tax cuts [Archive] - Quarter To Three Forums

SpoofyChop

06-04-2003, 05:17 PM

XPav

06-04-2003, 06:52 PM

Anyway, if the median is pointless then the mean is pointless too because the mean is going to be skewed dramatically by the number of people who aren't getting any refund at all.

From the source (http://www.house.gov/reform/min/pdfs/pdf_inves/pdf_admin_dividend_tax_cut_executives_rep.pdf)/

Only 26.4% of the
returns filed reported any dividend income.The remaining 73.6% of
returns, representing an estimated 132 million taxpayers, reported no
dividend income and would receive no benefit from a dividend tax cut.

Much of the source for that source is from the Citizens for Tax Justice (http://www.ctj.org/), with the exact detail (including figures) at http://www.ctj.org/stim03.pdf

There's a nice chart there on the first page that, while it doesn't paste well here, points out that 77% of the tax cut goes to the top 20% -- people with more than $77,000 of income.

Now, that was from January. The final tax plan is worse.

http://www.ctj.org/pdf/sen0522.pdf

Other good stuff on that website. Now Spoofy, are you still going to stick your fingers in your ears and claim that everyone that says something you don't like is partisan?

XPav

06-04-2003, 09:13 PM

Oh, and if you want to complain about lies, damn lies, and statistics, please read the following.

http://www.spinsanity.org/post.html?2003_05_25_archive.html#200367828

And be aware that Spinsanity will take everyone to task when they make shit up. Take a look at the list of columns.

voltaic

06-04-2003, 09:25 PM

I have a question which was never adequately answered for me before: why MUST the wealthy pay more in taxes?

Supertanker

06-04-2003, 09:32 PM

I have a question which was never adequately answered for me before: why MUST the wealthy pay more in taxes?

Every answer will boil down to "Because they can afford it & the government needs more money."

Bub, Andrew

06-04-2003, 09:45 PM

I like the "to maintain the status quo" answer best.

XPav

06-04-2003, 10:47 PM

I have a question which was never adequately answered for me before: why MUST the wealthy pay more in taxes?

Probably because if you factor in consumption (ie sales) taxes, rich people actually pay a lesser percent of their income in taxes compared to poor people.

And of course, the flip side to your question, is why MUST the wealthy pay less in taxes?

Jason McCullough

06-05-2003, 01:48 AM

Context is everything; in income tax discussions, millionare means someone who makes over a million a year. Net worth would be a messy metric for income.

So words mean what the dictionary says they mean unless you say that the context says they mean what you want them to mean. Got it.

The mode is pointless in discussing income. The median hides the power-law effect of income. That leaves the average.

The mode is not pointless here because we're not discussing income. We're discussing a tax cut. We can easily create ranges and then determine whether the most likely tax cut is in a certain range.

(I love the way you make these grand statements like "The median hides the power-law effect of income." I think you do this so that people will get so bogged down trying to figure out what the hell you are saying that they forget that you haven't given any reasons to back up your fancy claims.

Anyway...for those of you who don't want to have to go searching Google to figure out what Jason meant, basically the power-law effect he's yammering about asserts that "80% of the people control 20% of the wealth." But Jason would never state something so simply because it doesn't make him look as intellectual.)

Anyway, if the median is pointless then the mean is pointless too because the mean is going to be skewed dramatically by the number of people who aren't getting any refund at all.

The fact is, we need all of the information in order to draw a reasonable conclusion. We need the mean, the median, the mode, and the missing 19% that somebody doesn't want to tell us about.

But that's not what your charts are supposed to do. It's all spin and it's all bullshit and it's all designed to confuse people.

Christ almighty, pulling out the anti-intellectual faux-populism guns a bit early there, aren't we? The power law for certain kinds of data is really interesting because it shows up all over the place: income, city sizes, and birth name frequency, for a few.

Anyway, if the median is pointless then the mean is pointless too because the mean is going to be skewed dramatically by the number of people who aren't getting any refund at all.

Maybe it's just me, but I think including people who aren't getting a refund at all is a valid statistical procedure. I'm not sure what illustrative purpose the mode would serve. Here's the median (http://www.ctj.org/pdf/2003statecut.pdf):

In 2003, 49 percent of taxpayers will get $100 or less from the tax bill. For these 65.7
million unlucky taxpayers, the average tax reduction will be only $19.

In other words, the median tax cut is $100 (50% of taxpayers will be above the median and 50% below, so "49% below $100" is right at the median.) Why, that certainly looks a lot better! Those lyrical criminals at CTJ.....

SpoofyChop

06-05-2003, 07:05 AM

Now I can start to respect you guys again! You actually brought some facts and figures to bear!

Yay facts! Yay figures!

[EDIT: I meant to say can!]

Dave Long

06-05-2003, 07:36 AM

All I know is my employer is crying poverty and hasn't given me a raise. My medical insurance payment went up on a monthly basis and along with that I now pay more money in co-pay every time I visit the doctor, every time I need to buy prescriptions and on top of that, any medical procedures have a deductible AND only are covered up to 90% of total.

This tax cut isn't going to do jack squat for me and my family except for the changes to child tax credit (which I haven't looked into) so I'm essentially making less money and paying more for everything including property taxes and even the goddamn, motherfucking water bill.

I've had to cut services on my phone, I'm dropping digital cable and I'm considering a job change or a potential part time job to keep my head above water. We don't even have a lot of debt on top of all this.

Fuck Bush and fuck his economic incentives. None of it is working. Things are only getting worse.

--Dave

Mike Cathcart

06-05-2003, 07:48 AM

Fuck Bush and fuck his economic incentives. None of it is working. Things are only getting worse.

Clearly you forgot to be rich. Damn you poor people are stupid.

XPav

06-05-2003, 08:32 AM

Fuck Bush and fuck his economic incentives. None of it is working. Things are only getting worse.
--Dave
Dave, why do you hate America?

:roll:

Damn, its a good thing Bush showed up and rescued us from our long nightmare of peace and prosperity.

antlers

06-05-2003, 09:35 AM

Actually, it does kind of look like the economy is turning around just in time to help Bush in the election. Maybe massive deficit spending was exactly what we needed to overcome what would otherwise be deflationary pressures?

Jason McCullough

06-05-2003, 09:39 AM

If by turning around you mean a very slight uptick in business investment while unemployment keeps going up.....

bee cubed

06-05-2003, 10:59 AM

from what i understand, one of the repurcusions of decreased federal funding is going to be increased state and local taxes. where i live (pittsburgh, PA) state a local taxes are based on a flat percentage of income, so while they are technically fair, i think that they are generally more of a hardship on people with lower income. increasing the percentage is only going to increase the hardship on poorer people, while having very little impact on the wealthy. another thing under consideration is raising the occupation privileg tax (a flat yearly tax, which is currently $10/year but has been proposed to go as high as $120/year) and raising sales tax. both of these are obviously highly regressive taxes.

so, end of story is this: rich people get back fat checks, which is potentially eaten into by increased state/local income tax. middle class get back essentially nothing and end up paying (potentially much) increased sales, property, etc taxes to offset lower federal spending at state/local level.

XPav

06-05-2003, 11:06 AM

Now I can't start to respect you guys again! You actually brought some facts and figures to bear!

Yay facts! Yay figures!
Is that a typo? We have facts and figure and you can't respect us? Man, are facts and figures like Spoofychop Kryptonite or something? :lol:

SpoofyChop

06-05-2003, 12:13 PM

Hehe. Yeah...I meant Can respect. That must have been Freudian or Jungian or somebodyian.

voltaic

06-05-2003, 12:36 PM

I have a question which was never adequately answered for me before: why MUST the wealthy pay more in taxes?
Probably because if you factor in consumption (ie sales) taxes, rich people actually pay a lesser percent of their income in taxes compared to poor people.
OK in reality they pay a lesser percent. I can see why many people want them to pay more. But the question is: why MUST they pay more?

For what it's worth, I take home less than $20K per year, so I'm arguing from the poor side of the fence.

Bub, Andrew

06-05-2003, 12:45 PM

Then your opening question was a bit misleading. You want a history lesson? How the tax code came about?

bee cubed

06-05-2003, 06:37 PM

the way i see it, the government basically says, 'we need to take in X dollars next year in taxes.' and they are damn well going to get it from somewhere. the best solution would be to minimize the amount of X, but since that is never gonna happen, the next best thing is to have people who can do so without hardship carry the weight of the tax burden. certainly, someone who makes 300K per year can afford to pay 50% to 60% of income in taxes (i'm talking income, property, sales taxes). a person that only makes 30K is going to have substantial hardship from paying even 30% in total taxes.

voltaic

06-05-2003, 07:52 PM

Bub, Andrew

06-05-2003, 09:01 PM

Because they can?

XPav

06-05-2003, 09:19 PM

Sharpe

06-05-2003, 09:44 PM

Sorry, no not laws either. My question is what moral imperative is there that rich people MUST pay more taxes? Not "why do we want them to" or "what laws are there", but "what philosophy justified this point of view"? And by this I don't mean the liberal point of view.

What objective metric was used to determine that yes, rich people OUGHT to pay more taxes?

There are two primary justifications for progressive taxation:

1)The rich have a greater ability to pay. This is based on the assumption that the basic cost of living is fixed and that once you've met basic expenses, everything above that is discretionary consumption spending. For example, lets say that for a single person the basic cost of living is $2,000 a month for housing, food, utilities and basic services, necessary clothing, medical, car, insurance, any other expenses necessary for work, and other needed expenses. (This is just an example - some areas are higher or lower.) In the example, any income over $24,000 a year is available for consumption, investment, improving your lifestyle, etc. So if someone makes $25,000 a year and you tax that guy at 10% you are cutting into his basic cost of living. But if Guy #2 is making $50,000 he's got 26K over his "basic cost of living" - which means you can sock him 40% or 45% and he's still better off than the poor slob making $25,000. So the second guy has a lot more potential for being taxed with out taking food out of his mouth. Now of course many people have differing definitions of what a basic living expense is (I had a friend tell me last night that he felt it was necessary to make $200K per year in order to be the primary breadwinner in a family - anything less and he wouldn't be able to start a family in the Bay Area - now obviously setting your sights on that kind of money means you ain't gonna be satisfied until you are making more money than 97% of Americans - but the whole vicious wealth/expectations/brutal pressure grind is a story for another post).

Anyway, thats one theory.

2)The second idea is the levelling effect of progressive taxation, ie wealth redistribution. The extreme case is communism (Karl Marx included progressive taxation in the Communist Manifesto) but most western countries practice mild or moderate forms of this with modestly progressive schemes. In Europe the taxation is highly progressive (socialist) but in the US much less so. Right now in the US after the last tax proposal if you average all forms of federal, state and local, income, payroll, sales, estate, corporate etc taxes, then the system is very nearly flat: everybody plays roughly the same overall rate for government services, about 32% of money earned.

In theory, a moderately progressive tax system (which is what I favor) is supposed to function somewhat like the escalating unit costs in Rise of Nations: as the wealthy pay a somewhat higher proportion and the poor a little less it creates a self-balancing opportunity for the poor to catch up, if they apply themselves and increase their ability to earn money. Just as escalating unit costs in RoN is supposed to function as a drag on the dominance of an overwhelming player and a boost to the weaker player (and hence enhance back and forth give and take gameplay), progressive taxation is supposed to lessen the load that the poor bear, so as to allow them to "catch up".

The problem with this is when it segues into true wealth re-distribution where you take from the rich and just give to the poor without requiring them to earn it. IMO that creates dependancy and can lead to a variety of negative social and economic trends.

Overall I believe in a moderately progressive system (for example instead of everyone paying about 32% I wouldn't mind a system where the poor pay say 20% and the wealthy pay say 40%), but one WITHOUT big-spending redistributionist programs. Instead I would just place more of the burden for necessary government spending on the wealthy, who can better afford it and I would lessen the burden on the poor to allow them more opportunity to improve their situations.

There are some people who will disagree with me saying I have the incentives backwards -- by taxing the poor less I am giving them an incentive to remain poor but by taxing the wealthy more I am penalizing them for improving their earning ability. However, I believe that view ignores the powerful wealth generating power of having money and the deep opportunity cost imposed by being poor. I believe that in a flat tax system those with more money have a competitive advantage (irregardless of skill, effort and character - money BY ITSELF is an advantage) and that purely flat tax system will have a long term trend towards increasing mal-distribution of wealth, which ultimately leads to political instability and social upheaval. To use a gaming anology in most RTS, he who has the mightiest economy wins and we've all probably games of AoE or other games where once you got that big econ, the game was over and it was just a boring application of overwhelming force. To avoid that in the real economy, I favor a progressive tax system that's not too ridiculous and based on redistributing the cost of government but NOT redistributing wealth via direct handout.

Dan

Cleve Blakemore

06-05-2003, 09:50 PM

The American economy is like a pilot inside a plane that has lost both engines and the wings have fallen off, talking about "bringing it in through a controlled descent."

You guys are shuffling deck chairs on the fiat money Titanic. This time next year both of you are going to be boiling shoe leather for soup and huddling inside cardboard boxes in hobo camps.

You don't get "it." You really don't. Same old blabbering away about your quasi-socialist redistribution schemes. You don't have the foggiest. You can shift the tax burden around in whatever krazy klown fashion that amuses you, it hardly matters if nobody has any money left to tax.

Next stop, Petersburg, Russia. Stock up on ammo and rice.

XPav

06-05-2003, 10:50 PM

http://members.iquest.net/~elumpkin/img/hobo.gif

voltaic

06-06-2003, 12:11 AM

What objective metric was used to determine that yes, rich people OUGHT to pay more taxes?
What objective metric was used to determine that middle class people should pay a greater percentage of overall taxes under the Bush tax plan? What object metric was used to determine that poor people should pay less?
I don't know, those questions would be related to mine. However based on the next half of your reply, it doesn't look good:

This is politics -- its not objective. Its messy and involves compromise and desires and everything that doesn't fit into neat little packets.
I believe economics can be objective. I was hoping that someone somewhere in a fucking cave or something had come up with a rational (i.e. non-political) reason for this. But it appears that there isn't one. As I said in my first post, this was a question I have never had adequately answered. Thanks for continuing the tradition. :)

voltaic

06-06-2003, 12:16 AM

There are two primary justifications for progressive taxation:
So what I get from your post is that the only real justification proposed for taxing the wealthy more than the rest of us slummers is redistribution of wealth. To a lesser or greater extent, but still. In the first case, because we can afford to. In the second case, because our economic philosophy (example: Marxism) says we should.

The US has a non-socialistic economic model so that throws out #2. Am I to assume then that people who support taxing the wealthy of the US more simply because they can afford it so why the hell not? McCullough, care to chime in (it is so hard to find an actual educated liberal that I value your input)?

Brad Grenz

06-06-2003, 01:02 AM

20 bucks says Jason says something about an American aristocracy.

ydejin

06-06-2003, 01:19 AM

20 bucks says Jason says something about an American aristocracy.

Actually I was going to point that out. I thought Sharpe wrote a very nice post--well written and well thought out. However, he missed one important part of the tax code which is the estate tax. While I think one can make arguments about how progressive or regressive the income tax should be (personally like Sharpe I favor a moderately progressive tax system), I fail to see how the conservatives can defend complete elimination of the estate tax. Either Americans believe that we are a meritocracy or we don't.

Bill Gates earned his billions, so for the most part I don't have a problem with him having them. But after the 2nd or 3rd generation, what happens to that wealth. His descendants didn't actually earn the wealth, yet they can use it to maintain their advantage over others through better schools and better access to capital (which in fact Bill himself had when he started Microsoft as his dad was in fact quite well off).

Now, let's move off of the Bill Gates example and consider a different example. What about the Enron execs. As I recall the top 30 execs ended up pulling out $1.1 billion before the company went belly-up. That's almost $40 million each. How long do their decendents get an advantage over everyone else because their fathers or mothers "earned" the money by building up Enron.

I don't have a problem with raising the estate tax to help those with family farms or businesses. Even something on the order of say a $5 million exemption might be reasonable. But at some point, unlimited inheritance of wealth is not only bad it's un-American (that's assuming American values include having a meritocracy as opposed to the British 18th-century aristocracy we rebelled against).

Jason McCullough

06-06-2003, 01:24 AM

Brad, you sly dog.

Volt, there's a distinction between "redistribution of wealth" and "distribution of government cost."

A government that does nothing but roads and military could still have progressive taxation; "redistributive" sounds like the wrong word to describe this scenario. Allocating government costs could be done strictly by minimizing the marginal utility footprint. If you have, say, 1000 people who make 20k and 100k who make 100k, taxing the people making 10k the same rate as the 100k earners seems extraordinally unfair, regardless of your opinions on the "deserved nature" of the high income earner's salaries. In a 10% rate case, the 2k the low earners give up is much more painful to them than the 10k the high earners have to give up.

I'd call wealth redistribution when someone gets more money or services back from the government than they pay for. It's a fuzzy line accounting line, but welfare is obviously on the redistributive side of the ledger, while using a progressive rate scale to pay for a government that does nothing but defense doesn't seem to be.

Another interesting point that's rarely brought up is that redistribution isn't done to make the rich poorer; it's done to make the poor richer. Virtually no one would favor taking the dollars of the rich and just setting them on fire out of spite; it's all marginal utility arguments about ivory back-scratchers vs. kid's health insurance or whatever.

And yes, I think estate taxes should exist to prevent the growth of a self-perpuating european style aristocracy, because such a thing is toxic to a well-ordered society.

I mostly agree with Sharpe, including the pre-insane Mickey Kaus emphasis on work-based programs.

At root, liberals support all this stuff because a) it seems fair in moderation and b) we don't want the country to turn into Argentina. I think the rich have remarkable short planning time frames for this sort of thing; what do you expect to happen to a society with a tiny, rich elite ruling over vast low-paid hordes?

Captain Cookiepants

06-06-2003, 01:32 AM

20 bucks says Jason says something about an American aristocracy.
Bill Gates earned his billions, so for the most part I don't have a problem with him having them. But after the 2nd or 3rd generation, what happens to that wealth. His descendants didn't actually earn the wealth, yet they can use it to maintain their advantage over others through better schools and better access to capital (which in fact Bill himself had when he started Microsoft as his dad was in fact quite well off).

That's flawed because it depends on the subjective 'earn'. When I was a baby I in no way 'earned' my baby food, I wasn't a lumberjack or rail splitter at 2 months, I in no way 'earned' my diapers or the blanket or the rabid squirrel I slept with.
It's stupid to punish someone who's parent or loved one died because you think they didn't 'earn' their keep. What happens when the heir is still very young? 'Sorry kid, we're taking all your dads money, you should have thought about getting a job before you turned 3 and went over the hill.'

And, most importantly, if the children of these people haven't 'earned' the money, how the fuck has the government 'earned' the right to get to take half someone's cash on top of the regular payments? When a person dies the government suddenly needs even MORE money? How's that work?

Jason McCullough

06-06-2003, 01:34 AM

You'd have a point if the government actually took entire estates on death. Of course, it doesn't.

Forgot to mention the whole "righting immoral outcomes of the market" angle, too; there's a disturbing tendency in the libertarian wing of modern conservativism to treat market outcomes as some sort of natural-law approach to morality.

ydejin

06-06-2003, 01:47 AM

That's flawed because it depends on the subjective 'earn'. When I was a baby I in no way 'earned' my baby food, I wasn't a lumberjack or rail splitter at 2 months, I in no way 'earned' my diapers or the blanket or the rabid squirrel I slept with.
It's stupid to punish someone who's parent or loved one died because you think they didn't 'earn' their keep. What happens when the heir is still very young? 'Sorry kid, we're taking all your dads money, you should have thought about getting a job before you turned 3 and went over the hill.'

Please don't ignore the fact that I assumed up to a $5 million dollar exemption. That $5 million will by an awful lot of diapers. I don't have a problem with the Republican Congress raising the size of the exemption. What I have a problem with is eliminating it altogether. Eliminating it restructures society in a way that makes it easier for those that have to maintain an advantage over those that have not. As I see it that does indeed lead to an aristocracy.

And, most importantly, if the children of these people haven't 'earned' the money, how the fuck has the government 'earned' the right to get to take half someone's cash on top of the regular payments? When a person dies the government suddenly needs even MORE money? How's that work?

That depends on how you want to setup the system. Right now I believe the government charges an estate tax not because it needs the money but rather to redistribute wealth on the theory that excessive concentration of wealth is a bad thing. However, you might picture a different tax system where income tax was reduced (or even eliminated) and only estate tax was charged. Personally as previously stated I believe in a progressive income tax system, however, I can see reasonable arguments against it. I see no reasonable arguments for allowing a small number of families to maintain vast amounts of wealth for many generations with no system for redistributing it.

Mark Asher

06-06-2003, 01:52 AM

"And, most importantly, if the children of these people haven't 'earned' the money, how the fuck has the government 'earned' the right to get to take half someone's cash on top of the regular payments? When a person dies the government suddenly needs even MORE money? How's that work?"

First off, I don't think it's half. The first million is tax-exempt and then the rest of the inheritance is taxed at a normal rate, and I don't think that's anywhere near 50%.

Why should it be taxed? It's income for the receipient. If a person gives another person more than $10,000 in one year the excess is considered taxable income.

The other reason is what Jason referred to, the idea of trying to fight against the creation of a permament monied class. Seems like a good goal to me.

Jason McCullough

06-06-2003, 02:30 AM

Oh yeah, I'm not sure if I mentioned this before, but I think before the estate tax repeal there was exactly one kinds of tax-free gift: gifts to charitable organizations. Why should gifts to family members be exempt?

Sharpe

06-06-2003, 06:50 AM

So what I get from your post is that the only real justification proposed for taxing the wealthy more than the rest of us slummers is redistribution of wealth. To a lesser or greater extent, but still. In the first case, because we can afford to. In the second case, because our economic philosophy (example: Marxism) says we should.

The US has a non-socialistic economic model so that throws out #2. Am I to assume then that people who support taxing the wealthy of the US more simply because they can afford it so why the hell not? McCullough, care to chime in (it is so hard to find an actual educated liberal that I value your input)?

You completely misunderstood my post. First off I think there IS a difference between saying "the wealthy can afford to pay more" vs "we need to level the playing field by taxing the wealthy more". In the first case, assuming there is a required level of government spending for which we MUST tax in order to pay for things even libertarians like (like defense, law and order, enforcement of contract, and policing/safeguarding the market) then I argue that the wealthy have a greater ability to carry that burden than the poor, irregardless of any redistributionist ideas. Also, you can argue this is morally fair b/c the wealthy are the ones benefitting the most from the social and economic conditions that are created by our market system, so it makes sense to place more of the burden for sustaining that system on the wealthy.

Also, you dismiss my point #2 by basically saying that any redistributionist position at all is communist. This is the kind of binary / ideological hard-headedness I've grown to hate (on both the left and the right). Look, just advocating a little bit of market analysis does not make someone an instant Milton-Friedman-ite. And advocating a bit of redistributionist (or as Jason put it, distributionist) policy does not make some a communist. There is a HUGE middle ground between hardcore libertarian absolute-free-market ideology and hardcore statist communism. It is possible, if you ignore ideology, to have a practical position than combines some lefty and some righty ideas to make a compromise position that actually works. I know there are idealogues on both sides who disagree but such idealogues are a part of the current problem with American democracy.

And lastly, I wonder if you even read the last couple paragraphs of my post talking about the advantages conveyed by wealth and the long term trend towards extremely stratified societies (hey it was a long post, I forgive you). I really do think the RoN gameplay reference applies: I think there is a strong argument that taxing the rich more (which means taxing the poor LESS) is a key to providing opportunity to the poor (not a handout but the chance to improve their situation) and is key to helping keep society in a long term stable status. I honestly believe that if we maintain a flat overall tax system, you will see us approaching the demographic paradigm of a banana republic over the next generation or so.

Also, I did forget the estate issue - by removing that entirely the Bushies have worsened the maldistribution of wealth and entrenched-power-of-money problems severely. I believe that, allowing a reasonable deduction for most people to pass on their proberty, there definitely needs to a stiff estate tax on large estates (like over $1M or $2M, maybe with a $3M $4M exemption for farms/businesses) to avoid the problem of overwhelming concentration of wealth. Think of it in game terms: if you won a game of AoE or RoN and had a large economy, and if in every re-match you were able to carry over your vast wealth, would anyone ever want to play you? Hell no.

Dan

MikeJ

06-06-2003, 07:25 AM

[And lastly, I wonder if you even read the last couple paragraphs of my post talking about the advantages conveyed by wealth and the long term trend towards extremely stratified societies (hey it was a long post, I forgive you). I really do think the RoN gameplay reference applies: I think there is a strong argument that taxing the rich more (which means taxing the poor LESS) is a key to providing opportunity to the poor (not a handout but the chance to improve their situation) and is key to helping keep society in a long term stable status. I honestly believe that if we maintain a flat overall tax system, you will see us approaching the demographic paradigm of a banana republic over the next generation or so.

I'm generally susceptible to engineering arguments, so the idea of "damping the positive feedback of income" really strikes the right chord with me.

The wealthy have an interest in preventing the stratification of society as well. Who really wants to live in neo-feudal society? How much do armoured cars, electic fences and ever-present private security forces reduce your standard of living?

Bub, Andrew

06-06-2003, 07:40 AM

I'm not sure which impresses me more. Sharpe's clear and exhaustive look at the tax system -or- the fact that he's effectively using Rise of Nations to explain it.

To me there is a clear moral obligation for the haves to contribute more than the have nots. The bullshit argument that taxing the poor less, or providing generous aid programs somehow encourages the poor to remain poor is ludicrous. No one wants to be poor, and for those few who do work the system and gain a free ride from the government... you're jealous of those people? Resentful? Why? They're leading a really crappy existence.

DennyA

06-06-2003, 08:17 AM

I don't think the argument is that people want to be poor. I think the argument (usually obscured by conservative "the poor are lazy nogoodniks" vitriol, unfortunately) is that while nobody wants to be poor, it remains that, if they can maintain a certain level of comfort and sustenance while being poor, they won't make the effort to try to work themselves out of poverty.

So the conservative thought is, screw making sure that everyone maintains a basic level of human living. If people want health care, food for their kids, etc., they'll work for it and pull themselves out of poverty. Particularly if you remove the subsidies they currently receive.

However, this is disingenous. Because the conservatives are only concerned with the "remove the subsidies" portion. The economy that the conservatives enjoy requires a certain percentage of the population to work for minimum wage or close to it, and if all the lower-class (there must be a PC term for that) citizens DID pull themselves into better situations, our economic structure wouldn't work.

The conservatives want a poor working class. They just don't want to pay for it.

Captain Cookiepants

06-06-2003, 10:09 AM

So the main support for the estate tax is the redistribution of wealth?? Then why the fuck aren't we all communists?? Why aren't we all sitting around waiting for our 'dead guy' checks comrade?
And 'to prevent an American aristocracy'?? 'America land of the free -- unless you try to accumulate wealth then your ass is ours'

The only people this tax actually hurts is small business owners who, until 2011, will go out of business to the tune of one in every four everytime the business owner dies.

Anders Hallin

06-06-2003, 10:36 AM

Jason McCullough

06-06-2003, 10:58 AM

The only people this tax actually hurts is small business owners who, until 2011, will go out of business to the tune of one in every four everytime the business owner dies.

And people accuse me of pulling numbers out of my ass.

SpoofyChop

06-06-2003, 11:02 AM

Communism is a perfectly logical response to "Manchester liberalism" and the like, and the conditions for workers in the Western world is infinitely better off because of the fear of communist revolts than it once was.
Just because it was an abject failure as a whole doesn't mean that large parts of it can't be relevant.

This is bullshit.

Conditions have improved for all people over the last few centuries because of improved sanitary conditions, improved technology, improved governance, and simple progress.

Your statement is the most hyperbolic and absurd thing I've read in a while. Infinitely better off? No fucking way.

To even credit communism with improving conditions the way you do is abhorrent in my opinion. That's the moral equivalent of saying that the holocaust has improved conditions for the Jews.

I'm sure the millions dead under Hitler and Stalin wouldn't thank you for your disgusting analysis.

I'm sure you're an intellectual and thoughtful person who is concerned about the welfare of average people. But listen to what you are saying here. It sucks.

Anders Hallin

06-06-2003, 11:06 AM

Well, "infinitely" better off is a bit too much, I agree. While the conditions for workers today almost can be said to be infinitely better than the dark ages of the beginning of industrialism, only part of this can be attributed to communism.

And I didn't even hurt my knee, this time. :)

Tyjenks

06-06-2003, 11:10 AM

And I didn't even hurt my knee, this time. :)

:)

SpoofyChop

06-06-2003, 11:13 AM

"A bit too much"?

Did you actually read my post Anders? I basically called your assertion a huge bunch of filth.

Aren't you going to respond a bit more? Or are you conceding the point?

SpoofyChop

06-06-2003, 11:15 AM

Incidentally, I'm sure you're the best Swede in the world. Don't take it personally...but did I mention I hated your post?

:D

Anders Hallin

06-06-2003, 11:24 AM

Nah, I just felt that my objectively true and moral post only needed a bit of clarification, and can now in no way be argued with. :)
The way I consider it, the working conditions for the working classes was complete shit, you worked, you died of coal in your lungs. Then people realized that hey, there were a lot more of them than there were of their bosses, and so communism arose, unions and so on. This threat was incentive enough to make working conditions a bit more humane, lower the hours.. all that.
But Soviet was still the first country in the world that put the 8-hour workday into law. And I think the knowledge of that law, and the fear of communism (which was a large political movement at the time), worked the factory owners in a way to make things better for the workers.

SpoofyChop

06-06-2003, 11:27 AM

Oh! Of course! I can't believe I didn't understand before!

Seriously though. You are super wrong. But since you're from Europe and I'm from the U.S. we're not allowed to fight anymore since we're all trying to "repair relations."

So let's hear it for Anders! The best Swede on QT3! And apologist for communism.

Yay!

voltaic

06-06-2003, 11:50 AM

Also, you dismiss my point #2 by basically saying that any redistributionist position at all is communist.
No. I said point 2 was that "the reason" for taxing the wealthy more is based on an economic model, for example Marxism. If the phrase "for example Marxism" equates to "only Communism" when you read it, that's not my fault and I recommend you remove in your McCullough filter immediately.

But I did understand the point you were making, FWIW.

And lastly, I wonder if you even read the last couple paragraphs of my post talking about the advantages conveyed by wealth and the long term trend towards extremely stratified societies (hey it was a long post, I forgive you).
Yes I did. I didn't reply to them because I was more interested in the first portion which addressed the question I actually asked. I was just asking about the premise of taxing the wealthy more, not the results.

XPav

06-06-2003, 11:52 AM

The wealthy have an interest in preventing the stratification of society as well. Who really wants to live in neo-feudal society? How much do armoured cars, electic fences and ever-present private security forces reduce your standard of living?
Oh, they have an interest in a non-stratified society. What they may not want to do is have their money taken away.

But I'm a big fan of the estate tax. Mainly because I watched this one show that had the Rockefeller scion (in his 20s) jet setting across the world in jeans and a T-shirt with his coterie of hangers-on and just sitting in 5 star restaurants and hotels doing nothing.

If there's one thing we don't need -- its more of that.

Anders Hallin

06-06-2003, 12:08 PM

I think the difference here is that while I live in a country where labour rights actually mean something, you don't. :)

soondifferent

06-06-2003, 12:38 PM

This is bullshit.

Conditions have improved for all people over the last few centuries because of improved sanitary conditions, improved technology, improved governance, and simple progress.

Your statement is the most hyperbolic and absurd thing I've read in a while. Infinitely better off? No fucking way.

To even credit communism with improving conditions the way you do is abhorrent in my opinion. That's the moral equivalent of saying that the holocaust has improved conditions for the Jews.

The holocaust *has* improved conditions for Jews. Anti-semitism is no longer (as) accepted as before. Though we'll see how long that lasts.

Improvements in labour conditions were won through strikes and the lives of workers who died at the hands of hired goons. Though we'll see how long that lasts.

Jason Levine

06-06-2003, 01:03 PM

Unemployment has reached a nine-year high (http://www.msnbc.com/news/922969.asp?0cv=CA01). If W wants a second term, he's going to have to learn the lesson his Dad didn't. It is the economy, stupid. If people still can't find jobs a year from now, the War on Terror and Iraq won't mean squat. He'll be toast.

SpoofyChop

06-06-2003, 01:15 PM

soondifferent

06-06-2003, 01:32 PM

The holocaust *has* improved conditions for Jews. Anti-semitism is no longer (as) accepted as before. Though we'll see how long that lasts.

Your statement implies that the holocaust, (or communism in Ander's example) has some kind of silver lining.

I refuse to even participate in that sick line of reasoning. These assertions are amoral. Period.

I wouldn't call it a silver lining (which does seem dispassionate), but you can't deny that the decline in the level of anti-semitism around the world is a direct consequence of the holocaust. Humans commit horrible atrocities, others learn, and then others forget. That's the way of things.

Besides, I fail to see how a rational proposition (without advocacy) can be considered amoral. Hm, is it unpatriotic as well?

Jason Levine

06-06-2003, 01:53 PM

Anti-Semitism has certainly been viewed as less acceptable in the West as a direct result of the Holocaust. If it's declined in Eastern Europe (which, I'd say is a dubious proposition), it's because the Holocaust largely wiped out the victims of that particular discrimination in those countries, not because of an overall change of attitude.

On the other hand, you could say that the Holocaust is an indirect cause of an increase in anti-Jewish sentiment in the Arab world, to the extent that the Holocaust was a causal event of the establishment of the State of Israel, which it certainly was.

SpoofyChop

06-06-2003, 02:23 PM

I'm sure you guys mean well with this whole approach, but I really believe strongly that taking such a "dispassionate" view has the strong potential to foster a sense of moral neutrality.

When you approach something like the genocide of millions of Jews or the genocide of millions of people under Stalin as a sort of pro/con scenario you just reinforce a kind of bored and clinical approach to mass murder.

There is nothing good about that. I'm not saying you guys are sickos or something, like I said I think you probably mean well. But I do believe that the line of reasoning itself is sick. It's a perversion of the way human beings should think about other human beings.

It sees a real cost in human lives as being part of a big political equation. I absolutely refuse to condone or wink at that approach.

I also don't think that you can say in any way that the holocaust has helped reduce anti-semitism. If anti-semitism has been reduced (which I'm not even sure I believe unfortunately) then my guess is that it is because of better education and more open societies.

The reason I say this approach is amoral is because that it essentially claims to transcend morality and go into some sort of super-objective zone where millions lives are merely a statistic or footnote.

These lives don't matter anymore as the fabric of our world. They are viewed through a horrible filter that sees people as so many social security numbers. And that is amoral. It eschews morality completely in a quest for objectivity or rationality.

Notice that I did not say the line of reasoning was immoral. It doesn't seek to actively pursue evil. But it certainly aids those who hold and seek dictatorial power.

I doubt any of you will be convinced by this but I hope you at least think about it. Are there some issues that are so fundamentally important that you simply cannot look at them in this abstract and detached manner and still maintain your moral compass?

I believe it's possible to lose that moral sense. That's what happened to the German people for a time and it's what much of the Middle East is displaying today in its anti-semitism. The Ba'ath party was found by people who wished Hitler had succeeded!

Until more people refuse to see these issues as merely statistics and footnotes we'll never see the end of anti-semitism.

Brian Koontz

06-06-2003, 06:04 PM

SpoofyChop's Anti-Intellectual Anti-Scientific stance is the sort of thing I detest.

Morality is what you DO with a truth, not the truth itself. You can't argue that the Holocaust did not reduce Anti-Semitism on MORAL grounds. You might as well argue against 1+1=2 on moral grounds while you're at it.

You *can* argue for the irrelevancy of the Holocaust with respect to Anti-Semitism for moral reasons.

SpoofyChop is driven by his fear into closing his eyes, and shouting out "MORALITY!" while groping in the dark.

SpoofyChop is smelly. He needs to take a long shower.

voltaic

06-06-2003, 08:35 PM

The Swedes tell us it's all relative anyways. The holocaust was only bad in hindsight.

bmulligan

06-06-2003, 08:39 PM

Anders Hallin

06-07-2003, 01:49 AM

Captain Cookiepants

06-07-2003, 02:13 AM

Why yes, the system is designed to punish those who achieve and reward those who steal. Of course, the achievers in this logic are those who are actually doing the rowing (aka the workers) and the stealers are those who just sit and benefit from it (the owners).

Excuse me: BULL. Shit.

Do you have any idea the risk that the owners take in starting a company? The financial and personal stakes they have in it? The sheer amount of money they would owe if their company went under? You think they just magically form a company, then hire a guy to do the rest of the work for them?

You people seem to be operating under the delusion that the owners of these companies have the easiest jobs in the entire universe and thus deserve to have their money taken from them after they die. But here's the thing: Joe Essemblylineworker gets up in the morning, eats breakfast, goes to work. If he screws up during the day the company may slow down and lose a few minutes fixing it. Worst case scenerio he loses his job and has to find another one.

Joe Companyowner gets up in the morning, attends endless meetings and makes ONE decision during his day. However, if he makes the WRONG decision hundreds, if not thousands of people lose their jobs and millions of dollars are lost which ripples across all the companies that are connected causing them to lose money and time and maybe jobs as well. Worst case scenerio he ends up broke and jobless with no one who will back him ever again and no more chances to make his money back.

You may look at Joe Companyowner and say 'Well he has a fancy car so he must be the luckiest man in the world who does no work whatsoever' But that damned car cost him five years off his life span and came equipped with two bleeding ulcers.

But then again they don't get their hands dirty during a day's work so they deserve to be raped by the IRS. Only people with grease under their nails deserve money. 'Thanks for using your ingenuity and intelligence to put your money and credibility on the line to create a company that employs hundreds and helps keep the economy strong. Now give us your fucking money.'

Anders Hallin

06-07-2003, 02:27 AM

Anders Hallin

06-07-2003, 02:35 AM

Captain Cookiepants

06-07-2003, 02:59 AM

You people seem to be operating under the delusion that the owners of these companies have the easiest jobs in the entire universe and thus deserve to have their money taken from them after they die. But here's the thing: Joe Essemblylineworker gets up in the morning, eats breakfast, goes to work. If he screws up during the day the company may slow down and lose a few minutes fixing it. Worst case scenerio he loses his job and has to find another one.

Joe Companyowner gets up in the morning, attends endless meetings and makes ONE decision during his day. However, if he makes the WRONG decision hundreds, if not thousands of people lose their jobs and millions of dollars are lost which ripples across all the companies that are connected causing them to lose money and time and maybe jobs as well. Worst case scenerio he ends up broke and jobless with no one who will back him ever again and no more chances to make his money back.
Though I must take some issue with this. So what you're saying is that while Joe Assemblylineworker can end up jobless and broke, Joe Companyowner is in the much worse position since he can end up jobless and broke?
"Make his money back"? How is it his money?

Hmmm, I like how you ignored 99% or the content of my sentences in order to pull something out of your ass, attribute it to me, then 'call' me on it.

What I said, and if you payy attention to ALL my words and not just the ones you choose, you'll see that the situation I describe breaks down into this: JoeAssemblylineworker is responsible for himself in the company, his work has the minimum effect. Joe Companyowner is responsible for the entire company, the hundreds or thousands of workers his company employes, and the other companies that in some way depend on his company, his work has a maximum affect.

While Joe Assemblylineworker may break a sweat and dirty his hands, Joe Companyowner has to always be ready to handle any and all problems and answer to his shareholders. The pay increases by job stress and job difficulty, do you think Joe Assemblylineworker has the ability to run a giant company? That is the reason that higher pay exists; would you rather make $6.50 an hour putting heads onto dolls, or make $6.50 an hour deciding the fate of yourself and the lives of hundreds of people?

And of course it's his money, he's responsible for it, where do you think the money to start a business comes from 'Business Fairy?' Here on planet Earth we typically have to repay banks and investors.

Tyjenks

06-07-2003, 03:19 AM

....while Joe Assemblylineworker.....

Wow, I bet he got made fun of in school*.

*And thank you, that is my 2,000th post which is funny to no one except myself and contributes nothing to the conversation at hand.

Jason McCullough

06-07-2003, 05:56 AM

Posted by Xpav

But I'm a big fan of the estate tax. Mainly because I watched this one show that had the Rockefeller scion (in his 20s) jet setting across the world in jeans and a T-shirt with his coterie of hangers-on and just sitting in 5 star restaurants and hotels doing nothing.

This is called ENVY. It is the reason the rich are forced to pay more than their fair share by the force of the majority. Our politicians have helped mold a society that seeks to punnish those who achieve and reward those who steal. It's called socialism. Why do you and your people feel that the rich and their heirs should feel guilty for their wealth? Are you and the liberals of this country more deserving of this wealth that you did not create? This country was founded on a principle of private property, not stealing from producers to give to looters by force. Equality does not mean everyone gets the same amount regardless of the effort they input. If you truly believe in 'equality', then how do you feel about a flat tax? why shouldn't the tax rate br 10% or less on everyone, regardless of income? Isn't THAT equality?

You read the part where he didn't earn that money, right?

Particularly amusing detail about the dividend tax cut: they dropped the profitability requirement (http://www.nytimes.com/2003/06/06/opinion/06KRUG.html). It is now perfectly legal, if you're rich and powerful enough to get your company to do it, to pay you entirely in dividends, which are taxed at the 15% rate, instead of paying you in income, which is taxed at the 35% for the top rate.

The "improving economic efficiency by eliminating double taxation" argument is completely gone. It's just a firehose pointed at rich guys now.

Anders Hallin

06-07-2003, 07:11 AM

What I said, and if you payy attention to ALL my words and not just the ones you choose, you'll see that the situation I describe breaks down into this: JoeAssemblylineworker is responsible for himself in the company, his work has the minimum effect. Joe Companyowner is responsible for the entire company, the hundreds or thousands of workers his company employes, and the other companies that in some way depend on his company, his work has a maximum affect.
I focused on the part that didn't make sense, namely that you seemed to suggest that they stand to end up in a worse position than Joe Assemblylineworker, something that I disagree with.

And of course it's his money, he's responsible for it, where do you think the money to start a business comes from 'Business Fairy?' Here on planet Earth we typically have to repay banks and investors.
When he has lost it, I don't really see how it is his money. Is he somehow entitled to it due to the fact that he was once in a responsible position?
I reacted to that part of your post since you seemed say that there is some sort of "natural" separation between Joe Assemblylineworker and Joe Companyowner, which there really isn't, except in past action.

XPav

06-07-2003, 11:45 AM

This is called ENVY. It is the reason the rich are forced to pay more than their fair share by the force of the majority. Our politicians have helped mold a society that seeks to punnish those who achieve and reward those who steal. It's called socialism. Why do you and your people feel that the rich and their heirs should feel guilty for their wealth? Are you and the liberals of this country more deserving of this wealth that you did not create? This country was founded on a principle of private property, not stealing from producers to give to looters by force. Equality does not mean everyone gets the same amount regardless of the effort they input. If you truly believe in 'equality', then how do you feel about a flat tax? why shouldn't the tax rate br 10% or less on everyone, regardless of income? Isn't THAT equality?
Point 1: Envy? Hah! How about "disdain".
Point 2: The guy hasn't created any wealth. At all. He's the equivalent of a member of the arisotcracy.
Point 3: This country is a meritocracy, not an aristocracy. That's what the estate tax is for. (With the side benefit that foundations and charities gets lots of money too).
Point 4: Flat taxes don't work -- because the poor are double taxed then -- once for income, and another time when they spend their money. Why do you like double taxation?
Point 5: "Our politicians have helped mold a society that seeks to punnish those who achieve and reward those who steal." What country do you live in? In the country I'm in, the US, the politicians just made it possible for the rich to get richer, giving shit to the middle and lower class, and claimed it will help everyone. (Go read the links I did a page or so ago).

Robert Sharp

06-08-2003, 03:01 PM

One of the problems with the estate tax is that there are examples for and against it. For instance, you could argue that without an estate tax you would have people that get rich for doing nothing but being born into a wealthy family. I actually have no problem with that in itself. But then you throw in some cases of people in this situation who have misused their power because they don't understand what it's like to work hard for something.

Then, OTOH, you have cases of people who worked hard to make money and want to be able to use that money any way they see fit. It's their money right? So they want to leave it for their children, to provide an easier life for them. There doesn't seem to be anything wrong with that. To make the case more clear, there are children born into wealthy families who still work hard and contribute to society. For instance, the guys who own the Sacramento Kings seem to treat fans well and do a lot of good with their money. Do they squander it a bit too? Yes, but they aren't all bad.

So, both sides of the issue have lots of ammo to throw at each other. Personally, I think if someone earns money, he/she should be able to pass it on. It's his/her money.

Someone above (I'm not going back to look) posted about the problem of money that hasn't been taxed (e.g. owning shares that increase in value). That's all well and good, but it doesn't make up the majority of estate tax cases does it? Many people earn their money and have ALREADY paid taxes on it. Why shouldn't they be able to leave it to family members without such a ridiculously high tax being placed on it?

I think the estate tax is definitely an example of liberals trying to create a false sense of equality. To be honest, I am not sure what the value of a completely egalitarian society is supposed to be. Not only is it impossible from a practical perspective, but it doesn't even seem desirable. The only way to do it is to lower the best people in a society to the level of the worst.

Supertanker

06-08-2003, 03:18 PM

I think the estate tax is definitely an example of liberals trying to create a false sense of equality.

As I've pointed out before, the originators of the estate tax weren't liberals - Teddy Roosevelt was President! It was an attempt to follow the anti-aristocracy roots of the country. They saw the abuses that resulted from the huge concentrations of money created during the Gilded Age, and how money could form a style of aristocrat just as easily as political power. After the estate tax was first passed, JD Rockefeller confirmed their fears by inventing things like generation-skipping trusts to get around it. Before Congress could amend the law to close the loopholes, he had gotten $475 million of his $500 million around it. That's something like $5 billion in today's dollars, and is why we STILL see generations of Rockefellers that don't have to work.

We are now seeing a modern version of the same thing. Huge amounts of wealth have been created and concentrated since the end of WWII. The same abuses are happening, and the ultra-wealthy are attempting to get around the estate tax again.

Jason McCullough

06-08-2003, 03:21 PM

Sharpe

06-08-2003, 03:43 PM

I think the estate tax is definitely an example of liberals trying to create a false sense of equality. To be honest, I am not sure what the value of a completely egalitarian society is supposed to be. Not only is it impossible from a practical perspective, but it doesn't even seem desirable. The only way to do it is to lower the best people in a society to the level of the worst.

See, this is another example of what I am beginning to think of as "binary ideology". There is a HUGE gap between allowing unlimited concentration of wealth on the one hand and "a completely egalitarian society" on the other. What if you believe in a society that allows a large amount of inequality, based on people's earning their own money, but also has some limits to prevent the rigid stratification of society by wealth? Just b/c I believe in an estate tax (with reasonable exemptions to allow a chunk of wealth to be passed along) does not mean I believe in a "completely egalitarian society". Such a society, if you factor wealth into the equation would be a communism and I am firmly convinced that history has demonstrated communism to be a flawed and inefficient system, that works FAR less well than western capitalist democracy. But on the other hand, a totally unrestricted capitalist society, would IMO inevitably devolve into a wealth-stratified banana republic. So I believe in a balance of the issues.

One big thing you are missing Mr. Sharp is the problem of concentration of wealth, which in our society equates to the concentration of power. You mentioned that the problem with no-estate-tax is the heirs getting money they didn't earn. To my mind, thats a fairly minor problem. What I worry about is that if inheiritence is completely unfettered then its possible to pass on insurmountable advantage in terms of vast wealth from one generation to the next. That creates the potential for the rise of a new aristocracy and a deeply stratified society, which IMO is one of the things America was founded against.

Bottom line: I don't mind if society is *unequal* (ie with different life outcomes for different people based on their skill/effort/work/creativity) but I DO mind if society becomes stratified in a rigid fashion where there is no social mobility. Just as I would hate a communist totalitarian state where everyone is forced to be "equal" (as you say this would be equality of the lowest common denominator) I also hate the idea of a rigidly stratified society based on wealth, which would be a return to the medieval political system we revolted against.

And lastly, I DO mind that espousing even a modest amount of liberal economic philosophy is instantly equated with communism. Liberals are often guilty of overreacting: calling even a slightly anti-immigrant position racist for example. But on the web the dominant political philosophy seems to be a sort of shallow mix of anti-authoritarian pro-free-market libertarianism, and I get sick of the fact that any position which doesn't toe the Milton Friedman line being labeled as equivalent to communism.

Look, theres a HUGE middle ground on most of the issues we discuss here and I am strongly convinced that the best answers are often in the middle ground (although not always).

The problems with the Bush tax cuts are twofold: 1)Bush is really pushing the hard right edge of the political envelope and isn't really allowing much middle ground and 2)Bush has been very disingenuous about marketing his plans: often using misleading statistics and flat out distorted statements to deny that his ideas are actually extremely conservative. This combination is dangerous is that it may allow Bush to make fundamental structural changes to the US tax code and economy without a true decision by the American people that this is really what they want.

Dan

Ben Sones

06-08-2003, 04:39 PM

That's something like $5 billion in today's dollars, and is why we STILL see generations of Rockefellers that don't have to work.

So what? Why is what the Rockefellers do with their time so important to you (or anyone else)?

If the rich gave their kids money tax-free and they just spent their lives jetsetting or investing or whatever, that wouldn't be a big deal. What is a big deal is when they use ever-compounding generational wealth to blow a hole in the wall between the public and private spheres, subverting democracy.

Even if everyone were to agree that this is a problem, I fail to see what this has to do with estate taxes other than in a superficial "inheritances help make people rich" sort of way. Many people become wealthy without inheriting estates, however; we have plenty of self-made billionaires in the US. Like Bill Gates, who is one of the richest men in the world. Estate taxes are not going to eliminate the influence that money has over politics, nor will they eliminate the financial disparity between the rich and the poor (Gates is a good example of this). Thus they are either a poor solution to this problem, or they are only one part of a larger solution that must, of necessity, involve redistribution of wealth on a much more ambitious scale. I dislike either alternative.

The third alternative is that estate taxes serve some other purpose. Do they? I'm not sure. I guess they are similar to the gift tax, as Ry pointed out earlier. I have yet to see any convincing justification for their existence--mostly they seem to be merely another way for the government to hoard more money.

Captain Cookiepants

06-08-2003, 04:58 PM

I STILL do not see why you can consider this a good thing, what does it matter to you how people handle or aquire their money?
And in any event the estate tax isn't having anything but a negligable effect on the 334 billionaire in America, the real damage is being done to the small business owners and wealthy but not stinkin' portion of the populace (I didn't pull the 'one in four' number out of my ass Jason, take a second to look it up). I'm holding a 2 1/2 dollar gold piece in my hand that most likely will have to be sold off just to pay this tax.
So again, how is it any of your business? Yes, the Hilton girl is a twit and scummy, but why does she deserve to have money taken from her?

'To prevent millionaires from having too much influence'? How does taking money from someone's loved ones prevent that?
And I got a news flash for you: the days when one person had that much control have been over for more than 50 years, now we have lobbiests and organizations, if one person doesn't have enough money to sway things his way, he simply joins up with a few other people who want things their way until they do have enough money.
This 'redistribution of wealth' thing is pure communist talk, in fact it's the second thing on the agenda: 'Rise up against the oppressors (the upper class), redistribute their wealth.'
Say what you may, someone else's property is NONE of your business.

Jason McCullough

06-08-2003, 05:11 PM

"I didn't pull the 'one in four' number out of my ass Jason, take a second to look it up."

Then whoever you got it from made it up. Somehow we've gotten by for 100 years now without 25% of businesses going bankrupt when the owner dies and they're subject to the estate tax, but *now* is different!

Captain Cookiepants

06-08-2003, 05:36 PM

"I didn't pull the 'one in four' number out of my ass Jason, take a second to look it up."

Then whoever you got it from made it up. Someone we've gotten by for 100 years now without 25% of businesses going bankrupt when the owner dies and they're subject to the estate tax, but *now* is different!

No offence Jason, and you know if I meant offence I'd just call you a bunch of names; could you please edit that sentence, I can't make any sense of it. Sorry :(

DennyA

06-08-2003, 05:44 PM

IMHO double-taxation at any time is unfair.

Tax income *once*. (Sales tax oughta be deductible. And that's not even that unweildy to calculate in this day of credit and debit cards.) Tax other earnings, particularly dividends and so on.

But estate taxes and other taxes that hit already-taxed money are BS.

voltaic

06-08-2003, 05:57 PM

Someone we've gotten by for 100 years now without 25% of businesses going bankrupt when the owner dies and they're subject to the estate tax, but *now* is different!

Captain: I think if you replace "someone" with "somehow" in the above quoted sentence, it will be as Jason intended. As in: "Somehow we've gotten by for 100 years now..." etc.

Jason McCullough

06-08-2003, 06:37 PM

Oops, fixed.

IMHO double-taxation at any time is unfair.

Tax income *once*. (Sales tax oughta be deductible. And that's not even that unweildy to calculate in this day of credit and debit cards.) Tax other earnings, particularly dividends and so on.

But estate taxes and other taxes that hit already-taxed money are BS.

How about taxing social security benefits, or unemployment benefits? You can make a good case that both "tax twice."

I think Desslock and I went over this a while back; the vast majority of assets taxed by the estate tax in the US have never been taxed at all. For example, say you buy some stock for a dollar and hold it for 80 years, over which time its value goes up to $23. When your kids get it on death, without an estate tax only $1 of that assest transfer has ever been taxed.

It's hilarious how effective the Olin and Coors money at think tanks has been at reframing the public's views of capital. Poor, put upon rich people.

DennyA

06-08-2003, 06:58 PM

I think Desslock and I went over this a while back; the vast majority of assets taxed by the estate tax in the US have never been taxed at all. For example, say you buy some stock for a dollar and hold it for 80 years, over which time its value goes up to $23. When your kids get it on death, without an estate tax only $1 of that assest transfer has ever been taxed.
So when the kids cash in those stocks, they should have to pay the usual capital gains tax vs. the original purchase price. Same as if grandpa had cashed them in. The stuff in the estate should be taxed, but it should be taxed using the normal tax procedures, not extra-taxed at death.

It's hilarious how effective the Olin and Coors money at think tanks has been at reframing the public's views of capital. Poor, put upon rich people.
No, I think the BS the adminstration has been spouting about the justifications for their tax cuts is ridiculous, and anyone who believes that crap... Well, I can make them a great deal on some old computer equipment that I swear is better than the new stuff! Give me $100 for this Soundblaster 16 -- it's the "vinyl" of audio cards! Much richer sound than what you get with those newfangled PCI cards!

Ben Sones

06-08-2003, 07:14 PM

I think Desslock and I went over this a while back; the vast majority of assets taxed by the estate tax in the US have never been taxed at all. For example, say you buy some stock for a dollar and hold it for 80 years, over which time its value goes up to $23.

You seem to be implying that, sans estate tax, this money would never be taxed. That's not true. Were the heir to cash in the stock, he would be obligated to pay captial gains taxes on his earnings. This is an interesting example to select because I think in this case the estate tax serves as a disincentive for investment. Is it likely that Joe Heir is going to pay the tax on this asset out of pocket, or will he simply cash in as much stock as he needs to in order to cover his costs?

When your kids get it on death, without an estate tax only $1 of that assest transfer has ever been taxed.

That's because only $1 of that asset has ever been realized. It's not like Joe Heir now has $23 cash in his pocket, $22 of which is free and clear and will never be taxed by the federal government. In practical terms, it's not even $23 of Joe's money until he sells the stock, and the value of the stock could easily go down before he does. I'm no financial expert, but to me this seems akin to levying a tax on a person's entire (unrealized) yearly salary when a rate is first set, and then also taking income tax out of each paycheck. The kicker is that if the person is fired after his first week on the job, he's already paid a tax on his entire year's salary, most of which he will never receive. Does that seem fair? Because it does seem analogous.

Jason McCullough

06-08-2003, 07:17 PM

I think Desslock and I went over this a while back; the vast majority of assets taxed by the estate tax in the US have never been taxed at all. For example, say you buy some stock for a dollar and hold it for 80 years, over which time its value goes up to $23. When your kids get it on death, without an estate tax only $1 of that assest transfer has ever been taxed.
So when the kids cash in those stocks, they should have to pay the usual capital gains tax vs. the original purchase price. Same as if grandpa had cashed them in. The stuff in the estate should be taxed, but it should be taxed using the normal tax procedures, not extra-taxed at death.

I actually think we have no consistency at all on the "tax once" thing (unemployment & SS benefit taxation off the top of my head), but if you do try to follow the principal, it still doesn't make sense.

Do you think people should be able to transfer asset value increases forward indefinitely? Imagine for the sake of argument that Gates doesn't give all his money away and transfers his estate untaxed to his kids, who do they same to their kids, excepting a few nibble sales here and there for consumption, which unless they're stupid will come out of annual compounding, not the original capital. The increase in the value of the asset can be deferred for virtually any length of time, which strikes me as a bit unfair; this is the case with no other kind of income.

The thrust of the whole thing ("only tax consumption, never investment") is so not worth whatever its purported long-run economic efficiency gains are; it's corrosive.

Captain Cookiepants

06-08-2003, 07:21 PM

The increase in the value of the asset can be deferred for virtually any length of time, which strikes me as a bit unfair; this is the case with no other kind of income.

Unfair to who Jason? To you? How is that unfair? Would it be just as unfair if you were the one recieving the money for doing no work?
You propose that it's unfair that the children get the money with no work, but the government getting the money with no work isn't unfair?
And you people rejected the 'envy' thing out of hand..ppfftttt.

Ben Sones

06-08-2003, 07:25 PM

The increase in the value of the asset can be deferred for virtually any length of time, which strikes me as a bit unfair; this is the case with no other kind of income.

Why does this seem unfair? Is it somehow more fair to tax people on money that they haven't even received (and which will be taxed anyway when and if they do)? I think it's disingenuous to classify an investment asset as "income," and I don't think that it is at all unfair to treat it differently than cash transfers. I can't go to Wegmans and trade shares of Motorola for breakfast cereal, after all.

I agree that the "no money should be taxed more than once" argument doesn't carry much weight, however, since the government already taxes every dollar you ever see at least twice (once when you earn it, and once when you spend it). But at least they usually tax you on liquid assets that you actually have, not potential income that you could have.

Sharpe

06-08-2003, 07:46 PM

Here's my bottom line on all this:

There are really two different things that taxes go for:

One is the cost of paying for necessary government services. I am referring to the basic costs of maintaining our society: defense, law & order, courts, basic infrastructure, enforcement of contract, necessary economic regulation. I would also include education in this category as I believe a core level of education is necessary to maintain a stable society (note that I support public FUNDING of education, not necessarily publicly *administered* education - I am willing to see how voucher systems would work.) As I've said before, I believe it makes sense to tax the wealthy higher to pay for these services as they are the ones who are benefitting the most from the conditions created by our society. Please note I am NOT saying they receive the most *direct* benefit of these services (the poor and middle class often do, relative to wealth). But having the type of society we have, with a healthy economy, secure borders (at least in the macro/military sense) and so forth, is what allows the wealthy to reap the rewards of their work and investment. So I think it makes sense to have them pay a larger share. Note: note an *exclusive* share - I believe all citizens should contribute something to pay for necessary government services.

Also, there is the issue of the competitive advantage afforded by having more wealth. As someone put it above, there is a positive feedback loop for the concentration of wealth. I believe that by lessening the load on the less wealthy you put a dampener on this feedback loop and help create an opportunity for the poorer folks to have an opportunity. This is not about envy or communism: its about the fact that if you DONT do it, then the advantage of being wealthy will eventually lead to increasing maldistribution of wealth, which will be bad for our society in the long run. One of my core assumptions is that our liberty-based, democratic society is founded on having a large and prosperous middle class. If you destroy the middle class (either by excessive lefty taxation and regulation or by righty maldistribution of wealth) you end up with a banana republic.

(Note I am halfway through the new book on democracy by Fareed Zakaria and I find it excellent so far).

The second thing we use taxes for, is redistribution of wealth, primarily in the form of entitlement social programs. I don't actually support these programs as I believe other alternatives are better. For retirement programs, I believe a market set-aside type approach is better than the current system, which is a weird mishmash of investment (with a low rate of return), welfare system and outright tax-taking. For social welfare programs I strongly prefer work-based and education-based programs rather than straight cash handouts. So my position on taxing to pay for these is that we shouldnt have these programs anyhow, or at least not at our current levels. If these programs are deemed necessary then I do believe that a flat tax system is appropriate to pay for them on the theory that since these are for the general social good of all citizens regardless of status the cost should be spread amongst all.

Dan

Jason McCullough

06-08-2003, 08:24 PM

Let me see if I can explain more coherently why the elimination of the estate tax provides a gigantic windfall to investors who own chiefly reinvested assets (who make up the bulk of people subject to the tax).

The value of a stock is the total value of its future earnings, discounted to the present. One year's earnings from stock can be used to purchase more of the same investment good (this is implicitly what happens to no-dividend stocks, as all earnings are re-invested), they can be used to buy another type of investment good (sell the stock and buy another), or they can be used to buy consumption goods

The value of your labor for the rest of your life is the total value of all your future salaries, discounted to the present. One year's earnings from salary can be used to purchase investment goods or can be used to buy consumption goods.

How do we pay for today's government expenditures? In a no-estate tax scenario, the earnings of labor are taxed at the time they are earned, but the earnings of capital are only taxed when those earnings are moved to a different type of asset or consumption. Investment income reinvested in the same type of is not taxed at the time of its creation, while income from labor is taxed fully at time of its creation. As a result of this, reinvested capital earnings effectively have a long-term 0% loan on their tax liability.

Concrete example:

Person A's total stock value went up by 100k this year due to the company not paying a dividend and reinvesting the earnings.

Person B's salary this year was 100k.

Let's say both A & B want to spend 60k this year, investing the rest. A does this by selling however much reinvested stock it takes to get 60k of consumption after paying consumption and investment taxes. X dollars of consumption requires x * (1/(1-consumption tax rate) * (1/(1-investment tax rate)). Income spent on investment (the reinvested proceeds that aren't cashed out) are tax-free.

B does this by earning however much salaried income it takes to buy 60k of consumption goods consumption and income taxes. X dollars of consumption requires x * (1/(1-consumption tax rate) * (1/(1-income tax rate)). Income spent investment is taxed at the income tax rate.

Now A & B both had the exact same amount of income, and want to do the exact same thing with it; buy about 60k of crap, and invest the rest. What's the difference in their tax liability? The current effective tax rates:

Income tax: about 22% of 100k.
Consumption taxes: 7% of consumption purchases.
Investment taxes: 15% because the investor's total annual income under tax law for the year was under 46k. Above that it's 20%.

A's total tax liability is 4k of consumption taxes + 11k in investment taxes. $100k in income, wants to buy $60k of stuff, 15% tax rate.
B's total tax liability is 4k of consumption taxes + 22k in income taxes. $100k in income, wants to buy $60k of stuff, 26% tax rate.

Now here's the kicker: A, because their income came from investment, invests a total of 25k. B, because their income came from labor, invests a total of 14k. That right there is a crude metric of the feedback effect talked about earlier.

Do you think it's "fair" that two people with the exact same income and exact same spending preferences have wildly different tax rates? In favor of the guy who just cashed in part of the expected value increase of his stock, even? This leaves out state rates, but those follow the fed's model, so it only gets worse in favor of the capital income. Risk doesn't help either, as labor income has a risk too; you might become unable to work or unemployed, in which case your labor income is sharply constrained, but capital income is uneffected. Capital has only risks to market swings, while labor has risks to both market swings and disability/illness.

Among other things, the estate tax was created as a way to deal with this by "forcing you to cash in" untaxed asset appreciation; they tax it all, so it's a blunt instrument (I'd favor just taxing the unrealized part, but that's not what they're doing.) It's marked for complete elimination. This will result in a gigantic windfall for capital unless the budget shortfall is made up entirely by increases in the capital gains tax rate or corporate income tax rate relative to the income tax rate, which it quite clearly isn't going to be.

Edit: fixed the rates.

DennyA

06-08-2003, 08:41 PM

My head hurts. Let's just do a flat tax.

Jason McCullough

06-08-2003, 08:44 PM

The progressive tax rate on income has nothing to do with it. You could raise the tax rate on investment to match that for income, which would help, but you'd still have the problem with "deferring tax liability forward."

When you consider that effective corporate tax rates have fallen through the floor, capital's making out like a bandit.

Brad Grenz

06-08-2003, 09:24 PM

Having investors have to dump a bunch of stock each year to pay income taxes on that investment couldn't be good for the market. And what if the rest of the stock they didn't have to sell loses big the next year, does the government have to pay them back? I understand your concerns, Jason, but it's simply an unreasonable burden on the market economy to act like stock=money. Cause it isn't, stock=% of publically held business. Who decides what stocks are woth under your system? What if the government decides my stock portfolio is worth so much, showing a gain this year as income. I go to sell some to pay for may taxe last year, but since everyone else has to do the same thing I have to accept far less money for my shares than what the federal government says its worth.

So, I see what you're saying, but if you thought the dot com crash was bad for the market economy, try to imagine the damage that would be done if for tax purposes the United States decides stock is as good as money, even if you haven't sold it.

Jason McCullough

06-08-2003, 09:43 PM

Stock *is* money, unless you think there's a different reason people own it; maybe they like the funny colored paper? I didn't suggest taxing untaxed asset value at time of increase; that would be extremely unwieldy. I'm perfectly fine with just taxing untaxed gains on death. Conservatives are the ones junking the concept entirely, and they've got to explain why dropping the effective tax rate on capital even farther below that of labor is such a hot idea.

DennyA

06-08-2003, 09:47 PM

So if stock = money, then should someone who owns 100% of a small business have to pay taxes each year on the increased value of his/her business if it's successful and growing?

Stock *is* money, unless you think there's a different reason people own it; maybe they like the funny colored paper? I didn't suggest taxing untaxed asset value at time of increase; that would be extremely unwieldy. I'm perfectly fine with taxing untaxed gains on death.
Okay, I re-read what you said; obviously, you're not taking things that far.

Still, though, taxing untaxed gains on death is an artificial selection. Why not tax untaxed gains, in, say, 20 years? Or upon marriage? Or during solar eclipses?

Jason McCullough

06-08-2003, 09:51 PM

Because letting the value go untaxed forever (the alternative which Republicans are advocating, effective as of 2010) seems much worse.

Captain Cookiepants

06-08-2003, 09:56 PM

Just gonna interject that you DO pay taxes on stocks when you sell them, you even pay taxes on the dividends.

Jason McCullough

06-08-2003, 09:59 PM

Yes, but you don't pay taxes on reinvested earnings, which is what all the above is about. The dividend tax apparently isn't long for this world, either.

BTW, the elimination of the estate tax and dividend taxes almost certainly won't increase the rate of return of investment; that's driven by productivity growth, after all.

Captain Cookiepants

06-08-2003, 10:10 PM

Yes, but you don't pay taxes on reinvested earnings, which is what all the above is about. The dividend tax apparently isn't long for this world, either.

But you also don't SPEND reinvested earning, you want people to pay taxes on money they don't have?
If I spend 5 dollars on some stock, make 30 cents and automatically buy more stock I still have the same amount of money in the bank as I did after I spent that 5 dollars. Your plan is to make me pay for the priviledge of having stock at all, yeah, that's really gonna encourage people to go into the stock market and help the economy. And sure, why not pay taxes on that, I mean look at all the government does to earn that money...oh wait.

Bottom line: you want people with money to give it away simply because other people don't have as much money.
Never mind that they have that money by building companies that employ hundreds of people, they have money so it's unfair.

Jason McCullough

06-08-2003, 10:19 PM

Looking at the underlying economics is a lot more illuminating than calling each other communist/fascist, you know.

You're right, you don't spend re-invested earnings, you invest them. You don't spend invested labor earnings, either, but those are taxed, aren't they? You don't spend re-invested stock sales, but those are taxed. You don't spend re-invested dividends, but those are taxed (at least for the moment). Not the same, are they?

This all applies to any sort of appreciating asset, actually; people invest in baseball cards and art because they think they'll be able to sell them for more in the future. They don't annually give you a bit of money, but the future option to sell for more is just as much income as other type.

How does a company deciding to reinvest their earnings instead of paying it out as dividends magically turn the earnings from income into non-income?

Captain Cookiepants

06-08-2003, 10:27 PM

You're right, you don't spend re-invested earnings, you invest them. You don't spend invested labor earnings, either, but those are taxed, aren't they? You don't spend re-invested stock sales, but those are taxed. You don't spend re-invested dividends, but those are taxed (at least for the moment). Not the same, are they?

Looking at the underlying economics is a lot more illuminating than calling each other communist/fascist, you know.

God damn it McCullough, there is no passive consent, stop with the GAWD DAMN passive consent. Fucking commie.

Brad Grenz

06-08-2003, 11:01 PM

This all applies to any sort of appreciating asset, actually; people invest in baseball cards and art because they think they'll be able to sell them for more in the future. They don't annually give you a bit of money, but the future option to sell for more is just as much income as other type.

Yeah, income at the time of sale, until then it's theoretical. Baseball cards are a pretty good metaphor too, cause maybe I'll take my theoretically valuable card and trade it for 4 different cards from a collector friend. Should the government be able to take one of those four from me? I say no, it's still not cahs money, I have no way of spending my four baseball cards so it should not be considered taxable income.

Jason McCullough

06-08-2003, 11:10 PM

Maybe we should all invent our own forms of money then, so the government can't tax them.

DennyA

06-08-2003, 11:18 PM

Brad Grenz

06-08-2003, 11:42 PM

Maybe we should all invent our own forms of money then, so the government can't tax them.

Speaking of, are there taxes on currency exchange? I don't pay taxes if I decide I want the twenty in my pocket to be plastic funny-money from Australia, do I? Don't treat this as a snarky rhetorical question, cause I really don't know.

Jason McCullough

06-08-2003, 11:52 PM

Nope (http://www.globalpolicy.org/socecon/glotax/currtax/). There's no reason to on income grounds, though there's some interesting proposals along that lines to lessen currency panics (the suggested rates are extremely low).

Captain Cookiepants

06-09-2003, 01:09 AM

Maybe we should all invent our own forms of money then, so the government can't tax them.
I wonder if that would be illegal? Its not actually a bad idea... Is there a law against establishing alternate forms of currency?
Only if it's meant to represent existing money or designed to be honored by another countries bank. You can print up all the 'Dennybucks' you want, but once it starts to resemble American money, or has something on it stating that it must be honored by American banks, you're in trouble.

Desslock

06-09-2003, 07:26 AM

I think Desslock and I went over this a while back; the vast majority of assets taxed by the estate tax in the US have never been taxed at all.

Yep - I'm firmly against "estate tax", to the extent it means additional income tax on accumulated income that has been already taxed.

But the death of an individual should trigger a "deemed disposition" of capital assets (and therefore estate capital tax, on any accumulated capital gains) -- that's not additional tax; it's "catching up" on previously deferred tax - hell, it shouldn't even be called a deemed disposition, since it's an actual change in ownership of that asset.

Ben Sones

06-09-2003, 08:01 AM

ydejin

06-09-2003, 09:24 AM

And in any event the estate tax isn't having anything but a negligable effect on the 334 billionaire in America, the real damage is being done to the small business owners and wealthy but not stinkin' portion of the populace.

The small business owners can be taken care of by increasing the cap on how much can be transferred without taxation. I don't have a problem with increasing the cap. However the Republicans aren't trying to increase the cap, they're trying to eliminate the tax altogether. This will increase long-term wealth inequality.

As others have pointed out there are a number of societies with an extremely small portion of the country owning almost all the countries wealth -- Brazil and the African "Kleptocracies" come to mind. In these countries the ultrarich live in luxury, while most of the population is mired in severe poverty. Is that the kind of society we want to build, because with the elimination of the estate tax that's the direction we're headed.

Anders Hallin

06-09-2003, 09:33 AM

Isn't most economic business today based on "potential" money, as in you pretty much never really cash out as such?

Desslock

06-09-2003, 09:45 AM

Isn't most economic business today based on "potential" money, as in you pretty much never really cash out as such?

no.

Anders Hallin

06-09-2003, 10:14 AM

Isn't most economic business today based on "potential" money, as in you pretty much never really cash out as such?

no.
Good thing.

Jason McCullough

06-09-2003, 10:36 AM

Let's say both A & B want to spend 60k this year, investing the rest. A does this by selling however much reinvested stock it takes to get 60k of consumption after paying consumption and investment taxes. X dollars of consumption requires x * (1/(1-consumption tax rate) * (1/(1-investment tax rate)). Income spent on investment (the reinvested proceeds that aren't cashed out) are tax-free.

It's not "income spent on investment;" it's merely an existing investment that was never cashed out. The cash that went into the investment was taxed as income when it was income. Any gains that the asset makes are taxed when they are converted into income.

You may have a compelling argument for re-examining the fairness of tax rates on capital gains, but this seems wholly irrelevant to the estate tax issue.

1) You own a share of company A. They pay out all their earnings in dividends. You take your dividends and use the money to buy a new stock issuance from the company, which they use to buy a factory.

2) You own a share of company B. They pay out no earnings, instead taking your dividend and using it to buy a factory.

How is it income for you in case one, yet not in case two? I don't see how the company going to the trouble of sending you the cash and then you sending it back to them changes anything.

Because letting the value go untaxed forever (the alternative which Republicans are advocating, effective as of 2010) seems much worse.

It doesn't go untaxed forever, though. It's taxed the moment you cash out your stocks, and even while you maintain your investment that money is generating revenue for the government (since presumably the corporation that you have invested in is using your money to help run their business, and corporations pay taxes). It's not like it's buried in your back yard in a steel box, doing nobody good. In fact, these "untaxed" investment assets are probably making more money for the government than they would as estate tax revenue, since the massive compliance costs for estate taxes are nearly equal to the gross revenue generated by the tax. Even if I were to accept that the estate tax is fair in theory, in practice it serves only as a punitive measure against the taxpayer and does little to no good for the government. I oppose the estate tax for that reason alone, if nothing else.

"In fact, these "untaxed" investment assets are probably making more money for the government than they would as estate tax revenue, since the massive compliance costs for estate taxes are nearly equal to the gross revenue generated by the tax."

So when you sell stock, the government goes and takes money from the company? I'm not following.

The estate tax brings in about 50 billion in revenue per year. Making it up in income taxes will require increasing everyone's income tax burden by 5%.

Jessica

06-09-2003, 10:39 AM

Not that I'm any big fan of Bush or the current tax policies, but please remember when complaining about the rich getting tax cuts that 10% at the top of the tax ladder pay 60% of the income tax and the bottom 50% pays about 10% of the total income tax. Of course any across the board tax cut is going to help the guys at the top.

Jason McCullough

06-09-2003, 10:42 AM

They pay 60% of the income tax because they have about 60% of the income.

Desslock

06-09-2003, 11:34 AM

They pay 60% of the income tax because they have about 60% of the income.

Yay, you're in favour of a flat tax!

Captain Cookiepants

06-09-2003, 11:43 AM

And in any event the estate tax isn't having anything but a negligable effect on the 334 billionaire in America, the real damage is being done to the small business owners and wealthy but not stinkin' portion of the populace.

As others have pointed out there are a number of societies with an extremely small portion of the country owning almost all the countries wealth -- Brazil and the African "Kleptocracies" come to mind. In these countries the ultrarich live in luxury, while most of the population is mired in severe poverty. Is that the kind of society we want to build, because with the elimination of the estate tax that's the direction we're headed.

You forget to mention that in those countries they have no minimum wage, and that most of those billionaires have obtained their money through illegal activity that isn't taxed. Totally different situation.

Bub, Andrew

06-09-2003, 11:58 AM

Mark Asher

06-09-2003, 12:18 PM

They pay 60% of the income tax because they have about 60% of the income.

Yay, you're in favour of a flat tax!

I'm in favor of a flat tax with a generous cost-of-living deduction for each member in the family. Let's say it's $8000 per family member, so the average family of four would have the first $32,000 in income exempted from taxation. Then apply the flat tax to the rest. I think something like that would work.

Ben Sones

06-09-2003, 12:30 PM

How is it income for you in case one, yet not in case two? I don't see how the company going to the trouble of sending you the cash and then you sending it back to them changes anything.

It changes everything. In example A, you receive cash. The fact that you then choose to reinvest it in the same company is irrelevant. You could also use it to make a downpayment on a house, or to buy computer games, or groceries, or anything else you might want. In example B, you have none of those options, because you have received no income. I still have my investment, but I can't use my share of company B to buy computer games or groceries or anything else without cashing it in. And then the money is taxed as income.

So when you sell stock, the government goes and takes money from the company? I'm not following.

Huh? Now I have no idea what you are talking about. I was merely responding to your implication that money sunk into investment assets generates no revenue for the government. It's true that the government receives no tax income from the investor, but the government does receive tax income from the corporation, which is using your capital to conduct business. It is misleading to say that the money is not generating revenue for the government. Investing money is not analogous to burying it in your back yard.

The estate tax brings in about 50 billion in revenue per year. Making it up in income taxes will require increasing everyone's income tax burden by 5%.

I have no idea where you found that figure, but it is incorrect. In the current budget (http://www.whitehouse.gov/omb/budget/fy2004/pdf/spec.pdf), revenue from estate and gift taxes are listed together, and the total from 2002 is $26.5 billion for both. Moreover, your one-to-one model of losses in federal revenue assumes that there are zero costs associated with the collection of the tax. But the estate tax is an inefficient tax, with exceptionally high collection and compliance costs. Estimates vary, but most figures I've seen are in the 65-100% range.

XPav

06-09-2003, 12:31 PM

You forget to mention that in those countries they have no minimum wage, and that most of those billionaires have obtained their money through illegal activity that isn't taxed. Totally different situation.

http://www.amazon.com/exec/obidos/tg/detail/-/0805063889/qid=1055187566/sr=8-2/ref=sr_8_2/102-7235840-9321711?v=glance&s=books&n=507846

Read that book and tell me with a straight face that people can live on minimum wage and have any sort of normal life.

Dirt

06-09-2003, 01:13 PM

Yeah. If you categorize by deciles, I'm considered rich in the USA (and I'm not close to making 6 figures a year). I'm having trouble living well in California (where I'll probably never own a house). Bush's tax cut did jack diddly shit for me.

Jason McCullough

06-09-2003, 02:53 PM

They pay 60% of the income tax because they have about 60% of the income.

Yay, you're in favour of a flat tax!

Not really. Because of the way the income power law works out, 60% of the income paying 62% of the taxes lets you tax the bottom bracket at extremely low rates.

Ben, it totally looks like moving money from one pocket to the other to me. I have no idea why if the company decides to invest your earnings, that means no taxes, but if the company gives you your earnings and you then invest them, you should pay taxes.

Interesting related link (http://www.bankrate.com/brm/itax/tips/20010409a.asp?prodtype=itax):

"You bought 100 shares of a stock for $1,000 in 2001 and that year had dividends of $100 reinvested. In 2002, you got another $200 in dividends and capital gains distributions, again reinvested.

Tax law considers these reinvested earnings as paid to you even though you didn't actually have the cash in your hand. They are reported on Form 1099-DIV and you must pay taxes on the amounts in the years you receive them, either as regular income or capital gains."

Ben Sones

06-09-2003, 03:19 PM

Ben, it totally looks like moving money from one pocket to the other to me. I have no idea why if the company decides to invest your earnings, that means no taxes, but if the company gives you your earnings and you then invest them, you should pay taxes.

And I fail to see what is so hard to understand. In one case, you receive income. In the other, you don't. The dividend payment puts cash in your pocket, and that cash is taxed as income at that time. The reinvested earnings are not taxed as income until you cash out your stocks. In both cases, you pay tax when your investment becomes income. Whether the money in your pocket comes from dividends or capital gains, you pay taxes on it before it goes into your pocket. In the reinvestment example the tax is deferred, but so is the payout. Where's the problem?

I honestly don't know what you point is, here. Are you arguing that dividends should not be taxed? Or are you arguing that investments should be taxed on a rolling basis, as the investment increases in value? I think both are terrible ideas.

Tax law considers these reinvested earnings as paid to you even though you didn't actually have the cash in your hand. They are reported on Form 1099-DIV and you must pay taxes on the amounts in the years you receive them, either as regular income or capital gains."

Well, er, yeah. What's your point? I have my payroll set up for direct deposit. I also have electronic bill paying on my student loans. Every month $70.00 is deposited into my bank account and then immediately transferred to Southwest Student Services. Tax law considers these earnings as paid to me even though I didn't actually have the cash in my hand.

Jason McCullough

06-09-2003, 03:31 PM

Ben Sones

06-09-2003, 05:05 PM

I'm arguing that reinvested earnings should be taxed either on sale or earlier, if its been a really long time and no sale. Otherwise there's a serious distortion in market incentives and distribution of the tax burden.

Only if you pretend that stock is the same thing as cash, which it isn't, as any victim of the dot-com crash can tell you. How does the government go about taxing your invested capital? If the value falls after the tax is levied but before you can cash in your stock, does the government issue a refund? I mean, with the current system, you at least only get taxed on your realized return. In your system (and with estate taxes) you are taxed on money that you may or may not ever receive. Maybe I'm missing something, but your system seems pretty unfair, and I'm guessing it would represent a significant disincentive for investment.

Anders Hallin

06-09-2003, 05:23 PM

I'm not too sure how "dividends" work, but do you have a choice in getting it in cash or to re-invest immediately? Not what is usually done mind, I just want to know if it's possible to get it in cash, in which case I don't see how it can not be taxed.

Oh, and "fair" society? No such animal :)

Jason McCullough

06-09-2003, 05:40 PM

I didn't say stock was cash; that's why it's absurd to tax it yearly or something, it's not that liquid. But, you know, if you go your entire life without cashing it in that seems a good a time as any to tax the appreciated value.

How does the government go about taxing your invested capital? If the value falls after the tax is levied but before you can cash in your stock, does the government issue a refund?

I'm not advocating anything other than taxation the value on death. Stock losses can be used to offset any amount of other capital gains, and up to around $3,000 of other income, by the way.

Robert Sharp

06-09-2003, 08:43 PM

I think the estate tax is definitely an example of liberals trying to create a false sense of equality. To be honest, I am not sure what the value of a completely egalitarian society is supposed to be. Not only is it impossible from a practical perspective, but it doesn't even seem desirable. The only way to do it is to lower the best people in a society to the level of the worst.

And lastly, I DO mind that espousing even a modest amount of liberal economic philosophy is instantly equated with communism. Liberals are often guilty of overreacting: calling even a slightly anti-immigrant position racist for example. But on the web the dominant political philosophy seems to be a sort of shallow mix of anti-authoritarian pro-free-market libertarianism, and I get sick of the fact that any position which doesn't toe the Milton Friedman line being labeled as equivalent to communism.

Look, theres a HUGE middle ground on most of the issues we discuss here and I am strongly convinced that the best answers are often in the middle ground (although not always).

Dan

Wow! This topic has exploded! Anyway, I like your post, Dan. It makes some good points. I just wanted to point out that I did NOT say the estate tax was communist. In fact, I don't believe an attempt at a full egalitarian society is necessarily communist at all. Just as many liberals (and by that, I mean people who want full autonomy through largely democratic means, not socialists) believe egalitarianism is the ONLY way to achieve the end of full autonomy for everyone. Economic egalitarianism is one of the key ways that they try to achieve this end (rightly or wrongly).

What I should have done was made my egalitarianism point in a separate paragraph. I don't think everyone who wants an estate tax is necessarily a full egalitarian in every sense. that would be, as you noted, foolish. What I do think is that most people who want an egalitarian society want to have an estate tax. Thus, if you do not want an estate tax, you are not likely to want an egalitarian society. So, I agree with you that without an estate tax, the distribution of wealth could become a problem. However, many of the arguments being made here are based on when the estate tax was orginated. Yeah, the Rockefellers and Vanderbilts et al. at the time were a real problem. They were a new aristocracy (personally, I don't think aristocracy is a bad thing, but that's beside the point here). So the laws were perfect for stopping them (or at least slowing them down).

But what about today? Do those laws still work the way they were intended? Would dropping the estate tax (either completely or just lowering it) create an aristocracy today, post New Deal and other legislation that was created to redistribute wealth? We have anti-trust laws and other things to stop the development of an aristocracy.

My point is this: Today MANY people make over the 600K or whatever the estate tax line is at nowadays. 90% of them are not even close to founding an aristocratic dynasty. They just want to pass on some money to their kids. Those people are being punished by a double tax. You are right that there is a middle ground here. I don't think the nearly 50% (what is the exact number?) estate tax is a middle ground. I think it's robbery. It no longer really matters WHY it was created in the first place, or by whom. The question is what it does now, and to whom.

BTW, I am not exactly sure why we are talking estate tax. Just to get back on the original topic a bit, I am opposed to tax cuts at this time (of the sort Bush is proposing, not estate tax, of course!).

Robert Sharp

06-09-2003, 08:51 PM

Jason, you keep saying that most of the estate tax is not a double tax, and you are probably right in a pure percentile way. But what about the percentage of PEOPLE taxed by estate tax? In other words, do you really think most people who are hit with an estate tax actually earned all their money in ways that are not already taxed once before they die? There are a lot of people out there who have earned a million dollars or so in their lives, and it's already been taxed once. Not everyone earns the minimum estate tax number by investing.

So, I agree with you about the problem with capital gains, but I am not sure it directly affects the estate tax. Would you be opposed to just taxing those gains that have not already been taxed?

Jason McCullough

06-09-2003, 08:56 PM

I said I'm perfectly fine with bumping up the dollar amount and switching to taxing just untaxed assets; the revenue loss for that wouldn't even be too bad. That's not what we're getting, unfortunately.

Random factoids (http://www.cbpp.org/5-25-00tax.htm):

43,000 of the 2.3 million people who died in 1997, 2% (when the exemption was 600k per person), paid any estate tax at all. Of those, the ones with 600k-1 mil estate paid about 5%, 1-2.5 paid 16%, and 25% above that.

The top 5% of estates paid half the estate taxes.

Sharpe

06-09-2003, 10:35 PM

What I do think is that most people who want an egalitarian society want to have an estate tax. Thus, if you do not want an estate tax, you are not likely to want an egalitarian society. So, I agree with you that without an estate tax, the distribution of wealth could become a problem.

(personally, I don't think aristocracy is a bad thing, but that's beside the point here).

But what about today? Do those laws still work the way they were intended? Would dropping the estate tax (either completely or just lowering it) create an aristocracy today, post New Deal and other legislation that was created to redistribute wealth? We have anti-trust laws and other things to stop the development of an aristocracy.

My point is this: Today MANY people make over the 600K or whatever the estate tax line is at nowadays. 90% of them are not even close to founding an aristocratic dynasty. They just want to pass on some money to their kids. Those people are being punished by a double tax. You are right that there is a middle ground here. I don't think the nearly 50% (what is the exact number?) estate tax is a middle ground. I think it's robbery. It no longer really matters WHY it was created in the first place, or by whom. The question is what it does now, and to whom.

As to your main point of the estate tax needing adjustment to reflect the higher incomes and wealth levels (mostly appreciated house values) in certain parts of the country, I don't disagree. I am willing to adjust the values of the exemptions and rates to reflect the changing economics (in fact you could argue that the estate tax exemption should be indexed for inflation and should go up every year, just like the gift tax exemption does).

You also make an interesting point about the question being, does the concentration of wealth NOW given our other laws (anti-trust and so on) allow for the creation of an entrenched aristocracy. I would argue yes, based on the competitive advantage allowed by wealth and by the fact that money can buy all kinds of access. I do think the power of money to outright buy politicians and to become an elite/aristocrat type is somewhat diluted, compared to the Gilded Age days, but I don't think the core power of money will ever go away.

My question is, you mention not having a problem with aristocracy. What do you mean? I already stated that a certain inequality of outcome is inevitable (some will get rich, some poor, based on a variety of factors), and as long as society remains stable and overall prosperous I don't have a problem with that. My concern about maldistribution of wealth is two fold: 1)political - if maldistribution gets too bad you end up with a majority of the citizens being impoverished - this can lead to upheaval, crime, riots, and even revolution and in general would be miserable. 2)Social/Economic - if maldistribution gets too bad, you have a tiny minority controlling the vast majority of resources which I think inevitably leads to gross overall inefficiency, an impoverished society, and in general lousy living conditions. But even IF society were stable and prosperous I would have problem with an *entrenched* aristocracy (which entails social and economic stratification). My objection to that is largely social, on the idea that we all deserve the *opportunity* to succeed and to advance ourselves, and also historical, in that this country was found in significant measure on the idea of overturning stratification and revolting against the power of entrenched elites.

So really, why do you think aristocracy is a good thing? Or do you mean something different by the term?

Dan

Doug Erickson

06-10-2003, 02:25 PM

Since when, exactly, do the "best" people make the "most" money? Is this some kind of magical circular logic used to confuse degenerate liberal minds, where wealth is an indicator of excellence and a validator of one's life decisions - because, hey, great men and women can't be poor!

This cult of entrepreneurship is getting old. For every person in Proud America who makes a bundle based on superlative business skills, there's nineteen more who obtained their money bins brimming with lucre through inheritance, treachery, political machination, legal wrangling, abuse of power, insider shenanigans, exploitation, and/or good ol' dumb luck. The numeric value found in your bankbook has almost zero bearing on your ability to contribute to society and improve the human condition, so why the hell do we act like the rich are being unfairly treated? THey get to live a life of LUXURY, for God's sake, and will continue to do so even if we tax 'em double what we are now.

bmulligan

06-10-2003, 03:26 PM

You also make an interesting point about the question being, does the concentration of wealth NOW given our other laws (anti-trust and so on) allow for the creation of an entrenched aristocracy. I would argue yes, based on the competitive advantage allowed by wealth and by the fact that money can buy all kinds of access. I do think the power of money to outright buy politicians and to become an elite/aristocrat type is somewhat diluted, compared to the Gilded Age days, but I don't think the core power of money will ever go away.

An 'entrenched' aristocracy? So what! Uneven distribution of wealth? So what! unfair advantages? SO WHAT!!!

Some of you forget that we need rich people. The government doesn't create wealth, or jobs, or industry. Rich people do. Rich people buy new cars, houses, boats, businesses, buildings. They hire people to run these businesses. They create the demand for the things that give everyone here a job. Rich people risk their investments in new technology, new medicine, new markets, and don't always come up winners. But when they do, you commies out there start Boo Hooing about how unfair it is that someone is making money off of them. Rich people do not usurp wealth, they create more of it everywhere they go. Some call it the trickle down theory. That's capitalism. The opposite of trickle down is re-distribution, thats communism. You either keep what you earn, or have what you earn stolen from you. It IS that simple.

Yes, there may be some who inherit their wealth, but so what!! stop crying about it and get over your ENVY of those with stars upon thars.
It's MY property and If I want to bequeath it to my progeny, let it be written! Thomas Jefferson is rolling in his grave wondering why the rights of private property have discarded.

Has anyone ever thought of the man who works for his fathers company since he was 9 years old? He works harder than any one else for 25 years and rises by his own effort to run the company now worth $2 million, still owned by his father. His father suddenly dies at the ripe age of 57 and leaves ownership to his favorite son, only now the government says said son owes uncle Sam $500,000 for his troubles. "but, I can't afford to pay that kind of money," the son says. "that's ok," says Sam, "You can sell the company to pay us our money , or declare bankrupcy!" God bless the US Government, for they truly are your brothers' keeper.

And, how is buying a polititians influence with money any different than voting for these polititions? Aren't you doing the same thing by giving them your vote? You are buying their influence by giving them power. They promise to give you a chicken in every pot. The same relationship is at work. Why is one more noble than the other?

If you don't like rich people, don't give them power. If you don't like Bill Gates, don't buy Microsoft Windows. If you don't like AOL/Time/Warner, don't watch CNN news. If you dont like "blank", don't buy "blank". Rich people don't appear in a vacuum. Money must flow from the river to get to the ocean. It can either flow naturally, or be diverted and maligned by such bodies as government, and a majority of "thinkers" who give the government its power.

Dirt

06-10-2003, 03:30 PM

Ever been to Mexico?

Jason McCullough

06-10-2003, 04:04 PM

Do gold miners "create wealth?"

bmulligan

06-10-2003, 07:00 PM

Why yes, I've been to mexico many times. Unfortunately, many in their culture are dominated by the communist doctrine of wealth distribution as well. They are also hypnotized by the socialist rhetoric that promises them something for nothing. All the comforts, with none of the effort. Just give your power to me, and I will squash the capitalist dogs and give their money to YOU!

Fortunately, for the consumer and many mexicans, most of the mexican economy is underground. The government doesnt have the capacity to control it's population as our government does here. Mexicans love our money because we go there to spend it.

Do gold miners "create wealth?"

Do coal miners create wealth? Do copper miners create wealth? Yes, they do. they create a desirible commodity and trade it for other goods they require in return. It's called capitalism. Fair trade. Free trade. Ever heard of it?

Jason McCullough

06-10-2003, 07:24 PM

Let me clarify: do gold *prospectors* "create wealth?" I think we're a lot closer to a society of gold prospectors than coal miners.

bmulligan

06-10-2003, 08:27 PM

What's the difference? For anything to get done, it takes a series of events put in motion by 1 person with an idea, some money, and some initiative. Perhaps we should talk about what "wealth" is. Wealt is not the same as "money".

Jason McCullough

06-10-2003, 08:50 PM

Gold prospectors get rich by being lucky. Coal miners don't. Big difference.....

Ben

06-10-2003, 09:14 PM

Gold prospectors still create wealth.
Pre-prospector: patch of dirt, value nothing.
Post-prospector: patch of dirt now known as them thar hills.

Jason McCullough

06-10-2003, 09:19 PM

What's the difference between a successful gold prospector and a unsuccessful gold prospector?

XPav

06-10-2003, 09:42 PM

http://money.cnn.com/2003/04/25/commentary/kandel/

In 1982, the average chief executive's pay was 42 times more than that of the average production worker. In 2001, it had skyrocketed to 411 times.

But even while their number is rising, so is compensation. One study found that the median CEO salary at large companies rose 6 percent last year, while bonuses gained 20 percent.

Why the increase in pay? Did the average CEO actually make his company 100 times more profitable? No.

Executive compensation games are nothing more than rich people deciding to give other rich people more money, completely irregardless of performance. This is also in a time of economic troubles.

That's just one example showing why I'm not very sympathetic to the "rich people are the ones that create wealth" argument.

Brad Grenz

06-10-2003, 11:18 PM

What's the difference between a successful gold prospector and a unsuccessful gold prospector?

The same difference between a venture capitalist who backed MS and one who backed Amiga? What's you fucking point? Both prospetors had to accept the risk of hiking up some mountain with just a donkey, establish a claim, defend it from encroaching interests and dig all day in the hot sun. High risk, high payout. Your analogy in no way proves anything.

Jason McCullough

06-10-2003, 11:45 PM

My point is that random luck is a significant component of success, and the bizarre American cult of entrepenuership thinks it doesn't exist. Why, if you're poor you *must* be lazy.....

Supertanker

06-11-2003, 12:16 AM

Don't forget that much of business success is dictated by access to capital. I've known a number of dimwits that owned their own businesses because their birth put them in a family that could fund the business for them. I've known many more brilliant people in the middle class that had unfunded ideas or aspirations.

Brad Grenz

06-11-2003, 12:49 AM

My point is that random luck is a significant component of success, and the bizarre American cult of entrepenuership thinks it doesn't exist. Why, if you're poor you *must* be lazy.....

Random luck is a significant component for success for everyone. The poor aren't all lazy the same way rich aren't all industrius. But that's just how things are. You can't justify policy which is going to take hard earned money from the industrious rich man to give it to the lazy poorman as part of an effort to take money from the lazy rich man to give it to the industrious poor one.

But I don't think you should have extended you statements to entrepenuership. I think you would have been safer in the realm of lucking into a rich family. When you venture into small/new business you're staring at the free market. There's a right time right place component, but there's also a huge right idea, right product, right price, right service, right marketing which are squarely in the lap of a well run organization. Poorly run businesses get plowed under, that's capitalism at work, that's how we won the cold war.

Luck may be significant, but it's not the overriding factor. Some people just don't have good ideas and it's silly to expect tax policy to redress such "discrimination" against the stupid, or the disorganized. I'm all for helping the unlucky, those born into horrible family situations or abject poverty. But there's a limit of what you can reasonably demand from the "wealthy".

Captain Cookiepants

06-11-2003, 01:03 AM

SNORE
This topic has grown stale.
Jason: 'Tax the rich for having money, it's unfair that they have more money even if they did work harder for it. Also we should tax potential money as well, but only the rich's potential money. And we should take money away from relatives of dead people for no reason and with no return because the relatives don't do anything to get the money. That way nobody has too much sway over the government, and there's no such thing as lobbiests.
Then all rich people should be forced to live in shacks and be poor and give all their money away and we should strive for the collective ownership of property for the common advantage of all members. Also Superman should wear a kryptonite ring and Batman should give half his gadgets to Aquaman so he doesn't feel bad.'

Jason McCullough

06-11-2003, 01:52 AM

Demanding 5% of estates worth less than 1 million - not reasonable!

Anders Hallin

06-11-2003, 02:14 AM

Doug Erickson

06-11-2003, 02:29 PM

Right, because the prospector who had the wealthy social connections needed to buy the donkey and tools and food for him to gamble upon a patch of riverbed is *so* much more industrious than one of the wage slaves he later has working the mines when a fortuitous event makes his payout worthwhile.

The cult of entrepreneurship reveres ambition and initiative, even though in most cases, that "initiative" is enabled by the entrepreneur's social position and status. Even worse, it ascribes every other redeeming quality to the wealthy entrepreneur type: intelligence, discipline, diligence, moral character, and dedication. You don't need any of that to seize an opportunity, or to have an idea and rally up basic investment.

Entrepreneurs exist in defiance of industry; they're people to whom opportunity came as a result of their social status or position, or as an instance of dumb luck. In the most exalted case, an entrepreneur followed a chain of minor successes to a major one, but even then, those opportunities were afforded by his/her social situation at the time. To make capital, you need capital, and capital tends to circulate the most among the elite classes. An entrepreneur can't exist without workers, and the guys mining his gold - to extend the example - put a lot of heat-energy into generating the wealth for this person; in fact, they probably put a LOT more into it, per-person. Why should their industry be disacknowledged in favor of grossly overrewarding the guy with the "initiative"?

Now, I'm not arguing that there shouldn't be rewards for seizing an opportunity, but building a cult and an overclass around it is ridiculous, especially when that wealth is enabled by the wage slaves. I'm not even arguing that wealth should be evenly distributed, but I am arguing that it should be more fairly distributed back to the folks whose effort and industry makes entrepreneurship viable on a significant scale.

Ben

06-11-2003, 04:43 PM

1. Rich people aren't all rich because they are ubermench, but poor people are poor because they are lazy and/or stupid. Truly poor, I mean, not poor Joe making a mere 45,000. I guess you can say they were genetically unlucky not to be born to rich parents, or to be born smart and industrious, but that's getting absurd. You don't get truly poor without serious personal flaws. A person of moderate intelligence and moderate work ethic will have a high variability of wealth as the lucky ones are richer, but those people are never making $15,000 a year.

2. I assume Erickson is parody, cause otherwise, wow. Social connections necessary to buy a donkey? A donkey! Gold prospectors weren't idle sons of Boston bankers, they were stupid desperate poor people who figure shit on the east and shit in the west are roughly the same, but out west you get a chance of being wealthy as their is a no barriers to entry high risk, high reward opportunity. Granted, I imagine there was a lot of stealing from said poor prospectors by the rich(see, it was my land all along, so not only is the gold mine, I get to shoot you for trepassing) whenever they ended up striking gold, but that's really irrelevant to the issue at hand.

Wage slaves? What a wonderful turn of phrase. Are you next going to tell us about the joy of working together as an united proletariat to extract our rightful share?

How about this: People can make mutually beneficial trades of labor for wealth? That sound like a plan? I realize it does only have hundreds of years of unprecedented economic performance behind it while your "fair" wealth redistrubition has several exceeding brutal and unproductive dictatorships on it's side, so I'm probably crazy. But I think we might want to go with the theory and the fact over the idle musings of a 19th century idiot.

Anders Hallin

06-11-2003, 05:01 PM

In a choice between Manchester Liberalism and Communism, I'm just as unwilling to chose Manchester Liberalism as I am Communism. This because I will not accept the lesser of two so great evils.
Rich people can get rich through the grace of our society. The power to form society is derived from the power of the masses (not some farcical aquatic ceremony). If there is no incentive for the majority of people to uphold a certain society, then it is likely that the result will in the end be quite explosive, as it very well should. The "rules" of the uncontrolled market economy state that, quite simply, money begets money, which severely limits the chances for those who lack it to gain anything from what their personal attributes "should" make possible.

Jason McCullough

06-11-2003, 06:19 PM

Ben, yes or no: getting rich as a gold prospector was chiefly the result of luck.

Captain Cookiepants

06-11-2003, 06:24 PM

Ben, yes or no: getting rich as a gold prospector was chiefly the result of luck.

Trick question. It depends on the prospector. For instance: ProspectorOdd decides to prospect on a plot of land where gold has been found and uses equipment that is efficient and works well; meanwhile ProspectorJason prospects in the middle of the desert on a sand dune with no equipment.
It took more than luck to find the gold, extract it sucessfully, and stay alive until you could sell it.

Jason McCullough

06-11-2003, 06:43 PM

It's not a trick question. 1880s gold-rush era prospecting was a guy with a pan and a hammer. It was strictly a lottery.

Captain Cookiepants

06-11-2003, 06:46 PM

It's not a trick question. 1880s gold-rush era prospecting was a guy with a pan and a hammer. It was strictly a lottery.
I suggest you research a bit better. Start with the word: 'suuurveeeyooor.'

Jason McCullough

06-11-2003, 07:39 PM

Uh, yeah.

bmulligan

06-11-2003, 07:50 PM

My point is that random luck is a significant component of success, and the bizarre American cult of entrepenuership thinks it doesn't exist. Why, if you're poor you *must* be lazy.....

So, you're envious of luck too? most communists are. It randomly inserts an inequality into the perfectly controlled distrubution system they have created in their minds. They would rather eradicate luck along with all other facets which make us individuals, all in the name of fairness. Well guess what? Life isn't fair. There are no guarantees.

Posted by Ericson:

Now, I'm not arguing that there shouldn't be rewards for seizing an opportunity, but building a cult and an overclass around it is ridiculous, especially when that wealth is enabled by the wage slaves. I'm not even arguing that wealth should be evenly distributed, but I am arguing that it should be more fairly distributed back to the folks whose effort and industry makes entrepreneurship viable on a significant scale.

It IS fairly distributed back to the folks whose effort makes entrepreneurship viable. Its called a wage or a salary. You remenber what that is don't you? Its whats left over after all the TAXES have been automatically removed from your check before you even see it.

Yes, some CEO's make too much money. Is it fair? I don't care. When their company goes bankrupt, the stockholders will pay for the failure by losing their investment. But the mail guy certainly doesn't deserve to make the same as the vice president of production, does he? Is it fair that someone gets to be the boss and someone has to be the worker? Yes, we are not all equal.

Robert Sharp

06-11-2003, 08:46 PM

(personally, I don't think aristocracy is a bad thing, but that's beside the point here).

My question is, you mention not having a problem with aristocracy. What do you mean? I already stated that a certain inequality of outcome is inevitable (some will get rich, some poor, based on a variety of factors), and as long as society remains stable and overall prosperous I don't have a problem with that. My concern about maldistribution of wealth is two fold: 1)political - if maldistribution gets too bad you end up with a majority of the citizens being impoverished - this can lead to upheaval, crime, riots, and even revolution and in general would be miserable. 2)Social/Economic - if maldistribution gets too bad, you have a tiny minority controlling the vast majority of resources which I think inevitably leads to gross overall inefficiency, an impoverished society, and in general lousy living conditions. But even IF society were stable and prosperous I would have problem with an *entrenched* aristocracy (which entails social and economic stratification). My objection to that is largely social, on the idea that we all deserve the *opportunity* to succeed and to advance ourselves, and also historical, in that this country was found in significant measure on the idea of overturning stratification and revolting against the power of entrenched elites.

So really, why do you think aristocracy is a good thing? Or do you mean something different by the term?

Dan

As I said, it's not really related to the topic at hand (since it has nothing to do with taxes). I think you are right that the U.S. is founded on principles that clearly state that an established (and especially hereditary) aristocracy is denied in principle. And it is done for exactly the ideas you have stated. As an American, I even agree with your point about people deserving opportunity. However, when I try to be more objective about things, I start to wonder if mankind might better realize its full potential in aristocratic settings, i.e. those settings where a person is given every advantage and does not have to spend so much time on menial tasks in order to be successful at a basic level before even trying to go beyond what most people are capable of doing. Sometimes I think a democracy forces too much equality and keeps people from being able to reach new heights.

Of course, the counter argument is that in a democracy, since everyone (or almost everyone) is capable of reaching self-fulfilment, we are MORE likely to have extraordinary individuals, if for no other reason than pure percentages. More people are given the chance, so we are more likely to have people excel. But because of the innate equalizing that occurs in a democracy (since the majority will always be the average person and not the extraordinary), this doesn't really tend to happen.

I'm simplifying for brevity's sake, but I would be happy to talk to you about it more, if you want to PM me, especially since you seem open to actual debate and not just trying to shout your view louder than other people can :wink: . To clarify, I am not necessarily saying "aristocracy is good, democracy is bad". I am just saying I don't see an inherent problem with aristocracy per se. Also, I tend to think of aristocracy in its original meaning, which is 'rule by the best' rather than its more corrupt examples (of which there are many) in which it just means 'rule by the wealthy,' whether they are the best or not. Some societies can pull of an aristocracy. I supect the U.S. could not, so I agree with you that allowing families like the Morgans/Vanderbilts would not be a good thing in this country.

Ben

06-11-2003, 10:43 PM

I'm not remotely well educated enough on gold prospecting to offer a real answer, but I'd guess the prospectors who actually found gold were disportionately the ones with maps, surveying equipment, healthier donkeys, etc. It's not pure luck because the number of streams you can check for dust isn't capped, so a prospector who looked at more streams would appear to have an advantage even if all streams have equal chance of gold.

But I don't think it's important how much of a role luck plays. I'm not claiming they are better prospectors(more worthy, in other words) than the unsuccessful ones if it is purelyluck, but they definitely created more wealth than the unsuccessful ones even if it's a coinflip.

Anders Hallin

06-12-2003, 01:22 AM

It IS fairly distributed back to the folks whose effort makes entrepreneurship viable. Its called a wage or a salary. You remenber what that is don't you? Its whats left over after all the TAXES have been automatically removed from your check before you even see it.
See previous post about executive salary or whatever it was increasing.
I rather agree with this part, except for the bitter whining about taxes, as long as the workers have banded together to utilize all their power in negotiating salary and other worker's rights.

Yes, some CEO's make too much money. Is it fair? I don't care. When their company goes bankrupt, the stockholders will pay for the failure by losing their investment.
I claim the "workers" stand to lose just as much, if not more (ie 100% of their income), without the luxury of being able to affect the decision process.

Yes, we are not all equal.
Econoomically, no. But I think we're supposed (and are) to be it in the constant creation of society, which makes a society that treats the majority as dirt most of the time a risky proposition.

bee cubed

06-12-2003, 09:23 AM

i like how everyone totally ignores XPav's post... in my mind, that is the only reason we need to legitimately tax rich people more.

basically, according to this story, CEOs have just been sitting around giving themselves giant raises for the past 20 years. that doesn't have anything to do with entrepreneurship. it is just greed. it is just some person in power saying, "hey, i can either give myself a giant raise and buy a personal island or i can give all my employees raises, so that they can raise their families. hey, let me see those island brochures!"

that is the reason that we need some kind of wealth re-distribution program. i'm not talking handouts. i'm talking about taking money from the people who can afford to give it up (the rich) and using it on things like libraries and schools and nursery programs and healthcare. basic things that people should be able to expect in a modern prosperous society. these are all things that ensure that people have an equal chance to succeed, not based on the luck of their birth but instead based on their work and their talent. a society prospers on a healthy, well-educated, satisfied middle-class, not on an overwhelmingly powerful wealthy upper-class.

i also liked this quote from the article XPav linked:
"The company, for its part, says its pay practices are appropriate and in its proxy statement recommends a vote against the proposal."

basically, it says money = power = more money. and we aren't even embarrassed about it.

Jack

06-12-2003, 09:48 AM

I agree with you, bee, but the root of the problem is always what is "too rich"? Is too rich $500k a year or Rush Limbaugh's $40 million a year or Bill Gates' $15 Gazillion a year? To impose such limits on the "free market" system is considered socialism, which to most Americans is just another way of saying "communism."

To even suggest such a thing in the United States means you might as well pack your bags, get into your Yugo, and live with the other pinkos in Canada.

Some type of salary limit would be nice, but with unlimited toys available for the super-rich to purchase, they'll always want more. And since money = political power, you have a better chance of pissing wine than you do of limiting a CEO's salary. They feel their outrageous salaries are in direct proportion to their worth to the company. That said, I'd be willing to bet there are few CEOs that can't be replaced by someone in the mail room.

Sorry if I've repeated anything a previous poster said. I didn't have the stamina to read all 311 posts in this thread.

Jason McCullough

06-12-2003, 10:17 AM

Captain Cookiepants

06-12-2003, 11:00 AM

Fuck luck. You're saying that Henry Ford lucked into the auto business? It was pure luck that Bill Gates started Microsoft? Nothing but luck was what Ted Turner had to start his business? All of that was pure luck?
Obviously Jason, you have never owned a business of any type. it takes a HELL of a lot more than luck. MAYBE you can say it was luck for a few actors, MAYBE there are actors who happened to be in the right place at the right time, but business run on more than luck, businesses are started on more than luck, and you're an inexperienced boob if you think otherwise. I'd like to know just where you get all your opinions from, books I'd imagine, this is why I hate college kids so much.

Brian Koontz

06-12-2003, 11:44 AM

I'm not quite sure about most of these arguments.

Companies A and B are competitors.

Company A has a CEO who gives himself tons of money.

Company B has a CEO who gives himself little money (most of the money going back into the company).

All other things being equal, Company B gains market share, power etc, since as a Company they are in better financial situation than Company A, where more money is being directed outside of the company.

The Market therefore dictates how much a CEO can give himself. Successful stable companies can afford to have rich CEOs... unsuccessful, unstable, or ambitious companies do not.

And since it probably makes more sense to say a CEO is responsible for a company's success than the workers, why shouldn't the monetary rewards for that success go to the CEO?

If you guys want another system, then have companies that are worker-owned (and worked created) compete against the traditional capitalist-owned companies. If its such a great system to have worker-owned, then they should defeat the fat cat CEO companies, shouldn't they?

Or would that "worker-owned" system which still has to have important decisions made by SOMEONE end up reverting to Capitalism within a short period of time?

Jason McCullough

06-12-2003, 01:05 PM

Oh right, and you're a regular plutocrat, Cookie. Fun fact: Microsoft got its start because they got lucky on IBM picking them to write their initial OS.

Captain Cookiepants

06-12-2003, 01:20 PM

Oh right, and you're a regular plutocrat. Fun fact: Microsoft got its start because they got lucky on IBM picking them to write their initial OS.
I'm no plutocrat but I did own a small business for a few year (The Donut Stop Orange CT) And it takes MUCH more than luck to set up, start, then run a business.
And do SOME research at ONE point in time PLEASE. Christ. IBM wanted an operating system, went to Microsoft because they thought they made one, they didn't so IBM went to a different company, that company blew them off and Microsoft went for the hard sell.

Was it lucky that IBM heard of Microsoft? No, Microsoft worked hard to make a name for themselves. Was it lucky the other company blew IBM off? No, IBM wasn't big enough then for a 'big' company to bother with. Was it lucky that Microsoft then pitched the idea to make one for IBM and then set about doing so? Decidely not.
Was Bill Gates walking down the street one day and just happened to find an OS in the gutter? No. It took hard work, determinaton, and a lot of brains to put it together. Not to mention the guts to try to accomplish something they never did before. He put up a LOT of money and his entire reputation on a project that he wasn't even sure he could do. Boy how lucky can you be huh?

Bub, Andrew

06-12-2003, 01:26 PM

I'm no plutocrat but I did own a small business for a few year (The Donut Stop Orange CT)

From now on I'm going to think of you as Captain Donutpants.

Captain Cookiepants

06-12-2003, 01:32 PM

I'm no plutocrat but I did own a small business for a few year (The Donut Stop Orange CT)
From now on I'm going to think of you as Captain Donutpants.
I'll have to kill you very slowly if you do that. Veeeeeeeerrrrrryyyy slloooooowwwllllyyyyy....

Brian Koontz

06-12-2003, 02:08 PM

From now on I'm going to think of you as Captain Donutpants.
I'll have to kill you very slowly if you do that. Veeeeeeeerrrrrryyyy slloooooowwwllllyyyyy....

As long as its with a Jelly Filled Krispy Kreme. Slow death has never tasted so good.

Jason McCullough

06-12-2003, 02:17 PM

No, IBM wasn't big enough then for a 'big' company to bother with.

In 81? What the hell are you talking about?

XPav

06-12-2003, 03:08 PM

The Market therefore dictates how much a CEO can give himself. Successful stable companies can afford to have rich CEOs... unsuccessful, unstable, or ambitious companies do not.

HAH!

Seriously, HAH!

Have you even looked into CEO compensation problems? If anything, the complete lack of adherence to reality shows how utterly corrupt that system is. Airlines are forced into near-bankruptcy, they ask the unions for pay cuts, and then the CEO turns around and gets the puppet board to give themselves raises and bonuses!

And since it probably makes more sense to say a CEO is responsible for a company's success than the workers, why shouldn't the monetary rewards for that success go to the CEO?

And from the article I linked a while back...

In 1982, the average chief executive's pay was 42 times more than that of the average production worker. In 2001, it had skyrocketed to 411 times. An incredible -- and I think unjustified -- increase.
You call that justified? So we give tax cuts on the rich so they pay less, pay those that are CEOs more. All this, and the market still goes up and down irregardless of all this stuff.

The "we need to tax the rich less and pay them more so they invest because this is good for the economy" idea is completely bogus and not supported by any sort of fact.

http://slate.msn.com/id/2083926/

So once you throw out all these economic arguments, what you're left with is the "class warfare" issues in which a few people argue that the rich should get to keep all their money, a few people argue that the rich shouldn't get to keep any of their money, and the great majority of the people that sit in the middle and argue just how much the rich should be taxed.

I am strongly of the opinion that we have passed the limit of tolerable income inequality. Yes, CEOs should make more than factory workers. No, they shouldn't make 400 times more than factory workers.

Squirrel Killer

06-12-2003, 03:50 PM

Yes, CEOs should make more than factory workers. No, they shouldn't make 400 times more than factory workers.

Why? No seriously, why?

WTF is it any of your (meaning the public-at-large's) business what one particular person earns, even if they do run a company? Certainly the shareholders have a right to question. And if the minority holders are getting screwed by a rubber stamp board of directors then there should be legal (civil) consequences. But if the CEO is acting legally, then this is really just scolding someone because they have too many shoes. Of course if the CEO is defrauding people? Then slam his ass in jail.

I'm just as outraged as you when a CEO gets a multi-million dollar raise/bonus/severance even when a company is going through tough times, but I realize that in the great scope of things, whether Bill Gates gets $1 billion or $3 billion from Microsoft doesn't really affect my life (expect that when MS raises the price on Office, I switch to OpenOffice.org.)

BTW - regarding all of this redistribution of wealth talk, I thought that the purpose of taxes was to generate revenue to run the government. Trying to correct social wrongs with such a crude tool as taxation is like trying to improve morals by banning alcohol.

BTW2 - Cookie, in 1982 IBM was a huge monothic company that thought everyone would always use their hardware. After all, no one ever got fired for buying IBM. They figured hardware would continue to be the big moneymaker, so they just wanted to pawn the software off some little vendor that could provide it quick, say like Microsoft. MS turned the world on it's head selling IBM a non-exclusive license and turned around and offered MS-DOS to anyone with the cash.

Desslock

06-12-2003, 04:00 PM

CEOs should make more than factory workers. No, they shouldn't make 400 times more than factory workers.

I disagree. A good CEO can add far more value to the owners of a corporation than 400 factory workers.

The rise in CEO salaries is a market phenomenon -- the vast majority of major U.S. public companies are not owned by strong control blocks -- the rise in salaries is primarily due to the explosive growth of the markets during the twenty-year period you indicated, and competition for qualified candidates.

I'm all for CEO's being more accountable to the owners of the company (and other stakeholders), and executive compensation disclosure has become very comprehensive, and independent veting requirements significant. If you really believe major public companies have "puppet boards", you really misunderstand their necessary qualifications and fiduciary obligations.

The reality is that very few CEOs make that scale of magnitude more than their average employees, and most of those CEOs are either at very large companies or at companies where they own a significant portion of the company themselves.

Do some extremely well paid CEOs not end up meriting the high premium they are paid? Sure (and the airlines industry is a good example), in the same way that some professional athletes (who are paid far more than 400x the average athlete) don't live up to expectations, or well paid actors like Vin Diseal (who are paid far more than 400x the average actor) having movies commercially perform below expectations. At least apportion some of your misplaced anger at those identical phenomena as well.

MikeJ

06-12-2003, 04:16 PM

I'm not quite sure about most of these arguments.

Companies A and B are competitors.

Company A has a CEO who gives himself tons of money.

Company B has a CEO who gives himself little money (most of the money going back into the company).

All other things being equal, Company B gains market share, power etc, since as a Company they are in better financial situation than Company A, where more money is being directed outside of the company.

The problem with evolutionary arguments is that they tend to work in the long term, and the long term can be very long indeed. Running your car into a deer will still do damage, even though there is selective pressure for deer to avoid dashing in front of moving vehicles.

You are always talking about human irrationality. Would it surprise you to learn that culture, emotion and a herd mentality can temporarily dominate the long-term consequences? Remember that there are many people involved in the market who think: "Price-to-earnings ratios are at record highs. Sounds like a good time to invest!".

The Market therefore dictates how much a CEO can give himself. Successful stable companies can afford to have rich CEOs... unsuccessful, unstable, or ambitious companies do not.

This very belief can bring about a peacock effect: "Company A pays it's CEO twice what Company B does? Company A must be twice as stable and successful! Where's my broker?"

Jason McCullough

06-12-2003, 04:34 PM

CEOs are paid outlandishly because corporate boards, in general, tend to be packed with their friends and relatives; there's no real market for executives. It has nothing to do productivity, unless you think the value added of a an *average* CEO has gone up by 2800%. Krugman has some interesting stuff about this (http://www.pkarchive.org/economy/ForRicher.html).

Over the past 30 years most people have seen only modest salary increases: the average annual salary in America, expressed in 1998 dollars (that is, adjusted for inflation), rose from $32,522 in 1970 to $35,864 in 1999. That's about a 10 percent increase over 29 years -- progress, but not much. Over the same period, however, according to Fortune magazine, the average real annual compensation of the top 100 C.E.O.'s went from $1.3 million -- 39 times the pay of an average worker -- to $37.5 million, more than 1,000 times the pay of ordinary workers.

It's a side issue, really, as executive pay could be fixed by some corporate reforms, and should. The problem of inequality in general is a lot more intractable.

Ben

06-12-2003, 05:01 PM

Jason, executive compensation is not that simple. The reason that those top 100 CEOs are so much richer is because they own large shares of their companies as stock packages became standard methods of payment.

We should tax the rich over the poor because they can afford it and the government does need some money. We shouldn't tax the rich so they won't be so rich, that's just jealousy.

Executive pay is not a problem. Inequality(the legal, justified kind, not the stealing oligarchies of shithole countries) is not a problem.

Captain Cookiepants

06-12-2003, 05:18 PM

We should tax the rich over the poor because they can afford it and the government does need some money. We shouldn't tax the rich so they won't be so rich, that's just jealousy.
But the government is made up of the rich who don't spend wisely, giving them more money is just giving them more money to waste. Maybe a belt tightening would HELP the country, maybe then we won't be giving 50 million to create songs about Spam.
Jason: in the PC market, no. In fact 1981 was the year their FIRST PC was introduced.

MikeJ

06-12-2003, 05:24 PM

Jason: in the PC market, no. In fact 1981 was the year their FIRST PC was introduced.

Kind of like how Sony was too small to be worth dealing with when they introduced the PS?

XPav

06-12-2003, 05:51 PM

I like that Krugman article.

The more pessimistic view -- which I find more plausible -- is that competition for talent is a minor factor. Yes, a great executive can make a big difference -- but those huge pay packages have been going as often as not to executives whose performance is mediocre at best. The key reason executives are paid so much now is that they appoint the members of the corporate board that determines their compensation and control many of the perks that board members count on. So it's not the invisible hand of the market that leads to those monumental executive incomes; it's the invisible handshake in the boardroom.

The most remarkable example of how politics has shifted in favor of the wealthy -- an example that helps us understand why economic policy has reinforced, not countered, the movement toward greater inequality -- is the drive to repeal the estate tax. The estate tax is, overwhelmingly, a tax on the wealthy. In 1999, only the top 2 percent of estates paid any tax at all, and half the estate tax was paid by only 3,300 estates, 0.16 percent of the total, with a minimum value of $5 million and an average value of $17 million. A quarter of the tax was paid by just 467 estates worth more than $20 million. Tales of family farms and businesses broken up to pay the estate tax are basically rural legends; hardly any real examples have been found, despite diligent searching.

Desslock

06-13-2003, 06:43 AM

It's a side issue, really, as executive pay could be fixed by some corporate reforms, and should.

Sure, right after you reform actor salaries, professional athlete salaries and, especially, musician salaries, since those are clearly more egregious examples of overpayment.

Desslock

06-13-2003, 06:48 AM

I like that Krugman article.

Sure, let's modify it so that it addresses the pressing need for lowering actor's salaries:

The more pessimistic view -- which I find more plausible -- is that competition for talent is a minor factor. Yes, a great [actor] can make a big difference -- but those huge pay packages have been going as often as not to [actors] whose performance is mediocre at best. The key reason [actors] are paid so much now is that they [choose which producers they work with, and the producers] determine their compensation and control many of the perks. So it's not the invisible hand of the market that leads to those monumental actor incomes.

Jason McCullough

06-13-2003, 07:22 AM

I don't think the market for actor or musician salaries is broken. They're high, sure, but they actually appear to earn that much marginal value. That's what so teeth-grindingly annoying about executive pay.

steve

06-13-2003, 07:55 AM

Sure, right after you reform actor salaries, professional athlete salaries and, especially, musician salaries, since those are clearly more egregious examples of overpayment.
How so? Would any other actor in "Bruce Almighty" other than Jim Carrey have helped it score an $80 million opening weekend? Would "Anger Management, starring Philip Seymour Hoffman and Steve Buscemi" have made $150 million?

What musicians are overpaid? The only ones making money are the ones that earn their labels a lot of cash. There are again exceptions--mainly Mariah Carey, I suppose--but the record industry is more known for ripping off its artists, not paying them tons of cash.

Athletes are probably the ones that are easiest to target, but for the most part, actors and musicians who get paid tend to deliver results. An actor who has a string of failures can't really collect that big payday. They're not infallible, and you may not like their work or their movies, but the people paying them all that money generally get the results they expect.

Chris Nahr

06-13-2003, 09:31 AM

What musicians are overpaid? The only ones making money are the ones that earn their labels a lot of cash. There are again exceptions--mainly Mariah Carey, I suppose--but the record industry is more known for ripping off its artists, not paying them tons of cash.

Exactly. And the same doesn't apply to top executives at large publicly owned companies which are paid outrageous amounts regardless of whether or not they're making their company a lot of cash. The proposition that they are worth their money is pure speculation -- unlike musicians or actors whose appearance demonstrably influences sales.

Captain Cookiepants

06-13-2003, 09:35 AM

And another thing: company owners (nice try to switch the topic from company owners to management McCullough) company owners are payed with company perks for the most part, they live in apartments rented by the company, drive cars reserved for company higher ups, on and on, they are living on the success of their company.
I already made several really good points on why owners make more money and here's another one: they can afford to. If a company is in ruins then obviously their pay wouldn't be high, but if a company is doing great, then of course their pay can be high. If they paid themselves more than they could afford then the company would obviously be hurt pretty badly and the owner would have to lower his pay.
Of course in the 'soft industry' like airlines which get billions free from the government for no real reason, or Enron or that type of company which really isn't selling any product the rules are different, but fact is no one rule can be for anything and the majority of companies live or die on supply and demand.
I'd also like to point out the bit of Communism that I slipped into my summation of Jason's side that he has yet to contend. Way to go comrade.

steve

06-13-2003, 09:42 AM

Exactly. And the same doesn't apply to top executives at large publicly owned companies which are paid outrageous amounts regardless of whether or not they're making their company a lot of cash. The proposition that they are worth their money is pure speculation -- unlike musicians or actors whose appearance demonstrably influences sales.
During the 90s you had the rock star CEO. Whether they did anything or not, their mere existance was enough to drive up stock prices. So in a sense, they did make the company and shareholders a lot of cash in the short-term.

Jason McCullough

06-13-2003, 09:43 AM

It was Koontz responsible for the topic shift, oh master of reading comprehension.

As an interesting aside, apparently the reason behind the explosion in perks for top management is that salary beyond a million or so isn't tax deductible anymore.

Desslock

06-13-2003, 03:55 PM

Sure, right after you reform actor salaries, professional athlete salaries and, especially, musician salaries, since those are clearly more egregious examples of overpayment.

but for the most part, actors and musicians who get paid tend to deliver results. An actor who has a string of failures can't really collect that big payday.

That's the same as CEOs -- in fact, they are far more accountable for failures. While an actor, as you indicated, can have a string of failures before his rates decline, a CEO is toast if he/she has one notable failure. Reputation is everything. Who's going to fire Wayne Gretzky because he didn't win the cup, or has a bad game? CEOs get fired all the time for having a single bad year, or even just making a single bad decision. And it's virtually impossible to get back into a comparable job once you're tainted as a failure.

CEOs are in the exact same position as the other "performers" I indicated (musicians are probably least analagous, although there's still overpaid characters like Michael Jackson) -- "for the most part", those who are paid the most, tend to deliver results. Sure there's notable examples of individuals who received a great deal of compensation and yet added little/no value (as there are for all highly paid professionals, like actors/athletes and musicians), but that's infrequent given the nature of the compensation.

In fact, the sort of compensation that you guys are complaining about is almost entirely in the form of stock options, which are completely valueless (since, when issued, the exercise price is equivalent to the then current price per share) -- the only time they get any value out of that "compensation" is if the owners of the company also get equivalent value while the company is being run by the CEO. It's just a form of profit sharing.

...the same doesn't apply to top executives at large publicly owned companies which are paid outrageous amounts regardless of whether or not they're making their company a lot of cash.

That's impossible, since the compensation you're complaining about comes from stock options, which only have value if the owners receive equivalent value (or opportunity to realize it at their discretion).

The argument that CEOs aren't subject to market realities is laughable. There's nothing large public companies (which are primarily dominated by financial institution stockholders) would like better than to get a capable CEO for less than the market requires them to pay. But there's very few people with the experience and abilities to do be a CEO at a mature public company, and it takes those individuals 20+ years of work before they have the requisite experience to assume that role. You're severely underestimating the sophistication, and accountability, of the individuals who sit on the boards of large public companies. If there were more people available that they could reasonably expect to be able to do as good, or better, a job, for less consideration - the market would absolutely drive down compensation (in the same way it's been driven up by the increased demands of such jobs and the corresponding difficulty in capably staffing them).

Demonizing of CEOs, or their compensation, just strikes me as goofy, since I don't see anything wrong with someone being valued as much for their brain and business acumen as their hook shot, bloated tunes and goofy but catchy lyric or bouncing breasts.

Jason McCullough

06-13-2003, 04:05 PM

Yeah, getting fired and getting millions of dollars for it is pretty harsh!

So you think the value added by CEOs has gone up 3200% over the last 30 years? That's like a 12% annual average, which is absurd.

Anders Hallin

06-13-2003, 04:22 PM

Desslock

06-13-2003, 04:24 PM

So you think the value added by CEOs has gone up 3200% over the last 30 years?

Ignoring the fact that you're using extreme examples, or aggregating when it's useful (a "CEO' isn't exactly a uniform position, any more than a grade 3 baseball player is the same as a major leaguer), I'll simply state this: Whatever the market is valuing that position at is, by definition, the value added by CEOs.

Again, as others have stated, the only thing that's relevant is the opinion of the owners, since they're the ones who bear the cost of the compensation, even if outsiders such as yourself think it's "absurd".

Yeah, getting fired and getting millions of dollars for it is pretty harsh!

You're just bitter because you can't use a level-cheat code!

wumpus

06-13-2003, 04:27 PM

Yeah, well, at least he's NOT A ROBOT.

Desslock

06-13-2003, 04:32 PM

That's the same as CEOs -- in fact, they are far more accountable for failures.
Really? Because top-level management seem to be by far the most incestuous group when it comes to hiring.

Your scientific conclusion is inaccurate.

I do not see how it's a high-risk position either, since the chance of any CEO being reduced to a beggar seems a wee bit smaller than for most

They are more likely to lose their job and be unable to find a comparable position than individuals with any other job title. If you only associate "high risk" with "likely to become destitute", then you are correct -- CEOs are not likely to fit into that category, because they are generally incredibly intelligent, experienced and talented individuals, and those types of individuals are unlikely to become destitute, regardless of their chosen profession or activities.

Anders Hallin

06-13-2003, 04:48 PM

Well, I'm mostly looking at Sweden, which, ironically, is more in the hands of a small group of people making up a lot of the larger companies' boards than the US, in my opinion.
"Seem" does not really imply that I tried to make a statement of scientific objective truth.

Peter Frazier

06-13-2003, 04:51 PM

CEOs are not likely to fit into that category, because they are generally incredibly intelligent, experienced and talented individuals, and those types of individuals are unlikely to become destitute, regardless of their chosen profession or activities.

Oh, do you mean that Dilbert is wrong? I'll have to improve my research.

XPav

06-13-2003, 05:05 PM

They are more likely to lose their job and be unable to find a comparable position than individuals with any other job title. If you only associate "high risk" with "likely to become destitute", then you are correct -- CEOs are not likely to fit into that category, because they are generally incredibly intelligent, experienced and talented individuals, and those types of individuals are unlikely to become destitute, regardless of their chosen profession or activities.

As opposed to say, professional athletes who have a maximum of 20 years of working lifetime with a chance of an injury ending their career and quite possible causing physical harm?

As for CEOs being "generally incredibly intelligent and talented", thats... errr.. an opinion. There are many high-priced CEOs that did a good job at one company and bombed horribly at other companies. How about all the Jack Welch proteges? (Obligatory Slate link: http://slate.msn.com/id/2079650/ ) How about Ron Zarella butchering GM? "Yeah, what works for one industry works in others!... err... wait..."

More fun slate links: http://slate.msn.com/id/2067952/ (How limits on salary have made boards give completely-bogus bonuses to CEOs)

I say theoretically, because companies in recent years have proved ingenious at defining performance in ways that benefited top executives. Stock options were frequently issued far below the market price. Companies began to engineer arrangements by which CEOs would receive a percentage of any increase in net income. When stocks fell, making existing option grants worthless, companies repriced options at lower strike prices or issued new ones at lower prices. As a result, CEOs routinely received substantial "performance-based" bonuses in years where their stocks fell or lagged the broader indices. In 2001, a year when Citigroup's stock stagnated, Sandy Weill received a $16.9 million performance-based bonus. In 2000, Scott Sullivan of WorldCom received a $10 million retention bonus that depended on him "remaining with WorldCom for at least two years after September 2000." For Sullivan, 100 percent of "performance" was just showing up. (Not that he even managed that. Sullivan was bounced from the company for his accounting tricks before the two years ended, and WorldCom is suing to reclaim the cash.)

More: http://slate.msn.com/id/2077899/

So Desslock, you may be a robot, but I'm have to say that you're a little too influenced by the Cult of the CEO. Sure, a smart guy at the top can help -- but they don't personally turn huge companies around by themselves, and they don't deserve these misnamed "bonuses".

edit: One more neat link: http://www.jhu.edu/~jhumag/0902web/bigques.html

In 2001, median CEO pay grew by 7 percent, despite a 35 percent decline in corporate profits and the beginnings of a general collapse in stock prices.

Median there. Wonderful.

Jason McCullough

06-13-2003, 05:19 PM

How is an average of the top 100 an "extreme example?" Do you think earnings of those companies increased 32x over the last 30 years? Productivity sure didn't.

Anyway, I'm not arguing they're horrible people, just that the market for their services is defective. Ownership in most public companies is extremely diluted, and when management becomes entrenched and engages in self-dealing. Plenty of mainstream economists say this; it's not controversial.

There's been studies showing no real correlation between CEO pay and risk taken on (through stock options and such), and only a weak one between performance and pay.

bmulligan

06-13-2003, 08:16 PM

What gives any of you commies on this thread the right to determine what someone else's salary is ?? It takes a lot of balls for a ditch digger to tell a rocket scientist what the limit is on his income. And yes I'm phrasing this to get a rise out of some of you because I think your balls are too big and swolen from so much mental mastrabation on improving the social order. Would you like it if I decided how much you should make? I doubt it. Shouldn't the market bear these responsibilities? Shouldn't the OWNERS (i.e., stockholders) make these decisions? Isn't that what FREE markets are all about?

Well, perhaps we should cap salaries. We should cap home sizes, we should cap the number of cars people can buy. We should cap the number of choices of toilet paper offered in the store. We should have a government agency that goes around pointing out excess in individual lifestyle and confiscate their assets for the good of 'the people' or 'society'. That will solve all our problems. Let's just get rid of freedom altogether, because some people don't know how to handle it correctly, and some people have too much.

Anders Hallin

06-13-2003, 11:25 PM

Well, perhaps we should cap salaries. We should cap home sizes, we should cap the number of cars people can buy. We should cap the number of choices of toilet paper offered in the store. We should have a government agency that goes around pointing out excess in individual lifestyle and confiscate their assets for the good of 'the people' or 'society'. That will solve all our problems. Let's just get rid of freedom altogether, because some people don't know how to handle it correctly, and some people have too much.
Yes, that's exactly what we're saying and what we want from society.

bee cubed

06-14-2003, 08:19 AM

well, we've kinda gotten away from the original topic of taxes...

i agree with jason and xpav that executive pay is out of control. i don't know how many of you work for big corportations, but i do, and it sure sucks when you get a 3% raise and your CEO gets a 20% raise. i agree that he puts more value into the company than i do, and i have no problem with him making way more money than i do. the position of CEO is a big responsibility and no doubt very stressful. the thing that bothers me is that his *percentage* increase in pay is so much more than mine. if the company is doing well, then everyone should be rewarded equally, since they all worked towards making the company do well.

i think that the debacles at worldcom and enron pretty clearly dictate that the CEO/board of directors relationship has gotten too cozy at (at least) some companies.

unfortunately, there isn't an easy way to fix the problem. in the 80s, the government tried, by putting a $1million cap on the amount of salary that could be deducted. corporations responded by giving CEOs performance based compensation packages, which actually had a tendency to increase CEO compensation. woops, way to go, gov.

and, as captain donutpants points out, some people actually deserve crazy compensation packages. original owners, for one. they had the balls and the drive to try something new, and they deserve to reap the rewards. and there are actually a few CEOs that do get huge returns for investors.

but taxes on the rich should still be higher. the bottom line is that the government needs a certain amount of money to do the things that a government does. the rich are in a position to pony up that money without it having a serious impact on their standard of living. the poor and middle class are not in that position. thus, the tax burden should fall to the rich. and i'm getting sick of typing...

Kalle

06-14-2003, 09:46 AM

What gives any of you commies on this thread the right to determine what someone else's salary is ?

Might makes right. Freedom is never absolute.

Xaroc

06-14-2003, 09:50 AM

The thing that is worst about CEOs is they can fuck up horrendously, get fired, and still get a golden parachute that most workers could retire and live like kings on for the rest of their lives. I wish I could be a complete idiot at my job and get multiple millions when they kick my sorry ass out.

-- Xaroc

bmulligan

06-14-2003, 10:23 AM

bee cubed wrote:
but taxes on the rich should still be higher. the bottom line is that the government needs a certain amount of money to do the things that a government does. the rich are in a position to pony up that money without it having a serious impact on their standard of living. the poor and middle class are not in that position. thus, the tax burden should fall to the rich. and i'm getting sick of typing...

The burden already falls on the rich. And they don't reap the 'extra' benefits that the poor get like food stamps, medicare, social security, disability, unemployment payouts. The rich are already paying for all this stuff and for your national defense too. Yes they are in a position to "pony up" but at who's expense?? YOURS. Yes, the more taxes they pay, the less you will see in raises. The more you will see in prices rising because of higher production costs. The less capital will flow. The rich will not buy as many new houses, new cars, new boats, new buildings, new factories if their incentive to do so is overtaxed. And guess who really pays the price? The people who are employed to build these houses, cars, boats, furs, computers, software programs, because the fuel that feeds them will be usurped by the government in the form of taxes.

If you think that pay raises should be the same percentage, then why not tax them at the same percentage? Because you don't want fair, you want even. they are different.

And to Anders Hallin --- people like you scare the shit out of me. The mere fact that you took my sarcasm and agreed with the premise, that government should have control over ones personal gain, one's private property speaks volumes. You should go live in China where the communists do just that. Go live in N. Korea, where the communists do just that. Go live in Iraq, where the dictator does......well, we got rid of him, so err, never mind. Hell, go live in Australlia where the government already thinks of it's people as a bunch of lamebrained idiots and legislates behavior like a giant daycare center. Tell me what you think of this statement: "from each according to his ability, to each according to his needs." Do you agree with it?

We have a government in America, but Americans are governed by no man. We are sovereign in our own right. Our constitition protects our rights, they are not granted to us by it or any ruler. We are the first nation in the history of the world that has been founed on this principle, and we are the strongest, and greatest nation that has ever existed. Regardless of what Cleve thinks, This is the greatest nation in the World, and the world wants us to fail because we are great. It's the oldest human emotion, envy. Envy of our freedom, of our opulence, of our arrogance, and envy of our power.

Kalle

06-14-2003, 10:45 AM

Tell me what you think of this statement: "from each according to his ability, to each according to his needs." Do you agree with it?

You've already called everyone disagreeing with you commies already, why bother now with justification?

We have a government in America, but Americans are governed by no man. We are sovereign in our own right. Our constitition protects our rights, they are not granted to us by it or any ruler. We are the first nation in the history of the world that has been founded on this principle, and we are the strongest, and greatest nation that has ever existed. Regardless of what Cleve thinks, This is the greatest nation in the World, and the world wants us to fail because we are great. It's the oldest human emotion, envy. Envy of our freedom, of our opulence, of our arrogance, and envy of our power.

Your arrogance speaks volumes.

bmulligan

06-14-2003, 11:04 AM

Squirrel Killer

06-14-2003, 11:08 AM

...it sure sucks when you get a 3% raise and your CEO gets a 20% raise.

Isn't possible that he did his job 17% better than you did yours? I myself recieved a 16% raise once while the CEO was fired and they brought in a new CEO for less money.

i agree that he puts more value into the company than i do, and i have no problem with him making way more money than i do. the position of CEO is a big responsibility and no doubt very stressful. the thing that bothers me is that his *percentage* increase in pay is so much more than mine. if the company is doing well, then everyone should be rewarded equally, since they all worked towards making the company do well.

Really? They all did? I remember when I was on site at a major corporation, and there was one guy who drug his feet on anything just because he hated his job. Then there was the guy who spent all his time downloading porn.

I like how no one has even attempted to answer the question "So how does CEO compensation affect you?" I mean no one's even troted out the old standards like "It makes the company raise prices" or "Reduced services for public." I mean, the "Then they can't pay me want I'm worth" has only been obliquely referenced. What we're left with instead is thinly veiled class envy.

XPav

06-14-2003, 11:25 AM

I like how no one has even attempted to answer the question "So how does CEO compensation affect you?" I mean no one's even troted out the old standards like "It makes the company raise prices" or "Reduced services for public." I mean, the "Then they can't pay me want I'm worth" has only been obliquely referenced. What we're left with instead is thinly veiled class envy.
How does CEO compensation affect me? Besides the obvious things that you said? Go back and look earlier in this thread about the dangers of out-of-control income inequality. Yeah, there's always going to be people that make more, and people that make less, but at the far end of the scale lies banana-republic land.

Hey, lets read what Warren Buffet, the second richest man on the planet says: http://64.239.26.212/articles/investor/investor.shtml

Q: That's funny. People will say, here's a guy with $35 billion who thinks CEO's make too much money. What's the difference in the way you made your money running a company and the way these CEOs managed to make hundreds of millions, even billions of dollars in the 1990s, and still not provide performance?

A: I have made my money by being an owner. But that took a long time. I bought my first stock when I was 11, almost 60 years ago. Sometimes I wonder why I waited so long. I've always had an owner mentality. A number of our managers make a great many multiples of what I make. But they make it based on the performance of their units. And we tie all the top executives compensation to the performance of what's under their control. We don't tie it to the price of Berkshire stock. Because we own 10 plus billion of Coca Cola stocks. Well, the manager, given a business like ours, has nothing to do with what the Coca Cola stock is going to do. It can swamp their particular results. We do hold them responsible for their own businesses. And we pay them accordingly. And we pay well. Many of our executives earn well in seven figures and some of them even hit eight figures.

Q: But you don't give options? Why not?

A: We don't give options because it would be a lottery ticket. If I gave an option to somebody who is running our brick business in Texas or the candy business in California, they would be getting something whose value will depend 99.9% on extraneous factors that they have no control over and maybe they would contribute one tenth of one percent to it. That's kidding yourself. Why should they go out and change their behavior in a huge way for something where they are gonna get swamped by all these other factors. So we tie the pay of those people to how they perform with their own businesses. Otherwise, in passing, everybody would take lottery ticket. When I was running Solomon, everybody wanted options. They wouldn't have paid a dime for the options. But they look at them as free. They are free to everybody except the shareholders.

Q: In fact, you see some problem with the way they get accounted for, don't you?

A: Oh, I think the accounting is shameful. The way CEOs have behaved to essentially lobby and strong-arm Congress in very aggressive ways to avoid having them counter this compensation. I bought a number of companies that had option programmes. And believe me, if we hadn't done something as a substitute for those option programmes, those employees would have been very happy, because they were the part of that compensation. If they are the part of that compensation, I have never heard anybody say that compensation isn't an expense. And I never heard anybody saying that the expenses don't belong in a profit and loss statement. But CEOs don't want it that way. They are the only group that doesn't want it that way. But they have a lot of muscle in Congress. And so far they've kept it from happening.

Why is Warren Buffet a communist, wanting to put CEO compensation back down to lower levels by forcing it to be classified properly?

Kalle

06-14-2003, 11:30 AM

Why the justification? because most communists don't even realize what they are. They never question or bother to analyze their principles. They 'think' they belive in freedom. They 'think' they believe in justice. They 'think' they believe in fairness. What they really believe in is government control, the opposite of freedom. They think the government is the answer to every problem, every inequality, every offensive opinion. If you're a commie too, I'm sorry.

I think you should look up the definition of communist. I know perfectly well where I stand politically, but since I'm a liberal socialist according to you I must be an uninformed misguided fool incapable of critical thought. :roll:

Have you heard of something called the social contract? By being a citizen you give up some freedom and agree to play by society´s rules in exchange for security. If you don't like having your absolute freedoms infringed on I suggest you become a hermit.

I am not ashamed of my arrogance. Socialists hate arrogance because they want to be the only ones who posess it. They want to squash the achievers because they are a threat to the social order. Disruption of the homogeniousness of society can only foster individuality, competition, ingenuity, and progress. All uncontrolled by the government. Things outside of government control worry you, dont they Kalle?

Nobody likes an arrogant bastard, socialist or not.

Anders Hallin

06-14-2003, 12:59 PM

And to Anders Hallin --- people like you scare the shit out of me. The mere fact that you took my sarcasm and agreed with the premise, that government should have control over ones personal gain, one's private property speaks volumes.

Are you talking about "Yes, that's exactly what we're saying and what we want from society."?
Because that certainly wasn't sarcasm. Oh, no sir.

Anders Hallin

06-14-2003, 01:04 PM

Now, I'm not against CEO's making more but considering the fact that if you tried a little experiment, where you removed the CEO from a company, and from another company you got rid of all the workers (very wide definition of workers, of course), and then checked which company could make money the longest, I'd say that workers, if organized, have some clout.
But of course, unions are a communist idea, and evil.

bmulligan

06-14-2003, 02:14 PM

Kalle wrote:
By being a citizen you give up some freedom and agree to play by society´s rules in exchange for security.

Who makes the rules? Society? No, there is no such thing as 'society' as a volitional entity. Someone ends up making the rules. Be they leaders, priests, dictators, etc. Luckilly we have a representative democracy bound by the powers given to them in our constitution. Powers limited by that document to protect our individual rights. There are no other 'rights' except for those of the individual. There are no 'rights' of society. The social contract is an albeit non-clever way of establishing slavery. Giving up your rights for security= Giving up security for security. Abolishing your rights for the good of 'society' results not in freedom, but slavery. Your social contract, or socialism, will eventually lead to this result. Liberal Socialist is a euphimism for Communist-in-training. I never called you a fool, misguides yes, but not incapable of thought. I'm just asking you to question your principles. Do you believe in freedom, or do you believe you have a claim on the life and property of your neighbor?

bmulligan

06-14-2003, 02:30 PM

duplicate post

bmulligan

06-14-2003, 02:31 PM

Hellin wrote:
But of course, unions are a communist idea, and evil.
now, I'm guessing that is sarcasm. People united with a common objective can be used for good purposes. If workers want to organize, they have that right. If they want to represernt themselves to a business owner, they have that right. The business owner also has the right to fire them if he chooses. They also have the right to find another job if they choose. No one should be guaranteed a job, a house, a car, food, money. We should all be compensated for our own efforts, not from the efforts of others if they had no shoice in the matter. I personally don't like most unions. Their strong arm tactics and political bedpartners pale in comparison to the CEO/Board relationship some have spoken about.

Let me ask you this- you were hired into a company with Joe, he is a lazy ass. You are the epitome of hard work and effort. Yet under the union contract, you get paid the same. Joe sits on his ass every day and knows he'll never get fired because of the sweet union contract you all have. What is your incentive to work harder, to achieve? None. You don't need to work harder to recieve the same pay as the weakest link in the chain.

Now replace union contract with 'communism'. What you get is the same result- nothing. That's why a freaking American car costs over $20,000 today- union miners, union steel millers, union assembly workers. All working just enough to meet minimums because there is no incentive for productivity. Now we have a president who wants to protect the laziness of the steel industry, Hoo-rah!

Ben

06-14-2003, 03:18 PM

XPav- CEO compensation has absolutely nothing to do with the prices you pay. And the reduced services to public is also wrong. CEOs get the ridiculous high compensation totals from stock packages, not the company's operating funds. Not that their base salaries have much to do with end user prices or enduser services, either, but the CEO's money would be some other investor's money most of the time. So you are left with the original argument, "some (other) people have too much money". Cue slate quoting frenzy, I'm sure, but it really is just jealousy.

bmulligan- You're an idiot. American cars like what? Many American companies produce their cars internationally, and many foreign companies produce their cars in America. Cars are absolutely a price-taking industry, the reason a given car costs $20,000 is because it's better than the car that costs $18,000.

In short, socialists are all stupid, but not all stupid people are socialists. This thread is a neat enough proof of that.

Jason McCullough

06-14-2003, 06:32 PM

XPav- CEO compensation has absolutely nothing to do with the prices you pay.

Are you sure? In general, shifts in the cost of production (which is what CEO pay is) show up in a lower equilibrium price; if the price of raw materials dropped 10%, that would show up in a price cut proportional to the elasticity of the demand curve. Same deal with labor costs.

bmulligan

06-14-2003, 08:31 PM

Cars are absolutely a price-taking industry, the reason a given car costs $20,000 is because it's better than the car that costs $18,000.

perhaps its my stupidity, or the fact you believe me to be an idiot, but I fail to see the relation between your statement and mine. The car may cost $20,000 but that's not what it is worth. You might as well have said this candy bar costs more because it better than that one. This is overly simplistic, and simply untrue. There are a myriad of factors as to why 1 car costs $20k and 1 car costs$18k. Look at the success of the japaneese in our car markets in the 1970's- present.

My point was that artificial 'controls' impede our economy. When there's no incentive for improvement, costs will rise. When other countries don't have these same 'controls', we may not be able to compete with them in the same markets. That's why so many manufacturers are leaving for mexico where they don't have to deal with unions and US taxes. If our government would lower their rates, perhaps they could draw more income from the volume of companies who decide to stay. And if the unions stopped bitching and moaning, maybe their jobs wouldn't be moving overseas as well.

Jason McCullough

06-14-2003, 08:49 PM

Dude, if you think it's unions and taxes.....

bee cubed

06-14-2003, 08:50 PM

xpav's post should have ended this CEO argument. warren buffet knows more about investing and running a business than this whole forum put together. his opinion on CEO pay is still just an opinion, i'll admit, but it is an opinion that's worth more than anyone else's opinion here. there probably aren't many people in this whole country who shouldn't just shut up and start taking notes when warren buffet starts talking about running a business.

bmulligan

06-14-2003, 09:26 PM

funny, I thought this was a thread about tax cuts.............and people who deserve to have their money taken from them.

So McCullough, could you not finish your thought on the subject or........what?

Yes, I think it's unions, taxes, the general attitude of most 'workers' in this country who feel they should be paid the most for doing as little as possible. That includes your greedy, underperforming CEO too.

Jason McCullough

06-14-2003, 09:48 PM

It's not unions. Companies relocate production to Mexico when a) their product is easily transportable and b) the cost of its production is largely determined by labor costs.

Union membership is the US is only 14% or so, and the different between first-world union and non-union wage rates is nowhere near large enough to justify the move alone. According to this (http://216.239.51.100/search?q=cache:uZSPBk6rrCcJ:www.bls.gov/opub/cwc/archive/spring2000brief2.pdf+differential+union+non-union+wages&hl=en&ie=UTF-8), union blue collar employment is around $15/hour, while non-union blue collar is about $10/hour.

Mexican manufacturing wages are about $2/hour (http://dgcnesyp.inegi.gob.mx/pubcoy/short-term/competi/Salacti.html).

This is a straight pay rate, mind you; when you factor in benefits and other related things, the real "cost" is 50-100% higher. So let's put union US at $30, non-union US at $20, and Mexican wages at $4. Additionally, I've heard lots of reports of non-union jobs moving.

It's not taxes, because if they want to bring the profits the Mexican operation back into the US they still have to pay taxes on them.

The "general attitude" comment is generally untestable, but my anecdotal evidence strongly points the other way.

Ben

06-14-2003, 10:36 PM

CEO stock package compensation isn't a cost of production, XPav. Marginal costs are the relevant ones. That's why the raw product's price drop will be passed on the consumer.

bmulligan- American cars don't cost what they cost because of American unions, because many American cars are made outside the United States. American cars don't cost more than imports, anyway, nor are they worse values. The Japanese exploited a market demand shift towards smaller cars. The market has corrected, and in fact American companies primarily benefitted from the market deciding that it liked SUVs.

Kalle

06-15-2003, 04:12 AM

Who makes the rules? Society? No, there is no such thing as 'society' as a volitional entity. Someone ends up making the rules. Be they leaders, priests, dictators, etc. Luckilly we have a representative democracy bound by the powers given to them in our constitution. Powers limited by that document to protect our individual rights. There are no other 'rights' except for those of the individual. There are no 'rights' of society. The social contract is an albeit non-clever way of establishing slavery. Giving up your rights for security= Giving up security for security. Abolishing your rights for the good of 'society' results not in freedom, but slavery. Your social contract, or socialism, will eventually lead to this result. Liberal Socialist is a euphimism for Communist-in-training. I never called you a fool, misguides yes, but not incapable of thought. I'm just asking you to question your principles. Do you believe in freedom, or do you believe you have a claim on the life and property of your neighbor?

Someone always ends up making the rules, but they only apply as long as people agree to live under them. Those people who agree make up society. So, what "rights" do you think you are entitled to then? Life, liberty and pursuit of happiness? Personal property? Why?

The social contract is far from what you are making of it. Society itself has no rights, but a society pledges to defend certain rights by putting a force behind them that no individual can. I strongly suggest you read up on Hobbes. You have no security in your rights if you are the only one willing to defend them. Your polemic about slavery is moronic, socialist welfare states have existed for over 50 years yet none of us who live in them are slaves, or anything remotely similar to that concept.

Ironically a liberal socialist, in the parts of the world where political newspeak has not yet labelled moderates as liberal, is an anti-authoritarian socialist. I'm a strong believer in individual freedom to choose your life as you wish. I do not however see property rights to be absolute. No one is entitled to my life or anyone elses life, but wealth redistribution is fine by me.

XPav

06-15-2003, 02:18 PM

Warren Buffet said about the tax cuts: http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A13113-2003May19&notFound=true

Administration officials say that the $310 million suddenly added to my wallet would stimulate the economy because I would invest it and thereby create jobs. But they conveniently forget that if Berkshire kept the money, it would invest that same amount, creating jobs as well.

Overall, it's hard to conceive of anything sillier than the schedule the Senate has laid out. Indeed, the first President Bush had a name for such activities: "voodoo economics." The manipulation of enactment and sunset dates of tax changes is Enron-style accounting, and a Congress that has recently demanded honest corporate numbers should now look hard at its own practices.

When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a "break" requires -- now or down the line -- that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can't deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch. And last week the Senate handed the bill to the wrong party.

Supporters of making dividends tax-free like to paint critics as promoters of class warfare. The fact is, however, that their proposal promotes class welfare. For my class.

Now, Ben's right about the stock packages, but some of Buffet's other writing twigs into the fact that options packages encourage CEOs to make things look good -- even if they're not -- so they can get the bonuses.

Ok, so lets wee, we started at tax cuts, went to dividends, then onto CEO compensation, and now we're back at tax cuts. I'm sure everyone followed along, and as bmulligan would say, is a flaming commie now, because of course, anyone that argues with me or any of my fellow righteous populists is of course, ghey. :D

Jason McCullough

06-15-2003, 02:21 PM

I'm pretty sure giving the CEO stock reduces all other owner's future earnings, so it's a cost of production.

bmulligan

06-15-2003, 07:34 PM

kalle wrote:
Your polemic about slavery is moronic, socialist welfare states have existed for over 50 years yet none of us who live in them are slaves, or anything remotely similar to that concept.

The American social welfare state exists here already. I am a slave also. My money is taken from me by force by the government. I have no choice in the matter. My freedom, my life will be taken from me if I do not comply. Eventually, the receivers in these welfare states will outnumber the providers and then where will you and I be? There must be providers for your socialist state to exist, and they do not appear in a vacuum. Your system depends on the rich for there to be redistribution. When the rich are gone, your state will no longer be able to function.

Complete social welfare states are doomed to failure from inception. The purpose of government is not to provide welfare, it's to allow people to provide for themselves. Perhaps this is foreign to you because it is one of the principles my country was founded upon. Unfortunately, most do not understand or agree with this principle.

I do not however see property rights to be absolute. No one is entitled to my life or anyone elses life, but wealth redistribution is fine by me.

Can you not see the contradiction in your own statement? How can you believe no body is entitled to your life if redistribution of wealth is fine by you? It's the same thing. Your life IS your property, no one elses. Things you create are your property. Your money is your property. Redistribution is the stealing of YOUR property. Is a little slavery OK? How about a little poison in your food? Saying others have a claim on your property is the same as others having a claim on your LIFE!

I'm a strong believer in individual freedom to choose your life as you wish.

You cannot be a believer in individual freedom. You already said that freedom is not absolute. You cannot live your life as you wish because others have a claim on you and what you own under your social contract.

I know I'm beating a dead horse here, but you seem to be the horse so I guess i'll quit now.

BEN wrote:

CEO stock package compensation isn't a cost of production, XPav. Marginal costs are the relevant ones. That's why the raw product's price drop will be passed on the consumer.

Wasn't Buffets whole point about accounting fraud that the CEO incentive packages weren't being expensed as liabilities, or costs(of production)?

In the 1970's, Japaneese cars did cost less than their american counterparts. Ans they were a better value. It's the reason we have smaller cars today, with better gas milage. Yes they exploited a market demand, that's the nature of capitalism. Because of the unions who tied the hands of automakers in hiring, firing, and wages, American car makers got caught with their pants down. They were unable to re-tool, re-engineer, and re-design to compete with the japaneese because of the high overhead guaranteed to the unions.

And about union made cars. American cars are not made outside of the united states. Then they would not be 'american' would they? Granted, many assemblies, parts, and components are made outside the US and are assembled here at a higher rate then, say, in Mexico. Transportation is a major union cost also, thats why the unions are against free trade agreements with canada and mexico.

And to McCullough, a union rate of $30 compared to a $20 non-union rate is a significant difference---50% difference. a major component of a products cost basis. Considering most manufacturing plants in the US have exclusive contracts with unions, it's impossible to get these jobs done by non-union work in the US, so they move to mexico where they don't have to deal with the unions.

Jason McCullough

06-15-2003, 09:14 PM

I'm having trouble thinking of an industry that'll relocate for a $26/hour wage difference but won't for $16/hour.

XPav

06-15-2003, 09:46 PM

I swear bmulligan is from the mirror universe. I mean, here we are, with welfare under assault, social security in danger, tax cuts out the wazoo, and bmulligans is convinced that Lenin is about to take a international plane flight over and esconsce himself in place of Abraham Lincoln and turn the reflecting pool into a wading pond for the proletariat.

Your comments about the utter downfall of the United States because of its limited social welfare policies, are especially amusing seeing that many European countries have pursued greater social programs for nearly half a century, and while we can argue about how effective and useful they are, I don't exactly see many of the highly socialized western european countries as being more horribly worse off than here. As a matter of fact, my Dutch relatives all seem to be doing quite well for themselves.

Oh, and plants are moving out of Mexico. Its too expensive nowadays. Off to China! (And this I know because I work in the manufacturing sector).

But you know bmulligan, if you're convinced that the taking of money from you by the US government is completely unacceptable, there are numerous ways to not pay taxes. Yes, some of them involve moving to another country, but hey, thats your choice, right?

Kalle

06-16-2003, 01:00 AM

You cannot be a believer in individual freedom. You already said that freedom is not absolute.

Absolute freedom is the freedom to do anything, that is anarchy, and I do not wish for that kind of freedom. Do you claim that it is somehow a bad thing that my freedom to rape, rob and murder is limited by society?

Saying others have a claim on your property is the same as others having a claim on your LIFE!

Why? Life, unlike property, can't be traded away. If you cannot comprehend the difference between a 5 dollar bill and another persons life I doubt continuing the discussion is any use.

bmulligan

06-16-2003, 09:29 AM

XPav wrote:
I swear bmulligan is from the mirror universe. I mean, here we are, with welfare under assault, social security in danger, tax cuts out the wazoo, and bmulligans is convinced that Lenin is about to take a international plane flight over and esconsce himself in place of Abraham Lincoln and turn the reflecting pool into a wading pond for the proletariat.

He's (Lenin) already been here, defaced the statue and pissed in the pool

Your comments about the utter downfall of the United States because of its limited social welfare policies, are especially amusing seeing that many European countries have pursued greater social programs for nearly half a century, and while we can argue about how effective and useful they are, I don't exactly see many of the highly socialized western european countries as being more horribly worse off than here.

How does this justify the existence of 'social welfare'? If anything, It is an argument for its failure because these programs only create more dependancy and increase in size over time. Perhaps we should be arguing their effectiveness

Kalle wrote:

Absolute freedom is the freedom to do anything

No, it's not. One does not have the freedom to infringe on the rights of others. This should be the premise of your 'social contract,' but it is not.
Governments are instituted to protect such rights, that is their primary function.

Life, unlike property, can't be traded away. If you cannot comprehend the difference between a 5 dollar bill and another persons life I doubt continuing the discussion is any use.

Yes it can be traded away, or stolen, or given. You don't understand the differece between my life and MY $5 bill. You think it's my life but YOUR $5 bill. That's the difference. Individual liberty and private property are inseperable. You would choose to rob me of my $5 bill in order to help joe guy who only has 50 cents because YOU have the arrogance to determine who is more needy.

Time is money. The energy and time I spend acquiring money is being stolen from me. I.E., my time is being stolen from me. My time and effort belong to me, they are part of my life, they are one and the same.

You should find out that there are differences between currency, money and wealth, they are all different.

XPav

06-16-2003, 09:39 AM

The United States -- stealing people's lives since 1913!

Kalle

06-16-2003, 10:08 AM

Absolute freedom is the freedom to do anything No, it's not. One does not have the freedom to infringe on the rights of others.

Why not?

How can it be absolute freedom if it is limited?

Life, unlike property, can't be traded away. If you cannot comprehend the difference between a 5 dollar bill and another persons life I doubt continuing the discussion is any use.Yes it can be traded away, or stolen, or given.

How do I go about trading my life for something then? How can life be traded or given at all? My life cannot exist outside of myself.

Casper

06-16-2003, 12:36 PM

I just thought I'd chime in about people choosing things and not choosing things, as bmulligan was whining about.

Who says you have to work at a job where you pay taxes?? I'll bet there're lots of people living in the US who don't pay taxes. If you hate paying them so much, then work somewhere where your income either is under the table or on a 1099 and then don't pay the tax. It's your choice about whether or not to do it. Sure, that choice has consequences, but there you go...that's life.

In terms of the other stuff, I'm with Kalle. Total freedom is a myth. to quote from sondheim: "But if life were only moments/ Then you'd never know you had one/" Granted, that may not be exactly what you guys are expecting, but without boundries, total freedom would be meaningless. AND, I'm sure that there are different levels of freedome that we have in different situations. Like you said, bmulligan, well, total freedom wouldnt' include harming someone else or infringing on their freedoms...

I'd say that even within the bounds of the legal freedoms and rights that we have, we create other boundries for ourselves, so even if there was a legal total freedom, we wouldn't treat it like that.

man, I hope someone replies to this so that I won't get ignored again. I'm not sure what the word "Troll" means...maybe its the same thing as a lurker (which is what I am), but when I have something to say, I'd like to feel as though it's being listened too..

brian