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Wealth and Taxes

johnhcochrane.blogspot.com

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Re: Wealth and Taxes

#11

Post by rayiner »

This criticism of Saez and Zucman is extremely important. The media has latched onto their studies because it fits certain talking points. But their conclusions are far from universally accepted among economists.

More importantly, regardless of what side of the aisle you are on, you have to appreciate that these measurements are not simple, and are based on choices that are not obvious. Saez and Zucman, for example, exclude transfer income like the earned income tax credit from income. Under their methodology, even a very redistributionist economy, such as one with a high guaranteed minimum income, would look unequal because those transfer payments aren’t included in income.

How you measure things changes the results. Measuring pre-tax income shows inequality growing. Measuring income after taxes and transfers shows it growing slower. Measuring consumption shows it more or less stable since the 1960s: https://voxeu.org/article/consumption-and-income-inequality-.... There are good reasons to consider each of these measures. (Though I’d argue that measuring consumption is the most relevant to every day well being.)

Re: Wealth and Taxes

#12

Post by hash872 »

Retric wrote: post #3

This completely misses the political angle. Someone with 1 billion in liquid assets can affect the political landscape more than 1,000 people with 1,000,000$ in assets. Similarly to how someone making 50 million per year has more than 1000x the disposable income of someone making 50k/year. That’s what’s corrosive about wealth inequality. It’s why the marginal tax rate declines at very high incomes. It’s not about doc…

1. Changing how campaign contributions/PACs function seems like a more reasonable way to change this than simply pursing a quasi-communist means of dragging wealthy people down, in the hopes that with less money they'll have less influence over the political system. I'm kind of sympathetic to 'wealth taxes will give us more income for programs to better society', but when it turns out to outright retributive 'taking money away from some people is an aim in and of itself', I get pretty concerned. No societies that are explicitly & punitively about punishing the wealthy seem to function particularly well

2. If wealthy people like the Koch brothers are going to be taxed anyways, they may spend more of their wealth on campaign contributions simply because they'll lose the money either way. If it's 'use it or lose it', why not keep spending more on dark money PACs or whatever?

Re: Wealth and Taxes

#13

Post by rayiner »

HarryHirsch wrote: post #10
rayiner wrote: post #7

Earlier quoted context omitted.

> That’s what’s corrosive about wealth inequality. It’s why the marginal tax rate declines at very high incomes. It’s not about doctors vs landscapers because doctors don’t have political power relating to wealth. Tax rates decrease at the very top of the income spectrum because our tax codes make a deliberate choice to preferentially tax investments and capital gains. You’re assuming that choice is the result of “co…

Already the Brookings Institution (center, center-left, center-right, depending whom you ask) disagrees: https://www.taxpolicycenter.org/briefing-book/what-effect-lo...

Brookings tends to be mainstream American Democrat, which on tax issues is solidly to the left of the developed world consensus. (The US is the highest in the OECD for how much of tax revenue it derives from progressive taxes. Democrats are seriously proposing wealth taxes, which are unusual in Europe and were recently eliminated in France and Sweden.)

Here is an interesting article on NPR on a politically diverse set of economists agreeing that corporate and income taxes should be eliminated: https://www.npr.org/sections/money/2012/07/19/157047211/six-....

Re: Wealth and Taxes

#14

Post by delusional »

zozbot234 wrote: post #9
Retric wrote: post #3

This completely misses the political angle. Someone with 1 billion in liquid assets can affect the political landscape more than 1,000 people with 1,000,000$ in assets. Similarly to how someone making 50 million per year has more than 1000x the disposable income of someone making 50k/year. That’s what’s corrosive about wealth inequality. It’s why the marginal tax rate declines at very high incomes. It’s not about doc…

The article is definitely not "missing" the political angle; that part is addressed. The point is that it's indeed a question about politics , not economics. By advocating that people having 1 billion in assets should have some of their assets taxed away, you're essentially saying that our political processes are so screwy that on average , someone with say, 1 billion in assets can be expected to use the flaws of our…

Why does a tax have to be proportional to "real, actual damages"?

Re: Wealth and Taxes

#15

Post by lend000 »

There are definitely problems with most wealth tax proposals, but I think the author understates the generational differences in opportunity that emerge from massive wealth inequality. As I stated in another thread, perhaps the best solution would be to combine the two for a wealth-based income tax. If you're already worth 20M, should you be paying a higher rate on your 500k in interest than if you just sold your first company for 500k and previously had nothing? I think that's a reasonable way to address income inequality in the long run without forcing people to liquidate assets, especially those like Elon Musk who have most of their wealth tied into companies they actively manage or people whose entire net worth is tied up in historical family properties.

The current system is broken, but mostly because the income/capital gains tax/AMT need to be graduated on a far different system than today. Right now, making 510k places a single person in the top federal tax bracket, while there are people making 10,000 times that some years. If there isn't a high bracket that is rarely achieved in practice (10B+/year for example), then the brackets are probably broken. Right now we have a sharp cliff where it is very difficult to become a millionaire, but once you get a few million it becomes far easier to multiply wealth.

Re: Wealth and Taxes

#16

Post by war1025 »

3fe9a03ccd14ca5 wrote: post #8
war1025 wrote: post #4

Earlier quoted context omitted.

> This completely misses the political angle. The political angle that your comment does play to is the reason why many people find the "income inequality" argument rings hollow. The piss-poor are too caught up trying to survive to have much of a political agenda. Often the people on the picket lines are in the income classes of the "doctors" in your example. Sure they don't have near the influence of a robber baron,…

> The piss-poor are too caught up trying to survive to have much of a political agenda. With all due respect I don’t think this is true. Besides, as income level goes up, people are more likely to be a blue voter than a red voter[1], a fact people have a hard time believing. Arguably 2016 was the poor, lower middle class (one of the least represented demographics in America) rising up and rejecting globalism. They af…

> as income level goes up, people are more likely to be a blue voter than a red voter

That's precisely my point. Income inequality is a Democrat talking point.

Re: Wealth and Taxes

#17

Post by forrestthewoods »

Question for the group.

Working backwards, what percent of GDP do you think should be taxed by the local+state+federal government? Relatedly, what % of GDP should be spent by the government each year?

Right now the US spends 36% and taxes 32%. That.. seems pretty reasonable to me? Maybe a little high tbh. I definitely don't think the government should be spending more than 50%.

I'm curious what other folks think. Working backwards, what should total spending/taxes look like? Then how do you get there?

Re: Wealth and Taxes

#18

Post by HarryHirsch »

rayiner wrote: post #13
HarryHirsch wrote: post #10

Earlier quoted context omitted.

Already the Brookings Institution (center, center-left, center-right, depending whom you ask) disagrees: https://www.taxpolicycenter.org/briefing-book/what-effect-lo...

Brookings tends to be mainstream American Democrat, which on tax issues is solidly to the left of the developed world consensus. (The US is the highest in the OECD for how much of tax revenue it derives from progressive taxes. Democrats are seriously proposing wealth taxes, which are unusual in Europe and were recently eliminated in France and Sweden.) Here is an interesting article on NPR on a politically diverse se…

That NPR article is a very strange collection.

# 2: End the tax deduction companies get for providing health-care to employees.

Right now, large employers receive a group discount from whatever insurance provider they choose. So to bring down healthcare costs in the US, which are 4 times that of the civilized world, this motley crew of economists suggests to eliminate the group discount. That'll work.

# 3: Eliminate the corporate income tax.

Yes, Joe Plumber's firm pays corporate tax in PA, but any multinational with a decent lawyer pays no tax anywhere. Incorporate in Bermuda, license the IP. In the interest of fairness one could abolish corporate tax, but one could also come down on tax oases. Why isn't that even suggested?

# 4: Eliminate all income and payroll taxes

We are supposed to have a consumption tax instead. The wealthier you are, the more likely are to invest. Less wealthy people do not have that luxury, what comes in goes out that month. It seems to be an attempt to shift the tax burden away form the politically connected class.

It's not convincing at all, there's too many aspects missing from the discussion to be taken seriously.

Re: Wealth and Taxes

#19

Post by larnmar »

Retric wrote: post #3

This completely misses the political angle. Someone with 1 billion in liquid assets can affect the political landscape more than 1,000 people with 1,000,000$ in assets. Similarly to how someone making 50 million per year has more than 1000x the disposable income of someone making 50k/year. That’s what’s corrosive about wealth inequality. It’s why the marginal tax rate declines at very high incomes. It’s not about doc…

So should we tax people based on their political power? A heavily-read blogger might have thousands of times more ability to affect the political landscape than an eccentric billionaire. If you were to do a scatter plot between wealth and ability to affect the political landscape I believe you’d find they were correlated but not that heavily; the things that give you political pull include charisma, eloquence, and gregariousness.

If we are concerned with cancelling out the ability of the wealthy to influence politics should we not also be doing something about charismatic individuals?

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