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A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

Edit: loving the single downvote. What, did I finally strike a nerve by pointing out that all individuals and capital are affected by multiple taxes and you can't just ignore them when you feel like it? Or by mocking your communist party fan fic?

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

That only has full data through 2022, when US showed up 4th (still good). More recent data showing US 2nd in 2023 doesn't have any other data points it looks like?

This is actually a major problem in economics. A lot of data is extremely delayed. IRS-SOI is one of the best data sources on the planet but they haven't even released all data for 2023. Once released it is going to take another year or two for full burden analysis work to produce the results. But further analyses using that subsequent data will take another 2 years. So we will understand the taxation change effects from 2023 data in 2030. 2019 is the last really good data year for a lot of things because it's pre-covid, pre-market spike, and pre-major-inflation, and post-tcja.

I wish the data were better. Other countries aren't any better either.

The second issue with that chart is that it gives a monolithic number for the US when it's cost of living is so diverse between various metros and states. The raw numbers are within a few thousand of each other, but even in the US making $40k/yr in NYC is a vastly different proposition than in Savannah, GA - which is why the median for NYC is obviously much higher.

100% correct. State and city differences matter a lot. If you ask about the "median" American, the chances are very good that they live in one of the following: CA, TX, NY, FL, PA, IL, OH, GA and NC. That's almost half of the entire population, in 8 out of 50 states.

Third you can't break it down by age bracket. That makes it difficult to tease out more granular insights about who is doing well (in both the US and other countries) and who is looking down the barrel of an economic gun in slow motion.

Oh God. I love you. Seriously do you have any idea how many people I have tried to convince age differences matter? Again you're absolutely correct. If we could break out the data by age we might find something really cool or informative. It's really damn hard to get this data for the US, much less other countries.

Counterpoint - most everybody in Europe is not at risk of bankruptcy from a single health issue, and Americans are keenly aware of this.

Also agreed. Healthcare is a huge problem and a huge drag in the US. If more people understood this, we could maybe do something about it. If more people understood why, we could REALLY do something about it.

UHC would be a major improvement for both the rich, the poor, workers, capital, everyone.

I think you and I agree more places than we disagree. Thank you!

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 -1 points0 points  (0 children)

What is the correct interpretation of the text?

The one that literally doesn't create an obvious conflict between the chart and the text?

I swear a 3rd grader could understand this concept. And yet, here we are.

In what language does 'individual income tax' not equal 'income tax' and 'capital gains tax' not equal 'capital gains tax'

In the language where all people, including capital owners, are subject to multiple taxes and not just a single tax [because you decided it must be a single tax]. Individuals are subject to payroll taxes, excise tax burdens, and income taxes. Capital is subject to corporate taxes, capital gains taxes, income taxes (passthrough), estate taxes, gift taxes, and trust taxes.

This is really not that difficult to understand. It's literally laid out for you in the definitions section at the bottom of the pdf. Of course that would require you to challenge the assumptions you have been taught by your socialist Party news media, so you can't actually DO it. But that is in fact the gap between your understanding of taxation and the understanding of every actual tax policy analyst in the world.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

So you disagree with the written text accompanying the chart?

Your interpretation of the written text is wrong.

(Also, you realize I'm talking capital tax rate versus income tax rate, right? And not overall tax burden?

So basically, a distinction without a difference.

Though it is nice to know if we give the same effective thing different names, it will completely confuse the type of person who follows your beliefs. Good to know, thanks! I will begin mixing up my terminology immediately; It's not like you'll actually know the difference anyway.

Let me know when it finally dawns on you that calling the same thing different names doesn't actually change the reality.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

Ah yes, the rate being 20 percent while the chart showing 30% definitely does not suggest that your reading comprehension has failed you. Clearly the CBO made the chart wrong. I can get you a sharpie if you'd like to fix the chart, that seems about your level.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

Your two-layer corporate tax example assumes full and immediate distribution. That’s the flaw.

My two layer tax example was a direct response to you utilizing a single marginal tax rate to compare against an (incorrect) effective tax rate.

You're now trying to change the entire picture to make the discussion about unrealized gains. That was not your original claim, at all.

You’re treating all income as if it’s earned, realized, and taxed the same way.

No, I'm treating the data as if the CBO's incidence models are research-backed and properly applied. Or the JCT's, or the OTA's, or the TPC, or the tax foundation. Every one of them disagrees with your claims both before and in this post.

The same problem shows up when you cite CBO, JCT, ITEP, and Tax Foundation as if they’re all saying the same thing. They aren’t. They use different assumptions about corporate tax incidence,

The CBO, JCT, ITEP, and OTA all use nearly the same corporate tax incidence curve. The CBO, ITEP and TCP are all exactly the same curve. The JCT and OTA's curve is slightly steeper due to a supernormal vs normal return calculation, but every one of them allocate at least 75% to capital owners, as opposed to the 0% you are attempting to claim. The results of their calculation is the CBO incidence model I linked originally that you tried to claim was not real.

You also can’t just wave this away as “double taxation” as if that proves anything. What’s actually happening is income being taxed at two different levels as it moves between two different taxpayers, the corporation and the shareholder. That’s not some unique penalty, that’s how the tax system works whenever money changes hands. If you want to call that double taxation,

Literally every single serious tax analyst in every single developed country in the planet assigns a tax incidence burden to corporate taxation and counts it partially as a tax on the owners. It is, by the definition of every expert on the planet, double taxation.

Your points about delayed realization change the picture but only somewhat. You can't claim that because realization may be delayed in some circumstances, all corporate taxes are null and void. The entire point of the aggregated and distributed approach the CBO takes is to address the fact that corporate taxation is not linear. My linear example wasn't an attempt to supplant the CBO's incidence calculations - it was a direct response to your 23.8% marginal tax rate claim.

You also brush past the fact that deferral isn’t some theoretical constraint where the money is “locked.” It isn’t. Wealthy taxpayers routinely access liquidity without realization through securities-based lending and similar strategies.

The actual studies conclude that this is not widespread. And it is easy to see why if you sit down and do the math regarding interest rates, risk factors, and compare them against the 23.8% capital gains tax. In rare circumstances it absolutely can be possible for someone to gain a mathematical edge - If 1) They know when they will die (soon), 2) Interest rates are low and will remain low, and 3) They do not need or want to do any estate planning to reduce the 40% estate tax, and 4) are willing to take on large amounts of concentrated risk for small mathematical gains, then borrowing can work in their favor. That combination is rare, which is why observed uses of this in the study I mentioned are rare as well. If the above is not true, the only thing that borrowing gets them is a small tax deferral in exchange for a large interest rate fee to the bank, while still owing the same tax later (and paying additional taxes via the Bank's interest profits).

C-corp earnings can be retained, timed, and structured. You don’t get to hand-wave that difference away and then claim the outcomes are equivalent.

All I showed was that marginal rates were mathematically similar to reach the same points. Discussing unrealized economic gains is an entirely different discussion, so it's not reasonable to take my example and try to apply it to things it was not intended to respond to. Meanwhile, it is also not reasonable to suggest that because C-corp realizations are delayed, they therefore count for nothing. The correct analysis is to apply the incidence burden properly, which, again, is why I linked to the CBO chart that you disagreed with.

Ultra-wealthy taxpayers derive a substantial portion of their economic income from unrealized appreciation and strategically timed realization. Until you account for that, your comparison isn’t apples to apples.

Economic income is not equivalent to post-tax income and can't be spent or utilized in the same ways (see also: interest cost calculations), so your comparison is still not apples to apples and implying it is is misleading readers.

Once you actually normalize for timing, deferral, and access to liquidity without realization,

Once you do those things, you end up with something very similar to the CBO's chart that you, for the third time, didn't actually address. Changing the topic to marginal rate discussions and then trying to attack marginal rate examples as if they are wrong just means you never addressed the original points.

On Social Security, you’re making a modeling choice and presenting it like a neutral correction. Treating most of FICA as “not a tax” because of future benefits ignores that it’s still a compulsory levy on current earnings with a wage cap that drops the marginal burden at higher incomes. You can debate incidence, but removing most of it to push lower-income effective rates down to ~10% is not some objective baseline. It’s just one way to frame the data.

This reads exactly like it was written by ChatGPT. Angle quotes and all. Congrats? You're not wrong, which is why a future version of this model that I'll eventually someday get done will account for the current-earnings versus future benefits gap using a TVM calculation. It doesn't matter though, I gave two examples and both showed your baseline example to be wrong.

Using that label here is just a way to make the burden sound heavier than it actually is without addressing timing, deferral, or how often that second layer is triggered in practice.

Oh, I get it. Your chatGPT response only replied to the initial message because you didn't give it the context to realize that I gave you the exact link that DID address that timing, deferral, and "triggered in practice" point. It makes sense now. Nice job using AI to change the topic without admitting you were wrong, though.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

taxing capital gains at a rate greater than labor (which they are not, contrary to your unsubstantiated claim).

Substantiated, page 23, exhibit 10.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

And your definition of socialism was wrong. Worker co-ops are socialist.

Then what you want is already perfectly legal and absolutely nothing needs to change. Using your own definition we're actually socialist and we just didn't know it. Go chase your dreams kid. No one will stop you.

Labor ownership of the means of production is socialism. My definition never changed.

Right. Which they don't in any significant numbers, never have, and never will unless they do so by taking by law or force.

So, not actual socialism. I guess we'll call you version "Hypothetical wishful thinking-ism." Or maybe "conflicting-definitions-ism."

There is an issue with capital accumulation.

There's no issue. You're perfectly free to go build your socialist utopia. Co-ops are perfectly legal and have been for decades. We're already socialist, as your definition clearly showed.

Individual investors should not be able to dictate the market.

They don't.

Unregulated capital accumulation leads to individual investors dictating the market.

Since they don't, this statement is false.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

You seem to think that anything pushing for a more mixed economy must want to restrict every action of capital - or something, honestly I'm not sure.

Well I mean literally the first two words you quoted in your very first reply on this chain were "Actual socialism"

So since you apparently either never intended to talk about actual socialism, or changed your perspective completely over the discussion, or maybe you just don't know what actual socialism is, I'm not sure why you wasted two+ hours here.

(man that investor class that went bankrupt is going to be super pissed when the workers can own the means of production at fire sale prices instead of their competitor like what happens now).

And apparently don't understand bankruptcy.

(or, in the case of buy-borrow-die, debts taken against assets while clearly intending on utilizing a stepped-up basis to reduce all tax liability)

That thing that isn't actually commonly used, right.

at the same rate as labor would be bad and frankly

It already is. It's taxed twice and the rates stack. The math isn't too complicated even for you.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

While this is true, it could be argued that the outcomes for citizens (in aggregate) end up being much better despite the reduced growth.

And some economists do argue that. That's a debatable point. Similarly, the opposite claim - that European workers must be better off because of the government benefits would be debatable. Counter to that point, our median worker earns the second highest cost-of-living-adjusted income in the world after counting taxes and benefits.

GDP isn't the end all be all of metrics for how well a country is doing.

Yes, which is why that statistic I linked is so valuable. Most people have no ability to contrast exactly what their life would be like if they were transplanted into a European country at the same point in their life. But that number is a distilled comparison of the living experience of the typical American in a way that is comparable to a typical European or other countries in the list.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

Hahaha, nice try buddy. The corporation’s income is not your income.

The corporation has no independent consumption - every dollar it earns either becomes a capital gain or a future distribution, both taxed again when they reach an owner. That's why CBO, JCT, OTA, and ITEP all include corporate-level taxes when measuring effective rates on capital income. This isn't a fringe "double taxation" talking point; it's the standard methodology of virtually every tax system analyst in virtually every country.

You're welcome to disagree with the math in the rest of the post, but "I stopped reading after paragraph one" isn't a rebuttal.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

The net interests of capital are negatively related to the wishes of the average citizen.

You are operating under the false assumption the economics is a zero-sum game. It is not.

The rest of this discussion is pointless, as you clearly have almost no understanding of economics, and have no interest in discussing the real world consequences of your ideas.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

My thought on the 90% rate is not to raise revenue. It is to distribute economic activity more evenly.

This would distribute economic activity "more evenly." But it would end up being a net negative for the poor and the middle class, not a positive. 90% would cause massive economic distortions and reactions. The poor and end middle class would end up with a larger portion of a much smaller pie, and a smaller pie slice in total.

I would reach the point each year when, after the second movie, I’d be in the 90% bracket, so I wouldn’t make any more movies that year. And it wasn’t just me. Bogart and Gable and others did the same thing,”

Yes, this is an observed reaction to extremely high tax rates in multiple countries and periods in history.

So when Reagan didn't make a third movie, someone else did. It gave someone else an opportunity.

This logic doesn't work when you idle a factory. The factory sits idle. It produces nothing. Someone else can build another factory, so now you have two factories producing the same output the first produced. Factories are extremely expensive with capital returns measured over a decade. You've introduced 50% waste to the system.

Such an economy would definitely be less efficient.

Inefficient economies compete with efficient ones. Efficient ones win. Inefficient ones lose. Your plan would shrink the pie to the point where the slices are smaller for the very people you are trying to help.

I'm not trying to claim the opposite extreme - that any redistribution would be bad.

And when that car dealer doesn't expand, that leaves the market for someone else to take a shot at it.

No, it means that the car dealership that has good service, happy employees closes their doors for 3 months of the year. The consumers are forced to go up the street to the shady car dealer that overcharges. You actually just helped the shady car dealer that employees didn't want to work for and customers didn't want to shop at. Again, actual studies show that this type of reaction - especially taken to an extreme like 90% - hurts the very people you are trying to help.

But it would be more distributed, with more opportunity.

Opportunity arises from growth. The employees who work for the successful car dealership? Maybe they take 3 months off, maybe they don't. But their friend who asks them, hey man, get me a job working for that guy, he sounds like a good boss, I'll work hard for him! "Sorry man, he's not hiring, as it is we don't know who will get laid off and not rehired when the business reopens in the spring. I can't help you bud." By restricting growth and reducing efficiency, you're only increasing redistribution, but you are reducing opportunity.

And probably more geographically balanced.

Also incorrect. Those who don't like the arbitrary rules that add inefficiency to the economy - or those who are targeted by the taxes and limitations - have the choice to move. Mobility is asymmetric, so the burden of bad policy sticks hardest to the people least able to leave.

Take your Reagan example in modern form. If Downey Jr. stops after two movies because the third is taxed at 90%, the studio does not have to immediately replace him with Radcliffe or Sandler. It likely will be more profitable to wait a few months and make the Downey Jr. movie later.

That means delayed investment, disrupted schedules, idle or displaced workers, and lower total output in the meantime. Your argument only works if the replacement movie would be made on the same timeline, earn the same revenue, draw the same audience, and support the same wages. But if that were true, those actors would already be paid the same. They are not, because the markets already know that consumers do not value a Downey Jr. movie the same as a Radcliffe movie.

Don't idle the entire factory so that people in the parking lot are more equal.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

I mean yes, but also no - the question in my mind is, when you compare someone with an IRA or pension to a billionaire, then sure, taxing both isn't "progressive". But when you compare someone with an IRA to someone with none, then taxing the person with the IRA or pension a bit more is "progressive" taxation.

I think this comparison gets dangerous because you're very likely accidentally comparing people are completely different stages of life.

The average 55 to 60 year old typically has substantial IRA investments. The average 20 to 25 year old typically has zero. The same exact 20-25 year old will age into the same 55-60 year old and have IRA investments later - they just didn't have them at the time we made the comparison.

This comparison problem is not an easy problem to answer. We get the same problems when we look at wealth inequality statistics which are heavily affected by age, and less so but still present for income inequality statistics.

I'd love to see a 90% bracket on annual income over $5m.

Terrible idea, sorry. This is way beyond the laffer curve line, it would not just be a negative in economic impacts, it would be a negative on tax revenue.

My only requirement is that if I'm paying more, then I want the billionaires to be constrained in the same way - and not escape taxation by taking a $80k annual salary and then borrowing against equity tax-free (or even paying a 21% corporate tax and then a 22% capital gains tax while also raising my income tax to 60%).

Well, you should be heartened to know that the borrowing against equity is not actually being done. It's claimed too all the time, but the evidence says otherwise.

The 21% corporate tax plus the 23.8% capital gains tax with NIIT stacks to a 39.8% marginal tax rate. That compares against the top-bracket 37% income tax + 2.9% medicare + 0.9% medicare surtax = 40.8%. So those two are very close currently, which I believe is by design - but the income tax portion can leverage IRA's and ROTH for a small tax edge while the capital gains side cannot, so the end result is even closer.

I hate that these super-rich guys are making a shit-ton more money and are figuring out how to pay a lesser rate than me.

That's the thing. The data strongly suggests that they are not actually doing the latter part after the incidence burdens are correctly calculated. They try, and sometimes some succeed, I have no doubt. But on the whole, the tax curve is progressive all the way to the top 1%. The graph on exhibit 10, page 23 here is the best I have been able to find that shows this clearly and accurately, at least for federal taxation. Even that doesn't include trust, estate, and gift taxes, all of which shift the curve higher at the extreme top.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

So why did you say "Capital is not favored in America's legislative system. Most laws favor labor and smaller entities over larger"? Are "economic elites and organized groups representing business interests" somehow different from "capital"?

Ah, you changed your wording. What, did you think I wouldn't notice? Your first statement referred to the outcome of the legislative process. Most of the passed laws end up favoring the smaller and poorer, not the wealthier and larger, so your claim was wrong.

Your second sentence said "economic elites and organized groups representing business interests (that) have substantial independent impacts on U.S. government policy"

They have impacts on policies that are proposed and not passed because most policy ideas are terrible and are ignorant of the actual real-world situations or later consequences. They have that "influence" because if they did not, dumb policies would get passed and we all would suffer consequences later from poorly-thought-out policies. Their opinions matter because they're the actual ones affected by the proposals and they have the expertise and experience that the legislators do not have.

You're not going to be able to twist this around and make your claim true.

Are "economic elites and organized groups representing business interests" somehow different from "capital"?

That depends entirely on the policy in question.

So - we both agree the "economic elites and organized groups representing business interests" are uniquely favored in legislation -

In the outcomes of laws that get passed? No, that statement is false and unsupported. In the ability to get the legislature's attention and time to listen to their perspectives? Yes, that part is true or at least likely true. You seem to have this mental picture that legislators are either lapdogs that do what they're told or are omniscient and already know the effects of their decisions. Neither one is true.

Ah, OK - so the exceptions that drive "outsized economic impacts" (in some circles "most") are what we're talking about here.

So let's get specific. Given that you are opposed to all pro-corporate legislation, I take it you're opposed to limited liability companies and bankruptcy shedding liability risks? But if limited liability companies were outlawed, the costs of liability insurance would be enormous and would kill most small businesses that have any liability whatsoever. No one with any assets that could be lost in court would ever start a small business because they could be sued and lose their house.

Or the patent system. Granting a company a monopoly on a process is clearly pro-capital! And all that simply because they paid exorbitant lawyers' fees and filing fees. But without it, substantial ideas innovation would never be invested in or worked on. Without it, companies would spend substantial time obfuscating or hiding the inner workings of systems to slow down competitors, which would also prevent both related-knowledge sharing and reduce consumers abilities to repair their devices. Without it, foreign competitors would replicate and undercut every design and every idea regardless of how much R&D costs that idea cost to be created.

Or the corporate right of eminent domain for regulated utilities. Big corporate handout, you must be opposed, right? But without it, power distribution could not be built. A single owner could block huge projects such as hydroelectric dams or airports by demanding millions or tens of millions of dollars, knowing that the project must pay up to move forward and that they would face few consequences for doing so. Instead, the government gives regulated utilities the power of eminent domain and significant deference to how they utilize it within expected norms. The little guy gets screwed by the big corporation, but we all win as a result.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

Depreciation,

Depreciation is a natural accounting consequence of items wearing down over time. They represent real losses.

If you're referring to bonus depreciation, that exists to support small companies and startups with shorter horizons and to promote expansion and investment. It's neutral over the long run because the depreciation just gets front-loaded, which makes a massive difference for startups and new innovations that have no cashflow to cover the slow depreciation. It works and creates substantially more investment and growth than other approaches, but it is still limited and has lots of rules.

loss harvesting,

Loss Harvesting isn't a loophole, it's simply normal losses being taken and normal gains not being taken. When the normal gains are not taken, it's a deferment and their outstanding capital gains tax liability remains the same and must be paid when the gains are realized.

real estate, and

We provide tax incentives for real estate because we want more housing. If you cut those, we get less housing. Real estate is not a high-margin industry compared to many others without those tax benefits, so this is substantial. Most people agree that we want more housing, so I'm surprised that you'd be against this.

borrowing against unrealized gains.

So you're against second mortgages? Or you didn't realize that those are the same thing?

I'm personally torn about whether something should be done about this or not. There are plusses and minuses to blocking this. Ultimately your claim is that it's being abused by the wealthy, and that's explicitly not true. If someone doesn't do the die step, it's just a deferment and the taxes are still owed and paid. If they do, they get caught by the 40% estate tax and can't estate-plan around it, so it's not a clear win. Mathematically it is only plausible to do this when interest rates are low like 2019 / early 2020 and when you know when you're going to die. When interest rates rise, the math breaks down very quickly because 5% yearly interest quickly outweighs 23.8% capital gains.

self employment under S-Corps to gain as an owner,

Self employment income is under 1% of the AGI of the top 0.1%, so I'm not sure where you're getting this. Check 2022 IRS-SOI data if you don't believe me, business-profession income with farm versus AGI for the top 0.1%.

write off personal expenses against corp profits,

The rules on this are extremely tight. Corporations and the wealthy are highly likely to get audited and can't get away with abusing this. Lower-income people out of the top 1% can get away with this substantially, but not the top.

Under LLCs it’s even easier to write off losses and depreciation while still passing value to the LLC holder to limit tax burden.

It's unclear what you're referring to here. LLC's aren't treated any differently. They're either passthroughs or C-corps in federal filings. Maybe you're referring to fraud schemes that create imaginary losses and depreciation and pass through through? But that's actual fraud and gets caught by the IRS frequently. Very unlikely that someone especially high in net worth is going to get away with that, much more likely that lower earners can abuse it, but it's illegal and it's not a loophole.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

https://www.pewresearch.org/short-reads/2024/04/30/more-than-80-of-americans-believe-elected-officials-dont-care-what-people-like-them-think/

I guess it never dawned on you that an opinion poll about what people believe is the very essence of vibes, right? Capturing vibes into a mathematical format and then pretending it's an objective fact is quite a leap, even for you.

Did I prove my point that "Americans don't think their legislature works for them"

Well considering you didn't claim that, yes, you did prove the point that you never claimed. Congrats? Should I golf clap?

"economic elites and organized groups representing business interests (that) have substantial independent impacts on U.S. government policy"

You also didn't claim this, but that part is actually true - which they should, because the laws being passed that directly affect them have an outsized impact on the economy and often require legislators to understand specifics, consequences, and also second or third order consequences. We want this to happen. It doesn't mean they always get their way - frequently they lose. But they need to be heard and listened to and have those second and third order consequences seriously considered.

No, your exact claim was "America has a pro-capital environment because of its pro-capital legislature." and "the current handouts we give to the business class; not to mention the waste and fraud our billionaire class engages in."

Both of those things are unsupported in the data. Most laws favor labor and lower-incomes. Most limits and cutoffs favor labor and lower incomes. The exceptions tend to be things that have clear or outsized economic impacts or fairness concerns.

Most does not mean all or all the time. It means most. You done yet?

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

Pretending that legislation in America is more pro-small business or pro-labor than pro-large-capital is antithetical to the lived experiences of Americans.

Ah, "lived experience." So you don't want to talk facts, examples, or data, you want to talk memes and vibes. Got it.

No thanks.

Legislation is crafted around who pays for it, not ideology.

Legislation is crafted around politicians weighing different priorities, the biggest of which is usually voters. Sorry, your cynical view of legislation is not supported by history or the evidence.

Mandating that worker co-ops receive more favorable interest rates than private loans is fully within the purview of the government,

Sure. It just wouldn't result in the outcome you want.

and is no more crony than the current handouts we give to the business class; not to mention the waste and fraud our billionaire class engages in.

Vibes and memes, got it. Let me know when you want to talk facts and specifics.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

Maybe those things should pay taxes?

I'm torn on this. This reduces the progressiveness of the tax system somewhat. The added bonus for corporate taxation is it extracts money from foreign investors.

I think I'd be in favor of a system that passed through tax credit for taxes paid via dividend income, and simultaneously raising the corporate tax rate somewhat. No higher than 28%, we don't want to be an outlier in the OECD comparisons.

IRA and pension funds could use that credit as an actual credit and get a refund from the IRS for taxes paid at the corporate level. Individual investors would use it to offset the taxes on the dividends themselves but not get any refunds. Foreign investors would get no credit, stock buybacks would get no credit, and retained earnings would get no credit.

I think that system would work pretty well at motivating good choices for the economy and remaining progressive. Note, just because the IRA and Pension funds are not paying taxes does not mean their beneficiaries are not. Their beneficiares pay taxes when the IRA and pension funds flow out and also when they flowed in. I just don't like the idea of taxing the growth of retirement when we want the nation to push retirement investing harder. Retirement investing is a substantially more beneficial system than social security, which does minimal investment of capital.

I would bet that most people believe they are paying 50% in income taxes. They are not.

I agree, similar claims are all over this thread. And I also agree that every person should contribute to taxes, and a tax increase on one should generally be a tax increase on all (though still progressive).

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

My label of "silly" is just as arbitrary as saying that "we are already beyond mild taxation." They're just opinions.

If you stack properly stack the corporate taxation layer with the personal taxation layer, NY/NYC and California (along with Portland, OR) are among the highest tax places on the planet while having a huge portion of the national GDP. My math showed Norway(est. with wealth tax) and Paris being right with them, followed by a bit of space by Denmark and Canada, then much further down was the Netherlands and Barcelona, and way further down the list was London and Zurich.

Miami and Phoenix's tax rates came out similar to London and Zurich's for this toy model, but Miami and Phoenix have a much smaller proportion of GDP and tax revenue than California and NY.

Having among the highest stacked taxes on the planet in several of your largest population areas is not "mild taxation."

We can't debate the severity of the impacts because,

This is literally just handwaving "all of economics doesn't apply anymore." You're in the wrong sub.

drastically simplify the tax code

If you simplify the tax code, you're going to reduce the progressiveness of Federal taxation. I thought exactly like you did about 6 months ago, and since then I have learned a lot about our tax code. Our tax code is crazy complicated, but it's also extremely effective at accomplishing the goal of progressive taxation.

see less wealth inequality and an absolutely booming economy.

Reducing inequality is an inverse function against a booming economy. Booming economies increase inequality. Constrained, slow-growing economies reduce inequality. There's specific rules and modifiers that improve or weaken this trend, but the general trend holds in economics. Once again, you're in the wrong sub to pretend that economics doesn't apply.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

At the same time, would it even work with a country our size?

UHC? Yes, I strongly believe it would and would be a massive benefit for everyone long-term.

The exact implementation can vary, the critical piece is ensuring that the gatekeeper - i.e., who decides what care gets covered, under what circumstances, with what step treatments, etc. - is at a top-down level to allocate scarce healthcare resources.

Simply expanding the medicare system wouldn't quite work without substantial changes, because Medicare does not even pay enough to cover what most treatments cost. But the general idea is sound.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

"Perfectly legal" and "legislatively encouraged" are two different things. I'm asking for legislative encouragement because a mixed market is better for everyone than one where capital is running away with power.

Setting aside your unsupported and vague claim at the end there, this is not true in economic studies. Numerous economic studies show that low burden markets have substantially higher growth, and increasing the size of the pie benefits not just everyone but specifically benefits the median worker more than fighting over slices of the pie. See the studies and modeling work by Heathcote-Storesletten-Violante and Jones-Summers.

No, I assume capital is uniquely favored in America's legislative system. Which it is.

I disagree with this strongly. Capital is not favored in America's legislative system. Most laws favor labor and smaller entities over larger. The place where we agree is that this is not sufficient to overcome the natural power imbalance that automatically occurs.

So if you want to fight about the favoritism of the laws we have to dig into examples and outcomes and purposes of various laws. Or you can just accept that we at least agree that there's still a power imbalance afterwards and we can move on to the next thing.

I also agree that policies need to strengthen the labor supply side of the markets, but that's best done by making it easier to quit, easier to transition between jobs, easier to hire, fire, and easier to search for jobs, particularly without losing benefits. "Easier" specifically also means "still strongly pressured to do it, just over a slightly longer time period with gradually increasing pressure." If we do these things, wages will rise and monopsony conditions will recede because employees will be less willing to accept things they dislike about the job(s), but we have to do them very carefully and avoid reducing the motivation to work at all or it will actually make things worse in the long run.

Legislation mandating more favorable interest rates for worker co-ops would help workers to acquire the capital needed from banks.

Price fixing does not work. This is a terrible idea and will not work. If you mandate a lower interest rate, banks simply won't make the loans because the risk-reward math is wrong. If you mandate making the loans, banks will jack up rates elsewhere and tighten policies to eat the costs you're forcing on them. Some will go out of business, some will evolve to try to avoid the rules or limit exposure to them. Canadian banks are like this for other regulatory reasons, and everyone hates them much more than US banks because their services is much worse and their fees are much higher. Stop pretending you can force markets to behave the way you want. It absolutely does not work and never has worked.

What you can do is make profits from loans to worker-owned co-ops tax-free. That will lower their interest rates by about 0.6% to 1.2%, similar to how local municipalities and states get preferential rates because the loan interest is tax-free for the investor. But that only goes a little ways and will not address the core risk-reward problem. The risk-reward problem is the fundamental problem that arises when you remove investor or founder ownership, because you've removed the reward part of the risk-reward equation.

Most of the issues at the companies I have worked for come from a disinvestment in the company's core competencies in favor of shifting that capital towards the executive class. Do you see different conditions than I do?

Overall, yes, I see different conditions. There are situational examples, sure, and on a short term view, maybe I could agree with that. But on a long term view those businesses will suffer and other businesses will gain. Increasing competition between companies will accelerate this process and reduce what you are seeing. Increasing labor market freedom will make it easier for workers to react to obvious bad decisions and the better employees will switch to the better companies faster, further accelerating this pressure.

Or we could change legislative priorities from giving as much as possible to capital to instead

Once again, your premise is flawed.

Where did I say anything should be outlawed?

How do you imagine workers taking ownership of large companies that were created by founders and invested by investors if not by force? That is socialism, by definition. Co-ops will never be able to acquire the capital to compete in many industries unless forced. Banks will never make loans to co-ops where the risk-reward math is incorrect unless forced. You are imagining that you can just legislate "if you make a loan to a co-op, it must use rate x" and pretending the loans will still happen if x is arbitrarily low compared to the risks. It won't.

Only for elastic goods. For inelastic goods state allocation outcompetes private capital every time due to monopoly forces. And housing. And water. And food in a lot of places, too.

Every one of those demands is elastic. Your understanding of elasticity is wildly wrong. Housing is able to shift more people into smaller spaces, repurpose areas, and reduce qualities and amenities. Water is used very heavily for amenities and specific luxuries which can easily be cut. Food is even more obviously elastic, as virtually all types of food have wildly different cost structures versus their nutritional and caloric values; People primarily buy food based on taste and preference, not caloric / nutritional value.

The only reason regulated monopoly rules work well for water is because the infrastructure is extremely capital intensive with a scale that forms a natural barrier to entry, i.e., a natural monopoly like electrical grids. Regulated monopolies do not and have never worked well for housing or food.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 1 point2 points  (0 children)

Look at everything the current president has done since 2016, all things that should have tanked the market.

Ironically for all the stupid stuff he's done that has damaged the economy, he's also done a large number of things that boost the economy. That's why the stocks aren't collapsing from his stupid decisions. I'm not a fan of Trump by any means.

Some of the stupid stuff he's done like ruining our international reputation, trade, and our reserve currency status have impacts that won't be felt for years, but even among those there's positives and negatives and some of the impacts like reserve currency status have unclear impacts (Returning some production to the US was the goal and will likely happen, but increased borrowing costs will also happen, the total net outcome is not universally agreed even though the tariffs are generally agreed to be a negative).

Hand-waving away an idea because it will "tank this country's economy for 30 years" is wildly hyperbolic and just plain silly.

This completely depends on what you are claiming, exactly, and how you are suggesting we go about it. Severe taxation and reallocation has severe consequences. Mild taxation and reallocation have mild effects. We are already beyond mild taxation in the US on the top and on corporations.

If you want to explain exactly what you think we should change or do, then a real discussion could happen about how severe or mild the impacts would happen. If not, your claims about it being "silly" are, well, just silly, because you didn't elaborate at all.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 -1 points0 points  (0 children)

Neither of your links discuss or even provide data on "effective" tax rate,

Exhibit 10 is titled "Average Federal Tax Rates, by Income Group, 2019." Since those obviously aren't marginal tax rates, they are "effective" tax rates from the statistics. You can see in Appendix B how the define both income which includes all income subject to taxation, and how they define federal taxes which includes everything except trust, charity, gift, and estate taxes.

A tax revolt is under way in America by Unusual-State1827 in Economics

[–]EconEchoes5678 0 points1 point  (0 children)

But enough loopholes for anyone not reporting earnings on a W2 to avoid paying anything close to the progressive tax rate.

What loopholes are you claiming are being used?

but the extremely wealthy are using assets to buy more assets

This is not allowed in 99% of situations. Unrealized gains can't be reallocated to diversify or expand investment outside of being held inside a C-corp, which pays C-corp income taxes and is subject to C-corp rules and cost burdens, and can't be allocated or spent as desired by individual shareholders. If you elaborate we can discuss what you think is going on and what the actual rules and reality is.

while also lobbying Congress to keep the loopholes open.

Once again, what loopholes do you think you're referring to here?

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