Author Topic: Re: Klarman worried about political divide  (Read 14580 times)

wachtwoord

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Re: Klarman worried about political divide
« Reply #70 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).
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Cardboard

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Re: Klarman worried about political divide
« Reply #71 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?

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Cardboard

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Re: Klarman worried about political divide
« Reply #72 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.

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Re: Klarman worried about political divide
« Reply #73 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?

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Ross812

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Re: Klarman worried about political divide
« Reply #74 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%
96% Fixed Income CDs, Muni, Corporate Debt - 4% SPX Options

LC

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Re: Klarman worried about political divide
« Reply #75 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.
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Tim Eriksen

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Re: Klarman worried about political divide
« Reply #76 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???   

wachtwoord

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Re: Klarman worried about political divide
« Reply #77 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.
"Beware of he who would deny you access to information, for in his heart he dreams himself your master"

LC

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Re: Klarman worried about political divide
« Reply #78 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.
« Last Edit: January 23, 2019, 02:50:22 PM by LC »
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LC

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Re: Klarman worried about political divide
« Reply #79 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.
« Last Edit: January 23, 2019, 02:57:04 PM by LC »
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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