Just the Tax

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nicole
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Re: Just the Tax

Post by nicole » 07 Nov 2017, 15:43

Jadagul wrote:
07 Nov 2017, 15:10
nicole wrote:
07 Nov 2017, 14:59
Yeah I think you're just picking and choosing the kinds of saving that you like then and going beyond the economic rationale that supports a consumption tax as the least harmful option. Everyone's home heating and cooling bills would still be consumption ;)
Most people's primary form of savings is "buying a house" and that's terrible because a house is mostly consumption and not savings. The only thing that makes house-buying actually reasonable as a savings strategy is the mortgage interest deduction, which is a terrible idea.

So one goal here would be to push most people's savings away from basically-consumption in the form of a house, to actual investments.
But you don't consume the house. It's still there, being worth a lot of money.
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nicole
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Re: Just the Tax

Post by nicole » 07 Nov 2017, 15:44

Mo wrote:
07 Nov 2017, 15:16
Something insane about the new estate tax repeal, is that they are simultaneously keeping the step up exemption, which is insane.

Also, Greg Mankiw finally finds something in a Republican tax bill that he doesn't like.

http://gregmankiw.blogspot.com/2017/11/ ... er-ed.html
Yeah the stepup thing was in my thread that also had the passthru salt thing.
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the innominate one
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Re: Just the Tax

Post by the innominate one » 07 Nov 2017, 15:47

Aresen wrote:
07 Nov 2017, 15:07
A consumption tax only regime is not going to fly politically. It's even hard to sell even as just part of a tax package.

When the Mulroney government brought in the Canadian GST in 1990, the Conservatives were annihilated in the next election.

Whatever the merits economically of taxing consumption vs taxing savings, the average person is going to be angry at any tax that is 'regressive'.
If you can convince people by direct comparison that individuals in the lower and middle classes will pay less in tax, they won't be angry.
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fyodor
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Re: Just the Tax

Post by fyodor » 07 Nov 2017, 16:10

nicole wrote:
07 Nov 2017, 15:43
Jadagul wrote:
07 Nov 2017, 15:10
nicole wrote:
07 Nov 2017, 14:59
Yeah I think you're just picking and choosing the kinds of saving that you like then and going beyond the economic rationale that supports a consumption tax as the least harmful option. Everyone's home heating and cooling bills would still be consumption ;)
Most people's primary form of savings is "buying a house" and that's terrible because a house is mostly consumption and not savings. The only thing that makes house-buying actually reasonable as a savings strategy is the mortgage interest deduction, which is a terrible idea.

So one goal here would be to push most people's savings away from basically-consumption in the form of a house, to actual investments.
But you don't consume the house. It's still there, being worth a lot of money.
Since you have to live somewhere, you can't realize that money without incurring a cost. Rent isn't much in the short run, but it adds up (in increasing fashion).
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fyodor
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Re: Just the Tax

Post by fyodor » 07 Nov 2017, 16:15

the innominate one wrote:
07 Nov 2017, 15:47
Aresen wrote:
07 Nov 2017, 15:07
A consumption tax only regime is not going to fly politically. It's even hard to sell even as just part of a tax package.

When the Mulroney government brought in the Canadian GST in 1990, the Conservatives were annihilated in the next election.

Whatever the merits economically of taxing consumption vs taxing savings, the average person is going to be angry at any tax that is 'regressive'.
If you can convince people by direct comparison that individuals in the lower and middle classes will pay less in tax, they won't be angry.
Empirical evidence suggests there would be great initial resistance, but theoretically it should be possible. ;)

That's why I'm curious to know more about what happened in Canada....
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Jadagul
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Re: Just the Tax

Post by Jadagul » 07 Nov 2017, 16:17

fyodor wrote:
07 Nov 2017, 16:10
nicole wrote:
07 Nov 2017, 15:43
Jadagul wrote:
07 Nov 2017, 15:10
nicole wrote:
07 Nov 2017, 14:59
Yeah I think you're just picking and choosing the kinds of saving that you like then and going beyond the economic rationale that supports a consumption tax as the least harmful option. Everyone's home heating and cooling bills would still be consumption ;)
Most people's primary form of savings is "buying a house" and that's terrible because a house is mostly consumption and not savings. The only thing that makes house-buying actually reasonable as a savings strategy is the mortgage interest deduction, which is a terrible idea.

So one goal here would be to push most people's savings away from basically-consumption in the form of a house, to actual investments.
But you don't consume the house. It's still there, being worth a lot of money.
Since you have to live somewhere, you can't realize that money without incurring a cost. Rent isn't much in the short run, but it adds up (in increasing fashion).
Right. From an economic perspective, you're only saving the price of the house minus the rent you would be paying to live in an equivalent house. Which is I think not that large.

(Honestly, really what happens is that there's a depreciating consumable asset, which is the house itself. And there's an appreciating investment, which is the land the house is on. So maybe you should want to not tax the value of the land, since it's an investment. But it's a uniquely non-productive investment, and there are good arguments for taxing land more than everything else).

I should add--I can't speak for Jason, but the goal here isn't generally "to encourage people to have more retirement savings" or anything like that. It's to encourage people to put their money in productive investments to stimulate innovation and economic growth. A house is much better at the former than it is at the latter.

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Mo
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Re: Just the Tax

Post by Mo » 07 Nov 2017, 16:31

There's a whole school of thought, that only exists in the classroom, that the largest tax break is the fact that imputed rent is untaxed.
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the innominate one
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Re: Just the Tax

Post by the innominate one » 07 Nov 2017, 16:35

Can you elaborate/clarify, Mo?
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fyodor
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Re: Just the Tax

Post by fyodor » 07 Nov 2017, 16:57

nicole wrote:
07 Nov 2017, 15:43
fyodor wrote:
07 Nov 2017, 15:03
nicole wrote:
07 Nov 2017, 13:36
fyodor wrote:
07 Nov 2017, 13:16
nicole wrote:
07 Nov 2017, 10:28
JasonL wrote:
07 Nov 2017, 10:23
I've already said from my perspective the primary residence is consumption, so I can't really entertain seriously no taxation on anything in the driveway, on the walls and in the cellar. It seems strange to me that suddenly people jump mentally to it's unfair for x or y thing to be taxed when really the point is you don't get to deduct your chanel bag now nor your car nor anything else really outside of designated accounts.
I'm not talking about what's unfair, I'm talking about what you would do to actually incentivize investment and disincentivize consumption. The idea that primary residence is consumption is kind of insane, especially when for most homeowners it's their primary investment.
But why is that insane compared to the status quo in which you get taxed on that money anyway? (Well except for the interest deduction)
Because Jason is trying to create a system that incentivizes savings. Real property is the primary investment of most homeowners.
And if the plan would result in more saving than in the current way of doing things, then I think we would want to call it successful in that regard. I don't see how your objection negates that. You seem to be comparing his plan to some idealized version of how it should work rather than to the status quo to justify why we shouldn't move towards it from the status quo...?

ETA: I'll add that more savings such that income plays a smaller role in taxation and such that people are less reliant on transfer payments are what would justify Jason's plan. (To be specific enough to avoid a charge of circularity)
No, I'm comparing his plan to an idealized version of his plan to say that if he wants to do what he says he wants to do, he should be pushing the ideal version.

I'm not saying anything about whether we should move toward it or anything about it vs. the status quo.
So -- you're actually good with Jason's idea, other than the house thing?
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Mo
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Re: Just the Tax

Post by Mo » 07 Nov 2017, 17:39

the innominate one wrote:
07 Nov 2017, 16:35
Can you elaborate/clarify, Mo?
Basically, you tax property owners for what they could make if they rented out their property because you are, in essence paying yourself rent. Apparently, it's a thing in other countries and it's part of GDP calculations.

Image
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fyodor
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Re: Just the Tax

Post by fyodor » 07 Nov 2017, 18:09

Def weird to think I should be taxed for the income I could make were I to live elsewhere and pay rent that would cancel that income out. Should I also pay tax on the income I could be making had I gone to grad school? Heh, and I don't even know if I'm supporting Jason or Nicole....
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Eric the .5b
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Re: Just the Tax

Post by Eric the .5b » 07 Nov 2017, 18:13

Mo wrote:
07 Nov 2017, 17:39
the innominate one wrote:
07 Nov 2017, 16:35
Can you elaborate/clarify, Mo?
Basically, you tax property owners for what they could make if they rented out their property because you are, in essence paying yourself rent. Apparently, it's a thing in other countries and it's part of GDP calculations.
That's some Georgist-sounding shit, right there.

I have trouble seeing the value of paying taxes on money someone isn't making, aside from the give-us-ye-money taxman angle. If you're going to do that, why not tax people for the cars and houses they could be able to buy, but don't actually own?
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Re: Just the Tax

Post by JD » 07 Nov 2017, 18:19

So there's a school of thought...that not taxing people for money they didn't earn...is a tax break. Truly we live in wondrous times. If I have a vegetable garden, and I eat the vegetables instead of selling them, should the government tax me on the grounds that I'm selling myself the vegetables?

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Re: Just the Tax

Post by Aresen » 07 Nov 2017, 19:14

fyodor wrote:
07 Nov 2017, 15:27
Aresen wrote:
07 Nov 2017, 15:07
A consumption tax only regime is not going to fly politically. It's even hard to sell even as just part of a tax package.

When the Mulroney government brought in the Canadian GST in 1990, the Conservatives were annihilated in the next election.

Whatever the merits economically of taxing consumption vs taxing savings, the average person is going to be angry at any tax that is 'regressive'.
Did (does?) the GST include a robust exemption?
No exemption, though there is a (modest) credit on income tax for low income earners.
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Re: Just the Tax

Post by D.A. Ridgely » 07 Nov 2017, 19:16

Home ownership may be an objectively bad form of saving and investing. Yes, it's illiquid, although that's actually one of the reasons it works as a method of saving among most of the middle class and working class. Yes, it impedes mobility which, in turn, makes recovering from unemployment harder. But it's the only form of wealth the vast majority of people trust and are psychologically capable of accruing. As for savings, if more people actually understood fractional reserve banking; that is, if they realized their money isn't in the vault, that majority would probably shoot up to 90%. Try talking to these people about Exchange Traded Funds and Roth IRAs and watch their eyes glaze over. Christ, you can't even talk them into paying down their bank cards, but they fucking well understand owning equity in their own homes or, more precisely, understand that those homes represent their single largest asset and, especially when it can be homesteaded, their best bet for a cash cushion in retirement.

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Re: Just the Tax

Post by Mo » 07 Nov 2017, 20:20

It's counterintuitive, but it is economic activity of a sort. Which is why imputed rent is part of GDP, for example. If it wasn't in GDP you could have two identical countries but with one difference, in country A, everyone owns their home and in country B everyone rents from someone else (so no one is in their own home). Without imputed rent calculations, country B would have a significantly higher GDP.
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Re: Just the Tax

Post by Warren » 07 Nov 2017, 20:31

Mo wrote:
07 Nov 2017, 20:20
It's counterintuitive, but it is economic activity of a sort. Which is why imputed rent is part of GDP, for example. If it wasn't in GDP you could have two identical countries but with one difference, in country A, everyone owns their home and in country B everyone rents from someone else (so no one is in their own home). Without imputed rent calculations, country B would have a significantly higher GDP.
That's backwards. Rent shouldn't figure into GDP at all. It's not something that was "produced". But of all the shenanigans that go into fictionalizing the GDP that's just a misdemeanor.
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JasonL
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Re: Just the Tax

Post by JasonL » 07 Nov 2017, 20:59

If anyone in professional money management suggested the construction of a portfolio that went like “check me out, borrow the most amount of money it is possible to borrow, then buy as much of this single illiquid asset as you can with those funds, then profit”, that person could literally be sued for failing the most basic pre fiduciary standards of appropriacy for products.

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fyodor
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Re: Just the Tax

Post by fyodor » 07 Nov 2017, 21:03

D.A. Ridgely wrote:
07 Nov 2017, 19:16
Home ownership may be an objectively bad form of saving and investing. Yes, it's illiquid, although that's actually one of the reasons it works as a method of saving among most of the middle class and working class. Yes, it impedes mobility which, in turn, makes recovering from unemployment harder. But it's the only form of wealth the vast majority of people trust and are psychologically capable of accruing. As for savings, if more people actually understood fractional reserve banking; that is, if they realized their money isn't in the vault, that majority would probably shoot up to 90%. Try talking to these people about Exchange Traded Funds and Roth IRAs and watch their eyes glaze over. Christ, you can't even talk them into paying down their bank cards, but they fucking well understand owning equity in their own homes or, more precisely, understand that those homes represent their single largest asset and, especially when it can be homesteaded, their best bet for a cash cushion in retirement.
I don't know if anyone else is, but I'm certainly not saying people shouldn't own their own homes!!

The question came up as to whether it should be hypothetically be considered consumption versus saving/investment in Jason's hypothetical and very unlikely to ever be passed tax plan.

I think Jadagul called it a terrible investment mainly in response to Nicole saying it should be treated as an investment in such a plan.

Not sure if you're taking either side...?

I'd say the main thing that makes home ownership a good "investment" is simply that the alternative is renting, and at least owning is some kind of investment that saves you from rent increases.

Then the imputed rent thing came up, and all hell broke loose....
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Re: Just the Tax

Post by thoreau » 07 Nov 2017, 21:40

If you pay off your house then you reduce your cost of living considerably. The house might not be the best investment, but it's something that can reduce one's cost of living in a stage of life when most people are shifting away from earning money and facing higher medical expenses.

Plus, unlike any other investment, you can use it for stuff. Like sleeping, recreation, storage, parties, raising a family, puttering in the garage, etc.
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Jadagul
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Re: Just the Tax

Post by Jadagul » 07 Nov 2017, 21:44

thoreau wrote:
07 Nov 2017, 21:40
If you pay off your house then you reduce your cost of living considerably. The house might not be the best investment, but it's something that can reduce one's cost of living in a stage of life when most people are shifting away from earning money and facing higher medical expenses.

Plus, unlike any other investment, you can use it for stuff. Like sleeping, recreation, storage, parties, raising a family, puttering in the garage, etc.
"You can use it for stuff" is the definition of consumption.

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Mo
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Re: Just the Tax

Post by Mo » 07 Nov 2017, 21:55

Warren wrote:
07 Nov 2017, 20:31
Mo wrote:
07 Nov 2017, 20:20
It's counterintuitive, but it is economic activity of a sort. Which is why imputed rent is part of GDP, for example. If it wasn't in GDP you could have two identical countries but with one difference, in country A, everyone owns their home and in country B everyone rents from someone else (so no one is in their own home). Without imputed rent calculations, country B would have a significantly higher GDP.
That's backwards. Rent shouldn't figure into GDP at all. It's not something that was "produced". But of all the shenanigans that go into fictionalizing the GDP that's just a misdemeanor.
Rent is payment for goods and services. Turning 4 houses into a 30 unit apartment complex requires investment and generates economic activity.
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Re: Just the Tax

Post by Warren » 07 Nov 2017, 22:43

Mo wrote:
07 Nov 2017, 21:55
Rent is payment for goods and services.
That's just it. It really isn't.
Turning 4 houses into a 30 unit apartment complex requires investment and generates economic activity.
Sure the conversion investment produces new apartments. And maintenance, keeping the property in good repair, should figure into GDP because it too produces something of value. But rent is just paying for the use of something. No value is produced because you're renting something. That it is "economic activity" is irrelevant. Extortion is economic activity but it doesn't belong in the GDP either.
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Re: Just the Tax

Post by Mo » 07 Nov 2017, 23:10

Warren wrote:
07 Nov 2017, 22:43
But rent is just paying for the use of something. No value is produced because you're renting something.
Image

You're providing a valuable service. Are you saying that Hertz and Avis don't produce any value? What about Marriott, Hilton or Regis?
his voice is so soothing, but why do conspiracy nuts always sound like Batman and Robin solving one of Riddler's puzzles out loud? - fod

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the innominate one
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Re: Just the Tax

Post by the innominate one » 07 Nov 2017, 23:31

Regis Philbin? He produces nothing of value.

Disturbing image in your comment, btw.
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