Taxes: Obama vs. Romney

[Nocte]

So while stumbling today I feel upon something Ron Paul said about the whole Islam Mosque being built near Ground Zero or the Twin Towers.


www.bestoftheblogs.com/Home/32343/


This got me back into politics for a brief moment. I always stop following because I just get enraged at the amount of the bullshit either party feeds to Americans, and then they just eat it up.

So now I'm looking into who has the better tax plan for America.

Romney's Plan: http://www.mittromney.com/issues/tax

Obama's Plan: http://www.barackobama.com/taxes/

Now I want this discussion to be unbiased, because lets face it. Taxes can only truly work one way, both candidates want to reduce the deficit and in the name of Mr. Carlin, "balance the stupid fucking budget."

Myth, I'm really hoping you do your thing here. I really want to crunch the numbers myself and run scenarios to find out whose tax plan is the best? At the same time however I want to get to the bottom of which is the best over-all, as in how should our taxes really be ran regardless of the candidate's plan.

[Mythonian]

I first read the title as "Texas" for some reason, and I was like, "didn't know Texas was still contested..." lol


http://skepticon.org/wp-content/uploads/2012/01/knapp01.png

Since you specifically limited this to taxes, I'll ignore everything about social issues, foreign policy, other economic influences of the government, etc. and only talk about the taxes (for the first portion at least).


First of all, you need to understand the reasoning of taxes, what they are, their purpose, and their consequences.

Taxes are payments made by the citizenry to the government. This is basically saying, "I pay you to protect me and my rights" in a lot of ways (since that's the primary role of government).

These payments allows the government to receive a revenue. This revenue is then expended on various programs and operations ran by the government. If they spend more than this revenue, they run a "deficit," which is accumulated into the total national debt.


When you talk about tax system being "good" or "bad," what the average person means is "will I pay more or less?" Well, that's not how I'm going to talk about it. When I say "good" or "bad" I'll only be referring to how it will effect the overall economy in relation to government revenue.

As I said in another thread recently, taxes and revenue are related such that increases in taxes raise revenue up to a certain point, but then they cause the revenue to decrease once the taxes are too high. This is because taxes being too high result in people not being able to purchase products, resulting in a dieing economy, resulting in no income for people since they lose jobs, ad nauseum.

However, this time I'll bring in another variable. Economic productivity. Here is the relationships of it with taxes and revenue:

http://dqydj.net/wp-content/uploads/2009/09/tax_rates_vs_revenues.png

Here, you can see that the lower the taxes, the better the economy will be (this is obvious, since having more money lets you invest or spend more, allowing the economy--aka the flow of money--to work better).

Now, look at how the revenue curves (ignore the year part). The red one represents one tax system, while the green one represents another tax system. At the peak of the curve is the "equilibrium point," which is where the tax rate should be set for the government to receive the most revenue.

You can obviously see that the green one is a much better system. At the equilibrium point of the green curve, the tax rate seems to be approximately 35, while the amount of revenue the government receives (called "economic productivity units" in this graph) to be approximately 45. The red system has a higher equilibrium tax rate of 50% but a revenue of only 25.


Our current system is not at equilibrium. We are past equilibrium in nearly every individual tax. This is actually more of an issue than changing the entire tax system, but perhaps this is a spiel for another day.

On this note, though, please realize something that very, very few people can understand:

Raising taxes even more, since we are past equilibrium, will decrease revenue! This is especially true of the rich (ask me about this if you don't believe me, but I'm being serious here).


So, which candidate has the green system and which candidate has the red system?

Well, first of all this can get complicated.

Neither candidate has an optimal system (because people are stupid and also politicians are stupid, but I'll hold off from going into that). So, what is "optimal"?

Well, optimal would be a system that has a high government income but also a high economic productivity. The green curve represents a decent system, but an optimal system would be even better.

What this mythical optimal system actually works out to be isn't set in stone, since different economists have different perspectives, but in my opinion it's close to the Fair Tax (for some complicated reasons; if you want this explained just ask).


So, how do the systems of the candidates relate to this?

Well, first of all you should realize the "plans" they have on their sites are almost certainly going to be absolutely nothing like what they actually get in place (since its Congress that passes taxes, not the president).

So really, it doesn't matter what their "plans" are. What matters is what actually happens.


And what will actually happen is probably going to be very similar for whoever gets elected (since, as said before, it's Congress that passes taxes). The only difference is that one president may pressure them a bit more or might not veto it like the other one would.

And what they do in such a situation relates more to their ideals and perspectives than their posted tax plan.



So, now I'm going to expand this to more economic influences of the government and programs, etc., since limiting us strictly to taxes really can't go any further than the above, which ends at a cliffhanger.


First of all, the government uses the revenue it receives in a wide variety of ways. If it spends a lot, then it requires more income. However, getting more income without changing the tax system doesn't work, and simply raising taxes won't work (since we're already past equilibrium).

So, if the government needs more revenue but doesn't get more income, then we get a deficit. Over the years, our deficit has added up to our debt, which is currently much higher than preferable (since preferably it'd be zero).

So, let's compare our government's revenue and spending:

http://www.heritage.org/federalbudget/charts/2012/growth-federal-spending-revenue-680.jpg

And let's compare that to Greece:

http://static-l3.blogcritics.org/12/07/13/182395/Greek-Revenue-Expenditure-Chart.jpg?t=2012071309591 8

You can definitely see some similarities, although we aren't quite there yet (since our GDP is higher, we have a higher "resistance" which is the only reason it isn't already too late).


So, how do we eliminate the deficit? There are three ways:

Increase revenue until it matches the expenditures
Decrease expenditures until they match the revenue
Both.

So, I think we can all agree that the third option is best, since it's the fastest and easiest, and we can meet in the middle.

But what are the best ways of raising revenue or decreasing expenditures?

Best ways to raise revenue: (1) ensure you are at equilibrium tax rate, (2) improve the tax system to maximize income
Best way to decrease spending: cut programs (only way, really) [I'm including everything, even military, as a "program" for simplicity]

So how do we get there?

I already said that we are past equilibrium. We need to lower taxes on everybody, especially businesses. We have the highest business tax rates on the planet (except maybe Japan, but I think they recently lowered it below ours). This is because other countries have already realized that the equilibrium tax rate for business taxes is close to 10-15%, but we are still in the 30%+. We could get so, so much more revenue from this alone (and as a side effect it would create a lot of jobs, also).

The tax system could be seriously improved. As said earlier, neither candidate has an optimal system, and really it's up to the Congress, not the president anyway. I don't think we'll end up being able to change our system in the near future, which is a real shame. But if we could, we'd be able to eliminate the debt completely in a decade (not exaggerating).

Cutting programs: This is very subjective about what we should cut. In my personal opinion (that doesn't mean this is the best course of action, but I personally believe it would help), cutting social security and entitlements. Simply cutting those two programs would be the best in my opinion.


So, with all that in mind, which candidate is more likely to veto or not veto specific bills made by Congress or pressure them into specific bills?

Well, judging from what you know of their character and perspectives (which you can see some of it in what they often talk about), I personally lean toward Romney. Here's why:

Obama talks about raising taxes on the rich even though we're past equilibrium which I disagree with. He also wants to expand entitlements, which I disagree with.

Romney has mentioned often that he wants to remove the deficit by both raising revenue and decreasing expenditures simultaneously, which I said earlier I think is the best option.


TLDR; Neither, but I slightly lean toward Romney at this point.

[Nocte]

I've spent the past hour on wikipedia and numerous other sites trying to get how our current tax system is working down to the amount of revenue coming from each tax bracket. I can see why the US Tax Code is like what 70,000 plus pages?

[Silko]

I've spent the past hour on wikipedia and numerous other sites trying to get how our current tax system is working down to the amount of revenue coming from each tax bracket. I can see why the US Tax Code is like what 70,000 plus pages?

70k pages? Well I thought it was more but 70k? wtf no wonder why nothing gets done

[SuRroundeD By 1]

Cutting programs: This is very subjective about what we should cut. In my personal opinion (that doesn't mean this is the best course of action, but I personally believe it would help), cutting social security and entitlements. Simply cutting those two programs would be the best in my opinion.

You made a great freaking post Myth, bravo, I'm sad that I only really have time to reply about this one.

After taking my economics class last year, I've been arguing all around that we need to cut social security and entitlements, those alone account for what? 60% of our budget or more? Social Security, Medicare, Medicade, all need to lose spending. People are always blaming the military on excessive spending, and while we do spend A LOT on the Military, they aren't the biggest problem!

I was arguing again with my dad and step mom, who both work for Ford, so they are also part of the UAW. I was arguing that one, we need to cut entitlements like SS and both MC's (they both exploded on me for that one), and I argued that union's actually hurt a little more than they help at this point (I don't know your views on that but mine are coming up).

With the entitlements, they take up a ridiculous amount of our national budget, I think I remember it being around 2/3 give or take. They started yelling at me about all the poor people who need that money or who can't afford to go to the hospital and need blah blah blah. The point is, we're losing money every year, and these programs are a HUGE part of that problem.

Then for Unions: While I believe they were created for a good purpose, and that they can still be good in situations, whenever they convince a company to pay their employees more, or hand out better benefits, all that makes the company want to do is hire less employees because now they have to pay all of their other ones more! So boom, less jobs. Now let's say that the company, in fact,CANNOT pay every single one of their workers more like promised, what do they do? They LAY OFF WORKERS!

It's a non stop cycle! And it doesn't end there! Maybe that company needs all of its employees, they can't possibly cut down, what's next? They raise prices! Then what happens? The Union (UAW, etc) asks for better wages for their employees! What happens when the employees don't get it? They go on strike! Then the entire fuckin' process starts over again. I tried to explain that as calmly as possible to my dad and step mom the other day, and they had to call my mom and have her pick me up because of how pissed they were! It was unbelievable!

I want to call myself Independent . . . whenever it comes down to social issues (gay marriage, abortion, etc) I'm more liberal; however, when it comes down to handling the economy, I lean towards the conservative side (they are not pro-union, and they aren't planning on taxing business or the rich anymore, which is not what we need).

So while I don't like either candidate, if I had to, I'd probably vote for Romney also . . . as much as I don't want to take sides.

[silversleek]

well, when myth gets here... oh nevermind, seems like he already copy and pasted it. I was going to say the same thing, but he has it prepared. and always beats me to it. darn robot.

>.<

[Mythonian]

I want to call myself Independent . . . whenever it comes down to social issues (gay marriage, abortion, etc) I'm more liberal; however, when it comes down to handling the economy, I lean towards the conservative side (they are not pro-union, and they aren't planning on taxing business or the rich anymore, which is not what we need).

Welcome to the Libertarians. :)

[Nocte]

@Surrounded. Define cut SS and MC. For SS do you mean get rid of it right now and all of the money that was put in to it over the years? Because that's what would piss someone off whose been paying that SS. They paid it and were promised to get it back down the road.

I personally think social programs like SS and MC should exist, after all the average American doesn't make enough money to be able to retire at a reasonable age and just enjoy life.


As for Medicare, and from my understanding of Obamacare. It'll push the cost of Health Care down. Healthcare is a funny thing, my father has been working at USG his entire life. He told me when Healthcare became a thing the companies paid for it for their employees. Now the employees pay for it xD

http://edition.cnn.com/2012/06/28/opinion/horwitz-levy-obamacare/index.html

http://www.businessweek.com/articles/2012-08-30/hey-paul-ryan-obamacare-doesnt-steal-from-medicare


Here we are: http://www.nytimes.com/2012/09/30/opinion/sunday/why-obamacare-is-a-conservatives-dream.html?pagewanted=all

The NYTimes is one of the most creditable news sources I know. Bloomberg and CNN are too, but I love me the NYTimes.

[Mythonian]

The NYTimes is one of the most creditable news sources I know. Bloomberg and CNN are too, but I love me the NYTimes.

On principle, I never trust what someone tells me just because I view them as credible or not, and personally I've never been impressed by any of those news sources.

I don't have time to read those articles at the moment, but from reading the first two paragraphs of the NYT one, it seems extremely biased and I'm heavily skeptical of some of the things it's claiming.


Social Security. The concept of investing money (in the form of higher taxes) in the government which will supposedly be paid back to you (in the form of direct payments) when you are at an age for retirement.

How about investing that money in something that is actually somewhat intelligent? Like a ROTH IRA or something...


Seriously, Social Security is the stupidest thing to prepare for your retirement. There's a thousand better ways to do it, and all of them are (1) more secure and stable, (2) will result in higher returns, (3) are better.


It's nothing but a waste of government revenue, really.


EDIT: And if it were to be removed, then it should be obvious that the money people have paid into it would be included in their tax returns or as a form of tax reduction.

[SuRroundeD By 1]

On principle, I never trust what someone tells me just because I view them as credible or not, and personally I've never been impressed by any of those news sources.

I don't have time to read those articles at the moment, but from reading the first two paragraphs of the NYT one, it seems extremely biased and I'm heavily skeptical of some of the things it's claiming.


Social Security. The concept of investing money (in the form of higher taxes) in the government which will supposedly be paid back to you (in the form of direct payments) when you are at an age for retirement.

How about investing that money in something that is actually somewhat intelligent? Like a ROTH IRA or something...


Seriously, Social Security is the stupidest thing to prepare for your retirement. There's a thousand better ways to do it, and all of them are (1) more secure and stable, (2) will result in higher returns, (3) are better.


It's nothing but a waste of government revenue, really.


EDIT: And if it were to be removed, then it should be obvious that the money people have paid into it would be included in their tax returns or as a form of tax reduction.

That actually sounds like a great idea . . .

[Maxdoggy]

Hey Myth, do you mind if I basically copypasta your posts and make an informational video about it (and give you credit for it)???

[Mythonian]

Hey Myth, do you mind if I basically copypasta your posts and make an informational video about it (and give you credit for it)???

lol Have at it!

[Maxdoggy]

Awesomeness. I need to explain taxes to peeps on Facebook and since I'm away at college and not with them, this'll be the best way to inform them.

We should write videos together on important subjects! Haha.

[Maxdoggy]

Just finished filming it on my Droid Bionic. Lol.

I just have to edit it all together and I hope to have it posted for tonight.