Chile Forum

Good grief. We have some of the lowest tax rates in many years.

http://www.dailydoseofexcel.com/archive ... tax-rates/

And if you are a supply side economist(and really tried to understand it at all)-and you don't have to be PhD-and believed in the Laffer curve-you might notice that the first Bush tax cut was questionable and the second one...even more so. And I find this anti-education rhetoric troublesome. Really troublesome. I would certainly be interested in what a PhD has to say. Discounting an education is an odd thing to me. It's great to have a business but even better to have a business AND an education. Many have actually had both. This talk I hear about the elite intellectuals...Ayn Rand certainly valued the intellectuals in atlas shrugged-but of course that book has been twisted to meet the proper message. Actually I suspect most haven't really read it, just someone else's interpretation. It is a large book and not easy reading. But the tag lines are nice and easy to remember.

by eeuunikkeiexpat on Wed Apr 28, 2010 1:16 pm

sputnic1 wrote:
What is Chile's view on economics, eeuu...? I'm trying to gain a better understanding of the economic philosophy of Chile. It's great talking about what's going on here in the US, but I'd like to learn more on the direction of economics in my soon to be new country.

Well the most important thing for me was a country that pays its way for most everything (perhaps now disrupted for many years by the earthquake) with a real money making machine via CODELCO. So despite all the constant arguments of leftist expats from broke countries about how socialistic Chile is and that only socialist leaning expats should logically choose Chile, I see myself living in a country which is in line with my beliefs that government finances should be managed similar to how responsible individuals manage their finances and that a country has a right to determine what degree of a paternalistic government to have as long as it's managed well and paid for.

I think Chile does what seems to work best for Chile. So think various capitalistic and socialistic concepts over a culture that has traditionally been top down, patron system, paternalistic, oligopolic aided by the gifts of a wide ranging temperate climate and topography with abundant natural and mineral resources and a not too large homogeneous (though now changing) population.

So despite all the constant arguments of leftist expats from broke countries about how socialistic Chile is and that only socialist leaning expats should logically choose Chile,

Not exactly what I said at all-I was speaking to those fleeing the "socialist" bent of the US and pointing out that Chile has some decidedly socialist tendencies as well. I encourage people to move to Chile and I said so. Chile has no no specific economic model that I can see-they use a mix.

Pinera was trying to privatize/sell off to private companies both Codelco(I believe you called it a money making machine) and the natural gas pipeline they own 40% of...the left in congress stopped him. Now he will sell bonds using credit default swaps as insurance. Credit default swaps, those have been popular......hoping they are regulated in Chile.

The left were the ones who saved a nice nest egg(Allende made Codelco state owned and Pinochet didn't sell it like everything else). Just wondering who is more fiscally responsible.

It's a mix, it is moderate. The health plan is terrific-a mix of public(single payer) and private. Choice. But how ironic the right was against the public plan.

Laura55llc wrote:And if you are a supply side economist(and really tried to understand it at all)-and you don't have to be PhD-and believed in the Laffer curve-you might notice that the first Bush tax cut was questionable and the second one...even more so. And I find this anti-education rhetoric troublesome. Really troublesome. I would certainly be interested in what a PhD has to say. Discounting an education is an odd thing to me.

And you think we don't have some level of college education because? Nobody had anti-education rhetoric that I've seen in this thread, we criticized self-appointed academic "experts" in a specific field with a less than stellar record as a science. Way to broaden our argument until it's lost all its original meaning. 18th century medical "doctors" though they were experts too. Too bad grandmas had a better track record of keeping people alive back then. Basic logic: if your "science" doesn't fit with the real world, it's not science it's junk. Economists making statements that contradict what any businessman knows from direct experience would be like physicists explaining to engineers that their gizmo cannot possibly work, when in fact it does. Dude, get your theory straight, don't ask me to change my facts.

A lot of academia is closer to priesthood than science.

Survey businesspeople and economists and ask each group what "opportunity cost" means (business 101 really). Here's a funny anecdote:
http://www.nytimes.com/2005/09/01/business/01scene.html

People who want to start businesses, create jobs, and pay 65% tax rate out of their own sense of moral imperative have my blessing to do so. But employees, academics, professional politicians and other bystanders can, as far as concerned, take a hike. Go ahead and do it, we're watching.

Laura,

I knew I'd get you out of your shell. Like I said, a country has a right to determine what kind of public-private mix to have. To deny that the coup against what Allende had planned was very much Chilean homegrown in origin would be grossly distorting historical reality. "Helping" is not "causing" or effective "control" and indeed Pino thought he knew what the hell he was doing with his "right"' version of economic socialism until reality said something else must be tried. SO there were extremes with the TPTB Chicago Boyz (be thankful they weren't Yale S&B or S&K) brought in to experiment with reviving the economy but obviously some nationalistic sense did not allow Pino to give away the fundamental money making machine of Chile. In the end, Pino, a chileno "right" nationalist with ties to the traditonal oligarch, law and order guard kept what seemed to work and the subsequent "left" socialists have not messed much with it because it indeed works - FOR CHILE.

-eeuunikkeiexpat ---- BA Geography, minor Economics (which has proven useless compared to interdisciplinary Geography in understanding the real world)

And see one of my EQ related posts (the admin Piñera "poll") to see I am indeed a critic of Piñera.

otravers,

I did not advocate a 65% marginal tax rate. My point was that if the current 35% maximum marginal tax rate were reduced it would result in a net loss of tax revenue. Sounds like your real complaint is with the progressive tax system itself. I personally believe it to be fair and equitable.

john wrote:I did not advocate a 65% marginal tax rate.

OK, I guess "optimal" must mean different things to different people.

john wrote:My point was that if the current 35% maximum marginal tax rate were reduced it would result in a net loss of tax revenue.

All other things being equal, maybe. But the whole framework is way too complex. It costs us a fortune to process taxes every year. If the tax system was not the morass of incentives and exemptions and loopholes and whatnot that it is, the system would be much cheaper to operate, it would be less open to mistakes, leakage and abuse, and could collect more net money out of lower marginal tax rates.

In other words, discussing the rate in a vacuum is too narrow. It's the whole fiscal framework which is wrong.

john wrote:Sounds like your real complaint is with the progressive tax system itself. I personally believe it to be fair and equitable.

Partly. I believe a low, flat rate tax on consumption should be enough for minimal states to enforce the law, protect borders, coordinate big externalities and commonalities (energy, pollution), and do so competently. 5% on essential staples, 15% on everything else, maybe ownership of mineral resources (with management of their extraction under private concession but with substantial money flowing back to the state). Progressive tax systems are the path to creeping nanny states that fuck up everything they touch at tremendous cost. And even if they were competent, I'm not someone else's minor kid so leave me the fuck alone dealing with my life already. If you want to do charity to it with your own money.

To stick to tax practicalities, what gets lost again an again in these discussions is that many small businesses operate as pass-through structures to their shareholders. In practice income tax is corporate tax for plenty of people and their companies. More arbitrariness, unpredictability and unnecessary complexity.

My final point (already made by others earlier in this thread) is that progressive tax systems tend to degenerate into a minority of people paying income tax at all. This has obvious deleterious effects on how a democracy operates, explained since Plato. The political consequences are catastrophic, as we're currently witnessing, and the negative effects feed each other into vicious circles that are harder and harder to break from. Witness the current utter lack of a credible effort to get federal spending under control. Ditto California. Enjoy the preview in Greece. Read what I was writing about the Euro and these countries back in 2008 on this board, it's right in the process of happening (even earlier than I thought).

I don't want to get into Allende and Pinochet but the "historical reality" might be distorted by the millions paid by the CIA to El Mercurio to print propaganda. That is a matter of record although I seriously doubt we get the whole story.

http://foia.state.gov/SearchColls/CIA.asp

Taxes. I question the 65%. If you pay 65%, you need an accountant. Or Turbotax lol. Chile does the 19% VAT plus a progressive system. Taxes in Chile, as I understand them, can be done easily online-that is really a big part of it-it's not the amount really that people abhor-it's the difficulty, the paper, the time. My take on Chile taxes comes from my view of watching a Chilean friend do taxes. She enters, throughout the year, specific jobs(she is a private english tutor and has a regular contract job). Also admin Charles has mentioned how much simpler Chilean taxes are-not so much lower but simpler.

I don't believe a straight flat tax is the answer-and the the 19% Vat seems unfair. I would be in favor of an added smaller VAT tax(maybe 3-5%). At the bottom and lower middle class, people have a hard time paying food and shelter, much less progressing to a higher income level. I personally believe the goal is encourage those at the bottom to move up in income levels. I already know it's not hard to make more money when you already have money . And I believe a lot of the rhetoric and propaganda about taxes comes from corporations that pay no taxes. There are so many deductions and loopholes as you move up in income-but few for those under $75,000. Yes, corporations and businesses serve a valuable part of the US economy. But I think they have forgotten that workers do too. Businesses would be nothing without their employees. All employees are not equal, as they seem to think these days. And the corporations, the top 5% "income earners" want the other 95% to fight their fight.

The other issue is it's easy to take things for granted and forget where they go. There was recently an experiment in a smaller city where people said "no new taxes" so the city turned off the streetlights in much of the city and determined they would not water parks and golf courses. A month later the people said "ok, we'll pay"There is nothing wrong with wanting less regulation or taxes, I just wonder if people realize what that looks like...we need much more clarity in all areas.

And JH, I don't agree with a lot of that article although he makes the point that there weren't spending cuts. I wonder why it took 30 years to notice...there were tax cuts-but only at the very top. Reagan turned around and raised taxes because...I think he(actually someone else in his admin) noticed things weren't trickling quickly enough. Especially the more wealthy don't really want services cut-they want green golf courses and parks and clean nice streets and green boulevards. And street lights and police everywhere. The recent Arizona anti-immigrant law...the most important thing no one talks about is that it gives local police much more power-yet the anti-government types don't seem to notice. does anyone really think the police are not powerful enough? Well, it is also probably unconstitutional but who cares?

Laura it's really hard to engage in meaningful discussion with you. I don't know whether you read too fast, have reading comprehension problems, or just don't care. Nobody has been talking about paying 65% tax *in Chile* so why "question" that? Red herring anyone? On flat taxes, I explicitly talked about two tiers with a *5%* tax rate on staples. It goes on and on. Stop grabbing tidbits out of context to plaster what you wanted to say anyway no matter what. If you want to drop a non sequitur in the discussion, just do so openly, the half-assed orthogonal answers are tiring, as far as I'm concerned.

The only entities that pay taxes are individuals. Corporate tax obviously ultimately trickles down to consumers and shareholders. The core question is the burden on physical persons and how it's structured.

I'm glad you agree that part of the problem with taxes in the hidden but very real cost of dealing with them.

When public entities waste money on crap, gold-plated union contracts, and random vote buying, then yeah, at some point comes a time when there's no money even for essentials. "Hey do you guys really don't want lights in the streets" is a cop-out of the worst kind.

Or maybe the dangers of certain metals in household products and personal care items.

otravers wrote:Laura it's really hard to engage in meaningful discussion with you. I don't know whether you read too fast, have reading comprehension problems, or just don't care. Nobody has been talking about paying 65% tax *in Chile*

I wasn't talking about the 65% rate in Chile either.

I'm off for the weekend soon so be just as nasty as your little heart desires...

Why are we even throwing out random numbers like 5% or 35% or 65% anyway. We really shouldn't be debating the % of taxes, we should be addressing why they got so bloody high in the first place. We hav some of the lowest taxes in the world?And, I'm sorry, but < NO EMAIL > 35% tax rate, that means I'm working over 4 months of my life each year to pay for taxes at that rate. It doesn't make it ok since others get screwed more than we are! Screwed is screwed no matter how one looks at it.

Let's address the original subject of It's the spending, stupid. One example, of a million examples that I could give, is taxes for education. We spend in my county in IL over $12K per student per year! What's even crazier is that I had to take my kids out of school because they're getting about $500/yr worth of real education; the other $8,500 is wasted, the rest is understandable overhead expenses. I can do better spending 1 1/2 hours a day (on a good day) and $200 in materials and supplies. It's sad how schools can't do in 7+ hours what I do in <2.

Guess what my kids study: English writers who were actually talented and nonsuicidal, computer programming (Scratch http://www.scratch.mit.edu is awesome! it teaches kids the logic of programming without physically writing all the code), math, THE CONSTITUTION, sciences with experiments at home and in the community, etc. My kids are learning and they LOVE to learn. They are well ahead of their classmates and I do it on $200. I believe $4-7K is extremely generous and more then enough to teach. Give us back the rest so we stop wasting. Putting it lightly, the federal govt was never intended to get in education anyway (hard to imagine the feds getting into anything at all). What's the result? Spending $12K on education when it should be half that or more. How about the housing industry?

How about all the other areas they've screwed up. Govt. thinks throwing more money into something equates fixing/improving the problem! As a business owner I learn quickly what's a failed business model and when to count my losses and do something else. But it's MY money so I care. Taxes are not th Govt's Money so it's like Christmas to them. they don't have to make money. The only have to spend it. How wonderful that would be! A credit card with no limits and no one to go after you if you don't pay your monthly minimum.

This is just one example of a many in areas where we have obese spending because we can "handle" paying extra taxes. I don't know about you, but my mama told me just because I could eat an extra helping of desert didn't mean that I should. The same goes with taxes. Politicians are like sea gulls, once you try to feed them a piece of bread, 1000 of them swarm over you then attack you until you either run way finally give them the entire sandwich.

sputnic1 wrote:Politicians are like sea gulls, once you try to feed them a piece of bread, 1000 of them swarm over you then attack you until you either run way finally give them the entire sandwich.

LOL - you make excellent points and I agree with all that you say.

But look at it from the sea gull's point of view -- you're just a mean, stingy bastard with that bread, Mr. Businessman, and if you were smart, you'd give us sea gulls every morsel. Spread the wealth around...and get crapped on as a bonus

sputnic1 wrote:Politicians are like sea gulls, once you try to feed them a piece of bread, 1000 of them swarm over you then attack you until you either run way finally give them the entire sandwich.

well g~j were looking around for an appropriate thread to include this recent gem...
http://www.goldshark.com/kaspars-comments/item/76-top-10-keynesian-ways-to-boost-the-us-economy.html

so here we are - on It's the Spending, Stupid - after almost a year in languish-land
with Top 10 Keynesian Ways to Boost the US Economy
BTW --- it IS about (stupid) spending, stupid...
and we DO love bashing keynesian economics - at any time

btw... g~j also like sputnic1's above quote... so here's another appropriate one...

"A politician is like being a hooker.
You can't be one
unless you can pretend to like people
while you're f**king them."
--- Unknown