The Use of Tax Money

[guywithashovel]

Something that someone else said in the thread about the Obama/Joker situation got me to thinking about this. Someone brought up Cash for Clunkers and described it as taking money from people and giving it to others (if I understood correctly).

I think a fairly good case can be made that programs like Cash for Clunkers take money from the tax payes and redistribute it. However, what I'm wondering is, where do we make the distinction between what is and isn't a redistribution of money? In other words, couldn't the same allegation be made about virtually any program, infrastructure, etc. that is paid for with public money? What about public schools, public libraries, public roads, etc.?

[Boozy]

All tax systems involve redistribution of money.

The only question is how much to tax and how much to spend -- and on what.

[MystyGlyttyr]

Isn't going to the store to buy a loaf of bread taking money from one person and giving it to another?

[Boozy]

Yes, but the person paying is getting the loaf of bread, which is worth exactly what they paid for it (in Theoretically Perfect Free Market Land). The loaf of bread is a form of wealth; therefore no wealth is getting redistributed.

[Fashion Lad!]

NO NO and NO!

How is it just redistribution of wealth when they are earning the money and providing us with a service? No, that is not redistribution of wealth. A teach provides a service, they teach kids, we pay that teacher with our tax dollars. The teacher then pays income tax on that money that they earned. Same can be said about people who do construction for the government, i.e., roads, bridges and such. They are providing a service, we are paying.

Cash for clunkers is redistribution of wealth because the government basically said, "we will give you up to $4500 to use on a newer more fuel efficient car, you do not have to pay this back. Shit, you don't even have to earn it." (I paraphrased). So, people who got new cars, got $4500 from the government for virtually nothing. They did not have to do work. They do not have to pay this back. The government basically gave them a check for $4500 to use on a newer more fuel efficient car.

Redistribution in Economics is the theory, policy, or practice of lessening or reducing inequalities in income through such measures as progressive income taxation and antipoverty programs.

(Trust me, I have major issues with the progressive tax system as well.)

[AdminAssistant]

Actually, you could say that the people who participated in the Cash for Clunkers program "sold" their old cars to the US Government for up to $4500. It was an incentive program to boost the economy, in particular the car industry, and get a lot of low-mileage vehicles off the road. While I would have liked it if they'd worked out a way to salvage parts in the process (less waste), I don't have any major problems with the program.

It goes without saying that many of us "servants of the state", as it were, are under-compensated by the government for the services we provide. We also get the thrill of knowing that if the state government goes under, as it is threatening to here, we'll be furloughed.

[Fashion Lad!]

Actually, you could say that the people who participated in the Cash for Clunkers program "sold" their old cars to the US Government for up to $4500. It was an incentive program to boost the economy, in particular the car industry, and get a lot of low-mileage vehicles off the road. While I would have liked it if they'd worked out a way to salvage parts in the process (less waste), I don't have any major problems with the program.

Excellent point! However, the government still used my money to buy a product. I don't see a return on my money. They're not going to pay me interest. Those bastards stole! And as far as student loans go, you pay those back. It's not something for nothing. But, you honestly did make me look at Cash For Clunkers in a different light. But, I got ripped off because I didn't buy a car and I won't see that portion of my taxes back. Even if that meant an extra dollar in my pocket if they didn't do it, it was still my dollar.

[radiocerk]

Well, unfortunately, once the government has the money, there's nothing we can do about it. Personally, I'd like to see tax money no longer given to special interest groups, with one at the top of the list : the Boy Scouts.

[BlaqueKatt]

Personally, I'd like to see tax money no longer given to special interest groups, with one at the top of the list : the Boy Scouts.

Sadly the main reason the boy scouts do get federal money is that they are considered a "para-military" organization. If you reach the status of eagle scout-you receive a congratulatory certificate from branches of the armed forces, and your scout rank does transfer into military rank upon enlistment. Most enlisted start out as an E-1 rank(private) and paygrade, Eagle Scouts start out as E-4 rank(specialist) and paygrade which that rank advancement usually takes an E-1 about 2 years to achieve.

[BroomJockey]

and your scout rank does transfer into military rank upon enlistment. Most enlisted start out as an E-1 rank(private) and paygrade, Eagle Scouts start out as E-4 rank(specialist) and paygrade which that rank advancement usually takes an E-1 about 2 years to achieve.

That's interesting. I don't know if we've anything directly equivalent to the Scouts in Canada, but we've Air Cadets, which get that perk, but they're very obviously military. I wonder how many parents actually think about the implications of enrolling their kids in scouts.

[Rapscallion]

Excellent point! However, the government still used my money to buy a product. I don't see a return on my money.

The benefit isn't necessarily a direct amount in your pocket.

Cars that are more fuel efficient mean that there will be less noxious gas in the atmosphere than there would be without that program in place.

The stimulus to the economy means that car manufacturers and sales people can then spend more, and money cycles around in a healthy economy, and thus you will have more customers (either as a business owner to earn you more or as an employee to allow you a better chance of a pay rise or continuation of employment etc).

Fuel efficient cars mean that the oil supplies will last longer, so you'll be able to enjoy the benefits of this finite resource for longer, or your descendants will.

Rapscallion

[Fashion Lad!]

I'd be willing to argue against that. In fact, a lot of environmentalist will tell you that it is more eco-friendly to keep your current car than to go out and buy a moderately more fuel efficient car. Much of the carbon foot-print of a car is actually created during the production phase of its life and not driving. And the requirements for the new car's mpg were low. That's one of the biggest criticisms of the program.

Now, for the economy. The gains in the economy were artificial and moderate. Most economists will tell you that after the program ends, Monday, we'll see a significant decline in atuo-sales and it'll be sharp and painful. The retail segment was down again but the auto-industry was up due to government intervention that is not sustainable. We delayed the inevitable, basically.

Money doesn't come out of thin air, contrary to what seems like popular belief.

[Rapscallion]

I'd be willing to argue against that. In fact, a lot of environmentalist will tell you that it is more eco-friendly to keep your current car than to go out and buy a moderately more fuel efficient car. Much of the carbon foot-print of a car is actually created during the production phase of its life and not driving. And the requirements for the new car's mpg were low. That's one of the biggest criticisms of the program.

Completely correct, but the new cars are ones that are already produced and just taking up storage space (or at least that's how it was over here), and taking off the ones that produce more crap will produce benefits for future generations or yourself.

Moderately more fuel efficient - depends on how more fuel efficient it is. My car is thirteen-years-old. I get about 32 mpg on average and can get over 40 (barely) on a long run. I could trade it in and get something that regularly gets about fifty, and the only reason I don't is that I can't afford - even with our own version of the cash for clunkers affair. (If I remember right, it's less than the US version, even with the exchange rate, though I don't know as a percentage of the cost of a car).

Now, for the economy. The gains in the economy were artificial and moderate.

Artificial, yes, but a natural economy is impossible to maintain without artificial influences - our central bank changes the tax rate to affect the rate of inflation, and while that's artificial it's a standard way of doing it. Artificial is irrelevant - more important is the length of time they are in place. Moderate - well, they existed, but it's not just the financial benefits as I mentioned elsewhere.

Most economists will tell you that after the program ends, Monday, we'll see a significant decline in atuo-sales and it'll be sharp and painful.

Predictions - I have my own predictions, but I can't say that mine are going to be any more accurate. Until we see the end result, we're not going to know if anyone is right.

The UK scheme lasts until March next year or until the money runs out. Over the term of the offer, I fully expect to see a bathtub effect of take-up - a load of people taking it up at the start because it encouraged them to trade up, and then it will bottom out for a few months, and eventually at the end of the scheme it will become popular again because some people will have saved up and are able to take advantage of it before it runs out. The UK scheme requires that cars have to be ten years old and in possession of the owner for at least a year before they qualify.

I don't know the full details of the US scheme. However, people who could have traded up because of the scheme will (for the most part) have done so by Monday. That leaves the regular car buyers (whose cars may not have qualified anyway) who are still going to be buying. I'd also say that the car industry cannot have sat on its hands in the meantime - they can easily look at means of profiting from the boost they've had. Aftermarket sales, for example - selling services from brand-name dealers is big business over here. Parts for damaged cars will still sell better because of the extra sales.

If they haven't done any proper planning and are just willing to sit on their thumbs and wait for another handout, then they deserve to die.

The retail segment was down again but the auto-industry was up due to government intervention that is not sustainable. We delayed the inevitable, basically.

Money doesn't come out of thin air, contrary to what seems like popular belief.

On the last part, I have to agree - the capitalist system has been based on confidence rather than hard facts for far too long. I suspect what we'll see is an adjustment in the economy rather than a crash - or at least that's
how I would term it.

Rapscallion

[Fashion Lad!]

I suspect the people who were planning on buying cars this year took advantage of the cash for clunkers program. We had that SUV boom, so a lot of vehicles were in fact eligible. The cars that qualified as an upgrade in mpg efficiency werenn't spectacular.

The last quarter of the year is going to be very harsh on car dealerships.

[Rapscallion]

It's pretty much a sale - there's going to be a rush at the start and end of it. Some people just have to save up and will make their existng vehicle last for as long as possible in case they need the cash for something else.

What were the criteria of the US version of the scheme?

Rapscallion