<p>Well, I was arguing on strictly the morality of redistribution of wealth, but I suppose it’d also be worthwhile to discuss the economic benefits (yes, there are some).</p>
<p>I won’t deny that, as Mankiw put it, taxes ‘distort incentives.’ However, can we completely discount taxation on economic grounds? No, because, in the end, businesses still operate as an integrated part of the society in which they’re situated. As such, we can’t discount the negative effects that follow a grossly inequitable distribution of wealth. For example, what happens if crime runs rampant due to a large unemployed sector? What if public health becomes an issue when the homeless lack sufficient income to afford professional care? These extreme situations hinder business developments far more than taxes on capital gains would. Point being, a society has to reach a critical value on its Gini coefficient in order for businesses to operate efficiently, and taxation becomes a means of achieving this end.</p>
<p>Now, admittedly, capital gains aren’t the only source of revenue, but taxes on nothing but inheritance would scarcely provide enough revenue to ensure enough equality for a stable society. Moreover, this begs the question of whether it’s morally sound to tax specific aspects of society (household income, property value, etc.) but not others (capital gains).</p>
<p>Your examples are careless. Since we’re talking about taxes here, let’s assume a high disparity of wealth is inherent, and that taxes alleviate this “high Gini coefficient” (simplifies the situation – I’m merely ignoring other ways to solve the disparity of wealth problem). </p>
<p>Therefore an inequitable distribution of wealth implies that we didn’t tax at high enough levels. This means that the economy is flowing freely–the government is hardly involved. No reasonable economist would say that such an economy causes high unemployment–on the contrary, it’s the taxation itself that suffocates job growth (outside of short, normal economic cycles).</p>
<p>So we wouldn’t have many homeless or a large unemployed sector. The only issue is that many employees would be making less money than ideal (an important issue! but this would likely result in poor living conditions–not rampant homelessness and unemployment as you described). So the extreme situations you described could ONLY occur if taxation became so high that it choked the economy–to the point where unemployment rates skyrocketed. </p>
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<p>Eh, but we do tax capital gains. I’m not suggesting we stop taxing capital gains altogether–this would only be ideal if there was no budget crisis. I’m simply suggesting that taxes have an upper limit before their usefulness declines rapidly: redistribution of wealth can quickly turn into a stranglehold on the American economy. </p>
<p>In fact, at some point, higher taxes will actually produce lower tax revenue because of its negative effect on on the velocity of money.</p>
<p>Final point: unfortunately, many companies are reluctant to display exact shrinkage stats on their financial statements/notes…but I think it’s fair to say that for most companies, interest paid on outstanding debt + dividends on equity dwarfs shrinkage, so it’s a little outside the box to argue that taxes on capital gains and income is less important (to corporation’s well-being) than crime due to unemployment! That’s a lot of crime.</p>
<p>Yes, that would be how the ideal free market operates. However, that wasn’t the case in post-industrial Europe, nor was it the case in the post-Civil War US. Rather, there was so much competition for low-wage jobs in urban centers that, inevitably, a large unemployed sector resulted, with the skyrocketing crime rates following shortly after. On the other hand, with the right amount of taxation, one could ensure a stable base and allow certain sectors of the work force to specialize and alleviate competition for the low-skilled, low-wage earners. </p>
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<p>No one is arguing that over-taxation wouldn’t prove detrimental, but the point is that a certain level of taxation is required (a certain Gini coefficient, a certain level of overall standard of living) in order for businesses to operate fluidly.</p>
<p>And what’s more, it’s not like such redistribution of wealth is necessarily detrimental to private enterprise. Rather, other examples of redistribution such as minimum wage promote efficiency wage dynamics, which not only increase worker productivity, but, due to strict probability, increase the chances a corporation will hire more qualified individuals. And, in a strictly theoretical sense, wealth IS cyclical (though admittedly there are losses due to the inefficiencies in the system). Thus, ensuring a higher standard of living for the lower class increases consumption and aggregate demand for society in general, which, in the long run, could actually prove to be an investment for the private sector as a whole.</p>
<p>You are right. And the underling implication that economic theories have historically failed to forecast reality is true. But the markets are dynamic–there’s constantly new financial instruments that economists don’t really understand (this recession is proof). This makes history a poor indicator, too; the effects of taxation are constantly changing because the market changes with it. Ultimately, it’s what you choose to rely on: outdated historical evidence or incompetent theories–I truly believe this is a subjective choice, and a sign of how weak economics still is. </p>
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<p>I think we agree. But, just to reiterate my point using your specific indicators, I believe there is a trade-off between the Gini coefficient and the overall standard of living. The lower the Gini coefficient, the lower the average standard of living–the question is how far should our standard of living be dropping just to minimize our Gini coefficient. Lowering our Gini coefficient is simply to match philosophical ideals of equality. Lowering out standard of living is a real net loss for the economy.</p>
<p>I understand your argument that a lower Gini coefficient can reduce crime–it just seems more relevant for a developing country. It’s tough to imagine shrinkage having a serious impact on our economy (keep in mind retailers are just one small part of it), although I suppose it is a potential economic benefit even if on a smaller scale.</p>
<p>Aren’t we all ignoring the elephant in the room?</p>
<p>If high taxes (in whatever form) are placed on corporations in order to redstribute the wealth (from people who earned it, to people who didn’t), how long is it going to take before these companies simply shut down and move operations out of the country?</p>
<p>It didn’t take long for business to figure out that they could save money by closing manufacturing centers and outsourcing their work or building facilities in Mexico, so how long do you think it will take before these companies simply shut down and move out?</p>
<p>If you take away the incentive to make a profit, what is the point of keeping that business operational? </p>
<p>More importantly, if the incentive to make a profit is taken - why would any start a new business? </p>
<p>I never understood how people who worship this redistribution of wealth philosophy don’t understand how the real world truly works.</p>
<p>However, I believe that is the over all goal - shut down production and force industry into the hands of the government.</p>
<p>The marketplace is “redistribution of wealth” as well. A person or entity pays money for a good, and thus their wealth is “redistributed” to the seller. So, everyone participates in this. It’s my belief that conservatives use this phrase to somehow demonize people who want a more equitable society–one that has a robust middle class, not a depowered one that we have now due to deregulation and entitlements to the rich.</p>
<p>No one is suggesting that the government should tax corporations to death. Simply, they should be taxed equitably so that the burden falls away from the lower and middle classes–the vast majority of Americans.</p>
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<p>Is this a strawman, or do you truly not understand what the opposing side believes?</p>
<p>I’m sorry, your argument just lost a lot of credibility with that argument. Do you honestly believe that this is the goal of Socialism? It is not and never has been. The only reasonable conclusion I can come to is that, as ABR said, you are establishing a strawman to discredit the other side. Is this really what Tea Partiers believe? If so, then I am more than a little nervous about the sanity of our country. </p>
<p>Democrats do not believe this. Obama does not believe this. Not even Socialists believe this. I can already predict that you are going to say “I never said they were!” but the reality is that it was implied in your post, and in many of your previous posts, since you tend to lump more liberal Democrats, Socialists, and Obama all in one.</p>
<p>I don’t support Socialism, but it offends me to read such a blatantly false generalization of an entire group of people - one that includes people I knew, and who certainly did not believe this tenet.</p>
<p>The marketplace shouldn’t redistribute wealth: cash is not the only form of wealth. It is simply a form of liquidation for the seller. The good and the cash should have equal values (if there is a ready market, then the buyer could just sell the good again right?)</p>
<p>If there was a redistribution of wealth, then the transaction was unfair–if anything, I imagine this typically redistributes wealth back to corporations. I have no data for this, but I assume that corporations rarely “overpay” employees, yet some customers don’t know the value of the goods they buy.</p>
<p>But your point is valid. Taxation creates a robust middle class–but it also lowers the middle class’ income. </p>
<p>No one doubts that taxation is necessary; I haven’t met many that don’t support taxation for military and utilities at least. But, in my opinion, someone who supports fairly heavy taxation should also support copyright/patent infringement and online piracy for customers below a certain income level. The majority of pirating is done on big studios and companies–shouldn’t these companies be providing their services free to lower income customers? After all, entertainment increases standard of living–why not provide it to all? The upper class can finance the costs of movie production or R & D.</p>
<p>It’s the same argument, except that it doesn’t sound as pretty as taxing the rich who don’t deserve excess money. Because even those who focus more on social matters rather than fiscal can realize that legalizing copyright infringement hurts our economy.</p>
<p>Stop saying radical crap that no rational fiscal conservative actually believes. You’re making us look bad.</p>
<p>liberal != socialist != Communist. Very few liberals have the ** goal ** of wiping out free market. Some just don’t realize the consequence of their actions, and others’ ideas will simply choke the economy a bit–it won’t actually end free markets</p>
<p>Fact: Redistributing wealth from the rich to the poor is inefficient. You have to pay the middleman (government workers).</p>
<p>Thus from an objective standpoint, redistributing creates dead weight loss to society. Society would be better off letting Warren Buffet keep his dollar bill.</p>
<p>Also, I think the rich and the upper middle class (which probably contribute over 80% of all taxes) are near the maximum tax burden. Anymore taxes and they will be seriously ticked off and utilize even more tax shelters, legal or otherwise, and perhaps stop working altogether for the capitalist class. </p>
<p>Taxes for infrastructure and research and social maintenance are fine but wealth redistribution is very very detrimental.</p>
<p>And also, there are serious morality questions raised when you take a dollar from Money Mike and give it to Poor Paul. Money Mike earns that much money because he is worth more to society. Anyone who argues that janitors contribute more to society than Doctors or Engineers is either a) ignorant or b) down with a case of the sour grapes.</p>
<p>Simply, they should be taxed equitably so that the burden falls away from the lower and middle classes–the vast majority of Americans. ~ ABR1190</p>
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<p>So you’re saying the burden of taxes falls on the lower and middle class?</p>
<p>The rich people are overtaxed as it is. If you try to raise taxes higher, tax revenues would actually FALL because rich people figure it would be better to simply stop working and live off of capital gains. Thats what happened during WW2 right?</p>
<p>If that happens, government will further raise taxes to gain lost revenue, creating a downward spiral that ultimately costs the middle class, who cannot afford to stop working and live off of private equity and financial assets.</p>
<p>The top 1% have more than 40% of the financial wealth. The top 1.8% would then presumably have more than 50%. So in that respect they are undertaxed. The top 50% minus the top 1.8% on the other hand have less than half the financial wealth yet apparently close to 60% of the tax burden.</p>
<p>This has nothing to do with taxes, no by a long shot.</p>
<p>If this was a simple “tax the rich a lil more, the poor a lil less”, it wouldn’t be a big deal. I might not agree with it, but not a big deal.</p>
<p>This is about entitlements - massive entitlements. Creating a system in which the citizens are ultimately dependent on government aid, in one form or another. I’m not saying this is going to happen during Obama’s term, but little by little - they are gaining more and more control. It’s not regulation that worries me - it’s ownership, which I believe is their end goal(Automobile and Financial takeover, Healthcare).</p>
<p>The top 1% have more than 40% of the financial wealth. The top 1.8% would then presumably have more than 50%. So in that respect they are undertaxed. The top 50% minus the top 1.8% on the other hand have less than half the financial wealth yet apparently close to 60% of the tax burden. ~ Thiscouldbeheaven</p>
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<p>Well, as you know I was responding to a poster who said that the lower and middle class carried the tax burden, which is obviously untrue.</p>
<p>I mean, how much do you want the bottom 50% to pay? Nothing?</p>
<p>You want 50% of citizens not to pay taxes? How long do you think it will take for the top 50% to just leave to the table? Then what?</p>
<p>This graph only shows income taxes–the progressive tax rates in USA peak at 373k for married couples filing jointly. Every dollar earned beyond that pays 35 cents on federal income tax, regardless of wealth.</p>
<p>Which means that if the top 1.8% are paying all the taxes, then they are simply earning a ton. There is no special burden that they bear (except that their above-373k income is taxed at 35% instead of 33%).</p>
<p>I definitely agree with you that the rich bear the tax burden. But this is not because of the tax code: they simply earn a ****-ton. And the liberals want to close this gap, admittedly via a very inefficient taxation system.</p>