Economy Questions

[piasabird]

I think there should be a more graduated scale for Capital gains.

This concept makes exception for lower personal investments and only attempts to get a large capital gain tax from people who make all their
money from capital gains.

Something like this:
Capital
Gain +
Income Capital Gains
0-250k Zero
250k- 500k 10%
500k-1mil 15%
1mil-2.5mil 20%
2.5mil-5mil 25%
5 mil-10mil 30%
>10mil 35%

 

[piasabird]

It is only the people with lower income + Capital gain income that can really claim they are paying tax twice on both income and than on capital gains. This would also include retired people who might have saved like 1 million over 60years of working and saving. This is one reason I am saying the income of less than $250K should not have to pay a capital gains tax. I assume some people would try to paly with the bottom amount of $250k and try to put one more level in there that pay a lowe percentage of capital gains taxes.

 

[kia75]

Questions:

1. If the super rich don't get taxed as much, do they really reinvest their money and help drive the economy? AKA the trickle down effect?

No they don't. We've tried trickle-down economics (or voodoo economics as Bush called it) and it's never worked.

The more money that passes the most amount of hands is the most helpful to the economy. i.e. If I have a dollar and then buy a sandwich from Joe, Joe then uses that dollar to buy bread from Paul, Paul uses that dollar to buy a widget from Sarah, and then Sara uses that dollar to buy my time helping her make widgets, then I use that dollar to buy a sandwich...
Ideally that's best for the economy.

Now let's pretend that Paul decides to start saving some of his Sandwich money. Now I pay Joe a dollar for a sandwich, Joe pockets $.50 and buys half as much bread at $.50, Paul now only has $.50 to buy widgets, buys less widgets from Sarah, who can't afford to pay me as much. Taking half the money away really hurt our economy. Of course the money isn't really gone, Paul still has that $.50 cents, but for the economy those $.50 savings are gone.

So giving someone money that they don't spend does nothing to the economy. It's spending the money that makes things work, and people that are already rich tend to not spend the money they have, let alone any extra money they get.

Again, this isn't to say saving is bad for you, personally. Maybe Paul is saving money because he wants to take a day off to celebrate his birthday, so for him saving was tremendously helpful. But for the economy of our small island it was disastrous.

2. Is it really better for the overall economy to tax corporations more?

Wrong question. This is like asking if it's better for your health to drink more\less juice. The correct answer is it depends.

Let's say I live in an island have a a seashell selling corporation. I don't want bandits to destroy my seashells, so its in my best interest to have a tax for police to protect my shells. Let's pretend that people want to make a bridge to the island. Now more tourists can come visit me and I'm able to sell more seashells. It's in my best interest to pay the tax for a bridge so more people buy my shells. Let's pretend that for some reason the bridge is more expensive then everyone thought it'd be, either because of stupidity, corruption, nepotism, etc. Now taxes are raised so high that even though I'm selling more shells then ever before, due to taxes I'm making less money.


It really depends on what services are being provided, how they help society and whether or not they're worth the expenses.

The non-corrupt Police are EXTREMELY helpful to any business. If you don't believe me try and start a business in Congo or Zaire and see how well you do. At the same time if there was a 100% tax on business to pay for the Police then businesses wouldn't exist.

3. Does more money in the pockets of the super rich help the overall economy more or money in the middle class folks?

Economy-wise, it's better for people to spend all their money, as each dollar spent re-invigorates the economy.

Thus money in the hands of poor people helps the economy the most, then Middle income, then Rich people. Poor people tend to spend all their money, Rich people tend to save most of their money. Middle class income saves and spends.

Again, I'm not bad-mouthing savings for you, personally. The more money YOU have saved, the better YOU are. But for the economy, each dollar saved is a dollar that's not being spent.

4. Are there graphs or data that show economic growth between republican presidents and democratic presidents?

See this page

 

[child of wonder]

Questions:

1. If the super rich don't get taxed as much, do they really reinvest their money and help drive the economy? AKA the trickle down effect?

2. Is it really better for the overall economy to tax corporations more?

3. Does more money in the pockets of the super rich help the overall economy more or money in the middle class folks?

4. Are there graphs or data that show economic growth between republican presidents and democratic presidents?

1. Unless they stick their wealth under the mattress it's getting invested somehow, either by them or by the bank that holds it.

2. Depends. Simply increasing rates won't do a lot of good because of all the loopholes that exist to evade taxes. We should enact a low, flat tax on corporations and be done with it.

3. "Trickle down" is a term that not everyone can agree works, but "Trickle up" is definitely real. The more money the middle class has, the more money they'll spend which directly stimulates the economy and eventually finds it's way to the rich.

4. I'm sure others have already posted some.

 

[drebo]

The more money that passes the most amount of hands is the most helpful to the economy. i.e. If I have a dollar and then buy a sandwich from Joe, Joe then uses that dollar to buy bread from Paul, Paul uses that dollar to buy a widget from Sarah, and then Sara uses that dollar to buy my time helping her make widgets, then I use that dollar to buy a sandwich...
Ideally that's best for the economy.

Where's that dollar come from? Where's Joe get the money to buy his sandwich maker? Where's Paul get the money for his bread oven? Where's Sarah get her money for the manufacturing line?

Oh, right. From a rich person investing (either directly or indirectly) in their business.

There would be no business without capital provided by those with money.

Your understanding (and thus judgement) of "trickle down" economics relies on rich people sitting on their money and doing absolutely nothing with it, which is not the case and never was the case.

 

[kia75]

1. Unless they stick their wealth under the mattress it's getting invested somehow, either by them or by the bank that holds it.

I've heard this before, but I'm not quite certain where this idea comes from.

Let's pretend I'm given a million dollars to invest. I use that money to invest in Gold. How does that help the economy?

We seem to be running into this issue right now, as businesses and banks are flushed with cash, but are lending out very little money, New expenditures for businesses are at an all-time low.

It's not investment that drives the economy it's demand. I can have a billion dollars available to make the newest and greatest horse and buggy whip factory, but unless there's a demand for more horse and buggy whips I'm not spending my money to expand.

 

[piasabird]

I dont agree with this concept that someone has already paid tax once on the capital gains. Some people might never have earned any of the money they are trading on the stock market. You can play the market on margin only and all your income can be capital gains. Dont be so naiive that you take that baloney hook line and sinker.

This is why I made a bottom catagory that pays no capital gains tax. It is to protect the little guys. Also if you put your money in a roth IRA you can invest that in the market or other categories. (within limits)

 

[drebo]

3. "Trickle down" is a term that not everyone can agree works, but "Trickle up" is definitely real. The more money the middle class has, the more money they'll spend which directly stimulates the economy and eventually finds it's way to the rich.

All money spent in the economy finds its way into the accounts of the rich, as they're the ones that own the businesses (either directly or indirectly through investment.)

Who else is supposed to receive that money?

 

[drebo]

I've heard this before, but I'm not quite certain where this idea comes from.

Let's pretend I'm given a million dollars to invest. I use that money to invest in Gold. How does that help the economy?

We seem to be running into this issue right now, as businesses and banks are flushed with cash, but are lending out very little money, New expenditures for businesses are at an all-time low.

It's not investment that drives the economy it's demand. I can have a billion dollars available to make the newest and greatest horse and buggy whip factory, but unless there's a demand for more horse and buggy whips I'm not spending my money to expand.

"Investing" in gold can mean two different things. Did you buy the gold and are now using it to prop up your coffee table? If so, then you've bought a product and thus "spent" your money.

If you "invested" it by paying some bank to hold some amount of gold for you, then that's no different than you just storing your money in that bank anyway. They're going to invest it all the same.

Demand requires investment. The two are inseparable.

Businesses aren't spending and banks aren't lending because they aren't sure whether or not they'll ever recoup that money. It has nothing to do with where the money comes from or how they ended up with it.

 

[BurnItDwn]

There is no trickle down, only trickle up.

It may make sense to tax corporate profits more, however, it probably is a good idea to lower any taxes that affect their costs to hire people.

More money to middle class will find it's way back into the economy pretty quickly since a large percentage will get spent.

for 4, probably yes.

I think there should be a more graduated scale for Capital gains.

This concept makes exception for lower personal investments and only attempts to get a large capital gain tax from people who make all their
money from capital gains.

Something like this:
Capital
Gain +
Income Capital Gains
0-250k Zero
250k- 500k 10%
500k-1mil 15%
1mil-2.5mil 20%
2.5mil-5mil 25%
5 mil-10mil 30%
>10mil 35%

That's cool, as long as earned income gets taxed at the same rates too.

 

[Acanthus]

Where's that dollar come from? Where's Joe get the money to buy his sandwich maker? Where's Paul get the money for his bread oven? Where's Sarah get her money for the manufacturing line?

Oh, right. From a rich person investing (either directly or indirectly) in their business.

There would be no business without capital provided by those with money.

Your understanding (and thus judgement) of "trickle down" economics relies on rich people sitting on their money and doing absolutely nothing with it, which is not the case and never was the case.

You do realize that banks not lending has been and is a huge problem right now? Hence the practically 0% inter-bank lending rates? The money isn't flowing.

 

[QuantumPion]

Questions:

1. If the super rich don't get taxed as much, do they really reinvest their money and help drive the economy? AKA the trickle down effect?

Red herring question. The super rich pay the most taxes. 15% of a million is a whole lot more than 25% of 100,000.

2. Is it really better for the overall economy to tax corporations more?

Corporations don't pay taxes. Only people pay taxes. To properly rephrase your question: "is it really better for the economy to double tax business owners and investors more"? The answer is no.

3. Does more money in the pockets of the super rich help the overall economy more or money in the middle class folks?

It is best to let people keep what they earn. Giving handouts to people incentivizes them to not work. Taxing investment discourages future investment, leading to stagnate economy.

If you confiscate all of the wealth of the country and redistribute it equally, after a year or two the original rich people will be rich again and the original poor people will be poor again. The difference between rich and poor is in the actions, abilities, talents, and ambition of the individual. People who work hard and are responsible will become richer. People who are lazy will do the bare minimum required to survive. This is human nature and cannot be changed.

4. Are there graphs or data that show economic growth between republican presidents and democratic presidents?

You have to consider not only who was president, but who controlled congress, and how conservative or liberal the party was at the time as well. For example, JFK today would be even more right-wing than Romney. And the economic boom often associated with the Clinton administration is more closely linked to the economic policies of the republican takeover of congress in 1994.

 

[Acanthus]

I'm not sure about your response there QP to #1.

It doesnt really make sense.

He asked about the trickle down effect, you said the rich pay the most taxes in dollars... That may be, but doesn't answer the question.

As for your response to #3, patently false. Economic mobility studies show that while you have to have the right attributes, you also have to be lucky and have connections. Furthermore, you are less likely to improve your economic status in the United States than in, say, Norway. http://en.wikipedia.org/wiki/Economic_mobility

 

[drebo]

You do realize that banks not lending has been and is a huge problem right now? Hence the practically 0% inter-bank lending rates? The money isn't flowing.

Who said anything about economic conditions "right now"? We're speaking theoretically about a closed economic system.

Our economic system in practice is hardly closed, and there are many, many external factors which are affecting liquidity...not the least of which is our own country's fiscal policies.

So, tell me again, where does your dollar come from?

 

[QuantumPion]

You do realize that banks not lending has been and is a huge problem right now? Hence the practically 0% inter-bank lending rates? The money isn't flowing.

Banks aren't lending because the Fed is forcing interests rates to remain low so that the federal government does not default on its massive debt. Japan has been doing the exact same thing for the last 20 years.

 

[Acanthus]

You have to consider not only who was president, but who controlled congress, and how conservative or liberal the party was at the time as well. For example, JFK today would be even more right-wing than Romney. And the economic boom often associated with the Clinton administration is more closely linked to the economic policies of the republican takeover of congress in 1994.

The Dot-Com Boom was a "right place at the right time" moment for Clinton and the Republican congress. Neither of them really contributed to it.

Which economic policies would you cite that would have improved the economy?

 

[QuantumPion]

The Dot-Com Boom was a "right place at the right time" moment for Clinton and the Republican congress. Neither of them really contributed to it.

Which economic policies would you cite that would have improved the economy?

Welfare reform and tax reform.

 

[Acanthus]

Who said anything about economic conditions "right now"? We're speaking theoretically about a closed economic system.

Our economic system in practice is hardly closed, and there are many, many external factors which are affecting liquidity...not the least of which is our own country's fiscal policies.

We are speaking about a closed system, and i was using a real-life example of why your line of thinking is a problem. It was implied that money is always "in play" whether it is in a bank for 20 people or 1 person. That is not the case because if the lenders get "scared", they don't lend. That money is no longer part of the economy because it is just sitting there. Only when it returns to being "in play" is it doing the economy any economic benefit.

However, in an economic climate like ours if that same money was in the hands of middle class citizens it would likely be "in play" because they would have to dip into savings to maintain their lifestyle, or make up for economic shortcomings such as job loss.

 

[Acanthus]

Welfare reform and tax reform.

Clinton pushed hard for welfare reform... I would not give credit to R's on that one. It was clearly a bipartisan effort.

Which tax reform? What exactly did we do during that period?

 

[dank69]

...



You have to consider not only who was president, but who controlled congress, and how conservative or liberal the party was at the time as well. For example, JFK today would be even more right-wing than Romney. And the economic boom often associated with the Clinton administration is more closely linked to the economic policies of the republican takeover of congress in 1994.

Are you talking about the Republican policy of screaming "NO NO NO" while Clinton raised tax rates and cut military spending?

 

[CountZero]

I kinda get what you're saying but I'm still confused.:|

Ok so the super rich deposits money into the bank which regular people borrow to do business. Ok I got that. But if you give the dollar to 10 people, they should all have the money in the bank too, no? Regular people also deposit money into the bank which can be borrowed by other regular people, yes? Why does money need to be in the hands of the super rich for banks to have money to lend out?

If the entire country has $2, then it will always have $2. Does it matter if the money is in the hands of super rich or normal people? The money isn't going to magically be turned into $4 if the super rich has it.

Of course I'm not factoring in money being used to purchase goods from another country.

The only case I see for the super rich to have more money is if they can use their enormous resources to pull in more money from foreign countries that small businesses cannot.

Think of this scenario. To make things simple imagine an economy where nobody saves unless they reach the best living situation possible. In that economy it takes $1k minimum to make it and you can spend at most $10k, anything beyond that is extra.

Say you have 10 people that make $1k and 1 person that makes $10k after taxes. You can pump $5k in via tax breaks.

If you do it such that the one person makes $15k then that's all extra and it will go to either the bank as savings or invest as stock. Assume it goes to the bank. Now the bank can lend an extra $5k which it will make interest from and the loan can be used to start a business. Of course if the business can only sell to those with $1.2k or more than you have only one customer.

If you do it such that the folks with $1k are now at $1.5k all that money goes into living expenses. It is still in the economy but now it is there via buying newer or nicer goods. However none goes to the banks or stocks and so there are no loans available.

If you do it such that folks with $1k are now at $1.25k and the person at $10k is now at $12.5k you get a bit of a balance. Banks have money to lend, businesses have more consumers.

It is a contrived example though but that's the general idea. You can't just claim cutting taxes on the rich is always good nor can you claim the same for low earners. It is murkier when you consider lower earners living below their means or when you think about progressive taxes but that's why it is a simplification.

 

[werepossum]

Questions:

1. If the super rich don't get taxed as much, do they really reinvest their money and help drive the economy? AKA the trickle down effect?

2. Is it really better for the overall economy to tax corporations more?

3. Does more money in the pockets of the super rich help the overall economy more or money in the middle class folks?

4. Are there graphs or data that show economic growth between republican presidents and democratic presidents?

1. The super rich certainly invest their money, and it certainly helps the economy. However, many investments aren't building wealth; they are more or less informed gambling as Jhhnn pointed out recently, with one winner and one loser. The only good effects of these investments are fractionally helping better companies prosper over worse competitors (via higher stock prices) & moving money around in the economy. Also, the richer one is, the easier one can directly invest offshore.

Fractional reserve banking helps drive wealth creation (and inflation of course), so saved capital is critically important to an economy's health. But who holds that saved capital is not critical in my estimation.

2. Corporations don't really hold wealth except as proxies for stockholders, so taxing corporations simply removes money from the private sector (stockholders of consumers) and makes it government money. Whether this is a net gain or loss depends on government's efficiency and need; there is always a net loss to the economy in the taking and redistributing, but if it results in a new railroad or harbor or highway, something that facilitates trade and wealth creation, the economy can benefit. Success looks a LOT different without adequate infrastructure.

3. That's not a question with a clear answer, but I think most economists would agree that a robust middle class is one of the hallmarks of a successful economy. It does little good to develop innovative products and services if the vast majority of potential consumers can afford nothing beyond food and basic shelter, so the economy stagnates. (Unless like Red China or Cuba it can provide goods or services for a healthier economy.)

4. There are as many graphs and charts as there are political axes to grind. Trust none of them.

Your query lacks one essential thing - morality. Tax policy is not merely numbers, it is taking away what someone earns to spend it as you wish.

 

[drebo]

We are speaking about a closed system, and i was using a real-life example of why your line of thinking is a problem. It was implied that money is always "in play" whether it is in a bank for 20 people or 1 person. That is not the case because if the lenders get "scared", they don't lend. That money is no longer part of the economy because it is just sitting there. Only when it returns to being "in play" is it doing the economy any economic benefit.

However, in an economic climate like ours if that same money was in the hands of middle class citizens it would likely be "in play" because they would have to dip into savings to maintain their lifestyle, or make up for economic shortcomings such as job loss.

The US economy is not a closed system. Not by a long shot. Comparisons to it in a theoretical discussion are irrelevant.

 

[kia75]

"Investing" in gold can mean two different things. Did you buy the gold and are now using it to prop up your coffee table? If so, then you've bought a product and thus "spent" your money.

If you "invested" it by paying some bank to hold some amount of gold for you, then that's no different than you just storing your money in that bank anyway. They're going to invest it all the same.

Demand requires investment. The two are inseparable.

Other then for insurance purposes and investment fees, what difference does it make if the bank holds onto my gold or if I do?

Let's pretend instead of investing in gold I'm investing in stocks. I've now bought a million stocks of Apple. How does that help the economy? If Apple does well it helps me because in a few years I can sell that stock for a couple million dollars, but how does that help the economy? How is that investment useful to the economy?

Businesses aren't spending and banks aren't lending because they aren't sure whether or not they'll ever recoup that money. It has nothing to do with where the money comes from or how they ended up with it.

So you're saying businesses aren't investing?

That's sort of my point, there needs to be something to invest in before you can invest. Even if I had a trillion dollars, I would not invest in Blockbuster right now.

Banks are completely full of cash, but there's nothing to invest in at the moment. Investing isn't a magic word that banks do. Its spending money to get a return, and there is very little of that at the moment.

 

[drebo]

Other then for insurance purposes and investment fees, what difference does it make if the bank holds onto my gold or if I do?

Because gold is a product. If you buy gold and hold on to it yourself, you've purchased a product, and your money now belongs to some other party that can do with it as it wishes (generally, this means investing.)

If you "buy" gold and the bank "holds" the gold for you, you don't really think that they set aside a specific chunk of gold for you, with your name on it, do you? Of course not. They utilize the money that you send them to invest, and if you ever withdraw, they send you an appropriate amount of gold, and then replenish that gold for other people who may eventually withdraw.

Let's pretend instead of investing in gold I'm investing in stocks. I've now bought a million stocks of Apple. How does that help the economy? If Apple does well it helps me because in a few years I can sell that stock for a couple million dollars, but how does that help the economy? How is that investment useful to the economy?

You can't buy a million shares of Apple unless someone else is willing to sell those million shares of Apple. That person now has a tidy sum of money he ends up investing elsewhere. How doesn't that help the economy?

Assuming that you could just buy an infinite number of shares of whatever company, that company will who now has infinite capital will spend it to grow the business, thereby helping the economy. If the company just sits on the capital and does nothing, well, then there's no earnings for investors and they'll stop investing and pull their money out of the company.