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Although this thread does not function under the same strict guidelines as the USPMT, it is still a general practice on TL to provide a source with an explanation on why it is relevant and what purpose it adds to the discussion. Failure to do so will result in a mod action. | ||
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Gorsameth
Netherlands22102 Posts
On August 05 2015 07:21 LegalLord wrote: Have there been any updates on the Greek issue, or is it just a waiting game at this point? I dont think there has been any significant news since the IMF withdrew over lack of debt relief. Oh and the collapsing stock exchange. | ||
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Evil_Sheep
Canada902 Posts
On August 05 2015 07:21 LegalLord wrote: Have there been any updates on the Greek issue, or is it just a waiting game at this point? The fireworks are done...for now. The next thrilling episode will be the 3rd bailout "negotiations." In the popular parlance, the ball is now in Germany's court to find an economically and politically viable solution. Arguably there is no overlap between the two. Smart money is on renewed crisis and Grexit. | ||
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WhiteDog
France8650 Posts
On August 05 2015 07:23 warding wrote: I don't think there's a disagreement on the way to analyze these things. I'm not upset that we're moving away from an idealized 'optimum' equilibrium point. I'm arguing that high marginal tax rates move us from A to a B where people work less, invest less, and risk less in creating new startups. That B point is therefore a less prosperous economy and is generally worse than A. The Elon Musks vs the filthy heirs is a false point. There is a way to tax the lazy heirs if that's what you wish. It's not through high marginal tax rates on income and it doesn't have to be through capital gains tax. You don't have to kill the Elons to get to the Hiltons. Consumption taxes hinder growth, touch the poorest more than the rich. The core problem is saving, not consumption - consumption is demand ! Saving is part investment, part hoarding. A rich heir gain enough money through inheritance, and then capital income. They do not work nor invest, which is a big problem for the economy, but get its money through finance - yeah some is used to permit innovation, but not all (the public debt is a good exemple of that ! and our low growth the result of that giant hoarding). They do not take risk (which is the core characteristic of a good schumpeterian entrepreneur) but quite the opposite : want to reduce risk in order to secure theirself a rent. How does increasing marginal taxation rate prevent them from working when they do not work in the first place ? And you are also putting aside all the other bad things about inequality - because increasing marginal taxation rate goal is to reduce inequalities so you have to take all that into account in your scenario B - like the fact that great inequalities usually create unstability in the economy, is a drag for growth, etc. And what about the great gatsby curve ? Increasing marginal taxation rate might even favor social mobility and thus favor the rise of the future schumpeterian entrepreneur. And, may I add the most important argument, inequalities are immoral.  | ||
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warding
Portugal2394 Posts
On the heirs, I do not share your hatred on them, but my point was that the type of taxes you can apply to them are different than the taxes you apply to entrepreneurs. You can go through inheritance tax, taxes on real estate, taxes on luxury goods, different tax rates on gains from selling companies stock on companies you created than on stock you've invested in public markets.Be creative. I don't share your views on morality and inequality. I have a problem with poverty, I don't have a problem with current levels of inequality in developed countries. I do have problems with inequality when the elites abuse their power through politics, but in those cases if they do control the political system then it's going to be difficult to get them to tax themselves. My position is informed by my life - I'm an educated individual earning in the PT upper-middle class (which in PT is not all that great), but working my ass off and taking risks so that I can eventually earn more to ensure financial stability for me and raise a family. I don't see how it would be in any way moral to prevent me from having a higher income as a result of my effort and risk-taking just so that the rest of the folks in the middle class feel better about themselves. | ||
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cLutZ
United States19574 Posts
Edit: Also on taxing heirs for inheriting income. Its also bad for growth because it causes people to both: A) Not invest, even in ventures they may think are productive, late in life; and B) Spend money more recklessly later in life, creating a burden on the state if they outlive their projections. | ||
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WhiteDog
France8650 Posts
You have weird views on savings. It's merely the keynesian / fisher / minsky vision : hoarding is off-circuit money (Keynes). It can be reinvested through finance (and debt) but then can create crisis (if the increase in debt to GDP level are not sustainable). On the heirs, I do not share your hatred on them, but my point was that the type of taxes you can apply to them are different than the taxes you apply to entrepreneurs. You can go through inheritance tax, taxes on real estate, taxes on luxury goods, different tax rates on gains from selling companies stock on companies you created than on stock you've invested in public markets.Be creative. I agree, but then I watch reality and I see that the countries with the higher marginal taxation rate, or with the highest income taxation, have less inequality than the others. It's just a very efficient way to reduce inequalities. On August 05 2015 08:31 cLutZ wrote: Consumption taxes are the least distortionary (aka best for growth) type of tax on a dollar-for-dollar (Euro, etc) basis. The only reason they aren't used to fund 100% of the government is because they have the potential to be regressive and because they are politically unpopular, particularly among the people who are inclined to raise taxes in the first place. Your argument is based on the idea that the economy without distorsions is the most efficient - without taxation the growth is at its maximum : i'm not of this school. For neoclassic economists, consumption taxation has no real effect on relative prices (because all prices should increase by x%) : in this regard, it is similar to inflation and thus should have no direct effect on economic behavior. I already said that I don't agree with that. To me a society without taxes on income or capital is not even sustainable (Piketty's work again point at that). | ||
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cLutZ
United States19574 Posts
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WhiteDog
France8650 Posts
On August 05 2015 09:23 cLutZ wrote: Picketty, you mean the economist that failed to realize that housing prices accounted for nearly 100% of his most important conclusion? Flawed argument. The type of capital does not matter to him as long as it gives revenue - which is why he interchange the word capital with patrimony. His datas are crude, I can concede that, but still relevant. | ||
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cLutZ
United States19574 Posts
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WhiteDog
France8650 Posts
On August 05 2015 09:28 cLutZ wrote: It does matter, because if the problem is housing, the problem is government. Thus, Picketty uses an effect of government policies as a justification for another set of government policies. How is the problem housing / government ? Housing was also the problem in 1930 ? (because one of his point was that the situation is similar). By the way housing has greatly increase after 1945 and between 1990 and today, what about 1950-1990 ? | ||
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cLutZ
United States19574 Posts
http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequality | ||
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WhiteDog
France8650 Posts
On August 05 2015 09:37 cLutZ wrote: I dont know what you are asking. It appears that housing as a % of the return on capital has been steadily increasing since the 1950s. http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequality And how is that contradicting Piketty's arguments ? His argument is that the average return on capital assets is higher than growth and this create a problem of overaccumulation. That the capital assets in question are slaves - as he points out for the US' history - or house, or any other kind of obligation does not change his point ? I don't understand. If it was not housing it would be something else. Yeah the fact that it is housing in your piece is not really an argument against the idea that there is an increase in inequality, it just point this out to say that a "more specific approach" (taxing housing more than global capital in his mind) could be a possibility. On his other criticism, I'm waiting for this student to show us empirical datas that match his argument that the rate of return on capital assets is decreasing as the law of diminishing return suggest. | ||
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cLutZ
United States19574 Posts
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WhiteDog
France8650 Posts
On August 05 2015 10:07 cLutZ wrote: No, thats the point. If it wasn't housing it wouldn't be something else because housing returns kept increasing because of government distortions in the market that both restrict supply and spur demand. Yes it would be something else : investors would just jump horse and find another one with high return on capital, as history suggest. Also, Matt Rognlie seems to be wrong "somewhere" (his critics works "everything equal" - in theory - but not when you look at empirical datas) : In the framework in which Matt using, the fall in the wealth-to-annual-net-income ratio from 700% in the late Belle Époque Era to 300% in the post-World War II Social Democratic Era ought to hav greatly increased the salience of capital and its ownership in income. As best as I can quickly calculate on the back of my envelope, if we calibrate the Belle Époque to Rognlie's model, the model sees income from capital back then as roughly 18% of net total income--less than half of its actual value--and sees a sharp rise in the capital share of net income to 25% in the post-WWII Social Democratic Era. That did not happen. Something else is going on that Matt is not modeling. http://www.bradford-delong.com/2014/06/over-at-equitable-growth-daily-piketty-matt-rognlie-has-a-first-rate-critique-thursday-focus-for-june-12-2014.html Thanks for the link tho, never heard about this guy. I'll read that a little further. | ||
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warding
Portugal2394 Posts
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cLutZ
United States19574 Posts
I'm sure the big 3 auto companies would have similar charts if America gave people tax deductions for buying new cars and had highly restrictive import (and owner ship) regulations for car manufacturers for 8 decades. But we know that was untrue given the free market. | ||
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Incognoto
France10239 Posts
You have the income tax where people pay a part of their salary / income to the state. That's one tax. Then you have the consumption tax, where buying something gives the state a little part of what you buy. There's a second tax. If I earn €1000 a month, €100 already goes to the state in the form on an income tax and then 20% of the money I spend (which is more on things such as diesel fuel) continues to go to the state. There's little reason to hoard money, money in itself is useless if you don't spend it, so I don't understand why saving money is bad in the first place? It's private property. Hands off. The only thing a state should be able to do to privately owned money is have a monetary policy (interest rate and inflation rate). It is unethical to confiscate private property in the first place. Governments already have their monetary policy. If you want people to consume in the first place, then start by not confiscating the little money they're able to save up in the first place. | ||
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RvB
Netherlands6265 Posts
On August 05 2015 07:27 Gorsameth wrote: I dont think there has been any significant news since the IMF withdrew over lack of debt relief. Oh and the collapsing stock exchange. The IMF did not withdraw. They're still negotiating the 3rd bailout of € 86 billion. Debt relief is one of the conditions for the IMF to participate in the bailout. According to Tsipras the deal is pretty close to being sealed. | ||
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WhiteDog
France8650 Posts
On August 06 2015 02:17 warding wrote: One does not simply "find another [source] with high return on capital". The housing bubble had its own exogenous causes, as did the dot-com bubble. These inflations in specific sectors are created by specific causes, not created upon the whims of investors - and even if they were, cLutZ's argument is still on point since the increase in housing prices specifically benefits the already wealthy, whereas other bubbles do not necessarily benefit that specific group. That's all wishful thinking really. You're saying that the housing bubble is not easy to replace, yet in 1920-1930 the situation had similar accumation of capital and it was not due to housing : will you tell me then that it is still "exogene causes" that created the 1930 crisis ? This reductio ad equilibrium that all liberal always makes are kinda retarded - like the market by itself do not produce "bubble", like it's impossible for the average rate of return on capital assets to be higher than growth (when in fact Piketty's data shows that it is pretty stable throughout history from 3 to 5 % ! When was the last time that we had more than 3 to 5 % real growth ?). Reality is as it is, can we accept it at least ? In the critic Clutz linked, the main argument is that the return on capital investment will most likely drop - "everything equal" - when the stock of capital increase, because of the law of diminishing return (and not that the state created the 2007 crisis which is ridiculous). In reality it is not the case (as I've showed by linking Brad DeLong post on it) - and again we have historical data to support that ! Going back to the argument on the housing bubble, for the author of the article it is an argument that is supposed to show that the best efficient way to face inequality in capital (or the accumulation of capital) is not a taxation on capital assets but specifically on housing. He does not point out that housing is a big part of the capital accumulated to flat out refute the idea that the economy as it is leads to an over accumulation of capital - like you're both doing. To do that he rely on an hypothesis - the law of diminishing return on capital investment and the possibility of elasticity between labor and capital - that seems true from a logical perspective, but does not pass empirical tests. | ||
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Gorsameth
Netherlands22102 Posts
On August 06 2015 03:17 RvB wrote: The IMF did not withdraw. They're still negotiating the 3rd bailout of € 86 billion. Debt relief is one of the conditions for the IMF to participate in the bailout. According to Tsipras the deal is pretty close to being sealed. Just like those previous "deal soon" statements? | ||
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