Both? How do you figure?Quote:
Originally Posted by JarodParker
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Both? How do you figure?Quote:
Originally Posted by JarodParker
But why do you think that this is not an extraordinarily low tax rate?Quote:
Originally Posted by Presley Cannady
Deferring tax payments should drive taxes rate up, for the government didn't get the money earlier and had to substitute for it by lending money on which it had to pay interest during the period.
Because I didn't take the money for a year? And a year from now, my net gains may be negative?Quote:
Originally Posted by Fuchs
Deferring income generally doesn't.Quote:
Deferring tax payments should drive taxes rate up...
Yeah, but that's an intentional (lobbied) advantage for capital investors over labour income. That's my point.Quote:
Originally Posted by Presley Cannady
http://en.wikipedia.org/wiki/Capital..._United_States
(my emphasis)Quote:
Capital gains are generally taxed at a preferential rate in comparison to ordinary income (26 U.S.C. §1(h)). This is intended to provide incentives for investors to make capital investments, to fund entrepreneurial activity, and to compensate for the effect of inflation and the corporate income tax.
The mentioned compensation isn't a good justification for those tax rates, as financial math calculations of 1st semester quality reveal (and actually, a quick look at the different tax rates shows it as well).
The effect is of course regressive, i.e. lower income groups are being disadvantaged (kinda 'trickle down economics' again).
Look at the table in that link.
The long-term capital gains tax rate is clearly regressive in comparison to the short-term one (a difference that cannot to be justified with in both cases identical corporate income tax or inflation!).
Macroeconomically it's on first sight not important which group of the population owns capital, for consumption of the different groups is another data point and owned but not consumed wealth is akin to an illusion.
But on second sight there's a huge difference, for wealth means control, means power. The concentration of wealth has many undesirable effects that are not apparent on the typical very much aggregated macroeconomic data tables.
Concentrated wealth drives up economic distortions and market failures, even lobbied (and thus usually misguided) regulation. It leads to stuff like 'privatised profit, socialised risk'.
A regressive tax system that ends up fostering wealth concentration (and that's the unquestionable macro trend in the U.S. and, sadly, for a different set of reasons also in Germany) is a poor tax system. It's perfectly fine when people express their disgust and lobby with demonstrations against wealth and power accumulation by 1 % (if not 0.1%) of the population.
Hey, look, you guys love that 53% number, and no matter how you cut it, it's the wrong number. The number is 47%, and that's an unusually high spike. Furthermore, the statement that started this ridiculous 53% thing says "pay taxes in America". It doesn't say "pay Federal taxes," it says "pay taxes". If you don't like people to respond as if you made a broad statement that contains factually incorrect subsets, then don't make broad statements that contain factually incorrect subsets.Quote:
Originally Posted by Presley Cannady
Well, luckily, unless you're one of the banks that got bailed out, you're not being asked to cut anyone a paycheck. And if you are one of those banks, then it's very likely that you're not in the 53% oops I mean 47% anyway! But I'm going to assume that you're not a bank, because banks don't generally make forum posts.Quote:
Originally Posted by Presley Cannady
And why are you mad at OWS anyway? "Ten years of liquidity you probably didn't deserve" doesn't really describe very much of OWS. In fact, it more accurately describes the banks that OWS is protesting.
Which has what to do with what?Quote:
Originally Posted by Fuchs
So?Quote:
Yeah, but that's an intentional (lobbied) advantage for capital investors over labour income. That's my point.
Come again?Quote:
The mentioned compensation isn't a good justification for those tax rates, as financial math calculations of 1st semester quality reveal (and actually, a quick look at the different tax rates shows it as well).
How do you figure? There's a 15 to 35 percent tax rate on corporate income on top of the capital gains tax, so the effective rate is at least 30 percent.Quote:
The effect is of course regressive, i.e. lower income groups are being disadvantaged (kinda 'trickle down economics' again).
I don't think "regressive" means what you think it means. You'll forgive me if I don't waste time on the superfluous abuse of jargon in the remainder of your post.Quote:
The long-term capital gains tax rate is clearly regressive in comparison to the short-term one (a difference that cannot to be justified with in both cases identical corporate income tax or inflation!).
Nope, it's the right one. We're talking about TARP, which is a federal expenditure. Only 53 percent of Americans pay federal taxes. Therefore, the tax dollars of those 53 percent of Americans are the only tax dollars at issue here.Quote:
Originally Posted by motorfirebox
Because they're a bunch of shiftless know-nothings who smell funny.Quote:
And why are you mad at OWS anyway?
It's kinda pointless to discuss with someone who doesn't grasp arguments.
Well, at least I turned around the primitive 'discussion' tactic of "attacking, attacking, attacking without regard for counterarguments".
I've experienced that tactic often enough from certain quarters and it feels nice to break it for once with a counterattack. :D
After all, you cannot win by defending only (even if the attack is totally misguided and repetitive).
There's no point in trying to convince people who -even if they understood or at least recognised arguments - are deep in cognitive dissonance trap anyway.
Such 'discussions' are at most useful to keep bystanders from buying into some nonsense, but such an indirect approach is kinda weird.
Psychologists should do some research on how to circumvent crappy discussions and how to empower rational argumentation. It would be a great service to mankind if they made progress in that field.
I truly despair for future generations of self-inflated blowhards if that's the best you can come up with. How are America's children supposed to learn to avoid engaging substantively on facts that disprove their paradigms by instead engaging in personal attacks, if you continue to set such a weak example by using transparently dismissable attempts at insult?Quote:
Originally Posted by Presley Cannady
It's kind of pointless to discuss finance with someone whose entire "argument" boils down to "I fancy myself an economist, so jibberish."Quote:
Originally Posted by Fuchs
Are you a child?Quote:
Originally Posted by motorfirebox
Missing the point, I think. Deferring the sale of investment doesn't defer the tax payment, it defers the income. You can't tax hypothetical gain on an unsold investment, because it's unrealized and there's nothing to tax.Quote:
Originally Posted by Fuchs
The point of taxing gain on investments held less than a year as "income" (higher rate) and those held longer as "capital gain" (lower rate) is to create an incentive to keep capital invested longer, taxing day traders and investment-flippers at a higher rate. I don't see how that's a legislated advantage for wealth over labor in any way.
Warren Buffet does well out of it because he buys and holds, which is what the incentive is meant to persuade him to do. A dollar invested does the country more good than a dollar turned over to the government, and keeping the dollar invested does a whole lot more than the extra $.20 or so that the government would get if it's held less than a year.
Labour income doesn't get the "incentive" despite being about 2/3 of factor input for economic output. That's a legislative distortion of the input markets.Quote:
Originally Posted by Dayuhan
And of course it benefits the wealthiest way out of proportion because the lower and lower middle class don't own much capital.
The U.S. lacks capital investment (last year it had not even enough for replacing the depreciated parts of the capital stock), so a policy that distorts in favour of more capital investment may be useful (which doesn't mean it's not distorting or not favouring the rich).
A reduced taxation of private investments in general is worse than a shotgun approach to the problem, though.
Capital investment in the macroeconomic meaning (the one that's lacking) is actual buying of machines, construction of factory buildings or even government's ordering of construction of highways and that kind of stuff.
Capital gains on the other hand can be (and are in great part) about the service economy or not even about any real economy at all. Even worse; afaik you may buy Brazilian stocks or state bonds and still get the 'preferential' treatment by the tax code.
The low capital gains tax rates are such a horribly inefficient tool for fostering (macro-sense) domestic capital investment that this function is 90% lie and 10% fig leaf.
That tax code is not pushing for a better economy; it's saving the rich people taxes. Being a distortion of factor input markets, it's not much else than a redistribution of income (and thus wealth) from the employed parts of the lower and lower middle class (mostly) to the upper class (and mostly to the top 0.1%).
It's a common occurrence that something looks on the surface justified by nice economic policy goals as described by politicians, lobbyists and at times Wikipedia et al - and in reality even a casual analysis by a trained economist exposes it as a distortion driven by lobbyists (=money in policy) in favour of a special interest group or more.
Germany has the same problem. A quick look at the mineral oil tax code of Germany makes me puke in an instant. I begin to swear and then I puke.
*Need to switch to another activity right now, for I remembered that ####ty tax code for too many seconds.*
When income happens, tax happens. When income happens later, tax happens later. Quite indisputable, me thinks.Quote:
Deferring the sale of investment doesn't defer the tax payment, it defers the income.
It's an intentional distortion designed to reward behaviour deemed desirable: holding investments rather than flipping them. What do you see as undesirable, the goal or the method? I'll grant the incentive hasn't been as successful as it was intended to be, but does that argue for a weaker incentive or a stronger one?Quote:
Originally Posted by Fuchs
Do you see no benefit to labor in rewarding medium and long term investment (the type more likely to create jobs) over day trading and flipping?
Investment income isn't income of any kind until the investment is sold. Defer the sale, defer the income, defer the tax. Can't tax income that isn't there, and until it's realized it isn't there.Quote:
Originally Posted by Fuchs
posted by Fuchs
The tax code is based on the political philosophy of trickle down economics, which in my "opinion" doesn't work, has never worked, nor will work. It runs contrary to human nature. On the other hand we have the extreme left that desires to remove all incentative for performance from the system and put everyone in gray clothes and embrace the Maoist form of communism, which is even worse than the trickle down philosophy. The biggest challenge we have in the U.S. is moving the debate away from extreme political philosphies not supported by the data to addressing how we can honestly define and then tackle our economic problems.Quote:
That tax code is not pushing for a better economy; it's saving the rich people taxes. Being a distortion of factor input markets, it's not much else than a redistribution of income (and thus wealth) from the employed parts of the lower and lower middle class (mostly) to the upper class (and mostly to the top 0.1%).
There's no difference in macroeconomic terms. There's only savings (= investment) and consumption. The real economy doesn't mind directly whether two individuals keep a share of one company A and company B respectively forever or if they exchange the shares every minute.Quote:
Originally Posted by Dayuhan
There are no doubt some benefits in other views than the macro view, but they do most certainly not justify a three-digit billion $ market distortion.
This should weigh heavily in the land of the free market fanbois
He argued that somehow deferral justified the lower rate. I did just argue on that basis.Quote:
Investment income isn't income of any kind until the investment is sold. Defer the sale, defer the income, defer the tax. Can't tax income that isn't there, and until it's realized it isn't there.
We can ignore the deferral of both income and taxation, but then we end up with no justification for different tax rates whatsoever.
I'm fine with that view, but nobody can have it both ways. Either we talk about deferral (BOTH income and taxes) or we ignore the deferral because the hypothetical early realisation is just an illusion anyway.
Both ways I have a strong position. I won't accept a scenario in which deferral is only applied to tax, but not to revenue, though.
Presley's lack of economic expertise is in this discussion visible by his non-use of the strongest argument pro lower capital gains tax rates: Inflation. In fact, I was the only one who mentioned it so far in an apparently successful preventive move.
This argument justifies a somewhat lowered rate (but only one that's lowered according to inflation, not a fixed rate that's independent from both inflation and duration of investment!).
I do thus conclude that his opinion is not based on his own analysis, but on propaganda that was fed to him and that he absorbed properly (albeit apparently incompletely).
As I wrote earlier; there are so much better ways of distorting the markets in favour of more capital investment that the capital gains tax rates can in my opinion only be seen as overwhelmingly special interests gift, and only by a tiny part as steering the economy towards something useful.
Keep in mind that the manufacturing part (primary and secondary sector) of the U.S. economy is only about 22% of GDP. The capital gains tax applies to capital gains from all 100% - and from "investments" abroad. Now keep in mind windfall gains.
In the end (and this might shock the average U.S. citizen) it would be better (=less bad) economic policy to take the full tax rate (=higher revenue, NOT smaller no matter what Laffer curve fantasies say) and make public capital investments into manufacturing capacity or manufacturing-enabling infrastructure.
Giving gifts to capital owners in general instead of for capital investments (in macroeconomic sense) is so much bad policy that it's probably not even economic policy any more.
Then again, we're talking about a country in which "small business" fetishism, Laffer curve and "trickle down economics" dominate the public discourse on economic policy, while behind closed doors the political circus is overwhelmingly being financed by special interests.
Sadly, Germany isn't a good example in regard to the latter, either.
While frustrated with corporate corruption and the disregard of ethics (placing greed above all else), I don't necessarily think our tax system is as out of whack as some imply.
http://www.taxpolicycenter.org/brief...rs/revenue.cfm
http://www.npr.org/templates/story/s...ryId=125997180Quote:
Individual income taxes and payroll taxes now account for four out of every five federal revenue dollars. Corporate income taxes contribute another 12 percent. Excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts (earnings of the Federal Reserve System and various fees and charges) make up the balance. The composition of tax revenue has changed markedly over the past half century, with payroll taxes contributing an increasing, and corporate income and excise taxes a decreasing, share of the total, but the share provided by individual income taxes has remained roughly constant.
http://www.american.com/archive/2007...pays-the-taxesQuote:
SIEGEL: And if we looked at, say, the top 20 percent, the top fifth of all incomes in the U.S., who would that be and how much do they pay?
Mr. WILLIAMS: The top fifth starts a little bit above $100,000. That group makes about 56 percent of all income and pay about 70 percent of all taxes.
SIEGEL: So when it comes to the federal income tax, at least, we have a progressive system. The more you make, the more you pay. The less you make, the less you pay. But we pay other taxes, most notably the federal payroll tax. How many Americans pay more in payroll tax, FICA tax, than in income tax?
Mr. WILLIAMS: If you consider both the share paid by the employee and by the employer, which most economists think is borne by the employee, about 75 to 80 percent of us pay more payroll tax than income tax. Only 13 percent don't pay either one of the taxes a far cry from the 47 percent who get out of the income tax.
SIEGEL: And for what percent is there actually a negative income tax? What percent is actually benefitting from, say, the earned income tax credit so that the federal government is giving them money?
Mr. WILLIAMS: We estimate perhaps 40 percent of more of Americans are getting some money back. That's because we've made a number of the credits refundable. So if it takes your taxes down to zero, it can take it below zero and result in a payment.
6. What is the economic logic behind these lower tax rates?
As legend has it, the famous “Laffer Curve” was first drawn by economist Arthur Laffer in 1974 on a cocktail napkin at a small dinner meeting attended by the late Wall Street Journal editor Robert Bartley and such high-powered policymakers as Richard Cheney and Donald Rumsfeld. Laffer showed how two different rates—one high and one low—could produce the same revenues, since the higher rate would discourage work and investment. The Laffer Curve helped launch Reaganomics here at home and ignited a frenzy of tax cutting around the globe that continues to this day. It’s also one of the simplest concepts in economics: lowering the tax rate on production, work, investment, and risk-taking will spur more of these activities and will often produce more tax revenue rather than less. Since the Reagan tax cuts, the United States has created some 40 million new jobs—more than all of Europe and Japan combined.
7. Are lower tax rates responsi#ble for the big budget deficits of recent decades?
There is no correlation between tax rates and deficits in recent U.S. history. The spike in the federal deficit in the 1980s was caused by massive spending increases.
The Congressional Budget Office reports that, since the 2003 tax cuts, federal revenues have grown by $745 billion—the largest real increase in history over such a short time period. Individual and corporate income tax receipts have jumped by 30 percent in the two years since the tax cuts.
You'd think so, but it generally doesn't work out that way. When you work out the actual money paid to the very small number of executives, per company, cutting it by half or two thirds would give you but a drop in the bucket. The actual impact on the Company's balance sheet or operations would be pretty minimal.Quote:
Originally Posted by JarodParker
I didn't mean to suggest that dissatisfied investors should take money out of the markets, but that they should shift it to companies they feel are better managed. There are thousands of options, many of which (the ones you never read about in the news) are just doing business and getting on with it.Quote:
Originally Posted by JarodParker
Institutional investors (mutual funds, pension funds, etc) aren't exactly impotent. They don't apply their leverage by voting at shareholder meetings or trying to change management, because they recognize that they haven't the expertise and they'd rather not bother trying to get it. If they don't like the results a company is getting, they don't try to change management, they sell the shares and buy something else.
I think a lot of the less savory trends in modern corporate management were actually boosted by the rise of individual retail investors in the mid 90s. Before then almost everybody invested through institutions. The institutions were a lot more patient: they were well diversified and had a longer horizon. The analysts who advised them actually understood the businesses, read every word of the SEC filings. They were less concerned with quarterly results than with medium to long term company and industry trends.
When the boom in individual investment hit a lot of that changed. The guys who were trading on their own didn't read a 10Q, they just looked straight to the revenues and EPS. They were impatient. They didn't want to hit singles, they wanted home runs. By 98 or 99 even home runs weren't good enough, they wanted grand slams. They weren't huge, but there were lots of them, and they traded a lot, way more than most institutions. Executives were under a whole lot of pressure to deliver short term results... those that did got big rewards, those that didn't got the axe. Don't just look at how much they are paid, look at how executive turnover has spiked up and tenure has dropped. Company has 2 bad quarters, shares are diving, have to show the investors something... show them the head of the CEO and spend big bucks to bring in some new star who's going to turn everything around.
The whole 90s psychosis, the trade-it-yourself attitude and the perception of investing as a way to make the one killer deal that will set you up forever, rather than a way to gradually build value over a period of time... it's had a really nasty impact on the financial scene, and a lot of people who weren't watching in those days don't realize the extent to which it was driven from the bottom up. I remember in those days discussing "the barber rule": if your barber is talking to you about dot com IPOs (or, in retrospect, real estate deals) it's time to sell everything quick.
I can think of no more consummately boring field of study than "modern portfolio theory" - the prevailing wisdom in the financial word circa 1990 - but these days we could use a bit more of it. Of course now we'd have to call it ancient portfolio theory.
You also have to keep in mind the quite exorbitant standard of what Americans call "living". It's probably not so obvious to people who are there all the time, but it's just flat out shocking when you live outside and you go back once in a while to visit. It's one of the things that doesn't add up to me. Everyone talks about how much worse off Americans are, but to someone who left in the late 70s the amount of stuff, the level of luxury, the stuff Americans take for granted is absolutely astounding.Quote:
Originally Posted by JarodParker
A wee illustrative anecdote:
There's an American couple that spends a third of the year in my little town, a third in India, a third in the US. They're retired teachers, living very frugally; "aging hippies" would not be an unreasonable description. They pulled in from the US a few weeks ago. Les told me that he'd taken a Greyhound bus (not a place where you meet the upper class) from Idaho to Mississippi to see relatives. He recounted with complete astonishment that every seat on the bus had an electrical outlet, the bus was wi-fi enabled, and that practically everyone on the bus was logged in on one gadget or another. Terri, his wife, who is a bit earthy by nature, interjected something like "and every one of them was on Facebook whining about being oppressed and exploited".
Anecdotal evidence, to be sure... but I wonder how many of America's enraged realize what the system they loathe has done for them, and how much they've actually got. I see it all the time in my extreme sport buddies... visiting kayakers, young guys, basically cool but very much of the idealistic left, speaking of the exploitive system and how they're among the oppressed masses while bopping around the world with thousands of dollars in high-tech gear... just for the fun of it. Of course I don't say a word, but the incongruity of it does stick out just a bit.
I don't hate the OWS protestors, I just think they're pretty much irrelevant. They barely know what they're against and they haven't a clue about what they're for, beyond a lame litany of left mantras. They demonstrate no understanding of the problems for which they demand solutions, and they've no idea what solutions they want... not all that different from a cute appealing baby wailing for his teat.
We all have an issue, usually several... but I see no point in listening to people who can't be bothered to learn something about the issue and articulate reasonable solutions.
Nobody has "the solution". There isn't one. Solutions emerge through discussion and conflict among people who have varied opinions, all of them reasonable and well informed. Unfortunately that debate gets drowned out by the pointless polarized partisan shrieking.
If you treat taxes purely as a way of raising government revenue, there's no justification. In the US, as in many other places, tax policy is often used in attempts to promote behaviour deemed desirable. Three obvious questions there:Quote:
Originally Posted by Fuchs
Should tax policy be used as behaviour modification?
In any given case, is the behaviour for which an incentive is being created actually desirable?
Does the incentive actually create the desired behaviour?
In any given case that would take some looking at.
You could argue that removing the tax break for deferred sale of investments would benefit the rich, since the rich are more likely to be actively flipping investments than the middle or upper middle classes, who are more typically invested directly or indirectly through institutions that are more likely to be holding shares.
The hypothetical income is of course illusory. If you don't sell the investment, there's no income, even if the investment has gained in value. The deferral only applies if you defer sale of the investment. If you sell, you pay tax.Quote:
Originally Posted by Fuchs
Are you proposing that investment in manufacturing be treated differently than investment in non-manufacturing enterprise? Or that a different set of incentives be granted to investment overseas (very difficult to quantify with so many companies having both US and non-US operations)?Quote:
Originally Posted by Fuchs
That assumes that a decision has been made to prioritize manufacturing over non-manufacturing investment and award a unique incentive to manufacturing investment.Quote:
Originally Posted by Fuchs
The US government being what it is, the added tax rate would most likely disappear into the black hole with no capital investment being made
We're gonna have to agree to disagree on this one. I think executives are being compensated in disproportionate amounts relative to their contributions, at the cost of investors and employees. Banks were and still are setting aside 50%+ of their revenue for bonuses with a majority going to top management.Quote:
Originally Posted by Dayuhan
Here's an interesting chart about the CEO/employee pay gap...
That is a ratio of 185.3 which has ballooned by more than 7 times since the 1965 ratio of 24.2. I really don't see anything that justifies such an increase. According to the Military Pay chart for 2012 (which I hope I'm reading right) an E1 with less than 4-months of service gets $1,379/month while a four-star general with 38-years of service makes $19,239/month. That's a ratio of 13.95. Even if you factor in things like BAH/BAS, I don't think the ratio will go past 20. Now, I don't expect Corporate America to adopt an "officers eat last" mentality and narrow the gap to such levels but they should at least eat together.Quote:
According to the EPI figures, the average CEO received $8,917,000 in compensation in 2009, while the average production worker got $48,130.
I think you misunderstood my statement. I was agreeing with you that one should find other companies to invest in.Quote:
I didn't mean to suggest that dissatisfied investors should take money out of the markets, but that they should shift it to companies they feel are better managed. There are thousands of options, many of which (the ones you never read about in the news) are just doing business and getting on with it.Quote:
Originally Posted by JarodParker View Post
For a long time I was frustrated by the futility of option1 especially for retail investors. Even the big mutual funds are impotent. That's why I took option2 and voted with my feet. But even then the stock market as well as the overall national and global economies can still be taken hostage by these institution. And that's why stricter regulation is necessary.
I assure you I'm aware how the other half lives as I've spent quite a bit of time in East Africa. It is what it is. The American middle class cannot downsize to a Thai standard of living, just like Thais wouldn't want to live at Somalia's standard of living. Everyone wants to be upward mobile. Otherwise the CEO's would forgo the high pay, bonuses and everything that comes along with it and just live like their employees. Just because somebody somewhere around the world is doing worse than you doesn't mean that you don't have a legitimate gripe.Quote:
You also have to keep in mind the quite exorbitant standard of what Americans call "living". It's probably not so obvious to people who are there all the time, but it's just flat out shocking when you live outside and you go back once in a while to visit. It's one of the things that doesn't add up to me. Everyone talks about how much worse off Americans are, but to someone who left in the late 70s the amount of stuff, the level of luxury, the stuff Americans take for granted is absolutely astounding.
It's also the American way to speak up against perceived injustice. The abuses Asians, Africans, Arabs etc accept by saying things like "insh Allah", Americans would never stand for. That's why our official motto should've been "Don't Tread On Me."
Source on that? Seems unlikely.Quote:
Originally Posted by JarodParker
How much of that is actual cash paid by the company, how much is stock options... and how are the stock options valued? n Break the actual cash component down and compare it to the overall company budget and it stops looking so big.Quote:
Originally Posted by JarodParker
Neither executives nor workers are paid according to anyone's perceptions of how productive they are or how much they "deserve". A rather strange cult of the celebrity CEO has emerged, with companies competing to get "stars" whose record will impress the shareholders. It's almost like rock star or athlete pay in that sense. You've also got a trend of CEOs not lasting long... a few bad quarters and they get the sack, a few good quarters and they want to trade that "success" into a big package elsewhere... likely as a replacement for the guy who got the sack. Again, it's up to the boards of directors and the shareholders to change that, if indeed they want to. Not a terribly positive trend IMO but I really don't see what to do about it that wouldn't be worse.
I didn't mean to compare the American middle class to Filipinos or Somalis, but to compare them to the American middle class of 30 years ago. Again, the change is only noticeable if you've been away a long time.Quote:
Originally Posted by JarodParker
Of course Americans want to be upwardly mobile. I think the American habit of blaming the restrictions on their upward mobility on "wall street" generically, or on overpaid CEOs, or similar internal matters misses the point. The US walked out of WW2 with a staggering economic advantage. Every other industrial power in the world was shattered. Many powers and potential powers spent most of the next half-century either in the grip of a totally self-defeating economic system or being kicked around by the cold war. Americans didn't prosper because they were smarter or better or more efficient, they prospered because they had a huge head start.
The head start is gone. The rest of the world is in play, and they're hungry. That won't be changed by paying CEOs less or regulating banks more. It needs a retooling of American education and a completely new approach on all levels: that's on the part of small institutions and individuals and government as much as on the part of wall street and CEOs. Trying to lay the blame on the latter is satisfying (and advantageous to politicians who would rather have the electorate pissed off at wall street than at them) but it won't solve the problem.
That's largely intuition born out of Protestant work ethic and a distrust of liquidity. Here's an example. A Bangledeshi farmer grows a perishable crop only Americans will eat. Let's say this crop has about a month shelf life, so it depreciates in value every day. This farmer needs to round up as many end consumers as possible to buy his crop as soon as possible. Who's better equipped to do that? Your farmer or the "investment flipper?"Quote:
Originally Posted by Dayuhan
With a 35 percent corporate tax rate, how do you figure?Quote:
Originally Posted by Bill Moore
No, do you?Quote:
Originally Posted by Dayuhan
Afaik that's deductible from income tax and thus only relevant in considerations of foreign capital owners.Quote:
Originally Posted by Presley Cannady
The U.S. tax code (and sadly, most tax codes) is full of loopholes and exceptions. The true tax payments are different than the nominal ones.
Much of the regressiveness comes from this, for lower middle class peopledon't afford advisors and cannot afford to exploit many loopholes.
I confess to having a work ethic, and to not entirely trusting people to manage liquidity effectively.Quote:
Originally Posted by Presley Cannady
Unless the Bangladeshi farmer's crop is valuable enough to air freight, which it's probably not unless it's illegal, he's stuffed from the start, given how long it would take him to get the stuff to market.Quote:
Originally Posted by Presley Cannady
I see the point, but I didn't say that type of money movement shouldn't happen, only that it doesn't necessarily need to gety a tax break. If people make money on that sort of trade, fine... that's their income, let them pay income tax on it.
Whether or not the longer-term investment that the rule in question was designed to promote is actually superior is an open question. The point is that the rule was designed not to exploit labor but to create an incentive for a type of investment that whoever wrote the rule wanted to promote. Whether tax policy ought to be used for behaviour modification is still another question, but it is used that way and will probably continue to be used that way.
It's not.Quote:
Originally Posted by Fuchs
Didn't say work ethic. Said Protestant work ethic.Quote:
Originally Posted by Dayuhan
Which is why you probably shouldn't get into the commodity trade.Quote:
...and to not entirely trusting people to manage liquidity effectively.
Which is why he seeks out a buyer who can sign a futures contract with a fulfillment date within reason. That buyer then turns around and sells the contract to someone else until it ends up in the hands of someone with...say...refrigeration units that can take delivery within the shelf-life.Quote:
Unless the Bangladeshi farmer's crop is valuable enough to air freight, which it's probably not unless it's illegal, he's stuffed from the start, given how long it would take him to get the stuff to market.
What tax break? This is a transaction tax. Comparing it to an income tax is like comparing apples and oranges. Do you think it makes sense to ponder "why I have to pay 30 percent federal income tax when Johnny only has to pay 6 percent payroll?"Quote:
I see the point, but I didn't say that type of money movement shouldn't happen, only that it doesn't necessarily need to gety a tax break.
In any case, transaction volume is inversely proportional to its attendant costs--if you want more trade, you reduce transaction taxes. If you want less, you increase them. Why you would want less is beyond me.
I don't think the money saved from reducing executive pay is the point. The point is to realign pay with output. An executive who runs his corporation into the ground and costs hundreds of thousands of jobs should not get a bonus. Reducing the pay of an executive who fails that badly is not a goal in and of itself, it's a means to disincentivize that sort of failure and to incentivize, or reincentivize, success.Quote:
Originally Posted by Dayuhan
Link to last nights 60 minutes interview of Jack Abramoff and how Rich People Infilltrate and Subvert the US Government....like the man says they own it!
http://www.cbsnews.com/video/watch/?...in;cbsCarousel
And this differs from every other nation and era just how? :wry:
If I had to choose among having the country owned by the tea party, the OWS protestors, and the rich... I think I'd go for the rich. Least of 3 evils. t least they've a clue how it works.
An executive that cost hundreds of thousands of jobs? Where do you find one of those.Quote:
Originally Posted by motorfirebox
Who do you want to do the realigning? The government? We're talking about a miniscule minority of corporations anyway, so your overall impact on the economy is likely to be close to zero. Of course if you buy into the nonsense that "the banks" caused the crisis, it might look like there's sense in it... but lots of things look sensible if you buy into nonsense. They just don't seem to work out sensibly in practice.
Hasn't it ever struck you how eager politicians are to ride a bubble, cultivate it, urge its expansion, take credit for the pleasures of the upside... think of the Clintonites boasting of their balanced budget, the low unemployment, the soaring stock market, or the Bushies and their record home ownership rates... then when the bubble bursts it's all somebody else's fault? Doesn't that tell you something?
Ken, the world isn't everywhere alike, nor everytime.Quote:
Originally Posted by Ken White
Many countries have had phases in which the influence of the upper class got thoroughly demolished (even though usually it was either rebuilt or a new upper class created).
There are also countries in which the rich haven't so much influence even in normal times.
I don't claim that the rich have no above-average influence in these countries, but they certainly don't "own" the government/state in Switzerland or Scandinavian countries.
I'd look at Goldman Sachs.Quote:
Originally Posted by Dayuhan
There are plenty CEOs who wasted ten thousands of good jobs, too.
Why wasn't I told? Just 'cause I'm pushing 80 and have been in more Countries for longer periods than many, I can't be expected to know everything... :rolleyes:Quote:
Originally Posted by Fuchs
Sheesh. :wry:
No kidding. No, of course not. Each nation is different and the way they tax and spend certainly can and does vary. Obviously era transitions engender changes in mores and attitudes -- BUT -- essentially, in most countries most of the time in recorded History, the wealthy have controlled much that governments do. That's all I said.Thank you for making my point. That is certainly true of the US where the most recent such cycle taking the ultra wealthy down a peg or two started in the teens of the 20th Century, gained increased impetus in the 1930s, accelerated until in the late 1950s, there existed a larger and more prosperous middle class than anyone had seen before. The discontent of the late 1960s started a change and then when those ultra selfish Bay Boomers reached the zenith of their generational power, they had dismantled most of the laws and regulations that bread and sustained that middle class and the 1990s accelerated the (cyclical) rise of the more wealthy to again more blatantly manipulate the handles of power. Most of the rest of the world followed suit, Europe trailing by about five to ten years (today's 'austerity' and bailouts, anyone...), Asia by a bit more but that cycle was effectively mirrored worldwide, acknowledging that some countries were wiser than others in cycle management. :wry:Quote:
Many countries have had phases in which the influence of the upper class got thoroughly demolished (even though usually it was either rebuilt or a new upper class created).
Also true -- however, as we both know that has not always been the case and it is subject to change as you say -- "(even though usually it was either rebuilt or a new upper class created)." Everything goes in cycles...Quote:
There are also countries in which the rich haven't so much influence even in normal times.
If I were you, I would not bet the Farm on that. It's a matter of degree of ownership -- and perception. In those nations -- and others -- discretion is far more highly valued than it is in the US. We Yankees are rather gauche -- and that's a big part of the perception problem... ;)Quote:
I don't claim that the rich have no above-average influence in these countries, but they certainly don't "own" the government/state in Switzerland or Scandinavian countries.
Posted by Presley Cannady,
Quote:
Originally Posted by Bill Moore
The tax code is based on the political philosophy of trickle down economics, which in my "opinion" doesn't work, has never worked, nor will work.
Presley I'm not sure what your angle here is so I'll address it from two different angles and hopefully touch upon your point.Quote:
With a 35 percent corporate tax rate, how do you figure?
Trickle down economics assumes the rich will create more jobs and distribute the wealth for the betterment of society without the interference of government. It assumes that man is basically good, but reality (in my view) doesn't support this. It is a philosophy that runs in opposition to human nature. This isn't an attack against the rich, especially those who are self made and add value to society, but against the financial system manipulaters who use a wide variety of means that add no value to acquire more and more cash.
A 35% corporate tax rate (which I happen to disagree with and agree with the bi-partisan discussions to reduce it to make our corporations competitive again) is a government led effort to redistribute the wealth, which is not trickle down economics.
Our current economic problems seem to be based largely on less than ethical behavior. Assuming I'm correct (and I remain open to be convinced I'm not) that means the so called center of gravity is human behavior and the way to address destructive behavior is through deterrence implemented through regulation enforcment, which failed to happen prior to the crisis. This cure, just like many medications, has undesirable side effects also such as stiffling growth. Longer term it would be nice if the financial sector would police itself, but I don't remain optimistic that will happen.
I don't think I'd pick any of them. As much as I support OWS, there are large parts of the movement that go way too far. I wouldn't pick the Tea Party because I have a number of Mexican friends and because I think it's pretty silly to pay down your debts when you can't put food on the table. And I wouldn't pick the rich because I'm not particularly pleased with the job they've been doing thus far. If I absolutely had to choose... I suppose I'd go with OWS, mainly because I side with them on social issues. I think OWS is in the right place, directing anger at the right people, but I have doubts that any good solution is going to come from the movement directly.Quote:
Originally Posted by Dayuhan
With almost 8 million jobs lost to the crisis, I don't think you'd have to look very hard.Quote:
Originally Posted by Dayuhan
Of course I buy into the idea that the corporations who offered loans they knew would not be repaid, then lied about the value of those loans in order to sell them to investors, caused the crisis. I honestly didn't think that was up for debate.Quote:
Originally Posted by Dayuhan
It tells me we need to vote out incumbents on both sides of the aisle. Beyond that, I don't really see anything to choose from between the behavior of politicians and the behavior of corporate officers.Quote:
Originally Posted by Dayuhan
You know, you'd get to the point a lot faster if you didn't assume you had something to teach me.Quote:
Originally Posted by Bill Moore
So how do you figure our tax code is based on "trickle down economics?"Quote:
A 35% corporate tax rate (which I happen to disagree with and agree with the bi-partisan discussions to reduce it to make our corporations competitive again) is a government led effort to redistribute the wealth, which is not trickle down economics.
Why not? It's the company's money. And why should a bunch of crappy workers get a cut?Quote:
Originally Posted by motorfirebox
Edit: never mind. I don't see the point in engaging with such an obvious troll.
I imagine you were going to extol the virtues of the poor, weary worker laboring under the onerous incompetence of management. It's a remarkably self-serving story, isn't it?Quote:
Originally Posted by motorfirebox
Link to Rachel Maddow Show interview with Catholic Bishop Gene Robinson on the OWS and how part of his job is Looking for God. Fantastic interview. There is know Economic solution to the OWS movement only a moral one IMO.
http://www.youtube.com/watch?v=0p7DWqJhotc
Lot of Boyd Theory in this interview, the Moral Level is the supreme level in
4GW especially on your home turff.
Wow Presley, you really are showing your true colours now.
Self-serving...hmmmm :rolleyes:
I'm not the one calling for heads to roll.Quote:
Originally Posted by Kiwigrunt
And why should a crappy manager get a cut simply because he/she is a manager? Just as not everything is not necessarily the fault of management, it can't all be laid at the feet of workers. Accountability should go both ways...but it quite often doesn't.Quote:
Originally Posted by Presley Cannady
It seems to me that this conversation is losing value rapidly due to the fact that ad hominems and generalisations are creeping in. Buttons pushed and stuff like that. I think that two main questions / themes are being blurred somewhat.
1). To what extent are some CEOs and other top players guilty of criminal conduct?
2). To what extent is a huge differentiation in income (something like 500 fold) morally / ethically / legally / economically / social fabrically / what-ever-ly, justifiable or useful or sustainable?
Me? I am a self employed builder. I guess that puts me at least pretty close to the crappy workers class:cool:.
I have no problems whatsoever with the fact that a brain surgeon pulls in more than I do. I’d be concerned if that was not the case. But how much above the median or mean should the top few be? An order of 5 to 10 or so, I’d have no issues with at all. An order of 20 to 50 or so….my eyebrows are starting to gravitate in a Northerly direction. An order of 500 or so…..I think that is beyond silly!
I don’t agree with all that John Rawls puts on the table, but I think me makes some good points. The reason the top few can achieve the levels they do is because of the existence of hordes of crappy workers. These form the physical backbone of the social fabric. That same social fabric that the top few can enjoy to extents that go way beyond their individual contribution and worth to that social fabric. The businesses that these CEOs in question lead, and to which they deliver their value, are also agents within this same social fabric. Any individual or business that puts him/her/itself (too far) above this social fabric is delusional. But they can afford to disassociate themselves, financially at least. Beyond that…..well, we’ll see what the future has in store.
Why should a crappy worker get a severance package? Or his last paycheck? Or his last hourly wages? Short answer, because that's what both parties agreed to when they contracted with one another.Quote:
Originally Posted by Steve Blair
Except some folks seem to want more accountability going one way on top of that agreed to at the time of hire, for no better reason than the form and degree of compensation is way the hell out of their experience.Quote:
Just as not everything is not necessarily the fault of management, it can't all be laid at the feet of workers. Accountability should go both ways...but it quite often doesn't.
Considering the immediate topic of interest deals with a prevailing current of ad hominem and generalization (and abundant know-nothingness where it concerns the financial sector), that's to be expected. Whether that means the conversation is losing value, I'd say consider the alternative before jumping to that conclusion.Quote:
Originally Posted by Kiwigrunt
Is there a reason to suspect a spike in criminal conduct amongst CEOs and top players worthy of discussion here?Quote:
I think that two main questions / themes are being blurred somewhat.
1). To what extent are some CEOs and other top players guilty of criminal conduct?
Morally and ethically, don't give a damn. People would be whining about fairness if CEOs were making only 40 times the lowest income wage earner, let alone 275.Quote:
2). To what extent is a huge differentiation in income (something like 500 fold) morally / ethically / legally / economically / social fabrically / what-ever-ly, justifiable or useful or sustainable?
Legally, since when is it illegal in this country to be richer than someone else?
Economically, the top 1 percent owning a quarter of the "nation's" wealth is not qualitatively different from owning 40 percent. Outrage over this statistic alone betrays a severe ignorance of what constitutes wealth, as if 40 percent of it were stuffed into mattresses by a bunch of miserly hoarders.
Socially, Americans whine after a bust. Muddle through to the recovery and the vast majority will go back to being satisfied with being in the top 1 percent of the entire world.
Sustainability has very little to do with the magnitude of wealth ownership. Even wealth parked as conservatively as possible--in Treasury bonds--finances the trillion dollar deficits the nation runs up on top of $2 trillion in tax receipts the top $900 billion the top 1 percent fork will fork over for 2012. That leaves real estate investment (which peaked at 6 percent GDP over half a century ago), equity and bonds, and consumption--the latter three of which directly reinject wealth back into the system.
Why do you care? What does it cost you?Quote:
Me? I am a self employed builder. I guess that puts me at least pretty close to the crappy workers class:cool:.
I have no problems whatsoever with the fact that a brain surgeon pulls in more than I do. I’d be concerned if that was not the case. But how much above the median or mean should the top few be? An order of 5 to 10 or so, I’d have no issues with at all. An order of 20 to 50 or so….my eyebrows are starting to gravitate in a Northerly direction. An order of 500 or so…..I think that is beyond silly!
I've very little interest in philosophy, so I'll leave that to others.Quote:
That's not true, certainly not now as some universal law and--as automation picks up the pace--eventually not even as a matter of circumstance. But even when a man gains wealth by employing labor, precisely what obligation does he have to labor beyond what was contracted? A wage is earned.Quote:
The reason the top few can achieve the levels they do is because of the existence of hordes of crappy workers.
Who are you to judge whether the top few are compensated "way beyond their individual contributions?"Quote:
These form the physical backbone of the social fabric. That same social fabric that the top few can enjoy to extents that go way beyond their individual contribution and worth to that social fabric.
I think the extent is significant, but few--if any--charges will ever be brought. Instead, they'll throw one-off rogues like Adoboli under the bus whenever they get caught, satiating or attempting to satiate the public's hunger for justice. The collaboration between Standard & Poor's and the securitized mortgage industry alone ought to result in centuries of jailtime.Quote:
Originally Posted by Kiwigrunt
Hard to say how sustainable it is. There are a lot of ways the have-nots could shift the balance of power to even things out, but there are a lot of options available for counteracting those methods.Quote:
Originally Posted by Kiwigrunt
Morally/ethically, the line is the point at which those who have significant wealth are able to leverage that wealth to change the laws of commerce to the disadvantage of everyone besides themselves. There's no number at which it becomes wrong (though I could see a number which strongly indicates that something is wrong), it's the manner in which that number is used.
http://www.bizjournals.com/washingto...l-out-big.html
Tax payers dollars, requesting another tax bail out while asking for bonuses, once again a rewarding failure. This isn't capitalism.Quote:
The Federal Housing Finance Agency, which regulates the mortgage giants that are now under government receivership, has approved $12.79 million in bonus pay for the performance of 10 executives at Fannie and Freddie last year despite both companies posting losses in all four quarters, Politico reported.
The executives were rewarded with Wall Street-style incentives for meeting modest performance targets tied to modifying mortgages in jeopardy of foreclosure, according to Politico. Among the compensation deals was a $2.3 million bonus awarded to outgoing Freddie Mac CEO Ed Haldeman for 2010, a figure that is more than double his salary of $900,000. Fannie Mae CEO Michael Williams got $2.37 million in performance bonuses.
http://www.foxnews.com/on-air/on-the...e-giants-fredd
Government run can't be worse than what it was. Even an SES employee wouldn't come close to making that much money, and they frequently have much more responsibility (or provide more value in other terms).Quote:
VAN SUSTEREN: I mean, it isn't exactly good talent if -- maybe we could -- maybe we pay just to get rid of them so we don't have to pay another $6 billion next quarter!
THUNE: Right. Well, these are the guys who were brought in to kind of clean up the mess. And you know, so far, they're asking for another $6 billion. They have reduced what we think is going to be the liability of the taxpayers, though, for the Freddie Mac and Fannie Mae bailout significantly over the course of the last year.
But that being said, they're asking for an additional $6 billion in taxpayer assistance at a time when they're making these big bonus payments. And it just sounds -- it just looks terribly inconsistent, and I think it is -- it is an outrage. And I think, you know, you've got to show a little bit more of an ear for what's going on in this country right now and how important it is that we get our fiscal house in order, how important it is that we get people in the real economy back to work. This just doesn't square with that.
VAN SUSTEREN: I take it that we didn't sort of tie them up and handcuff them and drag them into these $900,000 jobs, right? They came voluntarily?
THUNE: Right, and you know...
VAN SUSTEREN: I mean, so it's, like -- (INAUDIBLE) it's not like they were forced to take -- and I -- when -- when they got these jobs, did we promise them this $13 million to be divvied up in bonuses?
THUNE: I don't know the answer to that for certain. What I know is that the Federal Housing Finance Agency, in consultation with the Treasury, sets this. Now, the president's czar sort of set the pay for a lot these things a long time ago. But I think the bonuses are probably all something that's very discretionary. And you would think if it's discretionary, you wouldn't want to make those types of payouts right now.
Now, the House of Representatives is working on legislation to reform Freddie Mac and Fannie Mae in a way that would create a new structure for the pay for these that's more consistent with what other federal employees might receive.