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Once you get over a certain income it gets harder to spend the money quickly locally. The wealthy in a way end up hording their income as they can and often spe

Once you get over a certain income it gets harder to spend the money quickly locally. The wealthy in a way end up hording their income as they can and often spend it slowly. The wealthy often spend it trading for objects and property from others in their cohort. The difference is the velocity of money for a minimum wage earner compared to the top 1% in very large. In a study in my 1980s economics textbook, the annual multiplier for the bottom 20% of incomes, the money recirculated 11 times more within 12 months. The multiplier for the top cohort (I don't recall if it was a quintile too) was only 0.4 times. That top cohort might spend their money on art, brothels on the other side of the world or on international investments. This is the reason Adam Smith and John Stewart Mill advocated for a progressive income tax and for some legal restraints on corporations and banks. They spend their money slowly and in ways that harm most of us. This study is an example of how putting more money in the pockets of people who are going to spend their money quickly in their immediate neighborhood are going to actually in this case create local economic growth. We need a progressive income tax not for social justice but for better economic efficiency and getting a larger economic pie to all eat from.

bequanna 3y ago
If the “hoarded” wealth you mention is just getting plowed into assets like existing real estate and the stock market I tend to agree with you. All it serves is to drive up those asset prices, which really doesn’t seem to have much effect and is low velocity. The tax code should discourage this type of investment but actually seems to support it currently. No more 1031 exchanges, less depreciation allowed or depreciation over some longer period, etc. However, investment in new projects, new businesses, new building, etc is very stimulating. This is what the tax code should heavily incentivize.
- Projectiboga 3y ago
  Yes all that happens too, I was specifically referring to the issue that the inheritance exemption is so high that much of that has escaped much taxation.
  - bequanna 3y ago
    But I think the underlying issue most of us have with inherited wealth is the idea of the idle rich. The people who have inherited and done nothing to get the money they have and are able to passively invest and still pay low taxes. Let’s reduce the incentive to be passive with taxation changes.
- _siis 3y ago
  There's some interesting reading about how the taxes should and should not work in the 5th book of the Wealth of Nations. Most copies only include the first 4 volumes. While its not complete, you are somewhat limited in what you can do with the tax code incentives, and generational wealth or concentration into a Bourgeois caste is one of many issues that affect socialism more dramatically than our mixed system (though there still is an effect). The inheritance tax is nonexistent. They kept it in entity vehicles until a law was passed excluding it then they dissolved the entities in a year where there were no tax implications (the entire amount was untaxed). Fiat and debt have their own implications when the money printer runs above capacity. Have you seen the derivative exposure for banks listed at the FDIC website?
specialist 3y ago
> better economic efficiency Yup. Keep the money moving. So weird that corporate media (the plantation class) emphasizes wealth accumulation while ignoring most other metrics like velocity of money and gini coefficient.

bequanna 3y ago

If the “hoarded” wealth you mention is just getting plowed into assets like existing real estate and the stock market I tend to agree with you. All it serves is to drive up those asset prices, which really doesn’t seem to have much effect and is low velocity. The tax code should discourage this type of investment but actually seems to support it currently. No more 1031 exchanges, less depreciation allowed or depreciation over some longer period, etc. However, investment in new projects, new businesses, new building, etc is very stimulating. This is what the tax code should heavily incentivize.

Projectiboga 3y ago
Yes all that happens too, I was specifically referring to the issue that the inheritance exemption is so high that much of that has escaped much taxation.
- bequanna 3y ago
  But I think the underlying issue most of us have with inherited wealth is the idea of the idle rich. The people who have inherited and done nothing to get the money they have and are able to passively invest and still pay low taxes. Let’s reduce the incentive to be passive with taxation changes.
_siis 3y ago
There's some interesting reading about how the taxes should and should not work in the 5th book of the Wealth of Nations. Most copies only include the first 4 volumes. While its not complete, you are somewhat limited in what you can do with the tax code incentives, and generational wealth or concentration into a Bourgeois caste is one of many issues that affect socialism more dramatically than our mixed system (though there still is an effect). The inheritance tax is nonexistent. They kept it in entity vehicles until a law was passed excluding it then they dissolved the entities in a year where there were no tax implications (the entire amount was untaxed). Fiat and debt have their own implications when the money printer runs above capacity. Have you seen the derivative exposure for banks listed at the FDIC website?

specialist 3y ago

> better economic efficiency Yup. Keep the money moving. So weird that corporate media (the plantation class) emphasizes wealth accumulation while ignoring most other metrics like velocity of money and gini coefficient.