Let's Debate Inequality

[muhammad_isa]

Care to explain why you disagree with what you quoted?

See my post #362

 

[anotherneil]

Sure.

• Premise 1: Poverty, hunger, lack of shelter and access to basic necessities happen mostly due to the poorest having a lack of resources/money.
• Premise 2: The rich people have many more resources/money than necessary to provide for their basic necessities and comfort.
• Premise 3: If the government taxes the rich people, it has access to their resources/money.
• Premise 4: If the government has access to their resources/money, the government distributes these resources/money to the poorest.
• Premise 5: If the government distributes theese resources/money to the poorest, the lack of resources/money of the poorest will be reduced.
• Conclusion: Therefore, if the government taxes the rich people, the lack of resources/money of the poorest will be reduced.

Fantastic! Thanks for providing this.

Strictly speaking, your argument as stated is valid but unfortunately not sound & the reason it's unsound is because premise 4 can be false; its consequent does not necessarily follow from its antecedent. It is possible for the government to have access to the resources/money of rich people, yet not distribute these resources/money to the poorest.

I'm going to disregard this nuisance of a technicality, though, because with your original claim, as stated (Crime, corruption, poverty, abject hunger, lack of shelter and access to basic necessities can all be reduced by taxing the rich and distributing money, goods and services to the poorest.), it does seem like it can be the conclusion to a sound argument & I think this can be achieved by making some tweaks to your premises - in fact, I think there's only one that's necessary - revise consequent for premise 4 to "the government can distribute these resources/money to the poorest." I believe this would now be consistent with your original claim resulting in your argument being sound.

As a side note: based on this tweak, your argument is sound independent of the 1st 2 premises; I'm just going to move on for now, but we can revisit these 2 premises and how they need to be incorporated into an argument if necessary.

Ok, so your disagreement is that you presume that if we heavily tax the rich people, they will no longer produce the wealth that we are using (through taxation) to feed the poor, is this correct?

Yes, I do believe this is a pretty good description - I'll go with it unless some unnoticed detail reveals some sort of discrepancy; I think you get the idea of my position or what I'm getting at.

There are many ways to address this, but I would like to make sure we are on the same page before I continue.

I agree that there may be several ways to address this, including educating voters, and I have quite a few:


One thing that voters ought to familiarize themselves with and understand about the economy is the Laffer Curve. This basically points out that there's an optimal tax rate for maximizing revenue; for example, a tax rate of 10% could bring in $1 trillion dollars in tax revenue, a tax rate of 50% could bring in $3 trillion in revenue, but a tax rate of 90% is going to bring in less than $3 trillion; it'll probably be the same as or close to the revenue brought in by a 10% tax rate (maybe a little more, maybe a little less). If enough voters were aware of this, then they might realize that the tax rate might as well be 10% rather than 90%, or 25% rather than 75%, etc.

Last I checked, there's a consensus among economists about the general shape of the curve, but not with where this optimal tax rate is. The free market economists more or less contend that this rate is somewhere below 50%, and socialist economists more ore less contend that this rate is somewhere above 50%. From the perspective of the top US marginal tax rate (~37%) and an analysis based on an engineering perspective (i.e. ~35%: The Crier Curve), they seem to be in agreement with the position of free market economists, and I think it's interesting that these values happen to be very close to each other. The discrepancy can probably be explained by the fact that the blog article doesn't assume tax brackets, meaning that without tax brackets & having the same revenue results, the US tax rate would probably be ~35%.


A tax rate, even without tax brackets, as opposed to a fixed tax fee is one thing that's already being done to tax more from the rich. With a tax based on rate, someone only making $25k/yr is only paying, say - $2.5k in taxes at a 10% rate, and someone making $25 million/yr is paying, say - $2.5 million in taxes; they're paying way more in taxes than what someone makes in a year at a rate of $25k/yr (that's a factor of 100 between richer person tax bill and poorer person total pay!).

Tax brackets is something else that's being done to tax even more from the rich; now that person making 25k/yr is only paying, say - $1.25k in taxes at a 5% tax rate, and that person making $25 million/yr, at a tax rate of, say - 20%, is paying somewhere in or near the vicinity of $4.5 million or more, but below $5 million (taking into account the lower marginal rates for the lower bracketed rate amounts) in taxes, depending on where those brackets are and their rates. Now you've gone from the poor tax payer paying $2.5k to only paying $1.25k, and the rich tax payer going from paying $2.5 million to paying around $4.5 million or a "little more" (meaning something like an additional $100k).


If it's your contention that the rich have the luxury of deductions and tax loopholes to avoid having to pay taxes, then the solution to this is to have a flat tax rate. In reality, it basically doesn't make a difference, because taxes are actually money being removed from between the trading parties; what I mean is this - let's suppose person A negotiates a trade with person B; person A sells a widget to person B for $100. One scenario is that there's a sales tax of 10%, meaning that person B actually has to spend $110 to purchase the widget, and tax revenue is $10. In another scenario there's an income tax of 10%, meaning that the person A has to pay 10%, which is also $10 in revenue, and made a net gain of $90; however, with the law of supply and demand, this basically means that each party is pays will vary.

Let's suppose person A wants to have a net gain of $100 for the widget; for a 10% income tax rate, then they're going to demand $111.12 from person B for the widget. Let's now suppose person B has a budget of $100 for the widget; if they have to pay a sales tax of 10%, they're going to offer person A $90.90 for the widget. In both cases, the tax revenue is slightly different, but essentially the same amount (~$10). There are several points being illustrated by this: one is that the government is receiving practically the same amount either way; another is that one or the other party has to foot the bill; the buyer is going to lower their offer if they have to foot the tax bill, and the seller is going to raise their price if they have to foot the tax bill.


This means that the only real difference between a sales tax and an income tax is who's responsible for that cutting a check for paying that ~$10 in taxes and sending it to the government. Retail businesses already have the responsibility of cutting that check for the sales tax revenue they have to collect from customers, and retail customers don't have to concern themselves with cutting a check to pay the sales tax, since they've already paid it when the retailer collected it from them, unless they want to deduct it as a business or medical expense, etc. The same isn't true for employees when it comes to paying income tax; employee income taxes are already being deducted by an employer's payroll department, but employees have to go fill out and file income tax returns and pay up to the IRS and state tax departments if they owe money.

As businesses, retailers have the infrastructure to collect sales taxes, and employers have the infrastructure to withhold taxes; employers and retailers are essentially or usually one in the same thing, meaning that it's one in the same entity that's both collecting sales taxes and withholding employee taxes, with some exceptions (e.g. wholesale distributors).

(to be continued)

 

[anotherneil]

(continued)

What if we changed the tax laws so employees wouldn't have to worry about whether or not enough was deducted and didn't have to file tax returns? I think this would be advantageous for lower income individuals; for example, they'll know that once they get a paycheck, every penny of it is theirs to keep rather than having to worry about holding on to some unknown amount in case they have to pay taxes. Just make the income tax rate a flat tax, and make the employers responsible for withholding it and cutting the government a check.

We can take this one step further, and make it abstract to employees, by which I specifically mean we have the tax rules say that an employer can state an hourly rate or salary to an employee (as a hiring offer, raise, etc.), and that hourly rate or salary that they state to the employee is what they actually get paid. The employer could still pay income taxes; they just need to adjust their stated hourly rates, salaries to fit into what they can budget or are willing to pay employees to abstractly include the income tax. The government is still going to be receiving the tax revenue from income taxes; it's not going to lose this.

I would also see something similar done with sales tax in retail businesses; make it so sales tax is already covered in the price of the good or service. They're already doing this for all other costs/expenses (e.g. labor, raw materials, shipping, handling, storage, energy, quality assurance, liability), so why is there an exception to the rule when it comes to sales tax (e.g. labor, raw materials, shipping, handling, storage, energy, quality assurance, liability, sales tax)?


Get rid of government policies that create or require the addition of overhead and overhead jobs that aren't essential or fundamentally necessary for the economy to function. It's in the interest of private businesses to eliminate as much overhead as possible without rendering itself inoperable, so based on this notion, there's no need to have any sort of government mandate that crosses over into the private sector. There are many ways and situations where this elimination can be implemented or achieved.

One example is with tax preparation services; by eliminating the requirement for employees to have to file tax returns, there's no need for tax preparation services for this purpose. Tax preparation services in such cases is basically nothing but overhead. When someone working at a tax preparation service is spending their time & effort filling out tax returns, they're not producing anything that adds to the economy; it's the opposite, they're a burden on the economy. Even if tax preparation services didn't exist, employees would have to fill out tax returns themselves, which is the same overhead cost. The only advantage of using a tax preparation service for income tax returns is efficiency, but that only cuts back on that burden, and not completely, either.


Implement a dividend-based version of a "UBI" (DB-UBI); what I mean by this is something like a UBI, with the only detail being that the amount received is a function of the performance of the economy. A fixed rate UBI (FR-UBI) is not sustainable, or maybe at the very best would be more and very inefficient for the economy. With a FR-UBI reduces the incentive for people to participate in the work force, which means less availability of goods & services market. The DB-UBI retains the incentive for people to participate in the work force, because if too many people don't participate in the work force, then these DB-UBI payouts go down as a result of less revenue being generated to fund it, meaning access to fewer goods and services for those who aren't participating in the work force (thus incentivizing them to join the work force).

DB-UBI isn't socialism; it doesn't prevent the free market from existing the way an FR-UBI would. It's also consistent with a system of property rights based on liberty and a free market, whereas what we practice now doesn't meet that criteria. Without a DB-UBI, we have a soft form of slavery; we currently have a system that says work or starve (unless you were born to a rich family and inherited their wealth). The problem with "work or starve" soft slavery dilemma is that this is only artificially created and imposed on society, and a DB_UBI gets rid of that.

Part of the underlying idea for justification for a DB-UBI pertains to property rights (or right to our own wealth); how do we have property rights? How do we have them? Where do they come from? It seems no one really has a clue. It's not difficult, I think; property rights really comes from the collective of society agreeing that something is your property or wealth; there's basically nothing more to it.

Another part of the underlying idea for justification for a DB-UBI pertains to agreements; when we agree to something, without coercion, we're doing so freely; when we agree to something only because we were coerced into it, that's slavery. A DB-UBI isn't a wealth redistribution program. Society has to freely and collectively agree that this house, or that car, or that plot of land, or this pile of gold/money belongs to person X, or person Y, or person Z, etc. The idea behind a DB-UBI is to serve as compensation in exchange for agreeing to property rights, not wealth redistribution.

The purpose of a DB-UBI is not to eliminate wealth inequality, as wealth inequality is not a problem that needs solving. By compensating the poor individual or individual who chooses not to participate in the work force, it's a reason to not steal because they don't need to starve. It's not going to eliminate crime; a DB-UBI doesn't ban laws and law enforcement. I'm confident enough that the crime rate will drop by a very dramatic amount to a degree that can much better mitigated and managed.


One more thing we can do is do away with inflation caused by a growing circulating money supply from fractional reserve lending. It destroys the purchasing power of that money, and bank runs is a risk that exists with such a system. Go back to a monetary system based on money backed by precious metals. Even a fiat money system would be better than what we have now.

 

[Kfox]

Why do I need to know them "personally"? Why do you keep asking these stupid questions?

Let me give you an example.

All across the U.S. there have formed "investment groups" (greedy capitalists) that have pooled their excess money, and they've been using it to buy up single family homes in specific areas, all across the country. This, of course, causes the price of SF homes in that area to increase dramatically, as the available stock diminishes dramatically. And the result is that home buyers in that area can no longer find or afford to buy a home. Which means they now have to rent one.

And guess who has a whole bunch of homes available to rent! Yep, the greedy investment groups that bought them all up. And guess what they do next ... they raise the prices of the rents dramatically because they now own most of the available rental homes. And because all those potential home buyers are being forced to rent, they will have to pay those excessive rent prices.

What's going on is that by combining their excess wealth, these investment groups were able to deliberately create a housing monopoly in a whole bunch of areas of the country, and of course they are using that monopoly to price gouge the people living there for housing. And this is all perfectly legal because the government is always years behind when it comes to responding to these sorts of greedy price-gouging schemes. Ignorance, corruption, incompetence, and not having the ready funds to counteract these schemes make sure of it.

And this is just one small example of MANY, MANY, MANY similar examples where capital investors have deliberately created monopolies and used them to price gouge everyone else on everything from housing, transportation, communication, home energy, gasoline, health care, insurance of all kinds, education, and pretty much anything else that people NEED in a modern society to survive. And the fact that you are not seeing this tells me that you have your eyes and your mind intentionally and deliberately tightly closed to it. Because it's a GLARING problem in this country and in many other capitalist countries, too. But in this one it's becoming dangerous in that most U.S. citizens have no savings and are buried in debt to the point that one life setback will drive them into poverty. And now, even into homelessness.

What you're not understanding is that the ideal goal of the capital investor is to invest in a monopoly, and then squeeze everyone involved in it for everything they have.

But you aren't seeing ANY of this, are you. And you are going to continue not seeing it, I suspect. In fact, you will FIGHT to deny it if anyone like me tries to point it out to you.

Why? I have no idea.

It would be a mistake to assume the problems you guys see in San Francisco are typical of problems everywhere in the USA; Your city has a unique set of problems compared to other places. But I also recognize there are good and bad people everywhere, so of course there are gonna be bad capitalists. There are also bad poor people, black people white people, cops, doctors, immigrants, gay, straight, etc. etc. But what I do not do is focus on a particular group of people, only recognize the bad among that group and label the entire group as bad; because that would make me a bigot, and I am better than that. Yes there are bad people in every group, but I also realize there are good people in every group; that's called being fair.

 

[Kfox]

That is decided by the state (central bank).
If they decide that there is 'too much wealth' in the system (inflationary), they use
monetary policy (usually raise interest rates) to control it.

As I've already pointed out, that main feature of capitalism causes inequality .. BY DESIGN.

Raising interest rates do not prevent wealth from being created; the Central bank does not have the ability to prevent people from creating wealth. Care to try again?

 

[Pete in Panama]

That is actually destruction of wealth. OK, it is only money, but I could have bought something valuable with it. When I give it to a scam company which has no contact to the IAU, it has lost all its value.
(Not really, the money is still there, but all the resources and energy that went into the scam are now lost for a bit of hot air.)

Creatio ex nihilo? You think the wealth gets created through the transaction? That thing I bought from you had no value when you had it?

When people effect a transaction, each person wants what he gets more than what he gives. If one person is drowning in a lake and someone else is dying of thirst in a desert, the first trades his excess water for the dry land that the other pays. Both are much happier and far better off. It's the same thing that happens when you're hungry and you trade money for food. The grocer wants the money more than the food and you want the food more than the money. He would have been willing to sell for less and you would have been willing to pay more. You're both better off.

 

[Kfox]

That is actually destruction of wealth. OK, it is only money, but I could have bought something valuable with it.

Just because you (or I) don't value it doesn't mean it has no value. My point is; the ability to create wealth is not limited to what is here on Earth.

Creatio ex nihilo? You think the wealth gets created through the transaction? That thing I bought from you had no value when you had it?

If I can convince you it is valuable enough to spend money on it, that is when the wealth is created.

 

[muhammad_isa]

Raising interest rates do not prevent wealth from being created..

That is not my experience..

In November 1979, the Thatcher government in UK raised interest rates to 17% in order to tackle inflation. This harmed manufacturing industry and exports, but did eventually have the desired effect on inflation.
- BBC Archives -

This caused mass unemployment, thus creating an underclass with little or no opportunity.
Her words:- "unemployment is a price worth paying" .

 

[an anarchist]

It's a lie .. they merely wish to keep the wealth in their corner by 'sleight of hand'.
They exploit people's fear of inflation, by insisting that controlling it through usury is the
only way. This results in oppression of the poorest, while the 'free-market' advocates increase
their wealth at their expense.

You are misunderstanding the free market.

 

[muhammad_isa]

You are misunderstanding the free market.

I don't think so .. the detail is in the word "free" .. unregulated .. able to make
whatever financial transactions you wish.

 

[an anarchist]

I don't think so .. the detail is in the word "free" .. unregulated .. able to make
whatever financial transactions you wish.

controlling it through usury is the
only way. This results in oppression of the poorest

 

[muhammad_isa]

@an anarchist

Controlling inflation by raising interest rates is NOT the only way.
This is the preferred method of the wealthy, because it increases their wealth
at the expense of those less fortunate .. on a national AND global level.

This is what the G7 is all about .. propping up a global, financial system that keeps them
uppermost.

 

[Kfox]

That is not my experience..

In November 1979, the Thatcher government in UK raised interest rates to 17% in order to tackle inflation. This harmed manufacturing industry and exports, but did eventually have the desired effect on inflation.
- BBC Archives -

This caused mass unemployment, thus creating an underclass with little or no opportunity.
Her words:- "unemployment is a price worth paying" .

Though it may have drastically slowed down, I can assure you it didn't come to a complete stop

 

[Koldo]

So we could say that the fact the earth rotates around it'a axis creates social issues and that would also solve nothing. If we want the world better for humanity we must first decide what we want and then consider the costs. Please explain what you want changed with how labor is sold and purchased.

The most practical suggestion I have to offer is to increase the minimum wage when applied to a given job on the basis of how much of a profit the employer's company is making.

 

[Koldo]

With what you are suggesting, government would redistribute a majority of the wealth. Am I understanding you right?

I believe it is doubtful that in a free market environment that an individual would be able to accumulate and misappropriate the amount of wealth that government would have access to in a State environment.

Perhaps I’m wrong. A pure free market economy has not been tried so is therefore in the realm of hypotheticals. (A free market economy would require the absence of government, at least, from an anarcho-capitalist point of view).

In principle, you are correct. But then again: Is manipulating the market only a bad thing when done in a very large scale?

 

[Koldo]

I think the word you used was "psychopath". Replace crazy with psychopath, and my point remains the same.

It does not. Because it doesn't make sense to have a debate with a psycopath concerning social issues if he is going to pull the 'there is no need to solve that' card.

Only to an extent

Great. So our disagreement is on the extent. Where do you draw the line and why?

What are you talking about? I said nothing about employees responsible; I'm talking about the typical ups and downs of business profit. Do you believe employees should see a reduction in pay when profits are down?

If the employee is responsible for the down, yes. Else, no.

 

[Koldo]

Capitalism is indicative of pulling people out of poverty and giving them more.

Incorrect. Knowing whether a country is capitalist is insufficient to determine if most of it's population is (very) poor. On the other hand, knowing it used to be a colonizer is sufficient to determine that.

 

[Kfox]

It does not. Because it doesn't make sense to have a debate with a psycopath concerning social issues if he is going to pull the 'there is no need to solve that' card.

How about if the person is not an actual psycopath, but is just someone who does not share your views on how to solve the homeless problems?

Great. So our disagreement is on the extent. Where do you draw the line and why?

I think there should be a safety net for those who fall between the cracks,

If the employee is responsible for the down, yes. Else, no.

So when profits are up, wages should be tied to profit; but when profits are down, what should wages be tied to?

 

[Koldo]

How about if the person is not an actual psycopath, but is just someone who does not share your views on how to solve the homeless problems?

As I have said before, that's alright because then we, at least, share a common ground and conversation is made possible.

I think there should be a safety net for those who fall between the cracks,

What are you calling 'cracks'?

So when profits are up, wages should be tied to profit; but when profits are down, what should wages be tied to?

In both cases, wages should be as close as possible to the value generated by the labor. But that is an ideal scenario that is not realistic when the company wouldn't be able to afford that. It is, however, far more realistic when there is massive profit, since then the company is able to afford that.

 

[Kfox]

What are you calling 'cracks'?

Exceptions to the rule. People with unfortunate circumstances that prevent them from contributing to society financially.

In both cases, wages should be as close as possible to the value generated by the labor.

But during times the company loses money, there is zero value generated by the labor. I'm gonna assume you expect labors to be paid even when their labor produces zero value; is that correct? If so, what should their pay be based on?

But that is an ideal scenario that is not realistic when the company wouldn't be able to afford that. It is, however, far more realistic when there is massive profit, since then the company is able to afford that.

Maybe the company needs those years of massive profits to make up for and balance out the years of massive losses while the labors still expect to get paid. Does this sound fair to you?