And for those who think mandatory service isn't problematic, please note that the 13th Amendment says there shall be no "involuntary servitude" except as punishment for crime.

Nobody is promoting the idea of mandatory service. "Universal" != "Mandatory".

Uhhmmm no. Except in rare situations, i.e. the future is not discounted at all, consumption today is preferred to consumption tomorrow. The only reason why I might forgoe consumption today is if I expect to have more consumption in the future that offsets the discounting of said future consumption back to the current period--e.g. pursuing a college degree.

I think that's pretty much where I was going, make sure you the future "bailout" you are offering will allow less total (resent + future) consumption than what one can achieve my avoiding consumption now in favor of saving.

(present consumption + future bailout) < (future consumption - present saving)

The problem is that while in economic models the discount rate is held fixed, in reality we don't know what it will be over time and hence this kind of fine tuning wont work.

It doesn't have to work, it just has to be probable enough that it will work that most people will still feel it worth while to save now.

And what is to stop a political scoundrel from borrowing to curry favor with current retirees? Once this happens other workers might start to see something like that in their future thus reducing current savings. No, this kind of discretionary policy is ruined by the problem of time inconsistency. You'd have to set up some sort of automatic/rule based system that politicians could not really touch except perhaps in the most extreme cases.

That's pretty much going to be a problem in any implementation of social security, isn't it? I don't like the idea of putting it in the Constitution, it really has no place there. A super majority might prevent necessary changes from happening, not prevent highly-visible major changes from happening, or both. It makes it harder, but doesn't make it less desirable.

Ideally we'd find a way to keep changes to the law from being something that would curry favors with seniors, thus removing the incentive. I have no idea on how to do that, though.

And how much of it do you think they are being taxed on right now? With two kids a mortgage deduction I wouldn't be surprised if it is 50%.

Yes, but because the rate they are being taxed is progressive, they end up paying significantly less per dollar than those wealthier than themselves. Under a flat tax, the per-dollar tax rate on that 50% would likely be higher, unless I am seriously underestimating the amount of consumption we can expect by the wealthy under a system that discourages consumption by the wealthy.

So, he is also saving far more which would end up being re-invested in the economy. Trade is a positive sum game. This benefits not just the guy doing the saving.

But if we're not taxing savings, we have to make up for that lost revenue by increasing the tax rate on consumption, which will hurt those middle-class people that would be helped by that money being re-invested in the economy. Will the break even? That depends on what the flat rate would have to be in order to match current tax revenues.

And the idea of a consumption tax is to tax consumption. As such if a person wants to limit their consumption spending and thus their well being and save why punish them?

I don't want to punish them for saving, but again their savings reduces government revenue, which has to be balanced by an increase in taxation on consumption, which again disproportionally punishes those who, because of their lower total income, devote a larger percentage of their income to consumption. Every dollar that the frugal millionaire saves under a flat tax must be paid by someone else. Yes, investment is positive-sum, but will it be enough to offset the redistribution of the tax burden? Only if we can expect a high enough level of discretionary consumption in a system that discourages discretionary consumption.

There are students who simply are not competent to do college level work, and there's no way they could earn a college degree unless college-level work becomes merely high-school+ level work. That's not acceptable, as it doesn't enhance the real educational attained by the American work force.

And for those who think mandatory service isn't problematic, please note that the 13th Amendment says there shall be no "involuntary servitude" except as punishment for crime. So unless there's something criminal about being an American citizen, mandatory service is something we should all reject.

Only if the government bailout is equal or greater than the retirement you could enjoy by saving minus the cost of saving for it.

Uhhmmm no. Except in rare situations, i.e. the future is not discounted at all, consumption today is preferred to consumption tomorrow. The only reason why I might forgoe consumption today is if I expect to have more consumption in the future that offsets the discounting of said future consumption back to the current period--e.g. pursuing a college degree.

All we have to do is keep the balance tilted in favor of personal saving enough that most reasonable people will choose that rather than a government-sponsored retirement.

The problem is that while in economic models the discount rate is held fixed, in reality we don't know what it will be over time and hence this kind of fine tuning wont work. And what is to stop a political scoundrel from borrowing to curry favor with current retirees? Once this happens other workers might start to see something like that in their future thus reducing current savings. No, this kind of discretionary policy is ruined by the problem of time inconsistency. You'd have to set up some sort of automatic/rule based system that politicians could not really touch except perhaps in the most extreme cases. For example, put it in the Constitution or require a super majority such as 75% or 80%. Of course what politician is going to be willing give up such ability to try and win elections?

Again, though, any tax savings the wealth would enjoy now have to be picked up solely by the middle class.

Actually the lower half of the income distribution pays almost no taxes. And the wealthy do spend, this is why they have bigger houses, nicer cars, jewelry, vacation homes, and so forth. It isn't like millionaire and billionaires are suddenly going to live like someone make $50,000 a year.

A family of 4 making $48,000 is probably spending close to all of their income, which means they will be taxed on nearly 50% of the dollars they earn.

And how much of it do you think they are being taxed on right now? With two kids a mortgage deduction I wouldn't be surprised if it is 50%.

Also don't forget that with the additional savings this would lower interest rates as well.

It gets even more disproportionate for someone making $2.4 million annually, who can again spend twice as much as the guy making $240k, and be taxed on only 9% of their income. In perspective of the first guy, our millionaire is making 50x the salary, and paying 9x the taxes.

So, he is also saving far more which would end up being re-invested in the economy. Trade is a positive sum game. This benefits not just the guy doing the saving.

And the idea of a consumption tax is to tax consumption. As such if a person wants to limit their consumption spending and thus their well being and save why punish them? So actually in your example, the second guy is paying 2x the first guy in taxes, and is helping with things like lower interest rates, increased capital formation as well. Under the current system there is reduced incentive to save and thus an incentive to spend. Further, any savings is reduced since it has to come out of post-tax income, and the associated distortions caused by taxes which reduce the total amount of money everyone can save.

One of the more developed consumption/flat tax proposals is that of Hall and Rabushka.

Hell, Steve, neither did you suggestion that everyone save for their own retirement.

Yeah, I don't like telling people what to do, generally speaking, and even less do I like forcing them to do something.

Billy,

Nice job of ducking the substantive points.

All your points rest on a faulty premise and as such are not relevant. I did read them, I just saw no reason to address them as the initial faulty premise rendered them void. See I'll demonstrate it, you wrote,

The taxes one pays out of such profits (and to which you are presumably opposed) are a contribution [to society].

This is wrong because taxes do nothing to create wealth they merely redistribute it. Further, the deadweight loss associated with taxes produces a net loss for society that irrevocably lost. So your faulty premise has lead you to misunderstand the nature of taxes and how they actually can reduce output not increase it.

Now, you might read that and think that I am implying that the ideal is no taxes at all. That is not the case. If there are say public goods and externalities for example, a government will most likely want to implement taxes. In this case, the issue becomes one of selecting taxes on all commodities (and labor is but one commodity in such an economy) so that the negative impact due to the deadweight loss is minimized. In the public finance literature it is called the Optimal Tax problem.

Of course, this places us into what economists like to call the world of the Second Best. In this case, simple arm chair reasoning can be seriously flawed. Further, solutions that might work in the "first best world" may actually exacerbate the situation.

As for the rest of your comment where you called me insane, I really can't be bothered writing up a detailed reason as to why it is hogwash.

Now, if you decide to re-work your initial premise and see where that leads you in terms of your resulting conclusions, please feel free to post them.

I don't need to bother with the rest of your comment as the initial premise is so badly flawed.

Nice job of ducking the substantive points. When you can't engage the substance of an argument (namely that without the taxes you rail against or the service programs you're hysterically bashing, the profits you hail as the end-all solution do nothing to further society) talk down to your opponent. Truly the refuge of the intellectually impotent. I can see why there are no M's or D's in your letters.

Next time try reading the words people write. As for me, I'll stop bothering with yours.

Well I personally object to the notion of a "War on Terror" in that it is open ended and can be used, like the "War on Drugs" to further erode our personal freedoms and liberties. But I don't expect many people on either Right nor Left to agree with me on this one.

You've got my agreement.

Then nobody will save (much) because it is a suckers game. Today I would be better off spending all my income and saving little or nothing for retirement and having the government bail me out when I retire.

Only if the government bailout is equal or greater than the retirement you could enjoy by saving minus the cost of saving for it. All we have to do is keep the balance tilted in favor of personal saving enough that most reasonable people will choose that rather than a government-sponsored retirement.

Most consumption tax plans come with a very large exemption on income, something like $24,000 for a family of 4. So you don't need specific exemptions for differnt products.

Again, though, any tax savings the wealth would enjoy now have to be picked up solely by the middle class.

A family of 4 making $48,000 is probably spending close to all of their income, which means they will be taxed on nearly 50% of the dollars they earn. Someone making $240,000 can spend twice as much, $100,000 per year, and still only get taxed on about 32% of the money they earn. So someone making 5x the income only pays 3x the taxes.

It gets even more disproportionate for someone making $2.4 million annually, who can again spend twice as much as the guy making $240k, and be taxed on only 9% of their income. In perspective of the first guy, our millionaire is making 50x the salary, and paying 9x the taxes.

Well yeah it is the goal, but it doesn't preclude mandantory either.

Hell, Steve, neither did you suggestion that everyone save for their own retirement.

And what happens when some people don't save for it? The society either saves them, or abandons them. Libertarians will says abandon them, but I don't think they'd like how our society will look if that were to actually happen. Our only realistic option is to reduce the number of people that need saving, and pool funds to save the rest. That is what Social Security & Medicare are supposed to be.

Then nobody will save (much) because it is a suckers game. Today I would be better off spending all my income and saving little or nothing for retirement and having the government bail me out when I retire. I know, sounds not quite right, but that is what Finn Kydland and Edward Prescott won a Nobel Prize for, they called it time inconsistency.

For a consumption tax to be socially acceptable, it would have to contain so many exceptions for "necessary" consumption, that it would become more of a mess than the progressive income tax rules we currently have. Is Milk exempt? How about skim-milk? Chocolate milk? Soy milk? Good luck figuring that out.

Most consumption tax plans come with a very large exemption on income, something like $24,000 for a family of 4. So you don't need specific exemptions for differnt products.

You'll notice that nowhere in that definition does it say "mandatory" either. "Universal" is the goal, "mandatory" is just a means of getting there.

Well yeah it is the goal, but it doesn't preclude mandantory either.

Billy,

You're insane. Hoarding gold is not a contribution to civilization.

Profits are not hoarded. They are either spent by the corporation, given to shareholders, or put in the bank and lended back out to other borrowers.

I don't need to bother with the rest of your comment as the initial premise is so badly flawed.

Profits are not a contribution to society, just as they do not detract therefrom. They simply are.

Trade is not a zero-sum game. Oh and rocks, "just are" too, but they can be used for a variety of usefull purposes that make people better off. So your argument fails yet again.

Charles,

Steve, I think I have a copyright on that "freedom is overrated" thing. Been using it for years.

The check is in the mail.

Michael again,

Billy has no point. Profits are part of the gains from trade. To accept that profits are not a net positive you have to accept that trade does not make people better off (or that profits are zero, in which case there are no profits and Billy has in underwear in a not over nothing). Since this is not the case, Billy is wrong. His analogy with blood and other nonsense is just that, nonsense.