Are the rich paying their 'fair' share?

[Al B. Sure!]

I'd be in a lot worse situation on that income, if I was renting an apartment. I have student loan debts, but ever since graduating with my Masters in 2006, I have been keeping them on forbearance based on economic hardship. Thankfully, before I even finished school, I had them all consolidated and they are locked at an incredibly low interest rate. Nevertheless, my student loans will continue to accrue interest while I'm on forbearance.

But other than that, no, I have no crushing debt - no credit card debt, no car payments (car I own, I paid in full).

And for my depression treatment, I go to a Catholic institution where I pay two dollars per appointment with my counselor, and I pay just twenty-six dollars for each refill for both of my prescriptions. So in regard to medical expenses, I am fortunate to have found out and gain access to these resources.

EDIT: This is a x-post in response to Alby

And you live with mom rent-free?

Looks like you're wasting money. I can't imagine the cost of living in Iowa is higher than Philly's which is quite a bit higher than the national average, being a big city and all. You could definitely afford cuts.

[Jon Miller]

Your model is absolutely confused. You have people making money off of consumption. Just because you think you're "fairer" than I am does not entitle you to use words incorrectly.

I don't object to your arguments because they are normatively redistributionist - because they come to the conclusion that wealth should be redistributed; I am a redistributionist as well. I object to them because they are wrong. Krazyhorse's model, which you describe as making the best economic sense, is also the most fair, in that it doesn't "take sides" between two people of equivalent levels of lifetime purchasing power who happen to have different time preferences on their consumption.

Are you incapable of considering my model?

And it is reality, in the housing market for example. They are not wrong. The housing market is just the clearest example.

If you worry so much about the language you can modify my previous post with:
He buys a place for 100$ (+10$ taxes), this is an asset, and not consumption. He then lives in the house and forgoes rent, however, he does not pay taxes on this consumption and hence gains an advantage due to his wealth (as he is not being taxed on his consumption). He still pays a small portion of the tax that the poorer person pays despite having the same level of consumption.

Your 'fairness' ignores that the vast majority of people due not have equivalent levels of lifetime purchasing power (anywhere near equivalent levels) because of the benefits of wealth that are not accounted for in your reasoning. Therefore consumption taxes unfairly penalize the poor.

JM

[giblets]

And that would be... NON-MONETARY COMPENSATION!

So the DOLLAR value a job pays does not SOLELY determine the value of the job!

Now why is it that the city of Philadelphia can't get 2000 people out of a city of 1.5 million to volunteer while much smaller communities can get more volunteers per capita?

The value of the job to the individual? No. That's trivial. The value of that individual's labor to society? I don't see why not.

And I am not an expert on fire safety, so I can't explain why Philadelphia doesn't use volunteers. I see no reason to assume that Philadelphia doesn't have a similar number of would-be volunteers. It's possible that the city doesn't think training and equipping volunteers would be worthwhile. How the **** should I know? What is your point anyway?

[rah]

Most volunteer FDs are in areas that have no more than a few fires a year. Where a full time FD isn't economical.
Major cities need full time coverage with higher skill level.
And remember, with almost all full time FDs, due to their shift schedules that are like 3 days on days off, most of them work a second job, usually a trade job, so they can supplement their income quite well. And they have those same job skills when they start collecting their pensions so they can do a lot of under the table jobs.

[Al B. Sure!]

So, assume I am a prospective investor with $400. In scenario 1, I would get an $80 dividend. In scenario 2, I would look to get a $100 dividend and pay $20 tax, and end up with $80. If my income was only/mostly from dividends, it'd look like I am contributing more in taxes in scenario 2 (20% burden vs 0% burden) when in fact the tax burden is not really falling on me as I am getting the same return on investment.

This is simplistic, but the point I was getting at....

Moreover, there are other issues to consider.

Those already holding shares at the introduction of the tax look screwed.

[MrFun]

And you live with mom rent-free?

Looks like you're wasting money. I can't imagine the cost of living in Iowa is higher than Philly's which is quite a bit higher than the national average, being a big city and all. You could definitely afford cuts.

I spend a lot of money on gas to get to work, and back home as my job is a half hour from where I live. My own bills that I pay:

car insurance
Internet service
smartphone service plan
renter's insurance

And of course, I buy my own groceries, and gas for my car. Except maybe for new package of socks, underwear, or shoes, there are some years I go through an entire year without buying any new clothes. Rest is leisurely spent and I try to put some into my savings.

[Dauphin]

Those already holding shares at the introduction of the tax look screwed.

Just a bit. Future pensioners in the UK lost billions when pension funds were made liable to taxes on received dividends in 1997.

[Hauldren Collider]

Okay I know this has been covered but it deserves special mention: Have you ever been to Denny's?. Huge plate of pancakes for like, a quarter or something. And it's open 24/7 so if you're blacked out all day from the liquor and smack you can still grab a bite at like, 3:00 AM.

Denny's
Wal-mart

[Hauldren Collider]

I spend a lot of money on gas to get to work, and back home as my job is a half hour from where I live. My own bills that I pay:

car insurance
Internet service
smartphone service plan
renter's insurance

And of course, I buy my own groceries, and gas for my car. Except maybe for new package of socks, underwear, or shoes, there are some years I go through an entire year without buying any new clothes. Rest is leisurely spent and I try to put some into my savings.

But are you starving or malnourished? Look, your situation sucks a lot, and you still have food, shelter, internet, smartphones, and a CAR. I'm not saying you should be content but JM going all chicken little with starving children is horse****.

[Hauldren Collider]

Are you incapable of considering my model?

And it is reality, in the housing market for example. They are not wrong. The housing market is just the clearest example.

If you worry so much about the language you can modify my previous post with:
He buys a place for 100$ (+10$ taxes), this is an asset, and not consumption. He then lives in the house and forgoes rent, however, he does not pay taxes on this consumption and hence gains an advantage due to his wealth (as he is not being taxed on his consumption). He still pays a small portion of the tax that the poorer person pays despite having the same level of consumption.

Your 'fairness' ignores that the vast majority of people due not have equivalent levels of lifetime purchasing power (anywhere near equivalent levels) because of the benefits of wealth that are not accounted for in your reasoning. Therefore consumption taxes unfairly penalize the poor.

JM

Explain what benefits are conferred upon rich people that isn't directly related to their consumption of goods with money. Let's say I had 10 million dollars in the bank. I never touched it, spent it, used it for anything--it just SAT there, making me rich without me consuming anything at all with it. What benefits am I getting?

EDIT: Here's another example. Let's say a farmer farms corn, and he takes ten barrels of it and eats it (who knows, maybe he really ****ing likes corn). He's consuming his corn but not paying taxes on it. Oh, how unfair!

By the way, the homeowner does pay in terms of risk to the property and property taxes and is responsible for the maintenance and upkeep of the property in question. A renter does not have such concerns, so it makes sense that an owner should be able to get such benefits. This is all totally reasonable.

[Jaguar]

So, assume I am a prospective investor with $400. In scenario 1, I would get an $80 dividend. In scenario 2, I would look to get a $100 dividend and pay $20 tax, and end up with $80. If my income was only/mostly from dividends, it'd look like I am contributing more in taxes in scenario 2 (20% burden vs 0% burden) when in fact the tax burden is not really falling on me as I am getting the same return on investment.

This is simplistic, but the point I was getting at....

Moreover, there are other issues to consider.

The results become different if you apply that tax across the board, which is why I specified "on that company alone." Here's what happens if you do it on the whole economy.



Supply and Demand curve for loanable funds. We'll hold consumer borrowing constant for now and just talk about corporate investment. The green line is the amount lenders are willing to give out, given the risk-free rate of interest. The orange lines is the number of businesses that are capable of making investments that give you that risk-weighted return.

We start with the equilibrium implied by orange line 1. Since the investment you described is $100 a share and continuously pays $5 risk-free dividends, we know the equilibrium is at 5% interest.

Once you add in the 20% tax on all profits, the firms that could previously give you 5% return on capital now can only give you a 4% return on capital at best, etc. So we move to orange line 2. Note that it has 4/5 of the (negative) slope of line 1, because returns are scaled down to 4/5 of what they were previously.

The new interest rate doesn't become 4%, though - because some people, instead of accepting the lower interest rate, devote more of their resoures to consuming things now. To get the market to equilibrium, things move from the blue dot to the purple dot. The purple dot is higher than 4% - so investors don't take a full 20% hit on their returns - but there are fewer investments being made.

The net result has a benefit in that people get more to consume now, but the downsides are that savers get a lower return and fewer investments are made, resulting in lower future income for society.

[Jaguar]

Here's another example. Let's say a farmer farms corn, and he takes ten barrels of it and eats it (who knows, maybe he really ****ing likes corn). He's consuming his corn but not paying taxes on it. Oh, how unfair!

This is actually a legitimate problem. All taxation systems favor non-market labor over market labor. There is no known solution to this.

[Al B. Sure!]

The results become different if you apply that tax across the board, which is why I specified "on that company alone." Here's what happens if you do it on the whole economy.



Supply and Demand curve for loanable funds. We'll hold consumer borrowing constant for now and just talk about corporate investment. The green line is the amount lenders are willing to give out, given the risk-free rate of interest. The orange lines is the number of businesses that are capable of making investments that give you that risk-weighted return.

We start with the equilibrium implied by orange line 1. Since the investment you described is $100 a share and continuously pays $5 risk-free dividends, we know the equilibrium is at 5% interest.

Once you add in the 20% tax on all profits, the firms that could previously give you 5% return on capital now can only give you a 4% return on capital at best, etc. So we move to orange line 2. Note that it has 4/5 of the (negative) slope of line 1, because returns are scaled down to 4/5 of what they were previously.

The new interest rate doesn't become 4%, though - because some people, instead of accepting the lower interest rate, devote more of their resoures to consuming things now. To get the market to equilibrium, things move from the blue dot to the purple dot. The purple dot is higher than 4% - so investors don't take a full 20% hit on their returns - but there are fewer investments being made.

The net result has a benefit in that people get more to consume now, but the downsides are that savers get a lower return and fewer investments are made, resulting in lower future income for society.

This is a really good explanation. I'm going to use your post elsewhere but add some further explanations for those who have difficulty understanding supply and demand curves.

My question is why does this change the demand curve and not the supply one? I would think the reduction in returns would make the supply curve shift to the left because investors would be discouraged from lending and would require higher returns for the same quantity supplied. Interest rates would therefore go up while quantity of loans will decrease.

[Aeson]

But people don't do it for free. They volunteer at significant cost to themselves in time, effort, and risk exposure. Why is this?

Community spirit. Or chicks dig it.

"No, no no no... Like, a big sweaty fireman carries you out of a burning building, lays you on the sidewalk, and you think, "Yeah, okay, he's gonna give me mouth to mouth." But instead, he just starts choking the **** out of you, and the last sensation that you feel before you die is he is squeezing your throat so hard that a big, wet, blob of drool drips off his teeth and just "flurr", falls right onto your popped out eyeball..."

[regexcellent]

Archer

I just started watching it and that show is so ****ing awesome.