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Just the Facts: S&P's $2 Trillion Mistake

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Re: Just the Facts: S&P's $2 Trillion Mistake

#201

Post by varjag »

JeffL wrote: post #199
_delirium wrote: post #155

Earlier quoted context omitted.

How do you manage to get an effective 40% tax rate in California? I could see that as a marginal rate on the last few dollars, but you'd have to make in the millions to get there for your overall tax rate. For example, if you make $100k and take only the standard deduction, you'll pay $19k in federal taxes (19%) and $6k in California taxes (6%), for 25% total. If you include payroll taxes, that's another ~7.5%, so 32…

Total tax burden includes sales tax that you pay on what you spend, property tax, gas tax, payroll taxes, taxes on utility bills, dog license fees, etc. I don't think 40% is completely far fetched. Not sure how exactly one would calculate this, though, other than looking at taxes as percentage of GDP and maybe trying to fit yourself in there somehow based on your tax bracket as a ratio to other people. But with an av…

Lumping all fees and duties together is not what people normally assume. Usually, just the income tax is compared, as it is present in most economies of the world.

Here in Norway an income tax bracket of 50% for a well-off middle class family is fairly normal. On top of that, sales tax is 25%, gas is mostly made of taxes (about 2.5 times what you'd pay in the US) etc.

Still somehow there's less bitching about taxes (or gas price) per capita than you hear from overseas :)

Re: Just the Facts: S&P's $2 Trillion Mistake

#202

Post by varjag »

ams6110 wrote: post #170
_delirium wrote: post #155

Earlier quoted context omitted.

How do you manage to get an effective 40% tax rate in California? I could see that as a marginal rate on the last few dollars, but you'd have to make in the millions to get there for your overall tax rate. For example, if you make $100k and take only the standard deduction, you'll pay $19k in federal taxes (19%) and $6k in California taxes (6%), for 25% total. If you include payroll taxes, that's another ~7.5%, so 32…

If you count income taxes, sales taxes, property taxes, other "sin" taxes and various and sundry fees, it's a lot more.

It's a lot more in the places you compare against it then, too.

Re: Just the Facts: S&P's $2 Trillion Mistake

#203

Post by artsrc »

pessimizer wrote: post #125
jerf wrote: post #104

Earlier quoted context omitted.

It isn't our current debts that have people concerned. It's the combination of current debts and unsustainable future obligations, which are so large that they in fact can't be paid down by just raising taxes. Barring an adjustment in what they are, they grow to the point that they eventually consume 100% of the economy in something like 40 years in conjunction with interest payments, but of course they become comple…

It is a political statement. As the Gr.Grandfather comment said, our debts are denominated in dollars, and can be paid off instantly, simply by printing the money. The only reason we can't is because the interest rates on treasuries would go asymptotic if we did that, because investing in bonds denominated in a currency that has a history of doing that would be a risky thing to say the least. If the reason for the S&…

> if you're not investing in US treasuries, what are you going to invest in?

You could fund my mortgage. I pay 7% floating in a currency with a pretty good record of late. My property could halve in value and you would still get your money back, and I can fund the the loan from my current income.

I also can't just decide to not pay you without you being able to foreclose.

Re: Just the Facts: S&P's $2 Trillion Mistake

#204

Post by alnayyir »

varjag wrote: post #201
JeffL wrote: post #199

Earlier quoted context omitted.

Total tax burden includes sales tax that you pay on what you spend, property tax, gas tax, payroll taxes, taxes on utility bills, dog license fees, etc. I don't think 40% is completely far fetched. Not sure how exactly one would calculate this, though, other than looking at taxes as percentage of GDP and maybe trying to fit yourself in there somehow based on your tax bracket as a ratio to other people. But with an av…

Lumping all fees and duties together is not what people normally assume. Usually, just the income tax is compared, as it is present in most economies of the world. Here in Norway an income tax bracket of 50% for a well-off middle class family is fairly normal. On top of that, sales tax is 25%, gas is mostly made of taxes (about 2.5 times what you'd pay in the US) etc. Still somehow there's less bitching about taxes (…

You get a lot more for your money. Sweden too.

Re: Just the Facts: S&P's $2 Trillion Mistake

#205

Post by benmmurphy »

fauigerzigerk wrote: post #50

S&P's mistake is certainly incredibly embarrassing but apart from that I'm asking myself a much more fundamental question: Why is the ability to pay considered at all when it comes to the US? A country that is indebted in its own currency can theoretically never default on its nominal obligations. Not due to inability to pay at least. I don't think that credit rating agencies even try to pass judgement on the likelyh…

regarding defaulting on nominal obligations:

1) sovereigns have defaulted in the past when they've had the option to monetize their obligations. often a sovereigns debt will be heavily owned by foreigners and it is a politically better option to fuck the foreigners. 2) a monetization of debt is equivalent to a partial default. if you bought a bunch of securities so you could cash them in 10 years to buy 20 hamburgers but now you can only buy 10 hamburgers because the price level has risen faster than you expected then this is equivalent to a 50% partial default. however, bondholders would prefer a country monetizes before it partially defaults (all other things being equal) because then they don't take 100% of the burden of default.

but i think you are correct in that it is mostly willingness to pay. also, it is not just the congressman but treasury as well which came out and said it couldn't prioritise debt payments. treasury might be correct morally and legally but it doesn't inspire confidence in bondholders. :)

Re: Just the Facts: S&P's $2 Trillion Mistake

#206

Post by quellhorst »

_delirium wrote: post #155
alnayyir wrote: post #117

Earlier quoted context omitted.

Our tax burdens are not the lowest by any means. My total tax rate partially due to living in California (although it is mostly Federal) is ~40%. There are plenty of countries in Europe that would be happy to tax me less. My buddy in Singapore pays about 8% all told and he's in the same income range. The temptation to become an expat gets stronger as I earn more money. My sin is not being a fat cat living off capital…

How do you manage to get an effective 40% tax rate in California? I could see that as a marginal rate on the last few dollars, but you'd have to make in the millions to get there for your overall tax rate. For example, if you make $100k and take only the standard deduction, you'll pay $19k in federal taxes (19%) and $6k in California taxes (6%), for 25% total. If you include payroll taxes, that's another ~7.5%, so 32…

You could add in 8.5% for sales taxes. There are also other 'hidden' taxes like gas and property taxes.

Re: Just the Facts: S&P's $2 Trillion Mistake

#207

Post by vukk »

mynegation wrote: post #157
katovatzschyn wrote: post #126

From Naomi Klein's The Shock Doctrine: In February 1993, Canada was in the midst of financial catastrophe, or so one would have concluded by reading the newspapers and watching TV. “Debt Crisis Looms,” screamed a banner front-page headline in the national newspaper, the Globe and Mail. A major national television special reported that “economists are predicting that sometime in the next year, maybe two years, the dep…

Please have my upvote (like you need one). I will definitely include "the shock doctrine" into my "To read" list. I wonder if there's an opportunity for "open source" credit ratings. Numbers like GDP, trade deficit or proficit, exchange rates, national debt etc are available and someone could creates a method that software or website could use to calculate all that into credit rating.

I recommend reading Friedman's Free to Choose after reading The Shock Doctrine http://www.amazon.com/Free-Choose-Statement-Milton-Friedman/... (Friedman is the guy that Naomi Klein blames on the book)

Re: Just the Facts: S&P's $2 Trillion Mistake

#208

Post by vukk »

cooldeal wrote: post #184
katovatzschyn wrote: post #126

From Naomi Klein's The Shock Doctrine: In February 1993, Canada was in the midst of financial catastrophe, or so one would have concluded by reading the newspapers and watching TV. “Debt Crisis Looms,” screamed a banner front-page headline in the national newspaper, the Globe and Mail. A major national television special reported that “economists are predicting that sometime in the next year, maybe two years, the dep…

http://en.wikipedia.org/wiki/Starve_the_beast

http://en.wikipedia.org/wiki/Fiscal_Illusion

Re: Just the Facts: S&P's $2 Trillion Mistake

#209

Post by shahan »

fauigerzigerk wrote: post #197
shahan wrote: post #172

Earlier quoted context omitted.

Oh, I think I answered my own question. The lenders probably factor in inflation when they lend the US money. That would actually mean that the loans are in real money, and that there is no such thing as a nominal obligation. Anyone know if this is correct?

I'm not sure I understand your question correctly. There is definitely such a thing as a nominal obligation. When the treasury wants to borrow money, it conducts an auction to determine who gets to lend it how much at what interest rate. If, at the end of that auction, a particular lender agrees to lend the treasury USD 1bn for 10 years at a yield (interest rate) of 3%, you can calculate the exact nominal dollar amou…

Thanks for your answer.

> I'm not sure what happens in terms of formal default if a borrower deliberately and aggressively inlfates away its debt faster than lenders can react by demanding higher interest rates at the next auction.

This is the reason why I asked my question(s). Why would the borrower ever aggressively inflate away its debt, as opposed to gradually inflating it away? If there is no definite point of default, the US is either defaulting frequently, or can never default.

I wonder what the definition of default is, and if it's an event or a process.

Re: Just the Facts: S&P's $2 Trillion Mistake

#210

Post by vukk »

varjag wrote: post #201
JeffL wrote: post #199

Earlier quoted context omitted.

Total tax burden includes sales tax that you pay on what you spend, property tax, gas tax, payroll taxes, taxes on utility bills, dog license fees, etc. I don't think 40% is completely far fetched. Not sure how exactly one would calculate this, though, other than looking at taxes as percentage of GDP and maybe trying to fit yourself in there somehow based on your tax bracket as a ratio to other people. But with an av…

Lumping all fees and duties together is not what people normally assume. Usually, just the income tax is compared, as it is present in most economies of the world. Here in Norway an income tax bracket of 50% for a well-off middle class family is fairly normal. On top of that, sales tax is 25%, gas is mostly made of taxes (about 2.5 times what you'd pay in the US) etc. Still somehow there's less bitching about taxes (…

I hear a lot of bitching about food and gas prices for example here in Finland. Also very few people DON'T have a problem with some sort of bureaucrat, for example idiotic and incoherent health inspectors, bureaucrats deciding who gets subsidized etc.

The best way to deal with bureaucrats here is to catch them making a mistake and then using that to make them sign the papers. (Usually this involves following their orders until there is some kind of incoherence in them, and thus is costly if those orders involve eg. building/renovating something that is fine as is).

For some reason the favorite explanation nowdays is that the EU is in fault here, even though this crap has been going on before the EU existed.

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