Why we should raise taxes on the rich

[Elixir]

Like a wad of c-notes stuffed under a mattress?
Real properties are taxed, and I think stocks should be taxed similarly. I have to pay tax on my home even if it is worth less than last year and no income is realized on it. Why should stocks be any different? Because the wealthy put their money there, that's why.

I'm not talking about stocks. The problem comes from startup and early-growth-phase businesses. Everything they've got is going into the company. Those are the ones screwed by wealth taxes.

I have what was a startup, now probably more like an early growth-phase business. Which "wealth taxes" are you referring to? So far, the painful bits have been taxes on corporate earning, which, if we were big enough to hire tax mitigation lawyers, set up offshore accounts etc., and paid the rates that say GE pays, would be no problem at all.

 

[Loren Pechtel]

I'm not talking about stocks. The problem comes from startup and early-growth-phase businesses. Everything they've got is going into the company. Those are the ones screwed by wealth taxes.

I have what was a startup, now probably more like an early growth-phase business. Which "wealth taxes" are you referring to? So far, the painful bits have been taxes on corporate earning, which, if we were big enough to hire tax mitigation lawyers, set up offshore accounts etc., and paid the rates that say GE pays, would be no problem at all.

I'm talking about what joedad is arguing for, not something that exists in the US.

 

[bilby]

https://www.nytimes.com/2017/09/05/opinion/rich-getting-richer-taxes.html?ref=opinion

A great article and one of the primary reasons why I vote straight Democratic - despite the party's flaws. Since the Reagan tax cuts of the 80's we've seen incomes for the wealthy soar while gains for others have been marginal at best - and even then often as a result of having to hold down several jobs at once or finding ways to work overtime without getting paid overtime. The high marginal tax rates stopped the excessive consumption that we see now in the uber wealthy. With high marginal tax rates, there was no incentive to cut workers salaries or hours since if you, as a CEO, took more income, then it would just go to taxes. That meant more money for the masses to spend on things. Whereas the rich don't really spend their money as much - their's only so much consumption one can do.

With so much money tied up in the super wealthy our economy stagnates.

I would however state that perhaps one policy does not fit all times. High marginal rates can stifle some entrepreneurial spirit. At times a lower marginal rate may be better.

SLD

You are advocating taxation as a public policy tool. Isn't taxation supposed to be about funding the government?

Taxation isn't about funding the government. The government creates whatever money it wants to spend ex nihilo, and need not raise a cent in taxes to do anything; Taxation is about preventing inflation by destroying some of the money that would otherwise build up in the economy; and it is ideally suited as a policy tool, in that the government has complete control over which parts of the economy (including individuals, corporate entities, and larger subsets such as specific activities) should be most affected, and by how much.

The mistaken belief that governments are comparable to other economic entities, and require income in order to borrow and/or spend, just as a householder or businessman would, is the root of much stupidity in conclusions about how things should be done on both left and right, including the twin insanities that are libertarianism and communism.

Reality is FAR more complex than you realize; and simplistic and false claims such as "Taxation is about funding the government" are the cause of much hardship and bad policy making from ends of the political spectrum.

 

[Jason Harvestdancer]

The government creates whatever money it wants to spend ex nihilo, and need not raise a cent in taxes to do anything; Taxation is about preventing inflation by destroying some of the money that would otherwise build up in the economy; and it is ideally suited as a policy tool, in that the government has complete control over which parts of the economy (including individuals, corporate entities, and larger subsets such as specific activities) should be most affected, and by how much.

There's something seriously wrong with that. It was only up until very recently that we did not have fiat currency, and the few times before the modern era that it was tried it always crashed. Throughout most of history, money was not created by the government. I understand that you think gold is a bronze age superstition, just as I think government is a bronze age superstition, but at least my view on what is money has some historical precedent.

Back when money wasn't created by government, back when it wasn't created ex nihilo, we still had taxes. If money wasn't created but existed outside of government, what was the purpose of the taxes then?

The mistaken belief that governments are comparable to other economic entities, and require income in order to borrow and/or spend, just as a householder or businessman would, is the root of much stupidity in conclusions about how things should be done on both left and right, including the twin insanities that are libertarianism and communism.

Yet in the long run, all fiat currencies have failed, as is happening now due to the mistaken belief that money can be created ex nihilo. The temptation to cheat is just too great when in the hands of politicians, which is where it has to lie for what you preach to be true. The belief that governments are immune to the laws of economics, and can just create the money they want, is the root of much stupidity in conclusions about how things should be done on both the left and right, including the twin insanities that are Keynesianism and Communism.

Reality is FAR more complex than you realize; and simplistic and false claims such as "money can be created ex nihilo" are the cause of much hardship and bad policy making from radical ends of the political spectrum that believe economics is a myth and that government decree can solve all problems. Prove your faith and decree that you don't need to produce in order to consume.

 

[fast]

You are advocating taxation as a public policy tool. Isn't taxation supposed to be about funding the government?

Taxation isn't about funding the government. The government creates whatever money it wants to spend ex nihilo, and need not raise a cent in taxes to do anything; Taxation is about preventing inflation by destroying some of the money that would otherwise build up in the economy; and it is ideally suited as a policy tool, in that the government has complete control over which parts of the economy (including individuals, corporate entities, and larger subsets such as specific activities) should be most affected, and by how much.

The mistaken belief that governments are comparable to other economic entities, and require income in order to borrow and/or spend, just as a householder or businessman would, is the root of much stupidity in conclusions about how things should be done on both left and right, including the twin insanities that are libertarianism and communism.

Reality is FAR more complex than you realize; and simplistic and false claims such as "Taxation is about funding the government" are the cause of much hardship and bad policy making from ends of the political spectrum.

That sounds like you're just twisting the perspective. Just because the government can print more money doesn't mean it should, any more than a 'householder or businessman should counterfeit. The effect of inflation is either way. If we sufficiently fund the governement or on a personal or business level sufficiently earn funds, the negative effect of ensuing inflation is negated.

You've flipped the goal from funding the government to controlling inflation. So, is it that we want to control inflation and achieve that by funding the government so that we don't have to just print more, or is it that we want to fund the government so that we don't have to print more money causing inflation?

There is no government caused inflation without a government. We want a government that isn't going to operate without bounds and cause excessive inflation, so it seems first that we should want to fund it so that it can operate without causing havoc and do things like causing excessive inflation by printing money not gained by sufficient funding.

 

[bilby]

There's something seriously wrong with that. It was only up until very recently that we did not have fiat currency, and the few times before the modern era that it was tried it always crashed. Throughout most of history, money was not created by the government. I understand that you think gold is a bronze age superstition, just as I think government is a bronze age superstition, but at least my view on what is money has some historical precedent.

Back when money wasn't created by government, back when it wasn't created ex nihilo, we still had taxes. If money wasn't created but existed outside of government, what was the purpose of the taxes then?

The mistaken belief that governments are comparable to other economic entities, and require income in order to borrow and/or spend, just as a householder or businessman would, is the root of much stupidity in conclusions about how things should be done on both left and right, including the twin insanities that are libertarianism and communism.

Yet in the long run, all fiat currencies have failed, as is happening now due to the mistaken belief that money can be created ex nihilo. The temptation to cheat is just too great when in the hands of politicians, which is where it has to lie for what you preach to be true. The belief that governments are immune to the laws of economics, and can just create the money they want, is the root of much stupidity in conclusions about how things should be done on both the left and right, including the twin insanities that are Keynesianism and Communism.

Reality is FAR more complex than you realize; and simplistic and false claims such as "money can be created ex nihilo" are the cause of much hardship and bad policy making from radical ends of the political spectrum that believe economics is a myth and that government decree can solve all problems. Prove your faith and decree that you don't need to produce in order to consume.

It's quite touching that your faith enables you to imagine that commodity money has intrinsic value. But it never did, despite everyone believing that it did. Before Newton, nobody knew about gravity, but things still fell down. Before explicit fiat money, nobody knew that the value of gold (or silver, or cowrie shells, or whatever) was controlled by the government - not even the government knew it - but it remained a fact, despite their ignorance. Money has always been, and remains, a measure of debt; and debt has always been, and remains, the creation of bankers - indeed, by definition, one who creates a monetary debt is a banker. Modern fiat money is created at the whim of banks, which are controlled by governments; and it is only under license from governments that such money is lawfully created. Forgery also creates money, but in an uncontrolled way which would destroy economies if unchecked.

In the past, governments were less aware of the nature of money, and often allowed non-government entities to create (and sometimes destroy) money, which led to all kinds of unpleasantness. I find it very amusing that you mis-attribute the causes of this unpleasantness so badly.

I find it even more amusing that you believe, contrary to all evidence, that fiat money is in the process of failing. The US dollar is going to fail any day now, in exactly the same way that Jesus is going to return any day now - ie it's never going to happen, despite massive numbers of people being convinced that it is imminent.

'Money can be created ex nihilo' isn't a claim; it is an observation - a fact.

In the long run, almost all of the currencies that survive today are fiat currencies. Most mammal species that have ever evolved are extinct; but that's not evidence that mammals are no good. Mammals survive and thrive today, which shows that they are successful. Please feel free to give an example of a strong, widely used currency that exists today that is NOT a fiat currency, if you wish to support you bizarre claim that 'in the long run all fiat currencies have failed' - if so, then such currencies should be rare exceptions (unless in the long run, all other kinds of currencies have failed EVEN MORE).

I do not now, nor have I ever, believed that you do not have to produce in order to consume; Nor is that implied by the fact that money can be created ex nihilo. Your inability to grasp that is disappointing, but not surprising, given the dangerously simplistic beliefs you have expressed here.

 

[bilby]

Taxation isn't about funding the government. The government creates whatever money it wants to spend ex nihilo, and need not raise a cent in taxes to do anything; Taxation is about preventing inflation by destroying some of the money that would otherwise build up in the economy; and it is ideally suited as a policy tool, in that the government has complete control over which parts of the economy (including individuals, corporate entities, and larger subsets such as specific activities) should be most affected, and by how much.

The mistaken belief that governments are comparable to other economic entities, and require income in order to borrow and/or spend, just as a householder or businessman would, is the root of much stupidity in conclusions about how things should be done on both left and right, including the twin insanities that are libertarianism and communism.

Reality is FAR more complex than you realize; and simplistic and false claims such as "Taxation is about funding the government" are the cause of much hardship and bad policy making from ends of the political spectrum.

That sounds like you're just twisting the perspective. Just because the government can print more money doesn't mean it should, any more than a 'householder or businessman should counterfeit. The effect of inflation is either way. If we sufficiently fund the governement or on a personal or business level sufficiently earn funds, the negative effect of ensuing inflation is negated.

You've flipped the goal from funding the government to controlling inflation. So, is it that we want to control inflation and achieve that by funding the government so that we don't have to just print more, or is it that we want to fund the government so that we don't have to print more money causing inflation?

There is no government caused inflation without a government. We want a government that isn't going to operate without bounds and cause excessive inflation, so it seems first that we should want to fund it so that it can operate without causing havoc and do things like causing excessive inflation by printing money not gained by sufficient funding.

I am not twisting anything; I am starting from a more useful perspective, and inviting you to cease your contortions and join me.

I agree that just because a government can print money doesn't mean it should; But that doesn't imply that it shouldn't, either. There is a time and a place for increased money supply, and as economies grow, some increases in money supply are needed.

We do want to control inflation, but taxes DON'T 'fund the government', so we achieve that by having the government destroy money in a controlled way; and we also want to increase the money supply in a way that enhances growth, which we do by having the government create money and add it to the economy (this is usually best achieved by spending on infrastructure, but operational expenditure and even direct handouts to the needy also achieve good results, when don in a measured and sensible fashion).

Government caused inflation is a necessary defence against deflation, which fucks things up massively. The job of the government is to both create and destroy money in a way that encourages and funds growth. Attempting to tie together the 'create' and 'destroy' elements is dangerous and stupid - typically this is called 'running a balanced budget', and there is a VERY good reason why it almost never happens - because it is a massive fucking disaster if it ever does. And calling the 'destroy money' function 'funding the government' is to fundamentally misunderstand what is actually happening.

 

[DBT]

Governments may see inflation as a useful means to reduce debt because the value of the money they repay the lender has reduced spending power/value than what they borrowed.

 

[Horatio Parker]

There's something seriously wrong with that. It was only up until very recently that we did not have fiat currency, and the few times before the modern era that it was tried it always crashed. Throughout most of history, money was not created by the government. I understand that you think gold is a bronze age superstition, just as I think government is a bronze age superstition, but at least my view on what is money has some historical precedent.

There's historical precedent for fiat money. The Romans used it, there was the Greenback during the civil war etc. And long before there was any money at all, there was credit, issued by govt. Ie in exchange for a day's labor, a worker would receive credit for a days worth of food. No commodities involved.

Anyway, there's nothing magic about commodity currencies to prevent cheating. They are as subject to temptation by it's keepers as anything else.

It should be obvious why the private sector would prefer to keep money creation in their hands. It's called self interest.

Back when money wasn't created by government, back when it wasn't created ex nihilo, we still had taxes. If money wasn't created but existed outside of government, what was the purpose of the taxes then?

It isn't exactly accurate to say taxes don't fund govt, because both the action and the amounts are significant. But it makes the point about govt money creation, that govt spending occurs before taxation, and govts can fund themselves without taxes.

Yet in the long run, all fiat currencies have failed, as is happening now due to the mistaken belief that money can be created ex nihilo. The temptation to cheat is just too great when in the hands of politicians, which is where it has to lie for what you preach to be true. The belief that governments are immune to the laws of economics, and can just create the money they want, is the root of much stupidity in conclusions about how things should be done on both the left and right, including the twin insanities that are Keynesianism and Communism.

Fiat currencies are a large part of the "laws" of economics(which if you remember correctly, in US colleges, began as a branch of social science). It's not hard science like physics. It's a social point scoring scheme derived entirely from the minds of humans.

If your thinking prevailed, we'd still be far down in a depression mire after 2008. Why are we not? Because of the trillions of dollars created out of thin air by the Fed.

 

[Elixir]

It's quite touching that your faith enables you to imagine that commodity money has intrinsic value. But it never did, despite everyone believing that it did.

That's something that has always bugged me. Sure, gold is useful, but so is paper. It is only our "faith" that others will perceive value in gold or paper that makes either of them perform as viable currency in exchange for goods or services. Yet, so many who bemoan "fiat currency" seem oblivious to that obvious fact. Truth be told, "fiat currency" is a bit of a redundancy.

 

[Horatio Parker]

It's quite touching that your faith enables you to imagine that commodity money has intrinsic value. But it never did, despite everyone believing that it did.

That's something that has always bugged me. Sure, gold is useful, but so is paper. It is only our "faith" that others will perceive value in gold or paper that makes either of them perform as viable currency in exchange for goods or services. Yet, so many who bemoan "fiat currency" seem oblivious to that obvious fact. Truth be told, "fiat currency" is a bit of a redundancy.

I've heard people say that a return to a gold standard would be an environmental disaster, because gold extraction is often a toxic procedure.

Any why? To remove it from one hole in the ground to only to place it in another? And somehow that result means there's "more" money.

 

[Jason Harvestdancer]

It's quite touching that your faith enables you to imagine that commodity money has intrinsic value. But it never did, despite everyone believing that it did.

That's something that has always bugged me. Sure, gold is useful, but so is paper. It is only our "faith" that others will perceive value in gold or paper that makes either of them perform as viable currency in exchange for goods or services. Yet, so many who bemoan "fiat currency" seem oblivious to that obvious fact. Truth be told, "fiat currency" is a bit of a redundancy.

Because it is easier to increase the money supply when you have a paper base than it is to increase the money supply when you have a commodity base. It doesn't have to be gold, it can be anything that is: uniform, divisible, scarce, few other uses, etc. You can do that with many commodities, and you can theoretically do it with paper, but the scarcity of paper is much more variable especially when you have politicians meddling with the money supply. The government did not and cannot control a commodity currency.

 

[Elixir]

That's something that has always bugged me. Sure, gold is useful, but so is paper. It is only our "faith" that others will perceive value in gold or paper that makes either of them perform as viable currency in exchange for goods or services. Yet, so many who bemoan "fiat currency" seem oblivious to that obvious fact. Truth be told, "fiat currency" is a bit of a redundancy.

Because it is easier to increase the money supply when you have a paper base than it is to increase the money supply when you have a commodity base.

That's just a matter of degrees. Paper is a commodity too.

 

[Jason Harvestdancer]

Because it is easier to increase the money supply when you have a paper base than it is to increase the money supply when you have a commodity base.

That's just a matter of degrees. Paper is a commodity too.

Specially printed pieces of paper. Note in the description you snipped, I included the word "scarce". That is an important point, that is why there are people derisively referred to as "gold bugs". I acknowledged it doesn't have to be gold. Can you acknowledge that paper is far more inflatable than a commodity based currency?

 

[Elixir]

That's just a matter of degrees. Paper is a commodity too.

Specially printed pieces of paper. Note in the description you snipped, I included the word "scarce". That is an important point, that is why there are people derisively referred to as "gold bugs". I acknowledged it doesn't have to be gold. Can you acknowledge that paper is far more inflatable than a commodity based currency?

I don't acknowledge that paper is not a commodity. Yes, it can be produced more easily than can purified heavy metals. But that's all. They're both still "fiats" that can be exchanged for stuff that an individual might need/want more than they need/want chunks of a purified metal.

Do you imagine that the difficulty of extracting gold or silver from the earth and purifying it confers upon it some intrinsic value that transcends individuals' circumstances?

 

[Jason Harvestdancer]

Okay, you basically in a very round-about method admitted that paper is a far more inflatable form of currency than other forms of currency. That is what I asked, and although it seemed you did not want to you did actually answer it.

To answer your question, I already wrote "it doesn't have to be gold". No, mining the gold doesn't make it more valuable. Yes, it is people agreeing it has value that gives it value. MY point, which you dance around, is that gold is far less susceptible to inflation. It doesn't have to be gold, but it has to be something you just can't easily create more of. That's the only reason "gold bugs" prefer gold to fiat currency. The reason paper is called "fiat" and not gold is because, as I pointed out, yes people agreeing is what gives gold value, but government fiat is what gives specially printed paper value.

“If," ["the management consultant"] said tersely, “we could for a moment move on to the subject of fiscal policy. . .”

“Fiscal policy!" whooped Ford Prefect. “Fiscal policy!"

The management consultant gave him a look that only a lungfish could have copied.

“Fiscal policy. . .” he repeated, “that is what I said.”

“How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.”

“If you would allow me to continue.. .”

Ford nodded dejectedly.

“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”

Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed.

“But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut."

Murmurs of alarm came from the crowd. The management consultant waved them down.

“So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances."

The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the management consultant a standing ovation. The accountants among them looked forward to a profitable autumn aloft and it got an appreciative round from the crowd.”

 

[funinspace]

Okay, you basically in a very round-about method admitted that paper is a far more inflatable form of currency than other forms of currency. That is what I asked, and although it seemed you did not want to you did actually answer it.

To answer your question, I already wrote "it doesn't have to be gold". No, mining the gold doesn't make it more valuable. Yes, it is people agreeing it has value that gives it value. MY point, which you dance around, is that gold is far less susceptible to inflation.

Tell that to the Spanish Habsburgs

Nice plug for Hitchhikers Guide!

 

[Elixir]

Okay, you basically in a very round-about method admitted that paper is a far more inflatable form of currency than other forms of currency. That is what I asked, and although it seemed you did not want to you did actually answer it.

It is more inflatable due to circumstance. Granted, paper would be more inflatable than metals under most circumstances I can envision, but not all. Just like, say, Bitcoins. As I previously said it's a matter of degrees and circumstance. In fact, there are circumstances where leaves (your silliest example) are worth more than gold. I should have put worth in scare-quotes though. Not all leaves are created equal.

 

[Jason Harvestdancer]

Fiat currency is not more inflatable due to circumstance, it is more inflatable by nature and design. Absent either an atom smasher or vague myths about alchemy, you really can't create more gold. Mining it is a laborious process. There have been examples of heavy inflation with precious metals, for example when funinspace mentioned the Spanish Hapsburgs. That is the exception, not the norm. Meanwhile paper currency is always subject to deflation. The US dollar, generally regarded as sound and strong, has lost 97% of its value since the US switched away from a gold standard. Some people call that stable, but I don't know why.

And funinspace, thanks for getting the reference.

 

[Canard DuJour]

Okay, you basically in a very round-about method admitted that paper is a far more inflatable form of currency than other forms of currency. That is what I asked, and although it seemed you did not want to you did actually answer it.

To answer your question, I already wrote "it doesn't have to be gold". No, mining the gold doesn't make it more valuable. Yes, it is people agreeing it has value that gives it value. MY point, which you dance around, is that gold is far less susceptible to inflation. It doesn't have to be gold, but it has to be something you just can't easily create more of. That's the only reason "gold bugs" prefer gold to fiat currency. The reason paper is called "fiat" and not gold is because, as I pointed out, yes people agreeing is what gives gold value, but government fiat is what gives specially printed paper value.

“If," ["the management consultant"] said tersely, “we could for a moment move on to the subject of fiscal policy. . .”

“Fiscal policy!" whooped Ford Prefect. “Fiscal policy!"

The management consultant gave him a look that only a lungfish could have copied.

“Fiscal policy. . .” he repeated, “that is what I said.”

“How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.”

“If you would allow me to continue.. .”

Ford nodded dejectedly.

“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”

Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed.

“But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut."

Murmurs of alarm came from the crowd. The management consultant waved them down.

“So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances."

The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the management consultant a standing ovation. The accountants among them looked forward to a profitable autumn aloft and it got an appreciative round from the crowd.”

Yup, hence currency issuing govt's tax in order to control inflation, not to fund themselves.