Billionaires Blast off

[Bomb#20]

One of the things going on HERE is that some people arguing against a wealth tax keep using examples of "If I made ten dollars an hour and you made a hundred dollars an hour", or "If your house was worth 600k...", then ask if YOU should be taxed on its increased value*.

THAT IS NOT ABOUT ANYONE TO WHOM A WEALTH TAX WOULD APPLY.

Wealth tax, in my mind, is not about people making ten or a hundred - or even a thousand dollars an hour. It's about people making tens of thousands, hundreds of thousands or MILLIONS of "on paper" dollars per hour whether or not they actually work.
IMO, any reasonable wealth tax would kick in only on increases in paper wealth above some threshold like perhaps 100x the median individual net worth.

Yes, we get all that. We all understand that the discriminatory tax you have in mind for your outgroup is a tax you want only on your outgroup.

It's like we're Muslims in a country under Islamic law, and you say we should raise the tax on dhimmis that they have to pay in order to be allowed to not be Muslim, and I say we shouldn't do that, and I say "How would you like it if they put a discriminatory tax on us, a tax we have to pay in order to be allowed to be Muslim?" So then you say "THAT IS NOT ABOUT ANYONE TO WHOM A DHIMMI TAX WOULD APPLY. Dhimmi tax, in my mind, is not about Muslims. It's about Christians and Jews and Hindus. So quit it with the strawman about a Muslim tax -- nobody's going to impose a special tax on Muslims."

NOBODY would be hurt by those taxes.

Of course they would -- just people outside your own monkeysphere. In the long run, though, pretty much everyone will be hurt if our culture normalizes the theory that property rights disappear in a puff of ideology whenever other people want your stuff so much you owe it to society to sell it to them.

Mega-billionaire individuals are like economic black holes, sucking up all the wealth in their vicinity and re-distributing bits of it as they see fit while hoarding vast amounts to allow their progeny to do the same.

You don't have a reason to believe that; it's your faith in zero-sum-game economics talking. Bezos got billions because he engaged in a long series of transactions in each of which the other party was better off with the transaction than without it -- that's why the other party voluntarily traded with Bezos. The wealth Bezos has wasn't a preexisting resource just sitting around in his vicinity waiting to be sucked up; it was created by all those transactions, along with more wealth that the other parties got out of it.

Another way to examine the American inequality trend that Bomb#20 for one denies, is to examine the difference between average and median net worth in the US.

I didn't deny the American inequality trend; I denied that within-country inequality is a moral issue. If it's immoral for rich Americans to be vastly rich when other people are so poor, explain to me why it's supposed to be a moral imperative to reduce that immorality by redistributing their wealth to other Americans, when inequality would obviously be reduced a lot more by redistributing their wealth to actually poor people in poor countries. Why should the recipients be the Americans at the bottom of your chart, making $15,000 a year, and not Zambians trying to live on $1,500 a year?

Whenever somebody is making an issue of within-country charts, his moral principle isn't inequality reduction; it's just naked tribalism.

* in fact I AM taxed on its increased value

I take it you're referring to your local property taxes and the increased value as judged by your local assessor. In the first place, that means the tax is something like $12,000, not the $200,000ish tax we'd be talking about if how much other people want your house determined how much income you have. And in the second place, the fact that you're taxed on its increased value doesn't mean that kind of tax is justifiable; it means your state needs to make like California and pass its own Proposition 13.

 

[Bomb#20]

How are capital gains different from normal (ordinary) income in reference to inflation. They are both acquired over the course of a year in which the inflation took place.

If by normal income you mean wages, they're paid by withholding. So your January 2021 income is taxed in January 2021 dollars, and your February 2021 income is taxed in February 2021 dollars, and so forth. So there just isn't any issue of a disconnect between the measurement units.

(If it weren't like that -- if you got to acquire income for a year and only pay tax on it on April 15, 2022, then you'd be paid wages in 2021 dollars and pay taxes on them in 2022 dollars. That would be a win for the taxpayers, so naturally Congress wouldn't go along with that system.)

Capital gains could be not realized for many years, decades even.

And over that entire time income, recent records indicate, remained static for many years even as inflation inched up at 2 percent a year for those many years. Why should capital gains benefit from inflation if income isn't adjusted with raises IAC inflation?

Where are you getting that? According to the chart Elixir posted, wages have been rising a little faster than inflation.

 

[Bomb#20]

Why this defense of excessive concentration of wealth into the hands of a small percentage of the population?

Wealth isn't being concentrated; that accusation is a zero-sum-game metaphor that implies wealth is being depleted elsewhere. People at all income levels are getting richer.

The situation clearly does not benefit society or the economy..

Sure it benefits society and the economy.

The economic practices that led to the situation you find so deplorable are the same practices that are in the process of wiping out extreme poverty. If you don't see that as benefiting society and the economy, it just means most of the beneficiaries aren't in your ingroup.

..so why defend it? What is the motive?

I'm defending it from attacks that are based on erroneous economic beliefs that need to be discredited before their adherents do more damage than they already have. But if you have a criticism of super-rich people that's based on facts and correct economic theories, I'll leave you to it.

 

[DBT]

Wealth isn't being concentrated; that accusation is a zero-sum-game metaphor that implies wealth is being depleted elsewhere. People at all income levels are getting richer.


Sure it benefits society and the economy.

The economic practices that led to the situation you find so deplorable are the same practices that are in the process of wiping out extreme poverty. If you don't see that as benefiting society and the economy, it just means most of the beneficiaries aren't in your ingroup.

..so why defend it? What is the motive?

I'm defending it from attacks that are based on erroneous economic beliefs that need to be discredited before their adherents do more damage than they already have. But if you have a criticism of super-rich people that's based on facts and correct economic theories, I'll leave you to it.

If it is true that - '' The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population'' - then it is done and dusted: the greater part of the wealth is in the hands of a small percentage of the world's population, wealth has in fact accumulated into the hands of a few.

''Global inequality is shockingly entrenched and vast and the number of billionaires has doubled in the last decade. Oxfam India CEO Amitabh Behar, who is in Davos to represent the Oxfam confederation this year said: “The gap between rich and poor can't be resolved without deliberate inequality-busting policies, and too few governments are committed to these.”

 

[Bomb#20]

In other words, once again a case of eat-the-rich.

I do not believe consumers are overcharged by getting a better deal.

Once again: nothing to do with 'eat the rich' and everything to do with power and position...the balance of power being weighed heavily in favour of you know who.

Yep: the balance of power is weighted in favor of the common man, and against the rich. What a surprise. We live in democracies.

In ancien regime France, the balance of power was weighted heavily in favor of the rich, and therefore rich people weren't taxed and poor people were. That's what people in power do: they tax people out of power. But as you can see from the IRS graph Derec showed in post #211, we have a progressive tax system: richer people have to spend more of their lives producing stuff for the government than poorer people do. If rich people really have most of the power, and are in a position to configure the tax system as they please, why the heck would they have made it discriminate against themselves?

 

[Bomb#20]

..so why defend it? What is the motive?

I'm defending it from attacks that are based on erroneous economic beliefs that need to be discredited before their adherents do more damage than they already have. But if you have a criticism of super-rich people that's based on facts and correct economic theories, I'll leave you to it.

If it is true that - '' The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population'' - then it is done and dusted: the greater part of the wealth is in the hands of a small percentage of the world's population, wealth has in fact accumulated into the hands of a few.

And it's also accumulated out of the hands of a few into the hands of many. That's what happens when people cooperatively produce: wealth accumulates into all their hands.

The 2,153 billionaires in the world evidently have more than $2.153 trillion among them -- probably trillions more since they aren't all 1-billion billionaires. Let's say the total is a bit over $4.6 trillion. That would imply the 4.6 billion poorest average about $1000 each*. The billionaires have their billions because the governments of their countries take private property rights at least somewhat seriously. So the question is, how much wealth would the 4.6 billion poorest have if those countries had governments that didn't take private property rights seriously? If you can't show that they'd have more than $1000 each, then you haven't shown the inequality is causing a problem.

(* If the billionaires had a lot more than the 4.6 billion poorest then Oxfam would have picked a bigger number than 4.6 billion to compare their wealth to.)

 

[ZiprHead]

I, for one, am proud to have helped pay the tax burden of billionaires so they can take their vanity flights to space.

 

[Swammerdami]

The logic is identical in case of labor income or interest income. So either it matters in both cases or it doesn’t.

The point is that the interest return on a dollar investment is partly to compensate the investor for loss of the principal due to inflation.

Labor income is return on the "capital" that is your own working body. That "capital" may be subject to deteriorations and depreciations also, but they have nothing to do with monetary inflation!

 

[laughing dog]

The logic is identical in case of labor income or interest income. So either it matters in both cases or it doesn’t.

The point is that the interest return on a dollar investment is partly to compensate the investor for loss of the principal due to inflation.

Labor income is return on the "capital" that is your own working body. That "capital" may be subject to deteriorations and depreciations also, but they have nothing to do with monetary inflation!

The return to one's own working body is reduced by inflation via the reduction in the purchasing power of one's wages due to inflation. That is the same logic as the reduction in the purchasing power of the principal due to inflation.

 

[Canard DuJour]

If it is true that - '' The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population'' - then it is done and dusted: the greater part of the wealth is in the hands of a small percentage of the world's population, wealth has in fact accumulated into the hands of a few.

And it's also accumulated out of the hands of a few into the hands of many. That's what happens when people cooperatively produce: wealth accumulates into all their hands.

The 2,153 billionaires in the world evidently have more than $2.153 trillion among them -- probably trillions more since they aren't all 1-billion billionaires. Let's say the total is a bit over $4.6 trillion. That would imply the 4.6 billion poorest average about $1000 each*. The billionaires have their billions because the governments of their countries take private property rights at least somewhat seriously. So the question is, how much wealth would the 4.6 billion poorest have if those countries had governments that didn't take private property rights seriously? If you can't show that they'd have more than $1000 each, then you haven't shown the inequality is causing a problem.

(* If the billionaires had a lot more than the 4.6 billion poorest then Oxfam would have picked a bigger number than 4.6 billion to compare their wealth to.)

Dunno about "taking property rights seriously" but GDP growth, both globally and within-country, has slowed to such an extent and in such local proportions that even the IMF now attributes it to increasing rich-poor income gaps , both global in within-country.

The idea that convergence further down the global income distritbution (which wouldn't even be a thing without China) is a necessary corollary of the average American's loss of income share is zero-sum thinking 101. Not to mention "in-group" favouratism.

 

[Elixir]

Yes, we get all that. We all understand that the discriminatory tax you have in mind for your outgroup is a tax you want only on your outgroup.

You talk as if mega-billionaires were half the population. In fact, they're an "outgroup" for 99.9999% of us.

It's like we're Muslims in a country under Islamic law, and you say we should raise the tax on dhimmis that they have to pay in order to be allowed to not be Muslim

No, it's not like that. It's like 10 muslims suppressing the standard of living for 10 million dhimmis.

Of course they would -- just people outside your own monkeysphere.

Again, YOU are part of "my monkeyshpere", as is virtually every other American.

You don't have a reason to believe that; it's your faith in zero-sum-game economics talking.

Bullshit. I have been a businessperson and an entrepreneur all my life. I KNOW about productivity, first hand. I know about growth algorithms, barriers to market entries and all kinds of things that bear on the success of enterprises. It is you who are harboring a fantasy that the physical and fiscal mechanics that apply to my productivity and that of my companies are the same as those that apply to generating tens of billions of dollars per year of personal profits for a single mega-billionaire.

Another way to examine the American inequality trend that Bomb#20 for one denies, is to examine the difference between average and median net worth in the US.

I didn't deny the American inequality trend; I denied that within-country inequality is a moral issue.

I tend to agree with that. There is no high horse from which anyone can righteously proclaim that this dollar or that dollar was unjustly accrued. The "immorality" is in the fiscal/mechanical setup permitted by our elected representatives operating in their own behalf rather than representing the interests of their constituents. The "morality" of taking advantage of that corrupt setup is IMHO a personal judgment, since it's nominally legal.

* in fact I AM taxed on its increased value

I take it you're referring to your local property taxes and the increased value as judged by your local assessor. In the first place, that means the tax is something like $12,000, not the $200,000ish tax we'd be talking about if how much other people want your house determined how much income you have.

Now you're back to trying to apply the same principles to you and me at our income and wealth levels, that I would apply to the 1,000,000,001th dollar of annual increased wealth of a mega billionaire. Surely you can see the difference?

 

[Jayjay]

In other words, once again a case of eat-the-rich.

I do not believe consumers are overcharged by getting a better deal.

Once again: nothing to do with 'eat the rich' and everything to do with power and position...the balance of power being weighed heavily in favour of you know who.

Yep: the balance of power is weighted in favor of the common man, and against the rich. What a surprise. We live in democracies.

In ancien regime France, the balance of power was weighted heavily in favor of the rich, and therefore rich people weren't taxed and poor people were. That's what people in power do: they tax people out of power. But as you can see from the IRS graph Derec showed in post #211, we have a progressive tax system: richer people have to spend more of their lives producing stuff for the government than poorer people do. If rich people really have most of the power, and are in a position to configure the tax system as they please, why the heck would they have made it discriminate against themselves?

There are loopholes for the super rich. If wealth and power was concentrated to the top 0.1%, I wouldn't be surprised to see progressive taxation for the bottom 99.9%.

 

[Loren Pechtel]

Non-investment income is generally spent soon after being made--inflation is not a meaningful factor.

Prove it. My father lived off investment income during his retirement - it was spent.

If p then q doesn't prove if q then p.

Want to try again?

 

[Loren Pechtel]

We got to the moon and then went home because doing it the government way wasn't practical. The political forces outweigh the economic ones.

Maybe.

But I prefer democracy over aristocracy.

A handful of people making the big decisions about the direction and future of human endeavour, selected almost entirely by their wealth, is a shit way to run a society. Even if it occasionally results in something you personally want to see happen, that might have not happened in a more democratic system.

It's astonishing to me that Americans, of all people, are so deadset keen on restoring an aristocratic system of governance.

I guess at least Musk will make the hyperloop run on time.

It's not a good system, it just works better to put people who have demonstrated good money-handling abilities in charge of money that people who have demonstrated good charisma and lying ability.

SpaceX just gets things done. NASA continues to pour billions in to pork because that's what Congress wants--they haven't produced a good rocket since the 60s.

 

[Loren Pechtel]

You can't demonstrate that any such cost exists.



We got to the moon without any help from either Russian or Billionaire financing.
J. Paul Getty had nothing to do with the successes of any of NASA's pioneering space programs.
We could get re-usable rockets, space planes, and space based manufacturing the same way - if the fed wasn't broke from trickle-down economics.

We got to the moon and then went home because doing it the government way wasn't practical. The political forces outweigh the economic ones.

I beg to differ. NASA is still the cutting edge of space research. I’m perfectly happy to let the B team handle space tourism and the like, if it’s viable and beneficial to the entity that paid for much of the underlying tech infrastructure - us. Taxpayers. Benefits from this endeavor should be public property, at least in large part.

NASA is still the A-team for scientific craft, but it's junior league when it comes to delivering delta-v.

 

[Loren Pechtel]

Nothing of the sort. Are you suggesting that the highly profitable companies are unable to pay their workers more? The reason that they don't is not that they are unable to, but that they are unwilling.

Their business practice is to pay a little as possible in order to maximize profits. They pay what they need to, and an imbalance of negotiating power prevents workers from securing better pay. Collective bargaining goes some way in addressing this imbalance of power.

You're trying to keep people from accumulating large sums of money.

SpaceX was the result of one of those guys who had already accumulated large sums of money putting part of it into an idea. Likewise Virgin Galactic (which probably won't amount to more than tourism and we don't really need) and Blue Origin (which is aiming to be a competitor to SpaceX.)

I am pointing out that excessive accumulation of wealth in the hands of a small percentage of the population is not good for society or the economy, and I have given the reasons why.....which you just ignore or brush aside.

You take this as an assertion but you refuse to consider the costs of your approach. That's the hallmark of religion.

 

[Loren Pechtel]

Non-investment income is generally spent soon after being made--inflation is not a meaningful factor.

Essentially all income is either spent immediately or invested.

To keep the numbers simple, assume 33% tax bracket, 9% nominal annual return on investment and 3% inflation. The tax on the real return of 6% "should be" 2% but because there's no inflation adjustment you pay 3%. The extra 1% is, in effect, an annual wealth tax.

Considering only 1st-order effects (and assuming equal income treatment), I think the same is true whether the investment pays interest, dividends or eventual capital gains.

Correct but irrelevant--your logic doesn't apply to earned income.

And a stealth wealth tax like this is a bad thing--you create an incentive for the government to create inflation. Bad idea.

 

[laughing dog]

Non-investment income is generally spent soon after being made--inflation is not a meaningful factor.

Essentially all income is either spent immediately or invested.

To keep the numbers simple, assume 33% tax bracket, 9% nominal annual return on investment and 3% inflation. The tax on the real return of 6% "should be" 2% but because there's no inflation adjustment you pay 3%. The extra 1% is, in effect, an annual wealth tax.

Considering only 1st-order effects (and assuming equal income treatment), I think the same is true whether the investment pays interest, dividends or eventual capital gains.

Correct but irrelevant--your logic doesn't apply to earned income.

Of course it does - inflation reduces the purchasing power of income regardless of its source.

 

[Loren Pechtel]

You talk as if mega-billionaires were half the population. In fact, they're an "outgroup" for 99.9999% of us.

That doesn't refute his argument.

 

[DBT]

I am pointing out that excessive accumulation of wealth in the hands of a small percentage of the population is not good for society or the economy, and I have given the reasons why.....which you just ignore or brush aside.

You take this as an assertion but you refuse to consider the costs of your approach. That's the hallmark of religion.

Not true, higher pay rates for workers stimulates the economy, more money to spend on goods and services, luxuries, etc. The rich don't get poor, everyone benefits. What we have now is greed. Those at the top are not willing to pay, not that they cannot afford to.