econ fagz, would estate tax solve income inequality?

[sana8410]

There is a lot I do not understand about the "inequality" crowd. For one, what equality are they concerned with? Equality of opportunity or equality of outcomes? In my view, no form of government or economy has ever designed a way to provide for equality of outcomes, and those that have tried have failed miserably. And market capitalism, especially American market capitalism, has proven time and time again to provide the best equality of opportunity while at the same time increasing general prosperity.

The other thing I do not understand is what I will call the "Pinketty solution." Pinketty correctly identifies a problem: return on capital is higher than general growth (r>g), so the rich get richer while the laboring classes' wages do not increase as quickly. But his solution is perverse: a punitive tax (80%) on all income over $500,000. I think we can all agree that this will have the effect of reducing the number of capitalists in the world. How can this be a good thing? If returns on capital exceed general growth, shouldn't the goal be to create more capitalists, not less?

One thing that is inseparable from this subject and has a lot to do with inequality is the fact that financial power within our society tends to translate into political power and that can be a self reinforcing fact of life. So we are left with wealthy individuals who are better able to influence law making to best suit their desires over those of us in the middle and lower income classes. That is a very visible aspect of our society and I think it (rightfully) angers people when they feel like they have no voice or that their voice is getting drowned out by a wave of money coming from a 1%.

[noviapriani]

There is a lot I do not understand about the "inequality" crowd. For one, what equality are they concerned with? Equality of opportunity or equality of outcomes? In my view, no form of government or economy has ever designed a way to provide for equality of outcomes, and those that have tried have failed miserably. And market capitalism, especially American market capitalism, has proven time and time again to provide the best equality of opportunity while at the same time increasing general prosperity.

The other thing I do not understand is what I will call the "Pinketty solution." Pinketty correctly identifies a problem: return on capital is higher than general growth (r>g), so the rich get richer while the laboring classes' wages do not increase as quickly. But his solution is perverse: a punitive tax (80%) on all income over $500,000. I think we can all agree that this will have the effect of reducing the number of capitalists in the world. How can this be a good thing? If returns on capital exceed general growth, shouldn't the goal be to create more capitalists, not less?

One thing that is inseparable from this subject and has a lot to do with inequality is the fact that financial power within our society tends to translate into political power and that can be a self reinforcing fact of life. So we are left with wealthy individuals who are better able to influence law making to best suit their desires over those of us in the middle and lower income classes. That is a very visible aspect of our society and I think it (rightfully) angers people when they feel like they have no voice or that their voice is getting drowned out by a wave of money coming from a 1%.

That's another part I do not understand about this debate. It appears to me that most of the people clamoring for government to address "inequality" are also in favor of more expansive government. Won't that just lead to more regulatory capture? Doesn't more government just create more opportunities for manipulation and crony capitalism?

[sana8410]

There is a lot I do not understand about the "inequality" crowd. For one, what equality are they concerned with? Equality of opportunity or equality of outcomes? In my view, no form of government or economy has ever designed a way to provide for equality of outcomes, and those that have tried have failed miserably. And market capitalism, especially American market capitalism, has proven time and time again to provide the best equality of opportunity while at the same time increasing general prosperity.

The other thing I do not understand is what I will call the "Pinketty solution." Pinketty correctly identifies a problem: return on capital is higher than general growth (r>g), so the rich get richer while the laboring classes' wages do not increase as quickly. But his solution is perverse: a punitive tax (80%) on all income over $500,000. I think we can all agree that this will have the effect of reducing the number of capitalists in the world. How can this be a good thing? If returns on capital exceed general growth, shouldn't the goal be to create more capitalists, not less?

One thing that is inseparable from this subject and has a lot to do with inequality is the fact that financial power within our society tends to translate into political power and that can be a self reinforcing fact of life. So we are left with wealthy individuals who are better able to influence law making to best suit their desires over those of us in the middle and lower income classes. That is a very visible aspect of our society and I think it (rightfully) angers people when they feel like they have no voice or that their voice is getting drowned out by a wave of money coming from a 1%.

That's another part I do not understand about this debate. It appears to me that most of the people clamoring for government to address "inequality" are also in favor of more expansive government. Won't that just lead to more regulatory capture? Doesn't more government just create more opportunities for manipulation and crony capitalism?

Well big businesses already have a lot of regulatory capture. I imagine (I can't speak for them) that the desire is to use government to change the system in a way that would limit such capture and reduce current capturing abilities (like through campaign finance reform initiatives).

[sana8410]

If we had an Bitcointalk book club I'd suggest "The Price of Inequality" by Joseph Stiglitz. Which deals with issues such as these. I've been meaning to read it ever since it came out, but haven't gotten to it yet.

[noviapriani]

If we had an Bitcointalk book club I'd suggest "The Price of Inequality" by Joseph Stiglitz. Which deals with issues such as these. I've been meaning to read it ever since it came out, but haven't gotten to it yet.

While I have not read that book, I have read a lot by Stiglitz. I will read the book, but Stiglitz seems to get it wrong more than he gets it right. During the financial crisis he was bemoaning the system of privatized gains and socialized losses that the bailouts created. But, before the crisis, he was in favor of explicit government guarantees of institutions like Fannie Mae and Freddie Mac. I am not sure I can take him seriously.

[sana8410]

If we had an Bitcointalk book club I'd suggest "The Price of Inequality" by Joseph Stiglitz. Which deals with issues such as these. I've been meaning to read it ever since it came out, but haven't gotten to it yet.

While I have not read that book, I have read a lot by Stiglitz. I will read the book, but Stiglitz seems to get it wrong more than he gets it right. During the financial crisis he was bemoaning the system of privatized gains and socialized losses that the bailouts created. But, before the crisis, he was in favor of explicit government guarantees of institutions like Fannie Mae and Freddie Mac. I am not sure I can take him seriously.

Weather you agree with him or not in everything, one thing that I like about Stiglitz is that he is very analytical and willing to elaborate on his opinions. No one is always going to be right, that's not how economics works, but I find Stiglitz pretty useful for his analysis and breakdown abilities. He is useful for sparking discussion and is much better to read than someone presenting an emotive argument on the subject. He's an infinitely better writer than Paul Krugman for example.

[noviapriani]

I am skeptical of campaign finance reform because all of the proposals I have seen greatly favor incumbency, which tends to favor entrenched interests. Besides, most regulatory bodies are run by bureaucrats and executive appointments, not elected officials. We can agree about Krugman. He is a grave disservice to everyone but himself.

[sana8410]

I am skeptical of campaign finance reform because all of the proposals I have seen greatly favor incumbency, which tends to favor entrenched interests. Besides, most regulatory bodies are run by bureaucrats and executive appointments, not elected officials. We can agree about Krugman. He is a grave disservice to everyone but himself.

Institution building and reform is a process, the legislative branch is generally a good place to start given the pressures and influences that they can have elsewhere and in terms of being able to highlight issues for national discussion (to say nothing of their law making abilities).

[noviapriani]

I am skeptical of campaign finance reform because all of the proposals I have seen greatly favor incumbency, which tends to favor entrenched interests. Besides, most regulatory bodies are run by bureaucrats and executive appointments, not elected officials. We can agree about Krugman. He is a grave disservice to everyone but himself.

Institution building and reform is a process, the legislative branch is generally a good place to start given the pressures and influences that they can have elsewhere and in terms of being able to highlight issues for national discussion (to say nothing of their law making abilities).

The problem is our legislative branches (at least federally) are flooded with incentive to make laws or set direction based upon what their "sponsors" want and not necessarily what is good for everyone as a whole. Regulatory laws that penalize one while enhancing a more "supportive" corporation or group seems to be the norm. It's going to be relatively impossible to really solve inequality (monetary or opportunity) if the regulators are bought and paid for.

[beetcoin]

wasn't john oliver the one who said that it would only affect .03% of the population.. because, you know, you can inherit up to $5ish million (per parent) without being taxed? so it's the same thing as taxing the wealthy. if i were inheriting, say 20 million dollars, and had to pay the taxes, i wouldn't love that fact but if it's a small percentage of my inheritance, then i won't be all up in arms over it.

[umair127]

It's such an emotional issue dependent on where you stand. You have people like the Hilton sisters who make people question whether they really deserve what they have for doing nothing. But these same people seem to have no issue with what Justin Beaver or LeBron James and others make. Nasty CEO's and their millions are just horrible people when so many of our citizens "deserve" a piece of their pie to make their lives so much easier.

Personally I'd rater see an increase in opportunity equality than simply focusing on income.

It isn't just about that though, it is also about tax inequality in terms of the rate at which we are effectively taxed. Ideally, it would be a bit progressive like our graduated income tax, in reality though the wealthy often have access to mechanisms that can effectively give them lower tax rates than some middle class households (the same goes for big businesses). I pay more in taxes than General Electric does for example (as a percentage).

If we simply removed loopholes would that work for you? What about loopholes that government has put in place giving tax breaks for job creation, etc?

GE gives back in the way of jobs and innovation. How many poor families can now afford refrigerators compared to the poor of the past? Same goes for cars, TV's, phones, etc. Sure, we can make them pay more but they have the capability of moving large portions of their infrastructure to other countries (global economy) which some say would hurt our poor (and hurt ever growing government coffers....and government keeps wanting more so who pays?) more than helping our economy.

GE "doesn't pay tax" because the tax structure in the US is stupid.

To bring overseas money home would require paying upwards of 30%, while most countries only require 0-3%. There have been plenty of CEOs in the news lately stating if the US fixed that issue they'd be more than happy to bring billions back and employ people here.

[zolace]

It's such an emotional issue dependent on where you stand. You have people like the Hilton sisters who make people question whether they really deserve what they have for doing nothing. But these same people seem to have no issue with what Justin Beaver or LeBron James and others make. Nasty CEO's and their millions are just horrible people when so many of our citizens "deserve" a piece of their pie to make their lives so much easier.

Personally I'd rater see an increase in opportunity equality than simply focusing on income.

It isn't just about that though, it is also about tax inequality in terms of the rate at which we are effectively taxed. Ideally, it would be a bit progressive like our graduated income tax, in reality though the wealthy often have access to mechanisms that can effectively give them lower tax rates than some middle class households (the same goes for big businesses). I pay more in taxes than General Electric does for example (as a percentage).

If we simply removed loopholes would that work for you? What about loopholes that government has put in place giving tax breaks for job creation, etc?

GE gives back in the way of jobs and innovation. How many poor families can now afford refrigerators compared to the poor of the past? Same goes for cars, TV's, phones, etc. Sure, we can make them pay more but they have the capability of moving large portions of their infrastructure to other countries (global economy) which some say would hurt our poor (and hurt ever growing government coffers....and government keeps wanting more so who pays?) more than helping our economy.

GE "doesn't pay tax" because the tax structure in the US is stupid.

To bring overseas money home would require paying upwards of 30%, while most countries only require 0-3%. There have been plenty of CEOs in the news lately stating if the US fixed that issue they'd be more than happy to bring billions back and employ people here.

Flat Tax is the way to go. 17% of everything you make over $30,000 and no deductions, loopholes, NOTHING.

That would bring in more revenue and would save people money who have to now get their taxes done and pay for that or buy software and pay for that.

And all those tax lawyers and other parasites would have to get more honest work.

Billions would be saved by the people on that alone.

[umair127]

It's such an emotional issue dependent on where you stand. You have people like the Hilton sisters who make people question whether they really deserve what they have for doing nothing. But these same people seem to have no issue with what Justin Beaver or LeBron James and others make. Nasty CEO's and their millions are just horrible people when so many of our citizens "deserve" a piece of their pie to make their lives so much easier.

Personally I'd rater see an increase in opportunity equality than simply focusing on income.

It isn't just about that though, it is also about tax inequality in terms of the rate at which we are effectively taxed. Ideally, it would be a bit progressive like our graduated income tax, in reality though the wealthy often have access to mechanisms that can effectively give them lower tax rates than some middle class households (the same goes for big businesses). I pay more in taxes than General Electric does for example (as a percentage).

If we simply removed loopholes would that work for you? What about loopholes that government has put in place giving tax breaks for job creation, etc?

GE gives back in the way of jobs and innovation. How many poor families can now afford refrigerators compared to the poor of the past? Same goes for cars, TV's, phones, etc. Sure, we can make them pay more but they have the capability of moving large portions of their infrastructure to other countries (global economy) which some say would hurt our poor (and hurt ever growing government coffers....and government keeps wanting more so who pays?) more than helping our economy.

GE "doesn't pay tax" because the tax structure in the US is stupid.

To bring overseas money home would require paying upwards of 30%, while most countries only require 0-3%. There have been plenty of CEOs in the news lately stating if the US fixed that issue they'd be more than happy to bring billions back and employ people here.

Flat Tax is the way to go. 17% of everything you make over $30,000 and no deductions, loopholes, NOTHING.

That would bring in more revenue and would save people money who have to now get their taxes done and pay for that or buy software and pay for that.

And all those tax lawyers and other parasites would have to get more honest work.

Billions would be saved by the people on that alone.

Still have state tax systems to deal with. So if I make $40k salary I should pay 5% of my income in taxes, but if I make $400k you think it's fair that I pay 0.5%?

[Rigon]

40k salary = (40000 - 30000) = 10000 * 17% = 1700 / 40000 = 4.25%
400k salary = (400000 - 30000) = 370000 * 17% = 62900 / 400000 = 15.7%
2M salary = 1970000 * 17% = 334900 / 2M = 16.75%
2B salary = 1.97B * 17% = 334.9M / 2B = 16.75%

The higher the salary, the closer to the 17% of said salary you would get under that plan (not weighing in on the merit....yet).

[zolace]

Moral arguments aside, even if the estate tax was 100% I don't think it would affect inequality that much. But I don't know the numbers

[umair127]

40k salary = (40000 - 30000) = 10000 * 17% = 1700 / 40000 = 4.25%
400k salary = (400000 - 30000) = 370000 * 17% = 62900 / 400000 = 15.7%
2M salary = 1970000 * 17% = 334900 / 2M = 16.75%
2B salary = 1.97B * 17% = 334.9M / 2B = 16.75%

The higher the salary, the closer to the 17% of said salary you would get under that plan (not weighing in on the merit....yet).

I agree with your flat tax proposal, but I think you could get away with a lower rate--something like 15%--and not affect revenue.

I disagree with your comment about states, though. States can and should do what they want. If a state has higher taxes, businesses and individuals are free to locate to a different, lower tax state.

[Rigon]

Wealthy people have liabilities too. Their total monthly payments to keep everything running smooth might even exceed Average Joe's annual income. It's not as easy as "the family will just take over" either. You have bankers, lawyers, accountants, executors, trustees, beneficiaries, etc. to deal with. Everyone wants a piece of the pie, and everyone wants to be sure their piece of the pie is the correct size. So the courts might freeze all assets, or the banks might lock the account until a court orders otherwise, etc. Now it's up to the rest of the family, who might all be fighting, or at the very least are grieving, to come up with the means to pay the bills. But since these guys are Average Joe, and they have their own lives to take care of, they simply can't afford it. Or maybe a kid or two gives up their own home(s) so they can save their parents' home and/or business / whatever. And at the end of the day, assuming they all make it through the initial battles and the dust settles, it's possible that none of them even have the wherewithal to keep the wheels turning, so income dries up and they lose the bulk of the estate anyway.

[umair127]

Moral arguments aside, even if the estate tax was 100% I don't think it would affect inequality that much. But I don't know the numbers

This is the position that I've always had too. I looked it up a few years ago and saw that the estate tax makes up very, very, very, very, very, very, very, very little of our total receipts, to the extent that doubling, tripling, quadrupling, etc. wouldn't even be noticed from a revenue standpoint, but it would certainly be noticed from the standpoint of families whose lives can be ruined as a result of it.


Besides which giving money to the government doesn't magically solve inequality. Corporatocracy still says the money will be used for increased military spending, bigger contracts for bigger business, etc. The little guy factors into this exactly nowhere.

[Rigon]

There's already so much shit to deal with after someone dies. Inviting the fucking Gestapo to goose step through it all is cruel and shitty. People who are okay with that are monsters. Just bitter and jealous little monsters.

[zolace]

Moral arguments aside, even if the estate tax was 100% I don't think it would affect inequality that much. But I don't know the numbers

This is the position that I've always had too. I looked it up a few years ago and saw that the estate tax makes up very, very, very, very, very, very, very, very little of our total receipts, to the extent that doubling, tripling, quadrupling, etc. wouldn't even be noticed from a revenue standpoint, but it would certainly be noticed from the standpoint of families whose lives can be ruined as a result of it.


Besides which giving money to the government doesn't magically solve inequality. Corporatocracy still says the money will be used for increased military spending, bigger contracts for bigger business, etc. The little guy factors into this exactly nowhere.

Hell, how about taxing 100% of everyone's income and realizing it's not even close to covering government spending? It's one of those non-issues that was created to misdirect the public so they have someone to be angry about.

I'm looking forward to France's 75% 'millionaire tax' to become law and see all the smart and successful people flipping the bird and moving out of this country.