Corner of Berkshire & Fairfax Message Board

General Category => Politics => Topic started by: MarkS on January 22, 2019, 06:19:57 AM

Title: Re: Klarman worried about political divide
Post by: MarkS on January 22, 2019, 06:19:57 AM
According to the NYT:

"Seth Klarman, a hedge fund billionaire some call the next Warren Buffett, wrote a sobering letter warning his investors of the economic impact of global tension, rising debt and pervasive political divide.

"It can't be business as usual amid constant protests, riots, shutdowns and escalating social tensions," Klarman wrote in the annual letter to investors, according to a New York Times column filed by CNBC "Squawk Box" co-anchor Andrew Ross Sorkin. "
Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 07:04:12 AM
He's been bearish since 2010....and the world hasn't fallen apart.

Eventually we will go through a serious downturn but who knows when.
Title: Re: Klarman worried about political divide
Post by: DTEJD1997 on January 22, 2019, 07:25:06 AM
Hey all:

I am also worried about the political divide.  Say what you will...but it is certainly WORSE now than it was in 2010.

I am also distressed about the rise & seeming popularity of that Occasio Cortez from NY.  The vast majority of what she spouts is simply ignorant.  So many young people are NOT getting any type of education in finance or economics.  This has been going on for a LONG time, decades perhaps.

SO, if people have little to no understanding of economics, business, or finance, is it any wonder that they don't know how the system works/functions.  They are also scared and or skeptical of capitalism...and then think well geez, socialism is promising free healthcare, education, and TONS OF FUN!  Why not?  What could possibly go wrong?

Couple that with ignorance of current events and history. 

What could possibly go wrong?
Title: Re: Klarman worried about political divide
Post by: MarkS on January 22, 2019, 08:13:15 AM
Hey all:

I am also worried about the political divide.  Say what you will...but it is certainly WORSE now than it was in 2010.

I am also distressed about the rise & seeming popularity of that Occasio Cortez from NY.  The vast majority of what she spouts is simply ignorant.  So many young people are NOT getting any type of education in finance or economics.  This has been going on for a LONG time, decades perhaps.

SO, if people have little to no understanding of economics, business, or finance, is it any wonder that they don't know how the system works/functions.  They are also scared and or skeptical of capitalism...and then think well geez, socialism is promising free healthcare, education, and TONS OF FUN!  Why not?  What could possibly go wrong?

Couple that with ignorance of current events and history. 

What could possibly go wrong?
[/quote
+1
Dalio thinks AOC's tax plan may have legs.
https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2019-01-22/ocasio-cortez-buzz-hits-davos-as-dalio-says-70-tax-talk-to-rise?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2019-01-22%2Focasio-cortez-buzz-hits-davos-as-dalio-says-70-tax-talk-to-rise
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 22, 2019, 08:21:55 AM
Hey all:

I am also worried about the political divide.  Say what you will...but it is certainly WORSE now than it was in 2010.

I am also distressed about the rise & seeming popularity of that Occasio Cortez from NY.  The vast majority of what she spouts is simply ignorant.  So many young people are NOT getting any type of education in finance or economics.  This has been going on for a LONG time, decades perhaps.

SO, if people have little to no understanding of economics, business, or finance, is it any wonder that they don't know how the system works/functions.  They are also scared and or skeptical of capitalism...and then think well geez, socialism is promising free healthcare, education, and TONS OF FUN!  Why not?  What could possibly go wrong?

Couple that with ignorance of current events and history. 

What could possibly go wrong?

AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 08:22:55 AM
I mean, in regards to taxing the haves, is there any doubt the have nots will be all for it? Gimme sum they say. With their hands out.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 08:28:37 AM
I'd like to solve the Cortez Ocazio puzzle.

Supposedly poor girl from the hood.
Attends top 25 university in the county that also happens to be one of the most expensive to attend, in one of the most expensive areas to live
Upon graduating becomes a bar tender

ALEX, I'LL TAKE SPOILED, LAZY, MILLENNIAL BRAT FOR $1000!
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 22, 2019, 09:03:09 AM
"AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?"

Taxing anything above $10 million at 70% rate is standard?

You are the one who should learn about what you are talking about!

Cardboard
Title: Re: Klarman worried about political divide
Post by: MarkS on January 22, 2019, 09:03:54 AM
Hey all:

I am also worried about the political divide.  Say what you will...but it is certainly WORSE now than it was in 2010.

I am also distressed about the rise & seeming popularity of that Occasio Cortez from NY.  The vast majority of what she spouts is simply ignorant.  So many young people are NOT getting any type of education in finance or economics.  This has been going on for a LONG time, decades perhaps.

SO, if people have little to no understanding of economics, business, or finance, is it any wonder that they don't know how the system works/functions.  They are also scared and or skeptical of capitalism...and then think well geez, socialism is promising free healthcare, education, and TONS OF FUN!  Why not?  What could possibly go wrong?

Couple that with ignorance of current events and history. 

What could possibly go wrong?

AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?

She seems iffy to me.   https://www.realclearpolitics.com/video/2018/07/18/ocasio-cortez_unemployment_is_low_because_everyone_has_two_jobs.html
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 09:12:28 AM
"AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?"

Taxing anything above $10 million at 70% rate is standard?

You are the one who should learn about what you are talking about!

Cardboard

I read a few days ago that 26 people essentially own 50% of the world's capital.

I think higher taxes on the uberrich would do quite a bit to help the income inequality that AOC is referencing when she talks about people working two jobs and still struggling to make ends meet. This is IMO due to wage stagnation:

http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

You'll also note that any wage growth has gone to top earners.
http://www.pewresearch.org/wp-content/uploads/2018/08/FT_18.07.26_hourlyWage_increases.png
 
Title: Re: Klarman worried about political divide
Post by: MarkS on January 22, 2019, 09:35:49 AM
"AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?"

Taxing anything above $10 million at 70% rate is standard?

You are the one who should learn about what you are talking about!

Cardboard

I read a few days ago that 26 people essentially own 50% of the world's capital.

I think higher taxes on the uberrich would do quite a bit to help the income inequality that AOC is referencing when she talks about people working two jobs and still struggling to make ends meet. This is IMO due to wage stagnation:

http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

You'll also note that any wage growth has gone to top earners.
http://www.pewresearch.org/wp-content/uploads/2018/08/FT_18.07.26_hourlyWage_increases.png

LC this isn't a gotcha question, seriously.  You imply that raising U.S. Taxes would help with world wealth inequality.   The 26 people that you're referring too are being compare to the world's poorest people - presumably in places like sub-saharan Africa among others.  Why is it our responsibility to fix global wealth inequality?
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 22, 2019, 09:46:08 AM
"I think higher taxes on the uberrich would do quite a bit to help the income inequality that AOC is referencing when she talks about people working two jobs and still struggling to make ends meet. This is IMO due to wage stagnation:"

Of course you are in favour of that... It would not affect you. Is that how you think? Make others pay but, not me?

It would not affect me directly either however, I am sure it would affect me indirectly.

Taking more from the rich would not solve any of the problems: they would move out, find ways to not earn as much taxable income and some would just give up pushing for more.

All of this means a trend toward less overall wealth, less competitiveness, less innovation.

Where is the evidence for this? Throughout history.

It has happened in the U.K. where they failed miserably taxing top income at 98%.

It is happening today in the U.S. where we have full employment due in part to corporate tax rates that are finally competitive with the world.

Finally, you don't solve problems by handing out free money to people. You solve them by creating opportunities.

Cardboard
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 10:09:10 AM
"AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?"

Taxing anything above $10 million at 70% rate is standard?

You are the one who should learn about what you are talking about!

Cardboard

I read a few days ago that 26 people essentially own 50% of the world's capital.

I think higher taxes on the uberrich would do quite a bit to help the income inequality that AOC is referencing when she talks about people working two jobs and still struggling to make ends meet. This is IMO due to wage stagnation:

http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

You'll also note that any wage growth has gone to top earners.
http://www.pewresearch.org/wp-content/uploads/2018/08/FT_18.07.26_hourlyWage_increases.png

LC this isn't a gotcha question, seriously.  You imply that raising U.S. Taxes would help with world wealth inequality.   The 26 people that you're referring too are being compare to the world's poorest people - presumably in places like sub-saharan Africa among others.  Why is it our responsibility to fix global wealth inequality?

I mean it on a global level, not just the US.

Logically, US taxes should address US income inequality.

One could also argue that the US has directly contributed to de-stabilization of certain regions (the middle east for example) and should therefore shoulder some responsibility in those regions as well. I'm sure there is room for disagreement over the strength of this argument (I'm generally on the side of, if we helped make the mess, we should help clean it up).
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 10:14:35 AM
Of course you are in favour of that... It would not affect you. Is that how you think? Make others pay but, not me?
No Cardboard that is not how I think, the fact that you jump to that conclusion is evidence of your extreme bias and illogical though process.

Lesson? If you're going to ask loaded questions expect a loaded response.

Quote
Taking more from the rich would not solve any of the problems: they would move out, find ways to not earn as much taxable income and some would just give up pushing for more.
Tons of regions countries are doing just fine (and arguably better than the US) with more progressive tax schemes.

Quote
Finally, you don't solve problems by handing out free money to people. You solve them by creating opportunities.
Who said anything about handing out free money? Again your bias is showing.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 10:27:49 AM
Of course you are in favour of that... It would not affect you. Is that how you think? Make others pay but, not me?
/quote]
No Cardboard that is not how I think, the fact that you jump to that conclusion is evidence of your extreme bias and illogical though process.

Lesson? If you're going to ask loaded questions expect a loaded response.

Quote
Taking more from the rich would not solve any of the problems: they would move out, find ways to not earn as much taxable income and some would just give up pushing for more.
Tons of regions countries are doing just fine (and arguably better than the US) with more progressive tax schemes.

Quote
Finally, you don't solve problems by handing out free money to people. You solve them by creating opportunities.
Who said anything about handing out free money? Again your bias is showing.


Thats not how you claim to think, but that's the end result of what you suggest.... OK then.

And in regards to the bolded, holy shit. These games are just too much. You advocate a redistribute the wealth position. And then go "who said anything about handing out free money"... Seriously?
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 22, 2019, 10:28:21 AM
I am expecting no less than idiocy from you LC!

Cardboard
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 10:30:24 AM

Thats not how you claim to think, but that's the end result of what you suggest.... OK then.

And in regards to the bolded, holy shit. These games are just too much. You advocate a redistribute the wealth position. And then go "who said anything about handing out free money"... Seriously?
Is it free money to tax the 1% to pay workers to build your wall?

Is it free money to tax the 1% and reduce gov't debt?

Is it free money to tax the 1% and pay for better public schooling, so that future generations don't ask such silly questions? What we really need is intelligence redistribution (kidding!) ;D ;D
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 10:31:59 AM
I am expecting no less than idiocy from you LC!

Cardboard

Boring, soft, low energy post.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 10:38:20 AM
LC are you Octazio Cortez's boyfriend?
Title: Re: Klarman worried about political divide
Post by: DTEJD1997 on January 22, 2019, 10:38:30 AM
Hey all:

I am a little concerned about the talk of "some people have too much".

As long as they didn't do anything illegal/highly unethical, what difference does it make to me (or anybody else) HOW much wealth they have?

Of course, the mega rich should pay their "fair" share of taxes...and maybe that should be a higher percentage than your nursing home CNA, fry-O-lator operator, or small business person.  HOWEVER, at rates approaching OR exceeding 50%, I've got a problem with that.  How is it ethical that the government gets/takes MORE of the money that YOU make?



Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 11:04:46 AM
I love the idea of a 70% income tax.

I think it's insulting when conservatives are like "take from those that earn it and give to those that don't! that's fair!"

What do you call it when a state gives money to a corporation to relocate there? Does Amazon really need billions of dollars to help their business? What do you call when a city builds a stadium for a sporting event and increasing taxes on people? What do you call when the government bails out the economy? Is this not the "havenots" giving to the haves?

Do you really think that a baseball player would stop playing baseball if he were taxed at 50%? Do you think a CEO would not take a job? Do you think a hedge fund manager might be like "well, I'm not going to do that because I don't want to pay 70% taxes". Highly, highly doubtful.

The US operated with a 90% income tax and people still worked.
Title: Re: Klarman worried about political divide
Post by: rb on January 22, 2019, 11:11:37 AM
Hey all:

I am a little concerned about the talk of "some people have too much".

As long as they didn't do anything illegal/highly unethical, what difference does it make to me (or anybody else) HOW much wealth they have?

Of course, the mega rich should pay their "fair" share of taxes...and maybe that should be a higher percentage than your nursing home CNA, fry-O-lator operator, or small business person.  HOWEVER, at rates approaching OR exceeding 50%, I've got a problem with that.  How is it ethical that the government gets/takes MORE of the money that YOU make?
Well are you concerned about the ethics of an x% marginal tax rate or are you concerned about instability/political divide?
Title: Re: Klarman worried about political divide
Post by: cubsfan on January 22, 2019, 11:14:41 AM
Hey all:

I am also worried about the political divide.  Say what you will...but it is certainly WORSE now than it was in 2010.

I am also distressed about the rise & seeming popularity of that Occasio Cortez from NY.  The vast majority of what she spouts is simply ignorant.  So many young people are NOT getting any type of education in finance or economics.  This has been going on for a LONG time, decades perhaps.

SO, if people have little to no understanding of economics, business, or finance, is it any wonder that they don't know how the system works/functions.  They are also scared and or skeptical of capitalism...and then think well geez, socialism is promising free healthcare, education, and TONS OF FUN!  Why not?  What could possibly go wrong?

Couple that with ignorance of current events and history. 

What could possibly go wrong?

AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?

AOC hasn't learned a thing. She may have a degree, but she doesn't understand economics or capitalism. She is pretty and extremely naive - the stuff that comes out of her mouth shows complete ignorance. But elected she is!
Scary.
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 11:16:34 AM
LC are you Octazio Cortez's boyfriend?
She can do better than me  ;D ;D
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 11:24:07 AM
Of course, the mega rich should pay their "fair" share of taxes...and maybe that should be a higher percentage than your nursing home CNA, fry-O-lator operator, or small business person.  HOWEVER, at rates approaching OR exceeding 50%, I've got a problem with that.  How is it ethical that the government gets/takes MORE of the money that YOU make?

Fair is the operative word. Winners in our capitalist society take advantage of both societal norms and public services. How to quantify that is difficult.
Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 11:57:13 AM
Personally, I think the huge government deficits are evidence that something is broken.

On a note of the "fair" issue, is it fair that if a normal person doesn't do a good job, they're fired but a CEO walks way with millions (or hundreds of millions?) Is it fair that a company produces a product that harms people, but the CEO keep his pay for all of the years of profits?
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 22, 2019, 11:58:51 AM
I love the idea of a 70% income tax.

I think it's insulting when conservatives are like "take from those that earn it and give to those that don't! that's fair!"

What do you call it when a state gives money to a corporation to relocate there? Does Amazon really need billions of dollars to help their business? What do you call when a city builds a stadium for a sporting event and increasing taxes on people? What do you call when the government bails out the economy? Is this not the "havenots" giving to the haves?

Do you really think that a baseball player would stop playing baseball if he were taxed at 50%? Do you think a CEO would not take a job? Do you think a hedge fund manager might be like "well, I'm not going to do that because I don't want to pay 70% taxes". Highly, highly doubtful.

The US operated with a 90% income tax and people still worked.

Apparently you don't realize you have almost everything wrong.  The US never operated with a near 90% income tax.  It had a near 90% marginal income tax rate, not income tax.  Effective rates were pretty close to today's effective rates.  If you study the issue, the "deficit" on the revenue side is not due to taxing the rich less.  It is due to taxing the poor and lower middle class less.  That is the result of Republican policies.       

Regarding stadiums and public assistance to corporations.  If the "have nots" are not paying taxes (and they are not, at least not to the level to cover their respective costs) then it is not the "have nots" supporting the haves.  It is the haves supporting other haves and the "have nots."
     
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 22, 2019, 12:23:21 PM
"AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?"

Taxing anything above $10 million at 70% rate is standard?

You are the one who should learn about what you are talking about!

Cardboard

Yes - it is.

I'd have to see what the PF impact of a 70% marginal tax rate above $10mm USD would be, but I can tell you that the US is pretty close to dead last in tax revenue as a percent of GDP relative to other Western nations.  Of course, we all tax sales/incomes/capital gains/etc. differently so you can't just Copy + Paste "70% marginal tax rate" and compare, you'd have to see how much additional revenue that would raise relative to GDP.

You honestly didn't know the US is vastly under-taxed relative to the rest of the Western world?
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 22, 2019, 12:26:35 PM
Hey all:

I am also worried about the political divide.  Say what you will...but it is certainly WORSE now than it was in 2010.

I am also distressed about the rise & seeming popularity of that Occasio Cortez from NY.  The vast majority of what she spouts is simply ignorant.  So many young people are NOT getting any type of education in finance or economics.  This has been going on for a LONG time, decades perhaps.

SO, if people have little to no understanding of economics, business, or finance, is it any wonder that they don't know how the system works/functions.  They are also scared and or skeptical of capitalism...and then think well geez, socialism is promising free healthcare, education, and TONS OF FUN!  Why not?  What could possibly go wrong?

Couple that with ignorance of current events and history. 

What could possibly go wrong?

AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?

AOC hasn't learned a thing. She may have a degree, but she doesn't understand economics or capitalism. She is pretty and extremely naive - the stuff that comes out of her mouth shows complete ignorance. But elected she is!
Scary.

Riiigghttt.  That's why her policies are much closer to what a consensus of Ivy League economists would suggest relative to Trump (as an example.)  Because she, professional economists and every other Western country (which have way better quality of life metrics) just don't get it!
Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 12:35:44 PM
I love the idea of a 70% income tax.

I think it's insulting when conservatives are like "take from those that earn it and give to those that don't! that's fair!"

What do you call it when a state gives money to a corporation to relocate there? Does Amazon really need billions of dollars to help their business? What do you call when a city builds a stadium for a sporting event and increasing taxes on people? What do you call when the government bails out the economy? Is this not the "havenots" giving to the haves?

Do you really think that a baseball player would stop playing baseball if he were taxed at 50%? Do you think a CEO would not take a job? Do you think a hedge fund manager might be like "well, I'm not going to do that because I don't want to pay 70% taxes". Highly, highly doubtful.

The US operated with a 90% income tax and people still worked.

Apparently you don't realize you have almost everything wrong.  The US never operated with a near 90% income tax.  It had a near 90% marginal income tax rate, not income tax.  Effective rates were pretty close to today's effective rates.  If you study the issue, the "deficit" on the revenue side is not due to taxing the rich less.  It is due to taxing the poor and lower middle class less.  That is the result of Republican policies.       

Regarding stadiums and public assistance to corporations.  If the "have nots" are not paying taxes (and they are not, at least not to the level to cover their respective costs) then it is not the "have nots" supporting the haves.  It is the haves supporting other haves and the "have nots."
   

Well, you're right. If I recognized I had everything wrong, I would have to change that opinion. ;)

With that said, I'm fully aware they were marginal income tax rates. I didn't feel the need to clarify that (I didn't think people thought everyone had a 90% rate). My error I suppose. I am interested in what you say about Republican polices taxes the poor and lower middle class lower though. Would you elaborate?

The "have nots" that I mentioned were basically the middle/upper middle class. I didn't mean the poor (who typically pay little taxes). I think we may be agreement here. Perhaps a better way to put it is the "haves" giving to the "have nots" and "have lots?"
Title: Re: Klarman worried about political divide
Post by: cubsfan on January 22, 2019, 12:36:07 PM

Riiigghttt.  That's why her policies are much closer to what a consensus of Ivy League economists would suggest relative to Trump (as an example.)  Because she, professional economists and every other Western country (which have way better quality of life metrics) just don't get it!

Yea, that's what we need - more Ivy League economists running the country, that'll work real well..

Title: Re: Klarman worried about political divide
Post by: SharperDingaan on January 22, 2019, 12:42:07 PM
I love the idea of a 70% income tax.

I think it's insulting when conservatives are like "take from those that earn it and give to those that don't! that's fair!"

What do you call it when a state gives money to a corporation to relocate there? Does Amazon really need billions of dollars to help their business? What do you call when a city builds a stadium for a sporting event and increasing taxes on people? What do you call when the government bails out the economy? Is this not the "havenots" giving to the haves?

Do you really think that a baseball player would stop playing baseball if he were taxed at 50%? Do you think a CEO would not take a job? Do you think a hedge fund manager might be like "well, I'm not going to do that because I don't want to pay 70% taxes". Highly, highly doubtful.

The US operated with a 90% income tax and people still worked.

I love the idea of the 70% marginal tax rate too ....
My company car can become a leased Maserati, as the $2000/month before tax cost is only $600 after tax.
My $2000/month after-tax mortgage, gets traded in for a $6700/month before tax mansion - complete with maid/cleaning service
And if I blow up my firm to get that cash, who cares - my 70% tax 'partner' will take care of it  ;D

Life is great!

SD




Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 12:45:47 PM
I love the idea of a 70% income tax.

I think it's insulting when conservatives are like "take from those that earn it and give to those that don't! that's fair!"

What do you call it when a state gives money to a corporation to relocate there? Does Amazon really need billions of dollars to help their business? What do you call when a city builds a stadium for a sporting event and increasing taxes on people? What do you call when the government bails out the economy? Is this not the "havenots" giving to the haves?

Do you really think that a baseball player would stop playing baseball if he were taxed at 50%? Do you think a CEO would not take a job? Do you think a hedge fund manager might be like "well, I'm not going to do that because I don't want to pay 70% taxes". Highly, highly doubtful.

The US operated with a 90% income tax and people still worked.

I love the idea of the 70% marginal tax rate too ....
My company car can become a leased Maserati, as the $2000/month before tax cost is only $600 after tax.
My $2000/month after-tax mortgage, gets traded in for a $6700/month before tax mansion - complete with maid/cleaning service
And if I blow up my firm to get that cash, who cares - my 70% tax 'partner' will take care of it  ;D

Life is great!

SD

By the way, I don't mean that everyone pays 70%. Just over a certain amount (say $10 million or whatever).

Dang SD, I didn't know you made the kind of money to be at that 70% level! :P
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 22, 2019, 01:05:16 PM
"By the way, I don't mean that everyone pays 70%. Just over a certain amount (say $10 million or whatever). "

Like I said to that LC: Everybody else problem but, not mine!

Taxing success is dumb. Many people are jealous of professional sport players, CEO's, rich entrepreneurs. Not me. Good for them!

I don't have their talent nor did I make the sacrifices to get to where they are.

And it doesn't matter if they have a lot of money, as some day like all of us, they will pass away and that money will all flow in society if not prior with their spending or giving.

The Leftists are interested to grab that money right away so that in their power drive can redistribute it as they see fit. Wow! How great is that?

Better watchout next success story I am coming for you! Must be how to encourage potential development in a society...

You guys should really look back to what Tim Eriksen said.

These catch phrases such as the one by dishonest Buffett and his secretary have been picked up by the Leftists. Reality is vastly otherwise.

Cardboard
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 22, 2019, 01:25:46 PM
"AOC has a degree in economics and her policies are pretty much the standard in the Western World (sans the USA).  What are you talking about?"

Taxing anything above $10 million at 70% rate is standard?

You are the one who should learn about what you are talking about!

Cardboard

Yes - it is.

I'd have to see what the PF impact of a 70% marginal tax rate above $10mm USD would be, but I can tell you that the US is pretty close to dead last in tax revenue as a percent of GDP relative to other Western nations.  Of course, we all tax sales/incomes/capital gains/etc. differently so you can't just Copy + Paste "70% marginal tax rate" and compare, you'd have to see how much additional revenue that would raise relative to GDP.

You honestly didn't know the US is vastly under-taxed relative to the rest of the Western world?

Since I had 2014 data handy it would have been $110 billion of additional revenue assuming no changes, meaning no one incorporated.  Remember in the 1950's the effective rate was still in the mid 30 percent range so it is likely the number would be cut in half to about $55 billion (effective rate of 35% instead of 70%).  Another factor is that cap gains rate would not be 70% it was 25% in the 1950's.  It seems at best it would have generate $60 billion in 2014.   
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 22, 2019, 01:42:01 PM

With that said, I'm fully aware they were marginal income tax rates. I didn't feel the need to clarify that (I didn't think people thought everyone had a 90% rate). My error I suppose. I am interested in what you say about Republican polices taxes the poor and lower middle class lower though. Would you elaborate?

The "have nots" that I mentioned were basically the middle/upper middle class. I didn't mean the poor (who typically pay little taxes). I think we may be agreement here. Perhaps a better way to put it is the "haves" giving to the "have nots" and "have lots?"

We are probably in agreement.  Average tax (income, payroll, corporate income and excise) rates have declined across the board for every quintile except the top.  I should update to the latest data but
Year     first  second  third  fourth    top
1980   7.5    14.3    18.9     21.8    27.0
2013   3.3     8.4     12.8     17.0    26.3

It is due to income tax rates going negative
1980   0.2    4.4      7.9      10.7    16.7
2013 -7.2   -1.2      2.6        6.1    15.5

The "lost" revenue form the lower and middle class is much bigger than what the "lost" revenue would be if we taxed the super rich.  In 2013 there was only $500 billion of total income for filers with over $10 million of income.   
Title: Re: Klarman worried about political divide
Post by: cubsfan on January 22, 2019, 01:44:52 PM
Ocasio Cortez - she may be cute, but she's not very bright.

If she's an Ivy League economist equivalent, this country is in trouble with someone like her running it:

https://www.usatoday.com/story/news/politics/onpolitics/2019/01/22/ocasio-cortez-climate-change-alarm/2642481002/

Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 02:24:53 PM

With that said, I'm fully aware they were marginal income tax rates. I didn't feel the need to clarify that (I didn't think people thought everyone had a 90% rate). My error I suppose. I am interested in what you say about Republican polices taxes the poor and lower middle class lower though. Would you elaborate?

The "have nots" that I mentioned were basically the middle/upper middle class. I didn't mean the poor (who typically pay little taxes). I think we may be agreement here. Perhaps a better way to put it is the "haves" giving to the "have nots" and "have lots?"

We are probably in agreement.  Average tax (income, payroll, corporate income and excise) rates have declined across the board for every quintile except the top.  I should update to the latest data but
Year     first  second  third  fourth    top
1980   7.5    14.3    18.9     21.8    27.0
2013   3.3     8.4     12.8     17.0    26.3

It is due to income tax rates going negative
1980   0.2    4.4      7.9      10.7    16.7
2013 -7.2   -1.2      2.6        6.1    15.5

The "lost" revenue form the lower and middle class is much bigger than what the "lost" revenue would be if we taxed the super rich.  In 2013 there was only $500 billion of total income for filers with over $10 million of income.

Do you have the numbers for the top 5% or top 1%?
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 02:35:27 PM


And it doesn't matter if they have a lot of money, as some day like all of us, they will pass away and that money will all flow in society if not prior with their spending or giving.

...

These catch phrases such as the one by dishonest Buffett and his secretary have been picked up by the Leftists. Reality is vastly otherwise.
Flow back to society?

“Dynastic wealth, the enemy of a meritocracy, is on the rise,” Buffett told lawmakers years ago. “Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy.”

https://www.theguardian.com/commentisfree/2018/oct/31/us-wealthiest-families-dynasties-governed-by-rich

Reality shows increasing income inequality, increasing 'generational' wealth and decreasing social mobility, decreasing real wage growth.



 
Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 02:49:29 PM
For the folks against a higher marginal tax at the top levels, let's look at it this way.

Do you think that a professional athlete would say "Nah, I'm going to work as a teacher since I'm paying 70% of taxes on my income over $10 million?" or still do the job?

Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I'm extremely skeptical about how much taxes impact people's work/career decisions.

I'd love a scenario where it would be illegal (or perhaps higher taxes) for the higher ups of a company to be capped at certain amount per median employee salary - let's say 150x.

Further, a lot of their compensation would be tied into company stock they couldn't sell for 5 or 10 years. And guess what, virtually every CEO would start thinking about things more long term because of that.

We could then take those funds and higher more teachers, or build better bridges, etc. Instead we're just getting more and more of a national debt until who knows when.

Do you think society would be better off with these things?

I do agree with Klarman that one day they'll be serious consequences to all of that. That could be another 10 or 20+ years though. who knows?
Title: Re: Klarman worried about political divide
Post by: 50centdollars on January 22, 2019, 03:11:08 PM
For the folks against a higher marginal tax at the top levels, let's look at it this way.

Do you think that a professional athlete would say "Nah, I'm going to work as a teacher since I'm paying 70% of taxes on my income over $10 million?" or still do the job?

Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I'm extremely skeptical about how much taxes impact people's work/career decisions.

I'd love a scenario where it would be illegal (or perhaps higher taxes) for the higher ups of a company to be capped at certain amount per median employee salary - let's say 150x.

Further, a lot of their compensation would be tied into company stock they couldn't sell for 5 or 10 years. And guess what, virtually every CEO would start thinking about things more long term because of that.

We could then take those funds and higher more teachers, or build better bridges, etc. Instead we're just getting more and more of a national debt until who knows when.

Do you think society would be better off with these things?

I do agree with Klarman that one day they'll be serious consequences to all of that. That could be another 10 or 20+ years though. who knows?

The higher tax rate doesn't matter. People making millions will find ways to move the money offshore so the taxman can't get it.

Case in point, Euchene Bouchard became a resident of the bahamas. This is what policticians don't get.

https://nationalpost.com/news/politics/canadian-tennis-star-eugenie-bouchard-has-moved-to-the-bahamas-and-some-quebec-politicians-dont-like-it
Title: Re: Klarman worried about political divide
Post by: Viking on January 22, 2019, 03:38:31 PM
According to the NYT:

"Seth Klarman, a hedge fund billionaire some call the next Warren Buffett, wrote a sobering letter warning his investors of the economic impact of global tension, rising debt and pervasive political divide.

"It can't be business as usual amid constant protests, riots, shutdowns and escalating social tensions," Klarman wrote in the annual letter to investors, according to a New York Times column filed by CNBC "Squawk Box" co-anchor Andrew Ross Sorkin. "

The big picture is not looking good. It looks like the US is headed for the perfect storm from a political perspective. The government shut down is the first example of how broken the political system is right now. There is a good chance Trump is going to get more aggressive moving forward. And the Democrats are going to give him more and more rope hoping that he hangs himself (meaning the Democrats will give him nothing). Trump, Democrats and Republicans look like they are wanting to play a game of Russian roulette, with the goal of taking out your opponent (not governing the country). At some point this poison is going to leach into consumer and business confidence (these are cooincident indicators and they are starting to turn down). The China situation is another shit show and is in its early innings. China’s attack on Canada after the Wahwei CEO was detained (at the request of the Americans) has become more vocal and threatening; the tiger is showing its true stripes and the US, Europe and Asia had best be paying attention. The US is less equipped politically to deal with a crisis today than in many, many years (i can’t think of a time when it was less equipped to deal with a crisis in the last 100 years). The tail risks are growing.
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 22, 2019, 03:51:06 PM
For the folks against a higher marginal tax at the top levels, let's look at it this way.

Do you think that a professional athlete would say "Nah, I'm going to work as a teacher since I'm paying 70% of taxes on my income over $10 million?" or still do the job?

Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I'm extremely skeptical about how much taxes impact people's work/career decisions.

I'd love a scenario where it would be illegal (or perhaps higher taxes) for the higher ups of a company to be capped at certain amount per median employee salary - let's say 150x.

Further, a lot of their compensation would be tied into company stock they couldn't sell for 5 or 10 years. And guess what, virtually every CEO would start thinking about things more long term because of that.

We could then take those funds and higher more teachers, or build better bridges, etc. Instead we're just getting more and more of a national debt until who knows when.

Do you think society would be better off with these things?

I do agree with Klarman that one day they'll be serious consequences to all of that. That could be another 10 or 20+ years though. who knows?

Clearly we are not even close to being in agreement.  Do you want to reduce the deficit or add more teachers??  Do we even need more teachers?  I understand infrastructure needs.  Spending it doesn't change the deficit.   Let's see 70% federal rate means about 83% total rate for California or NY City residents.  Might as well have payroll tax on full amount too and push it over 90%.

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation?     
Title: Re: Klarman worried about political divide
Post by: wachtwoord on January 22, 2019, 03:58:02 PM
This socialist crap taking a hold on the world more and more is scary as hell. Yes, let's make it less desirable to go through the difficulties and years of hard work to be successful by allowing those that succeed to keep less and less of it. And oh wait, here's the kicker, let's allow politicians, the least ethical of all humans, to decide how it is redistributed. I'm sure they won't take advantage of their position cause that never happened in history ever.

The world is heading towards some dark times, dystopian future here we come ...
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 04:05:37 PM
For the folks against a higher marginal tax at the top levels, let's look at it this way.

Do you think that a professional athlete would say "Nah, I'm going to work as a teacher since I'm paying 70% of taxes on my income over $10 million?" or still do the job?

Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I'm extremely skeptical about how much taxes impact people's work/career decisions.

I'd love a scenario where it would be illegal (or perhaps higher taxes) for the higher ups of a company to be capped at certain amount per median employee salary - let's say 150x.

Further, a lot of their compensation would be tied into company stock they couldn't sell for 5 or 10 years. And guess what, virtually every CEO would start thinking about things more long term because of that.

We could then take those funds and higher more teachers, or build better bridges, etc. Instead we're just getting more and more of a national debt until who knows when.

Do you think society would be better off with these things?

I do agree with Klarman that one day they'll be serious consequences to all of that. That could be another 10 or 20+ years though. who knows?

Clearly we are not even close to being in agreement.  Do you want to reduce the deficit or add more teachers??  Do we even need more teachers?  I understand infrastructure needs.  Spending it doesn't change the deficit.   Let's see 70% federal rate means about 83% total rate for California or NY City residents.  Might as well have payroll tax on full amount too and push it over 90%.

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation? 

This is the main issue and something that just doesn't resonate with the pee ons because it is so farfetched to even imagine being in that position. They can't conceive it. Much easier to think "gee, doesn't come out of my pocket, and might go into my pocket. GREAT RISK/REWARD!"...
Title: Re: Klarman worried about political divide
Post by: johnny on January 22, 2019, 04:27:09 PM
Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I think the larger risk is that society gradually reconfigures in response to excessive tax rates and lowers productivity not by changing what jobs people choose to do, but how much of the job they choose to do in a year.

We're currently in a world where there is a -very- strong social norm of working a 40+ hour work week in most high-status professions. In most of those jobs, you could dramatically raise your after-tax per-hour compensation by cutting your hours-worked from 40 to 20 a week. Especially interesting is that these sort of jobs tend to be those "knowledge economy" type jobs where it's actually totally feasible to give people flexible/non-standard schedules. In practice, however, there's generally a lot of institutional inertia that prevents these sort of arrangements from surfacing. In a certain large physician group I'm familiar with, there is an explicit option for working a 50% schedule, but in practice it is culturally unsupported, with really strange organizational burdens placed on those opting-in. A physician in this market moving from full-time to half-time would cut their hours in half, but maybe reduce their after-tax comp by only 30%, something that strikes me as a pretty compelling value already, as rates stand today.

Some physicians play this game already in another form: they work a few weeks or months at a time, then go on vacation for a like amount of time. Effectively working half-time, all the while I keep hearing people complain about doctor shortages.

But at some unknowable tax rate at some unpredictable bracket, you create enough pressure that all of these institutions overcome the rolling resistance and begin re-orienting to the new world. This might be a "slowly at first, then all at once" situation and I don't see people consider it very seriously. It seems to me we live in a very interesting world where we've sort of tricked a lot of highly capable people to work themselves to the bone, and I'd be nervous about disrupting that equilibrium.
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 04:43:07 PM
Quote
This socialist crap taking a hold on the world more and more is scary as hell. Yes, let's make it less desirable to go through the difficulties and years of hard work to be successful by allowing those that succeed to keep less and less of it. And oh wait, here's the kicker, let's allow politicians, the least ethical of all humans, to decide how it is redistributed. I'm sure they won't take advantage of their position cause that never happened in history ever.

Quote

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation? 

This is the main issue and something that just doesn't resonate with the pee ons because it is so farfetched to even imagine being in that position. They can't conceive it. Much easier to think "gee, doesn't come out of my pocket, and might go into my pocket. GREAT RISK/REWARD!"...

The top bracket tax rate was 70+% during the following decades:
1950s
1960s
1970s
A portion of the 1980s

These were the golden age of socialism in the USA, right watchwoord?

And nobody ever invested during those years, right Greg? Imagine! We almost missed out on Warren Buffett because he was playing the ukulele during those high-tax years.
Title: Re: Klarman worried about political divide
Post by: Cigarbutt on January 22, 2019, 04:48:16 PM
With that said, I'm fully aware they were marginal income tax rates. I didn't feel the need to clarify that (I didn't think people thought everyone had a 90% rate). My error I suppose. I am interested in what you say about Republican polices taxes the poor and lower middle class lower though. Would you elaborate?

The "have nots" that I mentioned were basically the middle/upper middle class. I didn't mean the poor (who typically pay little taxes). I think we may be agreement here. Perhaps a better way to put it is the "haves" giving to the "have nots" and "have lots?"
We are probably in agreement.  Average tax (income, payroll, corporate income and excise) rates have declined across the board for every quintile except the top.  I should update to the latest data but
Year     first  second  third  fourth    top
1980   7.5    14.3    18.9     21.8    27.0
2013   3.3     8.4     12.8     17.0    26.3

It is due to income tax rates going negative
1980   0.2    4.4      7.9      10.7    16.7
2013 -7.2   -1.2      2.6        6.1    15.5

The "lost" revenue form the lower and middle class is much bigger than what the "lost" revenue would be if we taxed the super rich.  In 2013 there was only $500 billion of total income for filers with over $10 million of income.
Do you have the numbers for the top 5% or top 1%?
Following this thread from the sidelines, here are two references that may be helpful:
https://taxfoundation.org/taxes-rich-1950-not-high/
https://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households

-US tax, like everywhere else in the world, is difficult to compare over time because of its complexity, changing rules and political agendas.
-The % of tax paid by the top earners as a % of total taxes paid has increased significantly despite lower effective tax rates because incomes for top earners has increased to a comparably high degree vs the rest of the people.
-The ratio of federal taxes received over GDP has remained quite constant over the last 30-40 years.
-It appears that the progressivity component has not changed a lot overall in the last 70 years.

I would say really bad incentives come when one reaches both ends of the spectrum and I've come to think that it is reasonable to sacrifice some growth in exchange for some fairness and social cohesion.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 04:49:24 PM
Quote

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation? 

This is the main issue and something that just doesn't resonate with the pee ons because it is so farfetched to even imagine being in that position. They can't conceive it. Much easier to think "gee, doesn't come out of my pocket, and might go into my pocket. GREAT RISK/REWARD!"...

The top bracket tax rate was 70+% during the following decades:
1950s
1960s
1970s
A portion of the 1980s

I guess nobody ever invested during those years? Imagine! We almost missed out on Warren Buffett because he was playing the ukulele during those high-tax years.

And that is the classic LC argument. "I bet there were people investing then! UR WRONG". When the real question is, is this conducive to economic growth? To which, the answer, unequivocally, is no... But I bet we'll find people who still invest!!!!
Title: Re: Klarman worried about political divide
Post by: johnny on January 22, 2019, 04:50:17 PM
The top bracket tax rate was 70+% during the following decades:
1950s
1960s
1970s
A portion of the 1980s

These were the golden age of socialism in the USA, right watchwoord?

And nobody ever invested during those years, right Greg? Imagine! We almost missed out on Warren Buffett because he was playing the ukulele during those high-tax years.

Nobody that invested was paying those rates, that's for sure. And most people who were clearly getting what we would consider labor-income weren't paying those rates either:


Quote
Ike’s lump sum payment in 1948 was treated as a capital gain, not as income. That was standard IRS procedure at the time for onetime authors who received a lump sum payment, and Ike received no special consideration. It meant that instead of paying income tax at the rate of 82.13 percent, which would have been Ike’s tax bracket, he paid taxes at the capital gains rate of 25 percent.
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 22, 2019, 05:01:50 PM
The effective rate combined (federal state and local) in the 1950's for the top 1% was 42%.  In 2014 it was just over 36%.   
https://taxfoundation.org/taxes-rich-1950-not-high/

Please people do your homework and understand that the wealthy incorporated in the 50's to 70s in order to lower their taxes since the corporate rate was much lower.   LT Cap gains rate was 25%.   

Sadly people do not realize that it is a myth that the rich are not paying taxes.  Buffett paid way more than his secretary too.   
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 05:03:52 PM
But LC said they did!
Title: Re: Klarman worried about political divide
Post by: meiroy on January 22, 2019, 05:17:23 PM


In the real world, extreme wealth is anti-capitalistic.  In the real world, such wealth, by itself, has a tremendous competitive advantage on so many levels. It distorts the capitalistic economy and destroys competition and market efficiency.

Again, this is how it is in the real world, where the USA is not a closed economy and the markets are not strongly efficient.

Ironically, her proposals are the result of the same cause that got Trump into power.  The pendulum simply swings to the other extreme, until the underlying cause is fixed.



 
Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 05:18:25 PM
For the folks against a higher marginal tax at the top levels, let's look at it this way.

Do you think that a professional athlete would say "Nah, I'm going to work as a teacher since I'm paying 70% of taxes on my income over $10 million?" or still do the job?

Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I'm extremely skeptical about how much taxes impact people's work/career decisions.

I'd love a scenario where it would be illegal (or perhaps higher taxes) for the higher ups of a company to be capped at certain amount per median employee salary - let's say 150x.

Further, a lot of their compensation would be tied into company stock they couldn't sell for 5 or 10 years. And guess what, virtually every CEO would start thinking about things more long term because of that.

We could then take those funds and higher more teachers, or build better bridges, etc. Instead we're just getting more and more of a national debt until who knows when.

Do you think society would be better off with these things?

I do agree with Klarman that one day they'll be serious consequences to all of that. That could be another 10 or 20+ years though. who knows?

Clearly we are not even close to being in agreement.  Do you want to reduce the deficit or add more teachers??  Do we even need more teachers?  I understand infrastructure needs.  Spending it doesn't change the deficit.   Let's see 70% federal rate means about 83% total rate for California or NY City residents.  Might as well have payroll tax on full amount too and push it over 90%.

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation?   

Well, we could do both, couldn't we? I didn't say all of the savings had to be spent on teachers or infrastructure. I also never said anything about taxing capital gains at a 70% rate.
Title: Re: Klarman worried about political divide
Post by: stahleyp on January 22, 2019, 05:21:15 PM
Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I think the larger risk is that society gradually reconfigures in response to excessive tax rates and lowers productivity not by changing what jobs people choose to do, but how much of the job they choose to do in a year.

We're currently in a world where there is a -very- strong social norm of working a 40+ hour work week in most high-status professions. In most of those jobs, you could dramatically raise your after-tax per-hour compensation by cutting your hours-worked from 40 to 20 a week. Especially interesting is that these sort of jobs tend to be those "knowledge economy" type jobs where it's actually totally feasible to give people flexible/non-standard schedules. In practice, however, there's generally a lot of institutional inertia that prevents these sort of arrangements from surfacing. In a certain large physician group I'm familiar with, there is an explicit option for working a 50% schedule, but in practice it is culturally unsupported, with really strange organizational burdens placed on those opting-in. A physician in this market moving from full-time to half-time would cut their hours in half, but maybe reduce their after-tax comp by only 30%, something that strikes me as a pretty compelling value already, as rates stand today.

Some physicians play this game already in another form: they work a few weeks or months at a time, then go on vacation for a like amount of time. Effectively working half-time, all the while I keep hearing people complain about doctor shortages.

But at some unknowable tax rate at some unpredictable bracket, you create enough pressure that all of these institutions overcome the rolling resistance and begin re-orienting to the new world. This might be a "slowly at first, then all at once" situation and I don't see people consider it very seriously. It seems to me we live in a very interesting world where we've sort of tricked a lot of highly capable people to work themselves to the bone, and I'd be nervous about disrupting that equilibrium.

What physicians are making $10 million a year?
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 05:21:54 PM
I'd also add, as I scroll through various news feeds and keep seeing Klarman's headlines, that I can't help but think that sometimes these guys just need to shut up. Klarman is another one of the many that for the past while couldn't hit the broad side of a barn. He's another one of those guys who we've talked about here in the investing forum who's performance of late is terrible. His last top 5 longs are FOX, LNG, AGN, VSAT, and a whole bunch of recently purchased PCG. In other words, he's continued to suck big time. It's hard not to get the feeling that these opinion pieces are just thinly veiled excuses for being wrong and distractions for investors.
Title: Re: Klarman worried about political divide
Post by: Schwab711 on January 22, 2019, 05:27:06 PM
The effective rate combined (federal state and local) in the 1950's for the top 1% was 42%.  In 2014 it was just over 36%.   
https://taxfoundation.org/taxes-rich-1950-not-high/

Please people do your homework and understand that the wealthy incorporated in the 50's to 70s in order to lower their taxes since the corporate rate was much lower.   LT Cap gains rate was 25%.   

Sadly people do not realize that it is a myth that the rich are not paying taxes.  Buffett paid way more than his secretary too.   


They obviously pay taxes. Due to the income levels being discussed, they obviously pay a large nominal amount. Tax fraud is also a major problem in the US and I think that's what most of the frustration around tax rates comes down to.

This thread feels like my days programming. Some non-programming manager requests something. I would build it and they said that's not what they want. I'd tell them that's what they asked for and this back-and-forth would continue. At some point, I had to realize what they wanted my not always be what they are asking for.

The question is not "what's the ideal tax structure". We aren't heading down that path in this thread and it's probably too complicated of a question to answer in this format. We should be asking why are folks on each side upset and what is the problem that underlies that frustration. One of the counters to high marginal rates is it's hard to enforce - so why punish those that follow the law with higher rates. Part of the reason folks want higher rates is because of the high rate of tax avoidance in the US (which is being polite considering how many 'avoidance maneuvers' are almost certainly illegal). If there was a higher rate of enforcing obvious tax violations, there would probably be less desire to raise taxes and punish rich/corporations. Both sides of this thread and both political parties probably want the same outcome, better tax law enforcement.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 22, 2019, 06:49:52 PM
"If there was a higher rate of enforcing obvious tax violations, there would probably be less desire to raise taxes and punish rich/corporations. Both sides of this thread and both political parties probably want the same outcome, better tax law enforcement."

Now that is smart! That is fairness!

Unfortunately, what Ocasio-Cortez and some of the Left (not even mentioning extreme Left anymore since they are now all extreme) want is to really play class warfare. They want to extract every dime possible from the rich. It is a sin to be rich according to them.

Same game that they play with woman, LGBT, blacks, etc. Divide and conquer. And if you disagree with us on how we want to proceed you are on the wrong side obviously. Demonize them.

If you carefully listen to them, and maybe it is because they are uneducated, what they are talking about is really asset confiscation. It is not income inequality. She mentioned: "If we allow billionaires to exist..." Does that not ring a bell?

A guy like Buffett has effectively no income relative to his wealth. You can say something similar for Bezos and Gates. What these guys have are stocks in their own company. They started a business, it has become very successful and they are worth a fortune... on paper.

Now I don't disagree that this "paper" is true wealth. However, it is not like this is cash. If you want to tax that wealth then you need to force a sale and for that you need some really rich people to buy it from them. Even if you were to tax the increase, these people would also be forced to sell stock to pay for these taxes. Again you need buyers with a lot of money.

Not sure what is the exact economic impact but, obviously that money now has to be used to buy shares of BRK, AMZN and MSFT vs doing something else.

Some will say: "Nah, that is not what we are talking about" Then what are we talking about really? Just taxing the people that realize their gains, the athletes or CEO's?

Then you are not really impacting at all billionaires.

Cardboard

Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 07:35:29 PM
If there was a higher rate of enforcing obvious tax violations, there would probably be less desire to raise taxes and punish rich/corporations. Both sides of this thread and both political parties probably want the same outcome, better tax law enforcement.
I think all would love to see real tax reform and real tax enforcement.

It is difficult to do when the President is slashing IRS funding, and Congress refuses to pass tax reform.

It is also difficult to do when many of the wealthiest families in the country are consistently lobbying for tax cuts, tax loopholes, etc. and the government does not hold them to task. It is plutocracy in action.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 22, 2019, 08:01:34 PM
Quote
This socialist crap taking a hold on the world more and more is scary as hell. Yes, let's make it less desirable to go through the difficulties and years of hard work to be successful by allowing those that succeed to keep less and less of it. And oh wait, here's the kicker, let's allow politicians, the least ethical of all humans, to decide how it is redistributed. I'm sure they won't take advantage of their position cause that never happened in history ever.

Quote

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation? 

This is the main issue and something that just doesn't resonate with the pee ons because it is so farfetched to even imagine being in that position. They can't conceive it. Much easier to think "gee, doesn't come out of my pocket, and might go into my pocket. GREAT RISK/REWARD!"...

The top bracket tax rate was 70+% during the following decades:
1950s
1960s
1970s
A portion of the 1980s

These were the golden age of socialism in the USA, right watchwoord?

And nobody ever invested during those years, right Greg? Imagine! We almost missed out on Warren Buffett because he was playing the ukulele during those high-tax years.

LC you were called out about how egregiously incorrect this was. Care to comment?
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 10:02:54 PM
What was incorrect about what I posted, Greg?
Title: Re: Klarman worried about political divide
Post by: LC on January 22, 2019, 10:46:44 PM
  If you study the issue, the "deficit" on the revenue side is not due to taxing the rich less.  It is due to taxing the poor and lower middle class less.  That is the result of Republican policies.       

...

Sadly people do not realize that it is a myth that the rich are not paying taxes.  Buffett paid way more than his secretary too.   
(https://compote.slate.com/images/fe0a06f5-a089-4f6a-97c7-65238fc05a97.png)
Take a look how the gap changes post-WW2 to present, between the bottom 50% and the top 1%.
The lower deciles are being taxed to make up for top decile tax breaks.

Effective tax rates on 1 percenters may not have fallen by half, as some on the left might be tempted to imagine. But they are down by about 6 percentage points at a time when the wealthy earn a vastly larger share of the national income. That drop represents a lot of money. Moreover, as Greenberg admits, tax rates on top 0.1 percent have fallen by about one-fifth since their 1950s heights. That rather severely undercuts the idea that taxes on the wealthy haven’t fallen “much.”


There are a few obvious reasons why the taxes the rich actually paid in the 1950s were so much lower than the confiscatory top rates that sat on the books. For one, the max tax rates on investment income were far lower than on wages and salaries, which gave a lot of wealthy individuals some relief. Tax avoidance may have also been a big problem. Moreover, there simply weren’t that many extraordinarily rich households. Those fabled 90 percent tax rates only bit at incomes over $200,000, the equivalent of more than $2 million in today’s dollars. As Greenberg notes, the tax may have only applied to 10,000 families.


You'll note the approximation of ~10K families would encompass 0.000208% of US families in the mid 1950s.
The rest of the 1% and the 0.1% could breathe easy.
Title: Re: Klarman worried about political divide
Post by: stahleyp on January 23, 2019, 06:18:37 AM
Do you guys think that there would be so many billionaires if the government didn't have these huge deficits? How many billionaires would be around now if the government didn't act in 2008? 
Title: Re: Klarman worried about political divide
Post by: MarkS on January 23, 2019, 06:41:52 AM
Interesting clip from:  https://www.marketwatch.com/

"Wage growth has risen to a 9-year high. Unemployment remains at an 18-year low. Jobless claims haven’t been this low since 1969. And nearly half of Americans don’t owe a dime of federal income tax.

Approximately 76.4 million or 44.4% of Americans won’t pay any federal income tax in 2018, up from 72.6 million people or 43.2% in 2016 before President Trump’s Tax Cuts and Jobs Act, according to data released Thursday by the Tax Policy Center, a nonprofit joint venture by the Urban Institute and Brookings Institution, which are both Washington, D.C.-based think tanks. That’s below the 50% peak during the Great Recession. They still obviously pay sales tax, property taxes and other taxes."
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 23, 2019, 06:43:15 AM
"Do you guys think that there would be so many billionaires if the government didn't have these huge deficits? How many billionaires would be around now if the government didn't act in 2008? "

So Japan and Italy must have the greatest share of billionaires per capita per your logic.

If the government had not acted in 2008, the crisis would have been different but, would have passed like every crisis. However, if you think that it would have caused a depression, it is obvious to me that the little guy would have suffered a lot more than the big buy.

By the way LC, do you have a chart on that claim:

But they are down by about 6 percentage points at a time when the wealthy earn a vastly larger share of the national income.

Cardboard

Title: Re: Klarman worried about political divide
Post by: stahleyp on January 23, 2019, 07:00:33 AM
Cardboard,

I wasn't comparing countries. The market forces here are different than Italy and Japan (along with birth rates and other social norms) and you know this.

But I'll say that yes, if the US (and various governments) didn't bail out the the economy then, yes, the number of billionaires per capita would have been very close. ;)

Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 23, 2019, 08:45:19 AM
  If you study the issue, the "deficit" on the revenue side is not due to taxing the rich less.  It is due to taxing the poor and lower middle class less.  That is the result of Republican policies.       

...

Sadly people do not realize that it is a myth that the rich are not paying taxes.  Buffett paid way more than his secretary too.   
(https://compote.slate.com/images/fe0a06f5-a089-4f6a-97c7-65238fc05a97.png)
Take a look how the gap changes post-WW2 to present, between the bottom 50% and the top 1%.
The lower deciles are being taxed to make up for top decile tax breaks.

Effective tax rates on 1 percenters may not have fallen by half, as some on the left might be tempted to imagine. But they are down by about 6 percentage points at a time when the wealthy earn a vastly larger share of the national income. That drop represents a lot of money. Moreover, as Greenberg admits, tax rates on top 0.1 percent have fallen by about one-fifth since their 1950s heights. That rather severely undercuts the idea that taxes on the wealthy haven’t fallen “much.”


There are a few obvious reasons why the taxes the rich actually paid in the 1950s were so much lower than the confiscatory top rates that sat on the books. For one, the max tax rates on investment income were far lower than on wages and salaries, which gave a lot of wealthy individuals some relief. Tax avoidance may have also been a big problem. Moreover, there simply weren’t that many extraordinarily rich households. Those fabled 90 percent tax rates only bit at incomes over $200,000, the equivalent of more than $2 million in today’s dollars. As Greenberg notes, the tax may have only applied to 10,000 families.


You'll note the approximation of ~10K families would encompass 0.000208% of US families in the mid 1950s.
The rest of the 1% and the 0.1% could breathe easy.

I found the article you were sourcing from.  It includes payroll taxes.  Should it?  I would argue only if you then count social security and medicare as negative taxes.
Should it attribute the employer paid portion to the employee or employer??  It looks like they chose employee.  I would choose employer. 

The bottom 50% in 2014 would be those under approx. $40,000 of income.  Total AGI was 1.44 trillion total income tax paid was 45 billion.  Just over 3%. 
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 09:37:26 AM

By the way LC, do you have a chart on that claim:

But they are down by about 6 percentage points at a time when the wealthy earn a vastly larger share of the national income.

Cardboard

There are many.

(https://c6dl5x1uaua7tk6u-zippykid.netdna-ssl.com/wp-content/uploads/2017/05/Share-of-total-us-income-1913-2015-1-768x424.png)

(https://www.cbpp.org/sites/default/files/styles/downsample150to92/public/atoms/files/11-28-11povf1.png?itok=2_R8fjdM)

(https://www.cbpp.org/sites/default/files/styles/downsample150to92/public/atoms/files/11-28-11povf2.png?itok=m6APXo-2)

https://inequality.org/facts/income-inequality/
https://fas.org/sgp/crs/misc/R44705.pdf
https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 09:44:09 AM

I found the article you were sourcing from.  It includes payroll taxes.  Should it?  I would argue only if you then count social security and medicare as negative taxes.
Should it attribute the employer paid portion to the employee or employer??  It looks like they chose employee.  I would choose employer. 

The bottom 50% in 2014 would be those under approx. $40,000 of income.  Total AGI was 1.44 trillion total income tax paid was 45 billion.  Just over 3%.
The article I quoted uses the same source as the reference which you posted:

https://taxfoundation.org/taxes-rich-1950-not-high/
Quote
The graph below shows the average tax rate that the top 1 percent of Americans have faced over the last century. The data comes from a recent paper by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman that attempts to account for all federal, state, and local taxes paid by different groups of Americans over the last 100 years.[2]


https://slate.com/business/2017/08/the-history-of-tax-rates-for-the-rich.html
Quote
Greenberg is not pulling his numbers out of thin air. Rather, he’s drawing them directly from a recent paper by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman in which the three economists—all well-loved by progressives—estimate the average tax rates Americans at different income levels have actually paid over time. Their historical measure includes federal, state, and local levies—including corporate, property, income, estate, sales, and payroll taxes. And lest you think Greenberg is misrepresenting anything, here’s Piketty & co.’s own graph (rates on rich folks are shown in green).

The source is Piketty's paper (http://gabriel-zucman.eu/files/PSZ2017.pdf) which is the longest time series we have on income and taxation.

Quote
This paper combines tax, survey, and national accounts data to estimate the distribution
of national income in the United States since 1913. Our distributional national accounts
capture 100% of national income, allowing us to compute growth rates for each quantile of
the income distribution consistent with macroeconomic growth. We estimate the distribution
of both pre-tax and post-tax income, making it possible to provide a comprehensive
view of how government redistribution affects inequality. Average pre-tax real national
income per adult has increased 60% since 1980, but we find that it has stagnated for the
bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle
class—adults between the median and the 90th percentile—has grown 40% since 1980,
faster than what tax and survey data suggest, due in particular to the rise of tax-exempt
fringe benefits. Income has boomed at the top. The upsurge of top incomes was first a
labor income phenomenon but has mostly been a capital income phenomenon since 2000.
The government has offset only a small fraction of the increase in inequality
. The reduction
of the gender gap in earnings has mitigated the increase in inequality among adults,
but the share of women falls steeply as one moves up the labor income distribution, and
is only 11% in the top 0.1% in 2014
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 23, 2019, 09:58:46 AM
Quote
This socialist crap taking a hold on the world more and more is scary as hell. Yes, let's make it less desirable to go through the difficulties and years of hard work to be successful by allowing those that succeed to keep less and less of it. And oh wait, here's the kicker, let's allow politicians, the least ethical of all humans, to decide how it is redistributed. I'm sure they won't take advantage of their position cause that never happened in history ever.

Quote

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation? 

This is the main issue and something that just doesn't resonate with the pee ons because it is so farfetched to even imagine being in that position. They can't conceive it. Much easier to think "gee, doesn't come out of my pocket, and might go into my pocket. GREAT RISK/REWARD!"...

The top bracket tax rate was 70+% during the following decades:
1950s
1960s
1970s
A portion of the 1980s

These were the golden age of socialism in the USA, right watchwoord?

And nobody ever invested during those years, right Greg? Imagine! We almost missed out on Warren Buffett because he was playing the ukulele during those high-tax years.

Let's be honest here - the right wing has created a fact-free bubble around themselves and their only response is exaggerated talking points.  It doesn't matter that (a) the USA had this tax structure during boom years, (b) most countries in the Western world do this now and are very successful and (c) there isn't a single credible economist that believes the rich are over-taxed in the USA.  Facts don't matter.  What only matters is saying, "They are jealous of rich people.  The economy will crater.   It's evil socialism.  Blah, blah."
Title: Re: Klarman worried about political divide
Post by: wachtwoord on January 23, 2019, 10:15:19 AM
Talking points? Europe has underperformed USA for a very long time. Also what Austrian economist (the only real economists) agrees with you? Economy is political if the state employs in central planning (central banks mainly).
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 23, 2019, 10:20:00 AM
"A guy like Buffett has effectively no income relative to his wealth. You can say something similar for Bezos and Gates. What these guys have are stocks in their own company. They started a business, it has become very successful and they are worth a fortune... on paper.

Now I don't disagree that this "paper" is true wealth. However, it is not like this is cash. If you want to tax that wealth then you need to force a sale and for that you need some really rich people to buy it from them. Even if you were to tax the increase, these people would also be forced to sell stock to pay for these taxes. Again you need buyers with a lot of money.

Not sure what is the exact economic impact but, obviously that money now has to be used to buy shares of BRK, AMZN and MSFT vs doing something else.

Some will say: "Nah, that is not what we are talking about" Then what are we talking about really? Just taxing the people that realize their gains, the athletes or CEO's?

Then you are not really impacting at all billionaires."

Is there somebody willing to address this above?

Cardboard
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 23, 2019, 10:31:29 AM
Thanks LC for the charts.

Looking at them, one can conclude that the divergence has started in the early 80's AND that it is not the first time in history that top 1% have earned such share of total U.S. income.

Should we look back to see how income to the top 1% dropped from 23.9% in the 20's to 8.9% in the 70's?

Now, is taxation going to address this issue? I think the honest answer is no since we are talking income inequality. Or maybe it should be rephrased: net income inequality?

Now I can also see that some want to tax the rich more. It is a progressive tax system after all and maybe that there is a 10% adjustment missing on the top ones.

But, 70%??? Eventually you kill some drive out of people and get what Johnny mentioned. It has happened before or just look at the U.K. in the 70's.

Cardboard
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 23, 2019, 10:33:20 AM
"Let's be honest here - the right wing has created a fact-free bubble around themselves and their only response is exaggerated talking points.  It doesn't matter that (a) the USA had this tax structure during boom years, (b) most countries in the Western world do this now and are very successful and (c) there isn't a single credible economist that believes the rich are over-taxed in the USA.  Facts don't matter.  What only matters is saying, "They are jealous of rich people.  The economy will crater.   It's evil socialism.  Blah, blah.""

If you have ideas on how to solve this, why don't you explain them to us?

Cardboard
Title: Re: Klarman worried about political divide
Post by: Ross812 on January 23, 2019, 11:59:35 AM
One example of more fair tax system:

Based on average income and multiples of average income. Say the 2019 average income is 60k.

< Poverty line - 5%
Poverty line - 60k - 15%
2x - 120k -20%
3x - 180k - 25%
4x - 240k - 30%
300k - 35%
360k - 40%
420k - 45%
480k+ - 50%

Dividends and Capital Gains:
60k - 0%
2x - 120k - 5%
3x - 180k - 10%
10x - 600k+ - 50%
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 12:34:13 PM
Thanks LC for the charts.

Looking at them, one can conclude that the divergence has started in the early 80's AND that it is not the first time in history that top 1% have earned such share of total U.S. income.

Should we look back to see how income to the top 1% dropped from 23.9% in the 20's to 8.9% in the 70's?

Now, is taxation going to address this issue? I think the honest answer is no since we are talking income inequality. Or maybe it should be rephrased: net income inequality?

Now I can also see that some want to tax the rich more. It is a progressive tax system after all and maybe that there is a 10% adjustment missing on the top ones.

But, 70%??? Eventually you kill some drive out of people and get what Johnny mentioned. It has happened before or just look at the U.K. in the 70's.

Cardboard

In the 20s income distribution was somewhat similar, essentially building up to the Great Depression.

As someone earlier mentioned, tax receipts as a % of GDP is stable (whether it should be or not, is a different discussion). The difference has been the shift: lower receipts from the top, at the expense of the middle and lower quintiles.

An effective tax rate of 50% on top deciles or top 5% would go far.
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 23, 2019, 01:00:23 PM

As someone earlier mentioned, tax receipts as a % of GDP is stable (whether it should be or not, is a different discussion). The difference has been the shift: lower receipts from the top, at the expense of the middle and lower quintiles.


Can you back that up???  Lower receipts from the top and a shift to the middle and lower quintiles.  Once again are you counting payroll taxes?  Or not.   Should you???   
Title: Re: Klarman worried about political divide
Post by: wachtwoord on January 23, 2019, 02:22:06 PM
One example of more fair tax system:

Based on average income and multiples of average income. Say the 2019 average income is 60k.

< Poverty line - 5%
Poverty line - 60k - 15%
2x - 120k -20%
3x - 180k - 25%
4x - 240k - 30%
300k - 35%
360k - 40%
420k - 45%
480k+ - 50%

Dividends and Capital Gains:
60k - 0%
2x - 120k - 5%
3x - 180k - 10%
10x - 600k+ - 50%

Can someone please explain to me why higher wages are taxed at a higher percentage. A static percentage of a higher amount already is more. Making higher incomes pay more is sort of acceptable but why does it have to be exponential rather than linear? Why is that considered "normal" these days?

Btw I would argue discontinuing all (labour, wealth, income, estate, corporate) taxes except consumer tax (VAT) which should also be a flat rate. Shrink any and all government spending to account for the huge cutback. Then sit back and welcome another golden age after the smoke clears.
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 02:28:25 PM

As someone earlier mentioned, tax receipts as a % of GDP is stable (whether it should be or not, is a different discussion). The difference has been the shift: lower receipts from the top, at the expense of the middle and lower quintiles.


Can you back that up???  Lower receipts from the top and a shift to the middle and lower quintiles.  Once again are you counting payroll taxes?  Or not.   Should you???

I am basing it off tax rates and share of national income. I am having difficulty finding a source on tax receipts by income bracket over time, but the logic flows as follows:

Top 1%: Largest share of real income growth, decreasing tax rate
Bottom 90%: Stagnant share of real income growth, increasing tax rate

The wealthiest still pay the most taxes on a dollar basis, but the trends above show the burden has been shifted to the middle and lower economic classes.

To your point on payroll taxes, feel free to make and justify whichever manual adjustments you prefer and post the results. I am not sure if it would change the overall picture, but I am open to being proven wrong.
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 02:38:00 PM
Can someone please explain to me why higher wages are taxed at a higher percentage. A static percentage of a higher amount already is more. Making higher incomes pay more is sort of acceptable but why does it have to be exponential rather than linear? Why is that considered "normal" these days?

Practically? Because society runs more smoothly without a starving class.

Philosophically? Because IMO on average, higher income individuals get more marginal utility from public goods. I'm not sure I can prove this though - but it makes intuitive sense to me. Reliable transportation generates more revenue to Walmart Co., than Joe the Walmart employee.

No comment on the VAT as I don't really understand the nuances. Wouldn't Buffett, for example (insane wealth, frugal lifestyle) have a minimal VAT liability? How does it deal with dynastic wealth?


Also I think I keep mixing up this thread with the other active thread on income inequality. Although one could argue that politicial divisiveness and income inequality are related, frankly I am more concerned about a plutocracy.
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 23, 2019, 03:56:39 PM

As someone earlier mentioned, tax receipts as a % of GDP is stable (whether it should be or not, is a different discussion). The difference has been the shift: lower receipts from the top, at the expense of the middle and lower quintiles.


Can you back that up???  Lower receipts from the top and a shift to the middle and lower quintiles.  Once again are you counting payroll taxes?  Or not.   Should you???

I am basing it off tax rates and share of national income. I am having difficulty finding a source on tax receipts by income bracket over time, but the logic flows as follows:

Top 1%: Largest share of real income growth, decreasing tax rate
Bottom 90%: Stagnant share of real income growth, increasing tax rate

The wealthiest still pay the most taxes on a dollar basis, but the trends above show the burden has been shifted to the middle and lower economic classes.

To your point on payroll taxes, feel free to make and justify whichever manual adjustments you prefer and post the results. I am not sure if it would change the overall picture, but I am open to being proven wrong.

I do not understand how you draw the conclusion you do.  You are arguing there has been a shift from the top to the lower and middle class.  The data shows the lower rates across the board and a shift to the wealthy paying an increasing share.   

Where did you conclude the bottom 90% has an increasing tax rate?   If it was from that chart noted earlier I presume you know it referred to the bottom 50% and it makes a number of questionable assumptions.  It includes all taxes, including sales and payroll.   Let's start with payroll.  Payroll taxes pay for Medicare and Social Security which is structured to pay more to the lower incomes than the upper incomes.  The poor are subsidized by the wealthy and upper middle class.  Payroll taxes should not be included at all since the payors eventually get it back (and more) in the form of Medicare and Social Security benefits.  Take out payroll taxes and the tax rate for the bottom 50% is now slightly declining.   

The chart attributes 5% of income to sales tax on an income of $16,000, which is absurd.  Food and housing are exempt in most every state.  It has capital taxes of a few percent and doesn't explain exactly what it is.  Capital gains rates are zero for those with incomes under $70,000.  They may be allocating a portion of corporate taxes to labor which is silly. The bottom 50% is now down to mid single digits as a percentage.
 
Further since they didn't want anyone to have a negative tax rate they had to attribute refundable credits to income.  It doesn't take a genius to know that screws up your results, particularly results showing tax rate percentages.

While I wish this went back to the 50's instead of 1979.  It shows what has happened over the past 40 years.   
https://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households


 
Title: Re: Klarman worried about political divide
Post by: MarkS on January 23, 2019, 04:11:31 PM


As I understand it, 44% of Americans will not pay any income tax in 2018.  Even if they still pay sales taxes, social security and Medicare i don't understand your claims LC that there has been a shift in the tax burden to the middle and lower quintiles.
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 04:35:30 PM

Where did you conclude the bottom 90% has an increasing tax rate?   If it was from that chart noted earlier I presume you know it referred to the bottom 50% and it makes a number of questionable assumptions.  It includes all taxes, including sales and payroll.

Yes I meant 50%. And yes it includes all taxes. I'm not sure why it wouldn't...

Payroll taxes absolutely should be included. Why wouldn't they? Do people not pay them? They are  some of the the most regressive taxes:
(https://upload.wikimedia.org/wikipedia/commons/c/c8/Effective_Payroll_Tax_rate_for_Different_Income_Percentiles_%282010%29.gif)

And worse off they are capped at the first 120K. It barely touches the wealthiest groups, yet the middle and lower incomes are entirely taxed.


Quote
The data shows the lower rates across the board and a shift to the wealthy paying an increasing share.   
On rates, again I'll repeat that Pikett's work shows falling effective rates for the wealthiest group, and rising effective rates for the bottom half.

For the second claim, what is your source for this? I have not been able to find a summary of total tax receipts by income bracket over a long history.

Also on this second claim - you need to look at why. Are the wealthiest groups paying more because their tax rate has increased? Or because income has gradually been concentrated in this group?

In other words, if the tax rate for the bottom 99% was zero, and the tax rate on the 1% was >0, the 1%ers would be paying all the tax. Which would be fine, unless there was also zero income in the 99% brackets. This is pretty much how current events are trending.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 23, 2019, 05:01:54 PM

Where did you conclude the bottom 90% has an increasing tax rate?   If it was from that chart noted earlier I presume you know it referred to the bottom 50% and it makes a number of questionable assumptions.  It includes all taxes, including sales and payroll.

Yes I meant 50%. And yes it includes all taxes. I'm not sure why it wouldn't...

Payroll taxes absolutely should be included. Why wouldn't they? Do people not pay them? They are  some of the the most regressive taxes:
(https://upload.wikimedia.org/wikipedia/commons/c/c8/Effective_Payroll_Tax_rate_for_Different_Income_Percentiles_%282010%29.gif)

And worse off they are capped at the first 120K. It barely touches the wealthiest groups, yet the middle and lower incomes are entirely taxed.


Quote
The data shows the lower rates across the board and a shift to the wealthy paying an increasing share.   
On rates, again I'll repeat that Pikett's work shows falling effective rates for the wealthiest group, and rising effective rates for the bottom half.

For the second claim, what is your source for this? I have not been able to find a summary of total tax receipts by income bracket over a long history.

You completely ignored his point. Payroll is set up that way because its put in place for the have nots. The money people put in is later given back to them. The 1%ers are not living off 5,000 a month social security checks. This funds unemployment compensation as well, which is largely where a lot of the lower income folks hang out. I remember maybe in 2010 or so a family friend got laid off from BNP. He was making about $70,000 per month plus bonus. When he filed for unemployment you know what he got back? $1700 a month. Most of the taxes taken out up to the $120K number fund programs that are by and large used by the lower class folks. So yea, its probably fair that it is taxed that way. And when wealthier folks do utilize those benefits, they get immaterial amounts of money.
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 05:07:05 PM
No I understand his point, I just don't understand how it is relevant.

Quote
The money people put in is later given back to them. The 1%ers are not living off 5,000 a month social security checks.

Do the 1%ers not receive their SSA checks?
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 23, 2019, 05:21:19 PM
The 1%ers get back what they contribute to it... meaning there's a cut off at the 120K number and as such, the money they receive back, is relatively immaterial to their income. So your point about:
 "And worse off they are capped at the first 120K. It barely touches the wealthiest groups, yet the middle and lower incomes are entirely taxed."

Is irrelevant because they aren't getting back anything over that amount. Like I said, you could make 500K and you'd more or less get the same unemployment check as someone making 125k.
Title: Re: Klarman worried about political divide
Post by: rukawa on January 23, 2019, 05:25:28 PM
Yes I meant 50%. And yes it includes all taxes. I'm not sure why it wouldn't...

Payroll taxes absolutely should be included. Why wouldn't they? Do people not pay them? They are  some of the the most regressive taxes:

I don't think they should be included. Payroll taxes are used to fund individual benefits..not things for the common good. If they are regressive and hurt the poor then lets get rid of them and get rid of the benefits associated with them completely. The poor should then benefit right? Except that they don't. Social security and medicare are not public goods...they are really private ones.

We are using the government to correct an initial distribution that is completely screwed up. I honestly don't think this is the proper role of the tax system. Taxes should not be used to make the world a fair place. They should be used to fund government in a manner that places reasonable burdens on its citizens. A progressive tax system can be justified this way. Lets say you want to fund a war...is it really fair for a poor person to pay 20% when he consumes 80% in food and rent alone vs a rich person who can afford to pay much more.

The initial distribution is the problem. I really regard the managerial class as adding the least value and getting way too much money. I'm not really sure what to do about that. I mean was Immelt really worth 72 million? CEO's are mostly just bureaucrats. Its a principal agent problem...stockholders are really just absentee owners and so managers can do what they want.
Title: Re: Klarman worried about political divide
Post by: Cigarbutt on January 23, 2019, 05:27:52 PM
Tax share for a group (% of total federal tax from households)=(tax rate for that group * pre-tax income for that group)+social insurance taxes.

1-Since the 1980's, when inequality took off, the tax rate for the top 1% (and top 10-20%) is basically unchanged but pre-tax income has grown++ on an absolute and relative basis vs the other groups.

2-Since the 1980's, when inequality took off, the ratio of social insurance taxes over total federal tax from households AND income tax over total federal tax from households (comparing 1980 to now) is basically the same.

From 1- and 2-, the tax share for the top 1% (and top 10-20%) has increased.

Various studies (using the Suits Index etc) show that progressivity of household tax in the US has not changed much and, if anything, has increased in the last few decades.

If the above hypothesis is true, one has to wonder why inequality keeps getting larger along most measures and if addressing or dealing with the underlying drivers may not be more effective.

Of course, the 30's showed how effective a changing regime could address inequality but there have to be other ways. No?
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 05:45:12 PM
Yes I meant 50%. And yes it includes all taxes. I'm not sure why it wouldn't...

Payroll taxes absolutely should be included. Why wouldn't they? Do people not pay them? They are  some of the the most regressive taxes:

I don't think they should be included. Payroll taxes are used to fund individual benefits..not things for the common good. If they are regressive and hurt the poor then lets get rid of them and get rid of the benefits associated with them completely. The poor should then benefit right? Except that they don't. Social security and medicare are not public goods...they are really private ones.
The payroll tax is regressive but the benefit is progressive. The poor pay a higher % of their income, but also receive a higher value relative to their net worth.
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 23, 2019, 06:20:41 PM
No I understand his point, I just don't understand how it is relevant.

Quote
The money people put in is later given back to them. The 1%ers are not living off 5,000 a month social security checks.

Do the 1%ers not receive their SSA checks?

I don't think you got my point at all.  My point was payroll taxes should not be included in the calculation and I detailed why.  Let me add to that: 1) Legally it is a tax but it is essentially an off-budget retirement/healthcare system.  The program is also hugely skewed for the poor.  The benefit is not just progressive because they "receive a higher value in relation to their net worth."  On SS one gets 90% credit for the first $925 of monthly income, 32% credit for between $925 and $5,583, and 15% credit for between $5583 and approx. $10,600 per month.  The poor also get a larger subsidy for their Medicare.  Wealthy also pay a tax on their SS benefits, even though it was an after tax contribution.  The poor do not pay tax.  2) The rate the group that did the chart uses for payroll taxes appears to be around 10% which is much larger than the employee portion so they seem to have included part of the employer portion in the employees taxes.  That is wrong.  3) I would contend it is incorrect to treat it as a tax now but not a tax credit when benefits are received.  Meaning if it is a tax now then the person should have a negative tax when they retire.   The study treats it as a tax now but income later.  4) the tax has gone up due to demographic changes not taxes being pushed onto the poor.  Congress has treated SS as self-funding.     
Title: Re: Klarman worried about political divide
Post by: wachtwoord on January 23, 2019, 06:41:39 PM
Can someone please explain to me why higher wages are taxed at a higher percentage. A static percentage of a higher amount already is more. Making higher incomes pay more is sort of acceptable but why does it have to be exponential rather than linear? Why is that considered "normal" these days?

Practically? Because society runs more smoothly without a starving class.

Philosophically? Because IMO on average, higher income individuals get more marginal utility from public goods. I'm not sure I can prove this though - but it makes intuitive sense to me. Reliable transportation generates more revenue to Walmart Co., than Joe the Walmart employee.

No comment on the VAT as I don't really understand the nuances. Wouldn't Buffett, for example (insane wealth, frugal lifestyle) have a minimal VAT liability? How does it deal with dynastic wealth?


Also I think I keep mixing up this thread with the other active thread on income inequality. Although one could argue that politicial divisiveness and income inequality are related, frankly I am more concerned about a plutocracy.

Thanks for the clear answer. Do you think it makes philosophical sense to you because you have been brought up with the notion?

I don't think this is the only way to avoid a large starving underclass however (through a smaller government and less regulation causing less parasitic business types).

I would (philosophically) prefer there to be generally larger wealth inequality between the bottom of society and the middle class (at least in north west Europe). I think the wealth levels of these two classes lie too close which unfair considering what the middle class adds to society.
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 07:15:53 PM
Thanks for the clear answer. Do you think it makes philosophical sense to you because you have been brought up with the notion?

I don't think this is the only way to avoid a large starving underclass however (through a smaller government and less regulation causing less parasitic business types).

I would (philosophically) prefer there to be generally larger wealth inequality between the bottom of society and the middle class (at least in north west Europe). I think the wealth levels of these two classes lie too close which unfair considering what the middle class adds to society.
On the first part, no I think it is actually due to my involvement in business valuation, investment research, whatever you call it. US corporations, the uber-wealthy, are the indirect beneficiaries of many "free" social components. Rule of law, for example. A strong education system, a gov't supported 8hr workday (which has become a social norm) is another...there are many more. I'm not sure if there's a word for it, but call it the opposite of "externalities".  In both cases, (positive and negative externalities), these are just really difficult to quantify.

On the second point, I don't know. Maybe there are other ways. In general I try to abide by the "rising tide lifts all ships" notion. But the last 20 years or so, it seems the "rising tide" is only lifting some of the ships. The question is why, and how to "fix" it. Generally I think the answer lies in providing equal opportunity. The concentration of resources in a select few seems to be counterproductive to that end.

On the third, I agree. Makes sense to me. Essentially I think a strong middle class is a better scenario than a society with peaks in the wealthy and poverty areas of the graph.
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 07:32:21 PM
Tim that simply does not convince me. To me it is a tax on 120K of income for benefits that almost all citizens receive. I think the benefit should be counted as income in any analysis, but I don't see how the paper we are referencing did not do so. Additionally, the study used IRS tax receipts which would have counted such benefits in most cases. Whether it is counted as income or a negative tax is inconsequential. Your other contentions may be true but still does not change the fact that it is a tax. Or do you propose we itemize every public benefit and only count the ones which the wealthy receive "adequate" utility, and attribute a portion of their tax bill towards those items?
Title: Re: Klarman worried about political divide
Post by: LC on January 23, 2019, 08:05:52 PM
Payroll taxes are used to fund individual benefits..not things for the common good.

This is not quite true. Can I withdraw from payroll taxes? No- it is forced saving to ease a future societal burden of caring for the daily needs and health costs of older generations.

If we had universal healthcare, would we consider a certain percent of our tax burden "not really a tax?"
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 24, 2019, 04:50:33 AM
"Let's be honest here - the right wing has created a fact-free bubble around themselves and their only response is exaggerated talking points.  It doesn't matter that (a) the USA had this tax structure during boom years, (b) most countries in the Western world do this now and are very successful and (c) there isn't a single credible economist that believes the rich are over-taxed in the USA.  Facts don't matter.  What only matters is saying, "They are jealous of rich people.  The economy will crater.   It's evil socialism.  Blah, blah.""

If you have ideas on how to solve this, why don't you explain them to us?

Cardboard

My best approach?  If it's not your wheel house, leave it to the experts.  That's not to say everyone can't have a viewpoint and discuss it (it's a very fun source of recreation.)  But when it comes to actually implementing policies in real life, understand we have no idea what we are talking about (relative to the experts.)  Let's treat our votes the same way we treat our body - find the experts and follow their advice.  (Think of it as indexing for politics - understand you probably can't beat the market and act accordingly.)

If you wanted to know about medicine, I assume you'd ask a doctor.  I also assume you'd want to ask a doctor that was educated at an elite medical school (all things being equal).  Just do the same for every other field.

Bill O'Reilly nor Sean Hannity are economists.  Neither is Donald Trump.  Nor is Larry Kudlow.  Why don't we listen to Krugman, Stiglitz, Bernanke, Rogoff, Summers?  All elite trained economists.  Even Bernanke, a staunch Republican economist, came out and said income inequality is a big problem.   Why?  Because the data is blatantly obvious. 

I mean - there is literally someone in this thread bragging that they don't listen to Ivy League economists.  In what other field is this not a completely laughable thing to say?  "I don't listen to no Ivy League doctors!"  "I don't listen to no Ivy League mathematicians!" "I don't listen to no Ivy League Computer Science professors!"  That's where the problem arises. 

Title: Re: Klarman worried about political divide
Post by: Cigarbutt on January 24, 2019, 05:45:01 AM
^Delegation of authority and decision-making is a risk-reward decision.
IMHO, listening to "experts" can lead one on the wrong path.
Perhaps useful to listen to experts and also to the average Joe who lost his job due to technology and globalization and to focus on a fact-based analysis.

1-On the shifting tax "share" and on experts
https://taxfoundation.org/top-1-percent-pays-more-taxes-bottom-90-percent/

The Tax Foundation are experts with a bias. It does not mean they should not be listened to.
They show a convincing tax share shift to the top earners and focus on tax credits. They conveniently forget though to include social insurance taxes. When one adjusts for that omission, the shift still persists but is less significant.

2-On the composition of federal revenue and distribution of the tax burden
https://fas.org/sgp/crs/misc/R45145.pdf
Figures 5, 6 and 7 are useful.
Corporate tax has come down and, to "compensate", "social" taxes and individual income tax have increased but the proportion between the two taxes has not changed much.

3-On the topic of social taxes, progressive or regressive?
The link above in 2- (like many tax-related work out there) indicates that social taxes are regressive (true from the mathematical standpoint). But, when one analyzes this tax within a greater perspective, these "programs" are progressive in nature.
https://www.cbpp.org/research/federal-tax/policy-basics-federal-payroll-taxes

Title: Re: Klarman worried about political divide
Post by: Cardboard on January 24, 2019, 05:53:37 AM
"My best approach?  If it's not your wheel house, leave it to the experts. "

So basically leave the decision to somebody because they have the solution but, the solution is unknown.

Seriously, you think that Ocasio-Cortez is an expert and has the solution? Or is she just using her gut feel like Donald Trump and in turn proposing something that makes her popular with the unprivileged?

I am trying to have an intelligent discussion and I think that the group of people here, if they leave some of their political bias aside, can figure out a lot of things. At least, we should obtain an intelligent assessment as to when some "expert" propose a solution that they are on the right track or not?

We have a progressive tax system so if it is really biased at the top, it should be addressed. I think that most of us can agree on that.

Maybe that capital gains need to be taxed like regular income passed a certain level of wealth/income? We all know that executives of large companies receive most of their income via restricted shares and the like. 

We still haven't addressed at all a case like Buffett. Basically almost none of his wealth will ever be taxed as it is being given away and it is mostly all going outside the U.S.

Buffett has amassed great wealth in America, has used the "free" social components described by LC and then he gives it away to Africa and other poor places.

I am not saying it is not a great thing for the world and keep in mind that Buffett is far from being alone giving to philantropy that will end up far away from U.S. people. With these 50% pledge, it must be getting into the trillion $.

So truly this wealth inequality that we are talking about goes quite far. And we should really talk about wealth inequality since otherwise this whole thread and the other one are pure waste of intellectual time.

Cardboard
Title: Re: Klarman worried about political divide
Post by: wachtwoord on January 24, 2019, 06:14:14 AM

I mean - there is literally someone in this thread bragging that they don't listen to Ivy League economists.  In what other field is this not a completely laughable thing to say?  "I don't listen to no Ivy League doctors!"  "I don't listen to no Ivy League mathematicians!" "I don't listen to no Ivy League Computer Science professors!"  That's where the problem arises.

Wow great call to authority.

Anyway your argument is easily refuted: economics (as the term is used today) is highly political. On the other hand, computer science, mathematics and (to a lower degree) medical doctors are generally not (heavily) influenced by politics. That's also why the whole branch of climate change academia cannot be trusted (they lie and manipulate).

Remember none of this is new. In centuries hence doctors in astronomy could not be trusted either as conclusions conflicting with the beliefs of the catholic church resulted in heavy punishments (plus the church had a lot of influence in deciding who was even allowed to fill positions in academia).

Humanity will (probably) get over this but perhaps not in my lifetime.
Title: Re: Re: Klarman worried about political divide
Post by: tombgrt on January 24, 2019, 06:17:46 AM
@Cardboard: Good points. But oddly enough, somehow I believe giving $100b to Africa and putting it into sensible projects does more for the US economy in the (very) long term than simply giving it to the US government. Getting as much people as possible into at least a somewhat decent consumer life and kick-starting these economies will do much more for everyone's wealth than just pumping more money into a debt black hole that no seems to be willing to fix. Sure, some sectors get fat checks but average Joe is getting screwed over in his taxes.

Edit: Just want to make clear I'm making this point specifically for Africa considering they will be with 4 billion at some point and could become a decent economic force. At some point the return of your pledges will obviously drop as those economies grow.
Title: Re: Klarman worried about political divide
Post by: MarkS on January 24, 2019, 06:26:27 AM
LC 

The chart that you rely on - in addition to payroll taxes - also includes state and local taxes including sales taxes.  Since about one half of taxpayers pay no federal income taxes and only pay the 7.5% payroll taxes, it seems to me that most of the problem is a result of high state and local taxes - not federal.

JSArbitrage

BTW - Larry Kudlow is an economist.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 24, 2019, 06:56:11 AM
LOL at the people saying we should respect economists... As already mentioned, with other professions, there are exact metrics by which to judge. Economists are basically high end weathermen. If anything I compare them to stock analysts. Guys who would be running money rather than writing book reports; if they were any good at it. But when they aren't knowing the talking points and sounding academic helps...
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 24, 2019, 08:04:10 AM
"My best approach?  If it's not your wheel house, leave it to the experts. "

So basically leave the decision to somebody because they have the solution but, the solution is unknown.


No, you leave it to somebody else because that somebody else is a pool of the brightest minds trying to understand a topic.   You are making a basic epistemological mistake.  The right question isn't: "Are Ivy League economists wrong sometimes?" Yes, they are.  The right question is: "Do you have a better pool of knowledge from which to make a conclusion?"  The answer is no.

In other words, just because doctors make mistakes sometimes DOESN'T mean you should start practicing medicine on yourself (or others.)  It also doesn't mean embrace the local witch doctor.
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 24, 2019, 08:11:44 AM
BTW - Larry Kudlow is an economist.

No, he isn't.  He got a degree in history and joined an iBank as an analyst.  He then quickly became TV host (which is what he has been doing for the last 40 years.)  I have both (a) more education in economics and (b) more experience in the fields of economics than Kudlow AND I don't think I should be even close to considered an economist.  Has Kudlow published a single thing in economics?  I am not aware of anything (but I am no Kudlow expert.) 

Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 24, 2019, 08:12:04 AM
Tim that simply does not convince me. To me it is a tax on 120K of income for benefits that almost all citizens receive. I think the benefit should be counted as income in any analysis, but I don't see how the paper we are referencing did not do so. Additionally, the study used IRS tax receipts which would have counted such benefits in most cases. Whether it is counted as income or a negative tax is inconsequential. Your other contentions may be true but still does not change the fact that it is a tax. Or do you propose we itemize every public benefit and only count the ones which the wealthy receive "adequate" utility, and attribute a portion of their tax bill towards those items?

It seems you have arrived at your conclusion before studying the issue.   You believe the bottom 50% who pay no income tax are now bearing an increased burden of paying federal taxes.   Please read that last sentence a few times. 
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 24, 2019, 08:20:28 AM
Good points Tombgrt.

I really do believe that vaccines and other things that Gates/Buffett do are really good for the world. These people are much poorer and much more in need than even the lowest income folks in any Western country.

However, this long term thinking or greater good does not seem to fit well with the concept of some who want to tax the rich now or more honestly take their wealth away and have representatives decide where to deploy it.

If you had taxed heavily their income or really wealth appreciation, these guys would never have amassed these sums. Now, that they have wealth beyond what they could ever dream of spending, they feel necessary to give it away and are even encouraging others to do so. More than that, they now have the means to truly make an impact while a few billions would not go very far.

So what should be done? Take money from the rich early on and redistribute local. Or leave more to them so they could do more later with it? We could also ask the question of local vs international on the latter.

It becomes a philosophical question.

Cardboard

Title: Re: Klarman worried about political divide
Post by: MarkS on January 24, 2019, 08:27:14 AM
BTW - Larry Kudlow is an economist.

No, he isn't.  He got a degree in history and joined an iBank as an analyst.  He then quickly became TV host (which is what he has been doing for the last 40 years.)  I have both (a) more education in economics and (b) more experience in the fields of economics than Kudlow AND I don't think I should be even close to considered an economist.  Has Kudlow published a single thing in economics?  I am not aware of anything (but I am no Kudlow expert.)

I don't know how you define economist.  From where I sit these jobs qualify Kudlow as an economist:

Staff economist for the Federal reserve
Chief economist for Bear Stearns
Office of management and budget as associate director of economics and planning
Economist for National Review



Title: Re: Klarman worried about political divide
Post by: Gregmal on January 24, 2019, 10:04:00 AM
BTW - Larry Kudlow is an economist.

No, he isn't.  He got a degree in history and joined an iBank as an analyst.  He then quickly became TV host (which is what he has been doing for the last 40 years.)  I have both (a) more education in economics and (b) more experience in the fields of economics than Kudlow AND I don't think I should be even close to considered an economist.  Has Kudlow published a single thing in economics?  I am not aware of anything (but I am no Kudlow expert.)

I don't know how you define economist.  From where I sit these jobs qualify Kudlow as an economist:

Staff economist for the Federal reserve
Chief economist for Bear Stearns
Office of management and budget as associate director of economics and planning
Economist for National Review

Economists are very much like university professors holding PHD's, with their self appointed positions of grandeur. The same way those bozos demand to be called Dr., just because they decided to spend extra time in school learning literature, economists think the fact they have degrees make them more worth of credibility than people who went out and did something useful.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 24, 2019, 10:08:00 AM
But Gregmal, we are making a basic epistemological mistake. We should not think nor comment on these things and leave these very important decisions to the experts such as Ms. Ocasio-Cortez. We are just uneducated dummies...

Cardboard
Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 10:43:39 AM
Tim, Mark,

I would refer you to the following paper on the Income Distribution between National Accounts
https://www.nber.org/papers/w22945.pdf

Specifically the discussion on taxes and transfers (p28-29).
Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 10:49:32 AM
So what should be done? Take money from the rich early on and redistribute local. Or leave more to them so they could do more later with it? We could also ask the question of local vs international on the latter.

The risk of "leaving it till later" or "kicking the can down the road" is that this allows the possibility for a few individuals or corporations to utilize social/public structures (employee health, for example) without limit for years so they can compound as much capital as possible, and then society must hope those individuals want to fix these now-destroyed public structures.

There is an alternative possibility of sustainable growth, where the needs of the many do not depend on the whimsical generosity of the few.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 24, 2019, 10:59:33 AM
"There is an alternative possibility of sustainable growth, where the needs of the many do not depend on the whimsical generosity of the few."

I am still waiting for your proposal on this "alternative possibility" with the case of billionaires such as Buffett, Gates, Bezos and many others who can basically let their capital compound free of taxes for decades.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 24, 2019, 11:02:57 AM
Breaking news!

An economic advisor or expert advising Warren is now defining the solution:

https://www.cnbc.com/2019/01/24/elizabeth-warren-to-propose-new-wealth-tax-economic-advisor.html

Stay tuned for more...

Cardboard
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 24, 2019, 11:06:43 AM
Breaking news!

An economic advisor or expert advising Warren is now defining the solution:

https://www.cnbc.com/2019/01/24/elizabeth-warren-to-propose-new-wealth-tax-economic-advisor.html

Stay tuned for more...

Cardboard

Warren is only qualified to talk about Native American history....
Title: Re: Klarman worried about political divide
Post by: MarkS on January 24, 2019, 11:14:29 AM
Tim, Mark,

I would refer you to the following paper on the Income Distribution between National Accounts
https://www.nber.org/papers/w22945.pdf

Specifically the discussion on taxes and transfers (p28-29).

On the top of page 28 the authors clearly state that they use all types of taxes from all sources, federal, state and local.  The chart you cite shows they are using a combined rate of about 24%. Since the Federal payroll tax is about 7.5% this means that approximately two thirds of the combined rate is state and local. So I stand by my comment.
Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 11:18:58 AM
I'm not saying you were wrong. The authors acknowledge the makeup of taxes. There is a figure in the appendix I believe which does so. I simply think payroll tax it is a valid addition to determine one's overall tax contribution.

I also thought you may have found the topic of transfers and income growth of the middle classes to be insightful. Perhaps not?

Tim, Mark,

I would refer you to the following paper on the Income Distribution between National Accounts
https://www.nber.org/papers/w22945.pdf

Specifically the discussion on taxes and transfers (p28-29).

On the top of page 28 the authors clearly state that they use all types of taxes from all sources, federal, state and local.  The chart you cite shows they are using a combined rate of about 24%. Since the Federal payroll tax is about 7.5% this means that approximately two thirds of the combined rate is state and local. So I stand by my comment.
Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 11:28:25 AM
"There is an alternative possibility of sustainable growth, where the needs of the many do not depend on the whimsical generosity of the few."

I am still waiting for your proposal on this "alternative possibility" with the case of billionaires such as Buffett, Gates, Bezos and many others who can basically let their capital compound free of taxes for decades.

You're still waiting because you seem to be forgetting. Many proposals have been suggested over time, right here in the politics forum or on this website in general.

Capping senior management pay would be one, or in general, incentive realignment. Much stronger punishments for environmental destruction, employee hiring collusion, market manipulation and fraud, etc. would other. There are many aspects of tax reform, legal reform, healthcare reform, I don't even know where to start. In other words, change the structure to limit the abuse of externalities, severely punish those who do as an actual deterrent, and fairly tax the ones you cannot limit.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 24, 2019, 11:35:33 AM
"There is an alternative possibility of sustainable growth, where the needs of the many do not depend on the whimsical generosity of the few."

I am still waiting for your proposal on this "alternative possibility" with the case of billionaires such as Buffett, Gates, Bezos and many others who can basically let their capital compound free of taxes for decades.

You're still waiting because you seem to be forgetting. Many proposals have been suggested over time, right here in the politics forum or on this website in general.

Capping senior management pay would be one, or in general, incentive realignment. Much stronger punishments for environmental destruction, employee hiring collusion, market manipulation and fraud, etc. would other. There are many aspects of tax reform, legal reform, healthcare reform, I don't even know where to start. In other words, change the structure to limit the abuse of externalities, severely punish those who do as an actual deterrent, and fairly tax the ones you cannot limit.

Capping pay will just favor a specific few in terms of attracting talent. This is seen first hand in NBA and NHL where they have salary caps. Players who can get max contracts or field multiple offers in the same range pretty much always end up going to the most desirable places. Look at Labron. South Beach, back to his hometown, and LA. If you are a CEO and you have identical offers from similar companies but one is in South Florida, whereas the other is in Oklahoma, who is at a disadvantage? Not fair to shareholders either. If executive pay is capped, that excess money should go back to the owners of the company. Not wasted on low end talent.
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 24, 2019, 11:40:11 AM
Tim, Mark,

I would refer you to the following paper on the Income Distribution between National Accounts
https://www.nber.org/papers/w22945.pdf

Specifically the discussion on taxes and transfers (p28-29).

Yeah I had already read that.  That is what I was interacting with and noting the flaws (payroll tax inclusion, sales tax % is too high) which so far you have not responded to.

Please explain how the tax burden has shifted from the rich to the bottom 50% when the bottom 50% pays no income tax.

I understand the bottom 50% pay payroll tax although as I point out 1) some of it is refunded as credits which the paper incorrectly treats as income so as to avoid negative tax rates.  2) the bottom 50% get a much higher return than the middle class or the rich due to decreasing credit for higher incomes (roughly 90% credit for the first $1,000 of monthly average income, 32% for the next $4,000 and only 15% for the final $5,000) and 3) it is basically a retirement plan technically termed a tax and should be excluded from tax burden calculation. 4) Social Security is technically off-budget nothing paid in is used for anything else. 
Title: Re: Klarman worried about political divide
Post by: JSArbitrage on January 24, 2019, 11:51:56 AM
BTW - Larry Kudlow is an economist.

No, he isn't.  He got a degree in history and joined an iBank as an analyst.  He then quickly became TV host (which is what he has been doing for the last 40 years.)  I have both (a) more education in economics and (b) more experience in the fields of economics than Kudlow AND I don't think I should be even close to considered an economist.  Has Kudlow published a single thing in economics?  I am not aware of anything (but I am no Kudlow expert.)

I don't know how you define economist.  From where I sit these jobs qualify Kudlow as an economist:

Staff economist for the Federal reserve
Chief economist for Bear Stearns
Office of management and budget as associate director of economics and planning
Economist for National Review

I actually didn't know that Kudlow was chief economist of Bear Stearns.  I am wrong.  He is an economist.
Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 12:29:27 PM
Capping pay will just favor a specific few in terms of attracting talent. This is seen first hand in NBA and NHL where they have salary caps. Players who can get max contracts or field multiple offers in the same range pretty much always end up going to the most desirable places. Look at Labron. South Beach, back to his hometown, and LA. If you are a CEO and you have identical offers from similar companies but one is in South Florida, whereas the other is in Oklahoma, who is at a disadvantage? Not fair to shareholders either. If executive pay is capped, that excess money should go back to the owners of the company. Not wasted on low end talent.

Is this how the NY Knicks, one of the most valuable and desirable franchises in the NBA, has consistently underperformed the San Antonio Spurs, who rarely makes max offers and is in an entirely undesirable location?

Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 12:36:42 PM

Please explain how the tax burden has shifted from the rich to the bottom 50% when the bottom 50% pays no income tax.


Well, I'm still looking for a distribution of tax receipts over time. But here;s this:
 
https://www.nytimes.com/2012/11/30/us/most-americans-face-lower-tax-burden-than-in-the-80s.html

Quote
Public debate over taxes has typically focused on the federal income tax, but that now accounts for less than a third of the total tax revenues collected by federal, state and local governments. To analyze the total burden, The Times created a model, in consultation with experts, which estimated total tax bills for each taxpayer in each year from 1980, when the election of President Ronald Reagan opened an era of tax cutting, up to 2010, the most recent year for which relevant data is available.

The analysis shows that the overall burden of taxation declined as a share of income in the 1980s, rose to a new peak in the 1990s and fell again in the 2000s. Tax rates at most income levels were lower in 2010 than at any point during the 1980s.

Governments still collected the same share of total income in 2010 as in 1980 — 31 cents from every dollar — because people with higher incomes pay taxes at higher rates, and household incomes rose over the last three decades, particularly at the top.

There are now many more millionaires, in other words, paying more than they did in 1980, but they are paying less than they would have if tax laws had remained unchanged. And while they still pay a larger share of income in taxes than the rest of the population, the difference has narrowed significantly.

The trend can be seen by comparing three examples:

¶A household making $350,000 in 2010, roughly the cutoff for the top 1 percent, on average paid 42.1 percent of its income in taxes, compared with 49 percent for a household with the same inflation-adjusted income in 1980 — a savings of about $24,100.

¶A household making $52,000 in 2010, roughly the median income, on average paid 27.7 percent of its income in taxes, compared with 30.5 percent in 1980, saving $1,500.

¶A household making $22,000 in 2010 — roughly the federal poverty line for a family of four — on average paid 19.4 percent in taxes, compared with 20.2 percent, saving $200.

Quote
1) some of it is refunded as credits which the paper incorrectly treats as income so as to avoid negative tax rates.  2) the bottom 50% get a much higher return than the middle class or the rich due to decreasing credit for higher incomes (roughly 90% credit for the first $1,000 of monthly average income, 32% for the next $4,000 and only 15% for the final $5,000) and 3) it is basically a retirement plan technically termed a tax and should be excluded from tax burden calculation. 4) Social Security is technically off-budget nothing paid in is used for anything else.

1) Perhaps? I don't really see the economic difference so I have not really researched this to form an opinion.
2) Doesn't this scheme apply to all recipients? Do the wealthy not receive these credits?
3) It is a state sponsored retirement plan. Were SSA removed, the gov't would be spending tax money to solve the same problem: care for the elderly. It should be included in a tax burden calculation.
4) I thought proceeds (i.e. interest) earned on SSA financial instruments can be used by the gov't for any spending item?
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 24, 2019, 12:46:55 PM
Capping pay will just favor a specific few in terms of attracting talent. This is seen first hand in NBA and NHL where they have salary caps. Players who can get max contracts or field multiple offers in the same range pretty much always end up going to the most desirable places. Look at Labron. South Beach, back to his hometown, and LA. If you are a CEO and you have identical offers from similar companies but one is in South Florida, whereas the other is in Oklahoma, who is at a disadvantage? Not fair to shareholders either. If executive pay is capped, that excess money should go back to the owners of the company. Not wasted on low end talent.

Is this how the NY Knicks, one of the most valuable and desirable franchises in the NBA, has consistently underperformed the San Antonio Spurs, who rarely makes max offers and is in an entirely undesirable location?

LOL There you go again. "Oh the exception to the rule!". Always reliable. Although your example is awful. You are on a role in this thread LC!

If you knew anything about the situation you'd know the Knicks are one of the least desirable teams in the league because of terrible management. And the Spurs don't draw free agents.... Try again.

Going over to hockey though, yes, the Rangers regularly have first dibs on whatever free agent they want, should they have cap space.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 24, 2019, 12:48:08 PM
"Capping senior management pay would be one, or in general, incentive realignment. Much stronger punishments for environmental destruction, employee hiring collusion, market manipulation and fraud, etc. would other. There are many aspects of tax reform, legal reform, healthcare reform, I don't even know where to start. In other words, change the structure to limit the abuse of externalities, severely punish those who do as an actual deterrent, and fairly tax the ones you cannot limit."

Sorry LC but, I cannot understand how this would prevent the top 26 worldwide to still own 1/2 of what is owned by the poorest half as reported by Oxfam.

Cardboard

 
Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 01:03:11 PM
LOL There you go again. "Oh the exception to the rule!". Always reliable. Although your example is awful. You are on a role in this thread LC!

If you knew anything about the situation you'd know the Knicks are one of the least desirable teams in the league because of terrible management. And the Spurs don't draw free agents.... Try again.

Going over to hockey though, yes, the Rangers regularly have first dibs on whatever free agent they want, should they have cap space.
You're using professional sports as "one exception to the rule" despite wage limits in other industries with no discernible effect.

As usual Greg you have played yourself, as your own example betrays you: If the Knicks are undesirable because of non-salary reasons, why wouldn't this factor also relate to companies? Maybe a great CEO wants to work in Oklahoma because the company there is in a preferred line of business versus one located in NYC.
Title: Re: Klarman worried about political divide
Post by: Gregmal on January 24, 2019, 01:11:39 PM
LOL There you go again. "Oh the exception to the rule!". Always reliable. Although your example is awful. You are on a role in this thread LC!

If you knew anything about the situation you'd know the Knicks are one of the least desirable teams in the league because of terrible management. And the Spurs don't draw free agents.... Try again.

Going over to hockey though, yes, the Rangers regularly have first dibs on whatever free agent they want, should they have cap space.
You're using professional sports as "one exception to the rule" despite wage limits in other industries with no discernible effect.

As usual Greg you have played yourself, as your own example betrays you: If the Knicks are undesirable because of non-salary reasons, why wouldn't this factor also relate to companies? Maybe a great CEO wants to work in Oklahoma because the company there is in a preferred line of business versus one located in NYC.

The Knicks disqualify themselves. If their management was not an outlier, they would be the first choice for free agents. Lebron even mentioned it as a reason he didn't go there. Its crazy you are arguing that capping pay, doesn't inevitably leads to an advantage for certain select few, for reasons the majority can't compete with. In fact your argument is essentially "I can think of a case or two where that isn't true" LOL. I can see why you want to shift this, after getting your you know what pushed in by Tim and Mark in your last liberal spiel, but this one is no different. Shareholders/companies should be able to pay whatever they are capable to attract candidates they feel are best for the job. Period.
Title: Re: Klarman worried about political divide
Post by: Tim Eriksen on January 24, 2019, 01:32:35 PM

Please explain how the tax burden has shifted from the rich to the bottom 50% when the bottom 50% pays no income tax.


Well, I'm still looking for a distribution of tax receipts over time. But here;s this:
 
https://www.nytimes.com/2012/11/30/us/most-americans-face-lower-tax-burden-than-in-the-80s.html

Quote
Public debate over taxes has typically focused on the federal income tax, but that now accounts for less than a third of the total tax revenues collected by federal, state and local governments. To analyze the total burden, The Times created a model, in consultation with experts, which estimated total tax bills for each taxpayer in each year from 1980, when the election of President Ronald Reagan opened an era of tax cutting, up to 2010, the most recent year for which relevant data is available.

The analysis shows that the overall burden of taxation declined as a share of income in the 1980s, rose to a new peak in the 1990s and fell again in the 2000s. Tax rates at most income levels were lower in 2010 than at any point during the 1980s.

Governments still collected the same share of total income in 2010 as in 1980 — 31 cents from every dollar — because people with higher incomes pay taxes at higher rates, and household incomes rose over the last three decades, particularly at the top.

There are now many more millionaires, in other words, paying more than they did in 1980, but they are paying less than they would have if tax laws had remained unchanged. And while they still pay a larger share of income in taxes than the rest of the population, the difference has narrowed significantly.

The trend can be seen by comparing three examples:

¶A household making $350,000 in 2010, roughly the cutoff for the top 1 percent, on average paid 42.1 percent of its income in taxes, compared with 49 percent for a household with the same inflation-adjusted income in 1980 — a savings of about $24,100.

¶A household making $52,000 in 2010, roughly the median income, on average paid 27.7 percent of its income in taxes, compared with 30.5 percent in 1980, saving $1,500.

¶A household making $22,000 in 2010 — roughly the federal poverty line for a family of four — on average paid 19.4 percent in taxes, compared with 20.2 percent, saving $200.

Quote
1) some of it is refunded as credits which the paper incorrectly treats as income so as to avoid negative tax rates.  2) the bottom 50% get a much higher return than the middle class or the rich due to decreasing credit for higher incomes (roughly 90% credit for the first $1,000 of monthly average income, 32% for the next $4,000 and only 15% for the final $5,000) and 3) it is basically a retirement plan technically termed a tax and should be excluded from tax burden calculation. 4) Social Security is technically off-budget nothing paid in is used for anything else.

1) Perhaps? I don't really see the economic difference so I have not really researched this to form an opinion.
2) Doesn't this scheme apply to all recipients? Do the wealthy not receive these credits?
3) It is a state sponsored retirement plan. Were SSA removed, the gov't would be spending tax money to solve the same problem: care for the elderly. It should be included in a tax burden calculation.
4) I thought proceeds (i.e. interest) earned on SSA financial instruments can be used by the gov't for any spending item?

If you actually read what I posted you would have seen that I linked to a site that showed effective tax rates by income quintiles over time since 1979. 

The NY Times examples are beyond stupid.  The last one family of four on $22,000 in 2010 would have paid zero federal tax and received a earned income tax credit for $3,862.  They would have paid about $1400 in payroll taxes.  (Is the Times counting the employer paid portion?)  So they would have have received back $2400, a negative 12% tax rate.  Yet received full credit for contributing to SS even though they didn't.  The NY Times somehow come up with 19% whatever.  How you think this person could be funding government when the two kids alone would cost taxpayers $20k ($10k each) annually to educate is beyond me.  They are massively subsidized by the caring rich.
 
The second to last one, a family on $52,000 would have paid federal tax of $1,066 in 2010, or 2%.  They would have paid payroll tax of about 7.5%, all of which they would get back at retirement. 

Once again - how the authors calculate matters.  You are fixated on the conclusion (of two left leaning publications).   Are they allocating corporate income taxes to individuals?  Are they allocating employer paid payroll tax to the employee?  Are they including employee paid payroll tax?  How are they treating SS benefits?  How did they allocate sales tax?  How did they allocate property tax for renters?   

One final try here - you want to treat SS as a tax when paid but income when received.  Why?  Is that consistent?  Why not tax when paid and tax refund when received?  Or why not excluded since it gets paid back upon retirement.  Is a 401k contribution a tax?  Of course not.  Is a mandatory union retirement plan contribution a tax?  Of course not.  Then why is a mandatory SS contribution???????  Because including it skews the result to make it look like the poor and middle class pay higher taxes when they actually don't.

Clearly, there is no point in continuing this discussion.   


Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 01:53:43 PM
Well Tim as I've said the difficulty is finding total tax receipts by income bracket over time. You haven't provided this either.

Tax rates per bracket do not do enough - you need to combine this with aggregate income to determine tax paid, and to uncover the underlying reasons behind changes in overall tax payments.

I have tried to do this by showing national income share over time per income bracket, combined with average tax rate per income bracket.

But you argue about the calculation of average tax rate. Frankly I disagree with your arguments.

The IRS considers SSA benefits as income, some as non-taxable income, some as taxable income.
I consider SSA taxes as eligible for a few reasons. (1) they are mandatory (2) they are universal (3) they are designed to provide a societal service, essentially the young are taxed to pay for the old.

We obviously disagree on this, but I think the main item of discussion (income inequality) has not been disproven.
Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 02:05:02 PM
The Knicks disqualify themselves. If their management was not an outlier, they would be the first choice for free agents. Lebron even mentioned it as a reason he didn't go there. Its crazy you are arguing that capping pay, doesn't inevitably leads to an advantage for certain select few, for reasons the majority can't compete with. In fact your argument is essentially "I can think of a case or two where that isn't true" LOL. I can see why you want to shift this, after getting your you know what pushed in by Tim and Mark in your last liberal spiel, but this one is no different. Shareholders/companies should be able to pay whatever they are capable to attract candidates they feel are best for the job. Period.

Right. So salary caps are limiting - except when they're not. Thanks for that.

I'm not shifting any argument, as far as I know I've addressed every point raised, even your absurd ones. This cannot be said for Mark or Tim - who for example still have not addressed the fact that (1) SSA benefits would essentially be a gov't cost if they were not taxed on the young (2) SSA financial instruments provide income for other gov't spending (3) reduction in tax rates is only half of the equation when calculating tax paid per income bracket.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 24, 2019, 02:16:35 PM
Sorry LC but, I cannot understand how this would prevent the top 26 worldwide to still own 1/2 of what is owned by the poorest half as reported by Oxfam.

At least make an effort!

Cardboard
Title: Re: Klarman worried about political divide
Post by: MarkS on January 24, 2019, 02:44:42 PM
The Knicks disqualify themselves. If their management was not an outlier, they would be the first choice for free agents. Lebron even mentioned it as a reason he didn't go there. Its crazy you are arguing that capping pay, doesn't inevitably leads to an advantage for certain select few, for reasons the majority can't compete with. In fact your argument is essentially "I can think of a case or two where that isn't true" LOL. I can see why you want to shift this, after getting your you know what pushed in by Tim and Mark in your last liberal spiel, but this one is no different. Shareholders/companies should be able to pay whatever they are capable to attract candidates they feel are best for the job. Period.

Right. So salary caps are limiting - except when they're not. Thanks for that.

I'm not shifting any argument, as far as I know I've addressed every point raised, even your absurd ones. This cannot be said for Mark or Tim - who for example still have not addressed the fact that (1) SSA benefits would essentially be a gov't cost if they were not taxed on the young (2) SSA financial instruments provide income for other gov't spending (3) reduction in tax rates is only half of the equation when calculating tax paid per income bracket.


When Social Security was designed in the mid 1930s it was designed primarily as a retirement fund.   The program had attractive attributes at first.  First the number of people expected to live longer than 65 years of age was relatively small. Also for the first few decades the number of workers needed to support retirees greatly exceeded the number of retirees. https://www.ssa.gov/history/ratios.html   (As I understand the system you need about 3 workers for every retiree for a stable system, which we haven't had for years.  In fact I've seen several studies predicting that in the near future the ratio will fall below 2 workers for every retiree.)  As a result the program built up a massive amount of unspent cash.   This cash hoard was routinely raided by Congress who left essentially an IOU for every "loan."  Fast forward to 2019 -  my guess is that the amount of IOUs are nearing 3 trillion just when the baby boomers are retiring in force and the money is needed most.

So LC I would respectfully disagree with all of your characterizations concerning social security.  I believe that the program has been mismanaged by the government for decades.


Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 03:49:41 PM
Mark,

So a few things:

According to this article:
https://www.fool.com/retirement/2018/05/20/did-congress-really-steal-from-social-security.aspx

Congress does the following:
The truth is that the Social Security Administration takes this extra cash, which would be earning nothing if it were sitting around in a trust, and invests it in various special-issue bonds, and to a lesser extent certificates of indebtedness, with staggered maturity dates ranging from a year to perhaps longer than a decade from now. By placing this excess cash -- which has been built up since 1983 as a result of Social Security being a cash-flow positive program -- into special-issue bonds and certificates of indebtedness, it earns interest. In 2016, $88.4 billion of the $957.5 billion in revenue that was generated came from interest income earned on its bonds and certificates of indebtedness.

Does the federal government use the cash that's invested in these bonds, as well as non-special-issue bonds, for regular revenue items? Absolutely! Selling Treasury notes is a common way Congress raises money to pay the bills. The thing is, these bonds are backed by the full faith of the U.S. government, and the federal government is legally obligated to honor both the interest payments and maturities as they come along. Every single interest payment on Social Security's special-issue bonds has been paid, and every last maturity has been met with a full repayment.


So Congress funds spending using excess SSA fund as an asset base.

I pay SSA $1. Congress takes that dollar, securitizes it, and uses proceeds to pay for roads bridges tunnels etc. And then Congress promises to pay back the SSA and in essence myself, $1.25 in 30 years. This seems closer to the "tax" side of things.
Title: Re: Klarman worried about political divide
Post by: Cigarbutt on January 24, 2019, 04:11:33 PM
A way to evaluate the tax effect on the different quintiles over time is to look at the following CBO publication (pages 4,15 and 21):
https://www.cbo.gov/system/files?file=2018-11/54646-Distribution_of_Household_Income_2015_0.pdf
-Specifically comparing the income before taxes and transfers with income after taxes and transfers, one can infer some conclusions including the evolution of the net impact of federal taxes over time (1979-2015).

                                                                                      CUMULATIVE GROWTH (baseline=0)
                                                     income before taxes and transfers                income after taxes and transfers
top 1%                                                               233                                                          242
top quintile                                                         101                                                          103
top quintile without 1%                                        74                                                             78
middle 3 quintiles                                                32                                                             46
lowest quintile                                                     32                                                             79

Conclusions (CBO methodology)
-income before items has risen in an unequal way with a high skew to higher earners
-taxes and transfers changes from 1979 to 2015 resulted in close to a neutral effect on the top 1% and the top quintile
-taxes and transfers changes from 1979 to 2015 resulted in a "progressive" effect on the middle 3 quintiles
-taxes and transfers changes from 1979 to 2015 resulted in a significant "progressive" effect on the lowest quintile
-during that time frame, the essential reason for a rising share of income tax paid on an absolute basis by the top 1% (and top 20%) per total tax paid by all is not related to changes in the "progressivity" of taxes but mainly because of much higher relative growth of pre-tax income.

Discussions for higher taxation at higher levels of income can be discussed, but not on the basis of the lower quintiles having paid more taxes to compensate the higher quintile paying less in the last 40 years.
Title: Re: Klarman worried about political divide
Post by: MarkS on January 24, 2019, 04:22:18 PM
Mark,

So a few things:

According to this article:
https://www.fool.com/retirement/2018/05/20/did-congress-really-steal-from-social-security.aspx

Congress does the following:
The truth is that the Social Security Administration takes this extra cash, which would be earning nothing if it were sitting around in a trust, and invests it in various special-issue bonds, and to a lesser extent certificates of indebtedness, with staggered maturity dates ranging from a year to perhaps longer than a decade from now. By placing this excess cash -- which has been built up since 1983 as a result of Social Security being a cash-flow positive program -- into special-issue bonds and certificates of indebtedness, it earns interest. In 2016, $88.4 billion of the $957.5 billion in revenue that was generated came from interest income earned on its bonds and certificates of indebtedness.

Does the federal government use the cash that's invested in these bonds, as well as non-special-issue bonds, for regular revenue items? Absolutely! Selling Treasury notes is a common way Congress raises money to pay the bills. The thing is, these bonds are backed by the full faith of the U.S. government, and the federal government is legally obligated to honor both the interest payments and maturities as they come along. Every single interest payment on Social Security's special-issue bonds has been paid, and every last maturity has been met with a full repayment.


So Congress funds spending using excess SSA fund as an asset base.

I pay SSA $1. Congress takes that dollar, securitizes it, and uses proceeds to pay for roads bridges tunnels etc. And then Congress promises to pay back the SSA and in essence myself, $1.25 in 30 years. This seems closer to the "tax" side of things.

LOL  -   the government takes the money from the trust fund and buys treasury bonds (or other government securities) from the treasury so the money can go into the general fund.  The interest owed on the bonds are owed by the Federal government to the Federal government.  The only way that the money will be paid back is by raising taxes or issuing even more bonds (more debt).   Actually it does not strike me as a tax scheme at all (Ponzi scheme? Maybe?)

Moreover, as stated previously, about half of taxpayers only pay FICA taxes to the US government.  So if you try to reduce the amount of FICA taxes the bottom half pay in order to reduce their tax burden you will effectively reduce the number of workers supporting retirees well below 2 to 1.  In other words you will implode Medicare and Socia! Security.  You're probably better off looking at reducing the burden of state and local taxes especially in high tax jurisdictions like New York and California.

Title: Re: Klarman worried about political divide
Post by: LC on January 24, 2019, 06:45:56 PM
Jefferson on the matter:

I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.
Title: Re: Klarman worried about political divide
Post by: MarkS on January 25, 2019, 04:53:23 AM
Jefferson on the matter:

I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.

So you're aligning yourself with Jefferson, a slave holder.  How interesting.
Title: Re: Klarman worried about political divide
Post by: Castanza on January 25, 2019, 05:51:20 AM
Let’s break a few things down about some of the arguments I’m seeing here.

I don’t think it’s very surprising AOC won her district. A lot of people on here are very alarmed. Let’s break down the demographics.
-   Only 100k people voted in the district. (pop is 700k)
-   49% Hispanic, 11% black, 16% Asian, 18% white
-   47% foreign born (67% speak language other than English)
-   27% have bachelor degrees
-   75% have HS diploma. Much lower than the 90% Nat average
-   Average income 58k (27k per capita) both lower than Nat avg. and NY avg.
-   Average age 38 (pretty similar to NY
-   1.8% of population are veterans

It’s really not difficult to see why she won based on demographics. Add in her fiery personality, her minority status (appeals to voters in district) and the fact the she is a woman (appeals to current societal climate).

She has a degree in economics. One using education as a point of authority for debate is ignorant. Anyone can get a degree in economics. Doesn’t mean you’re an expert. There are plenty of highly educated idiots out there. Two she isn’t a very honest person. She was not poor growing up and this has been proven time and time again. She is now rich and sitting at the top. So before you get on the band wagon (with any politician cough cough Bernie and your multiple houses/yacht) ask yourself this. Are they really “in the trenches” with you?

Long story short. Her victory is not impressive at all. Her grasp of economics is not very good and she continually lies to her voting base. She is overly confident and driven to be in power (people who seek power often don’t deserve it)

Lincoln – “Most any man can handle adversity. If you want to test a man’s character give him power.”

Frederic Bastiat - “If the natural tendencies of mankind are so bad that it is not safe to permit people to be free, how is it that the tendencies of these organizers are always good? Do not the legislators and their appointed agents also belong to the human race? Or do they believe that they themselves are made of a finer clay than the rest of mankind?”

_________________________________________________

Taxes

-   Less than 10k households qualified for the 91% tax rate in the 50’s. The requirement was income of 200k+
-   The top 1% actually only paid about 42% tax in the 50’s
   - This number takes into consideration taxes levied by Federal, State, Local, govt’s including income, payroll, corporate excise, property, and estate taxes
   - So in actuality they really only paid about 16.9% in income tax.
-   Studies show that as marginal tax rates rise, income reported by taxpayers goes down. In other words. Rich people pay to find ways to avoid taxes. See NJ as 5700
        Millionaires left in 2017 (I believe).
-   The current top 1% of taxpayers are paying around 40% income tax.

Taxing the rich won’t do anything but cause them to leave or find ways to avoid the taxes. That’s not a solution. It’s a band aid (and a poor one at that)

______________________________________________

A lot of people look at the US debt and think that it is insurmountable. How will we ever pay this off? Dare I say our hockey loving allies north of the border might have a solution?!
   
It all starts in 1896 with Wilfrid Laurier former prime minister. He has a simple vision of spending restraint, low taxes, free trade, and civil liberties. Very much mimicked the Founding Fathers vision for America. Well as history shows us Government always has a way for growing. And By the 60’s Canada became left leaning country with increasing amounts of spending and social programs added for the next 16 years. Increased income tax, capital gains tax and social welfare programs. (However they did not yet have a central bank like the US)
   
If you look at the size of the Canada pop and economy during the 60’s. The debt that was accumulated was very similar to what we have in the US currently. Canada really began to have issues with inflation in the 70’s and 80’s. Needless to say it was looking Grim. Low and behold in the 90’s they finally got their stuff together (mind you short term) IN 1994 Paul martin the Finance Minister began to cut the budget. They mad huge budget cuts and cut many government programs people in the US would deem “necessary.” Some were unnecessary government agencies, public transportation, unemployment insurance, business subsidies, aid to foreign governments, social program bloat. Spending was cut from 22% - 15% from 1995-2006.
   
In Canada tax spending is 38% federal and 62% local where the US is the opposite 71% F 29% local. Certain provinces in Canada were not required to balance budgets every year. I believe it was Ontario that single handedly ran up 37% (for the province). They continued to tighten the belt on this and the huge issue of social health care. And Canada was making great progress.
But then came the economic slowdown of the mid 2000’s. New leadership was elected and politicians preyed on the fears of people during this time period. Since then spending has ramped up. Canada increased individual income tax to mid-40%. Increased welfare and healthcare spending as well as reenacted multiple regulations previously removed. It has now become too difficult to have economic reform because of the demographics of their leadership. Too far left. This same thing is happening in the US. Although not a mirror image (other issues persist), the US has a lot of thinking to do. From a historical perspective it is very clear what works and what doesn’t. It’s really very simple.

US has a corporate/government tie issue. The closer gov’t and companies get the more corrupt they are. Look at China. We need to stop subsidizing companies, reduce lobbying, add term limits to congress.

Less government is better. More control on the local level. Less social programs.
Title: Re: Klarman worried about political divide
Post by: Cigarbutt on January 25, 2019, 06:45:33 AM
...
Taxing the rich won’t do anything but cause them to leave or find ways to avoid the taxes. That’s not a solution. It’s a band aid (and a poor one at that)

______________________________________________

A lot of people look at the US debt and think that it is insurmountable. How will we ever pay this off?
...
Welcome Castanza.
What are your investing style and interests?

The topic is political divide and the Canadian fiscal turnaround story that you describe was due in large part to Mr. Martin, a leader who had a vision, used tactical political skills in a responsible and constructive manner and was able to express that vision in a moderating way. But he benefitted from a good economy which made a significant difference in the turnaround.
 
I would not underestimate the "traction" that a certain political current is getting in the US as the pendulum may swing to an extent, given various economic scenarios, that unexpected outcomes should be considered.

I agree that adding another layer of taxation can be discussed but represents the easy way to extend and pretend.
I have a feeling the solution will come from the grass-roots level.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 25, 2019, 06:45:58 AM
Hi Castanza and excellent first post!

Personally, I am not alarmed that AOC won in her district but, I am alarmed that a majority of people may listen to what she says and feel that her proposals may make their lives better.

Like you, I have looked at history to see what happens when a country goes down the direction being proposed and overtime it gets really ugly. Especially, when the leaders of that direction are solidly entrenched (Cuba, Nazi Germany, USSR Venezuela).

Somehow, many have heard the siren songs of a few European country (tiny ones really) who apparently have the happiest people on Earth and abundance for everyone due to socialism. Unfortunately, when one digs just a little bit to find out if this is true at all or where it comes from, then the dream falls quickly apart.

Cardboard
Title: Re: Klarman worried about political divide
Post by: wachtwoord on January 25, 2019, 08:31:42 AM
Less government is better. More control on the local level. Less social programs.

You have my vote!
Title: Re: Klarman worried about political divide
Post by: Castanza on January 25, 2019, 08:44:24 AM
Thanks for the warm welcomes!

I've been a lurker for the better part of two years. I have to say I am very impressed with the in-depth analysis conducted by individuals on this forum. It's really best in class (at least seems that way to me.)

I will say I am a younger investor and primarily I am focused on index funds or well diversified companies (Brk.b). I don't particularly like trendy stocks and I try to find "boring" areas to invest.

When looking for value I try to find mid-cap and smaller companies with potential to grow or possible buyout targets. However, I really limit my portfolio percentage dedicated to "value plays" as I'm new and still learning a lot!

The majority of my portfolio is help in a total market index fund.

Other positions:
- Brk.b
- BAM
- LPT

Not so much value plays but stocks I feel confident in that I hold small position in:
- BA
- LMT
- WM
- MSG

Companies recently entered:
- ASC (I think they are well positioned to be a primary carrier/shipper of low sulfur fuel. In low 4's)
- NNA (similar to ASC, however I like ASC better, in low 4's)
- MITK (potential buyout target, good growth, good cash flow, niche market, in at 9ish)
- MO (in low 44)
- WFC (in low 44

Companies I'm eyeing
- GRBK
- MKC
- UPS
- FDX


Also, sorry my first post was a political one! I feel kind of bad, seeing as this is a investment forum. Regardless, I will for sure be doing more reading than posting but I am excited to try and put together some "analysis" of stocks I am eyeing. Glad I finally pulled the trigger on subscription.
Title: Re: Klarman worried about political divide
Post by: MarkS on January 25, 2019, 08:52:21 AM
Welcome "George"  :D nice to have you
Title: Re: Klarman worried about political divide
Post by: meiroy on January 26, 2019, 04:41:44 PM

You guys should listen to Soros' Davos talk, it's spectacular.
Title: Re: Klarman worried about political divide
Post by: Cardboard on January 27, 2019, 05:59:26 AM
I read enough hate already from that message board. No need to get more from one of the biggest hypocrite the world has ever seen.

Cardboard
Title: Re: Klarman worried about political divide
Post by: Spekulatius on January 27, 2019, 07:09:28 AM
LOL at the people saying we should respect economists... As already mentioned, with other professions, there are exact metrics by which to judge. Economists are basically high end weathermen. If anything I compare them to stock analysts. Guys who would be running money rather than writing book reports; if they were any good at it. But when they aren't knowing the talking points and sounding academic helps...

I respect the freakonomist kind of economists. They look at socials experiments that have occurred in the last or are occurring presently and trying to figure out what happens and why. There are about 200 nations in the world and a whole lot of history. That amounts to a significant amount of social experiments that have been conducted. One sure can learn a lot from it. Sure, some is transferable and some is not, due to a different social or economic backdrop. I would bet there is a lot of useful data out there that has been looked at for sure, but has it been looked at in a way they aided decision making?
Title: Re: Klarman worried about political divide
Post by: DeepValuePlay on January 29, 2019, 02:23:59 AM
Can anyone share the 2018 letter from Klarman that everyone is talking about...?

Thanks!