Author Topic: Re: Klarman worried about political divide  (Read 18274 times)

50centdollars

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Re: Klarman worried about political divide
« Reply #40 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
« Last Edit: January 22, 2019, 03:14:22 PM by 50centdollars »


Viking

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Re: Klarman worried about political divide
« Reply #41 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. Chinaís 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 canít think of a time when it was less equipped to deal with a crisis in the last 100 years). The tail risks are growing.
« Last Edit: January 22, 2019, 03:46:51 PM by Viking »

Tim Eriksen

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Re: Klarman worried about political divide
« Reply #42 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?     

wachtwoord

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Re: Klarman worried about political divide
« Reply #43 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 ...
"Beware of he who would deny you access to information, for in his heart he dreams himself your master"

Gregmal

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Re: Klarman worried about political divide
« Reply #44 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!"...

johnny

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Re: Klarman worried about political divide
« Reply #45 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.

LC

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Re: Klarman worried about political divide
« Reply #46 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.
« Last Edit: January 22, 2019, 04:47:43 PM by LC »
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Cigarbutt

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Re: Klarman worried about political divide
« Reply #47 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.

Gregmal

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Re: Klarman worried about political divide
« Reply #48 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!!!!

johnny

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Re: Klarman worried about political divide
« Reply #49 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
Ikeís 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 Ikeís tax bracket, he paid taxes at the capital gains rate of 25 percent.
« Last Edit: January 22, 2019, 04:53:35 PM by johnny »