tag:blogger.com,1999:blog-582368152716771238.post2582659772090314274..comments2024-03-28T11:50:52.581-05:00Comments on The Grumpy Economist: TaxesJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-582368152716771238.post-72139069145077275072015-06-24T18:45:22.982-05:002015-06-24T18:45:22.982-05:00One can agree that this idea is a good one, but al...One can agree that this idea is a good one, but also believe that it is a) not going to happen and b) probably impossible to implement. <br /><br />Also, c) probably being proposed by people who aren't very serious or believable (i.e. Rand and company). <br /><br />Sweeping "smash everything down" approaches are universally doomed to fail simply due to their impracticality in implementation, their unrealistic goals, and the people in charge of doing so. <br /><br />The GOP would benefit by finding serious economists (not necessarily those affiliated with think tanks of any sort), to have public debates on this. You need to convince people...but only when they're ready to be convinced. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49358369336558026352015-06-23T22:46:35.960-05:002015-06-23T22:46:35.960-05:00Anonymous,
You do argue that capital income shoul...Anonymous,<br /><br />You do argue that capital income should be taxed the same as labor income. The federal government already does this with the short term capital gains tax.<br /><br />The difference in tax treatment comes from the long term capital gains tax that is set lower than the short term.<br /><br />Are you arguing that long term capital gains should be taxed the same as short term capital gains?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-48341560774485998532015-06-23T19:29:09.728-05:002015-06-23T19:29:09.728-05:00"Labor is sold on (typically) an hourly basis..."Labor is sold on (typically) an hourly basis while capital goods might be held for a life time before they are sold."<br /><br />Ehm, nope. Labour and capital are both inputs. We tax capital and labour income for obvious reasons. You seem to confuse wealth taxes with capital income taxes. I never argued anywhere for a wealth tax.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-72917016013263008472015-06-23T19:26:02.224-05:002015-06-23T19:26:02.224-05:00"There is a long-standing literature in Econo..."There is a long-standing literature in Economics that labor and capital should be taxed differently - capital should be taxed at zero rate."<br /><br />So what, there is a lot of nonsense in economics. The only reason to not tax capital income are tax incidence reasons. If capital is more mobile than labour we obviously gotta change our laws, open our borders for migration and reintroduce capital market restrictions to level the playing field.<br />If this political distortion did not exist standard optimal taxation arguments imply that labour and capital income should probably be taxed at roughly equal rates.<br /><br />If you add distributional goals to all this (reducing income and wealth inequality reduced the risk of oligarchy and has postive effects on democray) it is reasonable to tax capital income even more than labour income.<br /><br />Of course we all know why you and other folks argue for low/zero capital tax rates. RIght-wingers care little about democracy and the 99%.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-66745709317785427402015-06-23T13:55:58.272-05:002015-06-23T13:55:58.272-05:00Manfred,
In regard to John's article, I belie...Manfred,<br /><br />In regard to John's article, I believe the scope is limited to federal taxation.<br /><br />Yes, local (and some state) governments tax the value of capital assets including land and buildings. <br /><br />Determining the value of that capital without requiring the owner to sell it into the market is of particular concern and subject to debate. Property taxes can be assessed using a number of metrics including (but not limited to) last sale of same property, market value of similar properties that have recently been sold, etc.<br /><br />You indicated that there is literature stating that capital (on the state level) should be taxed at a rate of 0%. <br /><br />There is also a very good reason for taxation of capital - to more closely align the taxpayer with the service being provided by government in question.<br /><br />For instance, in Pennsylvania, property taxes are utilized to fund the state's public education system. The reason is so that out of state visitors, travelling workers, etc. are not paying for Pennsylvania's education system through higher income and sales taxes.<br /><br />There is nothing worse than paying a tax without receiving any benefits from that taxation. See American Revolution.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-35377239191012401322015-06-23T12:44:59.611-05:002015-06-23T12:44:59.611-05:00Frank - which government are you talking about? Lo...Frank - which government are you talking about? Local government routinely tax property (equipment, buildings), which is capital. The Feds may not, but the locals do.Manfred the mamoothhttps://www.blogger.com/profile/07516724901598949627noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-43325364317540443622015-06-22T20:12:37.832-05:002015-06-22T20:12:37.832-05:00Anonymous,
From what I can tell the Paul plan do...Anonymous, <br /><br />From what I can tell the Paul plan does tax capital income at the same rate as labor income. And I don't know where you get the idea that "as right now the effective tax rates of upper class folks (in the US) is below those of middle class people." On average upper income households pay significantly higher rates than middle income households, and middle income households pay higher rates than lower income households.<br /><br />http://www.cbo.gov/sites/default/files/cbofiles/images/pubs-images/49xxx/49440-Land-Figure2.png<br /><br />Zacknoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-63575833057228000312015-06-22T17:03:52.696-05:002015-06-22T17:03:52.696-05:00John,
Voluntary tax payment has a long history in...John,<br /><br />Voluntary tax payment has a long history in the United States - what could be more fair?<br /><br />And so, in the spirit of fairness, good of the country, etc., why shouldn't taxes be totally voluntary? We are able to raise a volunteer army to put life and limb at risk in defense of this country, is voluntary payment of taxes such a tremendous leap?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-33977034462212612412015-06-22T16:45:15.063-05:002015-06-22T16:45:15.063-05:00Who exactly is this guy named "my country&quo...Who exactly is this guy named "my country" you speak of? We are talking about tax policy, yes? The direct recipient taxes of is the Federal Government, not some guy named "my country".<br /><br />If you are talking about your fellow countrymen (me and everyone else), then you are barking up the wrong tree with a nihilistic approach to bargaining - I'll cut off my arm if you cut off your leg - when in the history of man has that ever led to anything but misery.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-26738263613869351742015-06-22T16:40:03.884-05:002015-06-22T16:40:03.884-05:00There you go again, confusing "the country&qu...There you go again, confusing "the country" with "the Federal Government." John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-74240909762014417732015-06-22T16:35:08.776-05:002015-06-22T16:35:08.776-05:00John,
See:
http://www.treasurydirect.gov/govt/re...John,<br /><br />See:<br /><br />http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm<br /><br />Last year, the U. S. Treasury accepted over $5 million in gifts as a means to reduce the federal debt.<br /><br />Have you cared enough about your country to contribute?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-37073722858121125162015-06-22T16:29:36.494-05:002015-06-22T16:29:36.494-05:00Yes. People like me who are too lazy to spend all ...Yes. People like me who are too lazy to spend all day meeting with lawyers come out way ahead in a flat consumption tax regime. <br />But I also would happily lose personally in return for a simple fair and pro growth tax regime. I do care about my country. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-66592641181674403972015-06-22T16:23:52.383-05:002015-06-22T16:23:52.383-05:00John,
"Rip the band aid off. We're all i...John,<br /><br />"Rip the band aid off. We're all in this together. If you lost yours, you're darn sure sure going to make sure the other guy loses his. $7,500 to buy a Tesla? No way if I'm losing my interest deduction."<br /><br />So are you ready to lose yours and pay full taxes on your tax deferred savings?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-84524312180813721902015-06-22T16:07:41.035-05:002015-06-22T16:07:41.035-05:00Manfred,
Government doesn't tax capital (equi...Manfred,<br /><br />Government doesn't tax capital (equipment, buildings, ownership stake in a company). Government taxes gains in the market value of that capital (capital gains) and only requires that those gains be paid after that capital has been sold and be paid in the means of exchange (dollars). <br /><br />Of course a government should not tax capital. The last thing we want is the government to own a majority share holder stake in private businesses.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-67635322799197720412015-06-22T15:15:47.300-05:002015-06-22T15:15:47.300-05:00Anonymous 12:08
There is a long-standing literatur...Anonymous 12:08<br />There is a long-standing literature in Economics that labor and capital should be taxed differently - capital should be taxed at zero rate.<br />John Cochrane has blog entries to this effect.Manfred the mamoothhttps://www.blogger.com/profile/07516724901598949627noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47129299748062891032015-06-22T14:52:31.605-05:002015-06-22T14:52:31.605-05:00One reasonable approach would be to introduce a gr...One reasonable approach would be to introduce a graduated system of capital gains tax rates over a significant time frame (say 30 years).<br /><br />It makes little sense to say that "long term" capital gains is anything held longer than one year.<br /><br />https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States<br /><br />Short term (less than 1 year) capital gains are taxed as ordinary income (anywhere from 10% to 39.6%).<br /><br />Long term (greater than 1 year) capital gains are taxed at a reduced rate (anywhere from 0% to 20%).<br /><br />Instead, put the low end of long term capital gains out further (say 30 years) and then graduate it up to short term.<br /><br />If a government can sell 30 year interest paying securities, then it should be able to make the same type of long term commitments on the tax side as it does on the spending side.<br /><br /> FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-62318738871989377012015-06-22T13:06:22.030-05:002015-06-22T13:06:22.030-05:00Anonymous,
The market value of capital goods and ...Anonymous,<br /><br />The market value of capital goods and labor are established when they are sold. Labor is sold on (typically) an hourly basis while capital goods might be held for a life time before they are sold.<br /><br />Should the government be able to make you sell your stake in a company so that a market price can be obtained for that stake so that the government can collect a tax on it? How about your house? Should you have to sell your house every year to determine the capital gains tax you should pay?<br /><br />Also, if your bug is that labor and capital income should be treated equally, then fine - would you feel better if all labor income was contingent on the profitability of the employer? Capital income is contingent on a company remaining profitable. Should labor income bear that risk as well?<br /><br />Should minimum wage laws be stricken down to put labor income on an equal footing with capital income?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-56827260902607186212015-06-22T12:08:07.449-05:002015-06-22T12:08:07.449-05:00As I am a lef-twinger I am naturally against flat ...As I am a lef-twinger I am naturally against flat tax rates unless you libertarians actually want to tax labour as well as capital income equally. Then I would be for it (plus the elimination of all exemptions and special rules) as right now the effective tax rates of upper class folks (in the US) is below those of middle class people.<br />So yeah, flat tax plus no exemptions is better than a nominally progressive income tax rate system which is de faco made regressive by all those exemptions and low capital tax rates.<br /><br />The crucial question though is capital tax avoidance. Laws are one thing, the political will to enforce them is another. And somehow I doubt that any libertarian really want to enforce the hypothetical laws they might implement to the full degree.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-56953742212705024162015-06-22T09:12:00.775-05:002015-06-22T09:12:00.775-05:00I know I am late to the party. Saw the Rand Paul a...I know I am late to the party. Saw the Rand Paul article in the WSJ.<br />All fine and dandy - love the idea.<br />But... guys... I do not mean to be a party-pooper or interrupt a love-fest about blowing up the tax code: *reality check*: does any of you REALLY, REALLY think it is politically feasible? Does any of you really, really think that blowing up the tax code and putting a nice simple flat tax of 14.5% or 20% or whatever percent will pass Congress and its lobbyists that feed off the tax code?<br />It is beautiful to think normatively - "the tax code should be blown up..."; another thing is to think positively, meaning "what is".... There is a whole industry (lobbyists, K-street, the US Chamber of Commerce, etc) that pours gazillions and bazillions of dollars to keep things just like they are now.<br />Sorry guys, all nice talk. A flat tax idea has been around for decades (Hall-Rabushka, Steven Forbes, the Fair Tax, etc etc etc). It will never pass. Ever. Never. Ever. Too many lobbyists, too many vested interests, too much money invested in the current code. And too many politicians purchased by such interests. Sorry for being so gloomy, but that's how it is.<br />Manfred the mamoothhttps://www.blogger.com/profile/07516724901598949627noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-63028950666151589912015-06-21T19:07:46.280-05:002015-06-21T19:07:46.280-05:00John,
If the success of capital investment is sen...John,<br /><br />If the success of capital investment is sensitive to tax rates as well as interest rates, then a single adjustable tax rate may not be sufficient. There is a time aspect that must be contemplated as well.<br /><br />For instance, with Mr. Paul's simple, flat tax code, are long term capital gains taxed at the same rate as short term capital gains? Is there such a thing as tax deferred savings plans (401k, IRA, etc.) under Mr. Paul's plan?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-1739656181886042562015-06-21T18:46:03.770-05:002015-06-21T18:46:03.770-05:00I think it would work better to have a firm and ve...I think it would work better to have a firm and very simple structure, and adjust the rates. An annual fight over spending more/less and raising/lowering the tax rate is fine. Fill in the blanks. Removing the rates from the structure discussion would produce a much cleaner tax code. Pretending we know what rate now we'll need in 10 years is a bit silly anyway. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-74153050043969158402015-06-21T18:17:15.825-05:002015-06-21T18:17:15.825-05:00JB,
It goes beyond that. One individual does not...JB,<br /><br />It goes beyond that. One individual does not have the credibility to maintain a consistent tax code of any sort - unless you want to move toward an imperialist state.<br /><br />The best you can hope for in a democracy is legally enforceable contracts. Meaning a Congress elected 10, 20, 50, etc. years from now cannot re-nig on a contract agreed to by a previous Congress.<br /><br />John (in a previous article) indicates that coupon payments on government securities should be adjusted by the federal government in response to crises. The same argument can be made that tax policy should be adjusted by the federal government in response to crises.<br /><br />I don't agree with his position - changing one fiscal position as a crisis management tool without changing the other - after all, we are trying to be "fair" aren't we? FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49602985588433312622015-06-21T15:23:50.987-05:002015-06-21T15:23:50.987-05:00Harmon,
"There will inevitably be winners an...Harmon,<br /><br />"There will inevitably be winners and losers under the new system."<br /><br />https://www.stephencovey.com/7habits/7habits-habit4.php<br /><br />"Think Win-Win isn't about being nice, nor is it a quick-fix technique. It is a character-based code for human interaction and collaboration."<br /><br />As soon as you start using tax policy to create winners and losers, you have already lost the argument. FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-64913428019557205792015-06-21T09:31:33.618-05:002015-06-21T09:31:33.618-05:00John,
"It's not exactly the structure I ...John,<br /><br />"It's not exactly the structure I would advocate, but close enough. And close enough even if 14.5% becomes 20%. Or adds higher brackets at higher incomes. We should talk about the structure separately from the rates to avoid all these distractions."<br /><br />The question you need to ask yourself is should the rate be fixed for all time or adjustable? Should tax policy be flexible in the same way that monetary policy is flexible? If one fixed interest rate over time is not sufficient, then why should one tax rate be sufficient?<br /><br />In your article on perpetual, fixed value, floating rate bonds you recommend having the federal government adjust the coupon in response to crises. The same recommendation would need to be applied to the single tax rate you advocate if we want coupon payments to be paid from tax revenue.<br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3334586172171347622015-06-21T09:23:04.808-05:002015-06-21T09:23:04.808-05:00John,
"More deeply it's refreshing to he...John,<br /><br />"More deeply it's refreshing to hear a serious candidate start from the premise that the first purpose of the tax code is to raise revenue for the government, in a way that hurts growth as little as possible."<br /><br />Except when that premise is ill founded.<br />https://en.wikipedia.org/wiki/Article_One_of_the_United_States_Constitution#Enumerated_powers<br /><br />1. To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States<br /><br />2. To borrow Money on the credit of the United States<br /><br />3. To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures<br /><br />Perhaps Mr. Paul can explain why taxation is needed at all when Congress has the power to coin money?<br /><br />The purpose of taxation is not to raise revenue for the government. The government, if it so choses, is given the direct power by the Constitution to coin money AND define the standard of weights and measures for that coined money.<br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.com