What to do with Tiger Woods tax money?

[Moses]

Saw a news program last night where it was mentioned that Tiger may already have paid nearly half a billion dollars in taxes so far. Three pundits started to argue about Tiger's tax burden. The first said that since Tiger was well on his way to becoming professional sports first billionaire, his taxes were far too low. Nobody really needs that kind of money.

The second guy, a conservative argues that no individual ought to ever pay half a billion in taxes. It was an obscenity and essentially Tiger was being burdened with an inordinate tax load. He is being punished for his success.

The third guy calmly stated that most studies estimate tax usage efficiency at about 60%. When you send $1 to Washington, by the time your money is spent on actual goods and services, about 60 cents is left. Administrative inefficiency eats up all the rest. In contrast, Tiger's personal use of his own money is 100% efficient is stimulating the economy. If Tiger is greedy and packs all his money away, there is more money to lend, interest rates drop and we all benefit. If he spends wildly, he directly supports sales and production. In short, it's hard to imagine anything Tiger could do with his money that would not benefit society more than giving it to the government. He made a compelling argument that taxes ought to be kept at a bare minimum to support essential services. What do you think? Let Tiger keep his money?

[motion]

Moses, our government survives off of taxes from the wealthiest people. They don't survive off of the $500 per year that the lower class pays per year in taxes. I'm sure Tiger is doing just fine with the $80 mm he has left over each year after paying taxes.

So, what becomes of that 40% that is "wasted" in the government? Is that money stuffed under matresses never to be seen again? I'm pretty sure it makes its way back into the economy. Prolly no different than if Tiger had kept it and spent it.

[Moses]

Originally posted by motion

So, what becomes of that 40% that is "wasted" in the government? Is that money stuffed under matresses never to be seen again? I'm pretty sure it makes its way back into the economy. Prolly no different than if Tiger had kept it and spent it.

By "wasted" money, I usually think of money spent when no valuable product or service is provided. For example; if the tax code were simplified, thousands of accountants would be put out of work. Many of them would then find work providing products or services to the marketplace. Sure, giving a government worker a paycheck to process paperwork stimulates his personal economy, but gives the taxpayer little value. If more of our tax dollars found their way to actual goods and services (road building, SSI, Medicare) we would all benefit.

[s_wilwerding]

Moses, you need to read Capitalism and Freedom by Milton Friedman. It was written in the 50s, but it talks about the role of government in a free society.

In macroeconomics, there is a term called "deadweight loss", which is the 40% of tax money that you call wasted. For every dollar Tiger gets to keep (and subsequently spends), there is a multiplier effect, because the person Tiger gives the dollar to spends the same dollar, and that person spends the dollar, etc.. What you really find is that one more dollar in the economy actually adds something like 3 or 4 dollars, depending on the multiplier effect. So, 40% of that half a billion dollars that the government keeps is a deadweight loss, meaning that it has no multiplier effect, which means that government is in effect taking roughly one billion dollars out of circulation (40% * 500 million * 4).

[Superman]

I need to run off to a meeting, but I can see that Wayne has probably been wondering how long it will take Superman to find the OT Forum. I'll try to stay away for all your sakes, but here is some food for thought. Our construction contracts have two components. "Design" and "construction." One might suggest that since no construction occurs under the "design" budget, that this money is wasted. On the other hand, I'm not sure you want us building an international airport without designing it first.

You all do paperwork. If we reduce your business to just direct customer contact, and assume that all the supporting efforts are wasted resources, then your business will skin its nose on the sidewalk and then be trampled by the competitors that continue to focus on the administrative necessities.

You might be aware that I am pretty disappointed at the ignorant government-bashing I hear. All government-bashers are either deliberately self-serving political game players, or they are OUTSIDE the public policy making arena, guessing and being suspicious about a process they do not understand. Here is some more food for though:

Goverment is not THEM. Government is "us." If that's not true for you, then discuss sports, not politics.

[lendaddy]

"I am pretty disappointed at the ignorant government-bashing I hear"

Sup, I would say we are in less than ignorant, good company.

"Society in every state is a blessing, but government, even in its best state, is but a necessary evil; in its worst state an intolerable one; for when we suffer or are exposed to the same miseries by a government, which we might expect in a country without government, our calamity is heightened by reflecting that we furnish the means by which we suffer."
-- Thomas Paine, Common Sense, 1776

[Moses]

Originally posted by Superman
Our construction contracts have two components. "Design" and "construction." One might suggest that since no construction occurs under the "design" budget, that this money is wasted. On the other hand, I'm not sure you want us building an international airport without designing it first.

But imagine this, Super; Your construction company has a wildly inefficient CFO and financial department. You start with a $10 million budget, but by the time the money is distributed to the design and construction departments they share only $6 million. Thats what we're talking about here.

Big government inefficiencys are legendary. To point it out is not "anti-government". It seems to me that there are two distinct reasonable approaches to this colossal waste of resources. 1) Understand that government is by nature wasteful and inefficient and run the government on the smallest budget possible. 2) Find creative ways to increase the efficiency of government.

My view is this: If goverment waste was controlled, we would have a remarkable windfall of resources to address important issues like SSI, healthcare for the uninsured, energy research, etc.

[motion]

I still don't get it... if the government spends $50,000 on a toilet seat, doesn't the contrator receive that $50k, then distribute the money to the CEO, employees, property manager, sub-contractors, suppliers, fuel costs, etc. ?? It all ends up in the economy anyway. I don't understand why when the government wastes the money, which I have no doubt they do, that money doesn't end up in the economy in some shape or form.

[speeder]

The money that you send the federal governmentin taxes all gets spent, on salaries for govt. workers, (the fed is a huge employer), benefits for same workers, most of it goes to the military, (whether you happen to consider this a bloated waste or a lean, mean fighting machine), projects and services for its citizens, and don't forget the HUGE interest payments on the federal deficit that the current occupants of the White House are running up. That is what all of you anti-govt. waste Republicans should be focusing on, not Tiger's tax bill. (The poor guy).

"Deficits don't matter. Reagan proved that". Dick Cheney

There is Bush-enomics in a nutshell, let the little people (babies) pay for it.

Efficiency in govt. is a good thing, no doubt, we should hire those buyers from Walmart who beat down the suppliers in Bangladesh for polo shirt prices to do all govt. bidding. Halliburton would be focked, but we would eliminate a lot of waste.

[ronin]

Originally posted by s_wilwerding
Moses, you need to read Capitalism and Freedom by Milton Friedman. It was written in the 50s, but it talks about the role of government in a free society.

damn, you beat me to it. my prescription is usually "read the first two chapters and call me in the morning"

[s_wilwerding]

Originally posted by motion
I still don't get it... if the government spends $50,000 on a toilet seat, doesn't the contrator receive that $50k, then distribute the money to the CEO, employees, property manager, sub-contractors, suppliers, fuel costs, etc. ?? It all ends up in the economy anyway. I don't understand why when the government wastes the money, which I have no doubt they do, that money doesn't end up in the economy in some shape or form.

Look at it this way. Let's say you have a purely market economy - no government at all. That means the only way to make money is by buying and selling goods and services. With no intereference, this market economy would be subject to pure supply and demand, and would tend equalize itself to provide the most benefit for the most people.

Now, introduce government into the equation and let's say that they tax people 50% of their income. That means that I can only buy half as many things as I used to buy, which means producers only produce half as many things, so they have to fire workers and cut capital investments, etc. Now, if the government did nothing but distribute money back into the system, like in subsidies, then everything would operate as before, because the government is taking up the all the buying that the consumer used to do.

But the government doesn't just give all the money back - it has to support the enormous bureaucracy. Which means that the consumers are buying less, producers are producing less, and government is not taking up all the slack that the consumer used to provide. Which means that there are suboptimal number of transactions occuring.

The problem is that the bureaucracy portion of the government takes money in but doesn't produce anything. You could argue that you're purchasing garbage removal services or street repair services from the government, but what are you buying from the people who administer social security? What service are they providing you?

I think you misunderstood my money multiplier analogy, or I didn't explain it correctly. A dollar spent in the private sector will "seem" like three dollars in the economy. That actual supply of money is still only one dollar, but, by exchanging that dollar for goods and services over and over, the one dollar's effect is multiplied.

But when the government takes in a dollar and doesn't really give anything back in the form of exchange of goods and services, that multiplier effect doesn't hold. The dollar supply is still the same, but the exchange of goods and services is lower than it would normally be. The difference between the optimal level of transactions and the level of transactions under taxation is called deadweight loss.

[lendaddy]

Excellent Steve, why don't they teach this stuff in schools?

[s_wilwerding]

Originally posted by lendaddy
Excellent Steve, why don't they teach this stuff in schools?

They do - it's called macroeconomics. That's where I learned it.

My macro teacher was an economic advisor in Reagan's administration, so he obviously was a little biased. Maybe that's why I know so much about negative effects of taxation

[lendaddy]

Well I was blessed with our "excellent" public school system. I doubt any of my teachers even knew what macroeconimics means. No I am not kidding, we got one class on government and it was basically a love fest on entitlement programs. But on the upshot, I got to take several classes such as "I can" and "social skills". Ahhh thanks NEA.

[turbo6bar]

The scale of gross waste and misuse of dollars by the US government makes everyone else look like a saint.

When I worked for an environmental firm as a co-op, I had to handle a wastestream survey for a Navy base that was closing less than a year after I did the study. Not only was the work supposed to be done by the Navy's own environmental people (incredibly lazy people), but the survey served virtually no purpose on a base that was in the midst of being closed. Total pricetag: $110k. It was an absolute waste of tax dollars.

No one will disagree that despite the fact the dollars were distributed back to the economy (partly through my paycheck), it should have been used more wisely. What's wrong with the taxpayer getting some bang for the buck instead of getting the shaft?

As far as Tiger's taxes, I don't agree with the conservative or the liberal. The liberal says you make too much. You make too much money to spend, so why don't you give it to me, and we'll spend it for you... The conservative, well, he would just as well have Tiger pay zero taxes.

motion, why should we tolerate wasteful spending? If they are going to waste money, why won't they just give me a tax refund and let me waste it on Porsche parts. It goes back into the economy right? I could sure as he!! find better ways to spend $50k than on a d@mn toilet seat.
Jürgen

[speeder]

Steve answered before I could. They do teach this philosophy in schools, (economics not a science), mostly by right-wing instructors such as Steve's.

You guys have not answered the question of how govt. actually "wastes" these dollars, where do they go?

And don't answer, "to buracreacy", no points for this answer. This is what would be characterised as a "political answer", tell us where the $$ went. Guess if you have to.

The truth is that government spends $$ providing services, including the workers in the social security office, they are administering social secutity, for chrisakes, you guys would not do well in my class. And all of the $$ gets spent, I am sure of it.

The reason that economics is not a science is because one cannot isolate causalities and results, the best that economists can do is honestly evaluate trends and conditions and it will always be subjective to a degree. In a household or a business one can isolate all economic conditions and cost/benefits, but not globally. This does not mean that numbers do not exist, only that they can be manipulated. The Tiger multiplier is an example, truthfully his extra $20-30 million @ year in a taxless land would go mostly to entertainment lawyers and agents who would donate much of it to Democratic candidates, is that what you really want now? (Tiger earns ~$78 million @ year in prize $$ + endorsements/use of his name).

[tabs]

Bob Hope invested every dime he had in land in the San Fernado Valley, for Christs sake he even owned the land where KNBC stands in Burbank. I made him Mega Wealthy...yet today all he owns is a 6 foot plot of land in the cemetary.

[ronin]

like I said, Denis, read the first two chapters of "Capitalism and Freedom" and call me in the morning

[lendaddy]

You guys have not answered the question of how govt. actually "wastes" these dollars, where do they go?

I thought Steve answered it quite well. It's a matter of economic impact. I think you are assuming the "money pie" is static and hence the same amount of dollars just keep trading hands. This is very untrue, a dollar spent in the private sector can lead to the creation of new wealth and even new markets altogether. A dollar spent on the government red tape creates nothing.

[s_wilwerding]

The main point of Capitalism and Freedom is whether you believe that government should be paternalistic or whether people should have as much freedom as possible. Those two things are mutually exclusive. I think Dennis comes in on the side of paternalism. I come in on the side of freedom.