Worldly Talk

Civil discussion and debate on real world events and issues.


Society - Inequality vs. Equality

   
That's an easy solution. You exempt households below a certain income threshold from the estate tax. Similar to how it has been proposed before. Or hell, you exempt working farms regardless of income from estate taxes. At least then you'd still be encouraging the rich to do something productive with their money.

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Originally Posted by silveroak View Post
Estate taxes have a tendancy to hit farmers very hard as they tend to be land rich and cash poor. Capital gains I am all in favor of, but taxing investment income too heavilly tends to contribute to unemplyment. Of course luxury taxes are also an old standby- cars worth over $60,000, Yachts, houses wourth over $450,000, etc get extra taxes applied...
Income indexing as per Savayan. Also yes, luxury taxes have always been a good idea.

Further, I advocate reducing taxes on productive investment income that is derived from primary markets and venture capitalization. Secondary market taxes should definitely be increased as relatively little social/economic benefit is derived from that form of investment income. In otherwords, if you're rich, investing in a productive user of capital, and a _real_ job creator rather than shuffling money, you get a credit (and one that's improved over current allowances), otherwise you don't. Further, it only makes sense to fully tax investment income when it is a primary income source, especially when those in question can more than easily afford it without any kind of material lifestyle reduction.

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of course another aspect of the question is why you really want wealth equality vs. income equality or standard of living equality. Right now the wealth tends to be concentrated into the hands of people who have made a profession out of managing it- redistributing it could easilly lead to less effective management, or you get issues like prefered stock versus common stock, and of course when you encourage people to invest without understanding tehir investments you get Bernie Maddoff and stock market crashes... there was an old stock trader who pulled everything out of the stock market right before the crash leading to the great depression- my great grandfather asked him how he knew and he said he knew it was time to get out of the market when he got a stock tip from his shoe shine boy. Because once teh amateurs were getting heavilly invested the whole thing was going to go sideways.
Kind of like when congress decided to incentivize loans for low income home ownership and teh subsequent effects on teh real estate and credit markets.
First, it's important to note that I support improved income _and_ wealth equality. Why is wealth equality important? Because wealth is a creator of income, and it compounds and self-perpetuates, creating a recursive loop. Income eventually can become wealth, but it takes time and fiscal management. When wealth gets too concentrated, capitalism breaks down as monopolies and oligopolies naturally form from the consolidation.

Speaking to concern about malinvestment, other countries feature vastly more equitable distributions of wealth and income and, as a rule, have _more_ stable markets. I see no threat whatsoever in a more equitable distribution of wealth and income, and there are no facts that I can see which suggest your concern about inefficient allocation as a consequence is founded.

I advocate tax deductions for poor/middle class financial advice/consultation/management to better inform and allocate the capital of average investors, and improve their financial literacy.

Lastly, with the exception of tax reductions to venture capital gains, tax incentives remain exactly the same for the poor and middle class.

In summation, saving incentives have increased, not speculation incentives barring perhaps venture capital investments. However, I sincerely doubt some additional tax incentivization on that asset type is going to have a meaningful and systemic impact on the investment habits of the poor-middle class (who have improved access to financial expertise).


On the subject of congress incentivized/federally guaranteed loans/mortgages, these were, via GSEs and CRAs, a contributing albeit very tertiary factor, _not_ the primary causation of the 2007-8 crisis.

Why aren't you guys running the American economy? These all seem like rather good ideas, and better than what's been tried so far.

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Originally Posted by MonkWren View Post
Why aren't you guys running the American economy? These all seem like rather good ideas, and better than what's been tried so far.
They seem like good ideas now.
However, after someone opposed to them sees them and churns them through his rhetoric mill, it'll sound like they want to rob The People, put the money in the hands of the rich and/or undeserving of it, and put a slug in the back of The Economy's head.

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Originally Posted by Ikul View Post
They seem like good ideas now.
However, after someone opposed to them sees them and churns them through his rhetoric mill, it'll sound like they want to rob The People, put the money in the hands of the rich and/or undeserving of it, and put a slug in the back of The Economy's head.
I'm not sure how increasing capital gains taxes and estate taxes is taking from the poor to give to the rich, but ok.

It's not, but give Fox five minutes and they'll have a raft of lies to convince the poor that it's against their own best interests.

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Originally Posted by MonkWren View Post
I'm not sure how increasing capital gains taxes and estate taxes is taking from the poor to give to the rich, but ok.
Neither am I, but people make a living out of convincing everyone that it is and believe you me they're good at what they do.

The typical 'evasion' for estate taxes, of course, is to give it to the kids while you are still alive. The question then is intergenerational wealth redistribution versus a more populous wealth redistribution. Of course thre are ways to catch this, and loopholes arround those, etc. there is also some benefit to having the younger generations take over while the older generation is still arround to give advice. Part of teh question is how much wealth redistribution are we talking about- because unlike income wealth comes with responsibility in terms of decision making as well- electing an appropriate board of directors if nothing else.
Personally I would favor a 45% capital gains tax, an income tax calculated for earned income at 40% of income after the first $40,000, with those earning under $40,000 having a negative tax (so someone with no income has a tax of -$16,000/yr), and an investment income tax at 0% after the first $40,000/yr (so if all your income is from investments, you would have a 0% income tax). Not sure exactly why you feel that secondary markets should be taxed more- if someone buys an existing business for the income it generates then there is as much benefit to the economy from them keeping it open as there is to the orriginal developer keeping the property and keeping it open, plus the proven entrepreneur now has fresh capital to start a new business.

We could also go with a Scandinavian-style tax system of really high income taxes and few other taxes. Seems to work for wealth/income redistribution AND improving quality of life.

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Originally Posted by silveroak View Post
The typical 'evasion' for estate taxes, of course, is to give it to the kids while you are still alive. The question then is intergenerational wealth redistribution versus a more populous wealth redistribution. Of course thre are ways to catch this, and loopholes arround those, etc. there is also some benefit to having the younger generations take over while the older generation is still arround to give advice. Part of teh question is how much wealth redistribution are we talking about- because unlike income wealth comes with responsibility in terms of decision making as well- electing an appropriate board of directors if nothing else.
Personally I would favor a 45% capital gains tax, an income tax calculated for earned income at 40% of income after the first $40,000, with those earning under $40,000 having a negative tax (so someone with no income has a tax of -$16,000/yr), and an investment income tax at 0% after the first $40,000/yr (so if all your income is from investments, you would have a 0% income tax). Not sure exactly why you feel that secondary markets should be taxed more- if someone buys an existing business for the income it generates then there is as much benefit to the economy from them keeping it open as there is to the orriginal developer keeping the property and keeping it open, plus the proven entrepreneur now has fresh capital to start a new business.
Gifts/wealth transfers meant to circumvent death taxes are obviously taxable.

As for your tax plan I don't like it. There's not enough gradation, and too little tax burden on the top. A 40% flat tax on 40k and 4000+k earners alike? Nonsense.

0% income tax on investments after a 40k threshold is insane. Tax dodger's paradise. I'm probably bigger on venture capital encouragement than most, but that is ridiculously excessive.

Concerning secondary markets, if someone bails out an existing business by purchasing it on a secondary market with the intent to make a long term investment in it, then I agree that tax advantages similar to those afforded to venture capital gains should apply, but this is an exceptional event, and will not apply to most market participants. Wealthy people who buy say, a hundred thousand shares of a company with the intent to live off the capital gains and dividends in perpetuity contribute little and should be taxed accordingly.


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Originally Posted by MonkWren
We could also go with a Scandinavian-style tax system of really high income taxes and few other taxes. Seems to work for wealth/income redistribution AND improving quality of life.
Massively progressive income tax alone doesn't address _existing_ wealth inequity, or at best does so inefficiently, though it is good at arresting its growth.





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