How much do you want?

[BigBallinStalin]

The FDIC is insurance... Which the banks DO pay for.

They put in a proportion. The FDIC lends out more money from the Treasury, which is money that the banks did not put it. Therefore, the banks do NOT pay for it all.

Besides, the FDIC will still provide perverse incentives (moral hazard) for banks. If someone has your back, you can make riskier decisions. In other words, the FDIC subsidizes the rate of risk which banks face. This in turn leads to a decreased demand of the banks for capital/assets which are more liquid. Why hold more liquid assets and capital if you expect to be bailed out by the FDIC through the Treasury? It's rational to think this way, even though it creates systemic instability in the economy, and this instability is created unintentionally by the FDIC.

Also, this insurance scam net reduces the lenders' need to assess the actual performance of any bank. As a lender, i.e. one who deposits his money in an account at any bank, you should have an incentive to ensure that such a bank is not risky or has a good history. But we don't have this incentive when the FDIC covers everything, so the demand from lenders on banks to perform better is undermined by the FDIC.


Why is there an FDIC?

Because a crisis happened, people screamed, and politicians were eager to maximize their votes (regardless of the unknowns and long-term costs). Today, we're stuck with a system that fundamentally weakens the economy and is too complex for the average Joe to understand (which is understandable). Since voters are largely uninformed, then the political accountability of voting is completely ineffective in ensuring that politicians do not ignore systemic and long-term costs. This is another fundamental problem of (liberal democratic) government when it stretches beyond its Limited role.

It's funny because people screamed about the 2008 financial crisis and about the banks, but when it comes to reforming these systemic problems, the voting public at large has no idea, so politicians don't have to pander to them in order to fix the problems which they created. It's a great system for politicians and bureaucrats--not so great for the people.

If the FDIC is "lending" out more moeny than they put in.. presumably those loans are paid back.

I think the consensus is the FDIC has been and still is a good thing.

Without the FDIC you would have...
1) a higher chance of Bank Runs... which are bad
2) less savings... which is bad
3) less loans... which is bad

(Note... not talking about the quality of the loans... bad loans are of course bad. MOST loans made by banks are good and there is overall economic prosperity because we can borrow money.)

That's a nice presumption. Even if it were true for all cases, you still have failed to address my argument about perverse incentives--which lead to the "necessity" of bailing out banks through the FDIC--and other means.

1) FDIC subsidizes the risk. Without the FDIC, the banks would have to dedicate more resources to buying more liquid capital assets to cover such a risk. This curbing of this demand by the FDIC creates a less stable economy. You keep ignoring this point and simply saying otherwise without even explaining how.
2) I'd ask "how?," but if you're about to launch into a monologue, then I don't care.
3) same

[BigBallinStalin]

[
Also, this insurance scam net reduces the lenders' need to assess the actual performance of any bank. As a lender, i.e. one who deposits his money in an account at any bank, you should have an incentive to ensure that such a bank is not risky or has a good history. But we don't have this incentive when the FDIC covers everything, so the demand from lenders on banks to perform better is undermined by the FDIC.

It is impossible for your average consumer with a checking account and a few grand in savings to "assess" the balance sheet of a bank in any meaningful way.

No, it isn't. Consumer reports make it possible; they assimilate information and produce readable content for others.

Not only that, but it doesn't matter if most people do not do their own research. Information passes through word-of-mouth (typically), and the people who connect and are knowledgeable of others are a very small percentage of the world's population (i.e. they're called "Connectors" and "Market Mavens"). All it takes is for those two groups of people to become aware of some suspicious or dangerous activity within a bank's publicly disclosed activities.

This doesn't happen because there's no demand for it from the average consumer. Why? Because they don't have to worry about it. Why? Because the FDIC crowded out this demand. The FDIC, by providing the illusion of security, has unintentionally discouraged the incentive for consumers to at least demand this information from the Connectors and Market Mavens.

Furthermore... even a bank with a solid balance sheet could get caught in a bank run if there was some bad news or other outside factor.

Example>
Bank A has a bad balance sheet and fails... there then is a higher probability of a "run" on Bank B. Even if their loans are good and balance sheet is good. A Bank operates by taking deposits and making loans. If every depositor wants his/her money back NOW because another 9/11 then the Bank would fail.

Usually you make good arguements... but you fail in this case.

Sure, that's an example

Usually you make good arguements... but you fail in this case.

Jimboston, you can either be respectable, or I can change the content of my posts to make you really angry. Which do you prefer?


Anyway, why boast?

(1) You've still failed to address the problem of perverse incentives and how banks already found solutions to that problem and this was before the FDIC existed.
(Whoa, what?! Yeah. http://www.freebanking.org/2012/07/02/t ... e-banking/ )

(2) If you bring up bank panics again, I'm gonna continue repeating the more nuanced explanation of why the FDIC was created---another point which you have yet to address and defeat.

[patches70]

Just a question for you BBS, if you wouldn't mind. In regards to the FDIC insurance being an incentive to risky behavior.

If a person, who had no health insurance, that makes an effort to be careful to not get sick or injured (like smoking, cliff diving, unprotected sex nightly with dock whores and such) because he has no insurance.
If one day he finally got health insurance, would he say- "All Right! Now I don't have to take care of myself as much anymore! Off to the docks I go this very night!"?


The FDIC doesn't seem to me to have a major part, if at all, in risky behavior of the banks. Rather, the knowledge that The Fed and the US government will bail them out if things go bad, is much worse.

I suppose that is an insurance of a different sort though. But that insurance is funded by the taxpayer. The FDIC is fully funded by the banks (except in extremes, which to my knowledge haven't happened as of yet).

Just askin' is all.

[Baron Von PWN]

Right, what NS said, but as I stated, here in the CC we don't know because no one crunched the numbers.

TGD also mentioned the same. A flat tax would be applied to all income, whether it's from capital gains or "income," as in one's wage...

(which would be income: 35% --> 20%; and capital gains: 10%-15%? ---> 20%)


Still not seeing any good arguments against the flat tax. Come forth and don't be a dick; otherwise, I will be forced to respond with equal dickishness.

Well you said to put aside the fairness issue. ok
We can't crunch the numbers so put that aside. ok

What's left to discuss?

Tax brackets are inherently about fairness. So if you take that out of the picture then what are we talking about?
We can't crunch the numbers because no one here has those resources so what are we talking about? (main reason for introducing the graduated tax rates was to increase state revenue)

If the wealthy pay lower rates because of tax loopholes with regards to dividend income. then close those loopholes and have them taxed at the current rates. That isn't an argument for a flat tax it's an argument against the ridiculous tax loopholes. Get rid of the loopholes keep the same graduated tax rate.

1) It's not that simple with loopholes. We currently don't just have a progressive tax rate. We have different types of taxes and different rates for different sources of revenue. The flat tax says, "f that," and taxes all income at a set percentage. This closes the government's ability to manage growth, thus creating a tax system which favors the wealthy at the expense of the poorer (fairness argument cuts both ways all the time almost every time, which is why it's ridiculous).


2) If the flat tax of 20% with a $15,000 exemption were to create 80% of the current government tax revenues (which does not include deficit spending), then would you have a problem with the flat tax?

1)Why can't we tax all income at a progressive rate? It should be just as easy to sweep away all loopholes in order to implement the progressive rate as the flat tax rate. The argument is the wealthy can better manage the "unfairness". While the poor already have limited resources to deal.

2)Yes. As a base rate what's proposed is fine. (though I would put the exemption a tad higher). However I don't see why the state should deny itself revenue in favour of the rich. Especially considering the rich are most able to pay those taxes.

[Night Strike]

1)Why can't we tax all income at a progressive rate? It should be just as easy to sweep away all loopholes in order to implement the progressive rate as the flat tax rate. The argument is the wealthy can better manage the "unfairness". While the poor already have limited resources to deal.

How does that argument fit in to the 14th Amendment's guarantee of Equal Protection under the law?

2)Yes. As a base rate what's proposed is fine. (though I would put the exemption a tad higher). However I don't see why the state should deny itself revenue in favour of the rich. Especially considering the rich are most able to pay those taxes.

Because it's not the government's job to take as much as possible from people. The government is only supposed to take enough to execute its Constitutionally delegated tasks while leaving all the rest of the money in the private sector of individuals to do with it as they please. It's not favoring the rich: it's called charging only which is necessary.

[Baron Von PWN]

1)Why can't we tax all income at a progressive rate? It should be just as easy to sweep away all loopholes in order to implement the progressive rate as the flat tax rate. The argument is the wealthy can better manage the "unfairness". While the poor already have limited resources to deal.

How does that argument fit in to the 14th Amendment's guarantee of Equal Protection under the law?

2)Yes. As a base rate what's proposed is fine. (though I would put the exemption a tad higher). However I don't see why the state should deny itself revenue in favour of the rich. Especially considering the rich are most able to pay those taxes.

Because it's not the government's job to take as much as possible from people. The government is only supposed to take enough to execute its Constitutionally delegated tasks while leaving all the rest of the money in the private sector of individuals to do with it as they please. It's not favoring the rich: it's called charging only which is necessary.

1) I'm no constitutional expert.However you've had a progressive tax for some time now. Presumably that's already been challenged and dealt with.

2) What if they can't do what they are charged to do without the necessary funding?

[BigBallinStalin]

Right, what NS said, but as I stated, here in the CC we don't know because no one crunched the numbers.

TGD also mentioned the same. A flat tax would be applied to all income, whether it's from capital gains or "income," as in one's wage...

(which would be income: 35% --> 20%; and capital gains: 10%-15%? ---> 20%)


Still not seeing any good arguments against the flat tax. Come forth and don't be a dick; otherwise, I will be forced to respond with equal dickishness.

Well you said to put aside the fairness issue. ok
We can't crunch the numbers so put that aside. ok

What's left to discuss?

Tax brackets are inherently about fairness. So if you take that out of the picture then what are we talking about?
We can't crunch the numbers because no one here has those resources so what are we talking about? (main reason for introducing the graduated tax rates was to increase state revenue)

If the wealthy pay lower rates because of tax loopholes with regards to dividend income. then close those loopholes and have them taxed at the current rates. That isn't an argument for a flat tax it's an argument against the ridiculous tax loopholes. Get rid of the loopholes keep the same graduated tax rate.

1) It's not that simple with loopholes. We currently don't just have a progressive tax rate. We have different types of taxes and different rates for different sources of revenue. The flat tax says, "f that," and taxes all income at a set percentage. This closes the government's ability to manage growth, thus creating a tax system which favors the wealthy at the expense of the poorer (fairness argument cuts both ways all the time almost every time, which is why it's ridiculous).


2) If the flat tax of 20% with a $15,000 exemption were to create 80% of the current government tax revenues (which does not include deficit spending), then would you have a problem with the flat tax?

1)Why can't we tax all income at a progressive rate? It should be just as easy to sweep away all loopholes in order to implement the progressive rate as the flat tax rate. The argument is the wealthy can better manage the "unfairness". While the poor already have limited resources to deal.

2)Yes. As a base rate what's proposed is fine. (though I would put the exemption a tad higher). However I don't see why the state should deny itself revenue in favour of the rich. Especially considering the rich are most able to pay those taxes.

I've got a response, but I got some questions:

(1) Does your progressive tax on all income come with any exemptions? If so, what are they?

(2) Are you usually this holistic in your thinking? (The wealthy v. the poor, the rich v. the poor)

(2b) We can admit that there are individuals within these groups, but would you agree with me that a two-class analysis is insufficient for explaining complex phenomena in regard to taxation?

With tax policy, I tend to view five groups divided by income earned (thus, 5 groups of 20% brackets) because this provides a clearer understanding of the issue without distorting one's analysis with clumsy Marx-esque analysis.

[Baron Von PWN]

Right, what NS said, but as I stated, here in the CC we don't know because no one crunched the numbers.

TGD also mentioned the same. A flat tax would be applied to all income, whether it's from capital gains or "income," as in one's wage...

(which would be income: 35% --> 20%; and capital gains: 10%-15%? ---> 20%)


Still not seeing any good arguments against the flat tax. Come forth and don't be a dick; otherwise, I will be forced to respond with equal dickishness.

Well you said to put aside the fairness issue. ok
We can't crunch the numbers so put that aside. ok

What's left to discuss?

Tax brackets are inherently about fairness. So if you take that out of the picture then what are we talking about?
We can't crunch the numbers because no one here has those resources so what are we talking about? (main reason for introducing the graduated tax rates was to increase state revenue)

If the wealthy pay lower rates because of tax loopholes with regards to dividend income. then close those loopholes and have them taxed at the current rates. That isn't an argument for a flat tax it's an argument against the ridiculous tax loopholes. Get rid of the loopholes keep the same graduated tax rate.

1) It's not that simple with loopholes. We currently don't just have a progressive tax rate. We have different types of taxes and different rates for different sources of revenue. The flat tax says, "f that," and taxes all income at a set percentage. This closes the government's ability to manage growth, thus creating a tax system which favors the wealthy at the expense of the poorer (fairness argument cuts both ways all the time almost every time, which is why it's ridiculous).


2) If the flat tax of 20% with a $15,000 exemption were to create 80% of the current government tax revenues (which does not include deficit spending), then would you have a problem with the flat tax?

1)Why can't we tax all income at a progressive rate? It should be just as easy to sweep away all loopholes in order to implement the progressive rate as the flat tax rate. The argument is the wealthy can better manage the "unfairness". While the poor already have limited resources to deal.

2)Yes. As a base rate what's proposed is fine. (though I would put the exemption a tad higher). However I don't see why the state should deny itself revenue in favour of the rich. Especially considering the rich are most able to pay those taxes.

I've got a response, but I got some questions:

(1) Does your progressive tax on all income come with any exemptions? If so, what are they?

(2) Are you usually this holistic in your thinking? (The wealthy v. the poor, the rich v. the poor)

(2b) We can admit that there are individuals within these groups, but would you agree with me that a two-class analysis is insufficient for explaining complex phenomena in regard to taxation?

With tax policy, I tend to view five groups divided by income earned (thus, 5 groups of 20% brackets) because this provides a clearer understanding of the issue without distorting one's analysis with clumsy Marx-esque analysis.

1) In my mind there would be one exemption for very low income earners. So a tax cut off. make under say 20k a year, no taxes. That would be the only exemption

2) well I'm asking for a graduated income tax. So that implies multiple levels. Let's go with 5 with the middle rate affecting citizens making the mean income. So 1. lowest strata no tax. 2. bellow average income earners but above cut off. lowest tax rate 3. mean income earners,
4. above average income earners , 5. very high income earners.


2.b of course but in general it is true the wealthier benefit the most from a flat tax, while the poor are the most disadvantaged. I'm focused on these two groups as they are the most affected.

[BigBallinStalin]

I've got a response, but I got some questions:

(1) Does your progressive tax on all income come with any exemptions? If so, what are they?

(2) Are you usually this holistic in your thinking? (The wealthy v. the poor, the rich v. the poor)

(2b) We can admit that there are individuals within these groups, but would you agree with me that a two-class analysis is insufficient for explaining complex phenomena in regard to taxation?

With tax policy, I tend to view five groups divided by income earned (thus, 5 groups of 20% brackets) because this provides a clearer understanding of the issue without distorting one's analysis with clumsy Marx-esque analysis.

1) In my mind there would be one exemption for very low income earners. So a tax cut off. make under say 20k a year, no taxes. That would be the only exemption

2) well I'm asking for a graduated income tax. So that implies multiple levels. Let's go with 5 with the middle rate affecting citizens making the mean income. So 1. lowest strata no tax. 2. bellow average income earners but above cut off. lowest tax rate 3. mean income earners,
4. above average income earners , 5. very high income earners.


2.b of course but in general it is true the wealthier benefit the most from a flat tax, while the poor are the most disadvantaged. I'm focused on these two groups as they are the most affected.

(1) In other words, with the BVP progressive tax, if an individual earns at most $20,000 in income, then he pays no taxes. Correct?

(2) Can we agree to split these groups into 20% segments? Top 20% = highest income earners. Bottom 20% = lowest income earners. And in between: Mid Top 20%, Mid 20%, and Mid Bottom 20%, respectively. This will reduce the loss in translation.

(2b) In general that is true, but it isn't nearly as useful as my method. If you want to examine effects on tax policies, you need to examine the effects for all five groups and not the Top 20% v. the Bottom 20% (or the ambiguous "wealthy" versus the ambiguous "poor"). All individuals matter, do they not? So, can we agree to analyze the effects on all individuals in order to improve the usefulness of our arguments?


Potential Problem with either of our arguments:
Currently, the status of a sales tax administered at State/Province levels is not explicitly made clear in either of our arguments. Suppose we have a flat tax of 20%, but State X isn't earning enough revenue, so it doubles its sales tax. This would cause problems, but it could also lead to benefits for taxpayers in the long-run. Having a high sales tax relative to other States will create a stronger incentive to leave or to protest/vote differently. But for the sake of brevity, shall we assume away the tax policies implemented at the State/Provincial level for now?)

[Baron Von PWN]

I've got a response, but I got some questions:

(1) Does your progressive tax on all income come with any exemptions? If so, what are they?

(2) Are you usually this holistic in your thinking? (The wealthy v. the poor, the rich v. the poor)

(2b) We can admit that there are individuals within these groups, but would you agree with me that a two-class analysis is insufficient for explaining complex phenomena in regard to taxation?

With tax policy, I tend to view five groups divided by income earned (thus, 5 groups of 20% brackets) because this provides a clearer understanding of the issue without distorting one's analysis with clumsy Marx-esque analysis.

1) In my mind there would be one exemption for very low income earners. So a tax cut off. make under say 20k a year, no taxes. That would be the only exemption

2) well I'm asking for a graduated income tax. So that implies multiple levels. Let's go with 5 with the middle rate affecting citizens making the mean income. So 1. lowest strata no tax. 2. bellow average income earners but above cut off. lowest tax rate 3. mean income earners,
4. above average income earners , 5. very high income earners.


2.b of course but in general it is true the wealthier benefit the most from a flat tax, while the poor are the most disadvantaged. I'm focused on these two groups as they are the most affected.

(1) In other words, with the BVP progressive tax, if an individual earns at most $20,000 in income, then he pays no taxes. Correct?

(2) Can we agree to split these groups into 20% segments? Top 20% = highest income earners. Bottom 20% = lowest income earners. And in between: Mid Top 20%, Mid 20%, and Mid Bottom 20%, respectively. This will reduce the loss in translation.

(2b) In general that is true, but it isn't nearly as useful as my method. If you want to examine effects on tax policies, you need to examine the effects for all five groups and not the Top 20% v. the Bottom 20% (or the ambiguous "wealthy" versus the ambiguous "poor"). All individuals matter, do they not? So, can we agree to analyze the effects on all individuals in order to improve the usefulness of our arguments?


Potential Problem with either of our arguments:
Currently, the status of a sales tax administered at State/Province levels is not explicitly made clear in either of our arguments. Suppose we have a flat tax of 20%, but State X isn't earning enough revenue, so it doubles its sales tax. This would cause problems, but it could also lead to benefits for taxpayers in the long-run. Having a high sales tax relative to other States will create a stronger incentive to leave or to protest/vote differently. But for the sake of brevity, shall we assume away the tax policies implemented at the State/Provincial level for now?)

1) yes. On principle it would have a minimal income cut off. let's call it 20k.

2. sure. That's what I was going for.
2.b. fair enough

State/provincial sales taxes. Sure let's assume BBSonia or BVPistan are unitary states.

[thegreekdog]

BvP's tax plan will produce a killer amount of revenue - for a person making $100,000 a year, they would be taxed as something like 33%, with no exemptions and no deductions, effectively taking home $66,000 of their salary and paying the rest to the federal government regardless of previously deductible expenses, children, charitable gifts, etc.

By the way BvP - under current analyses, there would still need to be massive spending cuts even if the "very wealth" (those rich fatcats making more than $250,000 a year) were taxed at 90%. So what does your graduated tax system cut? Social security? Medicare/medicaid?

[Baron Von PWN]

BvP's tax plan will produce a killer amount of revenue - for a person making $100,000 a year, they would be taxed as something like 33%, with no exemptions and no deductions, effectively taking home $66,000 of their salary and paying the rest to the federal government regardless of previously deductible expenses, children, charitable gifts, etc.

By the way BvP - under current analyses, there would still need to be massive spending cuts even if the "very wealth" (those rich fatcats making more than $250,000 a year) were taxed at 90%. So what does your graduated tax system cut? Social security? Medicare/medicaid?

Well If I were king of US government, medicare/medicaid would be replaced by a universal single payer system. If spending cuts were necessary they would come from over seas deployments and economic subsidies(things like corn subsidies and the like).

[thegreekdog]

BvP's tax plan will produce a killer amount of revenue - for a person making $100,000 a year, they would be taxed as something like 33%, with no exemptions and no deductions, effectively taking home $66,000 of their salary and paying the rest to the federal government regardless of previously deductible expenses, children, charitable gifts, etc.

By the way BvP - under current analyses, there would still need to be massive spending cuts even if the "very wealth" (those rich fatcats making more than $250,000 a year) were taxed at 90%. So what does your graduated tax system cut? Social security? Medicare/medicaid?

Well If I were king of US government, medicare/medicaid would be replaced by a universal single payer system. If spending cuts were necessary they would come from over seas deployments and economic subsidies(things like corn subsidies and the like).

Okay, so if spending cuts were necessary under my flat tax plan, why wouldn't those spending cuts also be overseas deployments and economic subsidies? I think you've associated a flat tax with spending cuts on domestic spending for the poor; those do not need to coincide.

[Baron Von PWN]

BvP's tax plan will produce a killer amount of revenue - for a person making $100,000 a year, they would be taxed as something like 33%, with no exemptions and no deductions, effectively taking home $66,000 of their salary and paying the rest to the federal government regardless of previously deductible expenses, children, charitable gifts, etc.

By the way BvP - under current analyses, there would still need to be massive spending cuts even if the "very wealth" (those rich fatcats making more than $250,000 a year) were taxed at 90%. So what does your graduated tax system cut? Social security? Medicare/medicaid?

Well If I were king of US government, medicare/medicaid would be replaced by a universal single payer system. If spending cuts were necessary they would come from over seas deployments and economic subsidies(things like corn subsidies and the like).

Okay, so if spending cuts were necessary under my flat tax plan, why wouldn't those spending cuts also be overseas deployments and economic subsidies? I think you've associated a flat tax with spending cuts on domestic spending for the poor; those do not need to coincide.

They don't neceseraly. However the size of the cuts required would be quite large. I think you would agree the type of politician to pass such a tax is likely to not be supportive of social assistance type spending,. The tax structure clearly favors those with higher income, it seems to inherently imply less support of social assistance. Again this isn't neceseraly the case. You could have social assistance programs funded by a flat tax.

[thegreekdog]

BvP's tax plan will produce a killer amount of revenue - for a person making $100,000 a year, they would be taxed as something like 33%, with no exemptions and no deductions, effectively taking home $66,000 of their salary and paying the rest to the federal government regardless of previously deductible expenses, children, charitable gifts, etc.

By the way BvP - under current analyses, there would still need to be massive spending cuts even if the "very wealth" (those rich fatcats making more than $250,000 a year) were taxed at 90%. So what does your graduated tax system cut? Social security? Medicare/medicaid?

Well If I were king of US government, medicare/medicaid would be replaced by a universal single payer system. If spending cuts were necessary they would come from over seas deployments and economic subsidies(things like corn subsidies and the like).

Okay, so if spending cuts were necessary under my flat tax plan, why wouldn't those spending cuts also be overseas deployments and economic subsidies? I think you've associated a flat tax with spending cuts on domestic spending for the poor; those do not need to coincide.

They don't neceseraly. However the size of the cuts required would be quite large. I think you would agree the type of politician to pass such a tax is likely to not be supportive of social assistance type spending,. The tax structure clearly favors those with higher income, it seems to inherently imply less support of social assistance. Again this isn't neceseraly the case. You could have social assistance programs funded by a flat tax.

I may attempt to run some numbers at some point, but I suspect it's impossible.

In any event, the items upon which the federal government spends the most money are, as follows:

(1) Medicare/Medicaid $835 billion
(2) Social Security $725 billion
(3) Defense Department $700 billion
(4) Discretionary Spending $646 billion
(5) Other Mandatory Spending $465 billion
(6) Interest $227 billion

Let's say we keep (1) and (2). We cut (3) in half (to $350 billion). We cut (4) by $350 billion. We cut interest to net to $0 (because we pay off all our debt). That saves approximately $1 trillion.

Now let's implement my flat tax. It's 25% or 20% on all net income (i.e. income after certain deductible expenses; like medical expenses or child care expenses). There are no rich people deductions. There are no capital gains rates. I think it could work. Even without my super awesome 100% estate tax.

[BigBallinStalin]

The military industrial complex won't like that.