[hrothgar]

awm, on 2010-December-15, 19:42, said:

The simplest argument against a flat tax is that taxation should be based on disposable income. If someone makes $20,000 a year and legitimately needs $18,000 a year in order to have food and housing for themselves and their dependents... should we really be charging them $4,000 in "flat tax"? Having this person starve and/or living on the streets is a good way to lose them the job that makes that $20K a year anyway.

Here's an alternative argument / extension:

Diminishing marginal utility is one of the central assumptions that underlies economics.

Simply put, each dollar that I spend increases my utility.
However, the amount of additional utility that I derive from each additional dollar spent decreases.

If you accept this line of argument - which is essentially a given in microeconomics - then it follows that redistribution of wealth increases societal welfare.

[nigel_k]

hrothgar, on 2010-December-15, 20:14, said:

Here's an alternative argument / extension:

Diminishing marginal utility is one of the central assumptions that underlies economics.

Simply put, each dollar that I spend increases my utility.
However, the amount of additional utility that I derive from each additional dollar spent decreases.

If you accept this line of argument - which is essentially a given in microeconomics - then it follows that redistribution of wealth increases societal welfare.

I agree with a utility maximising strategy and this seems like the only place to really start a serious discussion. However:

1. A tax which is a flat percentage of income does result in redistribution. Diminishing marginal utility at most implies it would be sub-optimal to charge each citizen a fixed dollar amount in tax. Hardly anybody is opposed to redistribution, we're just arguing about method and quantity.

2. Redistribution of income, redistribution of wealth, and redistribution of consumption do not follow each other automatically. It's quite easy to come up with a plan that will redistribute a nominal dollar amount but inflation will eat away at the entire amount so the receipients' real income doesn't change.

3. There isn't a fixed amount of income or wealth just sitting around waiting to be distributed by fair and wise politicians. A rule that leads to redistribution often tends to diminish total wealth, by creating a disincentive to work for both the payer and the recipient.

[Elianna]

hrothgar, on 2010-December-15, 18:14, said:

Most conservatives (probably) do believe that a flat tax would raise more revenue.
Most of them also believe that the great sky fairy is going to wave his magic wand whisk all of them away to Never Never Land.

With this said and done, I doubt that you'll find any reputable economist who believes that a flat tax will generate more revenue than a progressive tax structure. (I'm sure that bizarre examples can be constructed, but by and large, progressive tax structures generate much more revenue under any realistic conditions)

This is why modern day conservativism is (essentially) a religion, near completely isolated from "The Reality Based Community"

That raving liberal David Frum had a very interesting series of articles about the alienation between the educated and the Republican Party.

http://www.frumforum...gop-in-midterms

Pew did a very interesting study showing that only 8% of scientists self identify as Republicans (let alone conservatives)

I agree

[mike777]

Fwiw

I find this whole discussion about taxing the rich really creepy.

It seems to be based on the assumption the truly rich dont give back to society in the USA in a fair way.

So we should force them and take away their money with the power of the government/

[Rodney26]

awm, on 2010-December-14, 05:38, said:

The Republican view seems to be that the poor and middle class should pay. They want to retain low tax rates for the wealthy, and cut (or eliminate) the estate tax which effects only a very small number of fabulously wealthy families. They make proposals about banning earmarks and a federal hiring freeze... neither of which will seriously help with deficit reduction (small potatoes relative to the federal budget) and both of which potentially hurt the middle class (most federal workers are middle class, as are the people who end up getting paid to work on earmarks, most of which are construction and renovation projects).

I pretty much disagree with everything you say admittedly, but this here is a little much. US federal employees are probably the most well compensated class of workers in the entire world when taken as a group. If they're middle class, there is no upper class. It's like how there is no longer such thing as a small coffee except in reverse.

Their average total compensation (including bennies) is twice as high as your average US private sector worker (120k/60k). Reading this blog, you'd think it was at least the other way around.

[hrothgar]

mike777, on 2010-December-15, 23:09, said:

Fwiw

I find this whole discussion about taxing the rich really creepy.

It seems to be based on the assumption the truly rich dont give back to society in the USA in a fair way.

So we should force them and take away their money with the power of the government/

That about sums it up.

Of course, I'd frame things very differently:

Here, in the glorious United States, one's opportunities in life are largely determined by accidents of birth.

If you lucky enough to be born to affluent parents, who are capable of sending you to the best schools and willing/able to invest time and attention to your education you're set for life. (Sure, its possible for someone to really screw things up at an early age, but you need to work at conversely)

Conversely, if you're unlucky enough to be poor in a inner city or some rural wasteland, you're screwed. There's an enormous range of opportunities that will (likely) never be available too you.

There are obviously exceptions to this rule. There are a small numbers of individuals who get born in the bottom quartile of society who advance to the top, just as there are some who are born with a silver spoon in their mouth who sink to the bottom after a generation or two. However, these are outliers and you don't design policy around statistical flukes.

I would argue that its drastically unfair that one's lot in life is determined by an accident of birth;
That all people deserve the same types of opportunities;
and that income distribution from the affluent to the less well is right and proper.

[helene_t]

awm, on 2010-December-15, 19:42, said:

The simplest argument against a flat tax is that taxation should be based on disposable income. If someone makes $20,000 a year and legitimately needs $18,000 a year in order to have food and housing for themselves and their dependents... should we really be charging them $4,000 in "flat tax"? Having this person starve and/or living on the streets is a good way to lose them the job that makes that $20K a year anyway.

I don't disagree but since the current system in the US and everywhere else is regressive, a truly flat tax would would be a step in the right direction for those who care about the welfare of low-income people.

But maybe "flat tax" just means abolishing the progressive scale while keeping deductions and other holes in the system.

[hrothgar]

Rodney26, on 2010-December-15, 23:17, said:

I pretty much disagree with everything you say admittedly, but this here is a little much. US federal employees are probably the most well compensated class of workers in the entire world when taken as a group. If they're middle class, there is no upper class. It's like how there is no longer such thing as a small coffee except in reverse.

Their average total compensation (including bennies) is twice as high as your average US private sector worker (120k/60k). Reading this blog, you'd think it was at least the other way around.

Comment 1:

A more meaningful comparison is the number of years of education/training required for a given federal job compared to the benefits packages.
Most federal workers are grossly underpaid compared to what they could be making in the private sector.
The reason that (many) of these jobs are well paid is that you need to invest substantial time and money to be qualified to take them.

Comment 2:

Here are some interesting numbers:

In December 2008, the US government had 2,518,101 full time employees
The total payroll for that month was $15,471,672,417

In 2010, Goldman Sachs had 31,701 employees.
The average compensation for each employee was $622,000K
In 2010, Goldman Sachs employees took home (in aggregate) about 9.5% as much as all 2.5 million federal employees.

If we lump in another couple dozen hedge funds and investment banks, we'll top federal payrolls pretty darn quick...

Please recall that the compensation packages at these large investment backs are heavily tilted toward the top.
If I had to hazard a guess, I say that the compensation package for the top 5% of investment bankers / hedge fund managers was easily greater than all US federal employees.

Another interesting data point:

The average salary (note compensation) salary for the top 50 CEOs was 10.7 million dollars.
These 50 individuals take home a third as much as 2.5 million federal employees.

Care to take back any of your assertions?

[mike777]

I think for 99% of us the facts are confusing and changing....


Just look at your girlfriend/wife: does she love you today or not next week

I will post later what this means in macro econ/

[hrothgar]

mike777, on 2010-December-16, 05:04, said:

I think for 99% of us the facts are confusing and changing....

I will post later what this means in macro econ/

If you find facts confusing and changing, you might well consider sparing us your theories about macroeconomics....

[luke warm]

helene_t, on 2010-December-16, 04:50, said:

But maybe "flat tax" just means abolishing the progressive scale while keeping deductions and other holes in the system.

the way i use the term (and probably i should have put the word 'marginal' in front of 'flat'), only incomes above a certain amount are taxable... there are far too many holes as it is, the only "deductions" should be for those earning below a certain level, based on family size

hrothgar, on 2010-December-16, 04:58, said:

Most federal workers are grossly underpaid compared to what they could be making in the private sector.

then why aren't they in the private sector?

Quote

In December 2008, the US government had 2,518,101 full time employees. The total payroll for that month was $15,471,672,417

In 2010, Goldman Sachs had 31,701 employees. The average compensation for each employee was $622,000K. In 2010, Goldman Sachs employees took home (in aggregate) about 9.5% as much as all 2.5 million federal employees.

and what is your point? if it is that a comparable job in the private sector is higher paid that it is in the public sector, you are disregarding a very important point

his quote was "Their [federal workers] average total compensation (including bennies) is twice as high as your average US private sector worker (120k/60k)." this is either true or it isn't... saying that a comparable private sector job pays, usually, more ignores the fact that this is only true if a comparable such job exists

there are countries that have gone to a flat tax... i guess we can compare their before and after pictures, even though i know that all countries (and economies) aren't created equally - i.e. shaddow earnings, etc.... even so, it's an interesting study

[hrothgar]

luke warm, on 2010-December-16, 10:25, said:

and what is your point? if it is that a comparable job in the private sector is higher paid that it is in the public sector, you are disregarding a very important point

his quote was "Their [federal workers] average total compensation (including bennies) is twice as high as your average US private sector worker (120k/60k)." this is either true or it isn't... saying that a comparable private sector job pays, usually, more ignores the fact that this is only true if a comparable such job exists

Rodney made a specific claim:

Quote

US federal employees are probably the most well compensated class of workers in the entire world when taken as a group.

This claim is clearly false:

There are any number of fairly well defined classes of workers who make much than US Federal Government employees.
The reason that I brought Investment Bankers into the picture is the gross disparity in pay scales.

Not only do per capital earning dwarf that of US government employees, but the aggregate earnings of investment bankers is significantly larger (which is quite impressive given the size of the Federal workforce).

I'm not sure whether it really makes sense to treat all Federal Workers as a class. (There's a gross disparity between what a prviate in the US army makes and what an SES, and SL, or an ST rakes in).

A much more reasonable comparison would be to stratify the workforce based on the qualifications necessary for a given job and then compare wages and benefits between the public and the private sector. Here's a representative quote from one such study:

Quote

• Public and private workforces differ in important ways. For instance, jobs in the public sector require much more education on average than those in the private sector. Employees in state and local sectors are twice as likely as their private sector counterparts to have a college or advanced degree.
• Wages and salaries of state and local employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11 percent less; local workers earn 12 percent less.
• Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees. The pattern of declining relative compensation remains true in most of the large states we examined, although some state-level variation exists.
• Benefits (e.g., pensions) comprise a greater share of employee compensation in the public sector. State and local employees have lower total compensation than their private sector counterparts. On average, total compensation is 6.8 percent lower for state employees and 7.4 percent lower for local workers, compared with comparable private sector employees.

Center for State and Local Government Excellence and National Institute on Retirement Security

[hrothgar]

luke warm, on 2010-December-16, 10:25, said:

then why aren't they in the private sector?

Probably because they're motivated by something other than money (I have a number of friends in the foreign service or who have served in the military. None of them cited lucre as havig a significant impact on their career decisions)

If I had to list why people made the choices they did it would look something like:

1. Federal jobs often provide unique opportunities that you don't get otherwise (The Foreign Service is a lot like academia)

2. Laziness (There are well established processes for getting a job with the Feds. Getting hired in the private sector requires more work)

3. Some people actual see value in serving their country

4. Federal jobs are more secure

5. Federal jobs still provide pensions

[kenberg]

With regard to private and public employees, my experience is from way back but then the argument also goes way back so I will recite it anyway.

Summer 1960, me just out of undergrad, starting grad school in the fall: I worked for NASA Goddard for the summer. They want me to come back the next summer.

Summer 1961, pregnant wife giving birth in August, we have an apartment in Minneapolis: All things considered, staying in Minneapolis sounds right, I got a summer job at Minneapolis Honeywell.

As near as I can tell/remember the demands of the job and the salary were comparable. I had found a way to make myself very useful at Goddard and so I got a lot of overtime. Some overtime but less at Honeywell. (I seriously needed the money.)But basically, very similar. It's true that at Goddard one of my fellow employees was pretty useless, but they can be found in the private sector also. I talked with one of them at Comcast just yesterday.

[luke warm]

well even though it might not be apparent, i have very little negative to say about public sector employees (being one myself)... and richard is right that salary isn't as, or doesn't seem to be as, important as other things... i've been offered higher paying positions in the private sector doing pretty much what i'm doing now (different title maybe), but i've turned them all down... comfort, security, pension/health - many different things enter into it... even so, there are whole departments of state and federal gov't that can be stremlined or, in some cases, eliminated completely

for example, i read somewhere that the post office costs the u.s. so many billions a year... sell the whole thing to ups or fedex for one dollar (buildings, vehicles, everything)... you've immediately cut the budget by that many billions... some things just don't need to be public sector anymore

[hrothgar]

luke warm, on 2010-December-16, 13:05, said:

for example, i read somewhere that the post office costs the u.s. so many billions a year... sell the whole thing to ups or fedex for one dollar (buildings, vehicles, everything)... you've immediately cut the budget by that many billions... some things just don't need to be public sector anymore

Like delivering mail to "unprofitable" parts of the country...

[kenberg]

luke warm, on 2010-December-16, 13:05, said:

i have very little negative to say about public sector employees (being one myself)

Your secret is safe with me!

[awm]

Rodney26, on 2010-December-15, 23:17, said:

I pretty much disagree with everything you say admittedly, but this here is a little much. US federal employees are probably the most well compensated class of workers in the entire world when taken as a group. If they're middle class, there is no upper class. It's like how there is no longer such thing as a small coffee except in reverse.

Their average total compensation (including bennies) is twice as high as your average US private sector worker (120k/60k). Reading this blog, you'd think it was at least the other way around.

This is just not true.

[awm]

hrothgar, on 2010-December-16, 04:58, said:

Here are some interesting numbers:

In December 2008, the US government had 2,518,101 full time employees
The total payroll for that month was $15,471,672,417

The average salary (note compensation) salary for the top 50 CEOs was 10.7 million dollars.
These 50 individuals take home a third as much as 2.5 million federal employees.

This is not right either. Using your own data, the US government payroll was $15 BILLION for the month. That's about 6,000 per employee, so that really is the monthly (not yearly) payroll. Yearly payroll would be twelve times that, or about $180 Billion. The CEOs make about $500 Million, or only 1/360 as much as the government workers. That's nowhere remotely close to a third.

[Rodney26]

awm, on 2010-December-16, 16:16, said:

This is just not true.

Sorry, it's true.

http://www.usatoday....dpay10_ST_N.htm

federaljobs.net actually uses the gap as a recruiting technique.