The U.S. Economy: Stand by for more worse news

[Schmelzer]

Yes. Capital gains are not progressively taxed in the US.
That is something you would know if you actually knew anything about Clinton's tax proposals, for example;

Why should I care? My basic idea is that progressive taxation is a lie, because the rich can circumvent it. This was not a particular remark about the US, but a general remark about the modern corporatist systems. Now you explain me that in the US their main source of income isn't even progressively taxed anyway. Fine, no problem, but a nice example. Their main income source is not progressively taxed, and the income used for their main expenditure, buying firms or otherwise investing, is not taxed at all.

Then, why I should care about Clinton's position about taxation? I do not have to pay US taxes. That I have roughly classified her as Left is because she runs for the democrats. Given that I have said, often enough, that there is no essential difference between left and right today anyway, you may be correct that she is more right than left, but this would be only a minor error.

So why didn't you realize you were completely ignorant about all this stuff at the center of your posting, above?

Why do you ask such confrontative questions? The very purpose of a discussion is that the partner knows different things than you, and likes different arguments from you. If you know more about Clinton than I know, fine. Be happy about this. Seems, you are not, if you have to use every bit of information you know better to name your partner in the discussion "completely ignorant".

So - pay attention now - you were wrong. That entire line of posting about rich people in the US hiding 90% of their income and wealth from the tax man whenever they wanted to, and nobody able to even audit their books or track their wealth, and some corporation they own replacing their income with its own money, was in error. You are wrong about that.

If there is no reason to hide income which is not progressively taxed anyway, and, moreover, no reason to hide what one is spending as investment (once this is not taxed at all if the firm invests directly), it would be stupid to hide. It is well-known and reasonable that it depends on taxation how much is hidden. If you tax 99% almost everything will be hidden. If you tax 1% almost nothing will be hidden. Once the system has enough places so that the taxes at these places are moderate enough, fine. And this is what lobbyism will care about.

And that is directly relevant to this thread, as the future of the US economy depends in large part on whether the growing income and wealth inequality in the US can be curbed, and then reduced, the primary means of such efforts being taxation.

I think this hope is naive.

 

[iceaura]

Why should I care? My basic idea is that progressive taxation is a lie, because the rich can circumvent it

And every single piece of evidence, conclusion from reasoning, and real life example you have offered in support of that has been an error of fact. And every time one of these errors you have made is pointed out to you, you say you don't care about it, you haven't researched that topic, you want to talk about something else, etc.

So where did you get that idea? Why do you believe it?

Why do you ask such confrontative questions?

Because that is how one meets confrontative assertions.

Then, why I should care about Clinton's position about taxation? I do not have to pay US taxes. That I have roughly classified her as Left is because she runs for the democrats.

That's what I figured. That kind of ignorance is what is behind your false assertion - which you made uncivilly and confrontationally, above - that the politicians advocating increasingly progressive income taxation were being bribed and influenced by the same rich people as the politicians advocating the elimination of progressive income taxation.

You made that false claim to support your notion that progressive income taxation did not afflict the rich, in particular by claiming the rich did not put significant money and effort into opposing it. That notion has no support, as of now: everything you have offered in support of it has been contrary to fact.

If there is no reason to hide income which is not progressively taxed anyway, and, moreover, no reason to hide what one is spending as investment

Rich people hide as much as they can from all serious levels of taxation, whether those levels are progressive or not. Spending is different from investing (as buying is different from lending), neither of which is "hiding" anything. And rich people can neither spend nor lend money they have not received as income.

It is well-known and reasonable that it depends on taxation how much is hidden. If you tax 99% almost everything will be hidden.

The US taxed very high incomes at 90% and similar rates for many years, and nevertheless many hundreds of billions of dollars of income were not hidden.
http://2.bp.blogspot.com/-iY1z0uZYpdc/VemzlF3iBDI/AAAAAAAACGk/pIexXyKsIiU/s1600/1.png
Note that the recent large increase in the wealth of the rich, in these times of low income tax rates, has been disproportionately from capital gains rather than income - even at the modern low rates the wealthy have avoided paying income taxes as much as possible, and have invested much of their income after taxes as always.

So in direct conflict with your predictions, but in perfect agreement with common sense, lowering income tax rates on the rich has led to disproportionately increased ownership of the economy's wealth by the rich. The explanation is that they have more money left over to buy stuff with, when tax rates are lower.

 

[Schmelzer]

The usual useless "you make everything wrong" cries deleted.

So where did you get that idea? Why do you believe it?

How it is done in the US we have seen. The main income ressource for the rich is not progressively taxed, and if they want to invest this income, it is not taxed at all.

I believe it for other reasons - the rich have the power, so they would not allow progressive taxes if it would really hurt them.

That kind of ignorance is what is behind your false assertion - which you made uncivilly and confrontationally, above - that the politicians advocating increasingly progressive income taxation were being bribed and influenced by the same rich people as the politicians advocating the elimination of progressive income taxation.

Yes, the only difference is that they make first the claims uncomfortable for the rich, then they are bribed by the rich, and then they don't realize these plans. The other get first paid, and then openly support the rich. All this looks nicely like a political fight, but finally all they get their money and all is fine for the rich.

You made that false claim to support your notion that progressive income taxation did not afflict the rich, in particular by claiming the rich did not put significant money and effort into opposing it. That notion has no support, as of now: everything you have offered in support of it has been contrary to fact.

It is not an observation, but economic reasoning behind this. The rich will pay more money to politicians where they get directly something (like a big government order) and much less for things which favor a lot of rich people.

Rich people hide as much as they can from all serious levels of taxation, whether those levels are progressive or not. Spending is different from investing (as buying is different from lending), neither of which is "hiding" anything. And rich people can neither spend nor lend money they have not received as income.

It is nice to see how you (who seems to be somewhere on the left) defend the interests of the rich. So, fine, the rich buys a fabric, and this is not spending but investing, so no tax to be paid for the income used for buying the fabric.

The US taxed very high incomes at 90% and similar rates for many years, and nevertheless many hundreds of billions of dollars of income were not hidden.

Hundreds of billions for hundreds of millions of people is not that much.

Note that the recent large increase in the wealth of the rich, in these times of low income tax rates, has been disproportionately from capital gains rather than income - even at the modern low rates the wealthy have avoided paying income taxes as much as possible, and have invested much of their income after taxes as always.

This is what has to be expected. If the taxes are lower, less will be hidden, and once you estimate the wealth distribution from taxation, this looks like disproportionate gains for the rich.

 

[iceaura]

How it is done in the US we have seen. The main income ressource for the rich is not progressively taxed, and if they want to invest this income, it is not taxed at all.

And once again you have chased your tail around to this basic confusion. Three times now, in this thread alone?

That is a false statement. You continue to be baffled by standard bookkeeping categories, and determined to avoid the issue of the progressive income tax whenever the reality of it comes up.

Yes, the only difference is that they make first the claims uncomfortable for the rich, then they are bribed by the rich, and then they don't realize these plans

Except they aren't bribed by the same people, and they were defeated in their plans by other people who were. So what you just described did not happen, in the US. Reality check.

- - So, fine, the rich buys a fabric, and this is not spending but investing, so no tax to be paid for the income used for buying the fabric.

More false statements. Any of their income the rich use for anything was subject to tax.

It is not an observation, but economic reasoning behind this.

Why did you change the subject?

Hundreds of billions for hundreds of millions of people is not that much.

Again changing the subject. The high rates never applied to hundreds of millions of people. We were only talking about the people in the very highest income brackets.

"Note that the recent large increase in the wealth of the rich, in these times of low income tax rates, has been disproportionately from capital gains rather than income - even at the modern low rates the wealthy have avoided paying income taxes as much as possible, and have invested much of their income after taxes as always."
This is what has to be expected.

It is the opposite of what you said would happen, above. So it wasn't what you expected.

If the taxes are lower, less will be hidden, and once you estimate the wealth distribution from taxation, this looks like disproportionate gains for the rich.

But less was not "hidden". More was "hidden", according to your vocabulary, where these kinds of investments are called "hiding income". "Hiding" more of one's income at lower rates than at higher rates is exactly what you claimed would not happen.

Meanwhile, in the normal vocabulary of the world, the wealth distribution as measured includes these investments. So there has been no change in the estimated wealth held by the rich due to the sudden appearance of formerly invisible wealth in the form of these investments. They have always been visible.

And the growing inequality of wealth and income in the US this setup has created is the first or second most serious drag on the economy, if the economists who study this are not completely wrong. Only the absurd health insurance setup is as debilitating.

Here's Asher Edelman (Google is your friend) elaborating on why he immediately named Sanders as the Presidential candidate with the best policies for improving the US economy:

Asked to elaborate, Edelman stated his case.

“Well, I think it’s quite simple,” he began. “If you look at something called ‘velocity of money’—you guys know what that is, I presume—that means how much gets spent and turns around. When you have the top one percent getting money, they spend five, 10 percent of what they earn. When you have the lower end of the economy getting money, they spend 100, or 110 percent of what they earn. As you’ve had a transfer of wealth to the top, and a transfer of income to the top, you have a shrinking consumer base, basically, and you have a shrinking velocity of money. Bernie is the only person out there who I think is talking at all about both fiscal stimulation and banking rules that will get the banks to begin to generate lending again as opposed to speculation. So from an economic point of view, it’s straightforward.”

 

[Schmelzer]

And once again you have chased your tail around to this basic confusion. Three times now, in this thread alone?
That is a false statement. You continue to be baffled by standard bookkeeping categories, and determined to avoid the issue of the progressive income tax whenever the reality of it comes up.

We see a lot of aggressive words, but essential no argument.

You obviously don't get that these bookkeeping categories are not part of reality, but parts of the methods used to avoid such things as progressive income taxation. There was a time when German firms were allowed to book bribes paid outside of Germany as "current expenses", in this way not paying any income tax for their income used to pay such bribes.

Except they aren't bribed by the same people,

Given that they don't tell you who bribes them and why, at least I cannot know. You probably know, the Left has a known ability to mind read.

More false statements. Any of their income the rich use for anything was subject to tax.

You continue to accept the known bookkeeping method to hide income spend for investment by firm owners as investment by the firm?

Why did you change the subject?

I didn't. I remind you what is the base of my considerations. Behind this is a quite subtle conflict between the Austrian and the mainstream position about the role of empirical evidence and, on the other hand, rational reasoning about the aims, intentions, strategies and methods used by the participants. While I'm not completely Austrian (who sometimes tend to ignore or reject empirical economics completely) I accept their argument that the economy is much too complex to allow to make sharp conclusions based on empirical evidence alone, and that the theoretical conclusions based on how rational human beings with normal aims in a given situation would act are much more reliable.

So what is the Austrian-like (only Austrian-like, pure Austrians reject common good problem considerations) theoretical consideration? We have a lot of rich guys, we have politicians, the politicians want money, the rich have them, but have also interests. The rich have a much less serious common good problem (imagine the left would have to collect money among the poor to bribe the politicians) so they will reach their aims much better. But mostly their personal aims (government contracts for their own firms, import restrictions for their competitors) less for aims reached by all rich (there is a weaker, but nonetheless a common good problem), but nonetheless nothing really horrible for the rich will be allowed.

The conclusion is that existing law will tax the rich - their real income - in a sufficiently moderate way, effectively regressive.

What is the role of empirical evidence? It allows to falsify some theories, but this is very hard, given the complexity of economy. Have you shown that the US is an obvious counterexample for the theoretical construction presented? Not even close. We have found that some essential part of the income is not even progressively taxed, and another essential part not taxed at all.

Of course, the critical point here is that we disagree about what is the "real income" of the rich. Which is, of course, different from the "official income" they have if they make everything in accordance with the legal rules. Hint: A firm which I own, which makes no profit at all but invests a lot, makes me richer. The increase in its value is an income I have made. But no corporate profit appears, and nothing is taxed.

"Hiding" more of one's income at lower rates than at higher rates is exactly what you claimed would not happen.

Not exactly. If I become richer, I will spend more on investment, simply because they cannot eat more hamburgers. That's natural, I have often used this. So, this form of "hiding" will increase simply if the rich become richer.

This is part of the Austrian point that reality is too complex to derive much from empirical observations. One does not have to go to the Austrian extremes and to reject empirical economy completely, but one has to be aware of its very serious limitations.

Meanwhile, in the normal vocabulary of the world, the wealth distribution as measured includes these investments.

Of course. (Which was my point, there you heavily objected, because these investments are another bookkeeping category, but not income.) Unfortunately, not "as measured", you and Piketty have no idea about the size of these investments. Because they appear nowhere in the tax forms, except being indistinguishable from buying raw materials or replacing old machines. No tax is paid, thus, they are not visible in the data Piketty uses.

And the growing inequality of wealth and income in the US this setup has created is the first or second most serious drag on the economy, if the economists who study this are not completely wrong.

That's a very big "if". Most of them are Keynesians, and Keynesians are almost certainly wrong. Your quote being a nice example (too lazy to google if he is Keynesian, but the nonsense is the same). The problem is that the rich spend money on investment good, which are also a form of consumption, and for the remaining part of the economy it makes no difference if they have to produce consumer goods or investment goods. Except that many investment goods (machines, research) tend to be more high tech.

 

[iceaura]

You obviously don't get that these bookkeeping categories are not part of reality

They are as real as any other legal boundary - like the edge of your property line. People go to jail over them. Another thing: they aren't secret. They are not hidden.

Given that they don't tell you who bribes them and why, at least I cannot know.

Of course they do, or they used to. By law such lobbying expenses and campaign contributions and so forth - the stuff you insist we call bribes - are public record. This changed recently in the US, btw, in a famous Court ruling, and now for the first time such influence money can be kept anonymous, but for most of my life this has not been so.

So for all these years it has been possible to answer the question of who is spending money legally to influence which politician, in my country. That is how I know that politicians who advocate higher income taxes and more progressive income taxes are lobbied and influenced by different people than those who advocate lower income taxes and flatter brackets.

While I'm not completely Austrian (who sometimes tend to ignore or reject empirical economics completely) I accept their argument that the economy is much too complex to allow to make sharp conclusions based on empirical evidence alone, and that the theoretical conclusions based on how rational human beings with normal aims in a given situation would act are much more reliable.

Bad theoretical reasoning from false assumptions that delivers claims directly in conflict with physical fact is not reliable.

The conclusion is that existing law will tax the rich - their real income - in a sufficiently moderate way, effectively regressive.

And when that does not happen - as it does not in several countries and did not in the US for fifty years starting in 1935 - the conclusion has been falsified. So either the reasoning or the assumptions are wrong, in a sane person's world;
or one must redefine terms, and assume aspects of reality not visible and in conflict with what is visible, and jigger things around until the conclusion has been verified, in a crazy person's world.

You continue to accept the known bookkeeping method to hide income spend for investment by firm owners as investment by the firm?

Why are you using the word "hide"? I am such an owner - I own shares of corporations. All these corporations invest some of their surplus receipts in various things including - sometimes - other firms. None of this is hidden from me, or anyone else. I don't pay any tax on such money, for the very good reason that I received none of it. If my shares rise in value accordingly, great - I will pay tax if and when I take this rise as income, by selling them. Meantime I may be potentially rich on theoretical paper, but I have no money now in real life - do you understand the difference? My landlord does.

Of course, the critical point here is that we disagree about what is the "real income" of the rich. Which is, of course, different from the "official income" they have if they make everything in accordance with the legal rules. Hint: A firm which I own, which makes no profit at all but invests a lot, makes me richer. The increase in its value is an income I have made. But no corporate profit appears, and nothing is taxed.

The increase in its value is not an income you have made, but a possible income you could make in the future - maybe. You can't pay your bills with it now. The same is true of me with shares of companies I have bought on the stock market in the US, with dividends reinvested automatically. Until I sell, I owe no tax - but I have no money from them either.

You are making a very big deal of these simple little situations, you obviously think they are important. What's your point?

Of course. (Which was my point, there you heavily objected, because these investments are another bookkeeping category, but not income.) Unfortunately, not "as measured", you and Piketty have no idea about the size of these investments. Because they appear nowhere in the tax forms, except being indistinguishable from buying raw materials or replacing old machines. No tax is paid, thus, they are not visible in the data Piketty uses.

You should read the book, first, before telling people who have read it what's not in it. You will maintain more dignity that way.

btw: I suppose I have to point out the obvious: They do appear on the basic tax forms of the corporations involved. They also appear on lots of other forms - such as the ones joint stock corporations are required to provide their shareholders in the US, or the "schedules" sole owners of LLCs are required to file with the IRS. They are not hidden. They are measured, with some fair reliability as checked by various means. You are in error. Yet again.

That's a very big "if". Most of them are Keynesians, and Keynesians are almost certainly wrong.

They don't make claims I know to be false, they don't get things like corporate and personal income confused in their brains, their arguments make sense logically, and they don't base their arguments on assumptions made ignorance. So who is more likely to be wrong - you or them?

 

[Schmelzer]

They are as real as any other legal boundary - like the edge of your property line. People go to jail over them. Another thing: they aren't secret. They are not hidden.
Of course they do, or they used to. By law such lobbying expenses and campaign contributions and so forth - the stuff you insist we call bribes - are public record. This changed recently in the US, btw, in a famous Court ruling, and now for the first time such influence money can be kept anonymous, but for most of my life this has not been so.

Campaign spendings are one way to pay bribes in a legal way, together with other popular ways (high payments for useless speeches, "jobs" with high income but nothing to do and so on). And, BTW, you can never know what was the reason for this particular spending. Some of the phrases used by that guy in his election campaign? Formally, one cannot exclude this. As well as one cannot exclude that the speech of the former politician was really that interesting that it is worth to spend 100000\$ for them. Or that he is really such an efficient worker that for two hours per month of real working time he creates millions of income for the firm. Who knows?

And when that does not happen - as it does not in several countries and did not in the US for fifty years starting in 1935 - the conclusion has been falsified. So either the reasoning or the assumptions are wrong, in a sane person's world;
or one must redefine terms, and assume aspects of reality not visible and in conflict with what is visible, and jigger things around until the conclusion has been verified, in a crazy person's world.

Of course, I "redefine" the word "income", I mean the real income, not the "income" as defined by the tax laws.

Feel free to call me crazy, for "redefining" my part of the profit of a firm, which is paid out as dividend, but invested, therefore increasing the value of the firm (and, as well, my share) as part of my real income, and that this part is very essential for the rich, not the poor, and completely untaxed. Feel free to name me crazy for thinking that dividends, according to you not progressively taxed, are an essential part of the income too.

Why are you using the word "hide"?

Because it is hidden for all what matters for the rich: It is not (or at least not progressively) taxed. If it is somewhere in the papers available to the taxmen, but in some legal form, so what?
It is also hidden from Piketty and similar researchers using income tax to estimate wealth distribution. One can reasonably guess that corporate taxes are mainly paid by the rich, but who knows for sure? I know even people on welfare who own some shares and pay even corporate taxes for that income.

I am such an owner - I own shares of corporations. All these corporations invest some of their surplus receipts in various things including - sometimes - other firms. None of this is hidden from me, or anyone else. I don't pay any tax on such money, for the very good reason that I received none of it. If my shares rise in value accordingly, great - I will pay tax if and when I take this rise as income, by selling them.

Really? The question of how much of this additional income is really taxed is a very subtle one, and differs very much in different jurisdictions. Note that if I buy from my already taxed income shares of A, pay taxes for the dividends I receive, and later sell them for the same original price, then selling this is simply a transformation of already taxed income into another form. It is not income, I already own it and have already paid taxes for this. A very good argument for politicians, even the poor agree that taxing twice is somehow unjust. How many jurisdictions nonetheless tax the full income? I don't know, I bet not many.

A common solution is to tax the difference: I buy shares, sell them tomorrow much higher, the difference is a real income of the speculator. Ok. Usually he will be allowed to book losses as negative income too. And usually this form of taxation is restricted to a short period of time, which is typical for speculation, different from long time investments. If I, for example, buy shares for 20 years before selling them, inflation will make the sum in \$ much larger, even if the real value is the same. Again a case of double taxation, again the politicians can make a good case not to tax the difference if this is not a short time speculative difference.

So, there are many jurisdictions where selling shares is not taxed as income. Usual with some exceptions for short-time speculative gains (the speculators are popular as scapegoats, so it is common to tax them).

btw: I suppose I have to point out the obvious: They do appear on the basic tax forms of the corporations involved. They also appear on lots of other forms - such as the ones joint stock corporations are required to provide their shareholders in the US, or the "schedules" sole owners of LLCs are required to file with the IRS. They are not hidden. They are measured, with some fair reliability as checked by various means. You are in error. Yet again.

Sorry, you have not got the point. Of course, it appears in a lot of forms. But how you distinguish what is paid for raw materials, what is paid for replacement of old machines, necessary to preserve the value of the firm, and what is paid for really new things, increasing the value of the firm? How would Piketty, even if he would have access to all this, distinguish these parts?

 

[iceaura]

Campaign spendings are one way to pay bribes in a legal way, together with other popular ways (high payments for useless speeches, "jobs" with high income but nothing to do and so on). And, BTW, you can never know what was the reason for this particular spending

You were trying to argue that the US politicians advocating for higher and more progressive income tax rates were being influenced, bribed, and so forth, by the same rich people as were bribing and influencing the advocates for lower and flatter income tax rates and brackets. You were wrong about that.

Because it is hidden for all what matters for the rich: It is not (or at least not progressively) taxed. If it is somewhere in the papers available to the taxmen, but in some legal form, so what?
It is also hidden from Piketty and similar researchers using income tax to estimate wealth distribution. One can reasonably guess that corporate taxes are mainly paid by the rich, but who knows for sure?

Read the book, or shut up about it. Everything you've said there is in error - contrary to fact.

Of course, I "redefine" the word "income", I mean the real income, not the "income" as defined by the tax laws.

Feel free to call me crazy, for "redefining" my part of the profit of a firm,

Or your part of the costs of a firm - these expenditures you describe are not profits.

Ok, you're crazy. Nobody thinks anyone should owe tax on "income" that is money they have not received, and may never receive, and is currently in other people's pockets.

Because it is hidden for all what matters for the rich: It is not (or at least not progressively) taxed

It is not hidden from economic analysis, and if it is taken as income by somebody it is subject to taxation.

Really? The question of how much of this additional income is really taxed is a very subtle one, and differs very much in different jurisdictions.

A topic you know nothing about, remember? I can tell you about my "jurisdiction", the example I gave you is from firsthand eyewitness check writing experience. You then reasoned from assumptions made in ignorance using principles never reality checked to tell me my firsthand experience never happened, and believing it to be possible was naive.

Sorry, you have not got the point. Of course, it appears in a lot of forms. But how you distinguish what is paid for raw materials, what is paid for replacement of old machines, necessary to preserve the value of the firm, and what is paid for really new things, increasing the value of the firm?

Or the value of improvements in the raw materials, upgrades of the old machines, etc. Easy. The market does that. No central economic organization is capable of making that determination - remember?

The market value of a joint stock corporation is public information. So is the aggregate sale price of the marketed sole-ownership LLCs and private corporations within the IRS jurisdiction - the cash-out values, taken as income, aggregated over the economy (these are numbers published by the US government).

And so forth.

It is possible, and has been largely accomplished, to get a very good idea of the level of wealth and income inequality within the US and similar economies, and compare current with past levels. Piketty and dozens of others have done that, and now warn us about the likely effects of current trends.

Or one could simply go back to the lefty pundits and so forth twenty years ago, who pointed out that banana republic economics were likely to lead to banana republic politics. Kind of prescient, no?

 

[Schmelzer]

You were trying to argue that the US politicians advocating for higher and more progressive income tax rates were being influenced, bribed, and so forth, by the same rich people as were bribing and influencing the advocates for lower and flatter income tax rates and brackets. You were wrong about that.

You think so? I have explained that bribes will not be declared openly as bribes. I have given some hints about other standard ways (so standard that doing this is considered already as strong evidence of bribery) to hide bribes. And, of course, the order is a different one: The left politician makes great claims for higher taxes, when receives bribes, and then nothing happens. The right politician gets campaign support first, then talks about what the rich want.

Which is also a gross oversimplification, because there is no such clear subdivision left/right as suggested by this oversimplification. They all like to make proposals just for receiving bribes to forget about them. They all receive campaign money for proposing what the spenders want. If the firm is somehow engaged in the renewable energy sector, this will be in favor of very green proposals.

Read the book, or shut up about it. Everything you've said there is in error - contrary to fact.

Fine, in this case it would have been easy for you to quote the book. to prove your point. As would a reasonable person do, before making such claims.

Or your part of the costs of a firm - these expenditures you describe are not profits.

As I have explained - to make the distinction is very difficult. That's why this is a nice place to hide the income.

Ok, you're crazy. Nobody thinks anyone should owe tax on "income" that is money they have not received, and may never receive, and is currently in other people's pockets.

I don't think one owes any income tax to the government. And I have explained that those who argue against taxing these forms of income have good arguments. It is easy to present yourself as unjustly taxed, double taxed and so on.

But having a fabric which produces something may be worth much more than money. Money income is special only because it can be more easily taxed. Else, there is nothing special.

It is not hidden from economic analysis, and if it is taken as income by somebody it is subject to taxation.

Formally it is not hidden. But in reality scientists have the same problem as the taxmen - to distinguish what is necessary to preserve the value of the firm from what is really an investment.

A topic you know nothing about, remember? I can tell you about my "jurisdiction", the example I gave you is from firsthand eyewitness check writing experience. You then reasoned from assumptions made in ignorance using principles never reality checked to tell me my firsthand experience never happened, and believing it to be possible was naive.
Or the value of improvements in the raw materials, upgrades of the old machines, etc. Easy. The market does that. No central economic organization is capable of making that determination - remember?

Indeed no need to remember such trivialities. The market manages this. But the taxmen as well as the economists fail to distinguish these things, thus, will be unable to tax all income, as well as to compute the real income.

The market value of a joint stock corporation is public information. So is the aggregate sale price of the marketed sole-ownership LLCs and private corporations within the IRS jurisdiction - the cash-out values, taken as income, aggregated over the economy (these are numbers published by the US government).

Fine. So you have to give an information about all shares you own, and the difference of their actual values and their values last year is part of your progressively taxed income? If not, it means this income is hidden from progressive taxation. And how Piketty knows how the shares are distributed among the population? A very difficult question. He may have some plausible guesses, but more? Aggregates over the whole economy are nice, but ... And so forth.

It is possible, and has been largely accomplished, to get a very good idea of the level of wealth and income inequality within the US and similar economies, and compare current with past levels. Piketty and dozens of others have done that, and now warn us about the likely effects of current trends.

I think you grossly underestimate the inaccuracies and error sources in such considerations. Essentially this is nothing but plausible reasoning supported with some numbers which are somehow related with wealth and income inequality. And if they would argue in such ways as you argue here, the results would be not even on the plausible reasoning level.

 

[iceaura]

Fine, in this case it would have been easy for you to quote the book. to prove your point.

No, it wouldn't. It would be a lot of work, and a lot of quotation over several chapters, and a large waste of bandwidth here, and the book is not handy to me at the moment. The obvious point that you are making unsupported claims about the contents of a book you have not read requires no such effort.

As I have explained - to make the distinction is very difficult. That's why this is a nice place to hide the income.

If it's in there, it's not hidden, and it's not income. It's expenditure. By the corporation. Recorded on the books of that corporation.

Fine. So you have to give an information about all shares you own, and the difference of their actual values and their values last year is part of your progressively taxed income? If not, it means this income is hidden from progressive taxation.

It isn't income, until I sell the shares and receive the money. You do understand that income is "in coming"? That it is money or value actually received, not hypothetically promised?

When I do, I will pay capital gains tax on the capital gains. In the US, that is not a progressive tax.

You originally claimed such income was hidden from the tax rolls altogether. Are we agreed that it is not? That it is in fact visible to the tax man, and recorded on the books that analysts such as Piketty use? Along with the fluctuating market valuation of the shares not yet sold, and other non-tax matters, of course.

Formally it is not hidden. But in reality scientists have the same problem as the taxmen - to distinguish what is necessary to preserve the value of the firm from what is really an investment.

Neither one of them has any such problem. It's not at all necessary that they make any such distinction - the market will settle that question for them.

I don't think one owes any income tax to the government.

And that is the nature of your other claims here as well - they occupy an alternative reality.

And how Piketty knows how the shares are distributed among the population? A very difficult question. He may have some plausible guesses, but more?

Yeah, actually - quite a bit more. As do we all - that kind of stuff is public information, and the IRS keeps very close track of such things.

And so we see that the question of wealth and income inequality is not an unfathomable mystery, but an increasingly significant one bearing directly on the fate of the US economy.

 

[Schmelzer]

No, it wouldn't. It would be a lot of work, and a lot of quotation over several chapters, and a large waste of bandwidth here, and the book is not handy to me at the moment. The obvious point that you are making unsupported claims about the contents of a book you have not read requires no such effort.

Yes, and therefore it is only a cheap unsupported claim which I do not have to take seriously.

It isn't income, until I sell the shares and receive the money. You do understand that income is "in coming"? That it is money or value actually received, not hypothetically promised?

Fine. In this case, why should somebody, except the taxmen, care about income distribution, if what matters is wealth distribution? It means, income is only some special part of the wealth gains, the one which is heavily taxed and therefore avoided by the rich?

You originally claimed such income was hidden from the tax rolls altogether. Are we agreed that it is not?

I don't remember to have made such a claim. I would guess you have misunderstood this. Of course, capital gains paid out (dividends) are taxed.

My claim is that the probably speculative price raises on the market of my shares are not taxed. If they would be, this would be a tax for the poor (the rich would, then, leave all this to a special firm so that all this would be expenditure) and be related with a lot of paperwork for the poor who own a few shares.

And if the taxman really knows how many shares of which company you own, then the US is already a much more heavy surveillance state than I thought. And even in this case, I doubt that these data are open to the public, so that Piketty can use them. Is there completely no privacy in the US? Why, in this case, nobody seems to know how much Trump is really worth?

Neither one of them has any such problem. It's not at all necessary that they make any such distinction - the market will settle that question for them.

So, fine. The market knows what a share is worth. (If shares are on the market.) So I know what my shares are worth. And Trump knows what his shares are worth. But what is the base for Piketty knowing about my wealth and Trumps wealth? Why one makes an issue about Trump refusing to open information about his income tax, if Piketty knows it anyway?

And that is the nature of your other claims here as well - they occupy an alternative reality.

Not alternative reality, but alternative moral position. At least the German translations of "owe" are about the moral aspect. We agree about the reality that if I do not pay taxes I will be imprisoned. We do not agree about the moral side. I would not say that I owe a bagman any money. Even if my property or person will be heavily damaged if I do not pay.

 

[iceaura]

Yes, and therefore it is only a cheap unsupported claim which I do not have to take seriously.

If you don't take such things seriously, why are you bothering to make false claims about them - with absolutely no support whatsoever?

Fine. In this case, why should somebody, except the taxmen, care about income distribution, if what matters is wealth distribution?

Why anyone should care is beside the point. The point is that if anyone is interested - and many people are, however strange it may be to you - they can investigate the matter, and discover what the income distribution is, in a modern capitalistic economy.

I don't remember to have made such a claim.

I do. You have repeatedly claimed, for example, that the income of the rich is not visible on the tax rolls because the rich can hide it from the tax man, by such tricks as taking it as capital gains.

Of course, capital gains paid out (dividends) are taxed.

So are capital gains taken as income from the sale of shares of stock and other such investments. "Realized", as they say.

My claim is that the probably speculative price raises on the market of my shares are not taxed.

Nobody is arguing that obvious point. When you go on to claim these price hikes are income received by an owner of some shares who has not sold them, then you are faced with argument. Or more likely mockery.

And if the taxman really knows how many shares of which company you own,

The US tax man knows how many shares of what company you have bought and sold, and at what price, and thereby realized income or loss from, if and when he audits your books. That's how he catches you lying about your income from capital gains, if you try to hide your income from capital gains.

And even in this case, I doubt that these data are open to the public, so that Piketty can use them.

You continue to base your arguments on ignorance and uninformed "doubts".

Piketty is using - carefully and with consideration - summary data about the behavior of classes of people, which is public information available from the IRS in the US and similar government budgetary agencies in other modern industrial economies. It is used to inform government policy and for many other purposes. It is common knowledge, available via a few mouse clicks and some diligence in research etc.

Read the book, or shut up about it.

Not alternative reality, but alternative moral position

Not an alternative moral position, but a fantasy of bookkeeping that makes no sense, used to support an alternative view of reality that is in conflict with observable fact.

The fact of growing income and wealth inequality in the US is not going to evaporate because you regard income taxation of the rich as by turns immoral and impossible.

 

[Schmelzer]

If you don't take such things seriously, why are you bothering to make false claims about them - with absolutely no support whatsoever?

Because we have completely different ideas about what is "support" for some idea in economics. You follow the Keynesian mainstream or so, with its positivistic methodology, which overemphasizes empirical observations. I support Popperian methodology, which is focused much more on theoretical considerations, and accept, in part, the Austrian criticism of empirical methods in economy, namely that economy is far too complex to allow unique interpretations of macroeconomic observations. The Austrians overdo this, and reject macroeconomics completely - even if they are not really consistent in this rejection too, given that they also accept the empirical evidence that socialist economy has failed.

But this does not change the fact that what we know, and in a sufficiently good way, is how people behave. We understand microeconomics in a sufficiently good way. So we have a good base to derive theoretically what will happen in macroeconomics. Of course, only partially, because there are simply too many different unpredictable circumstances. But, nonetheless, for understanding these aspects the theoretical considerations of what one has to expect from the participants are far better support than some empirical observations which are easily misinterpreted and depend on too many different things to allow a clear interpretation.

Why anyone should care is beside the point. The point is that if anyone is interested - and many people are, however strange it may be to you - they can investigate the matter, and discover what the income distribution is, in a modern capitalistic economy.

Indeed, he can investigate what income the state has got from tax form nr. 86309768 or so. According to what we have found, namely that dividends are not part of income tax, and income of firms used for investments is untaxed, income tax is quite irrelevant for the rich, in comparison with the poor.

When you go on to claim these price hikes are income received by an owner of some shares who has not sold them, then you are faced with argument. Or more likely mockery.

Mockery is, of course, cheap, given that I'm not a native speaker and even less know about the particularities of US tax laws. If you want name "income" only what the US taxes as "income", so be it. What I see is a tax law very comfortable for the rich, which allows them to tell "Oh, we pay very very high, progressive taxes on all our income" and the left don't even mock them for this cheating.

Piketty is using - carefully and with consideration - summary data about the behavior of classes of people, which is public information available from the IRS in the US and similar government budgetary agencies in other modern industrial economies. It is used to inform government policy and for many other purposes. It is common knowledge, available via a few mouse clicks and some diligence in research etc.

And, at least as it seems, it does not contain the relevant information about the real wealth distribution. Or do these "summary data" contain information about how many of the shares are owned by the rich, and how much give income to the poor, say, via pension fonds, who have to pay pensions to the poor and middle class?

Read the book, or shut up about it.

Quote the book, or shut up about it. And stop to make claims about what you don't know. That you don't quote it, we can see here. If I have read it or not, or may be in some parts, or skimmed it, remains unknown to you.

The fact of growing income and wealth inequality in the US is not going to evaporate because you regard income taxation of the rich as by turns immoral and impossible.

I regard any taxation as immoral. To claim that I regard income taxation of the rich as immoral is, even if it formally correctly follows from this, a defamation, because it suggests that I regard only income taxation of the rich as immoral. I think that, if one would really consider all forms of wealth increase, not only your "income", then the "progressive income tax" appears to be an effectively regressive tax on this wealth increase. So, it is part of a redistribution of money from the poor to the rich. Omitting it completely would be in favor of the poor.

If the wealth inequality is growing or not is something difficult to decide, given that the data used to estimate this are highly questionable. It may be a fact, it may be not. I have no particular ideological interest in favor or against this claim, it is quite irrelevant. I would expect that it is growing. This is what has to be expected in a state which is, essentially, ruled by an oligarchy of a few superrich.

 

[iceaura]

You follow the Keynesian mainstream or so, with its positivistic methodology, which overemphasizes empirical observations. I support Popperian methodology, which is focused much more on theoretical considerations, and accept, in part, the Austrian criticism of empirical methods in economy, namely that economy is far too complex to allow unique interpretations of macroeconomic observations.

My "methodology" (argument) is not positivistic. My reasoning here is not Keynesian. You do not follow Popperian anything.

Karl Popper was a serious opponent and strong critic of failing to correct one's theoretical fantasizing by checking it against empirical fact.

Mockery is, of course, cheap, given that I'm not a native speaker and even less know about the particularities of US tax laws. If you want name "income" only what the US taxes as "income", so be it.

It's not the details of US tax law here, but the general meaning of income - as a concept. You are claiming that fluctuations in the market price of investments are gains (and losses?) of income for the investor. That is not a detail of tax law, that is a fundamental incomprehension of economics altogether.

What I see is a tax law very comfortable for the rich, which allows them to tell "Oh, we pay very very high, progressive taxes on all our income" and the left don't even mock them for this cheating.

I have no idea what you are looking at when you "see" that, but if you look at the US you will see no such very high progressive income taxes, and no shortage of mockery from the Left directed at the complaints of the rich.

Quote the book, or shut up about it

Barring my initial recommendation, which I think you should reconsider, I'm not talking about it. I haven't been talking about it, except to correct your false assertions. You keep bringing it up. All I have done is point out that everything you have said about it is false, and to no one's surprise, because what you keep telling us is what's in the book and what's not in the book, and you haven't read the book.

If the wealth inequality is growing or not is something difficult to decide, given that the data used to estimate this are highly questionable

Nonsense. Getting precision is complicated and onerous, but the basic situation is straightforward arithmetic from ordinary evidence.

I regard any taxation as immoral. To claim that I regard income taxation of the rich as immoral is, even if it formally correctly follows from this, a defamation, because it suggests that I regard only income taxation of the rich as immoral. I think that, if one would really consider all forms of wealth increase, not only your "income", then the "progressive income tax" appears to be an effectively regressive tax on this wealth increase. So, it is part of a redistribution of money from the poor to the rich. Omitting it completely would be in favor of the poor.

And the libertarian joins hands with the billionaires, in advocating that the rich not be taxed. So that the poor, free from the burden of having their government collect taxes from the rich, will be better off.

As we see, for example, in the French Ancien Régime.

Have you even read Popper?

We are social creatures to the inmost centre of our being. The notion that one can begin anything at all from scratch, free from the past, or unindebted to others, could not conceivably be more wrong

 

[Schmelzer]

It's not the details of US tax law here, but the general meaning of income - as a concept. You are claiming that fluctuations in the market price of investments are gains (and losses?) of income for the investor. That is not a detail of tax law, that is a fundamental incomprehension of economics altogether.

What matters is the change of the wealth which one owns. Which is, of course, not exactly the same as income, because part of the income will be used for simple consumption without increasing your wealth.

Barring my initial recommendation, which I think you should reconsider, I'm not talking about it. I haven't been talking about it, except to correct your false assertions.

Say, not to correct, but to claim (without evidence from the book) that I have made such false assertions. Such claims without evidence are joepistole-like sound bites to be ignored.

Have you even read Popper?

Of course. I do not agree with him about everything, in particular he is essentially a social democrat, I'm not, and he rejects Bayesian probability, I'm not. But with your particular quote I'm quite comfortable, and therefore I do not propose rebuilding society from scratch. What I propose is an evolutionary transition toward a libertarian society.

 

[iceaura]

What matters is the change of the wealth which one owns.

Why yes. Maybe you did read some Piketty? That's the major theme in the book I linked for you.

Which is, of course, not exactly the same as income, - -

Ya think? Two correct statements in row. You're on a roll.

Of course. I do not agree with him about everything, in particular he is essentially a social democrat, I'm not, and he rejects Bayesian probability, I'm not

Popper's theory is fully compatible with Bayesian probability,

and Popper completely and with vigor rejected your approach to economic analysis - you do not correct your theoretical speculations according to empirical evidence, and that is fundamental to Popper's approach.

 

[Schmelzer]

Why yes. Maybe you did read some Piketty? That's the major theme in the book I linked for you.

Maybe. But, whatever, I think that what he has as data is insufficient to make more than some plausibility considerations.

Popper's theory is fully compatible with Bayesian probability,

Yes and no. I see no conflict between Bayesian probability and the main line of his scientific methodology, but he has explicitly criticized and rejected Bayesian probability and proposed his own propensity interpretation of probability. It is better than the frequentist one, but nonetheless his objections against Bayesian probability are misguided.

Popper completely and with vigor rejected your approach to economic analysis - you do not correct your theoretical speculations according to empirical evidence, and that is fundamental to Popper's approach.

Popper of course rejected the straw man you build out of me, I reject that straw man too. But the role of empirical evidence in economy is, indeed, a point where I'm between Popper and Mises. Mises has a strong point that empirical evidence in macroeconomy depends far too much on too many different things which cannot be reasonably controlled, so that it becomes almost worthless. Mises goes too far with rejecting it completely. But empirical evidence is nonetheless much less important than in natural sciences. The other point raised by Mises is also a good one: We have no idea about what electrons think and do, so all our assumptions about them is purely hypothetical. Instead, we have a much better understanding of human behavior. So, the base for our theoretical constructions is a much better one in economy.

 

[Michael]

Incidentally, the Panama Papers suggest numerous high level Public "Servants" use offshore shell companies to hide money and pay no Progressive Income Tax / Labor Tax. Which isn't a surprise. Everyone from SlumLords "writing off" various 'expenses' on their Slums to Surgeons buying Avocado farms or Professors buying Honey Farms - everyone in our Centrally Planned Progressive Socialist Paradise does their part to avoid paying as much tax as is possible.

You know, for the "Good of Society" (and the roads).

Just a few weeks ago, I was speaking with someone who was pissed they had to drive 5000 miles over their Easter Break. Why? Because they can only get the tax credit if their car has enough miles on it. And apparently propping up the rear end and running the car in gear doesn't move the odometer.
LOL
A wonderful example of Central Planning if ever there was one - you know, because "Social Good", "Protect the Environment" and End The White Patriarchy

The middle class and rich take full advantage of any and every loophole possible (with the Bankers being the worse of the lot, which is why they generally metamorphisize into SlumLords to emerge as the gatekeepers of generational poverty / their business plan) while the poor learn to work the Centrally Planned Welfare Scam - cranking out as many fatherless children as is humanly possible.

All made possible through our wonderful State and it's Progressive Income Tax. Which, incidentally, helps fund the Never-Ending Phony Wars it starts whenever possible.

 

[iceaura]

Maybe. But, whatever, I think that what he has as data is insufficient to make more than some plausibility considerations.

You can discover what he has as data by reading the book.

"Popper's theory is fully compatible with Bayesian probability, - "
Yes and no.

No: Yes.

But the role of empirical evidence in economy is, indeed, a point where I'm between Popper and Mises

As I said, you are not a Popperian. Not even close. You reject his entire approach, explicitly.

The other point raised by Mises is also a good one: We have no idea about what electrons think and do, so all our assumptions about them is purely hypothetical. Instead, we have a much better understanding of human behavior. So, the base for our theoretical constructions is a much better one in economy.

You know, I am going to give Mises a break, and presume you are reading him with the same level of comprehension you read my posts. Because that's one of the silliest damn things I ever read in my life.

 

[Schmelzer]

You can discover what he has as data by reading the book.

Of course. But, once you do not provide any evidence here, your claims about this book are empty. And you don't even know if I have read it or not.

It would be really useful if you would start by providing arguments instead of cheap personal attacks like "you have not read this book" or so.

Do you have to tell something interesting about Popper's own propensity interpretation of probability, and how it is related to Bayesian probability, or have you simply no idea about this?

You know, I am going to give Mises a break, and presume you are reading him with the same level of comprehension you read my posts. Because that's one of the silliest damn things I ever read in my life.

Yet another example of a stupid rant without even a single argument about the content.