Society - Inequality vs. Equality - Page 6 - Myth-Weavers


Worldly Talk

Civil discussion and debate on real world events and issues.


Society - Inequality vs. Equality

 
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Originally Posted by Surrealistik View Post
It's difficult to arrive at a specific % without modelling a budget and examining how much is needed. I might look into this later, but for now, even at a cursory examination I'm fairly confident that one as high as 55% isn't required.
Technically speaking your country quite recently had such highest rate thus at least theoretically it should have worked...

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Further, yes, they can engage in an orgie of consumption assuming they wish to leave little to their kids out of spite for the taxman, but even consumption and travel are taxed (economies here and abroad will love it by the way). I also doubt that they can spend enough on travel alone to meaningfully impact their taxes.
Not subject to US taxes. Though if they want to among other visit Poland and spend here with paying our 23% VAT I'd be grateful that you sent them on such a voyage.

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With a properly constructed regime, the only escape is capital flight to off-shores; the rest of the first world has comparable (or worse) tax burdens. Maybe they can become African warlords in a true free market anarchy? Lol.
Don't underestimate the Force and... international tax planning. Don't looking far my country doesn't have any controlled foreign corporation rules, does not tax gifts and inheritances between close relatives so all you need is a some legal entity abroad, let's say a Cyprus investment fund, (though Polish closed ended investment fund could also be useful) which our tax authorities can not blatantly mistreat because Cyprus is also an EU member so we can't discriminate against it.

I'm not saying that Poland would be the best, but it would be workable. I bet that actually quite many countries would serve well and there would be even not only as you suggested some backward African countries but presumably also a few actually more civilized than the US countries like Switzerland or Singapore.

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As per the article, incentives as they relate to estate taxes are preserved because the estate tax hits after death. It only has to apply necessarily to a fairly small fraction of the population if the study is to be believed. Further, it's important to note that improved wealth and income equity tends to be correlated with increased demand and growth. Granted, the model they use features ideal conditions without any capital flight or off-shoring, so taxation must be higher or more inclusive to compensate for this revenue loss, but the net burden shouldn't be undue.
This study assumes nicely no loopholes, no perverse incentive to actually retire earlier because anyway the additionally earned money would be taken by gov and closed economy from which one can not strategically flee.

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Aside from that, increasing obligatory pension contributions, or creating obligatory locked in savings contributions, but I am leery about obligatory savings programs.
Because one feels better when can force all those greedy rich to make them share big part of their wealth with the more disadvantaged, while forcing the poor to live more prudent and responsible lives does not give such a pleasurable feeling?

I think that two factors seem to be ignored so far:
1) Actually nowadays boring investments in less risky assets like gov bonds of highly developed countries bring negative real yields. (after adjusting inflation) That would be anyway obstacle in building huge wealth just from inheriting money and having the only virtue of not going on spending spree. So some merit and reasonable investment is required otherwise in long run the levelling that you wanted regardless of any additional tax changes would happen.
2) I've got a feeling that partially you have a point with slightly restructuring tax structure, but partially you concentrate your ideas too much on fighting symptoms and not on fighting underlying problems. What I mean is moving the money that you would acquire from the rich (after a heroic struggle from both sides ) not in giving it directly to the poor as negative tax, but as high quality education starting from kindergarten. They would like you less, that would look worse in statistics but in long run that would increase social mobility, not persistent transfer of cash.

Whenever you increase the gain on a feedback mechanism (in this case capital gains) you push a system towards instability. in this case teh gain is effectively pushed by ratio of taxation. There may be periods in which other market forces compensate but in the aggregate high taxes on dividends and low taxes on capital gains does destabilize teh system. Note that I also never claimed this is the only possible source of destabilization. However it is very hard to pick out other sources when such a blatant source of destabilization remains at the forefront.

Quote:
Originally Posted by TW Teczka View Post
Technically speaking your country quite recently had such highest rate thus at least theoretically it should have worked...

Not subject to US taxes. Though if they want to among other visit Poland and spend here with paying our 23% VAT I'd be grateful that you sent them on such a voyage.
They still have to pay for transport from here. If they travel in the States, visiting Vegas/Arizona/Hawaii/Virgin Islands all the better. Again, I don't think it's a meaningful concern. I sincerely doubt even the ultra-rich will as a practical matter splurge millions/hundreds of millions or billions on travel and other non-domestically taxable consumption.

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Don't underestimate the Force and... international tax planning. Don't looking far my country doesn't have any controlled foreign corporation rules, does not tax gifts and inheritances between close relatives so all you need is a some legal entity abroad, let's say a Cyprus investment fund, (though Polish closed ended investment fund could also be useful) which our tax authorities can not blatantly mistreat because Cyprus is also an EU member so we can't discriminate against it.

I'm not saying that Poland would be the best, but it would be workable. I bet that actually quite many countries would serve well and there would be even not only as you suggested some backward African countries but presumably also a few actually more civilized than the US countries like Switzerland or Singapore.

This study assumes nicely no loopholes, no perverse incentive to actually retire earlier because anyway the additionally earned money would be taken by gov and closed economy from which one can not strategically flee.
Given that the estate tax applies after death, can be constrained to only the very wealthiest, and leave more than enough for any children to live in luxury and do nearly anything they like for the entirety of their lives, I don't see disincentive as a problem.

Tax havens/tax competition are issues certainly. I was of course joking about Africa. As a solution, increased tax code sophistication is a partial fix which has yielded success as have political pressure on tax havens. Memorandums of understanding between countries to standardize and strengthen anti-money laundering and tax evasion law and enforcement are long overdue and should be implemented ASAP. Direct capital flight and tax competition elsewhere is a potential problem. In the end, between improved enforcement and the example of other countries that have comparable estate tax burdens (that don't seem to have excess problems with evasion/avoidance), I don't feel this would be too problematic.

Third, yes, a weakness of the study is certainly that no tax flight or avoidance is accounted for. This is why I have stated that in practice that either the inclusiveness or size of the tax must be increased, in addition to the above stated enforcement measures.

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Because one feels better when can force all those greedy rich to make them share big part of their wealth with the more disadvantaged, while forcing the poor to live more prudent and responsible lives does not give such a pleasurable feeling?
The lifestyles of the rich aren't materially impacted if the compliance onus is on them, the poor's would be if they were forced to put aside a substantial portion of earnings; this is the fundamental problem with obligatory saving for the poor without government assistance (that said such a program would be more acceptable for the middle class). I also specify that these programs would only apply to the working poor, who are contributing to the economy, even if they aren't contributing to the government.

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I think that two factors seem to be ignored so far:
1) Actually nowadays boring investments in less risky assets like gov bonds of highly developed countries bring negative real yields. (after adjusting inflation) That would be anyway obstacle in building huge wealth just from inheriting money and having the only virtue of not going on spending spree. So some merit and reasonable investment is required otherwise in long run the levelling that you wanted regardless of any additional tax changes would happen.
I'm not ignoring that. I know all too well the impacts of inflation on investment (very big on clients investing in solid dividend stocks, high quality short term corporate bonds, and/or inflation indexed/convertible bonds). However, this tends to be a non-factor for the rich who can easily purchase the expertise needed to guarantee a return on investment well over inflation and grow wealth.

Quote:
2) I've got a feeling that partially you have a point with slightly restructuring tax structure, but partially you concentrate your ideas too much on fighting symptoms and not on fighting underlying problems. What I mean is moving the money that you would acquire from the rich (after a heroic struggle from both sides ) not in giving it directly to the poor as negative tax, but as high quality education starting from kindergarten. They would like you less, that would look worse in statistics but in long run that would increase social mobility, not persistent transfer of cash.
Oh, I certainly agree with expanding and improving social programs, absolutely. Quality education and medicare should be available to all in order to improve social mobility and true equality of opportunity. As an aside, I also feel medicare is a logical and natural extension of the 'right to life' that citizens in the free world are afforded. You need relative parity on these terms, otherwise the advantages of the existing wealthy (and thus their economic power) are compounded and entrenched. I had only concerned myself with sketches of ideas related to saving programs as that was the focus and thrust of the conversation.

Also, these cash transfers would not be indefinite. Once a person has built up an adequate reserve of savings, negative taxation subsidies would naturally be phased out for that individual.

Quote:
Originally Posted by silveroak View Post
Whenever you increase the gain on a feedback mechanism (in this case capital gains) you push a system towards instability. in this case teh gain is effectively pushed by ratio of taxation. There may be periods in which other market forces compensate but in the aggregate high taxes on dividends and low taxes on capital gains does destabilize teh system. Note that I also never claimed this is the only possible source of destabilization. However it is very hard to pick out other sources when such a blatant source of destabilization remains at the forefront.
While I acknowledge the potential influence of incentives like capital gains tax advantages to encourage speculative bubbles, I have never known it to be a major factor in any recently notable bubble. Can you provide specific examples of where tax differentials were considered a significant contributor to a major economic bubble?

Quote:
Originally Posted by Surrealistik View Post
They still have to pay for transport from here. If they travel in the States, visiting Vegas/Arizona/Hawaii/Virgin Islands all the better. Again, I don't think it's a meaningful concern. I sincerely doubt even the ultra-rich will as a practical matter splurge millions/hundreds of millions, even billions on travel and other non-domestically taxable consumption.
Damn it, you are right, those destinations look as better fun than my country.

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Given that the estate tax applies after death, can be constrained to only the very wealthiest, and leave more than enough for any children to live in luxury and do nearly anything they like for the entirety of their lives, I don't see disincentive as a problem.
Let's assume that you are filthy rich though who are 55. You have two possibilities:
a) work hard with your business and leave less to your kids at the end;
b) become a tax exile, instead of working spend lot's of time ex. skiing in Switzerland and effective leave more to your children.
(it could be also possible to rule your international empire anyway from abroad)

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Tax havens/tax competition are issues certainly. I was of course joking about Africa. As a solution, increased tax code sophistication is a partial fix which has yielded success as have political pressure on tax havens. Memorandums of understanding between countries to standardize and strengthen anti-money laundering and tax evasion law and enforcement are long overdue and should be implemented ASAP. Direct capital flight and tax competition elsewhere is a potential problem. In the end, between improved enforcement and the example of other countries that have comparable estate tax burdens (that don't seem to have excess problems with evasion/avoidance), I don't feel this would be too problematic.
You know, the globalization still haven't reached its mature phase. It used to be simple, it used to be clear where one live. From May 2004 on huge scale it ceased to be clear in my country. We joined the EU and quite many people moved away - my country roughly lose one million people who discovered that can earn legally more abroad. (if you are curious I earned more per hour working in Germany in student cafeteria than I earn now in my professional job in Poland) Yes, that was all about money. The nightmare for gov who likes to have everything straight and simple are people haven't emigrated but live somewhat in between - ex. there are Polish doctors who every Friday take a cheap airline plane to the UK, work throughout the weekend and come back to Poland for rest for the week. (the gap in salaries still makes that a good business)

My point is the following. That's not the problem of getting a few tax havens forced to disclose some data. The problem is that in globalized world people (especially cosmopolitan elites) anyway are not bound too much to any country. That not a matter of creating some bogus net of mysterious legal entities and secret bank accounts. The devensive solution may be also simply packing suitcases. Especially if we're talking about the long run. I wondered about emigration not because of tax reasons but other economic factors, though actually my country was very mildly hit by crisis in contrast to Ireland. Had that been reverse I'd have a different IP number now.

Also you speak here about "loopholes". I'm not sure whether that's a good description for the problem - I mean the countries are free to choose their set of tax sources - consumption? personal income? corporate income? fixed property? inheritance? recreational substances? petrol? It's enough that they choose different taxation base and properly mobile person can surf between jurisdiction and pay less tax than expected.
(yes, they are also weaknesses - even though the same idea is behind American 401k and Polish IKE, other gov could feel complied to tax it as any other investment profit)

You can keep more eye on your citizens who engage in such a subversive act as living abroad. American idea to tax a person worldwide income regardless of that person place of residence and place lot's of paperwork to disclose all those hidden accounts towards which you simply receive your local salary already went a bit to far. US citizenship actually become a liability for person who don't consider living in the US all their life. Keep that in mind if you want to clamp that even further and just in case don't say that you haven't been warned that some of your cash cows might be hit with a stick one time too much.

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Oh, I certainly agree with expanding and improving social programs, absolutely. Quality education and medicare should be available to all in order to improve social mobility and true equality of opportunity. As an aside, I also feel medicare is a logical and natural extension of the 'right to life' that citizens in the free world are afforded. You need relative parity on these terms, otherwise the advantages of the existing wealthy (and thus their economic power) are compounded and entrenched. I had only concerned myself with sketches of ideas related to saving programs as that was the focus and thrust of the conversation.
With right to life I have one thing that always bothered me, especially in American case (but because you were first hit with epidemic of obesity anyway you would serve as good case study for other countries that unfortunately follow the same trajectory though slightly slower). It's all right to force a person to pay for other healthcare, (with all punishments prescribed for tax avoidance) but it's not all right to force the recipient to lead a healthy lifestyle (let's think about unimaginative fine for being obese which would be cancelled if the person shows at least some progress, start going for a walk everyday, etc.)? Even though if assessed from life expectancy good lifestyle would matter more than good health plan?

To give everybody my 2cts on wealth distribution: the distribution of wealth is not any affair the state should keep itself busy with. I have a classical liberal (not to be confused with what Americans call liberal) view of the state and therefore believe that, whenever possible, the state should keep itself outside of the personal life of individual citizens. Social welfare systems are, IMHO, harmful to society because they punish success while failure is rewarded (the poor, which will include a significant portion of society that simply doesn't want to succeed, will profit from welfare while this sytem will be a net drain on the succesful). I believe that, if we want to aid the lower strata of society, that charity is the only solution. Not only is this solution more moral, it also reminds the poor that they are dependant on others for their upkeep and are entitled to exactly nothing. Such a situation makes escaping relative poverty far more attractive than a welfare state that takes care of you one way or another.

IMHO the main example of how welfare systems can harm the state is contemporary France. Since Hollande was elected president, he has made efforts to invest more into the welfare system (unlike Sarkozy, who's a bit more on the right side of the political spectrum). As a result, many French entrepeneurs have either already moved or consider moving abroad to countries such as England. A proper economy needs entrepeneurs such as these more than it needs welfare leeches, since these entrepeneurs don't only carry the national economy but they also create jobs for the lower strata. To paraphrase French philosopher Alexis de Tocqueville, a democracy can only exist until the populace realize they can vote themselves the wealth of the state's coffers, which is exactly what's happening in Western Europe (and, under Obama, America is slowly moving in that direction as well).

On the other hand the Roman Empire was strong for centuries with a social welfare program- bread and cicuses. Of course they did have the annual orgies to promote social unity.

All in favor of the Roman model raise their hands.

I don't think bread and games was in any way comparable to what we'd now call welfare. The closest thing Romans had to welfare was the client-patron system (common in many ancient and some contemporary societies).

Quote:
Originally Posted by Kaeso View Post
To paraphrase French philosopher Alexis de Tocqueville, a democracy can only exist until the populace realize they can vote themselves the wealth of the state's coffers, which is exactly what's happening in Western Europe (and, under Obama, America is slowly moving in that direction as well).
Which is why the richest Americans are making more money than ever, and the poorest are making less. Unless you can provide evidence to the contrary. Also: Social welfare punishes success the way doctors punish the healthy.

Quote:
Originally Posted by silveroak View Post
On the other hand the Roman Empire was strong for centuries with a social welfare program- bread and cicuses. Of course they did have the annual orgies to promote social unity.

All in favor of the Roman model raise their hands.
I like the bread and circuses model, though for it to work in classical version it requires conquering quite a few countries first and then living from contributions. After failing to implement this model by Hussein by conquering Kuwait, and later by failing the same by W. Bush in conquering Iraq, I have serious doubts whether this model is still viable.

Quote:
Originally Posted by Kaeso View Post
To give everybody my 2cts on wealth distribution: the distribution of wealth is not any affair the state should keep itself busy with. I have a classical liberal (not to be confused with what Americans call liberal) view of the state and therefore believe that, whenever possible, the state should keep itself outside of the personal life of individual citizens. Social welfare systems are, IMHO, harmful to society because they punish success while failure is rewarded (the poor, which will include a significant portion of society that simply doesn't want to succeed, will profit from welfare while this sytem will be a net drain on the succesful).
I kind of stopped here (bold added by me).
There are plenty of people that work very hard, that strive for "success", that fall into the "poor" category and have - for various reasons not entirely under their control - had a need for social assistance. Now, more so than ever in recent memory. Maybe the career they are in doesn't pay very well. Maybe they had an unexpected medical crisis. Maybe they just have bad luck and didn't win the rich family lottery. There are others that have said it better, and probably will, but saying the poor are poor because of poor work ethic is simply wrong.








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