self-interest drives the engine we know as Capitalism. As Americans, we are dedicated to equality of OPPORTUNITY, not equality of outcome. If you are not comfortable calling yourself an American, and you are enamored of the concept of income redistribution, borne of the same mind that created the above quoted effluent, then I'd like to suggest that you leave this country and stop poisoning the minds of those you teach.

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What do you think of Graetz's suggestion in The Times of a 14% VAT, coupled with a $100K income tax personal exemption? Too "blue ribbon panel-ish"?

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Jim, thanks for the welcome, and chocolate chip cookies are too fattening for me these days anyway.
Whoa there, Goddess, I think there's a little bit of room for behind the veil utilitarianism (I don't buy Rawls) without signing up for Comrade Stalin's gameplan. And some of my students seem to like being "poisoned." Lucrezia Borgia couldn't have boasted of that.
Jack, I would guess that Graetz's revenue estimates are suspect. In his book he gives rates that are based on assuming the full tax on the first $75K (as it was at that point) kicks in the moment you are one cent over. That type of approach, which he did knowingly so he could state a lower rate, does not inspire confidence. The basic idea he is peddling has possible merit, except it doesn't address all of the tax planning and incoherence issues of our income tax and hence wouldn't reduce the business planning issues that waste lots of resources. Plus, what is the political economy of how the income tax would develop after the change? Possibly even worse than it is now; at any rate, one would have to think this through a bit.

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A more indepth esoteric look at karma gives us the following distinctions: Sanchita Karma: the accumulated result of all your actions from all your past lifetimes. This is your total cosmic debt. Every moment of every day either you are adding to it or you are reducing this cosmic debt. Prarabdha Karma: the portion of your "sanchita" karma being worked on in the present life. If you work down your agreed upon debt in this lifetime, then more past debts surface to be worked on. Agami Karma: the portion of actions in the present life that add to your "sanchita" karma. If you fail to work off your debt, then more debts are added to "sanchita" karma and are sent to future lives. Kriyamana Karma: daily, instant karma created in this life that is worked off immediately. These are debts that are created and worked off - ie. you do wrong, you get caught and you spend time in jail.
As a soul, you experience a constant cycle of births and deaths with a series of bodies for the purpose of experiencing this illusionary world gaining spiritual insights into your own true nature until the totality of all experiences show you Who you really are - the I AM! Until you have learned, you will find that pretending that the rules of karma do not exist or trying to escape the consequences of your actions is futile.
Although it may often "feel" like punishment, the purpose of karma is to teach not to punish. Often the way we learn is to endure the same type of suffering that we have inflicted on others and also rexperience circumstances until we learn to change our thinking and attitudes.
We are all here to learn lessons as spiritual beings in human form. These lessons are designed to help us grow into greater levels of love, joy, and awareness. They teach us our true nature of love. Where we do not choose love, show forgiveness, teach tolerance, or display compassion, karma intervenes to put us back on the path of these lessons. Quite simply, the only way to achieve a state of karmic balance is to be love.
Before you incarnated into your present personality, you agreed to put yourself in the path of all that is you need to learn. Once you got here, you agreed to forget this. Karma is impersonal and has the same effect for everyone. It is completely fair in its workings and it is predictable - "do onto others as you would have them do unto you" is a way to ensure peace and tranquillity in your own life as well as the lives of those you come into contact with. The law of karma is predictable - "as you sow, so shall you reap" what is done to you is the net result of what you have done to others!
Karma gives you the opportunity at every moment to become a better person than you are and to open up to the realization that you are the master of your own fate.
The goal of karma is to give you all the experiences that you need to evolve into greater levels of love, joy, awareness, and responsibility. Karma teaches that you are totally responsible for the circumstances of your life. They keep you on the straight and narrow until you have mastered your vehicle and can ride freely on your own. Once you understand that you are the master of your own circumstances and that everything you experience is a direct result of your past actions due to your thinking and emotional responses you can overcome its seeming negative effects by creating only 'good' karma.
Karma forces us to look beyond ourselves (oneness) so that we can see ourselves as we truly are Whole, Complete, at One with everything. Once we truly understand ourselves, we can see our divinity and our unity with all life.
Karma drives us to service. Love means service. Once you accept total responsibility for your life, you see yourself as a soul in service to God. Once you do, you become a fully realized being, allowing God to experience the illusion through you.
Belief in karma and an understanding of its workings will lead you to a life of bliss. Only your own deeds can hinder you. Until the time comes when we release ourselves from our own self-imposed shackles of limitation and fully understand who and what we are we will live under the mantle of karma. So until that day why not create some wonderful experiences for ourselves by "doing onto others, as we would have them do unto us". self-hypnosis

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