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American Equity

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Re: American Equity

#291

Post by edbaskerville »

koolba wrote: post #20
jacquesm wrote: post #16

People already have a share in the GDP. That's what it is, the total domestic product, the sum of all the little parts. The problem is not that people don't have share in it (and this goes for every country, not just for the USA), but that they have a disproportionate share in it. Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that rai…

> Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that raise your taxes on the rich and lift up those that are at the lowest end of the scale. That will have a lot more effect than some fiction where you get to do a bunch of make-believe bookkeeping. Or go a step further do what nobody has the balls to do: tax wealth That's what all the…

I like the idea of a wealth tax.

The details will be difficult: how do you assess wealth with any semblance of accuracy, especially in the face of an increased incentive to hide it? I'd love to hear anybody's clever ideas to tax wealth in a way that catches cheaters. The biggest issue is what you do with wealth held overseas.

But even if the cost of catching cheaters is many billions of dollars of enforcement apparatus, it seems worth it. Of course, you create a new problem: avoiding corruption in a large enforcement apparatus chasing after people with the resources to easily bribe them. (But this problem is not unique to wealth taxes, and I don't think bribing the IRS is actually much of a problem—people just bribe Congress.)

There's another problem: wealth taxes would probably need a constitutional amendment in the U.S. From Article I, Section 2:

"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers..."

There's already an amendment to clarify that federal income taxes are OK. But wealth taxes will need their own amendment.

Conceptually, though, I totally agree: if the problem is unequal wealth, just redistribute the wealth directly to move toward a less catastrophe-prone distribution.

Re: American Equity

#292

Post by dcre »

balozi wrote: post #266
thaumaturgy wrote: post #165

Corporations have been operating under the mistaken belief that they are legally obligated to maximize shareholder returns for a couple of decades now, to the detriment in general of labor and the overall quality of goods and services provided. I would expect something similar to happen to here: this would incentive massive changes in attitude towards national infrastructure and services. Take NASA for example: it's…

I would really like to know which school produced the idea that maximizing shareholder returns IS NOT the primary imperative of any commercial enterprise. Note the vast majority of corporations are not public and their only shareholders are the individual owners. So, maximizing return on their capital and labor is not based on some "mistaken belief", it is a basic existential requirement. Show me someone that doesn't…

How about Luigi Zingales, professor of finance at the University of Chicago Booth School of Business and a former president of the American Finance Association.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004794

Re: American Equity

#293

Post by WalterBright »

vkou wrote: post #181
cperciva wrote: post #63

Earlier quoted context omitted.

Indeed. And saving/investing is important! It's not a coincidence that the industrial revolution happened in a country with a secure established rule of law such that people could make investments without worrying about losing them at the whim of a dictator. Much better to tax consumption .

More importantly, it happened in a country which forced people off their land at gunpoint, into urban poverty, where they provided a huge supply of cheap, fungible, and utterly disposable factory labor. But that would run counter to the neo-liberal narrative... After all, the rule of law serves to protect investments , not the peasant forced off his land. Where was the rule of law to protect said peasants? Perhaps th…

That happened as well in S. America, but S. America did not become a superpower. There's something else at work.

Re: American Equity

#294

Post by logfromblammo »

Retric wrote: post #230
enraged_camel wrote: post #227

Earlier quoted context omitted.

>>The 'problem' is banks are limited in what they can do with this money which ends up creating investment bubbles and other market distortions which hurt the economy overall. If you slowly transitioned banks so they could not invest this money over say 100 years the net result would not be harmful. Um, no. The type of investing you suggest includes the risk of losing the money. This doesn't work with commercial bank…

I think you misunderstood my comment. Banks are currently allowed to loan out a percentage of their deposits IE: they need to keep say 10% cash on hand and can loan say 90%. I am saying if your raise that percentage to 11% cash on hand not much changes. Then next year that becomes 12% cash on hand... until banks can no longer lend money. At no point in this process is physical wealth destroyed only shifting how loans…

If the reserve requirement is 10%, the banks actually loan 990%. That is not a typo.

Of the deposit account, they keep 10% in the vault/Fed, and loan out 90%. Of that 90%, they keep 10% in the vault (9%), and re-loan 90% of it (81%). Of that 81%, they keep 10% in the vault (8.1%) and re-loan 90% of it (72.9%). Sum the series, and the effect on the money supply from loans and the reserve requirement is to divide the vault cash by the reserve requirement to get the bank account totals.

Raise the requirement from 10% to 11% and the circulating money supply drops from 10 x vault cash to 9.1 x vault cash. Raise it again to 12% and that drops to 8.3 x vault cash. To keep things steady, you have to print extra money for the express purpose of putting it into reserves.

The de jure impact of the reserve requirement on the money supply isn't "not much"; it's actually huge. But that is only down to the point where it goes below the de facto requirement imposed by normal bank operations. You drop the requirement to 0%, and banks will still keep cash on hand to cover their own needs. It is certainly possible to raise it all the way to 100% (or even higher, by requiring that banks freeze some of their own cash when accepting a deposit). But that would have to be done very slowly and cautiously.

Re: American Equity

#295

Post by dnautics »

kgwgk wrote: post #200
dv_dt wrote: post #159

Earlier quoted context omitted.

The prices they pay for goods go up...

The salaries do go up as well.

No, they don't. That's by design.

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

It's right there in plain English: Inflation exists as a policy to screw "workers" out of the value of their wages.

Workers is a nicer way to say lower classes. It doesn't include investors, financial sector, etc, who strongly benefit from inflation.

Re: American Equity

#297

Post by zemo »

jacquesm wrote: post #16

People already have a share in the GDP. That's what it is, the total domestic product, the sum of all the little parts. The problem is not that people don't have share in it (and this goes for every country, not just for the USA), but that they have a disproportionate share in it. Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that rai…

but aren't Bill Gates' earnings mostly capital gains, and aren't capital gains not included in GDP calculations?

Re: American Equity

#298

Post by WalterBright »

toomuchtodo wrote: post #108
cperciva wrote: post #92

Earlier quoted context omitted.

In the long run, every dollar of wealth gets spent. As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.

> In the long run, every dollar of wealth gets spent. Not necessarily. "Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service. That's even more cash concentration than…

> Not necessarily

Nobody has a Scrooge McDuck cash vault, not Apple, Microsoft, nor anyone else. It's all invested - even money in a checking account isn't actually there, it's loaned out to someone who spends it.

> the top 1 percent owns 90 percent of wealth in the US

No, the government owns/controls most of it.

Re: American Equity

#299

Post by dclowd9901 »

justinpaulson wrote: post #228
derefr wrote: post #176

Earlier quoted context omitted.

From the perspective of trying to get the budget balanced, taxing wealth is probably the single most efficient way to do it. From the perspective of the tax code as an incentive system , taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen! (This is also, for a similar reason, why economists don't like corporate taxes or trade…

I think becoming wealthy is incentive enough to become wealthy. No one is going to stop trying to be wealthy just because they might get taxed for that wealth. If anything, they will just try to hide it in another state. But the argument that a wealth tax would remove any incentive to become wealthy is not very strong.

Right, it only becomes a problem if you tax wealth so much that the net value of the next dollar is lower than the effort required to obtain it. At a certain level of wealth, where one is effectively paying others to invest their money for them, and they're earning off interest, that effort is basically 0.

Re: American Equity

#300

Post by kgwgk »

Retric wrote: post #270
kgwgk wrote: post #249

Earlier quoted context omitted.

Yes, it will be very convenient for people to issue bonds when they need a loan to buy a house or start a business...

Credit Cards are an example of non bank loans. The difference is people fronting money for loans would need to take on real risks without FDIC protection or have safe deposits but need to pay for bank services.

You know that the large majority of credit card loans are given out by banks, right? https://www.nilsonreport.com/upload/TopIssuersofUSGPCC.3.jpg
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