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Economists Are Rethinking the Numbers on Inequality

economist.com

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Re: Economists Are Rethinking the Numbers on Inequality

#221

Post by rjduduhehs »

simonh wrote: post #214
cannabis_sam wrote: post #199

Earlier quoted context omitted.

Do you have any actual arguments or are you just trying to sow FUD? Cause you sound exactly like a concern troll. Not providing any substantial arguments against Piketty, just vaguely suggesting that there are problems with his argument, then changing the subject to what’s nitpicky or not.. Give us a concrete argument, and we can discuss if it’s nitpicky or not. What you are doing is leading people into the weeds, wh…

Aren’t we discussing an article which actually lays out these arguments, and references the papers with more detail? At least, I thought that’s what we were doing. Under those circumstances it seems odd to complain about a lack of such arguments having been presented.

Doesn't seem odd at all and I think the post you replied to was right. If it seems weird it's probably because you're used to discussions that aren't more substantial than concern trolling.

Re: Economists Are Rethinking the Numbers on Inequality

#222

Post by SgtBastard »

StacyRoberts wrote: post #187
StacyRoberts wrote: post #140

I read Piketty's capital. It's very long. My current best solution to the problem of capitalism is this: once a year the richest n people must divest themselves of all assets minus the median annual salary and start over.

Explanations for the down votes are appreciated. I've put a lot of thought into this.

For any arbitrary n, those clustered at the top will arrange their affairs to maintain the n-1 wealthiest person in society to avoid the reset. Giving away 100s of millions to keep billions makes rational sense - especially if you can arrange it to flow to your spouse/children/trust/charity you control.

In fact, you could game such a system by spiking a competitors net-worth right before the reset i.e. by suddenly buying a small, but significant chunk of their shares to move the market value on their shares.

What exactly have you thought about?

Re: Economists Are Rethinking the Numbers on Inequality

#223

Post by AnimalMuppet »

hundt wrote: post #203
AnimalMuppet wrote: post #197

Earlier quoted context omitted.

Well, dcolkitt was talking about imputed income in the context of tax advantages. I assumed (perhaps wrongly) that the subtext was that people who own houses should be taxed on the "imputed income" as if it were real income. That raised my hackles - perhaps wrongly. Still... there's something funny in the "imputed income" accounting. Let's say I buy a house for $500,000. I live in it. I don't pay rent, though the hou…

I think your example actually helps make the case for imputed income, because whether you happen to live in the same house you own has huge tax consequences, which doesn't seem optimal. Without imputed income you are incentivized to live in the house that you own, even if it is worth less to you than what you could rent it for, because that way you don't have to pay taxes on that consumption value. If you had to pay…

Right. But then you've changed the default from "not having to pay tax" to "having to pay tax". That is, far more people live in the house they own than rent out the one house they own and live somewhere else. Right now the 5% (say) who rent out the house they own get taxed, the 95% who live in the house they own don't. The change you propose would result in the 95% now also being taxed. That's fair, I suppose, but it's also the most drastic change you could make to create fairness. You could, for example, offer the 5% that the rent they pay could offset their rental income for tax purposes.

So why change it in the direction you propose? We're back at my initial complaint: This turns into "Saving money rather than spending it deprives us of the tax we would have received, so we'll tax your saving as if you had spent it. Don't own a cell phone? Pay us the taxes that would have been on your monthly bill anyway. Don't own a car? Pay us the registration fee anyway. Walk to work? Pay us the gasoline tax anyway. Don't drink alcohol? Pay us the taxes as if you did. Don't smoke? Pay us the taxes on the cigarettes that you could have smoked. Don't visit national parks? Pay us the entry fees anyway."

Do you see that that's insane? But if it's insane, why isn't "imputed rent" as something taxable insane?

Re: Economists Are Rethinking the Numbers on Inequality

#224

Post by sokoloff »

dcolkitt wrote: post #118
js2 wrote: post #98

Earlier quoted context omitted.

Housing is already taxed. In the U.S., property taxes are about 17% of government revenue. https://www.economist.com/finance-and-economics/2013/06/29/l...

True. But housing is also tax-privileged in other ways. Most notable is the mortgage interest on federal income tax. More subtle is the fact that the value of the imputed rent from owning your own home is not taxed. I.e. if you rent your home to someone else, you pay income tax on the rent you collect. But if you "rent to yourself" by owning your own home, you don't pay tax on this implicit form of income.

You also don’t get to claim 3.6% deduction of basis of the improvements (everything but the land) plus other rental related expenses if you live in it which you would if you rented it out. This has the effect of significantly reducing the tax owed on rented property throughout the course of ownership.

Similarly, rented property has an unlimited deduction on mortgage interest rather than the capped deduction available for owner-occupied housing.

Re: Economists Are Rethinking the Numbers on Inequality

#225

Post by chipotle_coyote »

thorwasdfasdf wrote: post #179
koheripbal wrote: post #121

Earlier quoted context omitted.

Conflating the top 1% with the ultra-rich is another big problem. If we assume that most people achieve peak earning years between 45-50 years old, then about 30% of people end up in the top 1% at some point in their lives.

this is a huge problem because if you're in the top 1% then you're probably also living in the top 1% most costly cities and towns (at least in terms of housing cost). take into account the much higher taxes and you'd only be doing a tiny bit better than the average person nationwide.

I think "a tiny bit better" underestimates how big the gap is between "median income" and "1% income." The median individual income for the US in 2019, from data I can find (on "Don't Quit Your Day Job," which uses census data rather than Social Security data), is $40,100; the average income is $48,380. The threshold to enter the top 1% is $328,551.

I live in one of the most expensive cities in the country (San Jose, CA) in terms of both cost of living and taxes, and I'm making well under that $328K level. And I assure you I am doing more than "a tiny bit better" than someone making under $50K in a metro area closer to the national median.

tl;dr: I really don't think anyone who's in "the 1%" is having a huge problem with their finances, unless they're staggeringly bad at money management.

Re: Economists Are Rethinking the Numbers on Inequality

#226

Post by CryptoPunk »

carlob wrote: post #69
xorfish wrote: post #50

Earlier quoted context omitted.

> not on income or cap gains Why does it matter how it is taxed? If the capital returns 4% and is taxed at a 30% rate, you will have the same effect as if the capital is taxed at a rate of 1.15%. I think the biggest injustice is that return of capital isn't taxed at the same rate as income from labor. Someone who earns $100'000 from labor and $50'000 from return on capital should be taxed at the same rate as someone…

Before income tax, nobody had any idea about who was making what. Fast forward 100 years and we still have no idea about who holds how much capital. Even if you disagree on a universal wealth tax (just like we have for income) there is an argument to be made that it is important information to policymakers. Other than that Piketty argues that larger wealth means larger returns (per unit capital) and that is a very st…

>>Before income tax, nobody had any idea about who was making what.

That's precisely why the income tax is socially harmful. It forces people to divulge intimate personal information to the state, under pain of imprisonment. It's nothing less than warrantless mass surveillance.

The government having this much information on people creates an information asymmetry in society that makes the state incomparably powerful relative to private citizens. This manifests as trends like the suburbs of Washington, DC being the wealthiest in the US, and seeing the most income growth in the US over the last 40 years.

Re: Economists Are Rethinking the Numbers on Inequality

#227

Post by chipotle_coyote »

koheripbal wrote: post #121
el_cujo wrote: post #40

This is kind of a touchy subject. I feel like a lot of people would balk at the idea of the top 1% not doing better and better, not because they have any extra insight into the topic but because to say this seems like you're defending the ultra-rich (and by extension attacking everyone else). In reality, even if the rich aren't getting even richer at quite the rate we thought, it doesn't mean you really need to have…

Conflating the top 1% with the ultra-rich is another big problem. If we assume that most people achieve peak earning years between 45-50 years old, then about 30% of people end up in the top 1% at some point in their lives.

As I replied to someone else in this thread branch, the threshold for entering the 1%, at least in terms of income, is nearly $330K a year annually. The plain reading of your last sentence is that about 30% of people make that at some point in your life, which... doesn't strike me as very plausible.

Are you talking about net worth instead? That's still an argument that 30% of people have over $10M in assets (in 2019 dollars) at some point in their lives, and that... also strikes me as a stretch, honestly.

Re: Economists Are Rethinking the Numbers on Inequality

#228

Post by empiricus »

StacyRoberts wrote: post #187
StacyRoberts wrote: post #140

I read Piketty's capital. It's very long. My current best solution to the problem of capitalism is this: once a year the richest n people must divest themselves of all assets minus the median annual salary and start over.

Explanations for the down votes are appreciated. I've put a lot of thought into this.

Did not downvote. But this solution would make the rich try to hide their true wealth, so basically it becomes picking randomly from the first 0.x percent. Also do you agree your solution has zero chances of ever being implemented?

Re: Economists Are Rethinking the Numbers on Inequality

#229

Post by JimboOmega »

simonsarris wrote: post #204
vanderZwan wrote: post #191

Earlier quoted context omitted.

> which does not need massive economic intervention to solve, but something entirely different (relaxing of building laws, etc). Nitpick: you're probably thinking of directly intervening with the economy through regulations and subsidies, but isn't disrupting the housing market technically going to be a massive economic intervention in practice? As in, kind of by definition? Also, I'm not sure if it's actually that e…

Well, I agree on both points, but "We should tax X [and maybe redistribute Y]" is very different from "We should de-regulate or fundamentally change Z", is all. It's hard to actually address Piketty's inequality at all if people think it spawns from something fundamentally different from land/real estate appreciation. > I'm not sure if it's actually that easy to change the laws surrounding housing Totally agree, but…

Couldn't we address the real estate problem by having (more) property taxes? I wonder how much impact prop 13 alone had on the problem (I also wonder how the US analysis would look with California subtracted)

Of course such taxes wouldn't automatically create housing, but it definitely disincentivizes hoarding it, and allows the state to capture more of the accrued wealth to redistribute it. It makes real estate look like a less enticing holding and would make people less entrenched in defending its value, etc.

Re: Economists Are Rethinking the Numbers on Inequality

#230

Post by JimboOmega »

js2 wrote: post #98
rayiner wrote: post #77

Earlier quoted context omitted.

But not the kind of capital people usually think about when railing about billionaires and wealth taxes.

Housing is already taxed. In the U.S., property taxes are about 17% of government revenue. https://www.economist.com/finance-and-economics/2013/06/29/l...

Except in California we had proposition 13, so that property taxes are severely hamstrung; I wonder how much impact that alone has on the overall analysis given the size of California as part of the US economy.

I really think we should bring them back but it's anathema. The usual argument has something to do with a little grandma living on a fixed income who suddenly can't afford taxes on the home she's owned for 40 years. (And not, say, a landlord who owns dozens of buildings, though it benefits him far more)

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