Join the Online Tax Revolt

Started by loki, April 05, 2010, 09:54:26 PM

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DarklingAlice

Asuras, you seem to be repeatedly citing this 25-30% "hidden tax" figure. However you are very vague on it's source. What does this tax, specifically, consist of? What is the source of your information? Maybe you have mentioned, and I just missed it. But if you are going to keep insisting on this figure some data would be nice.
For every complex problem there is a solution that is simple, elegant, and wrong.


Asuras

US GDP is about $15 trillion, total government revenue (i.e., taxes) is about $5 trillion (from here)...5 divided by 15 is around...

The reason I say these taxes are "hidden" (and I'm not saying that conspiratorially) is because they are reflected downstream in the supply chain. It's simple: a tax raises the cost of something. An income tax raises the cost of labor. If the cost of an input (labor) goes up, businesses will raise the price of what they sell. You won't see it, but that difference in price is the hidden income tax.

Jude

I always see the argument put forth that if taxes on businesses went up, they would raise their prices correspondingly to reflect that increased tax, thereby passing on the tax to the consumer.  It makes sense on a very guttural level, but I'm not sure it's actually valid.  Corporations do very careful research to determine what they can get away with when it comes to pricing their products, if they could raise the price and keep their sales consistent, they would even without the tax being in the picture.

When a new tax is introduced, would they like to increase prices and pass it along the consumer?  Yes.  Is it always viable to do so?  No.  Sometimes doing so would mean a cut in the percentage of units they can move, and thus an overall drop in profitability caused by a price increase.  They use market research and mathematical modeling to find the "sweet spot" between supply and demand so that they can charge the optimum amount to lure in the perfect amount of people; too many customers priced out means fewer sales and too cheap of a product means too little profit per item sold.

There's a decent chance that an increase of taxes wouldn't effect the prices on commodities and entertainment products at all (along with everything else it's priced in the favor of business), and that a tax decrease wouldn't lead to falling prices.

Everytime someone proposes doing something to help businesses be more profitable because it's going to somehow create jobs I roll my eyes.  Could they use that increased profitability to invest new infrastructure and hire more employees?  Yes.  They could also turn it around and pay a percentage of it in bonuses, dividends, and raise wages of their executives--or use it in other dubious means.  Sometimes more profit just means more profit.

Asuras

I'm not arguing that the entire tax is passed onto the consumer - the deadweight loss of a tax is borne by both producer and consumer. But the part that's borne by the producer is still a hidden tax that the shareholders pay through reduced dividends and equity.

Vekseid

Quote from: Asuras on April 23, 2010, 01:37:53 AM
What "nonproductive classes?" What "protection of wealth?" What does this have to do with instability?

Pension class, financial class, celebrity class, etc. People who either produce nothing or nearly nothing compared to the amount of income they 'earn', so their wealth is artificially propped up by the remainder of society.

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Is there ever a "guaranteed trivial outcome" in politics?

Sure - a lot of political measures are enacted or avoided based on the amount of perceived resistance they will generate.

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I don't understand - do you resell or don't you?

I don't, but I'm still required to charge sales tax. Not sure what's difficult to understand about that, beyond 'that sucks'.

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You are protected for more than real estate. If there were a national property tax, I would:

A) Move back to Texas, where land is fucking cheap.
B) My business would also move back to fucking Texas.
C) We'd pay virtually nothing in property taxes since office space costs half as much
D) Meanwhile, the tax burden would be passed on to people who purchase real estate-intensive items...food would be a good example.
E) Luxury goods like...really big fancy TVs wouldn't be so affected since more of the cost goes to engineering, which is not real estate-intensive.

A, B & C: So? That's not going to be true for everyone. That is actually part of the intent, somewhat. Combine with a suitable tariff and externality-based exemptions and penalties, and people are paying directly for what they do and receive in terms of benefits.
D & E: A major part of the idea is to directly tack externality costs onto the property used, both pro and con - credits for garden areas, farms, areas left to nature, penalties for environmental costs. We need to rethink our agricultural system anyway.

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Hence the regressiveness of a property tax.

Not sure why you're even making the argument considering Fairtax openly admits that it is in fact regressive and intends to address it in much the same manner. The reason I argue for property tax instead is it prevents evasion issues and the justification for providing things like homestead exemptions, etc. are much more straightforward and logical than promoting the welfare class still further.

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I don't really care about the size/structure of the prebate - that can be changed to make the tax more or less progressive. I agree that the FairTax programme that the nuts in Congress suggested raises the tax burden on the middle class and that isn't justified.

To me it comes across as simple welfare promotion and active class division.

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Right, but I'll say it again:

You may not be paying these taxes yourself, but in the costs of the goods and services you purchase, you are paying these taxes indirectly. So, yeah, maybe it's 5% for you personally, but the other 25% is hidden in the cost that you pay out to employees and in your personal expenses.

I think that if/when the day comes that I'd be paying a ~30+% tax burden to an employee I'd be doing pretty well for myself.

Regarding goods and services - right now those are all based off of an income - expenditures model, minus the state sales tax. So a random Hollywood actor or football star pays their ~40%, but given my consumption of the goods and services they produce (effectively zero) - I'm not paying 30% for those. The same goes for most high-markup items, come to think of it.

Quote from: Asuras on April 23, 2010, 11:25:57 PM
I'm not arguing that the entire tax is passed onto the consumer - the deadweight loss of a tax is borne by both producer and consumer. But the part that's borne by the producer is still a hidden tax that the shareholders pay through reduced dividends and equity.

That's only going to be fully true if the company and consumer in question have no commiserate gain from the tax they spend, which to a degree is somewhat the point of having taxes in the first place. The US government is a giant insurance company with an army.

Asuras

Quote from: VekseidPension class, financial class, celebrity class, etc. People who either produce nothing or nearly nothing compared to the amount of income they 'earn', so their wealth is artificially propped up by the remainder of society.

By "pension class" I'll assume you're talking about trust fund babies and not retirees, who I figure probably deserve retirement...fine.

With celebrities...if they didn't produce millions of dollars of value for customers, film companies, record companies, whoever - they'd hire someone else. There is no shortage of people wanting to be actors or rock stars. So what I think you mean is not that they produce nothing, but that their wealth is serendipitous. Fine.

As someone who works in finance and just got home from a 14-hour day, I think that our usefulness to society is somewhat misunderstood.

Quote from: VekseidSure - a lot of political measures are enacted or avoided based on the amount of perceived resistance they will generate.

And I would argue that a 30% increase in price on something consumed by every voter controlled by a government-sponsored monopoly would provide such provocation.

Quote from: VekseidI don't, but I'm still required to charge sales tax. Not sure what's difficult to understand about that, beyond 'that sucks'.

Because if you resold you could use reseller certificates to get out of the sales tax. Otherwise I don't understand your complaint. If you're the end user and you can't be bothered to resell it, then yeah - "that sucks."

Quote from: Vekseid

A, B & C: So? That's not going to be true for everyone. That is actually part of the intent, somewhat. Combine with a suitable tariff and externality-based exemptions and penalties, and people are paying directly for what they do and receive in terms of benefits.

D & E: A major part of the idea is to directly tack externality costs onto the property used, both pro and con - credits for garden areas, farms, areas left to nature, penalties for environmental costs. We need to rethink our agricultural system anyway.

Sure - the goal of fees and subsidies is to penalize and compensate externalities. Excellent principle. Let Congress get a hold of it and you have an insanely complicated tax code full of loopholes for anyone who can buy a legislator. Do you have prebates for people with low incomes? Remember that these property taxes will be passed onto them through higher rents.

Quote from: VekseidNot sure why you're even making the argument considering Fairtax openly admits that it is in fact regressive and intends to address it in much the same manner. The reason I argue for property tax instead is it prevents evasion issues and the justification for providing things like homestead exemptions, etc. are much more straightforward and logical than promoting the welfare class still further.

Whereas you'll have a miasma of subsidies for farmers and whoever else to make your tax less regressive. The sales tax actually reflects what people purchase.

And I don't know where you get this notion that it "prevents evasion issues" - property appraisal is a crapshoot. Ask any realtor.

Quote from: Vekseid
To me it comes across as simple welfare promotion and active class division.

And the alternative is...what? This is an unavoidable consequence of making a tax more progressive.

Quote from: Vekseid
That's only going to be fully true if the company and consumer in question have no commiserate gain from the tax they spend, which to a degree is somewhat the point of having taxes in the first place. The US government is a giant insurance company with an army.

Yes, and you miss the point entirely...the deadweight loss is the economic cost of the tax alone, obviously there is some intended benefit on the other side. The matter is to minimize those economic costs and arrive at an equitable distribution of the burden.

Vekseid

Quote from: Asuras on April 24, 2010, 12:42:42 AM
By "pension class" I'll assume you're talking about trust fund babies and not retirees, who I figure probably deserve retirement...fine.

Both, really. Whether or not they deserve retirement is a different facet than the fact that they are not producing, yet still consuming resources.

My main concern with the retirees as a class is their relative size versus the workforce. As the average lifespan creeps towards infinity, if the labor time devoted to maintaining them remains constant, there will be a problem unless we move to a fully automated economy (which brings us back to the 'whoever starts with the best land wins' problem).

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With celebrities...if they didn't produce millions of dollars of value for customers, film companies, record companies, whoever - they'd hire someone else. There is no shortage of people wanting to be actors or rock stars. So what I think you mean is not that they produce nothing, but that their wealth is serendipitous. Fine.

As someone who works in finance and just got home from a 14-hour day, I think that our usefulness to society is somewhat misunderstood.

I'm primarily referring to people like John Paulson and other sorts who profited from actually helping to engineer the last economic collapse. Even still, that's no justification for the usury of the modern banking system. It's not meant to be for buying a company, selling off its assets and letting the husk fall into bankruptcy while getting off the hook for intentional mismanagement and to hide behind 'tort reform' to protect from legal ramifications.

To whit, the purpose of the financial sector is to be useful to society and not make use of it.

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Because if you resold you could use reseller certificates to get out of the sales tax. Otherwise I don't understand your complaint. If you're the end user and you can't be bothered to resell it, then yeah - "that sucks."

I'm still making business use of many of said goods, however. But it moves from being an expense to a direct tax liability in this case.

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Sure - the goal of fees and subsidies is to penalize and compensate externalities. Excellent principle. Let Congress get a hold of it and you have an insanely complicated tax code full of loopholes for anyone who can buy a legislator. Do you have prebates for people with low incomes? Remember that these property taxes will be passed onto them through higher rents.

Not sure what the point of that is - this is all indulging in fantasy until we can quash the corruption inherent in Congress in the first place. In the case of rent, the intent would be to heavily incentivize rent-to-own programs. Nothing promotes stability quite like land ownership.

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Whereas you'll have a miasma of subsidies for farmers and whoever else to make your tax less regressive. The sales tax actually reflects what people purchase.

And I don't know where you get this notion that it "prevents evasion issues" - property appraisal is a crapshoot. Ask any realtor.

At least it requires a third party as-is and has an industry already developed around that, and is generally normalized to actual sales going on at the time.

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And the alternative is...what? This is an unavoidable consequence of making a tax more progressive.

There are plenty of ways to go about it without handing out potentially inflationary cheques for no productive labor. Flat income tax starting at $50k (ie, 0% below 50k) + some exemption from children comes to mind. Progressive != rewarding people whether or not they work. There is also a difference between providing needed goods and services for the poor, and just giving them the flat cash value.

Not that using inflation as a part of 'revenue' is in and of itself a diabolical horror to be avoided at all costs, just that for the United States, it is more politically risky. But everyone should be responsible for some minimum level of production until the required level of human participation in the labor market is in fact zero. And from a personal perspective, I'm more concerned about the existential risk that sort of development represents (whomever starts with the best wins and even if they mean well pray they don't fuck up), so I consider policy accordingly.

Asuras

Quote from: VekseidMy main concern with the retirees as a class is their relative size versus the workforce. As the average lifespan creeps towards infinity, if the labor time devoted to maintaining them remains constant, there will be a problem unless we move to a fully automated economy (which brings us back to the 'whoever starts with the best land wins' problem).

I will agree with you that seems quite odd that someone can accumulate enough wealth that they can literally stop working forever. It seems particularly egregious if the beneficiary had nothing to do with generating that wealth, and this generates and perpetuates inequality without any incentives for being productive. And I agree that sales taxes (or property taxes for that matter) do not address that problem.

Quote from: VekseidI'm primarily referring to people like John Paulson and other sorts who profited from actually helping to engineer the last economic collapse.

If you mean outright fraudsters...okay, yeah, they're counterproductive, but I dispute that the class of fraudsters is the same as the financial class.

Quote from: VekseidEven still, that's no justification for the usury of the modern banking system. It's not meant to be for buying a company, selling off its assets and letting the husk fall into bankruptcy while getting off the hook for intentional mismanagement and to hide behind 'tort reform' to protect from legal ramifications.

Typically if a firm does this - buys out a company and dismantles it - it's because that company was unprofitable to begin with. Otherwise they'd keep reaping in the profits that the company makes.

Quote from: VekseidNot sure what the point of that is - this is all indulging in fantasy until we can quash the corruption inherent in Congress in the first place. In the case of rent, the intent would be to heavily incentivize rent-to-own programs. Nothing promotes stability quite like land ownership.

My point here is that all these programs intended to make the property tax less regressive end up A) complicating the tax code, which benefits anyone with a lobbyist and B) pretty much end up emulating the sales tax.

Quote from: VekseidAt least it requires a third party as-is and has an industry already developed around that, and is generally normalized to actual sales going on at the time.

Sure, but I'm not convinced that this is more transparent and less prone to abuse and avoidance than a sales tax. You can get the appraisal fudged in at least as many ways as you can hide sales receipts.

Quote from: VekseidThere are plenty of ways to go about it without handing out potentially inflationary cheques for no productive labor.

If the government were printing out cash to people, then yeah, that would be inflationary - but almost certainly this would be just like we do now with welfare payments (and any other spending) which is made out of tax receipts and borrowing. That wouldn't be inflationary.

Quote from: VekseidThere is also a difference between providing needed goods and services for the poor, and just giving them the flat cash value.

Right, but we're talking about more than just poverty relief, we're talking about making the tax progressive for working class and middle class people. For that I'm not sure that there's an alternative to cash.

Quote from: VekseidBut everyone should be responsible for some minimum level of production until the required level of human participation in the labor market is in fact zero. And from a personal perspective, I'm more concerned about the existential risk that sort of development represents (whomever starts with the best wins and even if they mean well pray they don't fuck up), so I consider policy accordingly.

I definitely like the principle - ironically none of these taxes - sales taxes, property taxes, or even income taxes and capital gains taxes - actually attack the issue that someone can accumulate enough wealth that they can live off the interest/dividends/capital gains indefinitely. The estate tax (which I really like) is almost the only one that does, but since it only applies when someone dies, it's still possible to have someone who can spend their entire life (or at least a substantial part of it) not working.

The only one that would do that would be a direct wealth tax - a tax that took some percentage of all assets. That would be a tax on savings. So that a trust fund baby with ten million dollars in the bank would lose a million in taxes each year just for having it there.

Zakharra


Quote from: Vekseid

   
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QuoteBut everyone should be responsible for some minimum level of production until the required level of human participation in the labor market is in fact zero. And from a personal perspective, I'm more concerned about the existential risk that sort of development represents (whomever starts with the best wins and even if they mean well pray they don't fuck up), so I consider policy accordingly.


I definitely like the principle - ironically none of these taxes - sales taxes, property taxes, or even income taxes and capital gains taxes - actually attack the issue that someone can accumulate enough wealth that they can live off the interest/dividends/capital gains indefinitely. The estate tax (which I really like) is almost the only one that does, but since it only applies when someone dies, it's still possible to have someone who can spend their entire life (or at least a substantial part of it) not working.

The only one that would do that would be a direct wealth tax - a tax that took some percentage of all assets. That would be a tax on savings. So that a trust fund baby with ten million dollars in the bank would lose a million in taxes each year just for having it there.


You are both assuming that the person isn't doing any actual work. They might have good stocks and accountants that take care of their money flow. The fact that a person can make enough money to live without having to do work for awhile, for years maybe, isn't a reason that person should be punished.

To have a tax on wealth per year would be prohibitive and punishing, especially if it is only applied to the 'wealthy'. Say that 'wealthy' starts at $150,000. By the 10% tax, that person looses $15,000 per year of their assets just because.  Assuming they make enough to earn that $15k back, they'd lose it again.

This is also assuming that income taxes are removed too. Add that in, the tax becomes even more of a burden.

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Vekseid

Quote from: Asuras on April 24, 2010, 12:24:48 PM
If you mean outright fraudsters...okay, yeah, they're counterproductive, but I dispute that the class of fraudsters is the same as the financial class.

While I realize that, I'd point out that the proliferation of fraud and things that should be fraud in the financial sector is beginning to taint the entire industry (again).

To put it more bluntly, is the money you make (here I'm using 'you' as a hypothetical lender in a typical financial situation and pretending that the agents of SauronMonsanto and co aren't a bigger problem) on the spread of a loan for a farmer to buy seeds, fertilizer, etc. more important than the farmer's ability to make food for thousands of people?

The financial industry is supposed to provide liquidity, smooth out chaos, etc. The idea behind it is great - but it's a service. It is not more important than agriculture or manufacturing, much less the rest of the economy combined as is nearly the case right now.

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My point here is that all these programs intended to make the property tax less regressive end up A) complicating the tax code, which benefits anyone with a lobbyist and B) pretty much end up emulating the sales tax.

Sure, but I'm not convinced that this is more transparent and less prone to abuse and avoidance than a sales tax. You can get the appraisal fudged in at least as many ways as you can hide sales receipts.

Not entirely. Eventually we're going to start using satellites to aid in apportioning land.

Then again you can do the same thing with currency by handling the tax at the transaction level itself, and controlling all or most transaction methods.

Or a combination (tax based on the distance involved in the transaction, etc).

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If the government were printing out cash to people, then yeah, that would be inflationary - but almost certainly this would be just like we do now with welfare payments (and any other spending) which is made out of tax receipts and borrowing. That wouldn't be inflationary.

The thing is you don't need to work for the prebate, and it doesn't in and of itself involve ending or reforming the current issues with welfare. So we'll be supporting even more non-laborers, meaning less gets produced - not what we want to happen (avoiding the discussion of producing better things which is really 'other thread' material).

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Right, but we're talking about more than just poverty relief, we're talking about making the tax progressive for working class and middle class people. For that I'm not sure that there's an alternative to cash.

Cash for cash earned I could stomach. Goal being to pull people out of poverty, not put a boot on their head when they start to make something.

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I definitely like the principle - ironically none of these taxes - sales taxes, property taxes, or even income taxes and capital gains taxes - actually attack the issue that someone can accumulate enough wealth that they can live off the interest/dividends/capital gains indefinitely. The estate tax (which I really like) is almost the only one that does, but since it only applies when someone dies, it's still possible to have someone who can spend their entire life (or at least a substantial part of it) not working.

The only one that would do that would be a direct wealth tax - a tax that took some percentage of all assets. That would be a tax on savings. So that a trust fund baby with ten million dollars in the bank would lose a million in taxes each year just for having it there.

Not sure why property taxes wouldn't be able to do that? That was sort of the point - provide a very comfortable homestead exemption - the needed property taxes to actually support the government apparatus as is would reshape the ownership map rather drastically. Give lots of breathing room even - let people take loads of time off. We're at something insane ridiculous now like 10% of the able-bodied labor force supports the whole damned population's basic needs and that number is only going down unless the kooks get their way.

On a wealth tax, I would give them the same earned income breaks the poor should get. Managing a lot of resources is a needed skill, after all.

Quote from: Zakharra on April 25, 2010, 11:47:54 PM
You are both assuming that the person isn't doing any actual work. They might have good stocks and accountants that take care of their money flow. The fact that a person can make enough money to live without having to do work for awhile, for years maybe, isn't a reason that person should be punished.

To have a tax on wealth per year would be prohibitive and punishing, especially if it is only applied to the 'wealthy'. Say that 'wealthy' starts at $150,000. By the 10% tax, that person looses $15,000 per year of their assets just because.  Assuming they make enough to earn that $15k back, they'd lose it again.

This is also assuming that income taxes are removed too. Add that in, the tax becomes even more of a burden.

You aren't even reading his argument. Not 'years'. Forever. $150k is such a trivially pointless amount of money in this scheme - no one who thinks a million dollars is a lot of money would be affected.

Asuras

Quote from: VekseidTo put it more bluntly, is the money you make (here I'm using 'you' as a hypothetical lender in a typical financial situation and pretending that the agents of SauronMonsanto and co aren't a bigger problem) on the spread of a loan for a farmer to buy seeds, fertilizer, etc. more important than the farmer's ability to make food for thousands of people?

Well, if the farmer needs a loan then (here comes the tautology) without the loan the food wouldn't exist either. So to a farmer that needs a loan to plant crops the financial sector is just as necessary as the seeds and fertilizer.

Quote from: VekseidThe financial industry is supposed to provide liquidity, smooth out chaos, etc. The idea behind it is great - but it's a service. It is not more important than agriculture or manufacturing, much less the rest of the economy combined as is nearly the case right now.

The way that I look at the financial sector (and naturally it is biased) is that it is the allocator of humanity's economic resources at the highest level, deciding which projects to invest in throughout the economy. That strikes me as of some importance.

Quote from: VekseidThe thing is you don't need to work for the prebate, and it doesn't in and of itself involve ending or reforming the current issues with welfare. So we'll be supporting even more non-laborers, meaning less gets produced - not what we want to happen (avoiding the discussion of producing better things which is really 'other thread' material).

Fine - I don't actually know what the structure of the prebate is but it should at a minimum be based on some kind of welfare-to-work program for its unemployed beneficiaries.

Quote from: VekseidNot sure why property taxes wouldn't be able to do that?

Property taxes are based on the appraisal of real property. Wealthy people have most of their wealth in things like stocks which aren't real property. I also think that they'd get out of the property taxes - these people who have a second house can certainly go without and take up a timeshare or something instead.

Quote from: ZakharraYou are both assuming that the person isn't doing any actual work. They might have good stocks and accountants that take care of their money flow. The fact that a person can make enough money to live without having to do work for awhile, for years maybe, isn't a reason that person should be punished.

(i'm often surprised how people treat "accounting" and "finance" as interchangeable...)

I don't think of this as "punishing" anyone. Society privileges people with wealth in order to reward them for their contributions. Someone who invents a better mousetrap deserves the privilege of spending ten years in luxury without lifting a finger. Fine.

If someone with "good stocks and accountants" takes a legitimate, active role in managing their assets, then I can abide it because they're contributing something. But there are plenty of trust fund babies who have perfectly "good stocks and accountants" who have absolutely no idea what a eurodollar is.

And yeah, I don't expect this to apply to someone earning $150K a year.

Vekseid

Quote from: Asuras on April 28, 2010, 11:11:06 PM
The way that I look at the financial sector (and naturally it is biased) is that it is the allocator of humanity's economic resources at the highest level, deciding which projects to invest in throughout the economy. That strikes me as of some importance.

Ultimately, it's a collection of applied algorithms, however you look at it.

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Fine - I don't actually know what the structure of the prebate is but it should at a minimum be based on some kind of welfare-to-work program for its unemployed beneficiaries.

It's a "You get $xk dollars depending on the size of your household."

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Property taxes are based on the appraisal of real property. Wealthy people have most of their wealth in things like stocks which aren't real property. I also think that they'd get out of the property taxes - these people who have a second house can certainly go without and take up a timeshare or something instead.

True, but I figure that the stock issue would be mitigated by the property tax in and of itself. At some point, no matter how much you implement a wealth tax, you're still dealing with people who have social capital in various forms and that's a lot harder to tax. "Please do what we say instead of what this person says 10% of the time..."


Asuras

Quote from: VekseidUltimately, it's a collection of applied algorithms, however you look at it.

That doesn't seem to distinguish finance from agriculture...every profession is an "algorithm" in some sense.

Quote from: VekseidTrue, but I figure that the stock issue would be mitigated by the property tax in and of itself. At some point, no matter how much you implement a wealth tax, you're still dealing with people who have social capital in various forms and that's a lot harder to tax. "Please do what we say instead of what this person says 10% of the time..."

Those property taxes would be passed on to any stockholder, rich or middle class, and more importantly if those taxes were heavy enough that they actually reduced the value of the stock year after year after earnings...that would essentially make it impossible to do business in this country.

Vekseid

Quote from: Asuras on April 29, 2010, 11:11:49 PM
That doesn't seem to distinguish finance from agriculture...every profession is an "algorithm" in some sense.

There are rather few jobs that require humans specifically in any conceivable future. However, the difference between having robots perform all agricultural work versus setting up a financial sector run entirely by computer network is the difference between a massive technological barrier and a massive political one.

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Those property taxes would be passed on to any stockholder, rich or middle class, and more importantly if those taxes were heavy enough that they actually reduced the value of the stock year after year after earnings...that would essentially make it impossible to do business in this country.

Which is why I'd want to make the homesteading rather generous. Wal Mart and McDonalds do not need to exist, but the services they provide do, at least for the next fifty years or so.

I won't deny that it's flawed, however.

Zakharra

QuoteI don't think of this as "punishing" anyone. Society privileges people with wealth in order to reward them for their contributions. Someone who invents a better mousetrap deserves the privilege of spending ten years in luxury without lifting a finger. Fine.

If someone with "good stocks and accountants" takes a legitimate, active role in managing their assets, then I can abide it because they're contributing something. But there are plenty of trust fund babies who have perfectly "good stocks and accountants" who have absolutely no idea what a eurodollar is.

And yeah, I don't expect this to apply to someone earning $150K a year.

So?  As lsong as the person has an active hand in their finances it's ok if they keep it, but as soon as it's passed on to someone that either doesn't know of care about it as long as there is money, it should be taxed at a higher rate? I'm sorry but that is seriously screwed up. 

That would penalize those who can afford to loaf for years.  It doesn't even have to be passed on. Say a person makes their fortune at a young age. About $10 million. They retire and live a comfortable life, yet they don't necessarily have to work again unless they want to.

To someone that makes $60k, $150k a year is a wealthy person. It's a subjective scale depending on your economic level. To someone that makes $150k, a person that makes $300k or more is wealthy, while they might not concider themselves wealthy.

QuoteYou aren't even reading his argument. Not 'years'. Forever. $150k is such a trivially pointless amount of money in this scheme - no one who thinks a million dollars is a lot of money would be affected.

I was responding you your post that seems to want people to be taxed on ALL of their wealth. $150k might be pointless to someone that has a net total of $10-100 millon or more, but it IS a hell of a lot to someone that makes $60k.  That's a net tax on all wealth, per year. Which can do a lot of harm.

Asuras

Quote from: VekseidHowever, the difference between having robots perform all agricultural work versus setting up a financial sector run entirely by computer network is the difference between a massive technological barrier and a massive political one.

Well, it's funny you put it that way because I actually work as a programmer for a quant fund which is essentially that: a network of computers which determine which stocks and equity derivatives to buy and sell.

But we work primarily in arbitrage which is a mathy, technical area of finance where there's a lot of hard data available which you can put into mathematical models and crunch. You make a computer do that and yeah, you have a money machine, at least until all the other firms do the same thing...and year after year the models get better and more complex, and yet even still things can go wrong. 2007-2008 was a terrible year for most quant funds which I think stands testament to how even the mathiest, most data-driven area of finance still can't be tamed by computation.

Other areas of finance are not so data-driven. For instance, a bank's decision to lend money to a company is a very complex decision that cannot (or at least has not) been reduced to a mathematical formula. The reason is that the variables involved are staggeringly complex; one has to understand the business's future prospects, its balance sheet, the entire company and its industry. It's not that banks wouldn't automate that process if they could - they'd be eager to do so, just as they've been eager to replace arbitrageurs with computers that do it with lightning speed - it's that the problem is hugely complex.

Quote from: ZakharraSo?  As lsong as the person has an active hand in their finances it's ok if they keep it, but as soon as it's passed on to someone that either doesn't know of care about it as long as there is money, it should be taxed at a higher rate? I'm sorry but that is seriously screwed up. 

How is that seriously screwed up? I see a clear difference between the person who earns the money and the person who simply has it and contributes nothing to society.

Quote from: ZakharraThat would penalize those who can afford to loaf for years.  It doesn't even have to be passed on. Say a person makes their fortune at a young age. About $10 million. They retire and live a comfortable life, yet they don't necessarily have to work again unless they want to.

That's exactly what I want - the kind of person who's able to earn $10 million at a young age should have an incentive to keep working. Those are the most talented and productive people in the world.

Quote from: ZakharraTo someone that makes $60k, $150k a year is a wealthy person. It's a subjective scale depending on your economic level. To someone that makes $150k, a person that makes $300k or more is wealthy, while they might not concider themselves wealthy.

I'm not so concerned with how much money a person earns as that there is an incentive to work. Someone who has a trust fund that gets him $60K a year without lifting a finger is as offensive to me as someone who has a trust fund that gives him a $1M a year.

RubySlippers

There is a fallacy that lowering taxes will reduce the money businesses ask for goods or services. Sadly they will still charge wht the market will bear and just pocket any extra money there no assurance that they will create jobs.

As for changing government unless the Tea Party manages to kick out lots of incumbents its a dead movement and voters sadly have limited attention spans if say in six months they may refocus on other issues and how many will vote out a legislater that is senior and bring money and pork back to THEIR districts. Few I would think.

Vekseid

Quote from: Asuras on April 30, 2010, 06:31:53 PM
Well, it's funny you put it that way because I actually work as a programmer for a quant fund which is essentially that: a network of computers which determine which stocks and equity derivatives to buy and sell.

But we work primarily in arbitrage which is a mathy, technical area of finance where there's a lot of hard data available which you can put into mathematical models and crunch. You make a computer do that and yeah, you have a money machine, at least until all the other firms do the same thing...and year after year the models get better and more complex, and yet even still things can go wrong. 2007-2008 was a terrible year for most quant funds which I think stands testament to how even the mathiest, most data-driven area of finance still can't be tamed by computation.

Would arbitrage even exist with proper normalization on a temporal database, imposed across the entire market?

It's one thing when there are many banks and many markets, but one bank, one transactional system, one inhumanly managed market.

Though I do find it funny that you mention that after coming home from a fourteen-hour red queen's race saying that the financial sector is underappreciated. : )

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Other areas of finance are not so data-driven. For instance, a bank's decision to lend money to a company is a very complex decision that cannot (or at least has not) been reduced to a mathematical formula. The reason is that the variables involved are staggeringly complex; one has to understand the business's future prospects, its balance sheet, the entire company and its industry. It's not that banks wouldn't automate that process if they could - they'd be eager to do so, just as they've been eager to replace arbitrageurs with computers that do it with lightning speed - it's that the problem is hugely complex.

The point being a full rewrite of our financial system. The numbers on a company's balance sheet, the trustworthiness of its individual decisionmakers, inventory, past performance, performance relative to its industries, etc. are all hard data. The lack of availability of a great deal of data is legal and political (not necessarily for reasons I disagree with). A fundamental understanding of the industry (including its future) is of course going to be a lot more difficult to model, but I'm not sure how much of a concern that will be if so much cruft is excised from the system by design.

In contrast the variables involved with agriculture are generally secondary to the necessity of physical action and having a keen awareness of the immediate environment (if only in large part because of computers doing the algebra in the first place).

Asuras

#69
Quote from: RubySlippersThere is a fallacy that lowering taxes will reduce the money businesses ask for goods or services. Sadly they will still charge wht the market will bear and just pocket any extra money there no assurance that they will create jobs.

Prices move. I paid $200 for a computer display three weeks ago that would have cost me $500 three years ago. The same forces which caused this change in price would cause prices to move if the tax structure changed.

Quote from: VekseidWould arbitrage even exist with proper normalization on a temporal database, imposed across the entire market?

The simplest example of arbitrage is spot FX arbitrage. This is when (for instance) $1 is trading for 100 yen in the US, but $1  is trading for 101 yen in Japan. Now trivially that form of arbitrage would be eliminated if you globally fixed the exchange rate, which I think is what you're saying.

But what is the "right price" for dollars in yen? What price would you fix to?

The arbitrageur doesn't really care - the arbitrage opportunity exists, which in this case is to buy dollars in the US and sell them in Japan - the price goes up in the US, and the price goes down in Japan until they're equal and the arbitrage opportunity is eliminated.

The reason that no one can come and say "It should be 100.5 yen" with certainty or "It should be 100.25 yen" with certainty is because as arbitrageurs make this trade, the price may rise faster in the US than it falls in Japan, or vice versa. No one can say for sure which because this is a reflection of the fundamental values of yen and dollars, which is (again) a hugely complex issue beyond the scope of arbitrage. Arbitrageurs let the market figure that one out.

Quote from: VekseidThe numbers on a company's balance sheet, the trustworthiness of its individual decisionmakers, inventory, past performance, performance relative to its industries, etc. are all hard data. The lack of availability of a great deal of data is legal and political (not necessarily for reasons I disagree with). A fundamental understanding of the industry (including its future) is of course going to be a lot more difficult to model, but I'm not sure how much of a concern that will be if so much cruft is excised from the system by design.

Much of this data is out there. There is an entire industry (Bloomberg, Thomson Reuters, etc) which has formed to provide it. Financial services companies thrive on information and have strong incentives to get it. Now if you think there still isn't enough information out there, fine - then the challenge is to increase transparency. As someone who works at a quant firm which crunches numbers, I'd love to have every receipt from every customer on earth on our machines.

But even if we had that data, we would not be able to come up with some definitive model for valuing a company's price or evaluating its creditworthiness. Maybe some day someone will, but at the moment, no. This remains an open question because projecting market conditions is, again, hugely complex. What we have now is decentralized, and this is a tremendous virtue. The firms with the best models - whether they're from computers or from people crunching balance sheets - win. If and when some firm can replace its people with a computer good enough to value a company, great, but if that happens it will happen organically.

The alternative you're suggesting is to place all central economic decision-making into the hands of a computer model which flatly doesn't exist. The financial system that we have, and that I support, strives toward improving its models organically; if we get there, we get there.

Vekseid

Quote from: Asuras on May 01, 2010, 11:46:48 AM
Prices move. I paid $200 for a computer display three weeks ago that would have cost me $500 three years ago. The same forces which caused this change in price would cause prices to move if the tax structure changed.

That's a horrifically bad example, considering the reason for the price collapse.

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The simplest example of arbitrage is spot FX arbitrage. This is when (for instance) $1 is trading for 100 yen in the US, but $1  is trading for 101 yen in Japan. Now trivially that form of arbitrage would be eliminated if you globally fixed the exchange rate, which I think is what you're saying.

Not quite. Just one market, rather than one in the US and one in Japan, etc. If the database was also normalized to temporal relations, interest rates would be automatically considered in every single trade, for example.

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The arbitrageur doesn't really care - the arbitrage opportunity exists, which in this case is to buy dollars in the US and sell them in Japan - the price goes up in the US, and the price goes down in Japan until they're equal and the arbitrage opportunity is eliminated.

The reason that no one can come and say "It should be 100.5 yen" with certainty or "It should be 100.25 yen" with certainty is because as arbitrageurs make this trade, the price may rise faster in the US than it falls in Japan, or vice versa. No one can say for sure which because this is a reflection of the fundamental values of yen and dollars, which is (again) a hugely complex issue beyond the scope of arbitrage. Arbitrageurs let the market figure that one out.

Right, but arbitrageurs are still basically human engines performing data correction.

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Much of this data is out there. There is an entire industry (Bloomberg, Thomson Reuters, etc) which has formed to provide it. Financial services companies thrive on information and have strong incentives to get it. Now if you think there still isn't enough information out there, fine - then the challenge is to increase transparency. As someone who works at a quant firm which crunches numbers, I'd love to have every receipt from every customer on earth on our machines.

But even if we had that data, we would not be able to come up with some definitive model for valuing a company's price or evaluating its creditworthiness. Maybe some day someone will, but at the moment, no. This remains an open question because projecting market conditions is, again, hugely complex. What we have now is decentralized, and this is a tremendous virtue. The firms with the best models - whether they're from computers or from people crunching balance sheets - win. If and when some firm can replace its people with a computer good enough to value a company, great, but if that happens it will happen organically.

I've been under the impression that a major reason for that complexity in the first place is politics. One of my professors talked about having to abandon an oil exploration project because calculating the tax/license/etc burden involved was computationally impossible.

Asuras

Quote from: VekseidNot quite. Just one market, rather than one in the US and one in Japan, etc. If the database was also normalized to temporal relations, interest rates would be automatically considered in every single trade, for example.

The global FX market is not exchange-traded because it actually requires the transfer of paper currency. (or at least the possibility that one could opt for paper currency) So A) you're talking about the creation of a single, global electronic market for all currency transactions and B) the elimination of physical currency, just to show the scope of the thing.

But you're right, doing that would eliminate the existence of arbitrage in the FX spot market (although practically speaking arbitrageurs in that market are so good at what they do and FX spot arbitrage is so stupid that no one makes money doing it, which is precisely why no one's succeeded in making a global forex exchange). In that case we move to the next level of arbitrage: triangular FX arbitrage.

In triangular FX arbitrage, let's say there are three currencies, yen, euros, and dollars. The spot yen/dollar rate is $1/100 yen; the spot yen/euro rate is 150 yen/1 euro. The spot euro/dollar rate should be $1.5/1 euro.

If the spot euro/dollar rate is not $1.5/1 euro, an arbitrageur will arbitrage the euro/dollar exchange rate. They will find euros and dollars and satisfy traders until the arbitrage opportunity is eliminated. So even on a single exchange you can have arbitrage opportunities.

Your exchange would have to find those dollars and euros because after all it can't simply make them out of thin air, because it's not the central bank for...any of these currencies. If your massive bank went finding traders, your bank is doing arbitrage. If it's not, then I will, and I still have a job then. :)

Quote from: VekseidI've been under the impression that a major reason for that complexity in the first place is politics. One of my professors talked about having to abandon an oil exploration project because calculating the tax/license/etc burden involved was computationally impossible.

Seems like a wonderful argument for simplifying the tax code...sayy...with FairTax :)

Vekseid

Quote from: Asuras on May 01, 2010, 02:35:42 PM
But you're right, doing that would eliminate the existence of arbitrage in the FX spot market (although practically speaking arbitrageurs in that market are so good at what they do and FX spot arbitrage is so stupid that no one makes money doing it, which is precisely why no one's succeeded in making a global forex exchange). In that case we move to the next level of arbitrage: triangular FX arbitrage.

...

The idea though is that there would be a central standard for currency (I would use energy, personally, though that's rather borderline on the 'tech required' argument) - like I said, politics.

Anyway, a more interesting tangent...

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B) the elimination of physical currency, just to show the scope of the thing.

...

Seems like a wonderful argument for simplifying the tax code...sayy...with FairTax :)

You don't need to eliminate physical currency when moving to an electronically based one, though yes, the scope is immense and would require replacing current currency with something where every individual 'penny' could be verified as genuine. One idea I had was to give currency units a half life, and have a floor for citizen accounts to guarantee a certain amount of savings as safe.

The result being a kind of economic hot potato.

Asuras

Quote from: VekseidThe idea though is that there would be a central standard for currency (I would use energy, personally, though that's rather borderline on the 'tech required' argument) - like I said, politics

The idea you've brought up is not a central standard but a central exchange...what does this have to do with energy?

Quote from: VekseidYou don't need to eliminate physical currency when moving to an electronically based one,

All exchanges of physical commodities (which practically includes currency) are based around the idea of a single point of delivery. The CME standardizes all futures contracts based on delivery to particular warehouses of that exchange in Chicago; same with the NYMEX and Euronext.

This is irrelevant for things that are electronically traded (god save the NASDAQ) but if it requires physical delivery (which is the case in FX) then there is market segmentation which makes the single exchange impossible because there will be a different practical price for physical delivery of currency X in Tokyo or London or Singapore or Dubai. Hence a different market hence arbitrage...

Vekseid

Quote from: Asuras on May 01, 2010, 05:04:49 PM
The idea you've brought up is not a central standard but a central exchange...what does this have to do with energy?

It has to include a central standard because of the three+ way arbitrages you were mentioning. It's not like I wasn't aware of that.

An energy production standard, rather than an Easter basket standard (gold/silver/coal/whatever), basically.

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All exchanges of physical commodities (which practically includes currency) are based around the idea of a single point of delivery. The CME standardizes all futures contracts based on delivery to particular warehouses of that exchange in Chicago; same with the NYMEX and Euronext.

This is irrelevant for things that are electronically traded (god save the NASDAQ) but if it requires physical delivery (which is the case in FX) then there is market segmentation which makes the single exchange impossible because there will be a different practical price for physical delivery of currency X in Tokyo or London or Singapore or Dubai. Hence a different market hence arbitrage...

You can have a physical chip store a unique key pair, lose it, and take a new one just fine. The nice thing about numbers is that there are an infinite number of them.