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Thread: Why cut taxes?

  1. #31
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    Quote Originally Posted by Goatnapper'96 View Post
    Maybe they just didn't want all the attention that accompanies greatness as a rock and roll band?
    Makes perfect sense.

    "Hey, let's try to suck as a rock band so that we aren't so rich and famous."

    Most Rush fans I know are total nerds.
    "There is no creature more arrogant than a self-righteous libertarian on the web, am I right? Those folks are just intolerable."
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  2. #32

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    Quote Originally Posted by PaloAltoCougar View Post
    OK, a snoozer of a thread, but the proposed tax cuts are bothering me...

    Anyway, given the skyrocketing debt/GDP ratio, tell me why cutting taxes is a good idea.

    Hey, wake up!
    This will be long and rambling. You've been warned.

    The chart below from the St. Louis Federal Reserve shows that taxes as a proportion of GDP have ranged between 14-19 percent since WWII. It seems that tax rates have temporary impacts, but it's hard to tell because other factors affecting receipts muddy the water, and there aren't enough observations with changing tax rates to form a statistically valid correlation. The one thing that certainly affects tax receipts is economic growth and recession. Another important contributor is stock market appreciation and devaluation. In short, the more robust the economy, and the higher the stock market, the greater the tax receipts, no matter what the tax rates.

    With the exception of periods of irrational exuberance, the stock market will reflect realistic expectations of GDP growth. In theory, a stock's value reflects the present value of its future dividends, and dividends consistently grow at the same rate as GDP. Thus we can surmise that government income will depend almost entirely on the size and growth rate of GDP. Framed in this manner, the tax issue becomes a question of what provides incentive for maximum economic growth.

    The tax-cut school of thought supposes that money turns over more times in the private sector than the public sector, and thus money not paid in taxes will be spent on things that create more jobs than money if it were collected and spent by the government. There is really no way to prove or disprove this, but logically it makes some sense that people spending money in an effort to make more will spend it more effectively than politicians spending money in an effort to be re-elected.

    Obviously, this reasoning has its limits, and only really makes sense when marginal tax rates are relatively high. For the 99.9% of Americans, I doubt tax rates are high enough for a tax cut to have a stimulating effect. In fact, the very wealthy that a tax hike usually targets pay a very low tax rate because most of their income is invested in tax-free assets like municipal bonds that fund schools, hospitals, etc. While changing tax rates seems to have little effect on collections, there are some exceptions, and here are some tax cuts (and hikes) that I think will make a difference.

    1) Capital gains tax cut - Many conservatives point to capital gains tax cuts in the past, and the subsequent increase in capital gains tax revenue as a case for cutting capital gains. I don't advocate that theory, because it's clearly possible that the short term bump comes from sales of assets that would have taken place anyway, but were moved up to take advantage of a favorable tax change. I do favor a low capital gains rate, though, because it lowers a barrier that keeps people from liquidating one investment in favor of investing in another, and thus encourages a more efficient allocation of capital. An ancillary benefit is the movement of some capital away from municipal bonds and into taxable capital gain assets like stocks.

    2) Eliminate estate tax – Estate tax income is a relative small portion of total tax receipts, imposes the greatest burden on families of small business owners, and is a waste of millions of dollars and immeasurable intellectual capital that could be spent stimulating the economy. The very rich rarely pay estate taxes because they have a team of lawyers and accountants setting up trusts and business structures that let them skate around it. The first or second generation business owners, on the other hand, get walloped with legal and accounting fees they can rarely afford because all of their cash is tied up in a growing business. There are few things that kill small, profitable businesses (especially farms) like the estate tax.

    3) Make dividends tax deductible on the corporate level – This will reduce corporate taxes but encourage them to pay more in dividends, which will be taxed at the personal level, and likely re-invested in the market. This will have the effect of stimulating the market and also provide more income to retirees living on dividend-paying stocks.

    4) Require everyone over the poverty level to pay 3% of their gross – As it stands, about 40% of the country pays no income taxes at all. This lends to the ‘make the other guy pay for it’ thinking that permeates our society and vilifies the rich. Everyone needs skin in the game, and paying something will make people pause before advocating new spending.

    5) Address Social Security and Medicare with a 3-way approach – First, raise the retirement age 10 weeks a year until it reaches 70. Second, cut the cap on FICA to 50% rather than zero over a certain income level. Finally, raise the FICA tax to 9%. Social Security and Medicare are important programs and this is the only way I see them surviving.


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  3. #33
    Senior Member Crockett's Avatar
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    Quote Originally Posted by cowboy View Post
    This will be long and rambling. You've been warned.

    The chart below from the St. Louis Federal Reserve shows that taxes as a proportion of GDP have ranged between 14-19 percent since WWII. It seems that tax rates have temporary impacts, but it's hard to tell because other factors affecting receipts muddy the water, and there aren't enough observations with changing tax rates to form a statistically valid correlation. The one thing that certainly affects tax receipts is economic growth and recession. Another important contributor is stock market appreciation and devaluation. In short, the more robust the economy, and the higher the stock market, the greater the tax receipts, no matter what the tax rates.

    With the exception of periods of irrational exuberance, the stock market will reflect realistic expectations of GDP growth. In theory, a stock's value reflects the present value of its future dividends, and dividends consistently grow at the same rate as GDP. Thus we can surmise that government income will depend almost entirely on the size and growth rate of GDP. Framed in this manner, the tax issue becomes a question of what provides incentive for maximum economic growth.

    The tax-cut school of thought supposes that money turns over more times in the private sector than the public sector, and thus money not paid in taxes will be spent on things that create more jobs than money if it were collected and spent by the government. There is really no way to prove or disprove this, but logically it makes some sense that people spending money in an effort to make more will spend it more effectively than politicians spending money in an effort to be re-elected.

    Obviously, this reasoning has its limits, and only really makes sense when marginal tax rates are relatively high. For the 99.9% of Americans, I doubt tax rates are high enough for a tax cut to have a stimulating effect. In fact, the very wealthy that a tax hike usually targets pay a very low tax rate because most of their income is invested in tax-free assets like municipal bonds that fund schools, hospitals, etc. While changing tax rates seems to have little effect on collections, there are some exceptions, and here are some tax cuts (and hikes) that I think will make a difference.

    1) Capital gains tax cut - Many conservatives point to capital gains tax cuts in the past, and the subsequent increase in capital gains tax revenue as a case for cutting capital gains. I don't advocate that theory, because it's clearly possible that the short term bump comes from sales of assets that would have taken place anyway, but were moved up to take advantage of a favorable tax change. I do favor a low capital gains rate, though, because it lowers a barrier that keeps people from liquidating one investment in favor of investing in another, and thus encourages a more efficient allocation of capital. An ancillary benefit is the movement of some capital away from municipal bonds and into taxable capital gain assets like stocks.

    2) Eliminate estate tax – Estate tax income is a relative small portion of total tax receipts, imposes the greatest burden on families of small business owners, and is a waste of millions of dollars and immeasurable intellectual capital that could be spent stimulating the economy. The very rich rarely pay estate taxes because they have a team of lawyers and accountants setting up trusts and business structures that let them skate around it. The first or second generation business owners, on the other hand, get walloped with legal and accounting fees they can rarely afford because all of their cash is tied up in a growing business. There are few things that kill small, profitable businesses (especially farms) like the estate tax.

    3) Make dividends tax deductible on the corporate level – This will reduce corporate taxes but encourage them to pay more in dividends, which will be taxed at the personal level, and likely re-invested in the market. This will have the effect of stimulating the market and also provide more income to retirees living on dividend-paying stocks.

    4) Require everyone over the poverty level to pay 3% of their gross – As it stands, about 40% of the country pays no income taxes at all. This lends to the ‘make the other guy pay for it’ thinking that permeates our society and vilifies the rich. Everyone needs skin in the game, and paying something will make people pause before advocating new spending.

    5) Address Social Security and Medicare with a 3-way approach – First, raise the retirement age 10 weeks a year until it reaches 70. Second, cut the cap on FICA to 50% rather than zero over a certain income level. Finally, raise the FICA tax to 9%. Social Security and Medicare are important programs and this is the only way I see them surviving.

    Great post. Agree wholeheartedly with almost everything.

    Yes, on dividend reform. They are already double-taxed and your proposal removes one of those events.

    ABSOLUTELY need everyone above the poverty level to "have some skin in the game" here. Right now the top 20% pay 95% of income taxes. That is not a healthy situation, and as you mentioned, this exacerbates an entitlement mentality and undermines a feeling of holding the govt accountable for its spending.

    We don't have a revenue problem (tax revenues are at all time highs), we have a spending problem. Entitlements, especially Social Security and Medicare, are out of control and unsustainable. More and more taxes will never be enough with current trends (living longer, smaller birthrates, etc.). Retirement age needs to gradually rise, but no more tax increases, including FICA. It's never enough and the appetite to take more and more seems insatiable.

    You've got my vote, cowboy.

  4. #34
    Senior Member Crockett's Avatar
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    Quote Originally Posted by Eddie View Post
    My jaded opinion is that this is all about bases.

    The Democrats tend to promise increases in services and benefits to get their followers rilled up.

    The Republicans tend to promise tax cuts and a better economy.

    Basically - both are promising to improve the financial situation of their primary supporters.
    I get what you are saying, but the thing with tax cuts is that you are keeping more of YOUR MONEY. The Democrats are TAKING from one group to effectively BUY VOTES. This is wealth REDISTRIBUTION from one constituency to another.

    Also, we think in terms of how much a political campaign costs (Hillary spent $1.2B in 2016), but the real campaign spending is the trillions spent on entitlement programs to secure the votes of a built-in constituency.

  5. #35
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    Quote Originally Posted by Crockett View Post
    I get what you are saying, but the thing with tax cuts is that you are keeping more of YOUR MONEY. The Democrats are TAKING from one group to effectively BUY VOTES. This is wealth REDISTRIBUTION from one constituency to another.

    Also, we think in terms of how much a political campaign costs (Hillary spent $1.2B in 2016), but the real campaign spending is the trillions spent on entitlement programs to secure the votes of a built-in constituency.
    Oh boy. We got a live one.
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  6. #36

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    Quote Originally Posted by Jeff Lebowski View Post
    Makes perfect sense.

    "Hey, let's try to suck as a rock band so that we aren't so rich and famous."

    Most Rush fans I know are total nerds.
    Says the guy who runs an internet message board...

    Of course I happen to be both typing on said message board and listening to Rush at the same time, so I probably prove your point.

  7. #37
    Board Bookworm happyone's Avatar
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    good stuff cowboy, about the only differences I have is with capital gains and SS taxes. Philosophically I would treat all income as income. Make the decision to sell an asset an economic rather than a tax reasons. Also I would completely remove the cap on SS taxes.
    Last edited by happyone; 10-30-2017 at 09:51 PM.

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    Senior Member Crockett's Avatar
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    Quote Originally Posted by Jeff Lebowski View Post
    Oh boy. We got a live one.
    Why the condescending attitude?

    You appear to prefer a robust social welfare state. I prefer one that is more limited and stays within its means. I'm concerned about where we are at and the direction we are headed. Current, discretionary spending including defense spending total roughly 1/3 of our annual federal expenditures. The rest is entitlement spending. We keep kicking the can down the road, but something that can't last won't. We are heading for a grave financial crisis, sooner or later. When I add up my federal, state, and property taxes, it's more than a third of my income. I think that's too much. Excuse moi if I voice my concerns in this forum.

  9. #39
    The dude abides Jeff Lebowski's Avatar
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    Quote Originally Posted by Bo Diddley View Post
    Says the guy who runs an internet message board...

    Of course I happen to be both typing on said message board and listening to Rush at the same time, so I probably prove your point.
    Oh I am definitely a nerd. But I don’t like rush.
    "There is no creature more arrogant than a self-righteous libertarian on the web, am I right? Those folks are just intolerable."
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  10. #40
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    Quote Originally Posted by Crockett View Post
    Why the condescending attitude?

    You appear to prefer a robust social welfare state. I prefer one that is more limited and stays within its means. I'm concerned about where we are at and the direction we are headed. Current, discretionary spending including defense spending total roughly 1/3 of our annual federal expenditures. The rest is entitlement spending. We keep kicking the can down the road, but something that can't last won't. We are heading for a grave financial crisis, sooner or later. When I add up my federal, state, and property taxes, it's more than a third of my income. I think that's too much. Excuse moi if I voice my concerns in this forum.
    Knock yourself out, champ!
    "There is no creature more arrogant than a self-righteous libertarian on the web, am I right? Those folks are just intolerable."
    "It's no secret that the great American pastime is no longer baseball. Now it's sanctimony." -- Guy Periwinkle, The Nix.
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  11. #41

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    Quote Originally Posted by Jeff Lebowski View Post
    Knock yourself out, champ!
    communist!
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  12. #42

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    Quote Originally Posted by Jeff Lebowski View Post
    Oh I am definitely a nerd. But I don’t like rush.
    you didn't answer the question.
    I'm like LeBron James.
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    Quote Originally Posted by smokymountainrain View Post
    you didn't answer the question.
    What question?
    "There is no creature more arrogant than a self-righteous libertarian on the web, am I right? Those folks are just intolerable."
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  14. #44

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    Quote Originally Posted by Jeff Lebowski View Post
    What question?
    I quoted the wrong post. sorry! meant to quote this one:

    http://www.cougarstadium.com/showthr...=1#post1340383
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    It's actually kind of comical seeing how utterly inept the GOP is at being the party in the majority. They have no idea how to do it. They need to just forget Trump and pass what they want and send it to his desk to sign. But they appear to keep looking over at him for the kind of leadership he is completely unable to provide since he contradicts himself and changes his mind every five minutes like a six year old. And a lot of them are going to find they're following him right into being voted out of office next year.
    Last edited by BlueK; 10-31-2017 at 07:34 AM.

  16. #46
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    Quote Originally Posted by smokymountainrain View Post
    I quoted the wrong post. sorry! meant to quote this one:

    http://www.cougarstadium.com/showthr...=1#post1340383
    Oh, ok.

    I am condescending because I am a jerk.
    "There is no creature more arrogant than a self-righteous libertarian on the web, am I right? Those folks are just intolerable."
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    Quote Originally Posted by Jeff Lebowski View Post
    Oh, ok.

    I am condescending because I am a jerk.
    I'm like LeBron James.
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  18. #48
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    Quote Originally Posted by Crockett View Post
    Why the condescending attitude?

    You appear to prefer a robust social welfare state. I prefer one that is more limited and stays within its means. I'm concerned about where we are at and the direction we are headed. Current, discretionary spending including defense spending total roughly 1/3 of our annual federal expenditures. The rest is entitlement spending. We keep kicking the can down the road, but something that can't last won't. We are heading for a grave financial crisis, sooner or later. When I add up my federal, state, and property taxes, it's more than a third of my income. I think that's too much. Excuse moi if I voice my concerns in this forum.
    I don't prefer a welfare state. I am fiscally conservative. I consider myself an independent, but I vote republican more than democrat.

    But your earlier post I quoted was uber-partisan hyperbole. It is the equivalent of stating that all republicans hate minorities and poor people.
    "There is no creature more arrogant than a self-righteous libertarian on the web, am I right? Those folks are just intolerable."
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    Quote Originally Posted by Jeff Lebowski View Post
    Makes perfect sense.

    "Hey, let's try to suck as a rock band so that we aren't so rich and famous."

    Most Rush fans I know are total nerds.
    I guess if one just makes it big they can just put up barriers to keep oneself intact!
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  20. #50
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    Quote Originally Posted by Crockett View Post
    Why the condescending attitude?

    You appear to prefer a robust social welfare state. I prefer one that is more limited and stays within its means. I'm concerned about where we are at and the direction we are headed. Current, discretionary spending including defense spending total roughly 1/3 of our annual federal expenditures. The rest is entitlement spending. We keep kicking the can down the road, but something that can't last won't. We are heading for a grave financial crisis, sooner or later. When I add up my federal, state, and property taxes, it's more than a third of my income. I think that's too much. Excuse moi if I voice my concerns in this forum.
    State taxes? But what about that damn sales tax that keeps me buying things on-line and out of my state? Oh wait, you are from Orygun. It must be nice just shopping at the local walmart all the time.
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    PAC is right, there were tons of loopholes. It was a great time for tax attorneys and tax accountants. The 1986 tax revision actually took away a lot of benefits for real estate as I remember. Maybe oil and gas shelters also took a hit.

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    Quote Originally Posted by happyone View Post
    good stuff cowboy, about the only differences I have is with capital gains and SS taxes. Philosophically I would treat all income as income. Make the decision to sell an asset an economic rather than a tax reasons. Also I would completely remove the cap on SS taxes.
    I understand your opinion on capital gains, and I think a lot of people agree. The primary reason for my position is that Cap X funds are usually reinvested, and taxing them at a low rate decreases the transaction cost of moving investment capital from one investment to another. Lower barriers for people to transferring capital to more productive investments increases the productivity of the economy's aggregate capital investment, and thereby grows the economy faster through more flexible and efficient capital allocation.

    From the perspective of fairness, capital gains represent returns over a number of years, and it doesn't seem fair to lump them all together and tax them at once if it will be taxed at the highest personal rate. This is equivalent to taxing the entire appreciation of your retirement portfolio at once. Unlike retirement portfolio's, capital investments like real estate can't all be liquidated gradually. This is why capital gains are taxed at a different rate.

    Regarding Social Security, it's all just math. At a 3% return and retirement at age 70 with a 20-year payout, a person needs to invest just over 9% of their income for 45 years (age 25 to 70) to receive a benefit equal to 40% of their working income. Currently, the benefit is capped at around $2,700, equivalent to 40% of an $84k salary, so it seems reasonable to cut the withholding in half at some point beyond that. Some withholding needs to be taken out at upper levels to make up for the disproportionate share of workers to retirees at present.

    This is all just opinion on my part. I've certainly put a lot of thought into it over the years, but I'm by no means an expert. I'd be interested to read Pelagius' take on things.

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    Quote Originally Posted by cowboy View Post
    I understand your opinion on capital gains, and I think a lot of people agree. The primary reason for my position is that Cap X funds are usually reinvested, and taxing them at a low rate decreases the transaction cost of moving investment capital from one investment to another. Lower barriers for people to transferring capital to more productive investments increases the productivity of the economy's aggregate capital investment, and thereby grows the economy faster through more flexible and efficient capital allocation.

    From the perspective of fairness, capital gains represent returns over a number of years, and it doesn't seem fair to lump them all together and tax them at once if it will be taxed at the highest personal rate. This is equivalent to taxing the entire appreciation of your retirement portfolio at once. Unlike retirement portfolio's, capital investments like real estate can't all be liquidated gradually. This is why capital gains are taxed at a different rate.

    Regarding Social Security, it's all just math. At a 3% return and retirement at age 70 with a 20-year payout, a person needs to invest just over 9% of their income for 45 years (age 25 to 70) to receive a benefit equal to 40% of their working income. Currently, the benefit is capped at around $2,700, equivalent to 40% of an $84k salary, so it seems reasonable to cut the withholding in half at some point beyond that. Some withholding needs to be taken out at upper levels to make up for the disproportionate share of workers to retirees at present.

    This is all just opinion on my part. I've certainly put a lot of thought into it over the years, but I'm by no means an expert. I'd be interested to read Pelagius' take on things.
    Yeah, please let's not change capital gains to regular income. That would be awful.
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  24. #54

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    Quote Originally Posted by Jeff Lebowski View Post
    Yeah, please let's not change capital gains to regular income. That would be awful.
    This thing is supposed to be revealed tomorrow. I'll laugh if it's a tax cut for the super wealthy paid for by tax raises on the middle class.
    Last edited by BlueK; 10-31-2017 at 01:33 PM.

  25. #55

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    Quote Originally Posted by Jeff Lebowski View Post
    Yeah, please let's not change capital gains to regular income. That would be awful.
    I don't think anyone is thinking that way. The increase that came with the ACA was bad enough. In my opinion, if any tax should be low, it should be the capital gains tax.

    Quote Originally Posted by BlueK View Post
    This thing is supposed to be revealed tomorrow. I'll laugh it's a tax cut for the super wealthy paid for by tax raises on the middle class.
    The bolded portion highlights the problem with the tax discussion. First, tax cuts aren't "paid for". They aren't an expenditure, but the tax-everyone-else crowd describes them as such in an effort to frame the discussion around revenue rather than spending. Second, most of the middle class pays nothing or very, very little in income taxes, yet politicians scream for middle class tax relief because it is politically popular. The cold, hard fact is that we don't need a tax break if we are pulling down less than $120k and have kids at home because our federal income tax expenditures probably total less than we spend on entertainment. Our income tax burden is born nearly entirely by the top 20% of earners, and more than have of that is shouldered by the top 5%, which is substantially disproportional based on total earnings in the US. How much more should we expect them to pay?

    Again, I feel strongly that the secret to increased revenue and debt repayment is economic growth. I'm actually a proponent of a graduated tax because it makes it easier for people to become wealthy and achieve the American dream. I am not, however, in favor of soaking the rich at extraordinary high levels 'because they can afford it'. Sure, they may be able to afford it, but the money they save in taxes is not going to leave the economy. It will be spent, and I believe they will do more for the economy by spending it themselves than giving it to the government to spend for them.

    Oh, and one more thing. We should restructure the repatriation tax to give a temporary holiday to all repatriated earnings, and then tax the rest as capital gains, with an exemption similar to the 1099 for repatriated funds that are invested in long-term assets.

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  26. #56
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    Quote Originally Posted by Jeff Lebowski View Post
    Yeah, please let's not change capital gains to regular income. That would be awful.
    Wat? That would just make me convert more money to Bitcoin and transfer it out of the country using this thing called the internet.

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    GIVE 'EM HELL, BRIGHAM!

  27. #57
    One man.....one pie Moliere's Avatar
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    Quote Originally Posted by Pelado View Post
    Pandering to your donors?

    Sent from my SM-G930V using Tapatalk
    Yes, however, when 45% of American households pay no federal income taxes and the richest 20% pay almost 90% of all federal income taxes, at what point will there ever be tax cuts? Who's taxes do you cut? Pretty much any tax cut will benefit the wealthy more than any others given that the wealthy are the ones paying pretty much all the FIT.

    I guess the real question is how big of a percentage of American households shoulnd't be required to pay FIT?
    "Discipleship is not a spectator sport. We cannot expect to experience the blessing of faith by standing inactive on the sidelines any more than we can experience the benefits of health by sitting on a sofa watching sporting events on television and giving advice to the athletes. And yet for some, “spectator discipleship” is a preferred if not primary way of worshipping." -Pres. Uchtdorf

  28. #58
    Senior Member Crockett's Avatar
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    Quote Originally Posted by Jeff Lebowski View Post
    I don't prefer a welfare state. I am fiscally conservative. I consider myself an independent, but I vote republican more than democrat.

    But your earlier post I quoted was uber-partisan hyperbole. It is the equivalent of stating that all republicans hate minorities and poor people.
    What do you call it when Bernie Sanders or another politician promise free health care, free college, free child care? Is that not vote buying? Is it really hyperbole to call it that?

  29. #59
    The dude abides Jeff Lebowski's Avatar
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    Quote Originally Posted by Crockett View Post
    What do you call it when Bernie Sanders or another politician promise free health care, free college, free child care? Is that not vote buying? Is it really hyperbole to call it that?
    And Trump wants to keep out muslims and build a wall. So is it real hyperbole to claim that republicans hate minorities? Is that not vote buying?

    We can do this all day.
    "There is no creature more arrogant than a self-righteous libertarian on the web, am I right? Those folks are just intolerable."
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  30. #60
    Semper infra dignitatem PaloAltoCougar's Avatar
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    A belated thanks to cowboy and others for some interesting thoughts. I especially like the changes to Social Security (pushing out the retirement age and lifting the cap). I’d also keep in place the relatively high tax rates for income above $1 Million. I’d kill the “carried interest” feature once and for all, and I’d put a temporary (six months?) tax of only 15% (maybe more, but below 20) on offshore funds being brought back into the U.S. I’d lower the corporate tax rate as well, but with an understanding that if these changes resulted in rising deficits, the higher rates are coming back.

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