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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

#341

Post by naveen99 »

60654 wrote: post #7

This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new. The major points of their work, and especially of Piketty's monumental _Capital for the 21st century_ still stand: that capital is a positive feedback loop in a way that labor is not; that mid-20th-century laws that put brakes on this feedback loop have been removed; th…

Professional labor can have a positive feedback loop, like engineering, law, medicine, even bureaucrats. you can get more efficient with more experience and usually can make more money. Less risky then capital investment. Also small business is a mix of labor and capital.

Re: Economists Are Rethinking the Numbers on Inequality

#342

Post by SamBam »

hnick wrote: post #292
drdec wrote: post #91

Earlier quoted context omitted.

That only matters if you realize the gains. If you own a business like a hotel, car wash, etc. and intend to keep it, you are not affected by value increases of the business itself. In fact, for many privately held businesses, it is not even known what the value of the business is because there is no reason to calculate it.

I'm not even sure how accurately some small businesses can be valued. A local cupcake lady or artist might run a business that makes decent money, but all the income and value is derived from their unique style. Remove them and the business is almost worthless. If a tax on capital is instituted are there mechanisms to value such cases?

With the current wealth-tax proposals by Warren and Sanders. the owner first of all would probably owe zero wealth tax unless she was worth more than $32 million, or $50 million for Warren. I doubt any local cupcake businesses are worth anywhere close to that much.

Second, an actual business of that size would probably be owned by some other corporate entity created for that purpose, not an individual, and that entity would be paying its own taxes.

Finally, Warren and Sanders both plan on beefing up the IRS to answer these kinds of questions, which will certainly be thorny for some kinds of assets.

Re: Economists Are Rethinking the Numbers on Inequality

#343

Post by FabHK »

chipotle_coyote wrote: post #283
Domenic_S wrote: post #243

Earlier quoted context omitted.

GP is overstating a bit but not by too much. I have friends in non-coastal states and $50k is a kingly amount of money out there. As in, renting a nice family-sized house for $500/month. At san jose's going rate of roughly $4k/month for the same thing, that would be the equivalent of a $400k/yr salary.

> At san jose's going rate of roughly $4k/month for the same thing, that would be the equivalent of a $400k/yr salary. No, it wouldn't -- conflating absolute dollars with percentages is a mistake in this kind of comparison, even though it's a very common one. You need to look at the amount of money you actually have left over after expenses. Let's throw in federal taxes based on 2019 rates for a better comparison. Pe…

Not sure I follow. Person A has 35.8K left, suppose they spend 30K, and still has something left.

Person B would have to spend 30*8 = 240K, and thus does not even have enough to cover this.

(In reality, things are not eight times as expensive, and as such your argument actually holds, but it does not seem to hold just as you phrased it.)

Re: Economists Are Rethinking the Numbers on Inequality

#344

Post by FabHK »

60654 wrote: post #7

This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new. The major points of their work, and especially of Piketty's monumental _Capital for the 21st century_ still stand: that capital is a positive feedback loop in a way that labor is not; that mid-20th-century laws that put brakes on this feedback loop have been removed; th…

> At least they are very open about their biases: they promote a view that the solution to all ills is lower taxes and less regulation.

That's a (common) caricature of The Economist's views. Their actual policy proposals are quite a bit more nuanced than that, and often call for taxes and regulation.

As one datapoint, note that in the last four US presidential elections, they've endorsed the Democratic candidate (see eg https://en.wikipedia.org/wiki/The_Economist_editorial_stance... ).

Re: Economists Are Rethinking the Numbers on Inequality

#345

Post by FabHK »

hueving wrote: post #239
harryh wrote: post #162

Earlier quoted context omitted.

Property taxes are not wealth taxes, they are consumption taxes. You can easily tell this because a person who owns a home outright pays the same tax as someone who owns a similar home but has a large mortgage. These two people have different levels of wealth but pay the same tax. This is because their consumption is the same.

That's not how consumption taxes work: https://en.wikipedia.org/wiki/Consumption_tax A property tax takes effect without sales occurring, without the property being used, etc. There is no act of consumption to tax, other than simply existing. And before anyone argues that the use of the land is the consumption, that would only make sense if the value of the house wasn't taken into account as part of the property tax.…

Consumption is not buying a house, the consumption is living in it.

Re: Economists Are Rethinking the Numbers on Inequality

#346

Post by FabHK »

dorfsmay wrote: post #329
harryh wrote: post #162

Earlier quoted context omitted.

Property taxes are not wealth taxes, they are consumption taxes. You can easily tell this because a person who owns a home outright pays the same tax as someone who owns a similar home but has a large mortgage. These two people have different levels of wealth but pay the same tax. This is because their consumption is the same.

Consumption tax are paid once. Property tax are every year! If you put that money in the bank, you'd only pay taxes on the cap gain, not on the capital itself.

Consumption taxes are paid every time you consume something. You buy an ice cream and eat it, you paid VAT on it.

Now with a house, the consumption is living in it, and while you own the house, you pay for that consumption at some rate.

A bigger, more expensive house corresponds to more consumption, and thus you pay more tax on it.

Consumption of a house is basically the product of house value and time, and that's what you pay tax on.

Re: Economists Are Rethinking the Numbers on Inequality

#347

Post by FabHK »

baron816 wrote: post #157
60654 wrote: post #7

This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new. The major points of their work, and especially of Piketty's monumental _Capital for the 21st century_ still stand: that capital is a positive feedback loop in a way that labor is not; that mid-20th-century laws that put brakes on this feedback loop have been removed; th…

> they promote a view that the solution to all ills is lower taxes and less regulation. I’ve read the Economist for a long time and have never gotten that impression. That’s more the Republican Party platform, who they really don’t support. In the articles, they explicitly argue for more regulation in the form of enhanced anti-trust laws and enforcement.

It's a surprisingly common prejudice against The Economist.

Re: Economists Are Rethinking the Numbers on Inequality

#348

Post by chipotle_coyote »

FabHK wrote: post #343
chipotle_coyote wrote: post #283

Earlier quoted context omitted.

> At san jose's going rate of roughly $4k/month for the same thing, that would be the equivalent of a $400k/yr salary. No, it wouldn't -- conflating absolute dollars with percentages is a mistake in this kind of comparison, even though it's a very common one. You need to look at the amount of money you actually have left over after expenses. Let's throw in federal taxes based on 2019 rates for a better comparison. Pe…

Not sure I follow. Person A has 35.8K left, suppose they spend 30K, and still has something left. Person B would have to spend 30*8 = 240K, and thus does not even have enough to cover this. (In reality, things are not eight times as expensive, and as such your argument actually holds, but it does not seem to hold just as you phrased it.)

I think you did follow! I was talking about housing costs, not the rest of living costs, because in general housing is (a) your biggest expense and (b) most tied to the region you're in.

Sure: gasoline, utilities, and groceries are certainly more expensive here in Santa Clara than they would be if I was still living in Tampa, Florida. But the difference is much smaller in magnitude than the difference in housing costs, and the absolute amount of money that I'm spending on those things is also less. (e.g., I pay around $3.60 a gallon in gas right now; in Tampa it's around $2.40/gal, which is a pretty astounding difference objectively, but it's not eight times less. if I drove 15,000 miles a year in a car that got just 30 mpg, I'd pay about $50 a month more here.

In general, everything else follows similarly. If the $30K number you produced is "stuff Person A spends on non-housing costs," in practice Person B, even in the most expensive area, isn't spending anywhere close to $240K on the same things. It's extremely unlikely they're spending anywhere close to $60K on the same things.

Re: Economists Are Rethinking the Numbers on Inequality

#349

Post by davedx »

leto_ii wrote: post #71
davedx wrote: post #53

Earlier quoted context omitted.

> the only reasonable solution for this is a tax on owned capital (not on income or cap gains) and the political chances of this happening are slim Seems to be a cornerstone policy of multiple presidential candidates in the US at the moment. We have it in the Netherlands. I don't think it's that unlikely. Not sure how much it helps with inequality in the Netherlands though. If anything I think it stimulates people an…

In the Netherlands (where I currently reside as well) I think this tax can easily be avoided by placing your assets in some sort of shell company. When the startup I used to work for IPO'd I was not surprised to find that most of the important stockholders were using such companies (presumably) to avoid being taxed on their hundreds of millions/billions of euros.

I know that the Belastingdienst is going after people pretty hard for tax avoidance/evasion at the moment. Things are changing quite quickly in this area in the EU, and NL is no exception. What worked well for people 5 years ago could well result in a pretty full on audit now leading to nasty bills to pay back owed taxes.

The only problem is companies like Amazon, Google etc. are still getting away with paying 0 taxes everywhere... easier for the Belastingdienst to take on SME's first I guess. :/

Re: Economists Are Rethinking the Numbers on Inequality

#350

Post by davedx »

rayiner wrote: post #108
davedx wrote: post #53

Earlier quoted context omitted.

> the only reasonable solution for this is a tax on owned capital (not on income or cap gains) and the political chances of this happening are slim Seems to be a cornerstone policy of multiple presidential candidates in the US at the moment. We have it in the Netherlands. I don't think it's that unlikely. Not sure how much it helps with inequality in the Netherlands though. If anything I think it stimulates people an…

Note that the Dutch wealth tax replaces their capital gains tax. It’s a tax on the assumed returns on capital assets. (Of course unlike a capital gains tax the wealth tax reaches unrealized gains. But the rate is also lower than a capital gains tax would be. It’s possible to come out ahead compared to a capital gains tax depending on your situation.)

Yeah. IIRC the "assumed returns" is finally going to be changed now so it's more in line with actual returns outside of more risky single stock investments (or other risky ventures)
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