Fight Poverty! Raise taxes?

[LeafByNiggle]

150 years ago almost everyone worked in agriculture in the US, upwards of 90% of the population. Our population is now much, much larger, we have more jobs than ever including in completely new industries, and were producing more food than ever, and yet now less than 1% of the population is involved in agriculture. Farming has largely been automated, and all the people who used to farm found other jobs.

Automation isn’t a boogeyman to fear. The lightbulb put a huge dent in the candle industry but that’s no reason to get rid of light bulbs.

You vastly overestimate the effect of automation on creating new jobs. Automation does create a few new jobs that didn’t exist before, but not nearly as many jobs as it displaced. If it did not reduce the need for as many workers overall, there would be no financial advantage to automation. Since there obviously is such a financial advantage, automation must have reduced the number of total jobs. Furthermore, the new jobs that are created can only be filled by those with higher skill. This adds to inequality of opportunity. Opportunity is much greater for a few and somewhat less for others.

Of course the solution is not to get rid of automation. The solution is to continue to use automation, but also recognize that with such high productivity, it is no longer necessary for each worker to spend so much of his time working. We can all share in the benefits of automation if, say, the standard work week were reduced to 30 or even 20 hours. This is nothing new. Back 180 years ago when productivity was lower, those that worked the most in agriculture worked much more than a 40 hour week. There is no way we could have feed the population if no one worked more than 40 hours a week. Sure, there were a few who worked less (the rich slaveholders, for instance) but the vast majority of workers worked many more hours per week. Since then we have come to recognize the 40 hour work week. And in time we should probably recognize the 30 hour work week, and even less. That way we can all benefit from automation.

 

[vsedriver]

Taxing goods and services (consumption) is an effective method of raising revenue

except that it hurts the very poor and working poor. The rich don’t bat an eye at 7% sales tax but to working poor it is a big hit.

 

[vsedriver]

Chances are, these people are not going to be super successful in life.

What do we do with people like this?

I have a foster nephew who is mentally disabled. When he aged out of the foster system, my brother and his wife who were his foster parents, applied for guardianship. They got him a job at a facility operated by the state for people like him. His income is so low that his medical care is free. If for some reason he had to leave my brother’s home, the state would place him in a group home.

The safety net is there for people like this.

 

[Hume]

Poverty has quite an extensive list of causes you’ve not mentioned.

First and foremost is being born into it.

 

[vsedriver]

Question is, can they continue to make a good living at it?

Automation is in the process of taking millions of jobs awa

this is the responsibility of education.

You can’t outsource plumbers, electricians, carpenters, etc. There are a lot of jobs out there if it were pushed in the education system. My son went to a trade high school. He’s got a good paying secure job working in security. And no college debt.

Education needs to channel people into jobs that can’t be outsourced or automated.

 

[Socrates92]

That simple math assumes that nothing else will change if the progressive income tax is removed.

Fair enough.

The fact is the only practical way to move from to a flat tax would be to set tax rates much higher than they are now for probably 90 percent of the working population,

That likewise assumes things you can’t necessarily know. First, you’re assuming that tax revenue would decrease as a result. You are assuming that the lost revenue from lower marginal rates would outweigh increased revenue from increased hours worked, which is something you would have to prove.

Besides, the purpose of mandatory overtime is not to increase anyone’s wages. It is to discourage the use of overtime in lieu of hiring more employees.

Granting that premise, why is that necessarily a desirable thing? I get that certain individuals may not want to ever work more than an absolute max of 44hr/wk, but their are many others who have legitimate reasons to want to work more than that. Taking that option away imposing real hardships on some people.

Excessive overtime is bad for the people left unemployed

That depends. You are a assuming a fixed amount of work to be done. The economy is not a zero sum game. One of the results of increasing the cost of labour is that businesses will more quickly substitute towards increased machination and away from the use of labour, which can likewise increase unemployment.

 

[Socrates92]

bad for those that sacrifice their quality of life in order to earn more through that excessive overtime.

That overtime = sacrifice of quality of life is a subjective judgement and not really something that your can generalize. Implicit in this premise seems to be that overtime laws actually decrease the amount of time and effort that employees need to dedicate to work. Even this is not necessarily the case. If I need to work 60hrs to make ends meet, and I’m only able to work 2/3s of that at one job, that requires I take on the additional hassle of juggling a second job, increasing commute time, time spent actually searching for and interviewing for the job, etc. Even ignoring these time costs, if the second job is something that I am less proficient in, I may be able to command only a lessor wage, with the result that overtime regs decrease my average pay, increase time spent working, and presumably decrease my quality of life (assuming I’m not a workaholic).

Adding intertemporal aspects to this, the inability to work say 50hrs at my present preferred occupation may induce me to undergo additional training that I wouldn’t otherwise undergo. This could lead me to in fact work much greater hours for an uncertain payoff. Instead of working a modest 50hrs, for example, I might try to juggle a 40hr job with 30hrs of academia/training for a period of several years, for a total of 70hr/wk.
There is also the time value of money. The ability to work extra overtime-exempt hours in the present might actually be cheaper than having to make do with less hours in the present and a higher potential rate in the future (after undergoing expensive additional training) once you factor in the cost of interest on debt or foregone investments/reduced financial flexibility that comes with a heavy debt load.

 

[Hume]

We all love the anecdotal stories where someone goes from rags or great challenges to riches and success.

What’s even more wild is that some of them are actually true.

But the fact remains that opportunities for social mobility are limited. There isn’t enough opportunity for everyone in the US to hit six figures and society wouldn’t work if, by some magic, they did. You’d either have no service workers or prices would have inflated to where $100k in that future would have the same buying power as the $20k a service worker typically earns now.

 

[Socrates92]

That simple math assumes that nothing else will change if the progressive income tax is removed. The fact is the only practical way to move from to a flat tax would be to set tax rates much higher

Ideally, gov’t would just spend less, but I do agree with you that is not practically likely to happen. I’m fully aware that my ideas aren’t likely to be implemented hence why I called it the “ideal” solution.

 

[Crocus]

There are 3 causes of poverty:

lack of education
refusal to work
children out of wedlock or abandoned by a parent

Those are excellent areas to address. Consult with other countries, consider policies that have proved successful elsewhere.

This investment will cost money; capital and applied talent needed for realization.

 

[vsedriver]

First and foremost is being born into it

and people who are born into it can rise above it by:

Getting a high school education (which is free)
a job ( no matter how lowly)
not having a child outside of marriage

 

[John10]

why? we live in the richest country in the world.

That does not mean there are no poor people. The major issue is the widening gap between those who are ultra-wealthy and those who live basically paycheck to paycheck or are homeless, although they might not die of hunger it is still unacceptable.

Some of the biggest companies on Earth have created a massive house market boom which makes affordable housing very difficult for many people.

 

[signit]

and people who are born into it can rise above it by:

Getting a high school education (which is free)
a job ( no matter how lowly)
not having a child outside of marriage

also:

not committing crimes
not abusing alcohol or drugs

 

[Crocus]

except that it hurts the very poor and working poor. The rich don’t bat an eye at 7% sales tax but to working poor it is a big hit.

The poor don’t buy stuff.

 

[vsedriver]

There isn’t enough opportunity for everyone in the US to hit six figures and society wouldn’t work if, by some magic, they did.

who said they had to make 6 figures? There are plenty of opportunities to make it out of poverty. As I posted before, the 3 I mentioned are clear ways out of poverty. Not saying they have to be millionaires but able to provide their own living.

 

[vsedriver]

The major issue is the widening gap between those who are ultra-wealthy and those who live basically paycheck to paycheck or are homeless, although they might not die of hunger it is still unacceptable.

why?

what does the ‘gap’ have to do with anything??

for most of history people lived paycheck to paycheck. You worked a day and got a day’s wages. No work, no pay, no eat. The safety net was the charities that provided food, clothing, and housing for the poor.

Is it the standard of living you wish to set? what would be ‘affordable’ housing? My mother and her 9 siblings grew up in government housing. They were poor.

What house market boom? Housing values are controlled by demand. Unless there is a demand for housing, housing prices don’t go up. If you are low income you are eligible for government housing. Around here, people get rent breaks as there is no government housing.

But if you are referring to owning your own home, well that too is a modern concept. The vast majority of people rented unless they owned a few acres they farmed on. It was the GI bill that allowed more families to own their own home. It’s how my dad bought our first house. Up to that point we rented.

 

[vsedriver]

The poor don’t buy stuff.

they buy food, clothing, fuel, etc. Don’t kid yourself that they don’t buy stuff.

 

[Hodos]

Many people bristle at the suggestion, however 2019 Nobel Prize for Economics winners say it’s the way to go.

https://www.google.ca/amp/s/www.bloomberg.com/amp/news/articles/2019-12-07/u-s-needs-to-raise-taxes-to-fight-poverty-nobel-laureate-says

"A lot of Americans are now poorer than their parents, and that’s one of the reasons so many people are upset, Banerjee said.

“The American dream, which was a continuous upward progress, has faltered and stopped,” he said. “That can’t be a a way to create a reasonable social system.’’

I have yet to see an example of a society that taxed their way into prosperity. Have seen lots of examples where societies have taxed their way out of prosperity though. Taxation doesn’t raise the standard of living, it is a hinderance to doing so. That being said, our spending is out of control and at some point that chicken is coming home to roost. We will eventually end up raising taxes in order to remain financially solvent, but that isn’t going to fight poverty, it is only going to decrease the standard of living for more Americans.

 

[LeafByNiggle]

LeafByNiggle:

The fact is the only practical way to move from to a flat tax would be to set tax rates much higher than they are now for probably 90 percent of the working population,

That likewise assumes things you can’t necessarily know. First, you’re assuming that tax revenue would decrease as a result.

As result of what? No specific formula for the flat tax was given. If flat tax was set to the current tax rate of the lowest paid worker, revenue would certainly go down, even if there was a modest increase in the total number of hours worked. In addition, if there was suddenly an increased incentive for everyone to work overtime, the law of supply and demand would force all wages down, because there would be more labor hours being offered by workers than the employers need.

You are assuming that the lost revenue from lower marginal rates…

What marginal rates? With a flat tax there are no marginal rates.

would outweigh increased revenue from increased hours worked, which is something you would have to prove.

The contrary is something you would have to prove.

Besides, the purpose of mandatory overtime is not to increase anyone’s wages. It is to discourage the use of overtime in lieu of hiring more employees.

Granting that premise, why is that necessarily a desirable thing? I get that certain individuals may not want to ever work more than an absolute max of 44hr/wk, but their are many others who have legitimate reasons to want to work more than that. Taking that option away imposing real hardships on some people.

Because that’s not how it would be used. There is no reason for employers to simply offer the option to those employees who “legitimately need it” (whatever that is). However without mandatory overtime pay, there is no reason for employers not to simple demand more overtime as a condition of employment. They don’t have to pay a penalty, so there is no reason not to use it.

continued…

 

[LeafByNiggle]

continuing:

Excessive overtime is bad for the people left unemployed

That depends. You are a assuming a fixed amount of work to be done. The economy is not a zero sum game. One of the results of increasing the cost of labour is that businesses will more quickly substitute towards increased machination and away from the use of labour, which can likewise increase unemployment.

That contest was tried in legend by John Henry. It did not end well for him.

That overtime = sacrifice of quality of life is a subjective judgement and not really something that your can generalize.

Not in every individual case, but overall, on the average, there is little doubt that excessive overtime takes people from their families, is detrimental to the worker’s health, and an affront to human dignity.

If I need to work 60hrs to make ends meet, and I’m only able to work 2/3s of that at one job, that requires I take on the additional hassle of juggling a second job, increasing commute time, time spent actually searching for and interviewing for the job, etc.

If a person needs to work more than 60 hrs to make ends meet, then there is something wrong that should be addressed differently. If the “ends” he needs to meet are making payments on his two SUVs or boat, maybe he should re-evaluate his needs. If the reason is that his job is so low paying that he cannot meet the bare requirements of life, then perhaps the minimum wage should be raised so that this does not happen. If the reason is that this person has exceptional medical bills that the average person does not have, then perhaps we should have universal health insurance. Since I don’t know which problem this hypothetical person has, I don’t know which solution is indicated. But forcing someone to work 60 hours while others stand idle is not the humane solution.

Ideally, gov’t would just spend less, but I do agree with you that is not practically likely to happen. I’m fully aware that my ideas aren’t likely to be implemented hence why I called it the “ideal” solution.

“Ideally” only if you are sold on the idea of minimal government. Many people do not consider that outcome to be so “ideal” which is probably why it is not likely to happen.