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The Strange Rise of Bourgeois Bolshevism

Discussion in 'GatorNana's Too Hot for Swamp Gas' started by philnotfil, May 21, 2020.

  1. gatorpika

    gatorpika Premium Member

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    Your question is flawed, because the marginal rate has nothing to do with anything. The effective rate hasn't changed nearly as drastically as the marginal rate over that time. And the propensity to work has to do with lower income levels, not the wealthy that we are talking about here. So maybe make a better question.
     
  2. docspor

    docspor GC Hall of Fame

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    the marginal rate is critically important. You could design a tax system with the exact same effective rate but with diff marg rates & they would produce very diff results. Marginal _________ pretty much always matter. Fill in the blank
     
  3. gator_lawyer

    gator_lawyer Premium Member

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    1. If you do the surface-level analysis, this sounds quite plausible, but once you dig deeper, you realize this entire thought process is inherently contradictory.

    2. It is also not remotely realistic. No government could operate as what is basically a giant hippie commune. It's why all the socialist governments have turned into big-state bureaucracy. I've seen people call themselves "libertarian socialists" and laughed at it. To the extent there's a somewhat coherent ideology, it could only exist in a fantasy world.
     
  4. gatorpika

    gatorpika Premium Member

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    It does increase the range. So if you have a 35% flat rate then everyone is paying 35%. If you have a 50% marginal rate and a bunch of potential deductions that yield a 35% average effective rate, then some people are paying 30% while others pay 40%. But the marginal rate does very little to explain behavior/economics when the effective rate is less than half of that. That was my point.
     
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  5. nolancarey

    nolancarey GC Hall of Fame

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    Yes, but I tend to argue that what motivates people to want these comforts isn't wrapped in a singular package. We don't need to perpetuate the ideal of the rat race, inculcating new adherents to the Cult of Work, in order to enjoy the pleasures much of our society appreciates. The widowed mother of three who works 80 hours a week at different businesses or gigs is no less motivated to succeed than the billionaire who had a cool idea twenty years ago. But their definition of success is different. I will never know what motivates a billionaire to need more money, sometimes to the point of illegality--it is neither my motivation nor my mindset. I won't say "abolish billionaires" because I acknowledge that there are some who thrive and make the world better for others by striving for more.

    I also don't know what your data is to support that (sorry if this puts words in your mouth, just correct me if I've misstated your view and I'll own up) limitations on capitalism significantly limits innovation. It seems to me that there are always people who will be interested in finding new ways of doing things regardless of limitations. Many intelligent minds in Europe were forced to engage in theoretical physics rather than experimental physics because they were Jewish--this is just one example, but one that gives us Einstein for one thing.

    I think growth is something to which many may aspire, but not all. Growth can be harmful if it is the constant expectation. How many businesses base their models on consistent (sometimes exponential) growth, often using this for hiring and retention, and how realistic is it to expect unfettered growth? It may work for some, but I just don't think it's for everyone. We can be thankful for luxuries that the growth others have afforded us without having to share a similar drive. Or maybe we share a desire to grow as people, which I would acknowledge is usually a good thing--but it's not always the same thing. Sometimes we are growing our skills as parents, friends, hobbyists, business people, but sometimes we are just growing old. And that's OK too.
     
  6. gatorpika

    gatorpika Premium Member

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    We also have not discussed how in the 50s and 60s the U.S. was a net exporter with a huge labor demand while today we have a trade deficit, low growth, low labor demand and high wealth accumulation at the top. Even if the tax regimes were comparable, you couldn't compare the two because of the differing economic situations.
     
  7. nolancarey

    nolancarey GC Hall of Fame

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    My question was only as flawed as the post I was addressing. They specifically said marginal rates: "when marginal rates go too high then it discourages work/ income and total receipts go down". If my question was flawed then the premise I've quoted is as well. Was there any merit to the statement I've quoted? If so, what's the answer to my original question?
     
  8. docspor

    docspor GC Hall of Fame

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    nice post. Prices go up after hurricanes because of consumers not producers/ retailers & yet they are the ones that are immoral.

    I remember being in a New Orleans souvenir shop. Every damn trinket & gator head had a price tag. Next to the front door was a big box of umbrellas. They were the only thing in the store with no price tag. Clever
     
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  9. gatorpika

    gatorpika Premium Member

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    I agree that the rat race isn't for everyone. I would disagree that they don't benefit from it. Maybe someone is unskilled, poor and working two jobs but in this country can still receive some of the best medical care in the world. The insurance is subsidized. Could it be better? Sure, but if you compare us to someplace like India then we are far better off even if we do dedicate more of our lives than we want to keeping the machine rolling. In Africa large numbers of children die from malaria while here we don't have that problem because we spray those areas to kill mosquitos and have the medical technology to cure the child. If you want to live in an Amish village or hippie commune then that should be an option but if you want to participate in what we have then it takes effort.

    As far as billionaires, I think what motivates them isn't the money as much as "winning" or innovation. The money is a factor to some extent early on but after a while the motivation diminishes. What isn't said though is that they didn't get there on their own, but instead with capitalism. Steve Jobs didn't own Apple, he took it public to raise the resources necessary to build the company. The people who invested that capital are interested in the returns. While some may be billionaires, most are institutional investors who allocate capital based on gaining returns for fund holders and retirement accounts. These may be pensions or 401Ks. As the company did better, the people behind those funds did as well and the company expanded, providing more jobs. This isn't just a one person gets rich and nobody else benefits thing.

    The example of Einstein is an interesting one. All those intelligent minds in Europe lived in Europe with access to top notch education and the resources for academic pursuits. By comparison how many of the great thinkers come from Africa? Not nearly as many is it? Of the ones you can find, how many were educated abroad? Or work abroad in a place like Europe? You simply don't produce knowledge and advancement at the same rate in low growth areas.
     
  10. gatorpika

    gatorpika Premium Member

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    My bad, I didn't see that. Yeah I would disagree with the OP.
     
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  11. gatorpika

    gatorpika Premium Member

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    Ok, I obviously need another cup of coffee because I am missing the points here. Yeah, I made the same argument myself above in the Apple example. Was thinking of it in terms of lower wage levels. So again, apologize to @nolancarey. To answer his question, the propensity to work shouldn't have changed much because the effective rate didn't change much over time (again, until recently). You also had high growth in the 1950s vs low growth now, so the two aren't really comparable. I would continue to work at an effective rate of 42% or 35% later. If the marginal rate was 80% and I could not shelter that income to reduce it to a lower level, then I may be unwilling to take on additional projects. That wasn't the case in the 1950s. For an individual the marginal rate is more important because your deductions are limited. So you probably already maxed them out against your current income and therefore the marginal rate would apply to any additional income.
     
  12. philnotfil

    philnotfil GC Hall of Fame

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    No one is making decisions based on how much taxes they owe in theory. They are making decisions based on how much they actually owe in taxes.

    Marginal rates are meaningless, only the effective tax rate matters.
     
  13. docspor

    docspor GC Hall of Fame

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    Completely disagree. I find it weird that you are telling me that I just turned down a gig b/c of the avg rate. I did not. I turned it down b/c of the marg rate. If that offer was taxed at my effective rate (~12%) I would ahve taken it. The first time I gave my old dog a hush puppy, he was confused. He loved balls & food & instantly realized this was both. It would take about 5 before he'd prefer to play with them for a while.* They have found that birds like woodpeckers tend to use marginal analysis in forging. There's an entire book on bees behaving in line with a lot of neo classical econ theory. I was involved in studies showing that rats & pigeons labor supply is affected by the marginal wage rate.


    * I gave this example in a class at a Western U. about 20 years ago. I got a shit ton of blank looks. I then asked if they knew what hush puppies were & a guy sez, shoes?
     
  14. docspor

    docspor GC Hall of Fame

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    Gee, why would Fort Collins do this when they can just raise the avg price?

    Monthly Single-Family and Duplex Water Rates
    (includes PILOT- payment in lieu of taxes)
    Single
    Family
    Duplex
    Base Charge $17.94 $18.95
    Tier Volume Charge, per 1,000 Gallons
    1 0-7,000 Gallons $2.78
    0-9,000 Gallons $2.41
    2 7,001-13,000 Gallons $3.19
    9,001-13,000 Gallons $2.77
    3 Over 13,000 Gallons $3.67 $3.18
    Charges rounded to the nearest cent. Actual costs vary due to rounding.
     
  15. philnotfil

    philnotfil GC Hall of Fame

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    Some times the marginal rate and the effective rate are the same. If you had to pay more than 12% on the new income, than your effective rate went up. Your effective rate is what you actually pay, the marginal rate is what the table says you should pay.
     
  16. docspor

    docspor GC Hall of Fame

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    I am making the decision at the margin. My effective rate is NOT what I pay on incremental income, the marginal rate is. Pretty sure you are making a sunk cost fallacy in the above
     
  17. docspor

    docspor GC Hall of Fame

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    at UF I sold cokes at football games. The way it worked was you paid $20 to buy a tray of 24 cokes. So, in (usually) the forth quarter it could be risky to buy an additional tray. (sidebar: oh, I just remembered yet another angle on marg analysis is this very example). So, you've probably seen vendors trying to sell cokes for 50 cents of less. That is below cost, but that's a perfect example of life on the margin. Here's the part I remembered as I was typing, knowing that marginal cost of selling cokes is convex (increasing in an increasing fashion), your 20th tray was free.
     
  18. BLING

    BLING GC Hall of Fame

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    Where’s the missing 9%?

    Looking at the graph, back in ‘62, the range between 1-10% controlled ~30%. In ‘16 if we back out the numbers it’s ~40%. So it’s actually this next group that has grown their share of the pie more than the top 1%.

    That would imply this group has actually benefited even more from this growing inequality than the top 1%. Though I suspect if we were able to get more granular with the data, the most gains would be the group closer to the 1% threshold rather than closer to the 10% threshold.

    Normally I’d say creating more millionaires and billionaires is a good thing, and it is. It could be a sign of a healthy economy. But not if it’s at the expense of many millions of other people actually becoming relatively poorer.
     
  19. philnotfil

    philnotfil GC Hall of Fame

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    You are making decisions based on the actual amounts, not the theoretical amounts.

    I can't speak for the others discussing marginal vs effective tax rates. But when I speak about marginal vs effective tax rates, I'm talking about the theoretical vs actual tax rates. It doesn't matter that the top tax bracket used to be 90%, nobody actually paid 90%. The marginal rates, the published rates, the theoretical rates are irrelevant. No one makes decisions based on those. The only rates that matter are the ones that people actually pay.
     
  20. GatorRade

    GatorRade Rad Scientist Premium Member

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    I agree that they look like they are doing well there, but we don’t really have a counter factual.

    One of Hayek’s greatest insights was that the economy that evolves from liberal markets is one of which humans simply don’t have the ability to conceive. So if he were reanimated today, I think he might look at Sweden and say, “that economy is very nice. Just imagine what they would have if they had trusted the economy to the people.”

    Now that kind of makes his idea one that is non-falsifiable in this respect, but it’s worth considering.