Paul Krugman is a jackass (2 Viewers)

[humpback]

Even if that were the case, how does that raise more revenue?

I didn't say it did.

Ugh. He put "getting rid of HFT" under his "how to pay for" it heading. MT asked how that would help do that, which is what I'm following up on.

You seem to be arguing the income-inequality angle, which I still don't see- even if the .01% was extracting it from the 10% (very debatable), how would removing that help the bottom?

 

[Andy Dufresne]

I just don't see how much more we can spend. We're currently spending $781b on education in America between Fed/State/Local spending.

How much is that with what people spend/incurr?

That's just government spending.

Maybe I didn't understand your question...

 

[Slapdash]

Even if that were the case, how does that raise more revenue?

I didn't say it did.

Ugh. He put "getting rid of HFT" under his "how to pay for" it heading. MT asked how that would help do that, which is what I'm following up on.

You seem to be arguing the income-inequality angle, which I still don't see- even if the .01% was extracting it from the 10% (very debatable), how would removing that help the bottom?

I stated this was the angle I was talking about HFT from. But it is worth pointing out, about taxes, that there is a kink in the rates at very high levels of income due to the current structure of tax policy.

It doesn't need to help out at the bottom to reduce income inequality which is this stark because of the extreme concentration at the very top.

 

[Slapdash]

I just don't see how much more we can spend. We're currently spending $781b on education in America between Fed/State/Local spending.

How much is that with what people spend/incurr?

That's just government spending.

Maybe I didn't understand your question...

Yeah, I was asking if there are any numbers on spending on education outside of the gov't. I'd imagine the total figure is pretty large.

 

[Slapdash]

1. Slash corporate tax rates in half.2. Promote free trade.3. Have open immigration.4. End minimum wage.5. Remove cumbersome environmental restrictions.6. Spend billions of tax money on repairing the nations infrastructure- whatever it costs.7. Enact a national space program like effort to get us off fossil fuels.8. Spend billions more on primary education.These aren't conservative ideas, necessarily, but they're what I think will do the trick.

All of these are good ideas (save for #1&5), but you are advocating a pretty massive increase in the debt here.

I'm aware, but it doesn't matter. I've become convinced that the only way to deal with the debt is to grow our economy out of it.

I'm with you there.

I'll make you a trade offer. We can get rid of corporate income taxes but treat investment income as ordinary income. Would you take that deal?

No.

Remember that I work in commercial real estate. Most of the smaller investments in real property (under 10 million dollars) are made mostly for tax reasons. If we took your proposal it would kill the smaller investors, and the only purchases of real property would be made by large corporations that could afford the taxes given their long term profits. Within a few years nearly every piece of commercial property that had any value whatsoever would be purchased by these same corporations, at cut-rate prices, further lowering their value. The individual property owners would be forced out of the marketplace completely, and the ultimate result to the state would be far less revenue than what is generated now. I don't think that's the result you want.

Are taxes not paid at all on this income? Do you have to be small to do this?

 

[humpback]

Even if that were the case, how does that raise more revenue?

I didn't say it did.

Ugh. He put "getting rid of HFT" under his "how to pay for" it heading. MT asked how that would help do that, which is what I'm following up on.

You seem to be arguing the income-inequality angle, which I still don't see- even if the .01% was extracting it from the 10% (very debatable), how would removing that help the bottom?

I stated this was the angle I was talking about HFT from. But it is worth pointing out, about taxes, that there is a kink in the rates at very high levels of income due to the current structure of tax policy.

It doesn't need to help out at the bottom to reduce income inequality which is this stark because of the extreme concentration at the very top.

Okay, but you responded to a post asking about the tax ramifications of it. In any event, this goes back to my point about lowering the top instead of raising the bottom. Even if we agree with the premise that HFT transfers money from the top 10% to the top .01%, removing that will do nothing for the bottom (which I assume is your goal) or the deficit.

I'm not a fan of HFT, but it's become another boogeyman. Getting rid of it won't do much of anything unfortunately.

 

[NCCommish]

I assume you guys are trying to "solve" multiple issues here, since even Krugman acknowledges that more education isn't the answer to the income inequality problem.

I doubt we are going to get converts to a BIG in this thread or higher taxes on investment income, so it seems we are content to argue at the margins.

Eh, some people are arguing for raising taxes on investment income as well as increasing spending on education.

I just don't see how much more we can spend. We're currently spending $781b on education in America between Fed/State/Local spending.

It's obviously a debatable topic, but it's a bit strange to me to see people advocating for a lot more spending on education to try and solve this "problem", when Krugman himself said it isn't the answer.

Actually I think new priorities in education would help. Krugman can be wrong. Look at how the Germans handle education. When a kid graduates high school, whether he is going to college or not, he already has training in a career field. That helps make for a better educated, more effective, high tech manufacturing sector that competes with Asia despite high wages and taxes.

 

[NCCommish]

Even if that were the case, how does that raise more revenue?

I didn't say it did.

Ugh. He put "getting rid of HFT" under his "how to pay for" it heading. MT asked how that would help do that, which is what I'm following up on.

You seem to be arguing the income-inequality angle, which I still don't see- even if the .01% was extracting it from the 10% (very debatable), how would removing that help the bottom?

I stated this was the angle I was talking about HFT from. But it is worth pointing out, about taxes, that there is a kink in the rates at very high levels of income due to the current structure of tax policy.

It doesn't need to help out at the bottom to reduce income inequality which is this stark because of the extreme concentration at the very top.

Okay, but you responded to a post asking about the tax ramifications of it. In any event, this goes back to my point about lowering the top instead of raising the bottom. Even if we agree with the premise that HFT transfers money from the top 10% to the top .01%, removing that will do nothing for the bottom (which I assume is your goal) or the deficit.

I'm not a fan of HFT, but it's become another boogeyman. Getting rid of it won't do much of anything unfortunately.

We should do like most everyone else and place a small fee on every trade. This fee would pay for regulators and would likely decrease HFT significantly.

 

[Tom Hagen]

I'm with you there.

I'll make you a trade offer. We can get rid of corporate income taxes but treat investment income as ordinary income. Would you take that deal?

No.

Remember that I work in commercial real estate. Most of the smaller investments in real property (under 10 million dollars) are made mostly for tax reasons. If we took your proposal it would kill the smaller investors, and the only purchases of real property would be made by large corporations that could afford the taxes given their long term profits. Within a few years nearly every piece of commercial property that had any value whatsoever would be purchased by these same corporations, at cut-rate prices, further lowering their value. The individual property owners would be forced out of the marketplace completely, and the ultimate result to the state would be far less revenue than what is generated now. I don't think that's the result you want.

Couldn't small investors just form corporations that would operate without paying income taxes? They could defer all income taxes until the property is eventually sold and money paid to the shareholder.

 

[humpback]

I assume you guys are trying to "solve" multiple issues here, since even Krugman acknowledges that more education isn't the answer to the income inequality problem.

I doubt we are going to get converts to a BIG in this thread or higher taxes on investment income, so it seems we are content to argue at the margins.

Eh, some people are arguing for raising taxes on investment income as well as increasing spending on education.

I just don't see how much more we can spend. We're currently spending $781b on education in America between Fed/State/Local spending.

It's obviously a debatable topic, but it's a bit strange to me to see people advocating for a lot more spending on education to try and solve this "problem", when Krugman himself said it isn't the answer.

Actually I think new priorities in education would help. Krugman can be wrong. Look at how the Germans handle education. When a kid graduates high school, whether he is going to college or not, he already has training in a career field. That helps make for a better educated, more effective, high tech manufacturing sector that competes with Asia despite high wages and taxes.

Of course he can be wrong (he has been in the past), but then those who disagree with many of his opinions can simply claim the same thing.

I happen to agree with him here, and it seems you did as well in a prior post where you said "The idea that in the near future so much work will be automated there will be far fewer jobs for everyone regardless of education levels. That's just reality of where things are going."

I agree that we can make improvements in our education system, but it isn't going to stop this trend.

 

[timschochet]

1. Slash corporate tax rates in half.2. Promote free trade.3. Have open immigration.4. End minimum wage.5. Remove cumbersome environmental restrictions.6. Spend billions of tax money on repairing the nations infrastructure- whatever it costs.7. Enact a national space program like effort to get us off fossil fuels.8. Spend billions more on primary education.These aren't conservative ideas, necessarily, but they're what I think will do the trick.

All of these are good ideas (save for #1&5), but you are advocating a pretty massive increase in the debt here.

I'm aware, but it doesn't matter. I've become convinced that the only way to deal with the debt is to grow our economy out of it.

I'm with you there.

I'll make you a trade offer. We can get rid of corporate income taxes but treat investment income as ordinary income. Would you take that deal?

No.

Remember that I work in commercial real estate. Most of the smaller investments in real property (under 10 million dollars) are made mostly for tax reasons. If we took your proposal it would kill the smaller investors, and the only purchases of real property would be made by large corporations that could afford the taxes given their long term profits. Within a few years nearly every piece of commercial property that had any value whatsoever would be purchased by these same corporations, at cut-rate prices, further lowering their value. The individual property owners would be forced out of the marketplace completely, and the ultimate result to the state would be far less revenue than what is generated now. I don't think that's the result you want.

Are taxes not paid at all on this income? Do you have to be small to do this?

No and no. In order to avoid paying taxes altogether, you have to do what's called a 1031 exchange- you sell an existing property for an equal or more expensive property. And you don't have to be small to do this. But the point is that the small guys will get priced out of the market without the tax relief.

 

[NCCommish]

I assume you guys are trying to "solve" multiple issues here, since even Krugman acknowledges that more education isn't the answer to the income inequality problem.

I doubt we are going to get converts to a BIG in this thread or higher taxes on investment income, so it seems we are content to argue at the margins.

Eh, some people are arguing for raising taxes on investment income as well as increasing spending on education.

I just don't see how much more we can spend. We're currently spending $781b on education in America between Fed/State/Local spending.

It's obviously a debatable topic, but it's a bit strange to me to see people advocating for a lot more spending on education to try and solve this "problem", when Krugman himself said it isn't the answer.

Actually I think new priorities in education would help. Krugman can be wrong. Look at how the Germans handle education. When a kid graduates high school, whether he is going to college or not, he already has training in a career field. That helps make for a better educated, more effective, high tech manufacturing sector that competes with Asia despite high wages and taxes.

Of course he can be wrong (he has been in the past), but then those who disagree with many of his opinions can simply claim the same thing.

I happen to agree with him here, and it seems you did as well in a prior post where you said "The idea that in the near future so much work will be automated there will be far fewer jobs for everyone regardless of education levels. That's just reality of where things are going."

I agree that we can make improvements in our education system, but it isn't going to stop this trend.

Right. And I do agree but there are time scales to consider. I think we have a generation or two to put through school before we hit that point.

 

[humpback]

Even if that were the case, how does that raise more revenue?

I didn't say it did.

Ugh. He put "getting rid of HFT" under his "how to pay for" it heading. MT asked how that would help do that, which is what I'm following up on.

You seem to be arguing the income-inequality angle, which I still don't see- even if the .01% was extracting it from the 10% (very debatable), how would removing that help the bottom?

I stated this was the angle I was talking about HFT from. But it is worth pointing out, about taxes, that there is a kink in the rates at very high levels of income due to the current structure of tax policy.

It doesn't need to help out at the bottom to reduce income inequality which is this stark because of the extreme concentration at the very top.

Okay, but you responded to a post asking about the tax ramifications of it. In any event, this goes back to my point about lowering the top instead of raising the bottom. Even if we agree with the premise that HFT transfers money from the top 10% to the top .01%, removing that will do nothing for the bottom (which I assume is your goal) or the deficit.

I'm not a fan of HFT, but it's become another boogeyman. Getting rid of it won't do much of anything unfortunately.

We should do like most everyone else and place a small fee on every trade. This fee would pay for regulators and would likely decrease HFT significantly.

There already are fees which pay for regulators, and most everyone else does not do this.

There are other ways they could curb or eliminate HFT (if they wanted) that wouldn't come with the negative consequences of a FTT.

 

[timschochet]

I'm with you there.

I'll make you a trade offer. We can get rid of corporate income taxes but treat investment income as ordinary income. Would you take that deal?

No.

Remember that I work in commercial real estate. Most of the smaller investments in real property (under 10 million dollars) are made mostly for tax reasons. If we took your proposal it would kill the smaller investors, and the only purchases of real property would be made by large corporations that could afford the taxes given their long term profits. Within a few years nearly every piece of commercial property that had any value whatsoever would be purchased by these same corporations, at cut-rate prices, further lowering their value. The individual property owners would be forced out of the marketplace completely, and the ultimate result to the state would be far less revenue than what is generated now. I don't think that's the result you want.

Couldn't small investors just form corporations that would operate without paying income taxes? They could defer all income taxes until the property is eventually sold and money paid to the shareholder.

Yes, they do right now. It's called a Real Estate Investment Trust (REIT). But what these have essentially become is one large corporation (or more) getting small guys to come on board- almost like stockholders. It wouldn't solve the essential problem that would take place if we made investment income fully taxable.

 

[fatguyinalittlecoat]

No and no. In order to avoid paying taxes altogether, you have to do what's called a 1031 exchange- you sell an existing property for an equal or more expensive property. And you don't have to be small to do this. But the point is that the small guys will get priced out of the market without the tax relief.

I don't really understand why you're so concerned with this potential consolidation of wealth but not other consolidations of wealth.

 

[NCCommish]

Even if that were the case, how does that raise more revenue?

I didn't say it did.

Ugh. He put "getting rid of HFT" under his "how to pay for" it heading. MT asked how that would help do that, which is what I'm following up on.

You seem to be arguing the income-inequality angle, which I still don't see- even if the .01% was extracting it from the 10% (very debatable), how would removing that help the bottom?

I stated this was the angle I was talking about HFT from. But it is worth pointing out, about taxes, that there is a kink in the rates at very high levels of income due to the current structure of tax policy.

It doesn't need to help out at the bottom to reduce income inequality which is this stark because of the extreme concentration at the very top.

Okay, but you responded to a post asking about the tax ramifications of it. In any event, this goes back to my point about lowering the top instead of raising the bottom. Even if we agree with the premise that HFT transfers money from the top 10% to the top .01%, removing that will do nothing for the bottom (which I assume is your goal) or the deficit.

I'm not a fan of HFT, but it's become another boogeyman. Getting rid of it won't do much of anything unfortunately.

We should do like most everyone else and place a small fee on every trade. This fee would pay for regulators and would likely decrease HFT significantly.

There already are fees which pay for regulators, and most everyone else does not do this.

There are other ways they could curb or eliminate HFT (if they wanted) that wouldn't come with the negative consequences of a FTT.

Most of the G8 have it. That's who I meant by most everyone else. I wasn't really thinking American Samoa for example. But in looking into this I ran into some studies that suggest it actually increases volatility not reduces it. So probably going to have to take that off the table as I am not just looking for more revenue. So thanks.

 

[timschochet]

No and no. In order to avoid paying taxes altogether, you have to do what's called a 1031 exchange- you sell an existing property for an equal or more expensive property. And you don't have to be small to do this. But the point is that the small guys will get priced out of the market without the tax relief.

I don't really understand why you're so concerned with this potential consolidation of wealth but not other consolidations of wealth.

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about.

The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

 

[fatguyinalittlecoat]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

 

[humpback]

We should do like most everyone else and place a small fee on every trade. This fee would pay for regulators and would likely decrease HFT significantly.

There already are fees which pay for regulators, and most everyone else does not do this.

There are other ways they could curb or eliminate HFT (if they wanted) that wouldn't come with the negative consequences of a FTT.

Most of the G8 have it. That's who I meant by most everyone else. I wasn't really thinking American Samoa for example. But in looking into this I ran into some studies that suggest it actually increases volatility not reduces it. So probably going to have to take that off the table as I am not just looking for more revenue. So thanks.

I believe the only members of the G8 that have it are France and the UK, and there are many exclusions and exemptions. It's really a bad idea no matter what your goal is (besides perhaps scoring political points).

 

[SacramentoBob]

I assume you guys are trying to "solve" multiple issues here, since even Krugman acknowledges that more education isn't the answer to the income inequality problem.

I doubt we are going to get converts to a BIG in this thread or higher taxes on investment income, so it seems we are content to argue at the margins.

Question for you and Ivan:

If we were to eliminate all transfer payment programs and institute a national BIG, what would the BIG be if we only used those funds and pocketed any administrative savings?

 

[Slapdash]

I assume you guys are trying to "solve" multiple issues here, since even Krugman acknowledges that more education isn't the answer to the income inequality problem.

I doubt we are going to get converts to a BIG in this thread or higher taxes on investment income, so it seems we are content to argue at the margins.

Question for you and Ivan:If we were to eliminate all transfer payment programs and institute a national BIG, what would the BIG be if we only used those funds and pocketed any administrative savings?

Is health care(Medicare, Medicaid, and CHIP) considered a transfer program in this example?

 

[SacramentoBob]

I assume you guys are trying to "solve" multiple issues here, since even Krugman acknowledges that more education isn't the answer to the income inequality problem.

I doubt we are going to get converts to a BIG in this thread or higher taxes on investment income, so it seems we are content to argue at the margins.

Question for you and Ivan:If we were to eliminate all transfer payment programs and institute a national BIG, what would the BIG be if we only used those funds and pocketed any administrative savings?

Is health care considered a transfer program in this example?

I can't think of a good reason to exclude Medicaid and Medicare at least.

 

[NCCommish]

I assume you guys are trying to "solve" multiple issues here, since even Krugman acknowledges that more education isn't the answer to the income inequality problem.

I doubt we are going to get converts to a BIG in this thread or higher taxes on investment income, so it seems we are content to argue at the margins.

Question for you and Ivan:If we were to eliminate all transfer payment programs and institute a national BIG, what would the BIG be if we only used those funds and pocketed any administrative savings?

Is health care considered a transfer program in this example?

I can't think of a good reason to exclude Medicaid and Medicare at least.

Or subsidies to businesses?

 

[Slapdash]

Question for you and Ivan:If we were to eliminate all transfer payment programs and institute a national BIG, what would the BIG be if we only used those funds and pocketed any administrative savings?

Is health care considered a transfer program in this example?

I can't think of a good reason to exclude Medicaid and Medicare at least.

I believe the total of social spending and tax expenditures hovers around 3 trillion a year.I'd probably set it somewhere around the poverty level per person so 10-11K. Half of the stipend for those under 18 would go in a trust fund until they turn 18. Given 300 million people, that would be in the same ballpark.I'd want to put an allowance for HSA or single payer on top of that since Medicare/Medicaid is a third of what we are eliminating. Others would probably want to bake that in.

 

[timschochet]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

1. They do, in a sense. But when I referred to redistribution of wealth, I was referring to the more traditional notion of higher taxes on the rich paying for more benefits for everyone else. "Benefits" do not equal tax breaks.

1a. Tax breaks do not create more wealth; they create the environment in which the creation of wealth can occur more easily.

2. Not true. Please read Milton Friedman on this issue for specifics. An increase in wealth, no matter how it is initially redistributed, benefits the entire population.

For instance: look at the development of smart phones. The specific monetary income for these phones went to a very few people and corporations who have made billions of dollars off of them. But in actuality, smart phones have made ALL of us wealthier. They make our lives easier and cheaper to live in a thousand different ways.

 

[SacramentoBob]

I believe the total of social spending and tax expenditures hovers around 3 trillion a year.I'd probably set it somewhere around the poverty level per person so 10-11K. Half of the stipend for those under 18 would go in a trust fund until they turn 18. Given 300 million people, that would be in the same ballpark.I'd want to put an allowance for HSA or single payer on top of that since Medicare/Medicaid is a third of what we are eliminating. Others would probably want to bake that in.

That doesn't seem like a lot of money really.

 

[Dinsy Ejotuz]

Here's my answer: Make pre-natal care available for every pregnancy and ensure that everyone has access to health careMake Head Start available for all childrenWork to make public schools stronger, and make charter schools available as an alternative where they're failingMake vocational training a part of H.S. again and have similar regional centers available afterwardEliminate tax breaks and financial incentives for companies to move jobs/industries overseasMake the minimum wage a livable wageProvide generous unemployment and job training for people who lose their jobs To pay for this: Break up the big banks and restore banking regulations such as Glass-SteagallBan high-frequency tradingRoll back bankruptcy laws to 1990s rulesTax capital gains as normal incomeEliminate the current tax breaks that overwhelmingly favor the wealthiestRaise taxes on the wealthy to 50% over the next twenty yearsLegalize marijuana and tax itIncrease consumption taxes on cigarettes, alchol and gasolineIntroduce a single-payer health care system to recognize the same cost efficiencies enjoyed by Medicare

How would banning high-frequency trading increase tax revenues (or reduce government spending)?

Yeah... pretty much just kitchen sinked it there. But I included it as arguably an item which lets the financial sector siphon off additional wealth from the economy. Given the market rigging we've seen in other markets (most recently currency markets) there's really no reason not to believe traders aren't front-running client trades.

 

[NCCommish]

I believe the total of social spending and tax expenditures hovers around 3 trillion a year.I'd probably set it somewhere around the poverty level per person so 10-11K. Half of the stipend for those under 18 would go in a trust fund until they turn 18. Given 300 million people, that would be in the same ballpark.I'd want to put an allowance for HSA or single payer on top of that since Medicare/Medicaid is a third of what we are eliminating. Others would probably want to bake that in.

That doesn't seem like a lot of money really.

I would go 15,600. It would go to people over 18. It would be tax free of course but every dollar in income you make over that would be subject to taxation no matter how it was made be it trust fund, bonds, money management or working McD's. 3 trillion would cover it.

 

[Politician Spock]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

1. They do, in a sense. But when I referred to redistribution of wealth, I was referring to the more traditional notion of higher taxes on the rich paying for more benefits for everyone else. "Benefits" do not equal tax breaks. 1a. Tax breaks do not create more wealth; they create the environment in which the creation of wealth can occur more easily.2. Not true. Please read Milton Friedman on this issue for specifics. An increase in wealth, no matter how it is initially redistributed, benefits the entire population. For instance: look at the development of smart phones. The specific monetary income for these phones went to a very few people and corporations who have made billions of dollars off of them. But in actuality, smart phones have made ALL of us wealthier. They make our lives easier and cheaper to live in a thousand different ways.

I hate my smart phone. I feel wealthier without it. Time when people can't reach me or email me has become the most valuable time I have.

 

[timschochet]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

1. They do, in a sense. But when I referred to redistribution of wealth, I was referring to the more traditional notion of higher taxes on the rich paying for more benefits for everyone else. "Benefits" do not equal tax breaks. 1a. Tax breaks do not create more wealth; they create the environment in which the creation of wealth can occur more easily.2. Not true. Please read Milton Friedman on this issue for specifics. An increase in wealth, no matter how it is initially redistributed, benefits the entire population. For instance: look at the development of smart phones. The specific monetary income for these phones went to a very few people and corporations who have made billions of dollars off of them. But in actuality, smart phones have made ALL of us wealthier. They make our lives easier and cheaper to live in a thousand different ways.

I hate my smart phone. I feel wealthier without it. Time when people can't reach me or email me has become the most valuable time I have.

well, this explains your luddite attitudes!

 

[Politician Spock]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

1. They do, in a sense. But when I referred to redistribution of wealth, I was referring to the more traditional notion of higher taxes on the rich paying for more benefits for everyone else. "Benefits" do not equal tax breaks. 1a. Tax breaks do not create more wealth; they create the environment in which the creation of wealth can occur more easily.2. Not true. Please read Milton Friedman on this issue for specifics. An increase in wealth, no matter how it is initially redistributed, benefits the entire population. For instance: look at the development of smart phones. The specific monetary income for these phones went to a very few people and corporations who have made billions of dollars off of them. But in actuality, smart phones have made ALL of us wealthier. They make our lives easier and cheaper to live in a thousand different ways.

I hate my smart phone. I feel wealthier without it. Time when people can't reach me or email me has become the most valuable time I have.

well, this explains your luddite attitudes!

Oh, bullcrap.Look, the value of the smart phones comes from being able to get knowledge from knowledge based workers quickly. This produces wealth. But eventually the knowledge based workers get to the point, after being reached as much as they are via their smart phone, where they come to appreciate not having their smart phone... Or they are just natural workaholics. Task based workers on the other hand use smart phones for social purposes. They use them to post to Facebook, twitter, etc, etc, text their friends, and gab on calls. This does not produce wealth. And given every time they are reached by someone via their smart phone, it is for social purposes, they never get tired of it. Smart phones have not made us all wealthier.

 

[Slapdash]

I believe the total of social spending and tax expenditures hovers around 3 trillion a year.I'd probably set it somewhere around the poverty level per person so 10-11K. Half of the stipend for those under 18 would go in a trust fund until they turn 18. Given 300 million people, that would be in the same ballpark.I'd want to put an allowance for HSA or single payer on top of that since Medicare/Medicaid is a third of what we are eliminating. Others would probably want to bake that in.

That doesn't seem like a lot of money really.

I would go 15,600. It would go to people over 18. It would be tax free of course but every dollar in income you make over that would be subject to taxation no matter how it was made be it trust fund, bonds, money management or working McD's. 3 trillion would cover it.

15.6K + health care or just that? 5K is probably about the cash value of the benefits anways.

 

[timschochet]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

1. They do, in a sense. But when I referred to redistribution of wealth, I was referring to the more traditional notion of higher taxes on the rich paying for more benefits for everyone else. "Benefits" do not equal tax breaks. 1a. Tax breaks do not create more wealth; they create the environment in which the creation of wealth can occur more easily.2. Not true. Please read Milton Friedman on this issue for specifics. An increase in wealth, no matter how it is initially redistributed, benefits the entire population. For instance: look at the development of smart phones. The specific monetary income for these phones went to a very few people and corporations who have made billions of dollars off of them. But in actuality, smart phones have made ALL of us wealthier. They make our lives easier and cheaper to live in a thousand different ways.

I hate my smart phone. I feel wealthier without it. Time when people can't reach me or email me has become the most valuable time I have.

well, this explains your luddite attitudes!

Oh, bullcrap.Look, the value of the smart phones comes from being able to get knowledge from knowledge based workers quickly. This produces wealth. But eventually the knowledge based workers get to the point, after being reached as much as they are via their smart phone, where they come to appreciate not having their smart phone... Or they are just natural workaholics.Task based workers on the other hand use smart phones for social purposes. They use them to post to Facebook, twitter, etc, etc, text their friends, and gab on calls. This does not produce wealth. And given every time they are reached by someone via their smart phone, it is for social purposes, they never get tired of it.Smart phones have not made us all wealthier.

Beg to differ: of course it does. How do you define wealth, anyhow?

For me, I define wealth as time, ability, and the pursuit of pleasure. If I have the ability to do things I did not before, and more time to do them, I am wealthier than I was. My free time to pursue pleasure is the measuring stick. If people on smart phones are able to enjoy social pursuits (i.e. pleasure) more than they were before, then they are wealthier for it. (Not to mention the money earned by the companies that provide these pleasures.)

 

[NCCommish]

I believe the total of social spending and tax expenditures hovers around 3 trillion a year.I'd probably set it somewhere around the poverty level per person so 10-11K. Half of the stipend for those under 18 would go in a trust fund until they turn 18. Given 300 million people, that would be in the same ballpark.I'd want to put an allowance for HSA or single payer on top of that since Medicare/Medicaid is a third of what we are eliminating. Others would probably want to bake that in.

That doesn't seem like a lot of money really.

I would go 15,600. It would go to people over 18. It would be tax free of course but every dollar in income you make over that would be subject to taxation no matter how it was made be it trust fund, bonds, money management or working McD's. 3 trillion would cover it.

15.6K + health care or just that? 5K is probably about the cash value of the benefits anways.

Well if I could do what I wanted I'd institute single payer and you'd pay based on what you make. Even if all you make is the BIG there would be some cost.

 

[RCon]

Eliminate tax breaks and financial incentives for companies to move jobs/industries overseasMake the minimum wage a livable wage

There two are directly at odds with each other. First we encourage companies to bring jobs here, then we encourage them to get rid of jobs here?

We'd be much better off going to a BIG and eliminating the minimum wage altogether, along with other programs such as welfare, unemployment, food stamps, etc.

 

[Politician Spock]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

1. They do, in a sense. But when I referred to redistribution of wealth, I was referring to the more traditional notion of higher taxes on the rich paying for more benefits for everyone else. "Benefits" do not equal tax breaks. 1a. Tax breaks do not create more wealth; they create the environment in which the creation of wealth can occur more easily.2. Not true. Please read Milton Friedman on this issue for specifics. An increase in wealth, no matter how it is initially redistributed, benefits the entire population. For instance: look at the development of smart phones. The specific monetary income for these phones went to a very few people and corporations who have made billions of dollars off of them. But in actuality, smart phones have made ALL of us wealthier. They make our lives easier and cheaper to live in a thousand different ways.

I hate my smart phone. I feel wealthier without it. Time when people can't reach me or email me has become the most valuable time I have.

well, this explains your luddite attitudes!

Oh, bullcrap.Look, the value of the smart phones comes from being able to get knowledge from knowledge based workers quickly. This produces wealth. But eventually the knowledge based workers get to the point, after being reached as much as they are via their smart phone, where they come to appreciate not having their smart phone... Or they are just natural workaholics.Task based workers on the other hand use smart phones for social purposes. They use them to post to Facebook, twitter, etc, etc, text their friends, and gab on calls. This does not produce wealth. And given every time they are reached by someone via their smart phone, it is for social purposes, they never get tired of it.Smart phones have not made us all wealthier.

Beg to differ: of course it does. How do you define wealth, anyhow? For me, I define wealth as time, ability, and the pursuit of pleasure. If I have the ability to do things I did not before, and more time to do them, I am wealthier than I was. My free time to pursue pleasure is the measuring stick. If people on smart phones are able to enjoy social pursuits (i.e. pleasure) more than they were before, then they are wealthier for it. (Not to mention the money earned by the companies that provide these pleasures.)

I define wealth they way those who don't have it define it. Those who can't afford food know they aren't wealthy. Those who can't afford to buy clothes know they aren't wealthy. Those who are homeless know they aren't wealthy. And none of them would buy you rhetoric that giving tax breaks to corporations so they could develop smart phone technology has made them wealthier. Using your definition of wealth makes them even poorer.

 

[timschochet]

I'm concerned with all of it. Just because I don't buy into forced redistribution ideas doesn't mean I'm not concerned. This one, though I know about. The way to deal with consolidation of wealth is not to attempt to redistribute it but to create more wealth. To do that, you need to create ripe conditions for new industry. The best way to achieve this, IMO, is lowering corporate tax rates, relieving cumbersome restrictions on business, and encouraging more, not less immigration and trade.

1) Why don't the tax breaks you're talking about that purportedly help small investors constitute redistribution of wealth? And how do they create more wealth?2) If you "create more wealth" that primarily goes to already-rich people, you aren't actually doing anything about the consolidation of wealth.

1. They do, in a sense. But when I referred to redistribution of wealth, I was referring to the more traditional notion of higher taxes on the rich paying for more benefits for everyone else. "Benefits" do not equal tax breaks. 1a. Tax breaks do not create more wealth; they create the environment in which the creation of wealth can occur more easily.2. Not true. Please read Milton Friedman on this issue for specifics. An increase in wealth, no matter how it is initially redistributed, benefits the entire population. For instance: look at the development of smart phones. The specific monetary income for these phones went to a very few people and corporations who have made billions of dollars off of them. But in actuality, smart phones have made ALL of us wealthier. They make our lives easier and cheaper to live in a thousand different ways.

I hate my smart phone. I feel wealthier without it. Time when people can't reach me or email me has become the most valuable time I have.

well, this explains your luddite attitudes!

Oh, bullcrap.Look, the value of the smart phones comes from being able to get knowledge from knowledge based workers quickly. This produces wealth. But eventually the knowledge based workers get to the point, after being reached as much as they are via their smart phone, where they come to appreciate not having their smart phone... Or they are just natural workaholics.Task based workers on the other hand use smart phones for social purposes. They use them to post to Facebook, twitter, etc, etc, text their friends, and gab on calls. This does not produce wealth. And given every time they are reached by someone via their smart phone, it is for social purposes, they never get tired of it.Smart phones have not made us all wealthier.

Beg to differ: of course it does. How do you define wealth, anyhow? For me, I define wealth as time, ability, and the pursuit of pleasure. If I have the ability to do things I did not before, and more time to do them, I am wealthier than I was. My free time to pursue pleasure is the measuring stick. If people on smart phones are able to enjoy social pursuits (i.e. pleasure) more than they were before, then they are wealthier for it. (Not to mention the money earned by the companies that provide these pleasures.)

I define wealth they way those who don't have it define it. Those who can't afford food know they aren't wealthy. Those who can't afford to buy clothes know they aren't wealthy. Those who are homeless know they aren't wealthy. And none of them would buy you rhetoric that giving tax breaks to corporations so they could develop smart phone technology has made them wealthier. Using your definition of wealth makes them even poorer.

Let's not go overboard.

To quote Nixon, let me make one thing perfectly clear: my ideas about wealth, and the best way to create it, are general in nature. I don't want a single person to go hungry in this country or be without clothes or without shelter or without basic medical care. I believe there should be a safety net to care for the most destitute among us, and social programs to try to help them out of their misery. But none of that has anything to do with my arguments about wealth.

 

[pantagrapher]

What the hell happened to the Krugman thread?

 

[Insomniac]

No and no. In order to avoid paying taxes altogether, you have to do what's called a 1031 exchange- you sell an existing property for an equal or more expensive property. And you don't have to be small to do this. But the point is that the small guys will get priced out of the market without the tax relief.

I don't really understand why you're so concerned with this potential consolidation of wealth but not other consolidations of wealth.

Maybe it would make his job obsolete.

 

[Maurile Tremblay]

He raises some good points but then falls back on his tried and tired solution.

I finally got around to reading this.

Regarding the title, I think it's appropriate to have sympathy for Luddites as people, but not for Luddism as policy. When some form of technology reduces the demand for certain types of labor, there are real hardships for the displaced workers. But I hope it's obvious that the best solution isn't to outlaw that technology. (For present purposes, I would consider international trade to be a form of technology as well.) I don't know what the best solution is; I just know it's not that.

As an initial aside, I'd point out that what's bad for American laborers is not necessarily bad for humanity. Krugman notes that "the nature of rising inequality in America changed around 2000. Until then, it was all about worker versus worker; the distribution of income between labor and capital — between wages and profits, if you like — had been stable for decades. Since then, however, labor’s share of the pie has fallen sharply." But the key phrase there is "in America." Worldwide, labor's share of the pie has not fallen. In third-world countries, wages have been going up by about 7% per year compounded, meaning that they're doubling every ten years. Outsourcing has been bad for American labor, but good for worldwide labor, and it's not clear to me why the first should be more important than the second. (It's clear why it's more important to American politicians, but it's not clear why it should be more important to neutral observers behind a Rawlsian veil of ignorance.)

American laborers are used to earning a lot more than third-world laborers. Historically, the reason they've earned so much more is because they have been much more productive. Probably the most important reason that they've been much more productive is that there's been so much more capital investment in the U.S. than there has been in third-world countries. I can make a lot more widgets per hour operating my American employer's expensive widget-making machinery than a Malaysian can make by hand. Because labor has been more productive in America, it has been paid more.

But that is changing. Countries all over the world are becoming more suitable for foreign capital investment. I can now open a factory in plenty of third-world countries without going through miles of red tape, and without fear that it will be confiscated by those countries' governments, or that it will be taken over by organized crime, or that I'll never be able to get my profits from it back to America, etc.

As other countries become decent options for capital investment in competition with the U.S., the wages in those countries will increase while the demand for American labor will decline.

Actually, that last sentence needs some further explanation. As I've pointed out plenty of times in the past, importing goods from other countries does not necessarily reduce demand for American goods. (It's international trade; not international gift-giving. When we trade domestic wheat for foreign cars, it decreases the demand for domestic cars, but it increases the demand for domestic wheat by the same amount.) The same reasoning tells us that outsourcing jobs to other countries does not necessarily reduce the demand for American labor. It's all part of the trade calculus, and ultimately, at least as a rough approximation, imports = exports.

But just because something is not necessarily true does not mean that it's not true in a specific case. Right now, I do think that outsourcing jobs is reducing the demand for American labor, and that's largely because of technological progress (which is nonetheless a very good thing, and should not be stifled).

Imports = exports as measured in dollars. But we can export a billion dollars' worth of computer software while importing a billion dollars' worth of textiles, furniture, and manufactured electronics, and if we measure the trade balance in terms of hours of labor rather than dollars, imports and exports won't be nearly equal. We can produce a billion dollars worth of computer software with a small fraction of the man-hours needed to produce a billion dollars' worth of manufactured goods. While international trade will still benefit the U.S. as a whole, the income-centric benefits will be fairly concentrated among a relatively small percentage of the population, like the owners and managers of software companies (who are already very well-to-do). Technological progress is making it possible for the entrepreneurial elites to produce greater value with fewer man-hours of work; that's generally a good thing, but it has income-concentration effects that can distort the foreign trade calculus.

If, dollar for dollar, our exports are a lot less labor-intensive than our imports, as is almost certainly the case, many American workers will be harmed by the globalization (and technologization) of the economy.

Exactly what to do about that is a hard question. I agree with Krugman that a decent social safety net is part of the answer, but I don't think it can ever be the dominant part. It's politically unfeasible and undesirable to have a relatively small working class support a relatively large non-working class. It's also an economic disaster to have a high rate of involuntary unemployment. Publicly supporting people without jobs, or with very low-playing jobs, isn't going to work in the long term unless it's combined with providing widespread opportunities for people to get highly productive jobs that they are qualified for.

But how do we do that? More education sounds like a good idea in the abstract. But in practice, education in America is kind of stupid in a lot of ways. I mean, college is an awful lot of fun, but it's generally not a very efficient way to become usefully skilled or learned. And high school education fails far too often even to ensure basic functional literacy.

If there's an easy answer to the problem, somebody else needs to point it out, because I'm not seeing it.

 

[Slapdash]

Imports = exports as measured in dollars. But we can export a billion dollars' worth of computer software while importing a billion dollars' worth of textiles, furniture, and manufactured electronics, and if we measure the trade balance in terms of hours of labor rather than dollars, imports and exports won't be nearly equal. We can produce a billion dollars worth of computer software with a small fraction of the man-hours needed to produce a billion dollars' worth of manufactured goods. While international trade will still benefit the U.S. as a whole, the income-centric benefits will be fairly concentrated among a relatively small percentage of the population, like the owners and managers of software companies (who are already very well-to-do). Technological progress is making it possible for the entrepreneurial elites to produce greater value with fewer man-hours of work; that's generally a good thing, but it has income-concentration effects that can distort the foreign trade calculus.

Very interesting post overall, but I think this paragraph is incomplete as far as the words imports and exports are used. The balance of payments is what equals but it is only because of the "statistical discrepancy" or plug. It is just definitional and would be quite negative without that adjustment. In practice the current, capital, and financial accounts can be in surplus or deficit at any given time.

In the example of the bold (current account) the deficit is quite large as imports of goods far exceed the exports. Your point about the distributional affects of this trade is well taken, but I think the picture is darker than you imply here.

More info on the balance of payments: http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm

 

[Andy Dufresne]

Krugman espouses the broken window theory of economics.

 

[SacramentoBob]

http://dilbert.com/strips/2013-06-03/

 

[bigbottom]

I'm with you there.

I'll make you a trade offer. We can get rid of corporate income taxes but treat investment income as ordinary income. Would you take that deal?

No.

Remember that I work in commercial real estate. Most of the smaller investments in real property (under 10 million dollars) are made mostly for tax reasons. If we took your proposal it would kill the smaller investors, and the only purchases of real property would be made by large corporations that could afford the taxes given their long term profits. Within a few years nearly every piece of commercial property that had any value whatsoever would be purchased by these same corporations, at cut-rate prices, further lowering their value. The individual property owners would be forced out of the marketplace completely, and the ultimate result to the state would be far less revenue than what is generated now. I don't think that's the result you want.

I know this was over a month ago, but I just saw this post and have a few questions regarding your underlying premise. You state that most of the under $10,000,000 investments in real property are made for tax reasons. Can you flesh this out a bit? I would think that they would be made mostly for investment reasons (anticipated investment gains, portfolio diversification, etc.) rather than mostly for tax reasons. Unless of course you mean capital gains tax treatment on investment gains when you refer to "mostly for tax reasons," though I would consider that as an aspect of an investment strategy, rather than strictly a tax avoidance strategy. Or are you talking about using depreciation as an itemized deduction, which is a clear example of short term tax avoidance.

Moving on, why would the treatment of capital gains as regular income kill smaller investors? Why would the purchases of real property only be made by large corporations? Why would only large corporations be able to afford the taxes?

 

[Slapdash]

http://dilbert.com/strips/2013-06-03/

 

[timschochet]

I'm with you there.

I'll make you a trade offer. We can get rid of corporate income taxes but treat investment income as ordinary income. Would you take that deal?

No.

Remember that I work in commercial real estate. Most of the smaller investments in real property (under 10 million dollars) are made mostly for tax reasons. If we took your proposal it would kill the smaller investors, and the only purchases of real property would be made by large corporations that could afford the taxes given their long term profits. Within a few years nearly every piece of commercial property that had any value whatsoever would be purchased by these same corporations, at cut-rate prices, further lowering their value. The individual property owners would be forced out of the marketplace completely, and the ultimate result to the state would be far less revenue than what is generated now. I don't think that's the result you want.

I know this was over a month ago, but I just saw this post and have a few questions regarding your underlying premise. You state that most of the under $10,000,000 investments in real property are made for tax reasons. Can you flesh this out a bit? I would think that they would be made mostly for investment reasons (anticipated investment gains, portfolio diversification, etc.) rather than mostly for tax reasons. Unless of course you mean capital gains tax treatment on investment gains when you refer to "mostly for tax reasons," though I would consider that as an aspect of an investment strategy, rather than strictly a tax avoidance strategy. Or are you talking about using depreciation as an itemized deduction, which is a clear example of short term tax avoidance.

Moving on, why would the treatment of capital gains as regular income kill smaller investors? Why would the purchases of real property only be made by large corporations? Why would only large corporations be able to afford the taxes?

Fair questions.

You're correct that I'm combining investment strategy and tax strategy- the two are intertwined. No small investor can afford to purchase investment property without considering the tax implications. Everything has to be taken into account- depreciation, the reassessment of the value of the property upon purchase (this is huge).

ANY change to the tax status makes it more difficult for small investors to compete- their profit margin in these investments is already extremely narrow. Large corporations can afford to purchase properties and wait for income long term, or even purchase them for the purpose of write-offs- small investors can't afford to this.

 

[timschochet]

BigBottom, I'm not really satisfied with my answer to you. Your questions are complex and I don't feel knowledgeable enough to answer them intelligently. Because I work with small investors, I KNOW that they purchase properties with taxes in mind, and I KNOW that making investment the same as normal income would make them unable to compete with large corporations. But as to why these are truths, you're better off talking to an economist or at the very least a CPA type, because I'm not great at understanding it myself.

 

[Andy Dufresne]

Detroit = #### happens

 

[TwinTurbo]

http://dilbert.com/strips/2013-06-03/

 

[TwinTurbo]

Detroit = #### happens

Krugman states: "So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces."

I do not agree. The political forces and blatant corruption played a significant role in the demise, and the people of the city bear responsibility for repeatedly voting in greedy, incompetent leaders that never diversified the economy to rely on more than just one cyclical industry. All they did was blame outside forces for years while at the same time stealing from the city and doing absolutely nothing that would further the long term economic prospects for the city.

Yes Detroit was uniquely irresponsible. If you ranked leadership of the top 50 cities in the country over the last 50 years, they would rank dead last. I defy Krugman to pick a bigger loser. New Orleans no. Pittsburgh no. Cleveland no. Detroit had the worst combination of corruption, stupidity, and gross mismanagement of resources. It's like a chain smoker wondering how they got terminal lung cancer after 50 years and taking no responsibility.