5 ms·

The problem with any consumption tax is that wealthier people spend a smaller percentage of their income on needs compared to lower classes. If you make it prog

by Shinkei 12y ago

The problem with any consumption tax is that wealthier people spend a smaller percentage of their income on needs compared to lower classes. If you make it progressive, they will just buy their most expensive items overseas and never (or hide?) the import and avoid the tax. Anytime you try to regulate, there will be people making big money trying to find workarounds. Anyway, taxing in this way imposes a moral judgement on the use of a person's wealth... I consider myself a pretty liberal person, but even I see a problem with 'punishing' a person for spending a million on a yacht rather than starving children. We can incentivize that by making it tax-deductible, but that does nothing to solve the problem of the income tax disparity. I work a lot of hours and my payroll taxes are much higher than capital gains taxes--as Buffett and others have pointed out, that's what's unfair but it won't change as long as the people who get their income from capital gains have the most power to influence politics.

couchand 12y ago
Why do people always use the term punish when talking about taxes? Taxes are levied, you're only punished if you fail to pay.
- jasode 12y ago
  Please don't add noise to the discussion by nitpicking something that doesn't need to be nitpicked. Shinkei already put scare quotes around the word "punished" so any reasonable person should interpret that he does not mean "punish" in a formalized legal sense. His usage was a figure-of-speech and not citing any legal doctrine. People can use <scarequotes>punish</scarequotes> the same way people can use <scarequotes>reward</scarequotes> when then say they felt "rewarded" with a tax credit for buying a hybrid electric car or installing solar panels. This is possible even though the word "reward" is nowhere stated in official USA tax code regarding those credits.
  - enraged_camel 12y ago
    I think you're being a bit too harsh on couchand. First of all, I didn't interpret his comment as attacking Shinkei. I think he posed it as a general question for the audience. Secondly, I don't see it as nitpicking. It's a reasonable discussion to have. Piketty himself spends a fair amount of pages discussing how a global wealth tax might be implemented, and people's attitudes towards taxation in general have to be part of that debate.
    - jasode 12y ago
      >, I didn't interpret his comment as attacking Shinkei. I'm not saying he attacked Shinkei. couchand criticized the message and not the messenger which is certainly acceptable. I'm pointing out that he's criticizing a figure-of-speech by stating to us the legal literal definition of "punish". Because couchand didn't parse Shinkei's "punish-as-in-sentiment", he made the mistake of equivocation[1] and talks about punishement-as-in-prison-sentence-from-illegal-tax-evasion. It's as if someone says "butterflies in my stomach" and a nitpicker adds a ST-MrSpock/ST:TNG-Data type of literal reply. Mr Spock asks, "Why do people use the term 'butterflies'? Caterpillars cannot incubate in the human stomach and metamorphose into a butterflies." Most observers would find that response annoying instead of being relevant to the conversation about nervousness. Sure, there can be other motives such as helping someone conquer stage fright but hopefully you agree that correcting someone with formal biology definitions of "butterflies" does not achieve that objective at all. [1]http://en.wikipedia.org/wiki/Equivocation http://en.wikipedia.org/wiki/Equivocation
      - moggflunkies 12y ago
        You utilizing the word "annoying" triggers me. I don't respect the underlying and implied racist/sexist usage that you created in your comment. Simply calling someone "annoying" is just a thinly veiled attempt at getting away with saying a word like "fag" or any another racial epithet. Just because someone annoys you, doesn't mean that you can strike them from the conversation. Just because you are a well-off, privileged male, don't forget that not that long ago African-Americans and Homosexuals "annoyed" you too. Anyways, I just wanted to jump in and add noise to the discussion by nitpicking like jasode too!
- davidw 12y ago
  Taxes, among other things, can be used to discourage "bad" behavior - like smoking, or burning carbon, or other stuff that has costs for society at large ("externalities"). By and large, the more you tax something, the more you discourage it.
  - couchand 12y ago
    It is true that by taxing something you usually discourage it, but that's a simplified view that's not always the case. It assumes normal goods and a particular relationship between taxation and interest rates that doesn't necessarily bear out. In particular, in a discussion of wealth tax vs. consumption tax, you can't rely on the naive assumption that elasticity of consumption has a significant bearing on the net effect of a consumption tax. See, e.g. http://ntj.tax.org/wwtax/ntjrec.nsf/4E562450B2F268D985256AFC007F19A8/$FILE/v52n1067.pdf http://ntj.tax.org/wwtax/ntjrec.nsf/4E562450B2F268D985256AFC...
    - davidw 12y ago
      I said 'by and large'. It's clearly a long, complicated discussion. But I wanted to provide a reason why taxes might be termed 'punishment' rather than delve into the economics of it all, which you could probably write entire books about.
crdoconnor 12y ago
>I work a lot of hours and my payroll taxes are much higher than capital gains taxes--as Buffett and others have pointed out, that's what's unfair but it won't change as long as the people who get their income from capital gains have the most power to influence politics. They only have that power because the rest of the country is disorganized/divided and un-unionized. There's more than us than there is of them. Ultimately they will cede this power at some point - the question is simply when.
judk 12y ago
The entire function of government is to impose moral judgments, otherwise we'd get along fine in anarchy. So you need a nuanced vire of which moral judgments are in scope of government.
enoch_r 12y ago
Imagine there are two products on the market: "the promise of $130 in 5 years" and "$100 today." The fact that people choose to exchange one product for the other every day suggests that the two products have equal value.[0] Capital gains taxes mean that these two products of equal value are taxed at different rates. Although I work a lot of hours too, I find that quite unfair. [0] http://en.wikipedia.org/wiki/Time_value_of_money http://en.wikipedia.org/wiki/Time_value_of_money
- ScottBurson 12y ago
  Ah, but there are different ways to solve that problem. One is to reduce the capital gains tax rate, perhaps to zero. The other is to subtract the expected return (based on the risk-free rate of return) from the gain, and then apply some nonzero tax rate to the remainder. Here's why the latter makes more sense to me. It's only at the risk-free rate of return that the two products you describe are of equal value. In order to realize returns higher than the risk-free rate, investors must do work. I think that the extra gain beyond the risk-free rate should be taxed as ordinary income, because that's really what it is: income produced by work. Of course, actually implementing this policy isn't quite trivial: it requires a running estimate of the risk-free rate of return that can be agreed on politically, and it requires knowing exactly when assets changed hands (down to the nanosecond, for HFT). But it's well within our computational capabilities at this point. So, should people who just stick their money in the bank at 0% for some period of time be able to claim a small loss on it? I would be fine with that, actually.
  - enoch_r 12y ago
    > In order to realize returns higher than the risk-free rate, investors must do work. 1. Are you claiming that taking risk is a form of work? Because the correlation between risk and expected return holds up very well empirically, and it'd take a lot to convince me that buying shares of an S&P500 ETF is a form of work that I should be taxed on. Even if risk and expected return had no correlation, it'd still only require luck, not necessarily skill, to often realize returns higher than the risk-free rate--just purchase one share of each of 100 risky stocks, and I guarantee that you'll have a significant return on at least one of them. 2. There is a shockingly large body of evidence that excess returns, for the vast majority of people the vast majority of the time, are the spoils of luck, not work. Mutual fund managers, for example--whose literal job it is to earn excess returns--perform in aggregate roughly as well as the market, and the very best performers, at the extreme tail of the distribution, in one year are barely more likely than chance to do better than average the following year, and people in the bulk of the distribution are essentially flipping coins.[0] Again, these are people whose job it is to beat the market, and they're failing miserably. 3. In cases where people really are working for returns, I completely agree with you. This is income and should be taxed--as income. But in cases where someone is investing their own savings, they really are just trading a certain present value for an uncertain future value. [0] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021

by Shinkei 12y ago

couchand 12y ago

Why do people always use the term punish when talking about taxes? Taxes are levied, you're only punished if you fail to pay.

jasode 12y ago
Please don't add noise to the discussion by nitpicking something that doesn't need to be nitpicked. Shinkei already put scare quotes around the word "punished" so any reasonable person should interpret that he does not mean "punish" in a formalized legal sense. His usage was a figure-of-speech and not citing any legal doctrine. People can use <scarequotes>punish</scarequotes> the same way people can use <scarequotes>reward</scarequotes> when then say they felt "rewarded" with a tax credit for buying a hybrid electric car or installing solar panels. This is possible even though the word "reward" is nowhere stated in official USA tax code regarding those credits.
- enraged_camel 12y ago
  I think you're being a bit too harsh on couchand. First of all, I didn't interpret his comment as attacking Shinkei. I think he posed it as a general question for the audience. Secondly, I don't see it as nitpicking. It's a reasonable discussion to have. Piketty himself spends a fair amount of pages discussing how a global wealth tax might be implemented, and people's attitudes towards taxation in general have to be part of that debate.
  - jasode 12y ago
    >, I didn't interpret his comment as attacking Shinkei. I'm not saying he attacked Shinkei. couchand criticized the message and not the messenger which is certainly acceptable. I'm pointing out that he's criticizing a figure-of-speech by stating to us the legal literal definition of "punish". Because couchand didn't parse Shinkei's "punish-as-in-sentiment", he made the mistake of equivocation[1] and talks about punishement-as-in-prison-sentence-from-illegal-tax-evasion. It's as if someone says "butterflies in my stomach" and a nitpicker adds a ST-MrSpock/ST:TNG-Data type of literal reply. Mr Spock asks, "Why do people use the term 'butterflies'? Caterpillars cannot incubate in the human stomach and metamorphose into a butterflies." Most observers would find that response annoying instead of being relevant to the conversation about nervousness. Sure, there can be other motives such as helping someone conquer stage fright but hopefully you agree that correcting someone with formal biology definitions of "butterflies" does not achieve that objective at all. [1]http://en.wikipedia.org/wiki/Equivocation http://en.wikipedia.org/wiki/Equivocation
    - moggflunkies 12y ago
      You utilizing the word "annoying" triggers me. I don't respect the underlying and implied racist/sexist usage that you created in your comment. Simply calling someone "annoying" is just a thinly veiled attempt at getting away with saying a word like "fag" or any another racial epithet. Just because someone annoys you, doesn't mean that you can strike them from the conversation. Just because you are a well-off, privileged male, don't forget that not that long ago African-Americans and Homosexuals "annoyed" you too. Anyways, I just wanted to jump in and add noise to the discussion by nitpicking like jasode too!
davidw 12y ago
Taxes, among other things, can be used to discourage "bad" behavior - like smoking, or burning carbon, or other stuff that has costs for society at large ("externalities"). By and large, the more you tax something, the more you discourage it.
- couchand 12y ago
  It is true that by taxing something you usually discourage it, but that's a simplified view that's not always the case. It assumes normal goods and a particular relationship between taxation and interest rates that doesn't necessarily bear out. In particular, in a discussion of wealth tax vs. consumption tax, you can't rely on the naive assumption that elasticity of consumption has a significant bearing on the net effect of a consumption tax. See, e.g. http://ntj.tax.org/wwtax/ntjrec.nsf/4E562450B2F268D985256AFC007F19A8/$FILE/v52n1067.pdf http://ntj.tax.org/wwtax/ntjrec.nsf/4E562450B2F268D985256AFC...
  - davidw 12y ago
    I said 'by and large'. It's clearly a long, complicated discussion. But I wanted to provide a reason why taxes might be termed 'punishment' rather than delve into the economics of it all, which you could probably write entire books about.

crdoconnor 12y ago

>I work a lot of hours and my payroll taxes are much higher than capital gains taxes--as Buffett and others have pointed out, that's what's unfair but it won't change as long as the people who get their income from capital gains have the most power to influence politics. They only have that power because the rest of the country is disorganized/divided and un-unionized. There's more than us than there is of them. Ultimately they will cede this power at some point - the question is simply when.

judk 12y ago

The entire function of government is to impose moral judgments, otherwise we'd get along fine in anarchy. So you need a nuanced vire of which moral judgments are in scope of government.

enoch_r 12y ago

Imagine there are two products on the market: "the promise of $130 in 5 years" and "$100 today." The fact that people choose to exchange one product for the other every day suggests that the two products have equal value.[0] Capital gains taxes mean that these two products of equal value are taxed at different rates. Although I work a lot of hours too, I find that quite unfair. [0] http://en.wikipedia.org/wiki/Time_value_of_money http://en.wikipedia.org/wiki/Time_value_of_money

ScottBurson 12y ago
Ah, but there are different ways to solve that problem. One is to reduce the capital gains tax rate, perhaps to zero. The other is to subtract the expected return (based on the risk-free rate of return) from the gain, and then apply some nonzero tax rate to the remainder. Here's why the latter makes more sense to me. It's only at the risk-free rate of return that the two products you describe are of equal value. In order to realize returns higher than the risk-free rate, investors must do work. I think that the extra gain beyond the risk-free rate should be taxed as ordinary income, because that's really what it is: income produced by work. Of course, actually implementing this policy isn't quite trivial: it requires a running estimate of the risk-free rate of return that can be agreed on politically, and it requires knowing exactly when assets changed hands (down to the nanosecond, for HFT). But it's well within our computational capabilities at this point. So, should people who just stick their money in the bank at 0% for some period of time be able to claim a small loss on it? I would be fine with that, actually.
- enoch_r 12y ago
  > In order to realize returns higher than the risk-free rate, investors must do work. 1. Are you claiming that taking risk is a form of work? Because the correlation between risk and expected return holds up very well empirically, and it'd take a lot to convince me that buying shares of an S&P500 ETF is a form of work that I should be taxed on. Even if risk and expected return had no correlation, it'd still only require luck, not necessarily skill, to often realize returns higher than the risk-free rate--just purchase one share of each of 100 risky stocks, and I guarantee that you'll have a significant return on at least one of them. 2. There is a shockingly large body of evidence that excess returns, for the vast majority of people the vast majority of the time, are the spoils of luck, not work. Mutual fund managers, for example--whose literal job it is to earn excess returns--perform in aggregate roughly as well as the market, and the very best performers, at the extreme tail of the distribution, in one year are barely more likely than chance to do better than average the following year, and people in the bulk of the distribution are essentially flipping coins.[0] Again, these are people whose job it is to beat the market, and they're failing miserably. 3. In cases where people really are working for returns, I completely agree with you. This is income and should be taxed--as income. But in cases where someone is investing their own savings, they really are just trading a certain present value for an uncertain future value. [0] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021