Tell me what would happen if we were completley out of debt .
What difference does it make to the average joe blow,I live about the same now as I did when Clinton had us debt free.
We have no sales tax in Oregon on anything, the people have to vote on it and it has to pass ,as for the federal tax I'm way below the poverty level,will that help ?

Mick -

Debt is insidious.  In the beginning of the cycle, it's great - you get to enjoy possessions and a life style that you, or the country, can't afford out of day to day income.  You can have gov't services that the gov't isn't paying for on its day to day income.

But as we all know, a day of reckoning comes when you have to repay that debt.

A nation can use tricks that an individual or a business can't use, since we people don't have access to the presses that print the currency.

So a country can simply print more money.  But since the money supply only represents the total value of a country's goods and services, each unit of the currency is worth less as the money supply increases.  That's called inflation, and devaluation of the currency.

That game can go on only so long, until currency becomes virtually worthless.  Remember how the Germans had to take, literally, a wheel barrow full of cash to just buy food during the 1920s and 1930s after WW I, when their economy was in the toilet.  The result was the attractiveness of the dogma preached by a radical upstart Austrian from the Munich beer halls, one A. Hitler.

So, to answer your question, the current U.S. situation probably doesn't mean much in the next few years, so for old farts like us, we'll probably get thru it.  But our children and grandchildren will have the piper to pay.

The history of income taxes in the U.S. is quite interesting, coupled with the eras in history that coincide.

First, there was never an income tax in the U.S. until the Civil War, when Congress first enacted a temporary income tax to finance the war.  The tax ended shortly after the war ended.  

The next income tax was enacted in 1913, as best I can recall.  So, except for that brief period during the Civil War, the U.S. had no income tax at all for the first 140 years (approx.) of our nation's existence.

Is it purely accidental that the greatest era of economic expansion occurred during this time of no income tax?  I don't think so.  Remember that during this century and a half, we grew from 13 colonies all on the East coast to a nation that spanned the North American continent.

Also during this time, the great businesses that employed Americans were born - our steel and railroad industries among them.  Great American shipping fleets ruled the seas of international commerce.  The Industrial Revolution steamed forward.

When Congress enacted the tax in 1913, it was ruled unconstitutional by the Supreme Court, leading to the passage of the amendment which allowed it, and then the passage of the permanent income tax in 1933.  Today we still have the 1933 law, amended and re-codified many times, but the basic philosophy of the graduated income tax is with us today.

Since 1933, we have endured the Great Depression, and wild economic boom and bust times.

The prosperity of the 1950s and 1960s can be validly argued to be a direct result of WW II, and the massive economic upheaval that the war spawned, as the nation returned from a wartime mindset and the drastically curtailed supplies of consumer goods that were put on hold as our factories produced war materiel.  We caught up with that demand for consumer goods during the 50s and into the 60s.

Since 1970, haven't things really gone downhill, in the long term view of things?  I think so.  How many recessions, followed by booms, followed by recessions have we endured in the last 40 years?

Just wonder, if you can, what life was like when, if you made a buck, you kept it, all of it.

The gov't ran on taxes from consumption, not from capital formation.  An income tax is a tax on capital formation.  A sales tax taxes consumption.

So long as a program exists to shield folks below a certian minimal level from any regressive nature of a sales tax, it's really the only way to go to ensure continued economic growth.

tldk1678 wrote on 12/14/10 at 05:46:33:


and how would the govt know what the correct "prebate" would be?  my grocery bill varies month to month, as does my cost of electricity?  what magical formula would the govt use to determine/control how much you spend or are supposed to spend on "necessities" do cigarettes count, junk food, fast food, alcohol, gasoline ( what if your commute is 40 miles and the average commute is 5 mile do you just get screwed for driving further to work, or if you have to change jobs. .. )  how does making it more expensive to buy goods in America incentivise companies to sell goods in America since as prices go up, demand will drop for goods??    

Jerry Eichenberger wrote on 12/14/10 at 06:28:57:


okay, here we go:

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recessions and booms are the economic cycle, they've been around way before America was around, steady growth is an illusion


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This never happens, you make a buck you must spend it on shelter, food, etc  . .   you don't get to keep it all, that's not how capitalism works, private industry taxes you in that way, their tax is called their profit


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I like this, too bad I don't think we'd agree on what the "minimal level" should be, to me it should be where you can make something of yourself and not just get by, so the current poverty level is way too low, you can barely exist from that, no hope means no risk taking means no growth mean stagnate life means depression means death.

Let me tell you about the lower rung of society.
They'll take their prebate and spend it all in one shot.  There'll be no using it only for the fair tax.  They'll live good that day and tomorrow they'll be back on the street with their empty hand out.

Vendors have the ability to tax or not tax individual goods or services.  That's were the burden should be based.

I feel sorry for the people in congress their cost of living keeps going up,but they do get a raise for it.Its official I got my S.S. papers today my cost of living hasn't went up in 2 years lucky me. Same old monthly pay check.The US postal works cost of living went up too they get a 4.6% raise in April.

Driller -

Like often happens, I didn't articulate the issue very well.

I didn't mean a VAT or variation in addition to income tax, I meant instead of our current high income tax rates, among the highest in the developed world.  I meant to say a VAT together with lessened income tax to foster capital formation, and to tax consumption more than savings.

For instance - I have cousins in Switzerland who operate a very successful business, and who are, by every observation, quite successful personally.

My cousin told me that his income tax rate is 15%.  Of course, Switzerland has a VAT in addiditon to the smaller income tax.  That's what makes sense to me.