A summary of trickle down economic theory:

[MichaeltheGreat]

Originally posted by Kidicious


Capital follows economic growth. Boy we disagree on a lot of simple stuff.

If you tax capital itself (rather than earnings on capital) above a certain point, then the solution for the taxpayer is simple - don't have capital in that market above that point. Economic growth would follow capital in this case - it would go elsewhere.

[Kidlicious]

Originally posted by Arrian
And I have friends who have taught poor kids, which is why I mentioned stuff like that. I know that's a huge problem - seeing failure & poverty everywhere they look, and therefore giving up. I don't really see how a wealth tax will help that, though.

Poor people do pay taxes. So eliminating those taxes would be direct help. It would stimulate the economy, because the middle class would have more money to spend and invest. That will create more jobs.

Originally posted by Arrian
How? All I see is lots of people having to liquidate their assets to pay the tax - and having a helluva time selling because everyone with the money to buy those assets will be taxed up the whaazoo as well. And, as Roland (Hersh) pointed out, your system will discourage savings - at least by anyone anywhere near the tax threshold.
-Arrian

The rational investor will demand a return on his investment. Why hold land that is going to be taxed that isn't producing anything?

Originally posted by Arrian
And for those that might be inclined to go a create something like Microsoft or Dell or whatever, they will probably just say "screw it" and either move to another country or decide to just work their 9 to 5 and get by like the rest of the righteous proletariate.

Man, the companies are shipping out all the jobs they can now. There would be absolutely no increase because of the a wealth tax.

Here's the way it works. Cutting working peoples taxes increases their disposable inome. More income means economic growth. Right?

[Kidlicious]

Originally posted by HershOstropoler
No really. When 100 % of output is consumed, what do you invest? The outcome of your digestive processes?

The only places where 100% is consumed is in famine economies, where stavation is the significant factor. It's not possible to consume 100% in US.

[Kidlicious]

Originally posted by MichaeltheGreat
If you tax capital itself (rather than earnings on capital) above a certain point, then the solution for the taxpayer is simple - don't have capital in that market above that point. Economic growth would follow capital in this case - it would go elsewhere.

It depends on the return. Since the economy would be growing there would be higher return.

[HershOstropoler]

That's not the issue. If it falls to say 10 % of GDP, you suffer a shrinking capital stock. Think that's a good idea?

[Kidlicious]

Originally posted by Arrian


Excuse me? Care to tell me how someone with no savings can invest in something?

-Arrian

Borrow

[Japher]

From who?

[Arrian]

Not necessarily, Kid. More income may mean more consumption, but a shortage of capital can stymie growth. Look, if suddenly poorer people had more cash on had and thus were able to consume more, that would be a positive. But economic growth - new growth, as opposed to increases in sales for established industries - is up a creek w/o a paddle if there isn't a bunch of capital around to use to start up new companies.

As for the "companies shipping out all the jobs" part, that's not what I was talking about. I'm talking about the people who innovate - the people who come up with the ideas and then put them into action, not the average working stiff. Those people will bail, or say "screw it." You are discouraging the country's best 'n brightest.

-Arrian

[Kidlicious]

Originally posted by HershOstropoler
That's not the issue. If it falls to say 10 % of GDP, you suffer a shrinking capital stock. Think that's a good idea?

Do you mean if the savings rate fell? I don't think a falling savings rate is that bad for this economy. The reason is that interest rates are so low right now. The savings rate wouldn't fall as much as you're thinking because interest rates would go up.

[DAVOUT]

Originally posted by Kidicious


The only places where 100% is consumed is in famine economies, where stavation is the significant factor. It's not possible to consume 100% in US.

Considering the US balance of foreign trade, one could believe that consuming more than 100% of your production has already been achieved.

[Arrian]

Without savings you cannot invest. Without investment, you cannot start new companies. The economy stagnates, and then collapses.

I am very thankful that you're not running the show.

-Arrian

[MichaeltheGreat]

Originally posted by Kidicious

I don't want to say that a poor person can't improve their situation either. If a middle class person were to become temporarily poor I'm sure that 9-10 times they could improve their sitiuation, but it's different for a person that grows up in that environment. If you grow up in that environment you probably won't be able to set your goals, because poor people see so much failure around them. Perceptions are very powerfull.

The crawdad principle. (If you catch one crawdad and put it in a bucket, it'll crawl out, but if you put two in a bucket, as soon as one's about to crawl out, the other one will grab it's tail.

A large percentage of people who grow up in a "poor" environment fit that mold precisely - they rationalize excuses for their failures, and actively undermine anyone who tries to do better. However, you're talking about a sociological defect, not a lack of economic opportunity. Tax policy won't help dumbasses - they'll just spend anything extra on lotto tickets, Marlboros or Kools instead of generics, and useless crap. People have to decide whether they want to subscribe to that sort of defeatist mentality or not.

I used to teach poor kids, so I've seen it first hand.

It's not what you've seen, it's what you've shown that counts. Talk to Charles Bolden for one example.

Few common folks who own their own homes would pay more tax overall. Some people may choose to buy smaller houses though.

You mean after they're forced to sell to pay your tax? (and since any house over a certain limit is subject to the tax, the value of those houses will depress)

A wealth tax will increase productivity. Land will be expensive to hold which will encourage productivity improvements. Speculation would decrease.

How so? Since you're taxing "wealth" i.e. assets, productivity improvements simply add to the tax burden - and if you don't have a market for it, turning every square inch of the US into shopping malls or factory space is silly. No need for speculation to decrease, all you do is break up the holdings into chucks below the floor of your tax, and create 40-50 LLC's or what have you to obscure ownership.

[Kidlicious]

Originally posted by Arrian
Not necessarily, Kid. More income may mean more consumption, but a shortage of capital can stymie growth. Look, if suddenly poorer people had more cash on had and thus were able to consume more, that would be a positive. But economic growth - new growth, as opposed to increases in sales for established industries - is up a creek w/o a paddle if there isn't a bunch of capital around to use to start up new companies.

People will weigh the wealth tax with the higher profits and interests, the market will establish the prices that will clear the production and meet the demand.

[MichaeltheGreat]

Originally posted by Kidicious


Borrow

Debt driven investment is insane. (Oh, and try to raise significant amounts of capital that way without equity, )

[Arrian]

People will weigh the wealth tax with the higher profits and interests, the market will establish the prices that will clear the production and meet the demand.

What? Sorry, but I have no idea what you're saying here.

-Arrian