This is the thing that galls me the most, believe it or not. My employer typically makes less than 10% margin on the products it sells. That means that for all the work that we do, the state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it? Now add on top of that the corporate income tax and other ways they're bled.
With all this in perspective, it's really hard to see why anyone would want to start a business.
Mostly they have made expensive labor contracts with public sector unions who in turn control the elections.
And by the way, despite the high tax burden California is still close to bankruptcy. They need more. Costs a lot to keep those unions fed.
The politically correct thing to believe is that California's budget woes are caused by those evil right-wingers who have prevented the state from collecting even more taxes. Heh.
> he state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it?
Seriously? Without a stable government enforcing property rights and the rule of law you wouldn't be able to conduct business reliably. Government provides the field business is played on, they have every right to a cut to pay for providing that field. Peace isn't free.
Does peace and a fair playing field require 30-40% of every productive person's income, or is that the result of special interests crowding out the core functions of government?
A little of both I'd say, but what you consider special interests other people consider interests. In a democracy there's always going to be disagreement about what's necessary and all good compromises leave everyone feeling a little unhappy.
Well, I will agree with you there--government generally leaves people feeling unhappy, which I why I prefer decentralizing it, letting people move out of the jurisdiction of a government that makes them miserable. That's the beauty of federalism and our Constitution. :)
I'd say it takes a good part of that. Some is direct: military, police, court, and prison spending accounts for a huge proportion of total government budgets, more than half. And some is indirect: there is only some level of inequality people will tolerate before there's rioting and seizure of property, so things like social safety nets indirectly serve to guarantee property rights by mollifying discontent.
That's a point a lot of people miss; redistribution of wealth to maintain acceptable levels of inequality are what maintain the peace. It doesn't matter if redistribution of wealth is right or wrong, only that it's a practical necessity to maintain a stable society.
I think the Federal government does most of those things. He's talking about state tax, I believe.
It's fair that everyone should pay taxes. It's ridiculous when the productive sectors of the economy get taxed heavily to subsidise non-productive sectors. Too many governments are approaching 50% of GDP - meaning half the country is working just to support the other half. This is madness anyway you cut it.
Half isn't getting paid from tax receipts for the other half. Everyone paying taxes is also getting benefits for what they put in. It's not as simple as just rich people paying for poor people. It's more that people kick in different amounts into the pool and then it's redistributed back out based on need. Wealth redistribution is necessary for a stable society.
I didn't say anything about benefits. I was talking about money.
All government services are paid by taxes of one kind or another, yes?
If 50% of the GDP is government spending, therefore, the other 50% is by definition non-government activity.
Half of the population is paying for the other half to live. It matters not that a public servant pays taxes - that money goes straight back into the government, and pays him back.
I disagree with you strongly that wealth distribution is <em>required</em> for a stable society. I would say that forced wealth redistribution leads to unstable societies, as it all degenerates into what is fair and unfair, of which everyones idea is different. As soon as the route to wealth becomes one of obtaining power and influence rather than hard work, you're on the road to Greece and riots in the streets. Or total collapse of government/society such as former communist countries, which were based by definition on wealth redistribution. The concept of fairness should apply only to being able to keep the bulk of the wealth created by onesself.
Government services are necessary for a stable society, no doubt. Government services in a lot of cases increase the wealth of society by providing natural monopolies such as roads, ports, police and defense. We all benefit from government services.
I'll put it into an analogy. 10 people are on a deserted island, and there are tasks to be done to survive, which is fish, collect coconuts and fresh water. If 5 people are collecting coconuts, fish and fresh water, and sharing it to the other 5, then it doesn't matter what the other 5 are doing, whether painting pictures, snoozing in the sun, formulating foreign policy or building rafts to invade the neighbouring island, you can't escape the fact that one half of the island is working to provide for the other half. When they invade the other island and find a fridge full of beer, the total wealth and benefits for the island go up, but 50% of the people are still living off the work of the other 50%.
Anyway you slice it, if you're working for the government in any way, you're getting paid by tax receipts. And when 50% of the economy is government services, one half of the economy is paying for the other half. It's not a perfect analogy but is intended to get people thinking about the size of government. The only exceptions are where governments own money-creating investments like net positive sovereign wealth funds, and they are few and far between, and usually identified by having low or no taxes.
You know the problem with simple analogies, they're simple, the world isn't.
> I didn't say anything about benefits. I was talking about money.
Of course you didn't because you think it's about money, but it isn't. So lets complicate your analogy a bit.
> 10 people are on a deserted island, and there are tasks to be done to survive, which is fish, collect coconuts and fresh water. If 5 people are collecting coconuts, fish and fresh water, and sharing it to the other 5, then it doesn't matter what the other 5 are doing.
It most certainly does matter because reality isn't that simple. If the other 5 people, in exchange for those fish, coconuts, and fresh water, also provide in exchange other necessary services to those workers such as medical care, law enforcement, and education then they most certainly are not parasites living off the backs of the productive as you wrongly imply.
It matters not whether you pay a private company via income or government via taxes if they are providing the same useful services to you; those services don't come free. The difference is a philosophical one of whether you have a choice in the matter. One half is not supporting the other, both halves are mutually supporting each other, the flow of money is irrelevant.
Your mistake is in wrongly saying the government workers are not doing anything productive or contributing in any way and that's simply not the case.
Collectivism tends to benefit the weak the most and the whole group overall while disadvantaging the strong. Individualism benefits the strong the most, benefits the collective some, and disadvantages the weak massively. As the strong are always going to be outnumbered by the average and the weak, it's only natural that any democracy tends to eventually slightly favor the collective rather than let the few dominate. But swing to far to either extreme and everything falls apart. You can't let the strong take too much or the collective rebels and you can't let the collective take too much or the strong rebel.
Redistribution of wealth through social policy maintains this balance and prevents the fall back to serfdom which is what happens when the strong get too much power/money and pass it down one generation to the next. Not taking too much and letting the individuals still accumulate a decent amount of wealth prevents the fall to communism which destroys any incentive to be productive. It's a balancing act, and it's not at all simple.
We're going to have to agree to disagree on this one, because I'm not into endless thread debates. I'm going to restate my thoughts, feel free to disagree, but this is to clarify my position one more time. Anyone who ever stumbles across the thread in the future can make up their own mind.
" they most certainly are not parasites living off the backs of the productive as you wrongly imply"
You have projected speech onto me, probably from what you think my political views are : that's not what I said at all. In my island example, I don't doubt that the other half of the island are doing something productive, I just said that, in order for them to exist, the half collecting the food and water have to provide for them. It's not a chicken and egg situation : the first half have to be productive before the second half can share in the results. The analogy is that one half of the population is creating things, people are paying money for those things, and the other half is living off the excess value or money created. Government services are mostly by definition a net consumer of money, this is obvious otherwise the government would be self-funding by now.
Again, I'm talking about money, not benefits. Of course people benefit from government services, however, I'm talking about the measurement of GDP : which is a measurement of money, not benefits.
At least we agree that you can't just take from the people who produce endlessly and distribute it around. And I'm a big supporter of social safety nets like welfare and medical services. I just don't like to see the government becoming larger than the private sector in any economy.
> Seriously? Without a stable government enforcing property rights and the rule of law you wouldn't be able to conduct business reliably. Government provides the field business is played on, they have every right to a cut to pay for providing that field. Peace isn't free.
Some states manage to do those things for a lot less than 9.5% plus income tax.
The US federal, state, and local govts collect more per person than most EU countries (even after you deduct defense) and we don't get anywhere near the services.
Partly that's because of our fear of "socialism". We'd prefer to give away $50 in subsidies, allowing people to buy some sort of private service, versus having the government provide it for $30. See: EU countries' national health-care systems versus our Medicaid+Medicare+SCHIP+etc.
> See: EU countries' national health-care systems versus our Medicaid+Medicare+SCHIP+etc.
You're assuming that the US govt can efficiently provide services. (Its payment systems can cut a check cheaply, which is what the "Medicare overhead" numbers measure, but can be susceptible to fraud. Note that despite rampant fraud, it's harder to win a dispute with Medicare than it is with private insurers.)
The US govt currently spends more per resident than EU countries do on healthcare yet manages to cover a much smaller fraction of the population.
That's why I wanted to give Obama free rein over existing govt healthcare, including all govt employees (state and local too), and maybe even employees of companies that get >80% of their revenues from govt contracts.
That works out to well over twice EU spending (per capita) on covered folk. Since the promise of govt healthcare is cheaper and better, in years 2-4, we cut the per-capita budget by 5% (which is a bit over 20%, or less than the 30% savings promised by single payer advocates). At the end of that time, we'll know whether the US govt can provide healthcare.
After all, it doesn't matter whether other contries can do it, it matters whether the US govt can do it.
> After all, it doesn't matter whether other countries can do it, it matters whether the US govt can do it.
If they can do it, we can do it too. The reasons that we're so bad at it now are because we're doing it wrong because so many people are opposed to the very notion of socialism. But I understand your wanting them to prove it first by ramping up slowly.
Actually, no, not for useful values of "can do it".
Consider Microsoft and Google. Microsoft has lots of smart people, but Google can do things that Microsoft can't.
Yes, Microsoft is capable of doing those, but in some very real sense, it can't.
It's sort of like Bill Gates' phone number. I know it in some sense (4 digits of area code, 3 digits of prefix, and then 4 more digitis), but not in any useful sense.
With all this in perspective, it's really hard to see why anyone would want to start a business.