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Very Hot Topic (More than 25 Replies) We are half way there ... but still so far away (Read 1,567 times)
TowardLiberty
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We are half way there ... but still so far away
Nov 29th, 2019 at 10:43pm
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I have really enjoyed locking arms with the board left against Trump's tariffs. We've had fun lambasting the populist right for supporting higher taxes and making arguments that amount to claiming we can tax ourselves into prosperity. And let's not forget all the discussions about the negative effects of tariffs: higher prices, billions in bailouts and promises of billions more, a contracting steel industry and an increase in uncertainty so large that the Fed started easing again, to name but just a few examples.

In short, the left has turned a big corner: They have admitted that *some* taxes are bad for economic growth and have borrowed free-market oriented arguments to that effect.

You can imagine the mental double-take I am doing when I see these same people claim that a massive wealth tax would not impact the economy.

Warren's plan calls for 2.75 trillion in tax revenue over 10 years. That's 275 billion a year.

Right now, Trump's tariffs are sucking about 75 billion out of the economy, annually. And we're noting their impact and it's rather stark. It's so stark it has disrupted the Fed's planned interest rate hike/balance sheet drawdown and has forced them to reverse course midstream.

Imagine if the tax were even bigger! What if it were 3.6X bigger - as Warren's proposal is? Wouldn't that have an impact on the economy?

Or do taxes only negatively impact the economy when the GOP passes them?

As a sidebar, we should always keep in mind there are no large masses of idle cash or capital in the economy. Rich people put their money to work. That's how they make more of it. Some way or another it is channeled into productive investment. It hires capital and labor. And taxing that fund in a big way will reduce the amount of capital and labor hired, resulting in a dramatic decrease in aggregate demand. Reduce the fund in a small way, you only get a small reduction in demand for labor. We're talking about a BIG reduction in that fund.

You can't interrupt the circular flow of payments without distorting the growth path of the economy, potentially kicking off a recession, or at the very least, a contraction which will have to be mitigated by countercyclical monetary and fiscal policies.

My leftwing buds intuitively understand this when the GOP is in power and the tax is regressive. But that's not good enough. We need to go all the way.

And that means applying the same understanding to taxation writ large, especially when it concerns massive increases such as a wealth tax.
« Last Edit: Nov 29th, 2019 at 10:54pm by TowardLiberty »  

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TowardLiberty
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Re: We are half way there ... but still so far away
Reply #1 - Nov 29th, 2019 at 11:12pm
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That 2.75 trillion wealth tax will come out of the fund that buys labor in the factors market.

That will reduce household income and consumer demand because we earn our incomes by selling labor services in the factors markets. As the demand for labor falls, the income earned from labor falls and consumers tighten their belts.

Ultimately, reductions in consumer demand lead to further reductions in investment and more lay-offs and idled resources.

The only way out of that puzzle is a recession or a government stimulus program.
« Last Edit: Nov 29th, 2019 at 11:31pm by TowardLiberty »  

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Tiberius
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Re: We are half way there ... but still so far away
Reply #2 - Nov 29th, 2019 at 11:55pm
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Fancy graphics are all well and good.

But the fact of the matter is that extreme wealth concentrated in an extremely small percentage of the population helps nobody. Not even the extremely wealthy, because they already have far more economic power than they need.

European nations, like Germany, have settle on a better solution. The ratio between CEO and worker compensation is far smaller than in the USA. Plus, worker unions are guaranteed representation on German corporate boards of directors. Doesn't seem to have hurt the German economy, despite that nation having had to recover from a highly destructive war.

It is wrong to equate progressive taxation of the wealthy with regressive taxation vis-a-vis tariffs, which hit all income classes, placing a much greater burden on those with least ability to shoulder it. I don't know how the holy conservative mantra of the godliness of extreme wealth accumulation got started. Didn't Jesus proclaim, "It is easier for a camel to pass through the eye of a needle than a wealthy man to enter Heaven"?

It is wrong to make wealth sacred and equate it with moral goodness. It is neither. Until our society realizes and accepts that, we are doomed to staying a 1.5 world nation.
  

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TowardLiberty
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Re: We are half way there ... but still so far away
Reply #3 - Nov 30th, 2019 at 12:04am
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Tiberius wrote on Nov 29th, 2019 at 11:55pm:
Fancy graphics are all well and good.

But the fact of the matter is that extreme wealth concentrated in an extremely small percentage of the population helps nobody. Not even the extremely wealthy, because they already have far more economic power than they need.

European nations, like Germany, have settle on a better solution. The ratio between CEO and worker compensation is far smaller than in the USA. Plus, worker unions are guaranteed representation on German corporate boards of directors. Doesn't seem to have hurt the German economy, despite that nation having had to recover from a highly destructive war.

It is wrong to equate progressive taxation of the wealthy with regressive taxation vis-a-vis tariffs, which hit all income classes, placing a much greater burden on those with least ability to shoulder it. I don't know how the holy conservative mantra of the godliness of extreme wealth accumulation got started. Didn't Jesus proclaim, "It is easier for a camel to pass through the eye of a needle than a wealthy man to enter Heaven"?

It is wrong to make wealth sacred and equate it with moral goodness. It is neither. Until our society realizes and accepts that, we are doomed to staying a 1.5 world nation.

We're not talking about "progressive" taxation. We are taking about a massive wealth tax. Trillions of dollars. And we could also be talking about returning to 90% marginal tax rates.

This is not merely "fancy graphics." There is a real point being made here about the link between the wealth held by the rich and the demand for labor.

You won't find in my post a single sentence equating wealth with moral goodness. This is about *how the economy works.*
  

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Tiberius
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Re: We are half way there ... but still so far away
Reply #4 - Nov 30th, 2019 at 2:29am
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TowardLiberty wrote on Nov 30th, 2019 at 12:04am:
We're not talking about "progressive" taxation. We are taking about a massive wealth tax. Trillions of dollars. And we could also be talking about returning to 90% marginal tax rates.

This is not merely "fancy graphics." There is a real point being made here about the link between the wealth held by the rich and the demand for labor.

You won't find in my post a single sentence equating wealth with moral goodness. This is about *how the economy works.*


I don't recall anyone seriously proposing a 90% income tax rate. I recall seeing figures of about 45% max.

Look, the justification for slashing progressive tax rates has been the repeatedly debunked trickle-down pseudo theory. It simply doesn't work. Money is power. Power buys legislation. With money and power, the rich keep on getting rich, the middle class slumps, and the poor get poorer. Wake up and smell the covfefe. This is just more 1920's BS in a new wrapper. This dog won't hunt.

  

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TowardLiberty
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Re: We are half way there ... but still so far away
Reply #5 - Nov 30th, 2019 at 3:38am
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Tiberius wrote on Nov 30th, 2019 at 2:29am:
I don't recall anyone seriously proposing a 90% income tax rate. I recall seeing figures of about 45% max.

Look, the justification for slashing progressive tax rates has been the repeatedly debunked trickle-down pseudo theory. It simply doesn't work. Money is power. Power buys legislation. With money and power, the rich keep on getting rich, the middle class slumps, and the poor get poorer. Wake up and smell the covfefe. This is just more 1920's BS in a new wrapper. This dog won't hunt.


The subject is Warren's proposed wealth tax which she projects would raise around 2.75 trillion over 10 years. That's trillion with a "T."  And AOC is proposing much higher marginal tax rates. Her estimate is that a 70% marginal rate would be bring in 720 billion in 10 years.

Both of these proposals would impact the economy but Warren's proposal more so by many orders of magnitude.

I have no intention of trying to defend trickle down. And my argument does not require I do so.

This is about understanding the link between wealth and investment and a wealth tax and diminished investment/ labor demand.

You can say that concern is BS, but that's not very convincing. Until the claim is dealt with head on, I must conclude it is powerful. We can debate small changes in the marginal rate and their modest or non-existent impact on growth but the massive taxes we are discussing are something else.

To simply wave these concerns away strikes me as irresponsible.
« Last Edit: Dec 1st, 2019 at 3:51pm by TowardLiberty »  

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Re: We are half way there ... but still so far away
Reply #6 - Nov 30th, 2019 at 9:49am
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I am not sure why anyone who is not a part f the 1% is worried about their tax rate. A marginal tax rate of 70% has already been proven not to hurt the economy as the 91% tax marginal tax did not hurt the economy in the 50’s. A wealth tax on the 1% will not hurt the economy either. It has already been stated by   Other posters that the rich will not stop producing or finding ways to make money just because they are taxed more. Most rich progressives like Buffet and others are OK with a marginal tax rate of 70%.  Most economists are OK with it.  So any person with no experience in economics or is not a part of the 1% or do not refer to the results of the marginal tax of the 50’s telling me that it will f#ck up the economy means nothing
  

The most ridiculous statement ever from Lomelis
Lomelis wrote on Nov 8th, 2019 at 3:03am:
This is why people need to turn against the gov in general.  Only going to get worse.
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TowardLiberty
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Re: We are half way there ... but still so far away
Reply #7 - Nov 30th, 2019 at 11:49am
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Wadsworth wrote on Nov 30th, 2019 at 9:49am:
I am not sure why anyone who is not a part f the 1% is worried about their tax rate. A marginal tax rate of 70% has already been proven not to hurt the economy as the 91% tax marginal tax did not hurt the economy in the 50’s. A wealth tax on the 1% will not hurt the economy either. It has already been stated by   Other posters that the rich will not stop producing or finding ways to make money just because they are taxed more. Most rich progressives like Buffet and others are OK with a marginal tax rate of 70%.  Most economists are OK with it. 

We're talking about a wealth tax which is almost 4X greater than *anything* we have had in history. We're talking about removing trillions from the economy.

There's no way that won't impact the demand for labor and aggregate demand in general.

Further, even those high 91% marginal rates were not effective rates, and occurred in a time when the US experienced rapid economic growth because of Europe's loss of productive capacity.

  

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TowardLiberty
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Re: We are half way there ... but still so far away
Reply #8 - Nov 30th, 2019 at 11:57am
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Wadsworth wrote on Nov 30th, 2019 at 9:49am:
So any person with no experience in economics or is not a part of the 1% or do not refer to the results of the marginal tax of the 50’s telling me that it will f#ck up the economy means nothing

Well, that excludes me. I am part of the global 1%. I have more experience with economics than anyone else on this board. And I have routinely refereed to the results of the 1950's and I have gone beyond results by including the relevant context.

While we are flexing our muscles, check out the following:

Quote:
Mercatus faculty director Tyler Cowen has pointed out that such a tax would “lower investments in human capital and the creation of new businesses.” While it might be tempting to imagine that large accumulations of personal wealth just sit in a hidden vault, that image is entirely inaccurate.

In fact, the savings of the rich are quite active. They are disproportionately likely to invest their wealth, which provides fuel for long-term projects, risk-taking entrepreneurship, and the development of unexploited potential. A wealth tax might not cause economic indicators to tumble immediately, but the American economy would eventually become less dynamic and competitive as a result.
https://www.mercatus.org/bridge/commentary/economic-effects-ultra-rich-wealth-ta...

Quote:
Euro Flop
Normally progressives like to point to Europe for policy success. Not this time. The experiment with the wealth tax in Europe was a failure in many countries. France's wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems. Only last year, French president Emmanuel Macron killed it.

In 1990, twelve countries in Europe had a wealth tax. Today, there are only three: Norway, Spain, and Switzerland. According to reports by the OECD and others, there were some clear themes with the policy: it was expensive to administer, it was hard on people with lots of assets but little cash, it distorted saving and investment decisions, it pushed the rich and their money out of the taxing countries—and, perhaps worst of all, it didn't raise much revenue.
https://www.npr.org/sections/money/2019/02/26/698057356/if-a-wealth-tax-is-such-...

But let's ignore history and the economists and do what makes no sense because we have righteous indignation.
« Last Edit: Nov 30th, 2019 at 12:27pm by TowardLiberty »  

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"It was the union of the anticapitalist forces of the Right and of the Left, the fusion of radical and conservative socialism, which drove out from Germany everything that was liberal.” F A Hayek
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Re: We are half way there ... but still so far away
Reply #9 - Nov 30th, 2019 at 11:58am
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TowardLiberty wrote on Nov 30th, 2019 at 11:57am:
Well, that excludes me. I am part of the global 1%. I have more experience with economics than anyone else on this board. And I have routinely refereed to the results of the 1950's and I have gone beyond results and have discussed context, while doing one better: including the relevant context.

While we are flexing our muscles, check out the following:

https://www.mercatus.org/bridge/commentary/economic-effects-ultra-rich-wealth-ta...

https://www.npr.org/sections/money/2019/02/26/698057356/if-a-wealth-tax-is-such-...

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The most ridiculous statement ever from Lomelis
Lomelis wrote on Nov 8th, 2019 at 3:03am:
This is why people need to turn against the gov in general.  Only going to get worse.
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