Ser Scot A Ellison

Were Mao and Stalin Actually Socialists? (No True Scotsman)

202 posts in this topic

On ‎3‎/‎18‎/‎2017 at 4:37 AM, Altherion said:

France tried a 75% version of this and it did not work out. Unless you are very careful about how your laws are written, chances are that it would not work out elsewhere either because you are going after people who control every aspect of the system. Also keep in mind that if you did somehow manage to get it to have a non-trivial effect, the 1% has the means to retaliate. If it ever got that far (which is not plausible), they may, for example, deliberately tank the economy until it is repealed. Such taxes are only likely in circumstances such as the Great Depression and WWII, when there is a nontrivial chance that refusing to share will result in losing everything.

You probably extract most money out of the rich with higher tax rates of 40-50%.  Rich people will pay a lot to live in a country where they and their money are safe, which has an independent judiciary, a high degree of personal freedom, and excellent cultural and shopping amenities.  But, they won't pay punitive amounts (except in wartime).

Share this post


Link to post
Share on other sites

Posted (edited)

The main problem is not tax rates. The main problem is evasion and tax havens. The trick is that the middle class is already pissed at comparably high income tax in many countries, so this can be used for anti tax propaganda by the 0.1% who usually pay less percentage on income from stocks, capital etc. than the middle class on their salary.

When I had a decent job I paid around 25% tax and almost another 25% for obligatory pension payments, health insurance etc. (this was in Germany ca. 10 years ago) so de facto I got only slightly more than 50% of my salary as a netto salary. So it feels like the government is taking almost half of your salary. Of course this sucks at first glance, that's why high taxes are never popular, no matter if they affect someone else even more. And this was less than 50k EUR p.a. (as a single without children, even with a worse paid part time job, I paid about 30% for obligatory "insurances" and taxes which seems a lot if that leaves you with an income barely enough to get by). The contributions for pensions and healthcare are capped, they peak around 70k EUR/year or so and then become degressive as a percentage. So the middle middle class, if they have no children or other ways to reduce taxes and payments for healthcare etc. feel like they are paying a lot for that. And they are. Of course they also get decent healthcare and almost free education etc. in countries like Germany and France. But still, the contributions are usually degressive even without the options of evasion. If there was less evasion, the rates could remain and one would simply change the tax-free minimum (which is below the amount one needs to survive which is nominally against the law) and the lower and middle class would profit immediately.

Even worse is evasion of corporations. Ikea pays almost no taxes in Germany although they make a lot of money there. With some trick they instead pay very low taxes in the Netherlands. But no smallish local furniture store can found a subsidiary in the Netherlands to use such a trick. So Ikea is basically both a parasite because they use German infrastructure (far more stores in Germany than Holland) without paying taxes in proportion and tends to destroy local family-owned furniture stores. I think even libertarians should agree that this is both unjust and plain bad economic policy.

But such is the power of corporations and corruption that there is apparently nothing to be done about such things. (That it is possible was shown when the US suddenly acted really tough on Swiss banksters after the 2008 crisis. The large countries could do it but usually they don't want to.)

 

Edited by Jo498

Share this post


Link to post
Share on other sites
1 hour ago, Jo498 said:

The main problem is not tax rates. The main problem is evasion and tax havens. The trick is that the middle class is already pissed at comparably high income tax in many countries, so this can be used for anti tax propaganda by the 0.1% who usually pay less percentage on income from stocks, capital etc. than the middle class on their salary.

When I had a decent job I paid around 25% tax and almost another 25% for obligatory pension payments, health insurance etc. (this was in Germany ca. 10 years ago) so de facto I got only slightly more than 50% of my salary as a netto salary. So it feels like the government is taking almost half of your salary. Of course this sucks at first glance, that's why high taxes are never popular, no matter if they affect someone else even more. And this was less than 50k EUR p.a. (as a single without children, even with a worse paid part time job, I paid about 30% for obligatory "insurances" and taxes which seems a lot if that leaves you with an income barely enough to get by). The contributions for pensions and healthcare are capped, they peak around 70k EUR/year or so and then become degressive as a percentage. So the middle middle class, if they have no children or other ways to reduce taxes and payments for healthcare etc. feel like they are paying a lot for that. And they are. Of course they also get decent healthcare and almost free education etc. in countries like Germany and France. But still, the contributions are usually degressive even without the options of evasion. If there was less evasion, the rates could remain and one would simply change the tax-free minimum (which is below the amount one needs to survive which is nominally against the law) and the lower and middle class would profit immediately.

Even worse is evasion of corporations. Ikea pays almost no taxes in Germany although they make a lot of money there. With some trick they instead pay very low taxes in the Netherlands. But no smallish local furniture store can found a subsidiary in the Netherlands to use such a trick. So Ikea is basically both a parasite because they use German infrastructure (far more stores in Germany than Holland) without paying taxes in proportion and tends to destroy local family-owned furniture stores. I think even libertarians should agree that this is both unjust and plain bad economic policy.

But such is the power of corporations and corruption that there is apparently nothing to be done about such things. (That it is possible was shown when the US suddenly acted really tough on Swiss banksters after the 2008 crisis. The large countries could do it but usually they don't want to.)

 

Some corporations are a problem.  Their tax arrangements can be completely artificial, and its often hard to distinguish between those that genuinely make losses, or don't make profits for years because they're reinvesting everything they earn, from those who make fake losses while actually being highly profitable.

I think rich people are much less of a problem.  Most Western countries are pretty good at capturing a healthy slice of their income (eg in the UK, the top 1% pay 28% of income tax). Yes, you can avoid income taxes by spending most of the year in a tax haven, but most of them are dismally boring places.

Share this post


Link to post
Share on other sites

Posted (edited)

4 hours ago, SeanF said:

Some corporations are a problem.  Their tax arrangements can be completely artificial, and its often hard to distinguish between those that genuinely make losses, or don't make profits for years because they're reinvesting everything they earn, from those who make fake losses while actually being highly profitable.

I'd say if you are skeptical of the Chamely-Judd results of capital taxation then there are potentially large gains to laborers from taxing capital. And if corporations are able to avoid paying taxes because of international tax arbitrage and are encouraging "a race to the bottom" among nations, then I'd say this is generally a problem, to the extent international tax compliance and enforcement is worth talking about among nations.
 

4 hours ago, SeanF said:

I think rich people are much less of a problem.  Most Western countries are pretty good at capturing a healthy slice of their income (eg in the UK, the top 1% pay 28% of income tax). Yes, you can avoid income taxes by spending most of the year in a tax haven, but most of them are dismally boring places.

I'm certainly certainly willing to live with some wealth or income inequality. But, in my view, saying the "rich aren't a problem" isn't quite the same thing as saying that growing wealth inequality isn't a problem. And saying well wait, but the top 1% pay 28% or 35% of all the income taxes isn't a convincing argument. Because it begs the question of why income is so distributed at the top that the top 1% pay that much. Also, such a statement implies that pre-tax income is independent of the tax rates. And I'm not sure that is true, like say for instance if higher tax rates deter rent seeking behavior.

Here in the US, at least for a long time, discussions about income inequality, among the economics profession, was kind of considered a taboo. I don't think that is longer the case. And in fact you see a growing discussion about it. 

Also, there is some growing evidence that it can be a drag in growth. Here in the US, at least for a long time, there was the general opinion that there was an growth income equality trade off. So for instance, if you preferred more equality, you had to trade off some growth. I think that view is changing now.

Conservatives have long argued that income is just simply the result of the first order condition of the firm's maximization problem. But, there are reasons to doubt the simple old story that people are simply being paid their marginal product. Certainly, there is evidence that CEO's are payed more than the actual value they deliver. And of course there is some growing evidence, here in the US, at least, that growing monopoly power is a problem. And while I don't consider my self a Marxist, I do not think he was completely wrong to believe that wages may be set, in part, at least, by class power.

Efficiency, arguments, aside, however, growing income inequality, can also endanger the political system at least through two channels, as I see it. One is that people don't believe in the legitimacy of the system, and they do stuff like, elect an orange swamp thing. David Autor has documented that places hit by the "China Shock" have become more radical in their politics. I'm generally a free trader, but your run of the mill free trade models do predict wealth redistribution. There are winners and losers. The standard recommendation has been to compensate the losers. But, that really wasn't done, nor was the problem acknowledged, even though the theory was there. The second channel is that the extremely wealthy  can engage in rent seeking behavior, which can potentially undermine both economic efficiency and legitimacy of the system.

Edited by OldGimletEye

Share this post


Link to post
Share on other sites
5 hours ago, SeanF said:

I think rich people are much less of a problem.  Most Western countries are pretty good at capturing a healthy slice of their income (eg in the UK, the top 1% pay 28% of income tax). Yes, you can avoid income taxes by spending most of the year in a tax haven, but most of them are dismally boring places.

In the UK, the top 1% also make 21% of the income.  So while they're paying very slightly more as a percentage of their income, given the marginal utility of money, they're being less burdened by taxes than the rest of the country.  

Share this post


Link to post
Share on other sites

There is ample evidence that the income equalities (and it is actually worse if wealth/net worth are considered) are back to levels of the "gilded age" of the late 19th and early 20th century. CEOs and the like are now paid 5, 10 or more times the amounts they received until the 1980s (in relation to the typical employee, depending on the country and branch of business) and nobody can claim with a serious face that they are doing better jobs than their predecessors from the 1940s-70s.

And the marginal utility as well as degressive effects of all kinds of fixed "living costs" is a very good argument for progressive taxation. With the current options of evasion, the rate is in effect often degressive. Or it is openly so, if one pays, say 40% in the highest salaries but only a flat 25% on income from investment returns. Was it again Buffett who said that his secretary paid a higher percentage of her income in taxes than he did? It's puzzling that there can be even a debate that this could be o.k., either in terms of justice or incentives.

Share this post


Link to post
Share on other sites
35 minutes ago, Jo498 said:

It's puzzling that there can be even a debate that this could be o.k., either in terms of justice or incentives.

I'm pretty sure you'll find that poor people just aren't motivated enough to have arranged to be born rich.  Their fault, really.  We have to give massive incentives to rich people to make sure the poors know that they should want to be rich because they're too stupid otherwise.  

Share this post


Link to post
Share on other sites
Just now, MerenthaClone said:

I'm pretty sure you'll find that poor people just aren't motivated enough to have arranged to be born rich.  Their fault, really.  We have to give massive incentives to rich people to make sure the poors know that they should want to be rich because they're too stupid otherwise.  

If you're lazy in the womb, odds are you'll be lazy all your life. 

Share this post


Link to post
Share on other sites

I'd be in favor of taxing Buffets secretary less instead of taxing one or both of them more.

Share this post


Link to post
Share on other sites

Is it worth pointing out that, apparently, in order to pay the taxe percentages Buffet said she was paying his secretary had to be earning at least $200k a year? I'm totally for taxing rich people lots more than poor people but I struggle to categorise her as a poor person.

Share this post


Link to post
Share on other sites
54 minutes ago, DunderMifflin said:

I'd be in favor of taxing Buffets secretary less instead of taxing one or both of them more.

Why? Organized public spending is absolutely necessary for basic infrastructure and services that cannot adequately be provided by the free market.  We get so many goddamn returns from our taxes that I simply do not understand the people who would throw that all away.  I like having roads and schools and a functioning water system and court system and garbage disposal and regulation of predatory businesses and basically the entire everything that make up society!  I like knowing that old people aren't dying because I pay Medicare taxes.  I like knowing that kids are getting food at school when they can't afford to at home.  And I like knowing that all of this is provided by a group that is (supposed to be) doing this without religious, economic, or racial biases, unlike a ton of charities.  

Share this post


Link to post
Share on other sites
6 minutes ago, MerenthaClone said:

Why? Organized public spending is absolutely necessary for basic infrastructure and services that cannot adequately be provided by the free market.  We get so many goddamn returns from our taxes that I simply do not understand the people who would throw that all away.  I like having roads and schools and a functioning water system and court system and garbage disposal and regulation of predatory businesses and basically the entire everything that make up society!  I like knowing that old people aren't dying because I pay Medicare taxes.  I like knowing that kids are getting food at school when they can't afford to at home.  And I like knowing that all of this is provided by a group that is (supposed to be) doing this without religious, economic, or racial biases, unlike a ton of charities.  

I don't think there's a shortage of tax dollars going around for any of those things. With EZpass I feel like I'm paying for highways twice. 

I think there's a far bigger problem in allocation of tax dollars rather than there not being enough.

Share this post


Link to post
Share on other sites
46 minutes ago, DunderMifflin said:

I think there's a far bigger problem in allocation of tax dollars rather than there not being enough.

Well yes, diverting funds from the ludicrously over-inflated military budget to more worthwhile endeavours would certainly help a great deal, at least for the US (would have helped the USSR too). That wouldn't stop massive inequality from being a problem, though.

Share this post


Link to post
Share on other sites
On 18/03/2017 at 5:52 PM, Khaleesi did nothing wrong said:

Another thing, if you want to read about how income inequality isn't necessarily bad (depending on how it is structured), then this paper by Sarah Voitchovsky is pretty interesting, and was part of the course literature at my university. http://qed.econ.queensu.ca/pub/faculty/lloyd-ellis/econ835/conf07/zhao.pdf 

It basically posits that income inequality among the wealthier segments of society is not necessarily negative, but can actually be good for stimulating economic growth, whereas the problems are more serious if the poorest segments of society end up getting very little of the overall share. 

Great read, thanks. A bit technical at times, but with interesting and solid conclusions. It seems to me this paper manages to reconciliate and explain the two opposing views on the matter.

 

Share this post


Link to post
Share on other sites
52 minutes ago, felice said:

Well yes, diverting funds from the ludicrously over-inflated military budget to more worthwhile endeavours would certainly help a great deal, at least for the US (would have helped the USSR too). That wouldn't stop massive inequality from being a problem, though.

It's...I mean this is the one area where you almost get consensus opinion. Most remarkable of all for anything government related, you actually get the military saying they don't need what they get now. And yet the US is such a milataristic society now that it's kind of the perpetual motion machine where no one thinks the whole is necessary but no one will commit suicide by dismantling an individual piece because jobs/commie or w/e, so the thing just keeps on moving. I have noticed that a lot of the noise Trump supporters made in here about how he'd be the guy to address this seems to have just evaporated now that he seems determined to increase military spending at the cost of, well, everything else.

Share this post


Link to post
Share on other sites
5 hours ago, DunderMifflin said:

I don't think there's a shortage of tax dollars going around for any of those things. With EZpass I feel like I'm paying for highways twice. 

I you think EZpass is bad move down to Florida and see how much more you'll be spending on Sun Pass -- but no state taxes!

Share this post


Link to post
Share on other sites
29 minutes ago, dmc515 said:

I you think EZpass is bad move down to Florida and see how much more you'll be spending on Sun Pass -- but no state taxes!

This is a bit of a tangent, but can you beat the Verrazano-Narrows Bridge's $17.00 EZPass toll? Although it's "only" $11.52 for New Yorkers.

5 hours ago, DunderMifflin said:

I don't think there's a shortage of tax dollars going around for any of those things. With EZpass I feel like I'm paying for highways twice. 

I think there's a far bigger problem in allocation of tax dollars rather than there not being enough.

The are two separate issues here. The reason to tax the 1% is only partly for the government to have more money. It is also so that they would be more inclined to share the wealth by, for example, refraining from creating structures in which the leadership gets paid hundreds of times more than the rank-and-file (these are not very appealing when the government will take most of the leaders' wealth).

4 hours ago, felice said:

Well yes, diverting funds from the ludicrously over-inflated military budget to more worthwhile endeavours would certainly help a great deal, at least for the US (would have helped the USSR too).

The military is a popular target, but the problem is much larger than that. Even the money allocated to public causes such as infrastructure or health care suffers from corruption and/or waste. For example, there are ~200K cars crossing the above-mentioned $17 bridge which means that it generates $2-3M each day depending on how many of them are New Yorkers paying the lower price. That's on the order of $1B annually from that bridge alone. The public benefit corporation that runs it is actually much larger than that (it runs most of New York City's public transportation as well as that of the surrounding metropolitan area) and has a budget that is larger than the GDP of many countries. This money is technically accounted for, but why they pay what they do for certain things is... a mystery. The same is true of many other government programs regardless of whether they are paid for by taxes or by fees.

Share this post


Link to post
Share on other sites
1 hour ago, Altherion said:

The military is a popular target, but the problem is much larger than that. Even the money allocated to public causes such as infrastructure or health care suffers from corruption and/or waste. For example, there are ~200K cars crossing the above-mentioned $17 bridge which means that it generates $2-3M each day depending on how many of them are New Yorkers paying the lower price. That's on the order of $1B annually from that bridge alone. The public benefit corporation that runs it is actually much larger than that (it runs most of New York City's public transportation as well as that of the surrounding metropolitan area) and has a budget that is larger than the GDP of many countries. This money is technically accounted for, but why they pay what they do for certain things is... a mystery. The same is true of many other government programs regardless of whether they are paid for by taxes or by fees.

And you think this would be better if it was a private entity somehow?

Share this post


Link to post
Share on other sites

I might buy that "incentives" work until comfortable upper middle class salaries. But there is enough evidence that high level executives, big law firms etc. did not do worse work 40 years ago when they made far less money in comparison both to their successors today and to the average employee in the 1970s.

To the contrary, I am convinced that it is very bad if the highest incentives (highest salaries and benefits) go to a large extent to sectors that are not productive but mainly distributive and speculative, e.g. the whole "FIRE" sector. Inventions, patents etc. are achieved by people working in R&D for low six figures salaries or so, not by the ones getting several millions in bonuses from selling real estate or legally cheating the state so some very rich people pay less taxes. Every smart person who rather works as a "quant" in Wall Street because there is more money to be made there instead of doing real research in science prevents finding cures for diseases, more efficient power plants, etc. maybe even some great invention that could change our lives. It is about the worst incentive structure one could come up with, if you ask me.

And again, it is very simple: Every tax dollar a (usually very rich) person or corporation does not pay because of legal or illegal evasion is a dollar/Euro that has to be paid by the middle class or by mom n' pop family businesses that do not have the means to cook their taxes in the right way. So they are not stealing from some abstract entity, some "state" or government that better be starved because it greedily wants our money, they are stealing from me and you and almost everyone in the bottom 90%.

Share this post


Link to post
Share on other sites

The thing about high top tax rates is that they cannot be implemented in isolation. Since the top 0.1%* get their wealth from investments, not salaries, you need strict capital controls, and regulation of trusts at the very least. You'd also have to deal with the very real possibility of an investment strike.

*Not 1% - as Krugman points out, Occupy Wall Street were actually too mild in their criticism.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.