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Wrong. Russia is raking in money because the two commodities is has in abundance (oil and gold) are both selling at record prices. The state gets a big chunk of this revenue.
I have lived in Russia myself. Russia implementing the flat-tax is one of the BEST things they did. It helped them a LOT. The simplicity of it, in a already deregulated bureaucratic state (I don't know how' it'll work in the states)
When there was a progressive-tax system most people would jump hurdles not paying taxes in the first place. A huge chunk of people wouldn't pay taxes in the first place.
The flat tax has created a huge-bundle of revenue for the economy. The flat tax was a HUGE investment on their part.
Do you have any sources to back your statement up that Russia is fueling its economy by getting "the big chunk" through those two venues of government revenue? It helps of course! AND YES you are right, If you like at GDP Russia's Exports FAAAARRR exceed it's imports, but majority of that wealth is also owned by uneducated oligarchs (Google Abromovich, and see what he was doing in the 80's) who use their money oversees in other venues. Here is my source.
Read the First two Chapters of "South-western federal taxation individual income taxes" 2012 Edition
Both. The top 5% income earners in the US spend 29%, the bottom 95% spend 71%. The bottom 95% are far more important than the top 5%.
Essentially, it boils down to circulation of money. When a wealthy person gets money, they spend very little as a percentage of income. When a poor person gets money, they immediately spend that money and put it back in the economy - buying things such as food, rent, cell phone service, car repairs, etc. That money stays here in the US.
ETA: This is why welfare and unemployment is so effective, and why the ROI is typically quoted as being > 1.
No wealthy person just, "saves" the money they get. They invest it. Just look at Berkshire Hathaway.
Also you are making the false assumption that spending is the most important thing. It is not. The reality of the situation is that saving, spending and investing of money are equality important. The MOST IMPORTANT thing, however, is the efficiency of that spending. By efficiency I mean converting those dollars into goods and services and satisfying consumer demand.
Money is simply a means to conduct exchange. That's it. Its not wealth, its simply a tool. The real metric of the standard of living of a society is the amount of goods and services produced that consumers demand. That's it!!!
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When a poor person gets money, they immediately spend that money and put it back in the economy - buying things such as food, rent, cell phone service, car repairs, etc. That money stays here in the US.
Wrong. The fact of the matter is that all money is, "put back into the economy." Think about it. You have three options for your money: save it, invest it or spend it. Here is what happens when you do each:
save it - it sits in the bank and the bank uses the reserves to make loans. People get the loans and spend it.
invest it - You buy stocks, build new factory, conduct R&D etc. Its basically spent building production or developing new products.
spend it - It gets spent buying the production from producers.
Also the money doesn't necessarily stay in the us. We live in a global economy so you could be buying stuff from all over the world and you often do so without even knowing it (even if you are buying made in america). All three are equally important for a properly functioning economy. For quite some time we've been trying to encourage people to spend, spend, spend and now look where we are at: Loaded to the hilt with no investments or personal savings. Thats what happens when the government tries to plan the economy. It causes recessions and depressions. In a free market, recessions are often short-term events.
No wealthy person just, "saves" the money they get. They invest it. Just look at Berkshire Hathaway.
Investment is fine when you are investing in the US. No one is investing in the US.
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Also you are making the false assumption that spending is the most important thing. It is not.
Spending is ~60% of our economy. Yes, spending is THE most important aspect. It is like cutting money out of a budget, do you cut the $30 phone bill or the $700 car payment? Which is the most effective way to cut?
Same with the economy. If you want to goose the economy, you encourage spending. You do that by taking excess money from those who have it, and giving it to those who do not in the form of a progressive tax structure.
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Wrong. The fact of the matter is that all money is, "put back into the economy."
What I stated is not wrong. ROI for welfare and food stamps is often quoted as being over 1.0, because of the scenario I posted.
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save it - it sits in the bank and the bank uses the reserves to make loans. People get the loans and spend it.
Banks aren't loaning. They are sitting on their (record levels of) cash reserves. So are companies.
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invest it - You buy stocks, build new factory, conduct R&D etc. Its basically spent building production or developing new products.
Buying stock does nothing to help the economy unless it's an IPO, of which they are the small minority.
Companies are doing the remainder overseas. Is does not help the US economy. Apple employs 750,000 indirectly overseas; here they employ about 50,000.
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spend it - It gets spent buying the production from producers. or services
#1 drive in the economy. I added the bold.
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Also the money doesn't necessarily stay in the us.
No it doesn't. But poor (truly poor, not those that make $60k and "feel" poor) people tend to buy goods/services that are of US origin. Food, rent, cell phone service and support US jobs directly.
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We live in a global economy so you could be buying stuff from all over the world and you often do so without even knowing it (even if you are buying made in america).
The majority of goods and services poor people buy directly support US jobs.
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All three are equally important for a properly functioning economy.
But to get an immediate uptick you need to address consumer spending. Long term, the most important aspect is the trade balance.
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For quite some time we've been trying to encourage people to spend, spend, spend and now look where we are at: Loaded to the hilt with no investments or personal savings.
This would be fine if we didn't run a $50-$60 billion trade deficit per month.
I have lived in Russia myself. Russia implementing the flat-tax is one of the BEST things they did. It helped them a LOT. The simplicity of it, in a already deregulated bureaucratic state (I don't know how' it'll work in the states)
When there was a progressive-tax system most people would jump hurdles not paying taxes in the first place. A huge chunk of people wouldn't pay taxes in the first place.
The flat tax has created a huge-bundle of revenue for the economy. The flat tax was a HUGE investment on their part.
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I strongly suspect (although I don't know) that Russia had no effective mechanism in place to enforce taxation. So a flat tax was much easier to administer. That is not the case in the USA, where there is an elaborate and all-encompassing infrastructure already in place to make it extraordinarily difficult to evade taxes.
Even as you indicated, the purpose of the flat tax was not to champion fairness (a consideration that probably never occurred to the authorities), but to facilitate its universal collection.
wheelsup:"Investment is fine when you are investing in the US. No one is investing in the US."
VW just spent billions building a new plant in Chattanooga, Tn. My last 3 employers spend substantial sums on US investment. We do not get 100%, nor does any nation, as corps are global. That is perfectly fair, btw.
BTW, Flat tax, and same rate for corps and individuals, with NO deductions nor exemptions, would be wonderful. No more wasted energy gaming the tax code.
wheelsup:"Investment is fine when you are investing in the US. No one is investing in the US."
VW just spent billions building a new plant in Chattanooga, Tn. My last 3 employers spend substantial sums on US investment. We do not get 100%, nor does any nation, as corps are global. That is perfectly fair, btw.
BTW, Flat tax, and same rate for corps and individuals, with NO deductions nor exemptions, would be wonderful. No more wasted energy gaming the tax code.
The amount of investment here vs say Asia is minuscule.
the poor would cry that the rich arent paying their share because the poor would be taxed on 100% of their income just to live.
the rich would only be taxed on a fraction of their income to live.
I don't understand this statement. Every National Sales Tax plan I've seen omits things like food, basic clothing (think sneakers not Air Jordans), housing, utilities, cars (think Honda not Hummer), medical/dental care and education. The poor would continue to pay any State sales tax on these items as they already do, but would only pay additional tax based on personal choices. If they have no money for extras now, their taxes will not change. If they have disposable income, I wouldn't be upset that a "poor" person gets taxed on an X-Box anymore than I would that a "rich" one gets taxed on a jet.
Steve Forbes has been pushing his """Flat Tax""" since the 1970's it's one of those things that sounds great until youb get the calculator out
Exactly...when the uber wealthy are PRO something and try to convince the masses it's in their best interests...you instantly know it is NOT what would serve our best interests.
Not true per capita, wheelsup. We're still getting massive investments, from VW, a new engine production line at Spring Hill, some massive solar panel mfg (Clarksville, Tn region), a new owner investing mega-bucks at former Ford Glass plant in Nashville, and Electrolux with its 2,800 employee facility constantly updating capital equipment about 30 miles from me right now, etc. For just 5% of the world's population, we are getting more than our share of investments.
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