economy

We need to move more towards taxing capital rather than labour.

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I am inclined to agree, but how do we define 'capital'? As money or ownership or means of production? And what about property? And anything else of value? Or is 'capital' basically just wealth? Examples:

- private money in the checkings and savings account -- (this is simply money owned by someone)
- capital gains of any kind -- (are taxable and should be considered income in my books)
- money already invested in a factory or company -- (ownership)
- corporate money parked in a bank account (corporate savings)
- money invested in company shares -- (ownership but with a 'value' that fluctuates every day)
- Company A rents an estate to build a factory -- (the estate is part of the 'means of production'?)
- Company B rents an estate and turns it into a payable parking lot (the estate is also a 'means of production' and is taxed how)? 

- and the list goes on...
- Person A owns a private house  -- (rather property, and what is the value over time? house maybe needs repairs?)
- Person B has a private house with a mortagae on it -- (shared ownership by buyer and bank)
- Persons C  have a huge mortage on their house and their personal stock portfolios serve as security to the bank -- (how much 'capital' is there and who owns it?)
- Person A has US$ 150,000 in the bank account saved for future purchases, Person B owns two expensive cars and some artworks -- (A is taxed for saving money? And B is taxed for using and looking at expensive items?)

So how do we define capital? Where are the demarcation lines? Every time money is 'moved' (buying/selling), that 'capital' is taxed already. What I do see though is a lot of positive discrimination, meaning some 'capital' is taxed lower than other...

living sounds said:

We need to move more towards taxing capital rather than labour. This will take care of the "robot workers".

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The unfortunate consequence of taxing capital is that you reduce that capital available for investment to grow the economy.

If you tax the same capital, say once every year, over time that capital will diminish. This is one way to reduce the wealth gap by making wealthy people less wealthy.

I will avoid the cliche comparisons to Cuba or whatever country.

I just finished the book "Rise of the Robots", it has good information about the economic implications of developments in the not so distant future. 

A lot of this has already happened, for example, Instagram was bought for a billion $$ while it had 12 full time employees. This is only possible due to automation of most of the services it provides. Taxation needs to be adapted to this reality.

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Perhaps we need to inspect the root need for all this tax revenue.  Transferring wealth from people who earned it, to displaced workers who are not earning any, is not remotely a long term solution (as has been famously observed, eventually you run out of other people's money).

We need to figure out how to empower these workers to earn their own money. Technology is generally applied to eliminate direct labor, perhaps we need a new and different focus. 

JR

The unfortunate consequence of taxing capital is that you reduce that capital available for investment to grow the economy.

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Is that really so? Isn't that money not just changing hands? The state does not usually hoard tax  money, they spend it (on good things and on bad things, sure, but they distribute it) and then that money reappears elsewhere in the economic cycle (lowest but hugely important level is consumer spending). So the money keeps flowing. It's just no longer in the hands of a single person or corporation.

Yes, taxing the same capital every year, diminishes it. That's the idea of a wealth tax. My point is what qualifies as wealth? And are we talking coporations or individuals, or both? Is wealth just money, or also estates and other property? Is a private house plus a second house near the beach being wealthy? What about stocks, physical gold and diamonds and works of art etc etc? And how much wealth is defined as being wealthy enough for being taxed?

Here's another idea.
A state could say to a company: "Look, if you stop hoarding and instead invest your money, you will benefit from a low corporate taxation rate. But if you continue hoarding, we will tax your hoarded 'dead' capital big time. The consequence: companies will rather want to invest to seize opportunities. Some will invest wisely because they are smart, others will invest stupidly and eventually wither. Is this being or has this ever been done anywhere?

Seems apropos.

https://youtu.be/CKCvf8E7V1g

Script said:

Is that really so? Isn't that money not just changing hands? The state does not usually hoard tax  money, they spend it (on good things and on bad things, sure, but they distribute it) and then that money reappears elsewhere in the economic cycle (lowest but hugely important level is consumer spending). So the money keeps flowing. It's just no longer in the hands of a single person or corporation.

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It is not zero sum game, first there is waste, and losses or inefficiencies associated with government spending.

There is an old joke that is partially true. If you take all the money from the rich and give it to the poor, the rich will ultimately end up earning the money back, because that is why the rich are rich and the poor are poor.

Yes, taxing the same capital every year, diminishes it. That's the idea of a wealth tax. My point is what qualifies as wealth? And are we talking coporations or individuals, or both? Is wealth just money, or also estates and other property? Is a private house plus a second house near the beach being wealthy? What about stocks, physical gold and diamonds and works of art etc etc? And how much wealth is defined as being wealthy enough for being taxed?

Here's another idea.
A state could say to a company: "Look, if you stop hoarding and instead invest your money, you will benefit from a low corporate taxation rate. But if you continue hoarding, we will tax your hoarded 'dead' capital big time. The consequence: companies will rather want to invest to seize opportunities. Some will invest wisely because they are smart, others will invest stupidly and eventually wither. Is this being or has this ever been done anywhere?

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Public corporations already get criticized by their owners (stockholders) if they hoard excess cash and don't put it to productive use. They can invest the capital into growing the business internally, use the capital to acquire a business that is additive to their sales and profit, or return the capital to owners via dividends (another strategy is for corporations to buy back their own stock to support market prices and engineer better price to earnings ratio as earnings get divided by less shares.)

Many public corporations right now are sitting on huge offshore reserves of retained earnings parked offshore to avoid high US tax rates if they repatriate the capital to invest here. One program being discussed is tax rate change or perhaps another one time tax holiday to allow corporations to bring back that money to invest here.

They did a one time tax holiday at least once before and that just teaches companies to repeat the hoarding behavior waiting for the next tax holiday. I would much prefer a permanent tax reform that normalizes US tax rates with the rest of the world, so taxes do not distort future investment decisions.

We are talking about trillions of dollars available offshore, so I suspect Washington DC wants to influence how this money gets used. Probably some bias towards infrastructure spending.   

JR

Here's a crazy idea - liberty. Stop forcibly removing people's money from them. Like anything else we as people want, we can fund important things if we wish to. Or not. In no way is this a "free country" when you never actually own anything (taxing someone every year for owning a house, then taking the house if they fail to pay, is tantamount to the "owner" merely renting or using the house).

But what do I know? I'm just an idiot musician who thinks the word "free" in "freedom" ought to mean something.

I know. "You can't have a society without taxation." ERmm...what about the first 150 years of this country - no income tax  :-\ ...sigh...sorry I don't mean to start a flame war. Peace.

living sounds said:

We need to move more towards taxing capital rather than labour. This will take care of the "robot workers".

I just finished the book "Rise of the Robots", it has good information about the economic implications of developments in the not so distant future. 

A lot of this has already happened, for example, Instagram was bought for a billion $$ while it had 12 full time employees. This is only possible due to automation of most of the services it provides. Taxation needs to be adapted to this reality.

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I think the two things that prevent that the most is first of all that "capital" is where the most wealth is located, i.e. those with the most power are the ones with the most consolidated capital and thus the ones most likely to use that (most) power to prevent what you propose. The second thing that prevents it is the perception by the people that they too can be rich as long as they work hard enough, a view that is of course perpetuated by the aforementioned group.

Sorry for being pessimistic again.....

Phrazemaster said:

Here's a crazy idea - liberty. Stop forcibly removing people's money from them. Like anything else we as people want, we can fund important things if we wish to. Or not. In no way is this a "free country" when you never actually own anything (taxing someone every year for owning a house, then taking the house if they fail to pay, is tantamount to the "owner" merely renting or using the house).

But what do I know? I'm just an idiot musician who thinks the word "free" in "freedom" ought to mean something.

I know. "You can't have a society without taxation." ERmm...what about the first 150 years of this country - no income tax  :-\ ...sigh...sorry I don't mean to start a flame war. Peace.

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In the beginning and for many years the Federal government funded their operations with permit fees and and tariffs (a tax on imports).

There seems to be a major disconnect between government spending and collecting taxes, as if it isn't our money that they are spending. For the millions who get more than they pay of course it isn't their money so it seems like a good idea.  :

Somebody needs to be the responsible adults, there is no free lunch.

JR

There is an old joke that is partially true. If you take all the money from the rich and give it to the poor, the rich will ultimately end up earning the money back, because that is why the rich are rich and the poor are poor.

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Partially true, I think so too. But would that then not just be another reason why higher taxes on accumulated capital would not really be a big problem? It could actually be good, because then it keeps flowing constantly. And I'd think that some waste along the way is way better than huge amounts of capital stowed away not contributing anything. -- On a different note, this also makes me think of almost any department in a company, where among, let's say, ten employees there are always one or two who are less effective. Do the remaining employees wish those less effective ones rather to be gone or do they help them out when it doesn't really cost them much?

Public corporations already get criticized by their owners (stockholders) if they hoard excess cash and don't put it to productive use.

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Yes, but private stockholders usually don't have that big a say in a corporation's policy. The number of free-flowing stocks vary widely across corporations. Huge stakeholders like Black Rock might have an influence, but most private people don't really. -- Apart from that paying out higher dividends is good for stockholders, but it is not 'investing', and buying back own stocks too can hardly be called 'investing', it's classic debt reduction.

Many public corporations right now are sitting on huge offshore reserves of retained earnings parked offshore to avoid high US tax rates if they repatriate the capital to invest here. One program being discussed is tax rate change or perhaps another one time tax holiday to allow corporations to bring back that money to invest here.

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Tax holiday -- yeah, that might be the Trump approach, I think. The EU wants Apple's tax money in Ireland and so do the US. Apple now seems to say that they had only 'parked' the revenue in Ireland over the years for later taxation in the US (i.e., waiting for tax holiday), probably because Trump's deal is cheaper for them than the EU's claims. I'd say, make Apple et al pay split taxes in both the EU and the US (i.e., together 100% of tax).

Like anything else we as people want, we can fund important things if we wish to.

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We can already to a small degree. It's called donations, which reduces our tax burden (in most countries I know at least). However, we don't really have a culture of donating. Interestingly though, most more affluent people do donate -- not always with admirable motives though.

Or do you mean no taxes at all and instead let people decide how to contribute and to what? For local schools or companies this might work. But for funding on a larger scale this is probably asking too much, I think, and would require teaching much more knowledge about businesss and economics to the general public.

I think the two things that prevent that the most is first of all that "capital" is where the most wealth is located, i.e. those with the most power are the ones with the most consolidated capital and thus the ones most likely to use that (most) power to prevent what you propose.

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I don't keep record of what I read, so I can't and won't provide links or websites, and I'm too lazy to look them up, but studies and surveys (across Europe at least, I think; IMF?? ) have shown that most affluent people are not totally against being taxed higher to contribute to alleviating off-kilter wealth distribution. And the more affluent people I meet through my jobs are also of this category. As for the motive: well, many affluent people know that too uneven a distribution is bad for them in the long run. But this is not the only motive. Will this abolish capitalism? No, it won't. But it is one piece in a puzzle toward changing both reality and our perception of it.

Script said:

Or do you mean no taxes at all and instead let people decide how to contribute and to what? For local schools or companies this might work. But for funding on a larger scale this is probably asking too much, I think, and would require teaching much more knowledge about businesss and economics to the general public.

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Like I said in the other thread, we had such a system during the Gilded Age in the mid to late 1800's.  Ask an immigrant at the time how fair the system was, and how 'generous' the average robber baron was to the general population.

JohnRoberts said:

The unfortunate consequence of taxing capital is that you reduce that capital available for investment to grow the economy.

If you tax the same capital, say once every year, over time that capital will diminish. This is one way to reduce the wealth gap by making wealthy people less wealthy.

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I don't think the above is true. If you tax capital it doesn't all of a sudden disappear out of the system. The system creates money at the very top, within the financial system, and it then gets invested. If you tax capital that's accumulated and the proceeds in one way or another goes to those at the bottom, then they will spend that money, because their way to "excess" is super-far compared to the way to "average" for the rich.

As the money gets spent it's recirculated and thus goes back to corporations and thus owners who again can reinvest the money.

The poor have to spend the money they make. The wealthy don't.

JohnRoberts said:

I will avoid the cliche comparisons to Cuba or whatever country.

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Apparently not. But you're still either ignorant about why such a comparison is hypocritical, or you're hypocritical about it.

It can't possibly be a reasonable and fair comparison to compare the supposed failure of Cuba to the success of the US when the latter prevented the former from doing free trade as it saw fit. It's a gross comparison. Regurgitating the failures of Cuba, Venezuela or a dozen other states in which the US played an active role in creating such failures is just dishonest... or ignorant.

JohnRoberts said:

Perhaps we need to inspect the root need for all this tax revenue.  Transferring wealth from people who earned it, to displaced workers who are not earning any, is not remotely a long term solution (as has been famously observed, eventually you run out of other people's money).

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This is again a nonsensical argument based on indoctrinated dogma. The key word is the silly application of the word "earn".

An owner of a company that sells millions of widgets hasn't earned the profit that sits on top of each widget any more than the workers that actually created the widget. What the capitalist absolutely DON'T want is a society where you get paid for your actual labor, and not for your ownership. It is the ownership that allows exploiting the labor of workers and customers. That's why it's key to capitalists. Limiting one's wealth to only what one can produce won't do.

JohnRoberts said:

We need to figure out how to empower these workers to earn their own money. Technology is generally applied to eliminate direct labor, perhaps we need a new and different focus. 

JR

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Perhaps we need 'not capitalism'.... ?

Yeah yeah... I know... "But Nicaragua"....

JohnRoberts said:

It is not zero sum game, first there is waste, and losses or inefficiencies associated with government spending.

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There is waste, loss and inefficiency associated with for-profit businesses as well. There are however two clear differences:

1. You get to choose your leaders in government, assuming democracy of some sort (you don't get the same in corporations)

2. In addition to the types of "waste, and losses or inefficiencies" you think of for-profit businesses provide an additional "loss" of value to the consumer that buys the product: Profit. When I buy something from a business and pay anything above the cost of that good or service I'm paying that extra amount solely for the ability of someone else to accumulate capital. That person getting paid for their labor is one thing, but ownership automatically yielding revenue etc is a different one.

So again, a pretty square view of the economy due to a purely capitalist-centric outlook.

JohnRoberts said:

There is an old joke that is partially true. If you take all the money from the rich and give it to the poor, the rich will ultimately end up earning the money back, because that is why the rich are rich and the poor are poor.

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Sounds like capitalism is pretty shitty then. Perhaps we need something else huh?

Phrazemaster said:

Here's a crazy idea - liberty. Stop forcibly removing people's money from them. Like anything else we as people want, we can fund important things if we wish to. Or not. In no way is this a "free country" when you never actually own anything (taxing someone every year for owning a house, then taking the house if they fail to pay, is tantamount to the "owner" merely renting or using the house).

But what do I know? I'm just an idiot musician who thinks the word "free" in "freedom" ought to mean something.

I know. "You can't have a society without taxation." ERmm...what about the first 150 years of this country - no income tax  :-\ ...sigh...sorry I don't mean to start a flame war. Peace.

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I think the problem is partially due to what John hinted at, which is that as accumulation of wealth gains momentum it sort of snowballs. And finally, without any societal controls, you end up with a tiny minority owning a vast majority of the resources.

At that point "liberty" is simply a meaningless term for all those without the money to exercise it.

mattiasNYC said:

I don't think the above is true. If you tax capital it doesn't all of a sudden disappear out of the system.

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Because I didn't say it would suddenly disappear, just shrink over time.

The system creates money at the very top, within the financial system, and it then gets invested. If you tax capital that's accumulated and the proceeds in one way or another goes to those at the bottom, then they will spend that money, because their way to "excess" is super-far compared to the way to "average" for the rich.

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Not sure what this means...  The current system taxes earnings, taxing savings will consume those savings over time, something old people like me do not like.

As the money gets spent it's recirculated and thus goes back to corporations and thus owners who again can reinvest the money.

The poor have to spend the money they make. The wealthy don't.

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So why make the wealthy spend more of their money? That is what taxing savings will do, why give it to the government when you can just spend it to not accumulate wealth. 

Apparently not. But you're still either ignorant about why such a comparison is hypocritical, or you're hypocritical about it.

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can't tell of that is an insult or two insults?

It can't possibly be a reasonable and fair comparison to compare the supposed failure of Cuba to the success of the US when the latter prevented the former from doing free trade as it saw fit. It's a gross comparison. Regurgitating the failures of Cuba, Venezuela or a dozen other states in which the US played an active role in creating such failures is just dishonest... or ignorant.

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again one or two insults?  If you do not think the failure of venezuela today is directly because of the policies of Chavez, perpetuated by Manduro, soon to be taken over by his hand picked VP, maybe you are.....? (not going to reply in kind, it is against the rules).

This is again a nonsensical argument based on indoctrinated dogma. The key word is the silly application of the word "earn".

An owner of a company that sells millions of widgets hasn't earned the profit that sits on top of each widget any more than the workers that actually created the widget. What the capitalist absolutely DON'T want is a society where you get paid for your actual labor, and not for your ownership. It is the ownership that allows exploiting the labor of workers and customers. That's why it's key to capitalists. Limiting one's wealth to only what one can produce won't do.

Perhaps we need 'not capitalism'.... ?

Yeah yeah... I know... "But Nicaragua"....

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There is plenty of history that compares the results of different systems, look at Hong Kong or Singapore, vs Cuba or Venezuela.  Don't put too much weight into romantic rationalizations for the failures of the inferior economic systems. There are too many examples to ignore, these are not new questions  (what is new is the impact of automation and  next AI threatening even white collar jobs).

JR

mattiasNYC said:

I think the problem is partially due to what John hinted at, which is that as accumulation of wealth gains momentum it sort of snowballs. And finally, without any societal controls, you end up with a tiny minority owning a vast majority of the resources.

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I am still looking for an easy way to snowball my capital... with banks paying low single digit interest, all higher return strategies are also higher risk.

I did invest in Berkshire Hathaway because Warren Buffet can get access to big deals that small individual investors (like me) can not, but we can ride his coattails and participate by owning his stock (BRKB). 

At that point "liberty" is simply a meaningless term for all those without the money to exercise it.

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Sound like more class warfare... Liberty is not about income redistribution, but opportunity and protection of rights.

I guess it's never to early to start winding up the division for 2020.

JR

JohnRoberts said:

Because I didn't say it would suddenly disappear, just shrink over time.

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The accumulation diminishes, but what you are implying is that the actual capital does. It does not, it gets reallocated. That was my point.

JohnRoberts said:

Not sure what this means...  The current system taxes earnings, taxing savings will consume those savings over time, something old people like me do not like.

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Of course you don't like your "earning" to be "consumed", because you think it's your money. That's something that will never change. People have stuff, they want to keep stuff. My point was merely that by redistributing money from big pools of consolidated wealth that money isn't not invested, it is invested in the sense that the poor that receive the funds have to spend them. So money gets into rotation. That was the point.

I'm also assuming you're not very wealthy, because typically taxation systems allow for a tiered system where some pay proportionally more than others. A such I'm guessing that you wouldn't be taxed until you had no money left.

JohnRoberts said:

So why make the wealthy spend more of their money? That is what taxing savings will do, why give it to the government when you can just spend it to not accumulate wealth. 

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We  might have just run into a language barrier between us....

JohnRoberts said:

can't tell of that is an insult or two insults? again one or two insults?  If you do not think the failure of venezuela today is directly because of the policies of Chavez, perpetuated by Manduro, soon to be taken over by his hand picked VP, maybe you are.....? (not going to reply in kind, it is against the rules).

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Being ignorant about something isn't necessarily an insult but just an accurate description.

Venezuela has problems that are in very large part due to outside interference, and that's why your comparison and use of it as an example completely breaks down. But that's par for the course for pro-capitalists. In a nutshell, prior owners of private for-profit businesses didn't want to play ball with socialism and rather than make their goods available domestically shipped them abroad for monetary compensation. That was against the mandate of the government and the intent of the system, and that's what creates shortages.

Your argument is akin to me telling you that your car doesn't work, you then driving it ten feet showing me that it indeed does work, me then slashing your tires and setting it on fire and going; see, that type of car doesn't work!

JohnRoberts said:

There is plenty of history that compares the results of different systems, look at Hong Kong or Singapore, vs Cuba or Venezuela.  Don't put too much weight into romantic rationalizations for the failures of the inferior economic systems. There are too many examples to ignore, these are not new questions  (what is new is the impact of automation and  next AI threatening even white collar jobs).

JR

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You're indoctrinated by the system you grew up in, and as a result you lack intellectual consistency when evaluating different systems.

Again, complaining about Cuba is extremely telling since you leave out a decades-long embargo, a failed invasion, and much more.

If you were open-minded and intellectually consistent you'd consider the following:

What if the relationship between Cuba and the US was diametrically opposed; Cuba had the relative military strength over the US that the US has over Cuba today, enacted the same embargo, was as large as the US is while the US is as small as Cuba is, invaded US soil, and so on... IF US capitalism then "failed", or rather didn't prosper as much, would that have been the fault of capitalism itself, or of outside interference by an outside power?

I know, we don't do hypotheticals.

JohnRoberts said:

I am still looking for an easy way to snowball my capital... with banks paying low single digit interest, all higher return strategies are also higher risk.

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The advantage on the free market probably doesn't scale linearly.

JohnRoberts said:

Sound like more class warfare...

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"class warfare", "redistribution of wealth".... talking points that certainly are convenient.

Wealth accumulation in capitalism is only possible because the labour of the working class can be partially consolidated by the owning class. How is that not a class system? How is that not class warfare?

The answer is; because you don't think you're at the losing end of it and because you've been told it isn't.... until you stand to lose something...

JohnRoberts said:

Liberty is not about income redistribution, but opportunity and protection of rights.

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Liberty without opportunity is not liberty. That was exactly my point. And since you have to pay for everything in this system, you need money to exercise the rights you're talking about.

No money to exercise your rights = "liberty" in name only.

Yes, a single-mother of three working two low paying jobs has the legal right to buy a yacht, and she never will because she'll never have the money available to do so. The word "liberty" to her relative to that example is just a word, not something in practice. Of course buying a yacht is an example that will be questioned, so we can talk about healthy food, clean water, good education, health care and so on instead.....

JohnRoberts said:

I guess it's never to early to start winding up the division for 2020.

JR

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You did that when you elected Trump. You've managed to divide the country quite well already.

JohnRoberts said:

The unfortunate consequence of taxing capital is that you reduce that capital available for investment to grow the economy.

If you tax the same capital, say once every year, over time that capital will diminish. This is one way to reduce the wealth gap by making wealthy people less wealthy.

Click to expand...

For decades, the growth of capital has been extremely high - taxing capital with a more progressive tax scheme would not cause the capital to diminish, it would start to stabilize the system.
Let's look at the effects of NOT taxing capital, which has been the 30-40 yr Republican experiment - radical wealth inequality - reduced GDP growth (people spend less because they have less).