7 ms·

This coincides with a podcast interview I listened to with a renowned CPA. He said that the existing tax code in the U.S. is set almost entirely to incentivize

This coincides with a podcast interview I listened to with a renowned CPA. He said that the existing tax code in the U.S. is set almost entirely to incentivize growth, entrepreneurship, and investment. So, the tax code is full of all kinds of breaks for employers, job creators, investors, owners of assets, etc. The tax rate on most long-term capital gains is significantly less than income tax. Salaried individuals be damned. When Warren Buffett claims, as he has in the past, that he pays a lower tax rate than most of his employees, he's not exaggerating. This tax strategy aggressively pursued during the Reagan administration, supported during the Clinton administration, and maintained during the Bush and Obama administrations relies on the assumption that growth among the asset-holders translates into more jobs and better pay for everyone ("trickle-down economics"). This assumption seems asinine now because of course the wealthy are going to save whatever profit they make. That's how the wealthy get wealthy in the first place! The Great Recession has only exposed this more. Employers realized "Actually, I didn't need those positions anyway." Other employers realized "There's enough demand for jobs here, so I don't actually have to increase salary that much." Property values may have collapsed during the Great Recession but a lot of long-term property owners realized "People still need a roof over their heads. Demand for rent is at an all-time high. I have no incentive to lower rent." Consequently, wealth inequality grows. Wages stagnate. Homeownership stagnates. Rent rises with inflation. The percentage of 25- to 34-year-olds living at home with their parents is the highest it's been in nearly a century. The young and educated see the situation, realize that they have no power over an establishment bending to the whims of the upper-class and corporations, and grow more and more apathetic. The old and uneducated are fed populist nonsense and anti-immigration scapegoating, thinking that driving out the brown people will get them the jobs and pay that employers have no interest in giving them. Trust is an emotion. A belief. What makes you less likely to trust others? Insecurity. And why wouldn't people be insecure in this economic environment? (I realize that this is a very U.S.-centric comment and I apologize to any other nationalities for whom this does not describe the political environment.)

marknutter 10y ago
But we do want growth. Would you prefer the opposite – stagnation? How's that working out for Europe? "Trickle-down economics" was never an actual concept. It was a silly characterization of policies that favored keeping corporate taxes low in the name of encouraging capital investment and it's been responsible for the strength of our economy over the past 40 years. Everyone loves to rail against wealth inequality (talk about populism...) but nobody ever explains why wealth inequality is so bad. So the 1% has a large concentration of the wealth. If we took all their money and distributed it evenly among all citizens it would barely move the needle in terms of living standards. Someone having 1000 times more money than you doesn't really affect you. In fact, that money is likely floating around the economic system anyways in the form of investments. Asking that the government liberate that money – which in terms of total tax revenue is a rounding error – does not seem like a good policy given how incompetent the government has proven itself to be when spending the money it already collects. I'd rather there be a few fat-cats sitting on yachts doing nothing (which is better than bombing brown people or spying on me) and have a Bill Gates and Elan Musk actually tackling important problems than have no fat-cats at all and a slightly larger government making all the same mistakes they make today with no visionary capitalists to speak of. Call me crazy.
- gerbilly 10y ago
  >Asking that the government liberate that money [...] does not seem like a good policy given how incompetent the government has proven itself to be when spending the money it already collects. So don't ask the government to liberate the existing holdings of the 1%, ask them to change policy to cutoff the supply. The tax code is so overwhelmingly in favour of the investing class that, if it were re-balanced, you wouldn't have to take anyone's money to achieve a similar outcome in a decade.
  - naasking 10y ago
    > The tax code is so overwhelmingly in favour of the investing class that, if it were re-balanced, you wouldn't have to take anyone's money to achieve a similar outcome in a decade. Except this 1% are exactly the sort that have the resources to just leave Canada if it ceases to be financially favourable. It's unfortunately not so cut and dry.
    - XorNot 10y ago
      They're a lot more willing to threaten to do this, and also invite politicians to fancy dining / holiday homes / helicopter rides, then they have historically proven to be willing to actually do this.
  - marknutter 10y ago
    Overwhelmingly in favor of the investing class? How on earth are you reaching that conclusion? The bottom 45% pay no federal income tax whatsoever. In fact, the top 1% pay 25% of all taxes in the US. I wouldn't call that "overwhelmingly in favor. You can certainly argue that they should be taxed more but let's not pretend they're not already footing a disproportionate portion of our tax obligations.
    - cmurf 10y ago
      The conclusion is reached by distinguishing between earned and unearned income. Unearned income is essentially investment income, and there is no FICA tax on that income, and it's taxed based on your earned income tax bracket, which could end up making it 0% and thus not taxed at all if you have no earned income. https://www.nerdwallet.com/blog/investing/2015-capital-gains-tax-rates/ https://www.nerdwallet.com/blog/investing/2015-capital-gains... Further, while it is true that "federal income tax" does not include FICA, FICA is a tax on income and the poorest sod pays FICA tax from the very first dollar of income. So it's kinda misleading to say the bottom 45% won't pay any income (related) tax whatsoever. You can have a case where those 45% are paying 7.65% of their pittance of income on FICA, with no additional income related tax, where someone wealthy enough who has no earned income is paying 0% federal income tax or capital gains tax or FICA on their unearned investment income. And that's just a small example.
turnip1979 10y ago
I am skeptical about the roofs over people's head argument. This is being used by buyers to rationalize mind boggling home values in Toronto and Vancouver. If the jobs keep being crappy, young people will just move away to better economic environments. Canada is constantly losing a lot of its top talent to the US because of this. I think the true cause of the unaffordable housing is the insanely low interest rates. The people at the helm are attempting growth at all costs. Edit: it is really interesting to contrast Toronto with SF. Both are really nice places to live without cost of living concerns. Both have insane home prices. Rents are relatively cheap in Toronto because of basic demand and supply. SF has great paying jobs, Toronto does not. Will be interesting to see how things pan out over the next decade in both cities.
- ppereira 10y ago
  Lack of construction is certainly a problem in Toronto, which has a default 10 meter height limit for new residential construction. All new buildings taller than a house require municipal buy-in. Between 2001 and 2011, the number dwellings in Toronto increased 11%, while areas 30km from the downtown core grew about 35%. You can clearly see the effects of the 10m restriction on urban sprawl at p. 11 of the city's census backgrounder: http://www1.toronto.ca/city_of_toronto/social_development_finance__administration/files/pdf/2011-census-backgrounder.pdf http://www1.toronto.ca/city_of_toronto/social_development_fi... Detached homes and town-homes use twice as much energy as apartments, and people commuting 30km to the city generally drive. There has been an uptick in apartment construction recently, but these units are generally too small for families because developers find it more profitable to sell mini-suites to young bachelors.
  - Tharkun 10y ago
    Limiting high rise sounds like a good thing. Especially in places reasonably far from the equator. It's nice being able to get sunlight at the street level! I don't think very tall buildings are the answer. More and better communal services and smaller more efficient properties. I think that would go a fair way.
    - 10y ago
aianus 10y ago
Rich people have lower savings rates than the middle class. You think billionaires just buy treasuries or CDs and wait for their wealth to evaporate through inflation? That money is invested, including into the VC funds that make the SV startup lifestyle possible.
- barrkel 10y ago
  Investments are savings; just riskier. (Did you think that your savings account at the bank is just held as treasuries? The bank invests it.)
  - soVeryTired 10y ago
    >Did you think that your savings account at the bank is just held as treasuries? The bank invests it. It's actually a bit more complicated than that: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...
- BrainInAJar 10y ago
  > make the SV startup lifestyle possible. You say that as though it's a good thing
  - aianus 10y ago
    Well they quite literally 'created' my job and many others' so I'm pretty happy with it.
- MagnumOpus 10y ago
  The parent is not talking about "savings" in the sense of savings accounts, but in terms of the macroeconomic sense of the word where savings denotes anything you do with money that is not immediate consumption (and therefore savings=investments).
anonbanker 10y ago
During the Great Depression, every newspaper called it a "Recession". it wasn't called a Depression until it was over. Seems history is repeating itself, judging from the wording of your post.

marknutter 10y ago

But we do want growth. Would you prefer the opposite – stagnation? How's that working out for Europe? "Trickle-down economics" was never an actual concept. It was a silly characterization of policies that favored keeping corporate taxes low in the name of encouraging capital investment and it's been responsible for the strength of our economy over the past 40 years. Everyone loves to rail against wealth inequality (talk about populism...) but nobody ever explains why wealth inequality is so bad. So the 1% has a large concentration of the wealth. If we took all their money and distributed it evenly among all citizens it would barely move the needle in terms of living standards. Someone having 1000 times more money than you doesn't really affect you. In fact, that money is likely floating around the economic system anyways in the form of investments. Asking that the government liberate that money – which in terms of total tax revenue is a rounding error – does not seem like a good policy given how incompetent the government has proven itself to be when spending the money it already collects. I'd rather there be a few fat-cats sitting on yachts doing nothing (which is better than bombing brown people or spying on me) and have a Bill Gates and Elan Musk actually tackling important problems than have no fat-cats at all and a slightly larger government making all the same mistakes they make today with no visionary capitalists to speak of. Call me crazy.

gerbilly 10y ago
>Asking that the government liberate that money [...] does not seem like a good policy given how incompetent the government has proven itself to be when spending the money it already collects. So don't ask the government to liberate the existing holdings of the 1%, ask them to change policy to cutoff the supply. The tax code is so overwhelmingly in favour of the investing class that, if it were re-balanced, you wouldn't have to take anyone's money to achieve a similar outcome in a decade.
- naasking 10y ago
  > The tax code is so overwhelmingly in favour of the investing class that, if it were re-balanced, you wouldn't have to take anyone's money to achieve a similar outcome in a decade. Except this 1% are exactly the sort that have the resources to just leave Canada if it ceases to be financially favourable. It's unfortunately not so cut and dry.
  - XorNot 10y ago
    They're a lot more willing to threaten to do this, and also invite politicians to fancy dining / holiday homes / helicopter rides, then they have historically proven to be willing to actually do this.
- marknutter 10y ago
  Overwhelmingly in favor of the investing class? How on earth are you reaching that conclusion? The bottom 45% pay no federal income tax whatsoever. In fact, the top 1% pay 25% of all taxes in the US. I wouldn't call that "overwhelmingly in favor. You can certainly argue that they should be taxed more but let's not pretend they're not already footing a disproportionate portion of our tax obligations.
  - cmurf 10y ago
    The conclusion is reached by distinguishing between earned and unearned income. Unearned income is essentially investment income, and there is no FICA tax on that income, and it's taxed based on your earned income tax bracket, which could end up making it 0% and thus not taxed at all if you have no earned income. https://www.nerdwallet.com/blog/investing/2015-capital-gains-tax-rates/ https://www.nerdwallet.com/blog/investing/2015-capital-gains... Further, while it is true that "federal income tax" does not include FICA, FICA is a tax on income and the poorest sod pays FICA tax from the very first dollar of income. So it's kinda misleading to say the bottom 45% won't pay any income (related) tax whatsoever. You can have a case where those 45% are paying 7.65% of their pittance of income on FICA, with no additional income related tax, where someone wealthy enough who has no earned income is paying 0% federal income tax or capital gains tax or FICA on their unearned investment income. And that's just a small example.

turnip1979 10y ago

I am skeptical about the roofs over people's head argument. This is being used by buyers to rationalize mind boggling home values in Toronto and Vancouver. If the jobs keep being crappy, young people will just move away to better economic environments. Canada is constantly losing a lot of its top talent to the US because of this. I think the true cause of the unaffordable housing is the insanely low interest rates. The people at the helm are attempting growth at all costs. Edit: it is really interesting to contrast Toronto with SF. Both are really nice places to live without cost of living concerns. Both have insane home prices. Rents are relatively cheap in Toronto because of basic demand and supply. SF has great paying jobs, Toronto does not. Will be interesting to see how things pan out over the next decade in both cities.

ppereira 10y ago
Lack of construction is certainly a problem in Toronto, which has a default 10 meter height limit for new residential construction. All new buildings taller than a house require municipal buy-in. Between 2001 and 2011, the number dwellings in Toronto increased 11%, while areas 30km from the downtown core grew about 35%. You can clearly see the effects of the 10m restriction on urban sprawl at p. 11 of the city's census backgrounder: http://www1.toronto.ca/city_of_toronto/social_development_finance__administration/files/pdf/2011-census-backgrounder.pdf http://www1.toronto.ca/city_of_toronto/social_development_fi... Detached homes and town-homes use twice as much energy as apartments, and people commuting 30km to the city generally drive. There has been an uptick in apartment construction recently, but these units are generally too small for families because developers find it more profitable to sell mini-suites to young bachelors.
- Tharkun 10y ago
  Limiting high rise sounds like a good thing. Especially in places reasonably far from the equator. It's nice being able to get sunlight at the street level! I don't think very tall buildings are the answer. More and better communal services and smaller more efficient properties. I think that would go a fair way.
  - 10y ago

aianus 10y ago

Rich people have lower savings rates than the middle class. You think billionaires just buy treasuries or CDs and wait for their wealth to evaporate through inflation? That money is invested, including into the VC funds that make the SV startup lifestyle possible.

barrkel 10y ago
Investments are savings; just riskier. (Did you think that your savings account at the bank is just held as treasuries? The bank invests it.)
- soVeryTired 10y ago
  >Did you think that your savings account at the bank is just held as treasuries? The bank invests it. It's actually a bit more complicated than that: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...
BrainInAJar 10y ago
> make the SV startup lifestyle possible. You say that as though it's a good thing
- aianus 10y ago
  Well they quite literally 'created' my job and many others' so I'm pretty happy with it.
MagnumOpus 10y ago
The parent is not talking about "savings" in the sense of savings accounts, but in terms of the macroeconomic sense of the word where savings denotes anything you do with money that is not immediate consumption (and therefore savings=investments).

anonbanker 10y ago

During the Great Depression, every newspaper called it a "Recession". it wasn't called a Depression until it was over. Seems history is repeating itself, judging from the wording of your post.