patrick.net

Equal sharing of misery is not a value nor a good goal to achieve.

Peter P says

Yep. This is why I support having a wealth tax instead of an income tax. The most practical form of wealth tax is the Land Value Tax because you cannot hide real properties.

If government is the protector of wealth, tax can be seen as a form of insurance premium.

I agree!

A 2% annual tax on wealth alone could replace all income tax, all sales tax, and all other taxes.

2% is not too much to ask in return for hiring armed peasants (police, judicial system, national guard) willing to shoot at unarmed peasants to protect 98% of your wealth.

Especially if your investment income exceeds 2%.

Since in the past generation the US has slowed in R&D and manufacturing, the effects of the contributors kicking up to the rim of Champagne glass are the root cause of the malaise, not the wealthy.....

The Professor says

How about we take 10% a year of everything over $10,000,000 in accrued wealth from the upper class? When their wealth fell below ten million they would still have enough to live fairly comfortably.

The problem isn't that some people have vast amounts of wealth. The problem is how those people got those vast amounts of wealth. The richest in our society become that rich by stealing wealth from the rest of us. The theft is legal, because the wealthy make the laws, but it's theft nonetheless. The problem is that their parasitic activities impoverish the rest of us.

For the few wealthy that made their money by inventing something or entertaining, those rich do not impoverish us and so there is no reason to begrudge them their riches. Those few wealthy actually increase our wealth as well.

But for the vast majority of the ultra-wealthy, their wealth comes from zero-sum games that cost the rest of us. The answer isn't to tax them. Under your proposal, those people would simply wastefully spend all money they acquire over the ten million on absurd luxuries. No, the answer isn't to tax them. The answer is to prevent those parasites from siphoning off our wealth in the first place. Those parasitic wealthy should not even exist in the first place.

@Dan8267

I 100% agree with your post above...

Meccos says

If one's goal is to make more and more, is there anything wrong with that?

Is snorting more and more coke a good idea? Could there be an addiction here?

Dan8267 says

The problem isn't that some people have vast amounts of wealth. The problem is how those people got those vast amounts of wealth. The richest in our society become that rich by stealing wealth from the rest of us. The theft is legal, because the wealthy make the laws, but it's theft nonetheless. The problem is that their parasitic activities impoverish the rest of us.

That's our government, an old boys club that takes care of the old boys club taxing, stealing, plundering the working people. That's the real welfare state of America.

They work for a few years and get their salary for a lifetime by taxing the rest of us to pay for their lavish lifestyles.

The Professor says

Agreed. But how?

There are a number of structural changes that we can make to eliminate financial parasitic behavior. No single change will solve the problem, and the fight is to a certain extent an arms race, but here are a few changes that will significantly improve things and greatly reduce parasitic behavior.

Change 1: Captain Gains Tax

Capital gains on anything should be set with the following formula.
taxRate = 1.00 - 0.01 * floor(numberOfMonthsCommodityIsHeld)

This simply formula would have prevented the Dot Com Bubble, the Housing Bubble, and the Second Great Depression. It would also prevent most financial parasitic behavior including the extremely dangerous practice of microtrading, holding assets for nanoseconds in order to manipulate the market.

The Goldman Sachs of the world would not be able to do nearly as much damage if this single change were made.

Change 2: Enforce Anti-Trust Laws

Any company that is too big to fail is, by definition, too big to exist. All banks that got the $16 trillion in interest free loans should be nationalized and all profits from them should go back to paying back the tax payer and dollar holder via paying off the national debt and offsetting the inflation of the past 10 years with an equal amount of deflation. These banks can be denationalized by liquidating them and selling the assets to smaller, more responsible banks.

Any other company that is too big to fail or gets too big to fail should be broken up into smaller companies. Company mergers/buyouts should not be allowed if a company has more than 1% of the market share of any industry.

Change 3: Tax the land, not the house.

A 6% tax on the value of land would stop parasites, including banks and real estate investment firms, from hording land and preventing its productive use.

I personally don't believe in taxing the buildings as that discourages production of high quality, valuable buildings, but if buildings are to be taxed, they should be taxed equally as opposed to the policies in states like Florida that tax younger people more than older people.

Change 4: Eliminate all deductions from all income taxes.

Do not lower the tax rates, just eliminate all deductions. Do not replace an income tax with a sales tax.

Eliminating these deductions will prevent the richest corporations and individuals from paying an effective lower rate than the middle class.

Change 5: Apply income taxes after capital gains taxes rather than instead of it.

Any income from capital gains should be taxed at income tax levels after the capital gains tax has been applied. This will prevent capital from devouring everything like a black hole. Right now, capital makes itself necessary by sucking all available capital. It's a positive feedback system that benefits those who do not have to produce anything while enslaving those who do produce wealth, the middle class.

FortWayne says

They work for a few years and get their salary for a lifetime by taxing the rest of us to pay for their lavish lifestyles.

How would you feel about a nationwide 1.5% and 25 cents per transaction sales tax?

Dan8267 says

How would you feel about a nationwide 1.5% and 25 cents per transaction sales tax?

I like that idea, but...

Would that replace existing taxes in CA? Because here we have some really high costs of doing business. I'm not talking about high sales taxes or income taxes alone, I'm talking about all the other fees and levies that make hiring someone full-time almost impossible without going bankrupt.

It's why we all hire Mexicans out here, cost of hiring in CA is tremendous.

Dan8267 says

Enforce Anti-Trust Laws

Any company that is too big to fail is, by definition, too big to exist. All banks that got the $16 trillion in interest free loans should be nationalized and all profits from them should go back to paying back the tax payer and dollar holder

I'd like to see that, but it cannot happen while corporations can continue to buy politicians.

The fundamental problem is our campaign finance system, where our supposed representatives actually represent those who give them the money to get elected.

And why should any of our elected representatives want to change the system that got them elected? That's the corner we're in.

Theodore Roosevelt recognized this back in 1912:

"To destroy this invisible government, to dissolve the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day."

http://teachingamericanhistory.org/library/index.asp?document=607

But the problem has never been fixed. How can we really fix it?

Why don't we take this one step further? Why stop with the US? Do you realize that as American wage earners most of us make more than 90% of the rest of the world? Is this really fair? Did we really EARN this money? Wouldn't it make more sense to just transfer most of our wages to the rest of the world so we can all live on world average salaries. Most of the world hates us, not because of our rich, but because of our rich wage earners. Think of the goodwill wage redistribution will bring our country. not to mention the peace, freedom, and opportunity across the globe. We've got to stop being selfish and start thinking about other people.

FortWayne says

Dan8267 says

How would you feel about a nationwide 1.5% and 25 cents per transaction sales tax?

I like that idea, but...

Would that replace existing taxes in CA?

No, it would just be a tax to ensure lavish lifestyles for a few people. It would not be used to provide any service.

I'd like to see that, but it cannot happen while corporations can continue to buy politicians.

The fundamental problem is our campaign finance system, where our supposed representatives actually represent those who give them the money to get elected.

All true. And that is why it will take some kind of revolt, violent or not, from the masses to stop this parasitic system.

The only non-violent solution I can think of is for all the pissed off people to start a new political party, to get that party elected in local government, and work up the chain of power to the senate and house. It's impossible now to change Washington without direct force from the outside. You cannot change the system from within the system because the system is built to be a stable stronghold for parasites.

The Professor says

Dan8267 says

There are a number of structural changes that we can make to eliminate financial parasitic behavior.

Double like! Awesome post!

Now, how can we get the oligarchy to agree to these changes?

From the bottom up, not from the top down.

Trifle says

Why stop with the US?

Because that is where our sovereignty stops. I would not favor a world government. Too much power in too few hands.

Trifle says

Do you realize that as American wage earners most of us make more than 90% of the rest of the world?

Yes. Do you realize that this statistic is entirely meaningless? The purchasing power of a dollar bill in China, where most of the laborers are, is far more than the purchasing power of the same dollar bill in your town or city. As such, comparisons of wages between societies is utterly meaningless and misleading.

Now, comparing the quality of life can be done in a meaningful way, and America's quality of life is better than these developing nations, but it would take far more drastic measures for us to positively affect that quality of life. Here is one way to do so.

Set the total compensation an executive can receive in one year to the median total compensation received by his employees. Include overseas employees, contractors, etc. as employees for this purpose.

This completely changes the game. Now the executives cannot exploit the workers because doing so diminishes his own income. The executive still has motivation to maximize per employee production since doing so maximizes his income. But the executive has no motive to use employees for non-productive uses or to reduce the labor force. Economies of scale will ultimately determine how many employees are hired for a particular company.

Of course, the big question is how could one pass or enforce such a measure when the politicians are already the whore slaves of these very executives?

As long as I can throw m&m's at the heads of the peasants whilst I dine on bleu cheese encrusted filet mignon ....i'm good to go.

Dan8267 says

The Professor says

Dan8267 says

There are a number of structural changes that we can make to eliminate financial parasitic behavior.

Double like! Awesome post!

Now, how can we get the oligarchy to agree to these changes?

From the bottom up, not from the top down.

SoftShell says

As long as I can throw m&m's at the heads of the peasants whilst I dine on bleu cheese encrusted filet mignon ....i'm good to go.

The peasants like M&Ms, so I doubt anyone would complain.

I'd like to see that, but it cannot happen while corporations can continue to buy politicians.

This is in essence, the root of the problem. As long as politicians can be bought, there will be no solution.
Although this discussion stated out with the argument for taxing "the rich" I am glad what a few here have eloquently made the distinction between "the rich" and "the parasitic rich or the exploiting rich", as these are completely different.
As many of you have seen from my previous post, I am a staunch defender of "the rich". If they earned their wealth, in my opinion, they deserve to keep it. However I do not defend people who exploit and practice parasitic lifestyles. I would challenge everyone here to make this distinction as it is important. Stealing is stealing, whether it is the rich stealing from the poor or the poor stealing from the rich...

Meccos says

So the executives would receive less than half their employees?

If they executives don't like that, they can always increase their income by mining the ore themselves, or spending 70 hours a week writing code, or manning the french fryer. I'm sure we can find some worker who would gladly take the place of the executive. Pay isn't the only difference between the jobs of executives and their employees.

But even if we adjusted the executive pay to say 1.5 or 2.0 times the median income, the principle is the same. There is no justification for executive pay being 100+ times the median wealth producer pay. Executives are, at best, overhead. They produce nothing.

Dan8267 says

Meccos says

So the executives would receive less than half their employees?

If they executives don't like that, they can always increase their income by mining the ore themselves, or spending 70 hours a week writing code, or manning the french fryer. I'm sure we can find some worker who would gladly take the place of the executive. Pay isn't the only difference between the jobs of executives and their employees.

Dan,

YOu realize that we can make the same argument about the workers also. If they dont like the pay, they can just go find another job. The problem your argument is that the average worker is much easier to replace than the average executive. You can find millions of people who can fry french fries, but you cant find millions of people who can run multi-million dollar companies. in addition, I bet most executives work more hours than the average worker... most probably do work 60-70 hours.

Dan8267 says

Meccos says

So the executives would receive less than half their employees?

But even if we adjusted the executive pay to say 1.5 or 2.0 times the median income, the principle is the same. There is no justification for executive pay being 100+ times the median wealth producer pay. Executives are, at best, overhead. They produce nothing.

I agreed with you and again I agree with you that executive pay is outrageous at times. WIth that said, you have no right to dictate pay in a private company. Secondly, executives do produce. Just because they do not directly produce the products or services themselves, does not mean they are not productive. This is the same as an analogy to football. Just because the coach is not throwing or running the football, it does not mean he is not productive.

Meccos says

WIth that said, you have no right to dictate pay in a private company.

It would not be me dictating the pay, it would be the state, obviously. And the state does have the legal right to dictate pay. It does this all the time in the form of the minimum wage and garnishing wages.

Meccos says

Just because they do not directly produce the products or services themselves, does not mean they are not productive. This is the same as an analogy to football. Just because the coach is not throwing or running the football, it does not mean he is not productive.

The analogy between coaching and executive far from perfect. The coach's strategy is clearly part of the product of the game, which is the good produced. The executive financial manipulations are not part of the product produced unless the company is in the financial industry, which produces nothing anyway.

Executives are at best necessary overhead, but overhead should not get the lion's share of the wealth produced by the non-overhead. At worst, executives wreck companies and cost stockholders everything all while extracting vast wealth from the company they are wrecking. The current system actively encourages this.

The very idea that executives are some how more important than the people producing the goods or services is complete nonsense that is perpetuated solely because those at the top of the hierarchy are precisely the ones who get to spend the marketing dollars.

In reality, it is ridiculous that we even use hierarchical structures in our economy. Everywhere in software, hierarchies have been replaced by networks, graphs, and sets. The hierarchical corporation is an archaism in the modern world. Production should be peer-to-peer along a distribution network that itself is managed distributively, much like the Internet.

Dan8267 says

And the state does have the legal right to dictate pay. It does this all the time in the form of the minimum wage and garnishing wages.

It dictates minimum pay, but never maximum pay.Dan8267 says

The analogy between coaching and executive far from perfect. The coach's strategy is clearly part of the product of the game, which is the good produced. The executive financial manipulations are not part of the product produced unless the company is in the financial industry, which produces nothing anyway.

Executives only financially manipulate their company? It appears that is what you are implying...
Dan8267 says

Executives are at best necessary overhead, but overhead should not get the lion's share of the wealth produced by the non-overhead. At worst, executives wreck companies and cost stockholders everything all while extracting vast wealth from the company they are wrecking. The current system actively encourages this.

I suppose Steve Jobs was necessary overhead, Bill Gates was necessary overhead.

Dan, you are falling into this trap of generalizing all executives, just like previous posters who generalized all rich people as parasites or exploiters. The fact of the matter is that executives are crucial in the success of any business. Lets not minimize their duties and jobs to make a point.

Meccos says

It dictates minimum pay, but never maximum pay

Hence the mention of garnishing wages.

And yes, government can certainly put pay caps on. There's nothing Unconstitutional about that.

Of course, what I'm talking about isn't even a pay cap, it's marrying the self-interest of the executive to the self-interest of all others in the company. A rising tide raises all boats only if everyone is in the same boat.

Meccos says

Executives only financially manipulate their company?

Not only their company... Executives manipulate a lot of things, but they rarely do something that isn't a zero-sum game today. I have yet to hear a single reason why society or an economy should reward zero-sum games.

Meccos says

Dan, you are falling into this trap of generalizing all executives, just like previous posters who generalized all rich people as parasites or exploiters.

Without generalization, not a single book could ever be written. There is a difference between extracting a general principle and stating that all executives are worthless. I did not say that. I did say that they are at best necessary overhead. But even necessary overhead should not take the lion's share of wealth production by any rational logic.

If a goal of economics is to maximize wealth production, then it makes no sense to strangle the economy by channeling that production away from the producers and towards a few individuals rigging the system. To do so is to discourage productivity all together.

The problem I have with most (not all) executives can be summarized as this... The modern executive is interested in exploiting the producers taking almost everything and leaving only the bare essential for the producer to live on. His greed knows no bounds and his siphoning of wealth harms everyone will providing only a marginal benefit to himself. Even riches have diminishing returns. The executive of today's transnational corporations has become a highly inefficient parasite. Instead of innovating, he stifles innovation with obscene patent laws. Instead of increasing productions, he decreases it to create artificial shortages to drive up prices. Instead of improving efficiency, he exploits and maintains inefficiencies in the system to maximize profits. Instead of working hard, he pits worker against worker to make them work hard for meager scraps. Instead of improving the quality of life, he seeks to make life cheap so he can indulge in extravagances. And then he acts indignant when we do not show adulation for him.

Consider a wealth tax instead of an income tax or sales taxes or pay caps. By wealth I mean all land, stocks, bonds, and everything else which is owned in the name of a particular person.

A 2% annual tax on all accumulated wealth, levied monthly as 0.17%, would be sufficient to replace all other taxes and would have these substantial benefits:

* The tax rate on your income would be zero, so working people could very rapidly accumulate assets.
* Vast wealth would also mean vast taxes paid every year, slowing down the formation of hereditary aristocracy.
* It is hard to hide vast wealth, especially land.
* The tax would never reduce anyone's wealth to zero. It would take about 35 years of sitting on uninvested assets for them to be reduced by half - but if your investment income were greater than 2%, you'd gain and never lose.
* It would dramatically reduce paperwork, since incomes and sales would not need to be tracked at all anymore, and land and other asset ownership is already tracked.

By wealth I mean all land, stocks, bonds, and everything else which is owned in the name of a particular person.

Let's focus on real properties. Once you start taxing abstract ownerships there will be all kinds of distortions.

This statement is completely idiotic.
The decisions made by the executive branch directly affect the viability of the company.
The decisions made by the workers may affect the quality of a small subset of product in the vast majority of cases.

Dan8267 says

The very idea that executives are some how more important than the people producing the goods or services is complete nonsense that is perpetuated solely because those at the top of the hierarchy are precisely the ones who get to spend the marketing dollars.

SoftShell says

The decisions made by the executive branch directly affect the viability of the company.

OK, so why not hire CEOs from India for less than a tenth of what US CEOs are being paid?

Lots of Indians are damn sharp at commerce and willing to work for less. Or the Persians. Also excellent CEO material. Thousands of years of accumulated cultural experience with commerce. Or the Armenians? Really smart and even worse paid in their home country.

Why are only the workers outsourced, and never the executives?

SoftShell says

This statement is completely idiotic.

The decisions made by the executive branch directly affect the viability of the company.

The decisions made by the workers may affect the quality of a small subset of product in the vast majority of cases.

If executives were truly responsible for the vast majority of wealth production, then they are also responsible for every recession, every downsizing, every diminished of the quality of life of Americans. Somehow, they never accept that end of responsibility.

Meanwhile, the per worker productivity of American workers has over doubled in the past two generations while the real wages of workers has barely increased over the same time. And those increases in worker productivity have nothing to do with executives. We engineers created that boost in productivity by developing software and hardware which made people able to produce far more.

You assertion that the executive is the most important person regarding wealth production is wholly false.

Why are only the workers outsourced, and never the executives?

Exactly. Executives are not paid a lot because they are so much smarter or more productive than everyone else. They are paid more because they are closer to the money pot. It's that simple.

Capitalism rewards bargaining power, not productivity. The more control you have over the distribution of money, the more bargaining power you have.

A better economic system would reward productivity and thus encourage more wealth generation rather than more wealth control. The pro-capitalist crowd loves to state the assertion that capitalism rewards productivity, but that is mostly a lie. The biggest financial incentives are for doing non-productive and often counter-productive work, destroying the infrastructure for one's own gain.

Good question....so what's different with Indian executives versus WASPS??
maybe because their cultural values are different? (see women being raped on buses with mass demonstrations ensuing...)

SoftShell says

The decisions made by the executive branch directly affect the viability of the company.

OK, so why not hire CEOs from India for less than a tenth of what US CEOs are being paid?

Lots of Indians are damn sharp at commerce and willing to work for less. Or the Persians. Also excellent CEO material. Thousands of years of accumulated cultural experience with commerce. Or the Armenians? Really smart and even worse paid in their home country.

Why are only the workers outsourced, and never the executives?

Agreed.
and that is the flaw in the system. Salaried executive pay should always be linked to company performance.
If the company performs, the exec gets the big bucks and the worker ants get bonuses...
If not, everyone should get screwed...

Dan8267 says

SoftShell says

This statement is completely idiotic.


The decisions made by the executive branch directly affect the viability of the company.


The decisions made by the workers may affect the quality of a small subset of product in the vast majority of cases.

If executives were truly responsible for the vast majority of wealth production, then they are also responsible for every recession, every downsizing, every diminished of the quality of life of Americans. Somehow, they never accept that end of responsibility.

nah....u wrong.
the top people generate the contracts that sustain the company and the worker ants.
their decisions and actions have far more reaching effect than the assembly line ant.
I'm only on my thrid merlot nad i'm already potperforming u....

Dan8267 says

You assertion that the executive is the most important person regarding wealth production is wholly false

Why are only the workers outsourced, and never the executives?

I'm surprised you've never heard of the golden rule. They have the gold, they make the rules.

Meccos says

They are responsible. If a company goes under, the executives get blamed, not the common worker.

They may get blamed but they make damn sure they get all the money possible out for themselves first.

Meccos says

Steve Jobs however could not be easily replaced

For every Steve Jobs or Jack Welsh that truly produce for the shareholders there are a thousand mediocrities running in place taking tons of money out of the company while the shareholders get squat.

There is no reason whatsoever that CEO's today earn 15 times what they earned in relation to the average worker in the 1970's. The dividends aren't 15 times higher, they aren't even 3 times higher. It's the result of crony capitalism plain and simple. They all sit on each others compensation committees and are frequently from interdependent companies. It's an insider's game.

CEO pay in other countries is dramatically less, for comparable companies. CEO JP Morgan 4th largest bank in the world 19.3 million, HSBC third largest bank in the world paid 2.8 million although that was 2009. Maybe it's improved.

bob2356 says

It's the result of crony capitalism plain and simple

Bob once you own these companies or have any significant skin in the game, then perhaps you can decide how much these guys should get paid. Until then you have no say.

HOwever if you want to talk about crony capitalism, lets talk about the billions of tax dollars being stolen by corporations like Solyndra and the numerous other companies who have bought our politicians. We could go on further and discuss Freddie and Fannie as well...

The corporation itself requires a government charter.

A perfect example of a CEO making decisions based on his own paycheck is Bank of America. Moynihan's bonus is tied to BAC having positive earnings.

In 2011, BAC sold off many highly performing assets to "raise capital." (China Construction Bank, Blackrock, Balboa, which combined paid annual dividends of over $1.5 billion to BAC) One would think that if raising capital was the primary goal, then non-performing assets would be sold first. But if you sell non-performing or poorly performing assets, there is either a loss or little gain.

Doing that wouldn't have given BAC positive earnings...no positive earnings...no bonuses for Moynihan and other top BAC executives. Since they all make a salary of $950k but bonuses many times that, the bonus is where the real compensation lies. (Moynihan's 2011 bonus was over $6M in stock awards)

Oh I suppose they could dilute shares to raise capital as well, but then, they would be hurting themselves too because a major portion of their personal wealth is in company stock. AND I would wager that most of those who sit on their compensation board are also major shareholders....so this is why you rarely see raising capital twith equity. Using debt is much more common...

http://www.forbes.com/profile/brian-moynihan/
http://www.charlotteobserver.com/2012/01/19/2938009/bofas-selling-of-assets-has-a.html

Bottom line, Moynihan is a scumbag. It's just one example, but if they are this brazen with what everyone can clearly see with the companies money, what do you think they are doing with what everyone cannot see?

I am sure Moynihan's expense reports would shock and anger every shareholder.

FWIW, I currently own some BAC.

bob2356 says

For every Steve Jobs or Jack Welsh that truly produce for the shareholders there are a thousand mediocrities running in place taking tons of money out of the company while the shareholders get squat.

True, although I don't give Steve Jobs credit for inventing anything. Steve Wozniak gets my respect, Jobs does not. Jobs stole every idea he had from someone else, and most of what he advocates is polishing turds to make them nice and shiny rather than doing something useful or inventive.

Meccos says

Bob once you own these companies or have any significant skin in the game, then perhaps you can decide how much these guys should get paid. Until then you have no say.

The stockholders are the owners, I'm surprised you don't know that. The compensation committees set pay, not the stockholders. Most corporations don't give the stockholders any avenue to have a say in executive pay.

Pretty presumptuous assuming I don't own stock

Trifle says

Why don't we take this one step further? Why stop with the US? Do you realize that as American wage earners most of us make more than 90% of the rest of the world? Is this really fair? Did we really EARN this money? Wouldn't it make more sense to just transfer most of our wages to the rest of the world so we can all live on world average salaries. Most of the world hates us, not because of our rich, but because of our rich wage earners. Think of the goodwill wage redistribution will bring our country. not to mention the peace, freedom, and opportunity across the globe. We've got to stop being selfish and start thinking about other people.

Are you joking or is your naivete really at this level?

Dan8267 says

The only non-violent solution I can think of is for all the pissed off people to
start a new political party, to get that party elected in local government, and
work up the chain of power to the senate and house

We are far away from mass "violence." There are still tons of people at shopping malls and restaurants which indicates that they have the means to ability to borrow to sustain the system and hence likely have incentives to preserve it. And the rest of the masses are likely at home watching reality TV.