RE: The Laffer Curve. Does the Laffer Curve actually work though? Bush II proved that it can be disastrous if you don't keep the budget under control. The Laffer Curve only works if you cut budgets and use discipline in addition to lowering taxes.
At any rate -- we have lowered taxes, they are at an all-time low. So clearly something else is at work here. It's called an overleveraged shadow banking system.
Re: It's a win-win for New Jersey
back2basicz
12/18/2011 12:03:55 PM
Phil.
Govt employees are NOT regular people like you and me(unless you too work in the Public Sector).
In this recessionary environment most Private Sector employees have already seen their pay/benefits cut-Govt employees and their Unions continue to resist any such move to cut pay,bankrupting States and forcing major cuts in all manner of essential services all across towns & Cities in America.States are trying to raise Taxes,but with highly mobile workforces(&companies) most people just up sticks and shift to a more tax-favorable destination.
Also,can you afford to retire at 52(with a full pension for life) in the Private Sector??? Govt employees can,even today.
Not to mention automatic COLAs in their Pensions(Cost of Living Adjustments).
Why not put them all on 401Ks like in the private sector for starters???
Lets also not forget to mention that there is NO competition(or worry about being fired in case of non-performance) for the Public sector,so it tends to encourage & attract all the worst elements of our workforce.
Its the same case with Public Sector employees everywhere.
For more info,read this book and check out Mike Shedlock.No one has written in more depth about this issue than Mish.
http://www.amazon.com/Plunder-Employee-Treasuries-Controlling-Bankrupting/dp/0984275207/ref=sr_1_1?s=books&ie=UTF8&qid=1324226566&sr=1-1
http://globaleconomicanalysis.blogspot.com/2011/04/25000-out-of-70000-illinois-state.html
http://globaleconomicanalysis.blogspot.com/2010/06/states-take-aim-at-pension-costs-public.html&sa=U&ei=VxjuTqPVO4PJmAXcnvHwCQ&ved=0CAgQFjACOAo&client=internal-uds-cse&usg=AFQjCNH__ZiOKP44eHAb4KntSAIcNSc
http://globaleconomicanalysis.blogspot.com/2011/09/unions-sue-new-jersey-governor-christie.htmldDw
Read these paragraphs very closely.You will understand and appreciate what I am talking about here.
"
Public unions' traditional strength - the ability to finance their members' rising pay and benefits through tax increases - has become a liability. Although private-sector unions always have had to worry that consumers will resist rising prices for their goods, public sector unions have benefited from the fact that taxpayers can't choose - they are, in effect, "captive consumers."
At some point, however, voters turn resentful as they sense that:
-- They are underwriting, through their taxes, a level of salary and benefits for government employment that is better than what they and their families have.
-- Government services, from schools to the Department of Motor Vehicles, are not good enough - not for the citizen individually nor the public generally - to justify the high and escalating cost.
We are at that point.
"
Regards
Ashish.
Re: It's a win-win for New Jersey
yalanand
12/18/2011 2:40:17 AM
If you study tax-policy long enough you will learn about something called the Laffer Curve.
@Ashish, thanks for the info. I will definitely look into about Laffer Curve so that I get insight into the tax basics.
I agree. Most people forget that 99% of government employees are regular people just like you and I. So cutting their salaries, benefits, etc sounds like a simple thing but what would you think if it happened to you in the private sector??
Re: It's a win-win for New Jersey
back2basicz
12/14/2011 2:15:13 PM
Anand,
If you study tax-policy long enough you will learn about something called the Laffer Curve.
Basically the more you raise taxes on a segment of the population,the less taxes you collect.
This is particularly true about the richie-rich(whom you want to pay more taxes);they tend to particularly adept at usage of Tax shelters,Tax loopholes or else shifting to neighbouring states where Taxes are lower.
End result-Tax collection from this segment will fall instead of rising.
While Govt employees tend to be the least mobile segment of society(after all they depend on the State for their paycheck,where are they going to go otherwise???).
Its a well-known fact that benefits for most Govt employees are beyond generous today(its totally insane)-You can retire with full pension at 52 and collect it for way longer than what you worked,with automatic COLAs(even if nobody in the Private sector can get a raise-Just like right now).
So bringing these benefits more in line with the Private sector is not really a bad thing.and best way to do it is to implement the cuts super-quick.
And we get to balance the State Budget in return as well !!
Regards
Ashish.
Re: smells like voodoo
back2basicz
12/14/2011 1:52:30 PM
Anand,
Headlines alsways look extremely seductive.Its only when you get into the details that the real picture tumbles out.
Hold on all on all the celebrations (The Economy or atleast the Consumer part is roaring ahead)for another month;those numbers were backed by unbelieveable promotions and sales cuts ,which means that margins must have collapsed dramatically.
Also,I was looking through a Reuteurs report recently-It clearly said that most Americans have already finished their shopping for the year end(In November!!!);
which means December looks set to be a total washout.
So lets wait till retailers release their Sales & profit numbers for this quarter.
Then we will know if this Recovery has legs.
Regards
Ashish.
Re: It's a win-win for New Jersey
yalanand
12/14/2011 6:34:47 AM
A better solution for Politicians in New York would be to cut spending.Lets say they cut Salaries and Benefits for all Govt.Employees by 5%.
@Ashish, I feel its better to tax the riches heavily rather than cut the salaries and benefits of government employees.
Re: smells like voodoo
yalanand
12/14/2011 6:25:17 AM
People have to feel confident about spending then only they will spend.
@Ashish, if that is the case then why did we see huge spending during black firday. Infact Black Friday E-Commerce Spending Up 26 Percent To A Record $816M. Looking at these figures we can't makeout we are facing financial crunch.
Re: It's a win-win for New Jersey
back2basicz
12/10/2011 10:07:20 AM
PC,
There is another thing about Taxes which Politicans very conveniently ignore.Its the Laffer curve-The more you raise the Percentage of Taxes the more Tax Revenue tends to fall(and not rise).
The reason being those that make that kind of money tend to be(usually) amongst the most mobile part of the population and would easily move to another state with a much lower Tax burden(or use tax shelters and various loopholes).
End result will be the same Revenue will fall,not rise.
More on that here
https://www.mcssl.com/content/166063/CC/120911_CC_final.pdf
A better solution for Politicians in New York would be to cut spending.Lets say they cut Salaries and Benefits for all Govt.Employees by 5%.Would that go a long way to balance budgets in the State?
Most Definitely Yes.
Of course this is a solution which trigger some revolts amongst the powerful lobbies who control Albany(and especially Govt Unions) but it would go down very,very well with the General Public.
Regards
Ashish.
Re: It's a win-win for New Jersey
AskAsa
12/10/2011 8:16:52 AM
New York still has a long way to go to lose its tax heavy reputation. People are here because of geography (manhattan) - not because of the political climate.
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