Sad state of American Economics

[sturg33]

Once you are dead, you can't be taxed. You are dead. The massive amount of aristocratic income that the heir receives is taxed (minimally these days), however.

If like the Free Market, you should like the estate tax. If you always whine about what "the Founding Fathers intended," then you should LOVE the estate tax.

So income that was already taxed... gets taxed again.

Alrighty

[50PoundHead]

It's not that simple because the pie isn't fixed.

Not in absolute terms, but it is in relative terms because as the size of the pie increases, so do prices of goods over the long term so you pretty much end up in the same place. If that doesn't happen, you risk deflation and the pie gets smaller. I think what zito is saying, and I don't like to project so I'm just guessing, is the problem arises when the folks at bottom aren't in a position to make ends meet and have to retire equity for income and in effect they move backwards. One can argue about the wisdom of spending patterns of those at the lower end of the income spectrum, but if they don't spend, consumption goes down and the economy slows down.

[Metaphysicist]

So income that was already taxed... gets taxed again.

Alrighty

It isn't the same income. That's like saying a store owner shouldn't pay income tax because "the income" was already taxed when the customers earned it. Income is a transfer; it's not like a dollar can only be income once.

[zitothebrave]

It's not that simple because the pie isn't fixed.

A pie is always representative of 100%, just because the pie grows, doesn't make it any worse. Thorw a 10 year down the line scenario. 2 people now have to eat of 50% of the pie that's not 2 times as large, but 300 people have control of the other 50%.

Don't get me wrong, I have no clue how to fix the issue, I'm not an expert on this. I do know based on correlation the current trend is scary. Better economic equality makes for a better economy. That being said the natural instinct of a capitalist is to crush equality. Why would Google want a competitor, that means they'd have to work harder make less money. And because of the shareholder game, businesses are less likely to take gambles.

[zitothebrave]

It isn't the same income. That's like saying a store owner shouldn't pay income tax because the person "the income" was already taxed when the customers earned it. Income is a transfer; it's not like a dollar can only be income once.

Yeah, I never really got the income was already taxes.

My only concern with estate tax as someone who's seen the concerns of it first hand is say you have a farmer in New Jersey where land is extremely valuable, worth millions (or close to a million) he/she dies and wills it to their kid. The farm doesn't make much money, they're now taxed on the millions of dollars the farm is worth as an estate tax. So you counter it by exempting farmers, now some rich people throw in a field or 2 and a horse stable onto their property so they can be land exempt. There's lots of issues with blanket taxes. I almost wish there was a way for the state governments to handle it. Let's say for example, the fed tells new jersey it's expected tax of it's residents to be given to the federal government is 1 billion. Then NJ has to figure out how to handle income taxes and property and what not, the downside is that some corrupt states will just go bankrupt rather than pay the fed, the upside is it allows for a more local touch where they may not be as nice to the rich.

[acesfull86]

Not in absolute terms, but it is in relative terms because as the size of the pie increases, so do prices of goods over the long term so you pretty much end up in the same place.

I'm not following how we end up in the same place. Society is richer in 2014 than it was in 1964; was richer in 1964 than it was in 1914; was richer in 1914 than it was in 1864; etc etc. Distribution of the "relative" pie may have changed, but we're all better off now than ever before.

[zitothebrave]

I'm not following how we end up in the same place. Society is richer in 2014 than it was in 1964; was richer in 1964 than it was in 1914; was richer in 1914 than it was in 1864; etc etc. Distribution of the "relative" pie may have changed, but we're all better off now than ever before.

That's not true. If we're better off it's by only the slightest of margins. Unless you're in the top 20%, even the 2nd quintile (where the folks in this board who do pretty well for themselves wind up) hasn't improved much in almost 50 years.

[weso1]

The top 1% are all going to die from heart disease because they eat way too much pie.

[50PoundHead]

I'm not following how we end up in the same place. Society is richer in 2014 than it was in 1964; was richer in 1964 than it was in 1914; was richer in 1914 than it was in 1864; etc etc. Distribution of the "relative" pie may have changed, but we're all better off now than ever before.

A few things. You are basically talking a century or so of economic expansion in which supply/demand was a nationally (sometimes regionally) determined. Capital was largely immovable so workers had security. I would argue that life for the poor--urban and rural--was horrid at a number of junctures prior to the advent of greater government assistance to the indigent. The former elements of these items have eroded dramatically over the past 20 years and that has caused greater consternation among workers, especially those in service industries, and the latter is under attack.

I think it's also important to point out that government intervention in individual economic decision-making has helped fund the boom. The home mortgage deduction fueled the housing market after World War II and continues to fuel it today, as it's largely the major piece of wealth for most Americans (if one can afford a house). Social Security and other income maintenance programs have allowed senior citizens to remain heavy consumers. Whether or not that is right or wrong (or good or bad policy), the government sending out money to average Americans to spend does help the demand side of the economy. Investments in national defense have fueled research/development and manufacturing.

The growth in consumer credit has also played a role in how we may look better off than we actually are.

I think we are at a critical juncture when looking at these issues. The 20th century was the American Century because as people left farming and moved to the cities, there were opportunities ready and waiting for those workers in manufacturing and other industries. The system was relatively closed. Given our economy is now based more on services than goods (at least in terms of overall middle class employment), it makes economic security harder to attain because when capital consists of a bunch of computers in an office building as opposed to a foundry, it's a lot easier to move. Globalization provides cheaper goods, but it also erodes long term earning potential for a large part of the workforce.

I don't think I'm unduly pessimistic, but I think the new normal is going to consist of much slower economic growth and a much wider distribution of economic benefit. In other words, a continuation of the angst we've seen since 2008. You have to remember that a century is only 100 years out of all time and the conditions that allowed the American Century may not be extendable indefinitely. Economics isn't a law in the sense that gravity is, but it can come pretty close.