tag:blogger.com,1999:blog-4900303239154048192.post3422627244448666170..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: The Tax Debate: Is High Income Due to Effort or Luck?Unknownnoreply@blogger.comBlogger10125tag:blogger.com,1999:blog-4900303239154048192.post-32942511455893782762009-04-29T23:06:00.000-04:002009-04-29T23:06:00.000-04:00We need a third category besides hard work and luc...We need a third category besides hard work and luck: privilege.<br /><br />It may take a lot of hard work to get the system set up working for you, but once you do you'll get a lot more money out of the system than your hard work alone could have gotten you.<br /><br />Absent the privilege of "intellectual property," one can only derive income from an innovation until others enter the market and adopt it, and arbitrage the quasi-rents down to zero. Patents and copyrights make it possible, on the other hand, to live a lifetime off the profits of a one-hit wonder.<br /><br />If it weren't for the state's IP laws, Bill Gates would probably have a comfortable upper-middle class income.<br /><br />In addition, artificial scarcity of land and capital, and the monopoly rents attending on them, mean that you can do the initial work of accumulating a chunk of wealth, and then let it build on itself via the law of compound interest. <br /><br />Most of the income of the plutocracy comes either from direct government subsidies (the main function of government is to subsidize the operating cost of big business), or from rents on artificial property rights.Kevin Carsonhttps://www.blogger.com/profile/07525803609000364993noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-11349583759591212682009-04-29T15:02:00.000-04:002009-04-29T15:02:00.000-04:00"Lastly, you are confusing wealth and income - the..."Lastly, you are confusing wealth and income - these are totally different topics from a tax perspective."<br /><br />An excellent point and obviously a valid one. Let's tax the income as it is earned regardless of how it is earned. Let's call it new and additional wealth. Let's be sure to include salary, bonus, paid in shares of stock or cash or any commodity of any value. Let's not forget to apply that income tax to dividends as well as interest on capital. <br /><br />Good distinction, income is taxed while it is earned. Then let's tax wealth when the holder of that wealth drops dead. Let's have no inheritance tax to avoid confusion. We'll only tax estates before distribution to heirs. Let's make that tax significant as a means of recouping all the earned income that the wealth holder had avoided in the first place. Let's differentiate the estate tax from an inheritance tax so that the heirs can't complain that their legacy is being unfairly taken. If the heirs have some special claim to an individual's wealth let them establish that claim while the benefactor is still alive to uphold that claim. If the wealthy benefactor is intent to have his/her wealth passed along to some next generation heir let that benefactor share that wealth before the sundown of life. If the heir(s) are special enough to be entitled to share the wealth, then that entitlement should not have to succeed a life time. No more battles in probate court. No more temptation to put the poor bastard out of his/her misery prematurely. <br /><br />Thank you Anonymous, that distinction between wealth and income was brilliant.Jacknoreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-87387040891762869002009-04-28T21:54:00.000-04:002009-04-28T21:54:00.000-04:00Let's base tax rates on luck. We can have a luck c...Let's base tax rates on luck. We can have a luck committee to review each case, obviously PGL has the stats and ability to judge this. So Shaquille O'Neill will be taxed at a 95% rate because his situation is clearly 99% luck that he possessed the right DNA and grew to his prolific stature.<br /><br />Never-mind the fact the people that sit around and argue Rawls all day treat people that earn $100,000 in NYC the same as Bill Gates. Do you really understand how dumb you sound?<br /><br />If you want to tax the 400 richest people at some obscenely high rate, then I do not care. But quit trying to lump everyone in that same economic category based on your "luck" rationalization.<br /><br />Lastly, you are confusing wealth and income - these are totally different topics from a tax perspective.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-22428519565536294782009-04-26T16:06:00.000-04:002009-04-26T16:06:00.000-04:00How about the government sets tax rates so as to c...How about the government sets tax rates so as to collect enough to pay its expenses and debts. How about the tax system tax those who have gained the most from our economy the highest rates just because they have gained the most from our economic structure. How about economists discontinue the mental masturbation of trying to predict what will be the effect of marginal increases and decreases until such time as those economists gain the ability to read the financial pages one or two decades into the future.<br /><br />There is too much opportunity to shill for one income group or another when we start to imagine that we actually understand the relationship between taxation and economic decision making. Will we really get any consensus of opinion in regards to the effect of marginal rates on future investment decision making? Not likely. Virtually every economic question that comes up on this and similar discussion sites results in no consensus, but a plethora of similar and dissimilar ideas. Great for discussion. Lousy for the purpose of tax planning. Taxes are for the purpose of paying the cost of good government in a complex society. There's going to be an effect. So, what? We stop collecting taxes? That's real bright, but little different from the nit picking discussions of how much to tax people who have so much money they can't figure out what to do with it all. Let them support the society that has enabled their wealth.Jacknoreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-24512794412583579752009-04-26T15:43:00.000-04:002009-04-26T15:43:00.000-04:00Try this thought experiment.
Suppose Mr. Yu made ...Try this thought experiment.<br /><br />Suppose Mr. Yu made a billion dollars selling adulterated products to mostly East Asian markets with some leakage into Australia and the United States. Suppose the Chinese government dropped all taxation of income over $1 billion. Would Mr. Yu redouble his efforts to produce and sell more product? Well probably. Would that make us all collectively better off?<br /><br />We can argue specifics of whether Microsoft has made us better or worse off in the long run (because somebody was going to supply that software to IBM) but either way there is a fundamental fallacy in the argument. Economic efficiency should not be a self-validating argument, not that is without considering issues of subsequent distribution and assorted externalities.<br /><br />If Mr Yu sells a $billion of adulterated pet food overseas in 2008 and $2 billion in 2009 because of lower marginal rates he wins, Chinese tax revenue is unaffected, Chinese GDP is up, as is its trade surplus. Hurray! Everyone is a winner!<br /><br />Except Fluffy and Bowser.<br /><br />I know this was not the focus of Varian's piece but he has simply built in the 'income is income' premise in without regard to whether that income derived from enforcement of near monopoly position (Gates) or producing products with deadly externalities (hypothetical Mr. Yu).Bruce Webbhttps://www.blogger.com/profile/13222670342780912788noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-4970849691713374222009-04-26T13:53:00.000-04:002009-04-26T13:53:00.000-04:00If a dollar has any value above null, is it even c...If a dollar has any value above null, is it even conceivable that anyone -- by their own efforts alone -- could earn a million dollars in a year?<br />I think not. <br />That's why I call executive pay piracy. How else does one explain its rise in the past fifty years from a two digit multiplier of basic wages to a three digit one?<br />--mlMartin Langelandhttps://www.blogger.com/profile/12214277415738344944noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-10008493594651012332009-04-26T12:59:00.000-04:002009-04-26T12:59:00.000-04:00I find it interesting that theoretical discussions...I find it interesting that theoretical discussions of the sources of income inequality never consider antisocial behavior. No system is airtight; there are always possibilities for unscrupulous individuals to benefit at the expense of others. The Bill Gates example brings that to mind.Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-44798496994729676222009-04-26T12:48:00.000-04:002009-04-26T12:48:00.000-04:00Milton Friedman argued (a) luck is a big factor an...Milton Friedman argued (a) luck is a big factor and (b) therefore taxes should NOT be progressive. Dig back into Capitalism and Freedom and you'll find it. If you win the lottery should your friends be able to force you to share the winnings with them?<br /><br />It's a crummy analogy--I think progrowthliberal has it right--but it's in the literature and you expect it to be trotted out in discussions like these.<br /><br />http://www.rothsteineconomics.blogspot.com/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-2833969415724127982009-04-26T12:17:00.000-04:002009-04-26T12:17:00.000-04:00With respect to people who are successful financia...With respect to people who are successful financially, an executive of a firm I represented told me of an old Italian saying (this executive was Italian-American):<br /><br />"If you're rich, you're not only smart, but you're good looking too."<br /><br />He told me this after the CEO and founder of the firm shot down his marketing proposal.Shag from Brooklinehttps://www.blogger.com/profile/07312591102812315460noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-17157267829940633682009-04-26T10:10:00.000-04:002009-04-26T10:10:00.000-04:00Effort or luck?? Try POWER.
"...no one bank had ...Effort or luck?? Try POWER.<br /><br />"<I>...no one bank had a consolidated statement of all the Hunt loans, because Bunker and Herbert had refused to allow them to see one. The Hunt business had been too good for the banks to insist....</I> Page 234<br /><br />"<I> Runs on a bank are no longer triggered by individual customers' lining up outside the doors to withdraw their life savings, as they were in the 1930s. (..FDIC..guarantees the accounts of depositors...). Now a run is created by institutional money managers who look at the bank's balance sheet and say: "I'm not going to risk a row with my board if there's trouble at the First of Chicago." The money managers just withdraw their money when short-term loans come due, and it ebbs out of the bank like the tide on a shallow beach. And their was one money manger of consequence who was threatening to do just that. A mutual fund with a balance of half a billion dollars at the First of Chicago...</I>" Page 221<br /><br />"<I> [the fate of the Hunts] had become inextricably linked with that of the financial system of the United States which was itself linked with that of the City of London, Paris, Frankfurt, and Zurich. In Europe, too, bankers waited anxiously for the latest news from New York and Washington..."Nobody wanted the Hunts bailed out: they're the least favorite characters anyone could dream of." Said Robert Carswell. But the personalities of Bunker and Herbert Hunt were not the issue. Bankers had begun to describe the problem as "systemic" and a decision would have to be taken about the best way to deal with the monumental debts of the Hunt brothers."</I> <br /> page 223<br /><br />From "Beyond Greed - How the two richest families in the world, the Hunts of Texas and the House of Saud, tried to corner the silver market - how they failed, who stopped them, and why it could happen again." by Stephen Fay. 1982<br />ISBN 0-670-64497-8Myrtle Blackwoodhttps://www.blogger.com/profile/07427043367624101075noreply@blogger.com