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Thread: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

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    Default huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    (snip)"Yesterday in the UK, something happened that has significant implications for us all.

    Old western economies are clearly losing their dominance. Particularly in Europe, the costs of broken pension plans and entitlement programs are bankrupting entire economies.

    Yet, national governments continue to perversely borrow and consume; politicians have been acting like degenerate gamblers, borrowing money from anyone they could, blowing it all on terrible bets, borrowing more money to make even worse bets, and actually expecting different results.

    Something needs to change… and it appears that Britain is the first major western government to face the music. As such, British Chancellor of the Exchequer George Osborne unveiled yesterday what has been touted as ‘emergency’ budget austerity.

    Osborne’s budget cuts deep. It hits the elderly, it hits low income workers, it hits single mothers, it hits business owners and investors… it even hits the Queen, who will see her multimillion pound salary frozen for several years.

    To give credit where credit is due, Osborne should be commended for looking his nation in the face, speaking about a very grim reality, and being candid about the tough sacrifices that everyone will have to make.

    But here’s the scary part, and what we need to learn from:

    While there was significant talk in Osborne’s speech about spending cuts, most line items have yet to be fully determined. What they are absolutely clear about, though, are the tax changes.

    Britain’s VAT, for example, will increase from 17.5% to 20%. Many personal income tax rates will rise as well, particularly for high income earners. These changes will be phased in gradually… except for one.

    Osborne announced that Britain’s capital gains tax will increase from 18% to 28% for higher income earners. Yet unlike the other changes which are phased in over time, capital gains tax change occurs IMMEDIATELY.

    There is a serious lesson here: governments have the power and willingness to make major changes overnight. With the stroke of a pen, they can impose capital controls, higher taxes, gold forfeiture, confiscation of retirement savings, or anything else they can dream up.

    Britain’s emergency budget underscores this point even more, and reminds those of us who aren’t in the UK that we need to prepare NOW. Why? Because other countries won’t be far behind, including the United States.

    At a certain point, President Obama will be forced by circumstance to look the American people in the eye and ask them to sacrifice… and pay higher taxes effective immediately.

    Also, it’s likely that the US government will get its hands on private retirement savings some day soon… there’s about $5 trillion out there, and at some point that they’ll mandate a portion of all managed retirement accounts to be held in the ’safety’ of US Treasuries."(snip)

    from

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    Default Re: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    So, is government the enemy, or are WE the enemy (and the government is negligent in not protecting us from each other)?
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    ... or are WE the enemy (and the government is negligent in not protecting us from each other)?
    I suppose that this point of contention goes all the way back to Roman 'bread and circuses' !

    (snip)"The phrase "tyranny of the majority" originates with Alexis de Tocqueville in his Democracy in America (1835, 1840)[3] and was further popularized by John Stuart Mill, who cites de Tocqueville, in On Liberty (1859); the Federalist Papers frequently refer to the concept, though usually under the name of "the violence of majority faction," particularly in Federalist 10.

    The concept itself was popular with Friedrich Nietzsche and the phrase (in translation) is used at least once in the first sequel to Human, All Too Human (1879).[4] Ayn Rand, Objectivist philosopher and novelist, wrote against such tyranny, saying that individual rights are not subject to a public vote, and that the political function of rights is precisely to protect minorities from oppression by majorities (and that the smallest minority on earth is the individual).[5] Similar arguments are made by a number of other philosophies that support individualism, including the Austrian movement, and libertarianism in general."(snip) - from WikiPedia

    in the case of the UK scenario, the 'majority' are the recipients of government largesse (i.e. the author's broken pension plans and entitlement programs ), and the 'minority' are the actual net taxpayers who must now be forced to fund that gov't largesse ! The government officials who are now using their power to 'force' a de-facto minority of net taxpayers to fund said broken pension plans and entitlement programs are, of course, elected ( and re-elected ) by the de-facto majority of 'recipients'.

    Charles Hughes Smith makes the point far more bluntly than I ever could ...

    (snip)"The Tyranny of the Majority is the primary topic of the Federalist Number 10, in which Madison tackles the Achilles Heel of democracy: undesirable passions can very easily spread to a majority of the people, which can then enact its will through the democratic government without difficulty.

    Put another way: the Power Elites of a democracy can buy the complicity of the majority by showering them with government giveaways and extracting no income tax from them. For 60% of the American public, the Federal government is a source of welfare/entitlements/giveaways. Yes, workers pay a modest 7% in Social Security taxes, but that is understood to be a "pay as you go" retirement system in which their modest contributions (the 7%) fund their elders' Social Security payments.

    The Federal government--the global Empire, the source of Medicare and Medicaid, the grantor of Section 8 housing vouchers, the funder of missions to Saturn, the entity which spends $3.5 trillion while collecting only $2 trillion, etc.--gets essentially little funding from workers' Social Security contributions. Yes, surpluses go to the general fund, but those surpluses have dried up.

    So 61% of the populace is all in favor of more largesse and more taxes on the 19% who pay most of the taxes. The 60% who pay little to nothing are delighted to receive "what's owed to me" and the top 1% which receives the vast bulk of corporate welfare and tax giveaways--recall that the top 1% own about 43% of all the wealth of the nation--are also delighted to shift the tax burden to the 19% below them who earn most of the wages and thus end up paying most of the taxes.

    Here are the numbers. Nearly half of US households escape fed income tax Recession, new tax credits have nearly half of US households paying no federal income tax

    This article outlines how a family of four (with two children under 17) and an income of $50,000 ends up receiving a small tax credit; they pay zero tax but get a small refund anyway.

    This document from the Congressional Budget Office (CBO) displays the Effective Tax Rates (CBO) for American households.

    After including earned-income tax credits, the bottom 60% of households paid less than 1% of all Federal income taxes, and the households between 60% and 80% paid 13%.

    The top 20% paid 68.7% of all Federal taxes: Income taxes, Social Security and Medicare, excise and corporate taxes. The top 10% of households paid fully 72.7% of all Federal income tax, the top 5% paid 60.7%, and the top 1% paid 38.8%.

    In essence, this is a vote-buying scheme by the Status Quo: the top 1% control the policies of the State in alliance with the State's own Elites, and together they buy the complicity of the bottom 60% to passively accept their dominance.

    This is the worst of all possible simulacra of democracy. In the Wikipedia entry linked above, Mancur Olson is cited as arguing in The Logic of Collective Action that narrow and well organized minorities are more likely to assert their interests over those of the majority.

    In other words, the top 1% Financial Plutocracy asserts its interests over the 99% and then buys the complicity of the bottom 60% with largesse paid for by the top 19% of earners. "(snip)

    from


    ~
    Last edited by Melonie; 07-25-2010 at 10:13 PM.

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    Default Re: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    Accompanying wealth is greater power to control one's life.

    What this doesn't discuss are the necessary expenses for sustaining life to the extent that one can contribute to self, family, society. etc. A person making $20,000 isn't one fifth as well off as a person making $100,000. In our society, that $20,000 is a pretty basic lifestyle and maybe only $2,000 (say) is discretionary money. While the $100k person takes his $82,000 more and may spend $50,000-$60,000 in discretionary funds on a more lavish lifestyle. And a person making say $10,000 is having a very hard time of it just surviving; and this person is probably availing himself of many subsidies. The people with such low incomes by and large are not causing consumer inflation, but they are surely suffering from it; they do though force everyone else to subsidize them through taxes. But those with more lavish lifestyles are primarily those contributing to consumer inflation. Those having such a hard time of it may be be more prone to illegal/under the counter means of supporting themselves, which is an additional cost we all have to bear. So maybe there is some practical necessity for limited legislation based on (regionalized) poverty levels. I'll easily grant that we seem to have hit the opposite pole in recent year, such as opening up the Social Security coffers to all sorts of 'excuses' for withdrawing from it to the point where it has become a major taxation burden.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    ^^^ but if you put actual numbers to your scenario, the differential is far less than it appears. For example, that person with a $20k annual income also pays zero income taxes, collects tax credits in the form of a tax refund, and is eligible for medicaid, subsidized rent, subsidized utility bills, and food stamps with a cash value of at least $15,000 per year.

    On the other hand, that person with a $100k annual income will probably pay something like $30k in federal and state income tax and isn't eligible for anything. So from an after-tax, dollar equivalent standpoint, the person earning $100k per year is about TWICE as well off as the person earning $20k per year ... despite the fact that their pre-tax pre-gov't benefit income is 5 times as high. The term you are searching for is called 'wealth transfer'.

    And in the case of the UK, it is precisely the degree of 'wealth transfer' taking place that is finally forcing the British gov't to start reducing national health care benefits, 'dole' benefits etc. in conjunction with yet another increase in income tax rates.

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    Default Re: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    Yes, it does even out things a bit, as it is intended.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    ^^^ yes, but ...

    As the standard of living available via a $20,000 a year income plus gov't subsidies involves a declining differential versus a $100,000 a year income less income taxes less other taxes and zero gov't subsidies, a 'moral hazard' situation is bound to develop. In other words, the question starts to be asked whether or not it is 'worth it' to continue working 12 hours+ per day / to continue working under high stress conditions / to continue assuming risk of financial loss ( small business ) etc. when the resulting standard of living is no longer an order of magnitude better than it would be working 8 hours per day in a zero pressure job with zero risk of loss.

    However, if that 'moral hazard' situation prompts too many Americans to question their $100,000 job's ultimate 'worth', and in turn to reduce their efforts to avoid 50% of those extra efforts going to taxes / 'wealth transfer', it also undermines the basic 'wealth transfer' engine that makes the present $20,000 per year subsidized standard of living possible. 2011 and 2012 should be extremely interesting in this regard as major federal and state income tax rate increases on those earning $100,000+ per year kick in, and as federal and state gov't deficit spending must ultimately result in a reduction in gov't benefits / subsidies to those earning $20,000 per year.

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    Default Re: huge gov't tax rule changes hit Brits overnight ... coming to the US soon ?

    Your 'moral hazard' refers merely to a poor implementation of a potentially useful plan. Your understanding of (or at least responses to) this seems constrained by what we have done in the past, mistakes and all. As things get tighter economically for the country, I'm expecting that (eventually) opportunities/necessities will come along when rational social system planning will have to take over political opportunism -- thus incentives and technologies will abound where people not in the mainstream of current working life, will be 'incentivized' and enabled to produce something that is useful to someone other than themselves. Hopefully.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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