Debunking a few myths about the economy

[smockers83]

The actual numbers dont matter. It's the principle.

Why, because he showed you math?

You're banking way too hard on the inclusive exclusive angle. You're not changing anything except the value of the thing. Either it's worth $100 or it's worth less. It doesn't matter for the sake of comparative analysis.

Both percentages are right, that is 23% and 30%, no one's trying to pull the blinds over anyone. One is just an inclusive rate whereas the other is exclusive, it's just a matter of which way you calculate it. Just assume that regardless of what the item is worth, what is paid is $100 post-tax. Under an inclusive tax rate of 23%, the item bought was worth $77 pre-tax. With an exclusive tax rate of 23%, the item was worth $81.30 pre-tax.

The reason the inclusive rate is used when talking about the fair tax prop is because this is how current income tax operates. You could take state sales tax today in your state (if you have sales tax in your state) and calculate an exclusive and inclusive tax rate right now. But to make the comparison of a sales tax to the current system of income taxes apples to apples and say compared to the inclusive rate of 25% federal income taxes, we're going to give you a 23% inclusive rate for a national sales tax. This demonstrates that a tax rate decrease is actually taking place. But what you will see on your receipt is a tax rate of 30%, but only because it's calculated differently.

Let's go the other way with it. In Michigan, sales tax is 6.00%. Let's say my income is $60,000 and I spend $20,000 pre-tax. Throughout my $20,000 of spending, Michigan has collected 6% on each transaction, resulting in $1200 in revenue. Let's say that next year Michigan said we're getting rid of the 6% sales tax, instead we're taking 6% of your income. Now they've effectively tripled the tax rate on me because they're now taking $3600 from me, translating into a 18% sales tax on my $20,000 of spending (I had the same income, my life didn't change, thus the same budget).

See how 6% here isn't the same as 6% there? It's not that someone's trying to pull the blinds over people. Had the state instead said we're getting rid of the sales tax but we'll collect 2% of your income, which would be the same $1200 of my $60,000. Had I just looked at the percentage rate and said alright, I'm going from 6% to 2%, woohoo, I'm all for that and think I'm getting a tax cut, I would be the one getting the blinds being pulled over me, because in reality, nothing's changed.

So when comparing two different systems, you have to put it apples to apples to determine if the tax rate is going up or down, which is absolutely key for comparative analysis.

[IBCoupe]

Why, because he showed you math?

No, the rest of that paragraph explained why. Do you need me to copy and paste it for you, or can you just scroll up?

Both percentages are right, that is 23% and 30%, no one's trying to pull the blinds over anyone. One is just an inclusive rate whereas the other is exclusive, it's just a matter of which way you calculate it. Just assume that regardless of what the item is worth, what is paid is $100 post-tax. Under an inclusive tax rate of 23%, the item bought was worth $77 pre-tax. With an exclusive tax rate of 23%, the item was worth $81.30 pre-tax.

The reason the inclusive rate is used when talking about the fair tax prop is because this is how current income tax operates. You could take state sales tax today in your state (if you have sales tax in your state) and calculate an exclusive and inclusive tax rate right now. But to make the comparison of a sales tax to the current system of income taxes apples to apples and say compared to the inclusive rate of 25% federal income taxes, we're going to give you a 23% inclusive rate for a national sales tax. This demonstrates that a tax rate decrease is actually taking place. But what you will see on your receipt is a tax rate of 30%, but only because it's calculated differently.

Let's go the other way with it. In Michigan, sales tax is 6.00%. Let's say my income is $60,000 and I spend $20,000 pre-tax. Throughout my $20,000 of spending, Michigan has collected 6% on each transaction, resulting in $1200 in revenue. Let's say that next year Michigan said we're getting rid of the 6% sales tax, instead we're taking 6% of your income. Now they've effectively tripled the tax rate on me because they're now taking $3600 from me, translating into a 18% sales tax on my $20,000 of spending (I had the same income, my life didn't change, thus the same budget).

See how 6% here isn't the same as 6% there? It's not that someone's trying to pull the blinds over people. Had the state instead said we're getting rid of the sales tax but we'll collect 2% of your income, which would be the same $1200 of my $60,000. Had I just looked at the percentage rate and said alright, I'm going from 6% to 2%, woohoo, I'm all for that and think I'm getting a tax cut, I would be the one getting the blinds being pulled over me, because in reality, nothing's changed.

So when comparing two different systems, you have to put it apples to apples to determine if the tax rate is going up or down, which is absolutely key for comparative analysis.

But I'm not saying people would lose more money under one system than the other. The comparative analysis is between how the two taxes affect different individuals, relative to one another. While I applaud your explanation, it is now, as it was when Stebo made a point of it, beside the point.

I'm trying to say that the current system is fair, and Stebo's trying to say that the FairTax is fair. With the regressiveness of state taxes in the background of the conversation, I've shown the current federal income tax to be an offset to that, whereas I've shown the FairTax to make the system actually regressive in comparison.

[stebo0728]

And that is where we are going to continue to disagree, as we've discussed previously. The funding of the federal government should not be based upon external factors. If other factors are unsatisfactory, then the people need to deal with them, not expect the government to do everything it can to even the score. If you dont like the external factors being regressive, do something about it. But dont make the system that funds the Fed overly progressive just to counteract. What happens if down the road, the local authorities try to move to a more progressive agenda? Is the Fed then going to make their system more regressive to balance it back out? Who knows, but the point is, that should not be the considerations made period. The Federal government is ONE tier, and it needs be funded fairly, regardless of how fairly or unfairly the rest of everyones lives are.

[IBCoupe]

The funding of the federal government should not be based upon external factors.

I would prefer to have my government base its policies on reality, not fantasy. How about you?

What happens if down the road, the local authorities try to move to a more progressive agenda? Is the Fed then going to make their system more regressive to balance it back out?

If and when that happens, Stebo, I will stand shoulder-to-shoulder with you to make the federal income tax less progressive.

[smockers83]

I'm trying to say that the current system is fair, and Stebo's trying to say that the FairTax is fair. With the regressiveness of state taxes in the background of the conversation, I've shown the current federal income tax to be an offset to that, whereas I've shown the FairTax to make the system actually regressive in comparison.

But I've already shown you that really isn't the case. A "poor" consumer is, by nature of survival, going to spend a higher percentage of his/her income on things like food, which are, in most cases not taxed, and could be made non-taxable at the federal level as well. The "rich" consumer is going to spend a higher portion of his/her income on discretionary spending, i.e. consumer goods, which are taxed. This in itself creates a progressive system.

I can guarantee that those who make half of what I do do not spend the amounts of money on taxable consumer goods that I do/can. A single person with no dependents who makes $35,000 is going to spend a higher portion on groceries (non-taxable transactions) than one that makes $70,000. On top of that, the person who makes $70,000 will spend more on consumer goods than the other, which is progressive. The $70,000 earner will spend $1000 (1.4% of $70,000) on a sideboard made of reclaimed wood whereas the $35,000 earner will go to IKEA, Wal-mart, Target, Craigslist or whatever the regional retailer is and spend $50-$300 on one (<1% of $35,000), or even decide not to buy one because the utility of a sideboard is low compared to the utility of other items.

[IBCoupe]

Which, again, ignores the fact that this is a choice. And the FairTax doesn't make the exemptions you're alluding to.

[stebo0728]

Please dont go mucking up my FairTax with exemptions. With exemptions you may as well call it "SameOldCrapTax". The prebate handles any issue that would require the implementation of exemptions, but does so without creating chinks in its armor.

Exemption = security loop hole.

[smockers83]

Which, again, ignores the fact that this is a choice. And the FairTax doesn't make the exemptions you're alluding to.

You're confusing the FairTax with what I'm proposing on top of it. I said in my post that transactions like food could be made non-taxable at the federal level.

Providing exemptions on a transactional basis is more efficient and accurate than providing a prebate or stipend. How does one measure how much of stipend to provide to everyone? You can't. Allow it to work on it's own within the economy by looking at what types of transactions can and cannot, or rather should and should not be taxed. States have demonstrated that this can be done.

[IBCoupe]

I agree that exemptions are, if done properly, a fairer method of tax offsets than a prebate. The downside is that now we're becoming more complicated, which makes it more expensive to implement, maintain, and execute. Stebo's right in at least that regard. I'm still not convinced, however, that a transactional tax would work better at the federal level than an income tax.

The current system of federal taxation works fine as it stands. If we simplify the code, it might work even better.

[szh]

If we simplify the code, it might work even better.

I am all for that!

Z

[smockers83]

I agree that exemptions are, if done properly, a fairer method of tax offsets than a prebate. The downside is that now we're becoming more complicated, which makes it more expensive to implement, maintain, and execute. Stebo's right in at least that regard. I'm still not convinced, however, that a transactional tax would work better at the federal level than an income tax.

The current system of federal taxation works fine as it stands. If we simplify the code, it might work even better.

How is it more complicated and more expensive to implement? You program software to say this item is exempt from being taxed and this item is taxed. There's hardly anything to maintain, there is hardly any tax code to write besides all items are taxed X% besides (insert list here). It's not that difficult. The store collects the sales tax, sends it off. It eliminates much of the staff needed at the IRS, tax attorneys, removes litigations from the courts, so on and so forth.

With the federal tax as it is, it is so complex that it requires huge amounts of resources to maintain and execute. Simplifying it (i.e. removing exemptions, credits, deductible items, etc.), lowering the rates, and thus broadening the tax base is definitely the next likely step towards tax reform in this country.

[IBCoupe]

You really think there isn't going to need to be an enforcement mechanism? You think it should be voluntary?

I agree that reform of the income tax to make it simpler is needed, but I think you'd have to be nuts to think that a system taxing the income of a couple hundred milliOn people is going to be more complex than taxing every daily transaction of those couple million people.

[HashiriyaS14]

Plenty of truth in that article.

I could write my own list though, with myth of stimulative tax cuts right at the top.

[carloslebaron]

Great debate about taxes, but the myths also reached other aspects of the economy.

Here is another myth crated by Obama: Giving incentives to small companies -or any company- that creates jobs in America. Creating jobs alone is the solution for unemployment.

Reality: At this moment it won't matter how many companies small or great will try to hire new employees because they can't, and the reason is the no sell status.

The no sell status of products made in America is due to the cheap prices of goods coming from Asia.

So, the solution is to put the economists to work and find how to make the prices of the goods manufactured by American companies being competitive with the cheap prices of goods coming from China (as an example).

I guess that an increase of tax to imports in order tomake their sale price be closer to American made products might be a solution, having that the average American consumer might prefer the product made in USA over the imported one by reasons of quality of the product. This measure can break the current trend of people buying imported products not because their quality but because their cheap price, due that the economy forces them to do so.

No doubt that an increase of the price on imported goods will affect the low income people at the beguining, but at the end this measure will call for more sells of goods made in USA, and will call for more employment, several American companies -small or great- will hire more employees at the same time of taking advantage of the government incentives offered by Obama.

But, I don't think that Obama's intentions will work without making the prices of the goods made in America companies as being competitive with the extremely cheap prices of the same goods imported from other countries. He might have good intentions, but the economy is not ruled solely by the number of employees in a company if is not included the selling of goods produced by them.

[AZhitman]

Actually, there are signs that the days of outsourcing and offshoring are slowly coming to an end.

[smockers83]

Great debate about taxes, but the myths also reached other aspects of the economy.

Here is another myth crated by Obama: Giving incentives to small companies -or any company- that creates jobs in America. Creating jobs alone is the solution for unemployment.

Reality: At this moment it won't matter how many companies small or great will try to hire new employees because they can't, and the reason is the no sell status.

The no sell status of products made in America is due to the cheap prices of goods coming from Asia.

So, the solution is to put the economists to work and find how to make the prices of the goods manufactured by American companies being competitive with the cheap prices of goods coming from China (as an example).

I guess that an increase of tax to imports in order tomake their sale price be closer to American made products might be a solution, having that the average American consumer might prefer the product made in USA over the imported one by reasons of quality of the product. This measure can break the current trend of people buying imported products not because their quality but because their cheap price, due that the economy forces them to do so.

No doubt that an increase of the price on imported goods will affect the low income people at the beguining, but at the end this measure will call for more sells of goods made in USA, and will call for more employment, several American companies -small or great- will hire more employees at the same time of taking advantage of the government incentives offered by Obama.

But, I don't think that Obama's intentions will work without making the prices of the goods made in America companies as being competitive with the extremely cheap prices of the same goods imported from other countries. He might have good intentions, but the economy is not ruled solely by the number of employees in a company if is not included the selling of goods produced by them.

There are myths there as well. Increasing import prices via taxes in order to make them more equal to domestic prices actually hurts the US consumer. When you increase prices, you essentially make the US consumer poorer because they can't buy as much as they otherwise could and has is not guaranteed to create additional domestic demand for domestic goods, thus not guaranteed to generate jobs...the odds of this working are slim. With an increase in prices, consumers can't spend money on other things like travel and vacations. Imposing duties on imports also has risks that countries producing those imports will retaliate with their own import taxes on US goods, thus creating a trade war and eliminating jobs. This is what played out during the Great Depression and was a contributor to extending it.

The biggest thing that is preventing companies from hiring is weak consumer demand. The problem currently is that the demand side of the economy (the US consumer) has been damaged. If there isn't consumer demand, companies won't hire as there aren't additional goods/services to produce. Since the Reagan era, we've had the supply siders proclaim that Keynesian economics is dead and it doesn't work. Well, it didn't work when the supply side theory was developed as the theory was developed to address the issues of it's time. The same can be said about Keynes' work...it was developed to address issues during his time. The question becomes when to apply which theory.

In my opinion, we're in need of a little Keynesian economics. We have an infrastructure problem and a jobs problem, why not put the two through joint counseling? There is demand for improved infrastructure, thus demand for jobs, which will create additional consumer demand in the rest of the economy. The increased consumer demand will increase certainty about the direction of the economy and will be more willing to hire, which then increases demand further, and so and so forth. All of this stimulus to businesses by reducing payroll taxes that was enacted by Obama and again put forth by Obama isn't going to work because it is too supply side focused. The supply side of the equation isn't broken, the focus needs to be on the demand side as this is what is preventing the unemployment rate to keep steadily high. Unfortunately, I think Washington will continue down this path because this (supply side economics) is what Washington has known for 30 years.

Back in the day, Henry Ford was considered a lunatic when he raised the hourly Ford rate to what was thought to be astronomical highs, which it was at the time. However, the foresight that Henry had was that those increased wages allowed Henry's own workers to buy the very Fords they were making. He created his own demand by increasing wages of his employees and it worked.

[IBCoupe]

Back in the day, Henry Ford was considered a lunatic when he raised the hourly Ford rate to what was thought to be astronomical highs, which it was at the time. However, the foresight that Henry had was that those increased wages allowed Henry's own workers to buy the very Fords they were making. He created his own demand by increasing wages of his employees and it worked.

This, and that it pissed the hell out of the competition. Dodge brothers eventually sued as shareholders in response to that and some other things. Drive up American wages, and watch other countries compete to hold onto their talent.

Oh, and the Dodge brothers got their payback against Henry Ford:

[szh]

But they could, is my point. Their biological needs are the same.

It's the difference, Greg, between:

"If I really pinch my pennies, this month, I can save 11% of what I made."

and

"If I really pinch my pennies this month, I can save 98% of what I made."

You want a FairTax? Have a tax that recognizes that. I think the current system does.

Yes, I suppose someone could do that, but it is unlikely to happen very often given human nature. People do expand their spending when the income is higher - for more than bare necessities.

Plus, what is the point of earning more? Isn't it to be able to use some of that extra income to do things that you might not have been able to otherwise? Perhaps live a better life-style?

if the approach is supposed to be: "No matter what you make, your take-home is a flat $40,000 a year and everything else is taken away in taxes or forced savings", then there is no incentive to do better.

Z

[Encryptshun]

Just to be fair, the current tax system (nor none of those proposed) would do that, Z.

The current proposal of eliminating certain loopholes for the rich is being met with resistance by the same people who, under the guise of "simplify the tax code" would, as far as they say, do exactly the same thing. Yet when Obama does it it's bad. When they do it, it's fine.

Requiring hedge fund managers to pay income tax rather than capital gains isn't going to keep those hedge fund managers from trying to do a good job and make more money. And it's not going to make them spend less money. And the investments they make don't have any direct contribution to the economy anyway (they aren't starting businesses, they aren't directly investing in companies, and they aren't bringing jobs back to the U.S.). So why is the fact that they will pay more in taxes even an issue?

So they will buy fewer luxury goods? Is that the kind of economy we're trying to create? The world's number one producer of frivolous items and services? At the expense of anything that anyone else could afford? Dog-walkers, housekeepers, personal chefs, auto detailers and watchmakers don't keep this economy afloat.

[IBCoupe]

if the approach is supposed to be: "No matter what you make, your take-home is a flat $40,000 a year and everything else is taken away in taxes or forced savings", then there is no incentive to do better.

That's not what I proposed. I'm sorry if there was some confusion, but here's what I proposed the basis of our tax system should be: "No matter what you make, your take-home, post-tax and post-basic living expense, is a flat X% of your income."

That's what our system does, and that's what a flat tax rate doesn't do.

[Encryptshun]

if the approach is supposed to be: "No matter what you make, your take-home is a flat $40,000 a year and everything else is taken away in taxes or forced savings", then there is no incentive to do better.

That's not what I proposed. I'm sorry if there was some confusion, but here's what I proposed the basis of our tax system should be: "No matter what you make, your take-home, post-tax and post-basic living expense, is a flat X% of your income."

That's what our system does, and that's what a flat tax rate doesn't do.

*takes two steps right from Isaac, looks over at him nervously*


Um, how BIG is that percentage that the government lets me keep of my own money? 95%? 85%? 5%?

Why is it that I feel like I'm the only one who thinks that reformation of the corporate tax code would yield much better results than setting a flat tax or a flat keep rate for individuals?

[stebo0728]

And I'm still in complete disagreement that things should work that way. To work from an angle that people keep a set % assumes a mantle of ownership over the wealth. You dont you cant ALLOW someone to KEEP unless you assume ownership of what you are allowing to be kept. Thats the fundamental argument I've been trying to make. This nation was founding on the idea personal freedom and liberty. Wealth is created and owned individually, not collectively. To assume collective ownership is an egregious error in my estimation. The only way taxes should be handled in a land of freedom in liberty is TAKING equally. Never LEAVING equally.

[szh]

if the approach is supposed to be: "No matter what you make, your take-home is a flat $40,000 a year and everything else is taken away in taxes or forced savings", then there is no incentive to do better.

That's not what I proposed. I'm sorry if there was some confusion, but here's what I proposed the basis of our tax system should be: "No matter what you make, your take-home, post-tax and post-basic living expense, is a flat X% of your income."

That's what our system does, and that's what a flat tax rate doesn't do.

Sorry, I did not mean to imply that you had proposed that. I just did not understand how the "98%" in your post was working - so looked at an interpretation that got there.

Maybe we are on the same page perhaps ... for years now (including in many older posts here at NICO), I have proposed a "Flat Percentage Tax", with a base for handling the "poverty" problem.

Something like this (assuming a base in $50k and assuming a percentage of 20% for the purposes of discussion):

1. Everything above the base (income, capital gains, etc., etc.) is taxed at 20% of that difference.
2. No deductions for anything (including mortgage interest, number of dependents, etc., etc., etc.) ... because number of kids, house ownership, etc., is a CHOICE of the individual, not a state or society mandated requirement.

With a big stretch, I suppose I can see changing the baseline based on the number of dependents, but I don't like this ... the tax "benefit" is not why people should have kids, for example. Yeah, you might be looking after your parents, but, again, that is choice that we should make without government interference.

Anyway, my meaning is:
if you make $50k or less, you pay nothing.
If you make $100k, you pay 0.2 * (100,000 - 50,000) = $10,000.
f you make $1,000,000, you pay 0.2 * (1,000,000 - 50,000) = $190,000.

Isn't that somewhat similar to what you said - meaning, is "flat percentage take-home" not just almost the opposite of "flat percentage tax" (assuming that the percentage is appropriately set, of course!)?

If it isn't, then what is the system you are proposing? What are the example numbers?

Z

[IBCoupe]

*takes two steps right from Isaac, looks over at him nervously*


Um, how BIG is that percentage that the government lets me keep of my own money? 95%? 85%? 5%?

Don't know how much you make, but probably after all taxes (all federal, all state, and all local) are taken into account and a deduction is allowed for a basic cost of living expense, you're probably in the neighborhood of 60-70%, but that's going to vary from state to state, too. You'll probably be in the 70-80% range if you get most of your income from capital investments, though.

Why is it that I feel like I'm the only one who thinks that reformation of the corporate tax code would yield much better results than setting a flat tax or a flat keep rate for individuals?

You're not, because it will. It's just that the Right enjoys pointing out that half of Americans don't make enough money to pay a federal income tax.

[IBCoupe]

To work from an angle that people keep a set % assumes a mantle of ownership over the wealth. You dont you cant ALLOW someone to KEEP unless you assume ownership of what you are allowing to be kept.

No, it doesn't assume anything of the sort. It assumes that you define "fair" as considering the way the parties are left standing at the end of the day. It assumes that you want a "fair" individual tax system that leaves people in proportional shape to where they started at the beginning of the day.

It's a functionalist approach to taxes. I know you're a formalist, Stebo, we don't need to rehash this.

[IBCoupe]

2. No deductions for anything (including mortgage interest, number of dependents, etc., etc., etc.) ... because number of kids, house ownership, etc., is a CHOICE of the individual, not a state or society mandated requirement.

I'd be careful. We instituted dependent deductions for a reason: because kids are expensive, and in paying for them, you're feeding the economy pretty well, and that substitutes for taxes. I don't think we should take that away because it's a "choice" to have kids, as if folks are looking to the IRS when they're trying to decide whether they want to. It's similar to my skepticism of the seriousness of the "marriage penalty:" folks aren't thinking about taxes when they get married. That's not why they do it.

With a big stretch, I suppose I can see changing the baseline based on the number of dependents, but I don't like this ... the tax "benefit" is not why people should have kids, for example. Yeah, you might be looking after your parents, but, again, that is choice that we should make without government interference.

And as I continue reading, it seems like maybe you share my concerns.

Here's what I mean, and it's what we have, generally speaking:

Basic cost of living, for the sake of argument, is $10,000.

Someone making $20,000 would have a deduction of $10,000, and they'd have taxable income of $10,000. If they get hit with a 5% tax (cumulative from all sources), they are left, at the end of the year, with $9,500, or 47.5% of their income.

Someone making $40,000 would have a deduction of $10,000, and they'd have taxable income of $30,000. In order to leave them with the same 47.5% of their income at the end of the year, we'd tax them at 36.7%, and they'd be left with $19,000 at the end of the year.

Someone making $100,000 would have a deduction of $10,000, and they'd have taxable income of $90,000. In order to leave them with the same 47.5% of their income at the end of the year, we'd apply a tax rate (across all sources) of 47.2%. And he'd still have $47,500 left over, proportionally the same to the first guy's $9,500 and the second guy's $19,000.

Now, these numbers are extraordinarily out of whack, but I think you get the gist - maybe the numbers shouldn't be 47.5%; maybe it should be 90%, maybe it should be 20%. I'm not making a claim on that point. The point is that the government should leave no individual relatively worse off than it does any other individual. Our tax system and our economy shouldn't leave a janitor any worse off than a ceo, with relation to what they're paid, to begin with.

[stebo0728]

No, it doesn't assume anything of the sort. It assumes that you define "fair" as considering the way the parties are left standing at the end of the day. It assumes that you want a "fair" individual tax system that leaves people in proportional shape to where they started at the beginning of the day.

It's a functionalist approach to taxes. I know you're a formalist, Stebo, we don't need to rehash this.

You absolutely make that assumption. You may not feel good about it, you may think "thats not the intended attitude" and have delusions of grandeur since its "for the greater good". But still the implication is still there in your outlook. As I said before, YOU CANT consider to ALLOW people to KEEP something unless you in some way assume or imply or interject some form of ownership upon the resource in question, in this case wealth. Furthermore its not the governments job to be concerned with leveling the game. The government has a job, and has to be paid to do that job, thus a monetary burden. Said burden needs to be distributed fairly, in way in which external modifiers are irrelevant. You overcomplicate things, and you end up pooping in your own food bowl with policies of "fairness". Screw "fairness" we've never had it, and we never will.

[AZhitman]

I'd be careful. We instituted dependent deductions for a reason: because kids are expensive, and in paying for them, you're feeding the economy pretty well, and that substitutes for taxes.

No, they're not, and no, it doesn't (necessarily).

(Agree with the rest, of course... taxes are the last thing on your mind when you're about to get your freak on. )

The point is that the government should leave no individual relatively worse off than it does any other individual.

Well-said.

I've often wondered if/how a system could be implemented that taxes us for usage of the provisions of the gov't. In other words, non-quantifiable things like national security and defense are a given. But what if I live off the grid on a 10-acre compound, generate my own power, grow my own food, travel an unimproved road into town (cleared and graded by me and other homeowners), never use emergency responders or police services, have no kids in public schools, etc etc etc. I know it's a stretch, but sometime, carrying things out to the ridiculous is how we recognize the flaws that we missed due to overfamiliarity.

[Encryptshun]

I've often wondered if/how a system could be implemented that taxes us for usage of the provisions of the gov't. In other words, non-quantifiable things like national security and defense are a given. But what if I live off the grid on a 10-acre compound, generate my own power, grow my own food, travel an unimproved road into town (cleared and graded by me and other homeowners), never use emergency responders or police services, have no kids in public schools, etc etc etc. I know it's a stretch, but sometime, carrying things out to the ridiculous is how we recognize the flaws that we missed due to overfamiliarity.

Hmm. Interesting. It sounds a bit like what I've heard a lot of Libertarians say. But here's what seems to be the rub with that:

(1) no economic point of entry for capital projects to get done in the first place (ie "the roads just build themselves" conundrum)
(2) the pay-per-use economics only work when amoritized over years and populations. you could live your first 20 years off the grid and then suddenly decide to get ON the grid. If so, who absorbs the cost of your getting added to the mix? Who pays for the pole and wires to your house? Who pays for your water and sewer pipes? If you had to incur that cost yourself, no one would ever get on the grid and therefore the system would be stagnant, no reason to innovate, no money to invest in capital projects, and no incentives to competition. I'm inclined to think that way would actually be more expensive than socializing it, because paying in versus taking out of the system is cyclical at the individual level and nets closer to zero move from center at the macro level.

/2cents

[AZhitman]

Makes sense.

And actually, I think the opposite is true more often than not: People need those first 30 - 40 years ON the grid so they can put themselves in a position of leaving it all behind in their 40's / 50's.