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"someone will adjust to optimize their outcomes under those rules." It isn't even clear how to make them stop that, per se, because in general that's a desirab

by jerf 7y ago

"someone will adjust to optimize their outcomes under those rules." It isn't even clear how to make them stop that, per se, because in general that's a desirable characteristic of the system. You can't use the tax system to nudge people or do anything progressive beyond the most basic and clumsy income-bucket based categorization if you can't set up incentives and expect people to "optimize" to them.

wcunning 7y ago
Sadly, unless you think about those nudges like a pen-tester, you're going to create unintended consequences with your adjustments and new rules and new exceptions every single time. I just listened to a podcast that posited that much of the CEO pay problem was due to changes in the corporate tax ability to write of CEO salary in the early 90's which led, through other tax provisions and investor desires, to paying with stock options. That happened right at the beginning of the dotcom boom and caused every person with a stock heavy position to massively increase in wealth, far faster than any salary would have. Had that been left alone, they would all be paid millions, but not hundreds of millions. The position posited in the podcast was that it should be stock with long term holding requirements and awarded based on relative performance vs. the market to prevent everyone getting the maximum stock bonus based on the market going up and nothing the managers and executives did.
- epow 7y ago
  Podcast sounds interesting. What's it called?
asdff 7y ago
The devil is in the details. People are clever and find out how obscure rules can work for them. However, if the system is stupidly simple, it would be much harder to game. Throw out the rulebook. Say you make 15k a year, your tax rate is zero, 16k, it's perhaps 1%, etc. etc. until you get to the big dogs who net millions a year, far more than they could reasonably spend on their own living expenses and well being, then you tax them 90%. Or maybe you can add tax on every purchase if you have a certain level of wealth. Someone who is broke might reserve a $2 coke for a special treat if they only made $50 that day, but if you made 50k that day it's still a $2 coke and not a $2000 coke. Replace coke with house, car, tuition, medical bills, anything you want. In the current system you can hide your income in a company and pay yourself remarkably little on paper, so I say tax those companies heavily as well. If money is fungible, taxes should be too and it shouldn't matter if the company makes 1m and you make 100k or if you make 1m and the company makes 100k, the tax burden should be exactly the same as it represents the same movement of 1.1m. The fact that the tax burden isn't the same currently is corrupt and serves the few at the cost of the many.

by jerf 7y ago

wcunning 7y ago

Sadly, unless you think about those nudges like a pen-tester, you're going to create unintended consequences with your adjustments and new rules and new exceptions every single time. I just listened to a podcast that posited that much of the CEO pay problem was due to changes in the corporate tax ability to write of CEO salary in the early 90's which led, through other tax provisions and investor desires, to paying with stock options. That happened right at the beginning of the dotcom boom and caused every person with a stock heavy position to massively increase in wealth, far faster than any salary would have. Had that been left alone, they would all be paid millions, but not hundreds of millions. The position posited in the podcast was that it should be stock with long term holding requirements and awarded based on relative performance vs. the market to prevent everyone getting the maximum stock bonus based on the market going up and nothing the managers and executives did.

epow 7y ago
Podcast sounds interesting. What's it called?

asdff 7y ago

The devil is in the details. People are clever and find out how obscure rules can work for them. However, if the system is stupidly simple, it would be much harder to game. Throw out the rulebook. Say you make 15k a year, your tax rate is zero, 16k, it's perhaps 1%, etc. etc. until you get to the big dogs who net millions a year, far more than they could reasonably spend on their own living expenses and well being, then you tax them 90%. Or maybe you can add tax on every purchase if you have a certain level of wealth. Someone who is broke might reserve a $2 coke for a special treat if they only made $50 that day, but if you made 50k that day it's still a $2 coke and not a $2000 coke. Replace coke with house, car, tuition, medical bills, anything you want. In the current system you can hide your income in a company and pay yourself remarkably little on paper, so I say tax those companies heavily as well. If money is fungible, taxes should be too and it shouldn't matter if the company makes 1m and you make 100k or if you make 1m and the company makes 100k, the tax burden should be exactly the same as it represents the same movement of 1.1m. The fact that the tax burden isn't the same currently is corrupt and serves the few at the cost of the many.