Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea • Hacker News Board

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#411

Post by throwaway2048 » Thu, Oct 22, 2020, 8:02 PM UTC

nickpp wrote: post #325

Spooky23 wrote: post #244

Earlier quoted context omitted.

Hoarding wealth is bad for the economy, as it lowers the velocity of money. See: https://fred.stlouisfed.org/series/M2V Our current policy is to paper over bank liquidity or other problems by printing money. Big institutions and the mega-rich are hoarding massive quantities of cash. The economy as a whole would be better off if billionaires were doing stuff with their money rather than hoarding shares.

You do realize that nobody keeps that cash on hand, right? It’s in banks where it gets lent out, thus participating and contributing to the economy. "Hoarding" is nonsense.

It plowed into low productivity assets like real estate, in an endless cycle of increasing real estate costs.

The effect is almost identical.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#412

Post by nine_k » Thu, Oct 22, 2020, 8:03 PM UTC

mac01021 wrote: post #250

RivieraKid wrote: post #11

Earlier quoted context omitted.

Why? (I mostly agree but it's not a strong opinion)

I don't have a super-well formed opinion about this but I think a wealth tax has some issues that don't get enough attention. Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset. So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of eq…

There is a ton of examples of societies where people don't want to build enterprises. Medieval Europe, where guild and social strata regulations prevented any large enterprise, except maybe large merchant operations. Sime of the poorer modern-day African countries, where social norms prescribe that any fortune has to be divided with the extended family, so concentration of assets to keep building something large is hard.

I frankly think that the American model of free enterprise with reasonably few restrictions made most to improve the well-being of its population.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#413

Post by gamblor956 » Thu, Oct 22, 2020, 8:09 PM UTC

SilasX wrote: post #367

gamblor956 wrote: post #318

Earlier quoted context omitted.

Actually, history bears out that higher tax rates result in corporations re-investing more of their profits in the company and less in tax-avoidance accounting. The difference being that the former is low risk and can grow the business, while the other has a good chance of triggering penalties that wipe out the savings and could even result in jail time for one or more executives. Consider that the historically highe…

>Actually, history bears out that higher tax rates result in corporations re-investing more of their profits in the company and less in tax-avoidance accounting. I'm just imagining the 1950s cottage industry in compensating executives with a company car, personal assistant outside of work, etc before the IRS caught up? And all the present day shenanigans with Amazon/Apple etc hiding profits in Ireland?

In both of your 1950s examples, those expenditures flowed into the greater economy resulting in multiple additional taxable transactions while also supporting the livelihoods of one or more other economic participants. In other words, exactly what we want. But on a further note: these expenses never went away, many companies still do these kinds of things today.

The present day shenanigans were Apple and Amazon (note: Apple takes historical credit for being the first tech company to implement this structure) hiding profits in Ireland through the double dutch or similar structures. However, the EU has already attempted to crack down on the use of that structure and deemed it illegal. Companies that currently use the structure may be grandfathered in as a result of EU court decisions but no new companies can get implement the structure. Apple especially has been hoarding money overseas and not doing anything with it. In contrast, companies with higher tax rates have been very active about spending their overseas money rather than bringing it back to the US, precisely to avoid paying the higher taxes that repatriation would incur.

Yes, it's counterintutive. But it's how the world actually works.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#414

Post by jjk166 » Thu, Oct 22, 2020, 8:10 PM UTC

bobcostas55 wrote: post #189

coliveira wrote: post #53

Earlier quoted context omitted.

This is so hidden in the debate that it is almost like a "secret". The more taxes you have on corporate income, the higher the incentive for corporations to invest in the company, so they can avoid paying taxes. This is good for the economy. On the other hand, lowering corporate taxes also generates a cascade of tax avoidance, since you have higher profits that generate the need for more complex tax avoidance schemes…

This is obviously fallacious, just consider the extreme case of 100% taxation. At the macro level the only source of investment funds is income that does not go to consumption. Lower the expected rate of return through taxation, and the result is inevitably a shift from investment to consumption. At the individual firm level it's obvious that taxation lowers the NPV of the firm's available projects - they are obvious…

Well starving could be considered just a 100% diet rate. Clearly that would be catastrophic so any claim that dieting is beneficial is obviously fallacious and in fact we would be better off eating more.

Looking at behavior in the extreme case is only valid if behavior scales smoothly up to that limit.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#415

Post by vkou » Thu, Oct 22, 2020, 8:12 PM UTC

brewdad wrote: post #369

vkou wrote: post #180

Earlier quoted context omitted.

The median household income in the US is $68,000, I'm pretty sure that household pays federal taxes. Should we move the goalposts again?

At that income level, a married couple with two children and childcare expenses could easily end up with zero tax bill and maybe even paying negative income tax. Standard deductions, child tax credit and childcare expense credits get you there without any exceptional circumstances.

The average number of people per household is 2.6.

The two adult two child family is not a median american family. It's a much-larger than normal family. Of course if you apply their deductions to an average income, you get a very low tax rate.

It's not typical.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#416

Post by mikepurvis » Thu, Oct 22, 2020, 8:13 PM UTC

davrosthedalek wrote: post #402

mikepurvis wrote: post #185

Earlier quoted context omitted.

Surely property tax is trivially easy to justify? It usually is collected by the municipality and pays for things that have ongoing operating costs— roads, fire department, schools, etc. How else should those things be paid for?

From the other taxes? Germany has vanishing property taxes compared to the US. Better roads and schools, no question.

I don't know how it works in Germany, but here in Canada, one of the big issues with that is that income taxes are only collected at the provincial and federal level. Now, a chunk of that money gets sent down to lower levels of government— Waterloo region where I live recently received $600M from upper levels of government for a light rail system that is now built and operating, and the current budget shows 27% of revenue coming from "provincial and federal grants".

The thing is, that money which comes from the upper levels is extremely subject to the whims of those governments; it can fluctuate wildly depending who comes into power and what their priorities are. So without some guarantees around it, I can understand the municipalities wanting a stable source of income over which they have some agency, and out of which they can reap immediate benefit from growing the local economy.

Anyway, I'd love to hear from someone in Germany how this is resolved there; but I'd assume there'd need to be some pretty structured, long-term agreements around minimum amounts, percentages of new growth, and so on.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#417

Post by astrea » Thu, Oct 22, 2020, 8:14 PM UTC

Jtsummers wrote: post #139

astrea wrote: post #89

Earlier quoted context omitted.

> A great example of this is "single family home neighborhoods" in urban areas. They have no societal benefit, they are essentially subsidized land use patterns for the well off, and it makes it harder for less well of folks to move to areas where they can get a better job/improve their lot in life and grow the economy. I've seen this talking point twice now this week. What's the alternative? We all live in crowded m…

Multi-family buildings != squalor It sounds like you've never been in an apartment building. Some are crappy, sure, but plenty are pretty nice or at least decent (the building, the apartments will be what the residents make of them).

I have lived in many apartment buildings; mostly why I hold this opinion. If my only aspiration for a future home for my family and myself is one where I have to deal with upstairs neighbors stopping and nextdoor neighbors with no respect for quiet hours, I would have very little to look forward to.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#418

Post by nine_k » Thu, Oct 22, 2020, 8:16 PM UTC

I suppose that if a wealth tax is enacted, one of the consequences will be mass-splitting the stock into voting and non-voting. Wealthy people who have a majority stake in their companies will transform shares to e.g. 5% voting + 95% not, and the big shareholders will only sell the non-voting stock to keep control of their companies.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#419

Post by AnthonyMouse » Thu, Oct 22, 2020, 8:19 PM UTC

gamblor956 wrote: post #363

AnthonyMouse wrote: post #284

Earlier quoted context omitted.

> But when taxes are high, I see that as an incentive to hide the profits by investing in the future. That isn't really the societal win you're making it out to be though. If you "pocket" profits, i.e. pay them to investors, the investors just go out and invest them again in something else. Which is actually better, because it reduces concentration of wealth inside of corporations. Instead of one corporation growing…

So if you increase the domestic corporate tax rate, investment moves from domestic companies to things like real estate speculation and foreign companies, which may not be desirable. The reverse is actually true. Historically, the lower the tax rate, the more investment you get in real estate speculation and other passive income streams because it's now more efficient to simply not invest in productive activities whe…

> The higher the tax rate, the more businesses invest in actual business activities, because they get more expenses they can use to offset income they may earn

The purchase price of real estate is ultimately deductible as depreciation, as is mortgage interest, and any profits from rents get reinvested into buying more real estate which becomes deductible as depreciation again. Also, real estate speculation is commonly done using LLCs (passthrough, no corporate income tax anyway).

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#420

Post by gamblor956 » Thu, Oct 22, 2020, 8:21 PM UTC

mrep wrote: post #410

gamblor956 wrote: post #345

Earlier quoted context omitted.

Buybacks are taxed as capital gains rates (0%, 15%, or 20%), while dividends are subject to special dividend rates (0%, 10%, or 20%). Dividends are thus actually preferred by most investors, and buybacks generally only advantage the biggest investors. Additionally, corporations don't get special capital gains rates but do get dividends received exemptions for dividends from related company, so in many cases corporate…

Don't buybacks benefit long term investors, not bigger investors precisely for tax reasons. Historical equities compound growth almost entirely comes from constantly reinvesting dividends to buy more shares which compounds to increase future dividends. So as an example, take a company that returns 5% of their share price and an investor pays a 20% tax rate allowing them to reinvest 4% after tax money to buy more shar…

Your example doesn't make any sense.

With a buyback, you have fewer shares after the buyback. If you "reinvest" in the company you give up all the proceeds you received to buy back the shares that you just sold to the company. But you've paid taxes as a result of the initial buyback so you have less money than you received to reinvest, and now presumably the shares are all more expensive as well. Your position is economically worse off if you reinvest than when you started, because you have the same amount of shares (or fewer) but paid some tax to get there.

With a dividend, you can keep the dividend, or buy more shares of the company or some combination of both. Your economic position is improved either way regardless of the amount of tax you pay.