simplefish

With all due respect...are you trolling, or did you not read the comment you're replying to?

The original comment was, basically, an assertion that oil a globally traded commodity where prices are set for the entire market, and the price paid for any given barrel is the current market price, which will be precisely the same for all market participants (not counting the impact of taxes, subsidies, and differences in regulatory climate. (Is this true? Hint: The answer is "yes".)

Not only did your comment and links not actually disprove this assertion (not surprising, given that it's rather obviously true), but nothing you said even really disagreed with it, which leads me to believe you're not even a troll, just clueless.

Every single example you gave could well lead to lower oil prices for both American and Swedish consumers; none of them could plausibly lead to lower oil prices for American consumers but higher ones for Swedish consumers. Want to play again?

Buffet made his fortune by, among other things, exploiting the tax code to the limit. Nowadays, of course, the Sage of Omaha is happy to back higher taxes...that won't apply to him and his fortune.

Alternate headline: "Incredibly rich man has no problem backing rules to stop other people from becoming rich." And that's his right. But you'll pardon me if I don't find his actions particularly laudable.

(Now, if he wanted to donate a portion of his wealth to the Treasury based on applying the new tax rules retroactively...well now, THAT would be impressive. And he's even donating most of his wealth - to private charities. Apparently he doesn't want the government spending his money, just yours and mine. How "selfless".)

Warning: It's by Mark Zandi. Zandi is a hack and a mouthpiece for the ratings agencies.

For one example among many, see this link: http://www.ritholtz.com/blog/2010/09/zandi/

More seriously, the link is just a summary of what Zandi's model predicted the recent stimulus would do. It's worth noting that:

1) Pretty much every other economist on the left and right disagree with him. On the right they think all his multipliers are too high, and even on the left they think the way he ranked them is bizarre. He reckons one of the best tax cuts is a lump sum refund - despite copious theoretical and empirical backing for the proposition that it's actually one of the worst (because it's most likely to trigger Ricardian Equivalency).

2) The actual results of the stimulus are starting to become clear, and they disagree with him too, both in terms of overall magnitude and, in particular, his completely batshit rankings. He thinks aid to state governments is one of the worst ways of spending cash, but infrastructure spending is quite good. In reality the aid to state governments was one of the most effective line items, while the infrastructure spending was a black hole in terms of job creation.

My advice is to go hunt up an actual respected economist (Romer or Barro are both great on this area) and read what they have to say. Zandi is neither respected nor, at the risk of being cruel, an economist.

A common mistake is to conflate hunter gatherer societies with the primitive agricultural societies that came after them.

Hunter gatherers were happy, healthy, and relatively long lived[1]. Unfortunately, they faced very sharp resource constraints - if you travel around gathering nuts and berries you need a lot of land for a pretty small tribe. Still, it wasn't a bad life.

But for whatever reason, some hunter gatherers developed the secret of agriculture. This changed everything - it was so phenomenally productive that for the first time there was a surplus. One person could produce enough food for himself and have some left over. This allowed the creation of an elite (priests, beauracrats, soldiers, scientists) who were not engaged in food production. Unfortunately, it came at a cost: A vastly shortly and unhappier life for pretty much everyone, but especially the non-elite. Let me reiterate: Being a peasant is just about the worst possible existence we have managed to come up with.

Modern society has, more or less, only brought adult mortality back up to hunter gatherer levels. (Of course, it's done wonders for child mortality, which was pretty terrible under both hunter gatherer and primitive agriculture.)

What the original post is pining for is a return to the hunter gatherer societies, without any specialization. Life expectancy would be MUCH higher than 30 in that scenario. Of course, there's probably only room on this planet for about 0.2% of the current population. Something tells me the 99.8% wouldn't be too happy about any attempts in that direction. :)

[1]: Life expectancy data is hard to come by for obvious reasons, but it's seems that for modern hunter gatherers you're looking about 50 years. That's a little misleading, because only about 2/3rds of children made it to 15; of the 15 year olds about 4/5ths made it to 45; of the 45 year olds, mean remaining lifespan was around 20 years. In other words, if you survive childhood, you're likely to see, at least, your 60s, and you've got a decent chance of seeing 80. That's radically different than what we think primitive life was like, because we're thinking of privative agriculture, which was entirely different.

I shall write this to the author, even though you are not he:

1) You have divided the universe of possible desires into a short list of "needs" and "wants". Good for you. But the essence of (true, classical) liberalism is the recognition that everyone has the right to their own list of needs and wants. I am not you; nor is anyone else. I am allowed to have different marginal utility curves for time, leisure, and consumer goods. Society needs to work for us all, not just your personal aesthetic ideal.

2) More generally, there are no absolutes. You try to turn to an imagined, mythical golden era. "If humans managed to do without [...] I can also." This is incoherent. What does it mean to be human? We are plains apes who have figured out a few tricks. In our time we've managed to "do without" pretty much everything, including clean water and nutritious food. And as for a "place to sleep", we've lived in mud huts, igloos, under bushes, in hovels, tents, wagons...and also penthouses, palaces, and six bedroom McMansions. Comfort has value. More to some of us; less to others.

3) You also seem to struggle with logic. There is a LOT of logic to having a large house and only intensively using a small part: Space is not a scarce resource, but the flexibility of having a lot of space is nice. Do you purposefully buy the smallest hard drive you can? After all, I'm sure you only access a small fraction of that 1TB hard drive on any given day... There's also a lot of logic to heating an entire house; it's simple and easy, and heat is cheap. Really, the median family in the US does not have to slave all day to pay their heating bill. Nor to purchase their car; you do not work anything remotely LIKE 8 hours a day to pay for your car. How about a few minutes?

4) The lawn mower example is so absurd as to deserve a point all on its own: This is an already solved problem. It's called a "lawn service". They're quite popular, you should look into it.

5) You decry people spending money in order to efficiently wash their clothes. You then turn, without pause, to decry a lack of efficiency. And then, to cap it off, to attack specialization, the ONE MOST IMPORTANT increase in efficiency we as a species have yet invented. Words fail me; I simply cannot grapple with the magnitude of cognitive dissonance these sentences have egendered in me except to ask: Is this some sort of joke? Are you trolling? Because if so, you win.

6) Even so, your entire rant about specialization has been said far better by a far better human than you: "A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects." Who here doesn't feel their heart stir upon reading that? And I've spent more than a few hours working my way through that list. And yet...

...and yet the great RAH is wrong. A society without specialization is a tribe of hunter gatherers. If you want anything more - be it material goods, services, or even our modern morality - then you need specialization. You get to pick one: A primitive hunter gatherer society, or specialization. If you are not personally gathering all the food you eat and crafting all the clothing and tools you use, then you have specialization. And if you are doing that, then you will eat nuts and berries, wear furs, and have no tools. Full stop. There are no other options.

7) You have a point buried under all the mistakes. Don't be defined by one of your activities, even if it happens to be the only one you make any money at. Have some idea of who you are as a person, and live that as much as you can, in as many aspects of your life as you can. It's equally stupid to have no life outside of your job as it is to work at a job you hate so that you can do what you really like outside of it. Strive to be a whole human being. Great idea!

...but get over the ridiculous ideas about specialization and efficiency. They have nothing to do with your core point, and they're naively wrong. People have unlimited needs and wants, and any given person is going to spend their resources in a way different from yours. That's what being a human is all about; any effort to stamp that out leads to the same insect-like existence that you (and RAH) were complaining about with regards to specialization.

I think your reply is cut off. :)

Anyhow, to the best of my knowledge, the best study on the subject is summarized in this graph: http://goo.gl/tmywx

What that shows is that no tax system has a significant impact on Gini. Switching from the most progressive tax system in the study (the US one) to the least (the UK one) would result in a change of Gini of around 0.02. If you rank OECD members by Gini coefficients, such a large change in taxation wouldn't even change the ranking; the US would remain at 4th most unequal. As such, I think it's fair to say that we can tinker with the tax system without fear of victimizing the poorest off. (And, also, that if we want to help the poorest off, we need to pull some lever other than tax policy.)

It's worth noting that the UK, France, Germany, Sweden, Australia, and almost every other western democracy finance very large chunks of their governmental expenditures via high consumption taxes. Most people agree that not only are they not hellholes with the poor and middle class starving on the streets, but they're actually nicer places to be poor than the US. So while you're right that this would be a shift to a less progressive tax system, it's also clear that this isn't the whole story.

In fact, the progessivity of the tax system has very little impact on inequality. You can have a highly progressive system (like the US, which by some measures has the most progressive tax system of any first world country), or a relatively regressive system like most of Europe, and it just doesn't matter. In which case, anything to simplify the tax system in the US is probably a good idea.

Further, the "rich" in your example are able to easily evade most taxes. Consumption taxes - specifically if implemented as a VAT, as in Europe - are effectively impossible to dodge, even if you're very rich. You may not pay a lot as a percentage of your total income, but you will pay. The (nominally) highly progressive system in the US is unable to guarantee that.

(And in any case, as recursive pointed out, the prebate check would make the system arbitrarily progressive, undermining your entire complaint. Although personally, I'd favour just implementing a straight up European-style regressive VAT, and if you want to redistribute income, do it via welfare payments; that's what they're there for. And unlike tinkering with the tax code, they actually are capable of effecting significant redistribution. Your entire argument seems predicated on the idea that the US tax code has something to offer that the typical European tax code does not. Will all due respect, I question this. The US tax code is a disaster, and US prosperity has been achieved in spite of it, not because of it.)

Correct me if I'm wrong, but... Backbone is great, but it's also just 600 lines of code aimed at addressing the things every single web app needs, right?

A complex web app, pretty much by definition is going to need some features that other web apps aren't going to need, not so? And those features are, according to the stated goals of Backbone, not going to be found in the core, right? (In fact, I seem to recall people asking for features their particular complex web app needed, and being told that stuff didn't belong in Backbone core...)

Boris' seems to be re-stating Backbones' mission statement, which I don't see being a knock on Backbone at all. And I'm really not sure what a list of people using Backbone is meant to prove. Boris is saying that any of those people using Backbone for complex apps will have to extend it a bit - which is one reason Backbone is made to be so easily extendable. Is that wrong?

1) Actually, no. We tax transactions. Your customer is buying a service from you, and we tax that. When you hire an employee, you are purchasing his labour, and we tax that.

But if you pay yourself a dividend, there is no transaction. If you own an asset, and it goes up in value, there is no transaction. (Capital gains tax is not on the transaction of selling your stock, but on the change in value of the stock; it's only realized at sale. Some countries do charge a transaction tax on stock sales, usually called a stamp duty, which is entirely different.)

More generally, we tax things when they change ownership. (We even tax things when you give them away!) In the case of a small business owner, everything in the business is owned by you. It's yours. You own the business, the business owns the couch, therefore, you own the couch. Ownership is inherently transitive. Even in a large business, everything is owned by the stockholders. Businesses are not people. (Note: At this point, people usually bring up Citizens United, despite the fact that the decision does not claim that businesses are people. Try reading it; it's actually pretty interesting.)

Thought experiment: Can we tax you on the rent you are implicitly paying yourself for living in your own house? Why or why not? And if we can't tax you on the value of the rent your house is providing you, why can we tax you on the value of the things your business is providing you? (Well, obviously, we can do it because the law says we can. But morally, the difference seems remarkably theoretical.)

Further thought experiment: Should you be taxed if you hire yourself as an employee? I'm actually torn on this one. Logically, the answer seems like it should be "no"; it doesn't matter if you hire yourself as an employee for a salary, or work for "free" in exchange for equity. Intuitively, it feels to me like it's okay to tax an owner on his salary but not his dividends. shrug Guess I'm not that logical. :)

2) Yglesias' post is suggestive, but doesn't really prove anything. As I said, there's a LOT of research on this point, and saying, as he does, "Germany added a capital gains tax, and their savings rate didn't immediatly change" does not really tell us as much as he thinks. Germany has also been noted for extremely low wage growth recently. Clearly the result of underinvestment caused by their pernicious capital gains tax, right? I doubt it, but it's no more implausible than Yglesias' argument.

Actually, it's very uncommon. Keep in mind, we have IRS data that shows the average rate paid by different groups, we know that most of the 1% is paying MUCH higher tax rates than the 99%. And should be make public policy based on the extremely rare edge cases, or the overwhelmingly common case?

Also, this debate really depends what you mean by "millionaires/billionaires". And "taxes". And "tax rates". And "working folk". Being a billionaire is a measure of wealth; your tax bracket is based on income in a single year. Are we talking about marginal rates or average rates? Federal income taxes? All federal taxes? All taxes? How do we impute the corporate income tax (knowing, as we do, that it is paid by both employees and investors)? How do we impute the corporate half of the payroll tax (ditto)? How should we handle cases where someone is in the "1%" for a single year due to the sale of a single large asset they've been working on for decades (family farm, small business, IPO, or the like)? Does it truly make sense that someone who makes $50k/year for 10 years, then sells his start-up for $100m should be in the same tax bracket in that 11th year as an investment banker who makes $100m/year every single year?

This is not an area with easy answers, and the tax code looks the way it does due to a long series of hard-fought struggles and difficult compromises. It's easy to look at Romney at say "he paid 14%", but it's less clear what rate is "right". Capital gains is fundamentally not normal income, and there's no reason it should be taxed at any given rate, much less whatever rate normal income would be taxed at. Some very socialist and egalitarian places have no capital gains tax at all. :)

Edit: My initial post had some silly errors of fact. Mike Ash was quite polite in pointing them out. :) Thanks.

Just to spell it out - there are three (main) reasons why we would want capital gains taxed at a lower headline rate:

1) Capital gains are already taxed at the corporate level. People seem to intuitively understand how this works at the dividend level (dividends are paid with post tax dollars), but if you do the math, it works precisely the same with capital gains. (Please note: Tax incidence is complicated. Not all the corporate tax is borne by investors. Especially in small open economies like the UK, it's actually mostly paid by the workers via lower salaries.)

2) Speaking of which...capital gains are a tax on investment. Investment leads directly to increased labour productivity. Productivity leads directly to higher salaries. If we want employees to be paid a lot, we want, as a matter of public policy, to encourage investment. At this point the observant will pipe up "wait, are you saying it's good for the workers if we tax worker salaries more heavily than capital gains income?!" Yes, that's exactly what I'm saying, and it's supported by a rich body of empirical and theoretical backing. Heavy capital gains taxes are the precise policy you'd implement if you wanted to keep labour poor and unproductive. (If it helps, consider that investment is saving - it's an accounting identity - and the US has a big problem with low savings rates, which in turn means that they struggle to get enough investment without borrowing from overseas lenders. See the problem?)

3) Finally, investment income isn't just already taxed at the corporate level - it's also already taxed at the personal level too. Imagine two people, Spendthrift Sally and Frugal Frank. Both work at jobs making $200k/year, after tax. Sally spends all her income on consumption, and saves $0. Frank spends 75% of his income on consumption, and saves $50k/year by purchasing stocks which go up in value by 5% per year. After twenty years, Frank has spent $1m total on stocks now worth a cool $1.7m (clearly he follows the buy-and-hold school of investing). He is retiring, and wants to sell them all to re-invest in safer bonds. What tax rate do you think is fair? He made those investments with after-tax dollars. Do we now tax him again on the result of those investments? Don't we want people to behave like Frank, instead of Sally? And if we charge him 15% on his capital gains, he'd end up paying over $100k MORE total tax than Sally. Does Frank, who has scrimped and saved his whole life, really deserve to pay more taxes than Sally, who never saved a penny?

(The analysis becomes more complicated if Frank received the stock as compensation, instead of purchasing it with his salary. But keep in mind that he's still (1) taxed on that initial compensation and (2) is deferring consumption; a responsible choice which we as a society probably want to encourage.)

There's actually some serious questions about that. In interviews, Bosanke has claimed to be paying a 35.8% tax rate. She's been a little coy about her income, but in one interview she claimed to only make $60,000 a year.

Anyone with even a passing familiarity with the US tax code will quickly understand that this is not possible. Seriously. So we know that at least some of what she's claimed in wrong. And since Bosanke won't release her tax returns, that's really as far as we can go.

In short, the "Buffet secretary" talking point really has no evidentiary value for either side. We simply have no idea what she makes or what she pays; all we know is what she's publically claimed is wrong.

I have no idea if you should, but in the US, you probably will. Depending on what year you inherited the money, you'll have paid up to 55%.