US Politics Mega-thread - Page 376

On August 09 2013 21:09 DoubleReed wrote:


Nothing blind about it. You said technology shifted money from labor to capital. That sounds to me like strengthening unions would really help.

Maybe we could tax capital gains like income. Then we could lower some other taxes. Mitt Romney had a what tax rate? 13%? Meanwhile, republican governors are trying to abolish income taxes on favor of sales taxes because sales taxes are regressive.

And so on and so on. You can just keep doing this. Each of the "fixes" will be attacked as class warfare (or socialist Marxism) in the current political climate. So acting like "class warfare" won't get us anywhere is just incorrect. Any kind of attempt at proper governance is considered un-American and class warfare. Hell, Bloomberg called Warren a socialist for this very reason and they're both democrats.

Edit: Also, because of the corruption in government, both liberals and conservatives feel very cheated by "the elite" so rhetorically it's a very powerful device. The fact that it's true in this case is something to be embraced, not feared.

On August 10 2013 01:34 JonnyBNoHo wrote:

Well, income is shifting from labor to capital worldwide (where unions are stronger) so I don't see what unions in the US will do, other than reduce productivity and encourage businesses to automate and move overseas. Also, income needs to shift from labor to capital to a degree anyway - capital income finances retirement incomes after all.

If you are really upset over Romney's tax rate (which ignores double taxation) then tax capital gains just like interest income. Ordinary income for the investor and a deduction for the business.

As for sales taxes it depends on what you do with the revenue. High VATs are common in Europe, for example.

On August 10 2013 01:34 JonnyBNoHo wrote:

Well, income is shifting from labor to capital worldwide (where unions are stronger) so I don't see what unions in the US will do, other than reduce productivity and encourage businesses to automate and move overseas.

On August 10 2013 01:49 DoubleReed wrote:


Whoa whoa whoa, pinko socialist commie. Why do you hate America?

I don't care how you spend the money. The tax itself is regressive. It's a regressive tax. It disproportionately taxes the poor/middle class.

On August 10 2013 01:53 Hagen0 wrote:


The income differential between labor and capital is far larger in the US than in most other developed nations.

On August 10 2013 02:25 DoubleReed wrote:
Why not have a progressive tax where the spending increases the after tax income of the poor? Generally you want to encourage consumption, not savings. Demand demand demand.

It's just not a related issue.

On August 10 2013 02:34 JonnyBNoHo wrote:

We already have a progressive tax code. Sales taxes and a progressive income tax are not mutually exclusive.

You can encourage consumption as part of a cyclical adjustment, but generally you want to encourage saving. For the most part, saving is just as much spending as consumption, the only difference is the structure of the spending and the goods and services bought.

On August 10 2013 02:42 DoubleReed wrote:


Our tax code is not actually that progressive. State/local taxes often are flat or regressive (like sales tax!) so it actually ends up being pretty flat overall. Source.

Nah, inflation is way way better than deflation, and consumption is way better than savings (deflation encourages savings after all), at least from a macro perspective.

On August 10 2013 02:57 JonnyBNoHo wrote:

Could you point out where your source says that the tax code isn't that progressive? They didn't conveniently have a graph (the graph they had was taxes and spending).

I'm not sure why you're talking about inflation / deflation now. Without saving and investment all the demand in the world results in no real growth.

On August 10 2013 03:14 DoubleReed wrote:


So now I have to admit that I just googled "how progressive is the us tax code?" and picked a link that looked legit. Thanks, Jonny. Jerk.

Investment implies spending so that's just confusing. I actually don't understand that second part at all. Your income is my spending. Recessions are caused by an inability or indesire to spend, so I get less income. Growth happens because you are spending more and therefore I'm making more income.

On August 10 2013 03:45 JonnyBNoHo wrote:

Hey man, I'm on the dark side, don't expect me to be nice (I'm guilty of the same thing constantly if it makes you feel better)

Basically I want moar spending on capital instead of consumer goods, if that makes more sense.

On August 09 2013 08:49 DoubleReed wrote:


Because productivity has been rising while wages have stagnated. The wages for rich have gone up massively so now there's huge wealth disparity.

Another way to say it is that the rich have rigged the system to take the middle class wages for themselves.

Edit: Also, there's massive amount of corruption in our government due to the influx of money in politics. Tons of legal bribery and under-the-table bullshit that makes it more of a corporate oligarchy rather than a democracy. Obviously when rich people have an unfair advantage in a democracy, then it's going to grow class tensions.

There's also things like the financial industry collapsing under their own idiotic and risky ventures and crashing the economy. And republicans think the only way to fix it is to punish poor people and the middle class by getting rid of food stamps and burdening them with more private debt. The wealth of the financial industry has skyrocketed compared to the wealth of CEOs and business owners.

That's the start of it. There's plenty of other issues too. Like when bankers stab people and then their charges get dropped from technicalities, undermining the fairness of the justice system.

I can keep going. The fact of the matter is that having higher taxes on the wealthy would be better for our budget and economy. But it's really a lot more fun to pose it as wealthy being a bunch of mustache-twirlers. So I'm going to do that.

Hope that clears some things up.

On August 10 2013 04:22 DoubleReed wrote:


Yea but no one suggests that is why we should have a sales tax. That's incredibly weird.

On August 10 2013 04:48 Sbrubbles wrote:


No one? In economic circles it's not uncommon to argue the advantages of sales tax over income tax in order to incentivise savings. A little search in the Mankiw blog led me to this:

http://gregmankiw.blogspot.com.br/search?q=income tax

Of course, you can make counter-arguments, like, for example, that savings decisions are largely inelastic to the offered returns and depend much more on cultural factors (hence why chinese saving rates are so high). But the argument itself is not unheard-of.

On August 10 2013 05:04 DoubleReed wrote:


Yea, but his argument is even weirder than that. He's saying that sales tax is to encourage capital goods over consumer goods. I realize that's basically the same thing, but when phrased like that, my head is just going to tilt to one side. Simply put: why don't we like consumer goods? Seems like kind of a weird thing to want to discourage...

Like his clarification has made me all the more confused, and has only convinced me that the case for sales tax is even more nonsense than I originally thought.

I also just generally don't understand why you want to encourage savings. That's not what drives the economy. That's how economies shrink. I tighten my belt, so you are forced to tighten your belt. Because my spending is your income.

We want corporations to have low prices. We want corporations to spend lots of money on stuff to make stuff and grow. That's what investments actually lead to after all: money being spent on things. And sales tax is regressive. Why bother?

On August 10 2013 05:31 JonnyBNoHo wrote:

By "saving" I mean saving at the household sector and a corresponding increase in spending in the business sector. Hence the phrase "saving and investment". There is no net saving, no paradox of thrift.

One of the long term problems in the US economy is the persistent trade deficit. We consume more goods and services than we produce. To rectify that, we need to produce more. That means more capital goods. A consumption tax is a policy that helps get you there.

On August 10 2013 05:04 DoubleReed wrote:


Yea, but his argument is even weirder than that. He's saying that sales tax is to encourage capital goods over consumer goods. I realize that's basically the same thing, but when phrased like that, my head is just going to tilt to one side. Simply put: why don't we like consumer goods? Seems like kind of a weird thing to want to discourage...

Like his clarification has made me all the more confused, and has only convinced me that the case for sales tax is even more nonsense than I originally thought.

On August 10 2013 05:04 DoubleReed wrote:
I also just generally don't understand why you want to encourage savings. That's not what drives the economy. That's how economies shrink. I tighten my belt, so you are forced to tighten your belt. Because my spending is your income.

We want corporations to have low prices. We want corporations to spend lots of money on stuff to make stuff and grow. That's what investments actually lead to after all: money being spent on things. And sales tax is regressive. Why bother?

Cowen can’t see why corporate hoarding is a problem. Like Riedl and Cochrane, he concedes that there might be some problem if corporations literally piled up stacks of green paper; but he argues that it’s completely different if they put the money in a bank, which will lend it out, or use it to buy securities, which can be used to finance someone else’s spending.

But of course there isn’t any difference. If you put money in a bank, the bank might just accumulate excess reserves. If you buy securities from someone else, the seller might put the cash in his mattress, or put it in a bank that just adds it to its reserves, etc., etc.. The point is that buying goods and services is one thing, adding directly to aggregate demand; buying assets isn’t at all the same thing, especially when we’re at the zero lower bound.

What’s depressing about all this is that Say’s Law is a primitive fallacy – so primitive that Keynes has been accused of attacking a straw man. Yet this primitive fallacy, decisively refuted three quarters of a century ago, continues to play a central role in distorting economic discussion and crippling our policy response to depression.

On August 10 2013 06:00 DoubleReed wrote:
Here, Krugman explains better than I can:



Source

Yes, I understand the role of investment, but there's no need to encourage it because there's no other choice of what to do with your extra money. You invest to make money of your own, after all.