Here's a good reason why we need a wealth tax

[911Sparky]

Nonsense. First jobs aren’t created on a whim; they're a response to more business. Second, profits are used to create new products (demand) and develop future products. New products and services are the key to business success which is the key to more jobs.

By the way, I haven’t heard any serious businessman or economy use “trickle down” in decades.

I know you read my post because your first sentence is exactly what I said. Profits may or may not be used to create new products. Employment is based on sales
of your product, it can be a new product, or something you have been selling for a hundred years, the demand creates the jobs, not the "newness" of the product.
Many companies use profits to reward executives or stock buybacks none of which create jobs. You may have a newer name for it but trickle down, or any other name you use for it, the simple fact is economies succeed when consumers have money to spend, not when corporations have profits.

 

[NatMorton]

Because things are not quite so simple as you seem to believe. All money that is not in couches or under mattresses works in the economy, but not all money works efficiently in the economy. Many economists believed that allowing the wealthy to keep more money would spur investment and create jobs, but the reality has not panned out like that.

Increasing the capital available to businesses makes the less efficient. Since Reagan we have consistently lowered the weighted average cost of capital to companies. However, companies have seen a steady increase in their required rate of return on project development because they have become less efficient at producing wealth/income. In effect, companies now have a competitive advantage based on the ability to raise capital more than their ability to produce goods and services efficiently. We know that this is reversed when we move from supply side focuses to demand side focuses. In other words, when people have more money to buy the stuff they want they reward companies who produce the goods and services they want at the prices they desire. When companies and the wealthy have money they acquire the goods and services they feel that people want.

In other words, money in the hands of consumers is better for the economy than money in the hands of savers so long as their are adequate retirement savings.

Ah, but here's the rub. Even if I agree with your "money in the hands of consumers is more efficient" argument (though I don't), that's not what we're talking about here. The money that would be taken from Jeff Bezos or Warren Buffett is not given to consumers. It's given to Washington. So the question becomes who does more good with that capital, the likes of Bezos & Buffett or the likes of Trump & Pelosi? I know which pair I trust to do more economic good.

 

[NatMorton]

So which of the two flat taxes is fair and why isn't the other one fair?

(1) - A flat percentage on everyone, which leads to everyone having the same percentage but paying different amounts.
or
(2) - A flat dollar amount on everyone, which leads to everyone paying the same amount, but having different percentages.

You are asking people to explain why a flat tax isn't fair, which I am attempting to do with this question.

That depends. How many different rates could you balance on the head of a pin?

Please, enough on this point. See post #242 and let's move on.

 

[NatMorton]

the beneficiaries of inflation are the 1. the initiator ( the Gov. ) and 2. Those who can hedge ( predominantly the wealthy ).
Since you can't create value out of thin air, the value is paid for by those who cannot hedge, i.e., the poor.

There it is , right there, so simple.

Moreover, as we can see from these tables, (courtesy Federal Reserve)

The Fed - Table: Distribution of Household Wealth in the U.S. since 1989

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

the gap between the rich and the poor are widening as time passes, noting that this is an incontrovertible fact, and that isn't because the rich are working harder insofar as being absolutely commensurate with the accrued value. And, so. that accrued value has to come from somewhere, and that somewhere are from those who unable to hedge (as a major contributing factor, of course there are other reasons).

So, indirectly, the accrued wealth comes largely from transferring wealth from the poor to the rich, albeit indirectly, it is real.

See, the point is, the rich are not keeping pace with inflation, the system puts them far ahead of it, and the poor far behind it, hence the widening gap.

We have had an extended run of historically low inflation, so by your logic the wealthy have benefited relatively less recently than at other times in our economic history. Is that what you mean to say?

There are lots of reasons lower wager earners have seen slower wage growth than high earners over the past several decades. The most significant reason is, IMO, the dramatic rise in available lower-skilled labor. Several things were true about the labor market right after WWII that are not true today. Immigration was almost zero. Women were excluded from many industries, and if they had a job were expected to leave it and mind the homestead after marriage. Non-European ethnic minorities were effectively barred from all but the lowest level jobs. The ability to draw on and manage a global workforce in most industries was simply not there. All this means that employers looking to fill good-paying jobs for much of the 19th century had their choice of domestic, white men.

These factors created an artificially scarce labor pool prior to the 1960s. And as any econ 101 student can tell you, scarcity of a desired resource drives up the price of that resource, and the price of labor is wages. Employers now have a vastly larger supply of labor from immigration, women entering and staying in the workforce, off-shore workers, and from many other types of people who simply would not have been candidates for the higher paying jobs in years past.

Labor is a market like any other, and we'd be wise to remember that.

 

[NatMorton]

Many companies use profits to reward executives or stock buybacks none of which create jobs.

Why must they "create jobs" with that money? It's their money, not yours.

Our friends on the left really need to get past this idea that companies exist to create jobs for other people. Businesses have only two real obligations: 1) obey the law 2) increase shareholder/owner value. That's it. All else is, ultimately, to serve those two ends.

 

[The Mark]

It’s always amazing to me to see people who want the government to have such massive control over their lives.
Especially when you look at the history of governments who have gotten that much power.


But I am sure this time it will work out differently.

Not control, support.

 

[rickc]

P

That depends. How many different rates could you balance on the head of a pin?

Please, enough on this point. See post #242 and let's move on.

Now a flat tax could be put together that would work. Here is my proposal.

Tax rate controlled by the federal budget. Whatever rate it takes to balance the federal budget. If our representatives cut spending you get a tax cut.

All payroll taxes are eliminated. SS and medicare are paid out of the general fund. No witholding. Every quarter every American sits down and writes a check to the federal government. Everyone sees what our representatives are costing them. Now we never see that money so it is just ignored.

First $35,000 is untaxed for everyone.

All income earned and unearned are taxed at the same rate.

Simple formula same tax for everyone on everything at the same rate. No deductions no exemptions no loopholes.

 

[The Mark]

So what was the massive opportunity that was only available to Bezos and no one else that luck allowed him to take advantage of. After all you say success is all luck.

It's never one big thing.
And I didn't say it was all luck.

The luck comes in when someone who has the right information, skills, and will takes advantage of an opportunity.
If that opportunity hadn't shown up, they might not now be where they are.
If they hadn't had the information, will, and/or skills to take advantage of it, they also might not.

Without luck they would not be in that position, but that doesn't reduce the necessity of the skills, information, and will.

 

[The Mark]

I take it you have never been around any homeless people.

I guess when you are this naive any idea can sound good.

I mean I've encountered a few in my life. Not recently.

 

[The Mark]

Do tell, how would you know?

I speak from a position of limited success as defined by our society.
I'm better off than some, worse than others.

 

[Integrityrespec]

Robert Reich's tweet basically states the case:

View attachment 67309692

And what law says I'm entitled to the money someone else made through his work and/or business experiences? Liberals always think they know what to do with someone else's money.

 

[Bullseye]

I know you read my post because your first sentence is exactly what I said. Profits may or may not be used to create new products. Employment is based on sales
of your product, it can be a new product, or something you have been selling for a hundred years, the demand creates the jobs, not the "newness" of the product.
Many companies use profits to reward executives or stock buybacks none of which create jobs. You may have a newer name for it but trickle down, or any other name you use for it, the simple fact is economies succeed when consumers have money to spend, not when corporations have profits.

You still got it backwards. I don’t hire a bunch of people and hope my sales will be enough to keep them employed. AS I sell more I hire more people witht the profits from previous sales. I hire as I see my workforce not able to keep up with demand. I don’t hire and hope demand with earn enough to pay them.

 

[911Sparky]

There is a basic law of economics that states when the price for something goes up, demand goes down. That is as true for the price of labor (wages) as it is for the goods and services you purchase.

Yes, there will be many businesses that cannot respond to that labor cost hike immediately (your must-have five employees example). To your point, they will have to raise prices and that will create less demand for that business's products. Maybe that drop in demand is the tipping point between remaining a going concern, or not. If their product is a necessary item, you've just raised prices on everyone, including the poor. Inflation is a killer.

You can find an expanded version of this problem here: https://debatepolitics.com/threads/...5-minimum-wage.428151/page-11#post-1072951592

I mentioned the inflation factor in my post, we are in agreement there. The example you gave of the small business with 2 highly paid workers, and 5 minimum wage workers would be unusual in my experience, but may exist, I don't know. Generally speaking the ratio of skilled workers to unskilled would be more like 10 to 1 in which case the minimum wage hike would have a much smaller impact on overall cost. A couple years ago I read the results of a study using McDonalds as an example,
showing the impact of a 12.00 minimum wage on the price of a Big Mac would be 5 cents each, whereas a 15.00 minimum wage would impact the price on that same
burger would be 55 cents. I am not an economist so I don't know how to arrive at the best balance between inflation and paying a living wage, but I'm sure that the current situation with people working 2 or more jobs just to subsist is not sustainable. Would you agree that working a full time job and still being eligible for
government assistance is not where we should be as a nation?

 

[rickc]

And what law says I'm entitled to the money someone else made through his work and/or business experiences? Liberals always think they know what to do with someone else's money.

In the United States, Article I, Section 8 of the Constitution gives Congress the power to "lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States. This is also referred to as the "Taxing and Spending Clause."

 

[911Sparky]

You still got it backwards. I don’t hire a bunch of people and hope my sales will be enough to keep them employed. AS I sell more I hire more people witht the profits from previous sales. I hire as I see my workforce not able to keep up with demand. I don’t hire and hope demand with earn enough to pay them.

Go back and READ my post, that is exactly what I said.

 

[CLAX1911]

Wealth is just after tax income.

What we need is a secondary income tax for those with incomes (not wealth...) over a certain threshold.

What we really need is less spending.

if you work yourself into $30,000 in credit card debt you don't then go buy a Ferrari every year. You stop spending first.

 

[beancounter]

Here's current relevant article.

50 years of tax cuts for the rich failed to trickle down, economics study says

Tax cuts for the wealthy didn't boost the economies of the U.S. and 17 other countries — but they did worsen income inequality.

www.cbsnews.com

 

[911Sparky]

a flat tax is just a way to give the medium rich another tax cut. that's why the trickle downers like it. no thanks. the yellow stuff trickling down isn't prosperity.

Be careful Helix, I was told in a post that nobody uses trickle down anymore! LOL

 

[CLAX1911]

A sales tax could be a substitute for direct taxes, but it would be equitable only if purchases essential to living were exempted.

Isn't that just a luxury tax?

 

[NatMorton]

Not control, support.

You don't get the latter without giving up the former.

Safe in the arms of Big Brother is no place you want to be.

 

[mrdeltoid]

FDR felt differently...and so do I.

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. "Necessitous men are not free men."[7] People who are hungry and out of a job are the stuff of which dictatorships are made.
In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race, or creed.

Among these are:

• The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
• The right to earn enough to provide adequate food and clothing and recreation;
• The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
• The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
• The right of every family to a decent home;
• The right to adequate medical care and the opportunity to achieve and enjoy good health;
• The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
• The right to a good education.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.

America's own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for all our citizens. For unless there is security here at home there cannot be lasting peace in the world.

https://en.wikipedia.org/wiki/Second_Bill_of_Rights

Having a decent home is a right? And making enough money for food, clothing AND recreation? I was raised to believe if you don't work, you don't eat. I'm not talking about people unable to do so through no fault of their own. If you are able bodied, you can earn.

 

[Evilroddy]

gbg3:

Just to clarify, I got the impression from reading your reply that you think I am in favour of wealth taxes. To be clear, I am not in favour of wealth taxes except in very limited scopes like municipal property taxes.

I'm quoting this to pose the question; what about the poor and disadvantaged who are unwilling to work hard or work at all? What do wealth taxes and wealth redistribution accomplish with this group?

The "willing poor" or the "determinedly unemployed" are very tough nuts to crack. First-off, they should not be receiving large sums of money from the state if they are unwilling to work. In such a case they should be limited to a subsistence level of state supplied income from state coffers. This income will be contingent on working for the state in simple manual labour programmes like cleaning up litter and planting trees. This means we replace welfare with workfare wherever and whenever possible. Second, they should be required to forfeit their right to raise their own children, who should be fostered or adopted by people who would give those kids better opportunities to succeed later in the kids' lives. Third, they should be moved out of their comfort zones in order to earn their workfare. This means being moved around from job site to job site, over and over, across considerable distances. Fourth, these determined unemployed should be forced to attend and pass courses which endow them with life skills and skills which will make them more employable. Part of this education will quite frankly be indoctrination to develop a mind-set more conducive to accepting the need to work. Finally, obstacles like drug addiction, substance abuse, and other obstacles to maintaining employment should be dealt with sternly during a workfare programme, removing those who abuse themselves from the objects of abuse. That's the stick.

Now the carrots. Those who participate in the workfare programmes can improve thier income levels marginally over subsistence levels and can improve their future prospects by advancing into private sector jobs where the state and the private sector share employment costs through temporary subsidies. These jobs would eventually transition into unfunded longer term employment. As a workfare recipient completes education and training programmes they can advance to less onerous and more enjoyable and skilled types of workfare. Eventually, after completing successfully enough training, conditioning and experience under their belts, the great majority of workfare recipients should be able to transition fully to self sustaining employment and tax paying.

For the dead-enders who simply refuse to work, they should face a life of hardship in state run work camps where miserable coercive stimuli are gradually replaced by positive incentives, only if they buckle under and accept the need for them to work. If not, then they become wards of the state and effectively they become indentured labour, one step above chattlevslavery.

One might assume that someone who has worked hard and accumulated wealth likely does stimulate the economy in numerous ways, often by creating businesses that employ some or many people. Once that person's wealth and ability to further stimulate the economy has been taxed too heavily, that job creating ability diminishes or disappears.

Agreed. This is why progressive taxation, if designed well, should tax more from the rich income earners than the middle income or low income earners. If you overtax any part of the workforce/entrepreneurial bloc, then you degrade the economy. Therefore the state must carefully set rates which maximise the milking by taxation while still allowing for investment and adequate entrepreneurial reward from investments. The key is to create a tax structure which is cheaper to pay than avoid, but still meets the needs of the responsible state to fund non-free market social,programmes.


Continued next post.

 

[NatMorton]

I speak from a position of limited success as defined by our society.
I'm better off than some, worse than others.

And you believe you did not earn what you have but rather it was just a matter of chance, yes?

 

[Evilroddy]

If that money was redistributed to the poor who will potentially survive on it but not be willing to work hard or work at all (or even work, but was only able to provide for themselves and not create business opportunities for anyone else), you've successfully dampened the economy overall.

Here I respectfully disagree. Providing the poor with a subsistence wage will mean the recipients will have to spend it all just to live. That money gets 100% reinjected into the economy and boosts aggregate demand. That servers the interests of the entrepreneurial sector of the economy who will try to capture that money. On the other hand a same amount of money being concentrated in the far fewer hands of the rich is less likely to be spent and is more likely to be invested in order to produce non-productive, speculative income which bleeds value from the economy as speculation is essentially parasitic. Speculative investment no longer produces as many jobs as it one did when the economy was more geared to productive manufacturing and productive agriculture.

Once you've run out of other peoples' money, what then? Financially going after the job creators will ultimately destroy the economy of the entire country. Trying to put everyone in the same financial category with wealth redistribution will never work - because the talents and abilities of people vary so greatly and outcomes, person to person, vary significantly. $100,000 in the hands of one person will not do the same for the economy that $100,000 in the hands of another will. You just can't cripple those that have the intellectual ability and drive to spur the economy.


Again, the levels of taxation and the avenues for reducing tax burdens must be carefully set by the state and not be abused. Taxation is harvesting capital by the state from the economy, so abusive taxation is like slashing and burning the economy until the whole thing collapses.

However there is another consideration to be factored into the taxation policy. That is, "How to use taxation to slow or halt concentration of wealth into too few and very powerful hands?". Concentration of wealth threatens democracy and republic because it leads to ultra-rich elites who by virtue of their great wealth can buy connections and influence to affect and effect the politics and the economy of the state to their own benefit. This leads to the growth of oligarchy which is profoundly anti-democratic and anti-republican as oligarchy does not depend on the state deriving its legitimacy from the people, but rather from the rich - plutocracy. So taxation policy should also seek to erect increasingly difficult barriers to the concentration of too much wealth into a shrinking subset of hands.

Cheers, be well and season's greetings.
Evilroddy.

 

[CLAX1911]

The Federal Sales Tax would be included in the cost of the item.

Say for example you buy a car battery at Auto Zone. The battery sells for $100, but the price listed on the shelf is $108. So Auto Zone takes $100 for their sale, and they forward the remaining $8 to the federal government for the Federal Sales Tax.

You just paid the FST. Government doesn't care who's pocket the FST comes out of - - - they just want their 8%.


That 20% to 30% estimate is true only if there are no spending cuts.

Of course there would need to be massive spending cuts in order for the 8% FST to work.

Welfare, Medicare, and around 50% of military spending would need to be cut.

Wouldn't an 8% sales tax on top of whatever other sales tax simply discourage local consumption of high value goods?

If I am mega wealthy and I want a $7 million yacht I'm much more motivated to say purchase it from acceler in Mexico or Chile or wherever to avoid the $560,000 sales tax. It's probably cheaper to buy it overseas. Same with a Ferrari or a private jet.

 

[Bullseye]

Go back and READ my post, that is exactly what I said.

I don’t think so. Profit is still the driver in business growth.