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Wealth and Taxes

johnhcochrane.blogspot.com

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Re: Wealth and Taxes

#41

Post by MuffinFlavored »

rayiner wrote: post #33
MuffinFlavored wrote: post #28

Earlier quoted context omitted.

> 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 pro…

Quality post + discussion, thank you.

Unbiased question: What’s your advice for the 50% of Americans who make less than $30k/yr? How are they supposed to afford health care + housing + transportation (let alone preparing for retirement)?

Re: Wealth and Taxes

#42

Post by MuffinFlavored »

lend000 wrote: post #29
MuffinFlavored wrote: post #27

Earlier quoted context omitted.

Say I own a business that has $250k in assets but does $10m/yr in revenue. Does that add to my wealth? How do you value owning a business?

Anything based on wealth will have the challenging task of valuing assets, which is why the cutoff for where current wealth becomes a factor should be pretty high, so you only have to look at areas generating significant economic activity. One solution could be to limit wealth measurement to liquid assets and real estate -- any real world implementation will only be a heuristic. Better to have false negatives than fa…

Can you expand on why you think income brackets are broken?

Re: Wealth and Taxes

#43

Post by Retric »

rayiner wrote: post #33
MuffinFlavored wrote: post #28

Earlier quoted context omitted.

> 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 pro…

Nominal tax rates are meaningless, total federal corporate taxes where $205 billion in fiscal year 2018. That’s a long way from the nominal 21% federal tax rate.

Re: Wealth and Taxes

#44

Post by MuffinFlavored »

Retric wrote: post #43
rayiner wrote: post #33

Earlier quoted context omitted.

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 pro…

Nominal tax rates are meaningless, total federal corporate taxes where $205 billion in fiscal year 2018. That’s a long way from the nominal 21% federal tax rate.

$205b on how much income?

Re: Wealth and Taxes

#45

Post by Retric »

MuffinFlavored wrote: post #44
Retric wrote: post #43

Earlier quoted context omitted.

Nominal tax rates are meaningless, total federal corporate taxes where $205 billion in fiscal year 2018. That’s a long way from the nominal 21% federal tax rate.

$205b on how much income?

Several ways to calculate that, but ignoring international profits you’re talking something like:

https://fred.stlouisfed.org/release/tables?rid=53&eid=18673&...

Corporate profits with inventory valuation and capital consumption adjustments: 2018

Q1: 1544b + Q2: 1561b + Q3: 1592b + Q4: 1593b

6290B giving an effective tax rate of 3.3% minus whatever they paid on foreign profits.

Re: Wealth and Taxes

#46

Post by harryh »

Retric wrote: post #45
MuffinFlavored wrote: post #44

Earlier quoted context omitted.

$205b on how much income?

Several ways to calculate that, but ignoring international profits you’re talking something like: https://fred.stlouisfed.org/release/tables?rid=53&eid=18673&... Corporate profits with inventory valuation and capital consumption adjustments: 2018 Q1: 1544b + Q2: 1561b + Q3: 1592b + Q4: 1593b 6290B giving an effective tax rate of 3.3% minus whatever they paid on foreign profits.

You've misinterpreted the data in that link. That isn't showing per quarter profits, but instead the annualized rate sampled by quarter.

Re: Wealth and Taxes

#47

Post by [deleted] »

Retric wrote: post #45
MuffinFlavored wrote: post #44

Earlier quoted context omitted.

$205b on how much income?

Several ways to calculate that, but ignoring international profits you’re talking something like: https://fred.stlouisfed.org/release/tables?rid=53&eid=18673&... Corporate profits with inventory valuation and capital consumption adjustments: 2018 Q1: 1544b + Q2: 1561b + Q3: 1592b + Q4: 1593b 6290B giving an effective tax rate of 3.3% minus whatever they paid on foreign profits.

[deleted]

Re: Wealth and Taxes

#48

Post by rayiner »

MuffinFlavored wrote: post #41
rayiner wrote: post #33

Earlier quoted context omitted.

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 pro…

Quality post + discussion, thank you. Unbiased question: What’s your advice for the 50% of Americans who make less than $30k/yr? How are they supposed to afford health care + housing + transportation (let alone preparing for retirement)?

Get married, have kids, and move to a low cost state. The median married couple with children in Iowa makes $79,000 a year, and in Minnesota it’s $91,000. As to health care, the large majority of Americans who aren’t eligible for Medicare get their health care through their employer. Median out of pocket costs for a family with employer provided insurance are around $7,700, which is affordable on those salaries, especially since it’s pre-tax. Also, on average, Americans’ social security and 401ks cover 70% of pre-retirement income, one of the higher figures in the OECD.

The real issue are the 15% or so of Americans who make much less than the median, don’t have employer provided health insurance, etc. I think there should be a strong safety net for those people, particularly subsidized or free health insurance. But we should pay for that safety net the same way every other OECD country does: through consumption taxes and income taxes where the top rates kick in around $70,000.

The whole “tax the rich” thing is a distraction. The rich don’t actually make enough money to pay for all the things people want to pay for. If you want European style welfare, you have to tax the 80% of income earned by the bottom 99% more heavily. Note that even under Warren’s Medicare for All Plan, the vast majority of the cost will be paid for with middle class taxes. The wealth tax will pay for less than 10% of the extra spending. But the amount of time spent talking about wealth taxes and 70% rates on super millionaires is much more than the time spent in talking about the new payroll taxes that will actually pay for the bulk of Medicare for All.

Re: Wealth and Taxes

#49

Post by MuffinFlavored »

rayiner wrote: post #48
MuffinFlavored wrote: post #41

Earlier quoted context omitted.

Quality post + discussion, thank you. Unbiased question: What’s your advice for the 50% of Americans who make less than $30k/yr? How are they supposed to afford health care + housing + transportation (let alone preparing for retirement)?

Get married, have kids, and move to a low cost state. The median married couple with children in Iowa makes $79,000 a year, and in Minnesota it’s $91,000. As to health care, the large majority of Americans who aren’t eligible for Medicare get their health care through their employer. Median out of pocket costs for a family with employer provided insurance are around $7,700, which is affordable on those salaries, espe…

the 1% only earns 20% of the US taxable income yearly? I didn’t know that.

When you say consumption tax, do you mean a VAT? What else? What percentage VAT do you see working in America? 10%? 15%?

Somebody making $200k/yr pays ~$41k/yr in federal income taxes. To be more in line with European rates, how much more should they pay? Another $20k/yr? Double?

Re: Wealth and Taxes

#50

Post by Retric »

harryh wrote: post #46
Retric wrote: post #45

Earlier quoted context omitted.

Several ways to calculate that, but ignoring international profits you’re talking something like: https://fred.stlouisfed.org/release/tables?rid=53&eid=18673&... Corporate profits with inventory valuation and capital consumption adjustments: 2018 Q1: 1544b + Q2: 1561b + Q3: 1592b + Q4: 1593b 6290B giving an effective tax rate of 3.3% minus whatever they paid on foreign profits.

You've misinterpreted the data in that link. That isn't showing per quarter profits, but instead the annualized rate sampled by quarter.

Thanks that’s much more reasonable 13% then. That’s what I get for posting before going to sleep, I kept thinking that’s to low and posted it anyway,
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