Author Topic: Trickle Up Economics?  (Read 1542 times)

Schwab711

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Re: Trickle Up Economics?
« Reply #10 on: October 07, 2019, 01:51:16 PM »
https://gfycat.com/fakecandiddungbeetle

This is the progression of tax rates per income group from 1950-2018.

"All federal, state, and local taxes are
included. Taxes are expressed as a fraction of pre-tax income"

This should exclude tax credits.

The source is: source is Piketty, Saez, and Zucman 2018 updated
estimates

Which I believe is this:
https://eml.berkeley.edu/~saez/PSZ2019datafile.xlsx

Excellent, thank you!


LC

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Re: Trickle Up Economics?
« Reply #11 on: October 07, 2019, 03:56:43 PM »
Yes and to be fair - tax credits push down the left side of the curve.

I am not sure what the reason for using pre-tax income vs. effective tax rates is. Perhaps for (1) consistency of comparison or (2) data availability.

But, we can generally envision the outcome of introducing tax credits into these charts:

The left side of the curve will drop as the lower income groups claim the highest percentage-benefit of tax credits (i.e. the standard deduction of $12,000 drops your taxes by 30% if you make 40k/year but only 3% if you make 400K).

And I'm being quite conservative by assuming billionaires are taking the standard deduction and not itemizing millions of tax deductions.

So while tax credits will drop the left side of the curve, it will not increase the right side of the curve - and this is where the major problem lies:

While those living in poverty went from paying 20% taxes to 5-10% effective taxes, those living in the stratosphere went from paying 50-60% taxes to 20-25% effective taxes.

"Lethargy bordering on sloth remains the cornerstone of our investment style."
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RuleNumberOne

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Re: Trickle Up Economics?
« Reply #12 on: October 07, 2019, 08:00:50 PM »
Schwab711,

That Guardian article was a deceptive article produced by a crooked mind. Three dirty tricks employed in that article:

1. The average of 2.4% was computed across all states. We need the numbers for CA alone, not CA averaged with zero-income-tax or zero-capital-gains-tax states.

2. It says 84% of billionaires lived in their countries of birth. The question to be answered is how many billionaires lived in high-tax countries of birth.

3. We really need the stats for CA after 2011 - when CA introduced the 13.3% tax.
« Last Edit: October 07, 2019, 08:16:12 PM by RuleNumberOne »

RuleNumberOne

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Re: Trickle Up Economics?
« Reply #13 on: October 07, 2019, 08:09:29 PM »
I personally know several people who left CA for zero-tax states or the country itself after getting wealthy.

Charlie Munger says he knows a lot of people who left CA because of the high taxes and that it was very stupid of CA to lose such people.

Should I believe my own eyes or some devious and envious journalist?
Should I believe Charlie Munger or some devious and envious journalist?

LC

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Re: Trickle Up Economics?
« Reply #14 on: October 07, 2019, 08:29:28 PM »
Schwab711,

That Guardian article was a deceptive article produced by a crooked mind. Three dirty tricks employed in that article:

1. The average of 2.4% was computed across all states. We need the numbers for CA alone, not CA averaged with zero-income-tax or zero-capital-gains-tax states.

2. It says 84% of billionaires lived in their countries of birth. The question to be answered is how many billionaires lived in high-tax countries of birth.

3. We really need the stats for CA after 2011 - when CA introduced the 13.3% tax.

While I think it is admirable to be naturally skeptical, unless you have the research at hand to disprove the claims from a certain article, perhaps we should not be so quick to throw around words like 'crooked' and 'deceptive'

For example on your item #3 above, i.e. the marginal Californian millionaire's response to tax increases, analysis has already been done using (1) the 1996 tax cut in California, (2) the 2005 Mental health tax which imposed a tax of 1% on taxable income above 1MM, and (3) the 2011 tax hike which you refer.

https://inequality.stanford.edu/sites/default/files/media/_media/working_papers/Varner-Young_Millionaire_Migration_in_CA.pdf

Below are the conclusions from the initial study (done in 2012 on items 1 and 2)

Quote
2. Using difference-in-differences models, which compare migration trends of the group
experiencing the tax increase to a group of high-income earners not facing a tax change, neither
in-migration or out-migration show a tax flight effect from the introduction of the 2005 Mental
Health Services Tax. In fact, out-migration has a “wrong-signed” estimate: out-migration
declined among millionaires after the tax was passed (both in absolute terms and compared to the
control group). In other words, the highest-income Californians were less likely to leave the state
after the millionaire tax was passed
.

Quote
4. The 1996 tax cuts on high incomes likewise had no consistent effect on migration. There
was a small effect for those experiencing the small (0.7%) tax cut, but no effect at all for those
experiencing the large (1.7%) rate cut. While we are planning to analyze the 1996 tax cut in
greater detail, the overall picture is one of no clear effect.

This paper was updated in 2018 to include the 2011 tax hike which you refer:

https://inequality.stanford.edu/sites/default/files/millionaire-migration-california-impact-top-tax-rates.pdf

Again the abstract conclusion:

Quote
We examine three waves of tax reform affecting top earners:
two “millionaire taxes” passed by voters via the proposition system in 2004 and 2012, and a tax
cut passed by legislation in 1996. We emphasize non-parametric, graphical analyses that reveal
the evidence with as few assumptions as possible and analogous regression models that confirm
the non-parametric results. Both in absolute terms, and compared to sensible control groups, we
find little migration response to changes in top tax rates


So when you ask the following question:
Quote
I personally know several people who left CA for zero-tax states or the country itself after getting wealthy.

Charlie Munger says he knows a lot of people who left CA because of the high taxes and that it was very stupid of CA to lose such people.

Should I believe my own eyes or some devious and envious journalist?
Should I believe Charlie Munger or some devious and envious journalist?
It seems you are in fact the one being devious by not including a third option: the actual immigration and income tax data.
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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RuleNumberOne

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Re: Trickle Up Economics?
« Reply #15 on: October 07, 2019, 09:38:32 PM »
What you are claiming is not logical.

If the Federal tax rate is 60% and the state tax rate is 13.3%, someone can move out of CA and get a 50% increase in their after-tax income.
If AOC becomes president and the Federal tax rate becomes say 74%, someone can move out of CA and double their after-tax income.

The Stanford study you reference specifically talks about immobility for skilled people. It does not address the obvious mobility of capital gains income. What happens when there is a bust and the skilled people are out of work? Another big spike in the CA state tax rate?

LC

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Re: Trickle Up Economics?
« Reply #16 on: October 08, 2019, 11:43:16 PM »
Authors response to methodology criticism:

“Zucman countered that his and Saez's analysis considers the EITC and other credits like it as transfers of income, akin to food stamps or jobless benefits, rather than tax provisions.

"If you start counting some transfers as negative taxes, it is not clear where to stop," he said via email. "Do you treat the EITC as a negative tax? Veterans' benefits? Medicaid? defense spending? . . . There's no clear line, and the results become arbitrary."
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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brk.b | irm | mmm | mo | nlsn | pm | pypl | tap | v | wm

rukawa

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Re: Trickle Up Economics?
« Reply #17 on: October 10, 2019, 12:20:16 AM »
19 century had close to zero income tax and it was and remains the single most innovative period of American history by far. Its also a period when there was an enormous increase in living standards and income.

What exactly are the taxes buying us? A behemoth bureaucratic government? A welfare state breeding criminals, , mass shootings, single mothers, gangland shootings and municipal decay and dysfunction. When you have a bad product/service why in the hell would you want to buy more of it.

RuleNumberOne

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Re: Trickle Up Economics?
« Reply #18 on: October 12, 2019, 09:38:16 AM »
LC,

Lying Liz has hired dishonest advisers (Saez, Gucman who are the authors you corresponded with) who are as Evasive as herself. Bloomberg did the calculation you were looking for. Were Saez and Gucman dishonest to begin with or did they become that way after Elizabeth hired them?

I am fine with the bottom 20% paying a negative tax rate (or even the bottom 70%). Just pointing out that both Elizabeth and her advisers are dishonest. Elizabeth is proposing a short-term capital gains tax rate for California of 69%. Pre-Trump it was 57.4%, right now it it 54.1%.

NYT suppressing Hunter Biden corruption and trumpeting evasive tax data from evasive researchers.

https://www.bloomberg.com/opinion/articles/2019-10-10/the-rich-really-do-pay-higher-taxes-than-you

"For Democrats, the Overton window — the range of ideas that are not considered extreme — has shifted markedly to the left in the last few years. It now seems that the window for discourse about economic reality is moving as well.

Take the headline on David Leonhardt’s recent New York Times column, summarizing the research of economists Emmanuel Saez and Gabriel Zucman, who are advisers to Elizabeth Warren: “The rich really do pay lower taxes than you.”

If you subtract these payments from federal taxes paid, the tax rate for the top 20% of households (including the top 1%) is unchanged, as those households don’t receive means-tested benefits. The tax rate for households in the middle 20% drops considerably, from 14% to 9%. And the rate for the bottom 20% of households plummets to minus 70%. Those households receive $49 in transfer payments for every $1 they pay in federal tax.

Saez and Zucman train much of their focus on the 400 wealthiest Americans. This group makes up 0.0003% of households. Characterizing features of the tax system based on a few hundred individuals is silly."

Authors response to methodology criticism:

“Zucman countered that his and Saez's analysis considers the EITC and other credits like it as transfers of income, akin to food stamps or jobless benefits, rather than tax provisions.

"If you start counting some transfers as negative taxes, it is not clear where to stop," he said via email. "Do you treat the EITC as a negative tax? Veterans' benefits? Medicaid? defense spending? . . . There's no clear line, and the results become arbitrary."

RuleNumberOne

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Re: Trickle Up Economics?
« Reply #19 on: October 12, 2019, 10:25:19 AM »
Elizabeth's interview questions when she hires economics advisers:

1. Give me examples of your dishonesty.

2. If somebody probes deeper, show me how evasive you can get.

3. Here are some numbers. Twist, hide and lie to fit the conclusions.

LC,

Lying Liz has hired dishonest advisers (Saez, Gucman who are the authors you corresponded with) who are as Evasive as herself. Bloomberg did the calculation you were looking for. Were Saez and Gucman dishonest to begin with or did they become that way after Elizabeth hired them?

I am fine with the bottom 20% paying a negative tax rate (or even the bottom 70%). Just pointing out that both Elizabeth and her advisers are dishonest. Elizabeth is proposing a short-term capital gains tax rate for California of 69%. Pre-Trump it was 57.4%, right now it it 54.1%.

NYT suppressing Hunter Biden corruption and trumpeting evasive tax data from evasive researchers.

https://www.bloomberg.com/opinion/articles/2019-10-10/the-rich-really-do-pay-higher-taxes-than-you

"For Democrats, the Overton window — the range of ideas that are not considered extreme — has shifted markedly to the left in the last few years. It now seems that the window for discourse about economic reality is moving as well.

Take the headline on David Leonhardt’s recent New York Times column, summarizing the research of economists Emmanuel Saez and Gabriel Zucman, who are advisers to Elizabeth Warren: “The rich really do pay lower taxes than you.”

If you subtract these payments from federal taxes paid, the tax rate for the top 20% of households (including the top 1%) is unchanged, as those households don’t receive means-tested benefits. The tax rate for households in the middle 20% drops considerably, from 14% to 9%. And the rate for the bottom 20% of households plummets to minus 70%. Those households receive $49 in transfer payments for every $1 they pay in federal tax.

Saez and Zucman train much of their focus on the 400 wealthiest Americans. This group makes up 0.0003% of households. Characterizing features of the tax system based on a few hundred individuals is silly."

Authors response to methodology criticism:

“Zucman countered that his and Saez's analysis considers the EITC and other credits like it as transfers of income, akin to food stamps or jobless benefits, rather than tax provisions.

"If you start counting some transfers as negative taxes, it is not clear where to stop," he said via email. "Do you treat the EITC as a negative tax? Veterans' benefits? Medicaid? defense spending? . . . There's no clear line, and the results become arbitrary."