Finally, Some Good News for Mitt

[gribbler]

You might was well claim "the Democrats got trashed nationwide in 2010, therefore they'll get trashed again in 2012!" which would instantly get you identified as a moron. Republicans perform well among old people with nothing better to do but vote in every election.

[regexcellent]

Virginia has an election every year. Do you think it's random noise that the government there is currently completely dominated by Republicans?

[gribbler]

Is it meaningless that voter turnout is much higher every presidential election?

[Guynemer]

Many state governments are dominated by Republicans; it doesn't have much effect on Presidential voting.

[gribbler]

Look at the Democratic dominance in Arkansas and West Virginia. Does Obama have any chance of winning those states? No.

[The Mad Monk]

You might was well claim "the Democrats got trashed nationwide in 2010, therefore they'll get trashed again in 2012!" which would instantly get you identified as a moron. Republicans perform well among old people with nothing better to do but vote in every election.

How can you have anything better to do for one hour on one day a year than vote on the people who will manage your public affairs?

I will concede that the lazy and vacuous do tend to avoid voting Republican.

[MrFun]

[The Mad Monk]

Just How Does Mitt Romney's Wealth Stack Up?
Abby Rapoport
January 24, 2012
The former Massachusetts governor is wealthy—but is he wealthier than past presidents?
Donate Share on emailEmail Print Send to Instapaper In case there was any question, after the release of his tax returns, it's clear that Mitt Romney is rich, even by 1 percent standards.

But it's one thing to be rich compared with the general public. Some of our readers wondered just how Romney's wealth stacks up against his would-be peers: the presidents. Turns out, were he to be elected, Romney would be among the top four richest people to become president.

In 2010, the website 24/7 Wall Street did an analysis of all 44 presidents' assets and adjusted their peak wealth to 2010 dollars. The article points out that the comparisons over time can be a little sticky. "The fortunes of American presidents are tied to the economy in the eras in which they lived. For the first 75 years after Washington’s election, presidents generally made money on land, crops, and commodity speculation," it says. "A president who owned hundreds or thousands of acres could lose most or all of his property after a few years of poor crop yields."

Interestingly, many U.S. presidents were worth less than a million (the lowest designation on the scale). For a good chunk of the 19th century, Americans elected presidents from poor backgrounds with little to their name, like Abraham Lincoln, Ulysses S. Grant, and James A. Garfield.

George Washington, the first president, also turns out to be the wealthiest, clocking in with more than half a billion in net worth. At his peak, Thomas Jefferson wasn't far behind with $212 million. Then there was John F. Kennedy, who shared a trust worth more than $1 billion with his siblings. Teddy Roosevelt and Andrew Jackson were the only other presidents to break the $100 million mark.

Most sources estimate Romney's net worth at around $200 million or so. However, at his peak he was reportedly worth as much as $500 million. Either way, he'd be on the podium for wealthiest presidents.

So if Romney were elected, he would rank among the richest presidents in American history. As a wealthy presidential candidate, however, he's got more company—most recently, Steve Forbes, Ross Perot, and John Kerry all had as much, if not more.

Of course, that didn't mean any of them got to be president.

http://prospect.org/article/just-how...s-wealth-stack

[MrFun]

Romney never really earned the wealth that he has today.

[notyoueither]

Care to go to the barricades?

[Al B. Sure!]

Jesus. I don't even have to click the video to see this is stupid. The screen capture saying "Pay Only 15% Tax" begins the idiocy that Jaguar and I thoroughly explained in the other thread.

[MrFun]

Then where do people get the claim that Romney only paid 15 percent in taxes, if it's clearly and obviously false?

[Hauldren Collider]

Romney never really earned the wealth that he has today.

Moron.

Want to explain how it wasn't earned?

[MrFun]

The video explains it. Moron.

[Hauldren Collider]

[Al B. Sure!]

Then where do people get the claim that Romney only paid 15 percent in taxes, if it's clearly and obviously false?

We covered this.

W= wage income
T= tax rate
r= return
C= investment tax rate

Wage and return income with no taxes:
W + W*(r)

Add taxes on wages:
(1-T)W + (1-T)(W)(r)

Add taxes on investment income:
(1-T)W + (1-T)(W)(r) - (1-T)(W)(r)(C)

so...

(1-T)W + (1-T)(W)(r)(1-C)

As you can see, the investment income is not only taxed at the investment tax rate but also implicitly taxed at the wage tax rate.

And yet, someone with more investment income will have a lower ETR but will actually have been more constrained by taxation!

[Jon Miller]

Investment isn't just a black box where you put in money and get more money out later. It isn't just some 'fact of nature'.

(A) Investment is often you getting a portion of someone else's labor, and to get a gain by it (this is investment in businesses/etc).

(B) Investment is also often due to you having wealth when others don't, and so being able to buy an asset that someone else wants and then sell it to them for more than what you paid for it when they come to have the money to be able to purchase it.

For (A), investment should be obviously taxed. Or at least the gains. And it should be taxed at the same rate as income.

For (B), investment isn't as obviously taxed. It is closer to the 'black investment box' that you and others keep imagining (but that doesn't exist). However, due to the fact that your asset increases in value because of the public goods that exist, it makes sense that you pay taxes on it.

My understanding, and I could be wrong, is that you don't pay capital gains on property but rather property taxes.

I think the easiest thing to do would be to just have businesses pay taxes (no income or capital gains taxes). That way we are taxing what is important, the output (whether the income from the output goes to the labor or the capital). However, quite logically they would just pass this on to consumers/etc. So then we are back to consumption taxes? Except maybe it is fairer to make it be on businesses.

JM

[Jon Miller]

Thinking about it, I am remembering why pragmatically it works better to be taxed on point of consumption.

Combining consumption taxes, wealth/property taxes, and some transfer, would be fairest and pragmatic.

JM
(wealth taxes could be in the form of a higher targeted inflation rate)

[Kuciwalker]

Investment isn't just a black box where you put in money and get more money out later. It isn't just some 'fact of nature'.

(A) Investment is often you getting a portion of someone else's labor, and to get a gain by it (this is investment in businesses/etc).

(B) Investment is also often due to you having wealth when others don't, and so being able to buy an asset that someone else wants and then sell it to them for more than what you paid for it when they come to have the money to be able to purchase it.

For (A), investment should be obviously taxed. Or at least the gains. And it should be taxed at the same rate as income.

For (B), investment isn't as obviously taxed. It is closer to the 'black investment box' that you and others keep imagining (but that doesn't exist). However, due to the fact that your asset increases in value because of the public goods that exist, it makes sense that you pay taxes on it.

Jon, (A) is Marxist nonsense. As in, it is literally both Marxist and nonsense and has been discredited since basically forever. It also doesn't logically follow.

(B) also doesn't follow. I'm calling you out on explaining how "benefits from a public good" becomes "should be taxed".

I think the easiest thing to do would be to just have businesses pay taxes (no income or capital gains taxes). That way we are taxing what is important, the output (whether the income from the output goes to the labor or the capital). However, quite logically they would just pass this on to consumers/etc. So then we are back to consumption taxes? Except maybe it is fairer to make it be on businesses.

So your big fairness issue is that you'd prefer businesses do the paperwork?

[Jon Miller]

It has nothing to do with marxism, do you even know what marxism states?

A person works and produces wealth. The business that employs can spend some of that wealth on paying the person (income), some of the wealth on paying for the things that that person needs to work with, and the wealth that is left over is profit.

It is entirely unfair to tax the wealth created by the person that goes to paying him (as income) and not tax the wealth that goes as profit (or to purchase the things needed to run the business). If you just tax the 'income', than you are creating a tax advantage for the wealth to go to profit instead of to pay for income. This might be fine economically, but is entirely unfair when you consider that those who own the business are getting gains that are untaxed while those who work in the business are getting gains that are taxed.

Consider this example:

I make a company. It is a law office (because that is easiest).

I hire 5 lawyers, and 5 clerks.

I could pay them 200k and 50k (for a total of 1m + 250k + 120k (for the office) = 1.37) and have a profit of (for example) 130k per year. Obviously the lawyers would pay quite a bit in taxes, and the clerks would pay a bit.

Or I could pay them a little bit (~30k), give the lawyers some preferred shares that give a dividend (initial dividend of say 70k per year), and give them shares in the company each year. Then my total costs are 0.77 and I can take the remaining 1.23 and invest it in property/etc and grow the wealth of the employees (and myself, and more than lawyers than the clerks) enormously. All of this with none of us paying taxes.

There is a reason why Steve Jobs worked for 1$. It doesn't mean that he wasn't making an income from his work.

Your method unfairly taxes those who 'make an income by standard means' (who are generally poorer) compared to those who 'make an income by using their wealth advantage' (who are generally much wealthier).

It is still income. Just because in one case I get payed by the boss, and in the other case I get payed by managers, doesn't mean I am not getting payed.

JM

[Jon Miller]

So your big fairness issue is that you'd prefer businesses do the paperwork?

No, it is just that a lot of things businesses do, are done to benefit those in control of the businesses (managers, CEOs, etc).

By taxing consumption, than many of these 'perks' are untaxed.

JM

[Jon Miller]

Why should one person's work (the worker at McDs or the engineer at Apple) get taxed, but another person's work (providing a building and supplies and so on for the McDs, providing the office and patents and so on for the engineer) not get taxed?

They both make an income from the work, but the earlier group (poor) would get taxed for their income while the latter group (wealthy) does not get taxed.

JM

[Jon Miller]

(B) also doesn't follow. I'm calling you out on explaining how "benefits from a public good" becomes "should be taxed".

The public good is payed for by everyone's taxes.

The more in assets you have (B type investments), the more you gain from the taxes that the public pays.

Therefore you should pay more in taxes relative to someone who does not have any B type investments.

Think of property. Who benefits the most (asset wise) from having good roads/electricity grid/etc/etc/etc? You can charge a lot more for property in an advantageous area than property that no one wants...

JM

[The Mad Monk]

Romney never really earned the wealth that he has today.

Did you notice how often "inherit" came up in that list? Including Washington and Jefferson?

[gribbler]

We covered this.

W= wage income
T= tax rate
r= return
C= investment tax rate

Wage and return income with no taxes:
W + W*(r)

Add taxes on wages:
(1-T)W + (1-T)(W)(r)

Add taxes on investment income:
(1-T)W + (1-T)(W)(r) - (1-T)(W)(r)(C)

so...

(1-T)W + (1-T)(W)(r)(1-C)

As you can see, the investment income is not only taxed at the investment tax rate but also implicitly taxed at the wage tax rate.

And yet, someone with more investment income will have a lower ETR but will actually have been more constrained by taxation!

So you're suggesting Mitt Romney was some hard working laborer who set aside his wages and reaped a return in doing so, therefore taxing his capital gains the way wages are taxed would be unfair?

[Kuciwalker]

It has nothing to do with marxism, do you even know what marxism states?

Better than you, apparently.

A person works and produces wealth. The business that employs can spend some of that wealth on paying the person (income), some of the wealth on paying for the things that that person needs to work with, and the wealth that is left over is profit.

A person works in conjunction with capital. Frequently the capital is actually far more important than the worker! In the extreme, imagine a Star Trek replicator that produced a car out of thin air, but for some reason it could ONLY be operated manually, i.e. by pushing a button once per car. So I build this replicator and then hire a worker to push the button, then sell the cars. It is very clear that the overwhelming majority of the value being produced derives from the capital, and the worker is providing essentially none of it. This becomes even more true if the worker is able to do all of the fun things he would normally do in his leisure time, just every few minutes he has to press a button (say we put the button in an app on his phone).

It is entirely unfair to tax the wealth created by the person that goes to paying him (as income) and not tax the wealth that goes as profit (or to purchase the things needed to run the business). If you just tax the 'income', than you are creating a tax advantage for the wealth to go to profit instead of to pay for income. This might be fine economically, but is entirely unfair when you consider that those who own the business are getting gains that are untaxed while those who work in the business are getting gains that are taxed.

Jon, let's continue on with the car replicator thought experiment. Let's say I, with my own labor, manufactured 100 of these. Let's say that the tax on wages is 10%. In that case pre-tax I have 100 car replicators and, over my lifetime, I will get 100*X cars (where X is the number of cars a replicator will produce in its lifetime before breaking down). I am assuming that the wages of the button-presser are small relative to the price of the cars, etc. and so can be ignored.

If we impose a 10% wage tax but no tax on capital income, when I make the 100 replicators I have to give 10 of them to the government. Therefore, I will have 90*X cars - 90% of my pre-tax lifetime income.

If we additionally impose a 10% tax on capital income, I will have to give 9 out of each batch of 90 cars to the government. This leaves me with 81*X cars of lifetime income, which is a 19% tax rate.

If the replicators can be configured to produce more replicators instead of cars, then this tax rate goes even higher, because each round of replicator production multiplies in the tax rate again.

Consider this example:

I make a company. It is a law office (because that is easiest).

I hire 5 lawyers, and 5 clerks.

I could pay them 200k and 50k (for a total of 1m + 250k + 120k (for the office) = 1.37) and have a profit of (for example) 130k per year. Obviously the lawyers would pay quite a bit in taxes, and the clerks would pay a bit.

Or I could pay them a little bit (~30k), give the lawyers some preferred shares that give a dividend (initial dividend of say 70k per year), and give them shares in the company each year. Then my total costs are 0.77 and I can take the remaining 1.23 and invest it in property/etc and grow the wealth of the employees (and myself, and more than lawyers than the clerks) enormously. All of this with none of us paying taxes.

When you provide non-monetary compensation you still have to pay taxes. The lawyers would have to pay taxes on the value of the shares received each year. Under current law, they would also pay taxes upon realizing any appreciation in the share price, and upon receiving any dividends. Depending on the way the firm was set up, there would be additional firm-side taxes paid on the dividends (under current law).

Your method unfairly taxes those who 'make an income by standard means' (who are generally poorer) compared to those who 'make an income by using their wealth advantage' (who are generally much wealthier).

There are occasional cases where wage income can be improperly (from an economics standpoint) classified as investment income. The scale of this problem is tiny compared to the scale of the distortion introduced by taxing investment income.

[Kuciwalker]

The public good is payed for by everyone's taxes.

The more in assets you have (B type investments), the more you gain from the taxes that the public pays.

Therefore you should pay more in taxes relative to someone who does not have any B type investments.

Think of property. Who benefits the most (asset wise) from having good roads/electricity grid/etc/etc/etc? You can charge a lot more for property in an advantageous area than property that no one wants...

JM

This logic doesn't actually work, Jon. Lots of people benefit far more from taxes than they EVER pay in. There are entire segments of society that receive huge net transfers of wealth through government redistribution. They are called the poor. Your logic would suggest that they should have to give all of that wealth back.

[Kuciwalker]

Government isn't a "you should pay in what you get out" thing. When the government provides public goods, it should try to provide the most benefit at the lowest cost, and that's pretty much it. Deadweight loss from the means of revenue collection (taxation) is part of that cost.

[Jon Miller]

If the capital contributes a lot more than the worker, than why shouldn't the capital be taxed far more than the worker?

JM

[Jon Miller]

Government isn't a "you should pay in what you get out" thing. When the government provides public goods, it should try to provide the most benefit at the lowest cost, and that's pretty much it. Deadweight loss from the means of revenue collection (taxation) is part of that cost.

No, but people who make their wealth due to the largess of government (Which is all rich people) should pay more than the the poor people who do not make such wealth.

This seems fair.

Asking the poor to pay to subsidize the wealthy seems grossly unfair.

JM