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Wealth and Taxes

johnhcochrane.blogspot.com

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Re: Wealth and Taxes

#31

Post by ZeroGravitas »

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…

What figures are you intending to quote from your link?

I was surprised by your comment as I'd seen data showing that Obama Vs Romney had a clear trend of richer people voting Republican (the crossover point was around 70K).

I knew educated people had swung towards Clinton and away from Trump, but I didn't think it was enough to change that overall result.

Looking at your source, the family income section seems to agree with my assumptions. Am I missing something?

Edit: I see there's a small blip in the detailed family income above 150,000 for combined dem/lean dem (though more identify as republican than democrat)

Re: Wealth and Taxes

#32

Post by HarryHirsch »

rayiner wrote: post #30
HarryHirsch wrote: post #18

Earlier quoted context omitted.

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…

> 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. That’s not what they’re talking about. They’re talking about t…

It's not that they didn't evade taxes in Europe. You can incorporate in Luxembourg, the Netherlands and Ireland are popular tax paradises as well. Easier when you deal in non-tangible goods, which is probably why until recently corporate tax evasion wasn't such a big deal.

It may well be that labour lost its negotiating power since the 1980s. The wealthy are as well connected as ever, but labour hasn't got a seat at the table any longer.

Re: Wealth and Taxes

#33

Post by rayiner »

MuffinFlavored wrote: post #28
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…

> 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. Why don't we make some more tax brackets up top and tax dividend + capital gain income more like income?

Three reasons.

1) Economists generally believe that it is inefficient to tax capital gains. (Dividend income is already mostly treated as ordinary income.) That is to say, raising the same amount of money through capital gains reduces economic activity more than doing so via say consumption taxes.

2) We are already on the high side of the OECD when you combine capital gains rates + corporate tax rates. (Corporate profits are taxed at both steps.) Here in Maryland, the combined state and federal capital gains rate is 28.25%, a hair below Sweden’s 30%. Sweden’s corporate tax rate is also about the same as the current post-Trump tax law. Personally, I’m uncomfortable being to the left of Sweden on anything.

3) As to adding more tax brackets, it just doesn’t raise enough money. Our tax brackets already go well into the top 1%. So you’re talking about targeting the top 0.1%. The total income of that group is about $1 trillion, or 10% of all income: https://inequality.org/facts/income-inequality. Even confiscatory taxes in that group aren’t going to raise very much money. According to 2014 data, those people paid an average of 27% in federal income taxes alone. (Excluding state income or other taxes). Doubling that, which would take their total taxes to levels far beyond what is typical in Western Europe, would raise maybe $250-300 billion. That’s assuming those people don’t head to Sweden to lower their taxes.

At all levels, the United States spends $7 trillion+ annually. Another $250 billion is a drop in the bucket. It’s a fraction of the $3 trillion per year or so that Medicare for All will cost, for example.

Re: Wealth and Taxes

#34

Post by Retric »

zozbot234 wrote: post #23
delusional wrote: post #14

Earlier quoted context omitted.

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

I'm not saying that all taxes have to be like this. There are other possible arguments for taxing assets, despite the fact that, prima facie, any tax on assets is double taxation and quite highly distortionary of the economy (far more than, e.g. taxes on pure rents, consumption taxes or taxes on labor income). But our existing taxes tend to account for these arguments reasonably well. So if you want to propose some e…

First, Art and collectibles are also given preferential tax treatment and have no kinds of double taxation.

Anyway, unrealized capital gains are untaxed as they compound, which might be ok except inheritance and gifts under 10m for couples are also untaxed creating a giant loophole allowing for very low lifetime tax rates.

It’s the same issues as companies keeping giant piles of cash offshore rather than issuing dividends. Tax loopholes create economic issues which a low AMT actually helps smooth out without creating excessive burdens. Another solution is to tax all capital gains and have an investment tax break of some kind, which allows earned income to be invested without excessive taxation relative to capital gains.

PS: Couples being assumed as people have 2 parents.

Re: Wealth and Taxes

#35

Post by war1025 »

ZeroGravitas wrote: post #31
3fe9a03ccd14ca5 wrote: post #8

Earlier quoted context omitted.

> 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…

What figures are you intending to quote from your link? I was surprised by your comment as I'd seen data showing that Obama Vs Romney had a clear trend of richer people voting Republican (the crossover point was around 70K). I knew educated people had swung towards Clinton and away from Trump, but I didn't think it was enough to change that overall result. Looking at your source, the family income section seems to ag…

I haven't looked into it enough to have any clear data, but I have always assumed that the distribution looks more like a layer cake than anything else.

If you are X, then the people in the social groups immediately below and above you are assumed to be Y. Mainly because people compare themselves to the people directly adjacent to them. So if you are different enough to no longer be part of the "in group", then you are likely to be part of the "out group".

Don't have any idea if there is truth to that or not.

Re: Wealth and Taxes

#36

Post by zozbot234 »

Retric wrote: post #34
zozbot234 wrote: post #23

Earlier quoted context omitted.

I'm not saying that all taxes have to be like this. There are other possible arguments for taxing assets, despite the fact that, prima facie, any tax on assets is double taxation and quite highly distortionary of the economy (far more than, e.g. taxes on pure rents, consumption taxes or taxes on labor income). But our existing taxes tend to account for these arguments reasonably well. So if you want to propose some e…

First, Art and collectibles are also given preferential tax treatment and have no kinds of double taxation. Anyway, unrealized capital gains are untaxed as they compound, which might be ok except inheritance and gifts under 10m for couples are also untaxed creating a giant loophole allowing for very low lifetime tax rates. It’s the same issues as companies keeping giant piles of cash offshore rather than issuing divi…

They're going to be taxed when the gain is realized. An asset is a durable good anyway, pretty much by definition so how can it matter when the tax is levied?!

Re: Wealth and Taxes

#37

Post by Retric »

zozbot234 wrote: post #36
Retric wrote: post #34

Earlier quoted context omitted.

First, Art and collectibles are also given preferential tax treatment and have no kinds of double taxation. Anyway, unrealized capital gains are untaxed as they compound, which might be ok except inheritance and gifts under 10m for couples are also untaxed creating a giant loophole allowing for very low lifetime tax rates. It’s the same issues as companies keeping giant piles of cash offshore rather than issuing divi…

They're going to be taxed when the gain is realized. An asset is a durable good anyway, pretty much by definition so how can it matter when the tax is levied?!

Not if it’s inherited. Buy stock at 10$ have it raise to 10,000$ and after death your children can sell it and keep the full 10,000$. Assuming your estate is worth only worth a few million.

Or if they maintain ownership and sell it in 10 years when it’s worth 20,000$ they are paying 15% of 10k gains which is 7.5% of the total gains from your purchase.

PS: For the ultra wealthily there are other games to be played. ‘No forgiven debt is taxable if it was discharged in any type of bankruptcy.’ Play the game correctly and a loss can be deducted from both your and your parents future incomes. While gains are taxed normally.

Re: Wealth and Taxes

#38

Post by elfexec »

rayiner wrote: post #7
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…

> 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…

> 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.

Our tax codes were written by people working for the wealthy. Our tax codes make a deliberate choice for a reason.

> That's why almost every tax code in the developed world has that feature.

You mean the wealthy in the developed countries like preferential tax treatment?

> I don’t think you can just assume the only reason for that is the super wealthy having disproportionate political power.

They may not be the only reason, but they are the major reason. In a capitalistic society, political power is subservient to and works for those who have and control capital.

The tax code didn't write itself. Who do you think the tax code was created by? Who do you think the tax code was created for? The janitors and street vendors?

Re: Wealth and Taxes

#39

Post by bronco21016 »

war1025 wrote: post #16
3fe9a03ccd14ca5 wrote: post #8

Earlier quoted context omitted.

> 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.

Are you mixing up red vs blue? I think most people tend to assume that as ones income increases they’re less in favor of a tax system that decreases income inequality.

Re: Wealth and Taxes

#40

Post by rascul »

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

Could you elaborate on this? I'm having trouble reaching the same conclusion from the link you provided.

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