Buffett: Tax the Rich

[jimtron]

Who takes Krugman seriously?

The Nobel Prize folks; Princeton University and London School of Economics. Here are awards he has won (from the Krugman Wikipedia article):

• 1991, American Economic Association, John Bates Clark Medal.[71] Since it was awarded to only one person, once every two years (prior to 2009), The Economist has described the Clark Medal as 'slightly harder to get than a Nobel prize'.[72]
• 1992, Fellow of the American Academy of Arts and Sciences (AAAS).[24]
• 1995, Adam Smith Award of the National Association for Business Economics[73]
• 1998, Doctor honoris causa in Economics awarded by Free University of Berlin Freie Universität Berlin in Germany
• 2000, H.C. Recktenwald Prize in Economics, awarded by University of Erlangen-Nuremberg in Germany.
• 2002, Editor and Publisher, Columnist of the Year.[74]
• 2004, Fundación Príncipe de Asturias (Spain), Prince of Asturias Awards in Social Sciences.[75]
• 2004, Doctor of Humane Letters honoris causa, Haverford College[76]
• 2008, Nobel Memorial Prize in Economics (formally The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) for Krugman's contributions to New Trade Theory.[77] He became the twelfth John Bates Clark Medal winner to be awarded the Nobel Memorial Prize.

"The first problem with Buffett's view is that the number of super-rich is too small for higher rates to make much difference to our budget problems.

This straw man argument has been raised on this thread before. IIRC, Buffet has not claimed that raising the capital gain tax will solve our budget problems. We have serious economic troubles in the U.S., and we're fighting very expensive wars. At a time like this (or anytime really, but especially a time like this), why is it acceptable for someone making 10s of millions of dollars a year to pay a 15-20% rate while someone making 100s of thousands a year can pay up to 35%? Has anyone answered that question with a credible argument yet?

 

[cesarz]

Krugman didnt receive his Nobel for Macroeconomics. Also economists that dont agree with Krugman received nobel prize.

You have spending problem - i think that is the point why CATO thinks it doesnt make sense to rise taxes for rich. And also Cato is for flat tax so its another point they make.
I personally agree - you can do it its not like they will die starving but it will not help you much (if at all) and you still have to cut.

 

[jimtron]

Krugman didnt receive his Nobel for Macroeconomics. Also economists that dont agree with Krugman received nobel prize.

OK. You asked who took Krugman seriously, and I replied with organizations that do.

You have spending problem - i think that is the point why CATO thinks it doesnt make sense to rise taxes for rich. And also Cato is for flat tax so its another point they make.
I personally agree - you can do it its not like they will die starving but it will not help you much (if at all) and you still have to cut.

Whether we have a spending problem or not, I don't see why someone making millions should be in a lower tax bracket than someone making far less. Regardless of the spending and debt problems we have.

 

[Skeptic Ginger]

Who takes Krugman seriously? ...

The Nobel Prize committee.

Do you have credentials that suggest we should take your opinion more seriously?

 

[Skeptic Ginger]

Krugman didnt receive his Nobel for Macroeconomics. Also economists that dont agree with Krugman received nobel prize.

Again, are you saying you are qualified to tell us who is more likely to be correct? Or should we just assume you like one opinion better than the other because of confirmation bias?

You have spending problem - i think that is the point why CATO thinks it doesnt make sense to rise taxes for rich. And also Cato is for flat tax so its another point they make.
I personally agree - you can do it its not like they will die starving but it will not help you much (if at all) and you still have to cut.

My confirmation bias says the Cato Institute is foolishly promoting Libertarianism and the evidence is clear that free markets do not solve all problems.

 

[cesarz]

So you can tell that Krugman is more qualified than Cato but not me You can say that Krugman was right while Friedman or Hayek were wrong.

Cool.

And of course - Krugman absolutely doesnt have his agenda only Cato have.

 

[Toke]

When Krugman says thinks like earthquake stimulate economy then how you can take him seriously?

You fail to read it properly.

What he have said, about more than just earthquakes, is that is stimulates economic ACTIVITY, not so much the actual economy.
(cleaning up/repairing is an economic activity)

ETA:

The fact that breaking windows would make a society poorer (fewer windows) is precisely why nobody ever proposes stimulating the economy by deliberately smashing windows. But the way the dialogue works is that first a Keynesian observes that fiscal stimulus can increase growth in a depressed economy. Second, as an attempted reductio, a conservative says “if that was true, then you could increase growth by breaking a bunch of windows.” Third, the Keynesian accurately points out that you could, in fact, increase growth by breaking windows. Fourth, the conservative accuses Keynesians of wanting to break windows or believing that window-breaking increases wealth.

 

[cesarz]

The problem is that its not true:

http://www.youtube.com/watch?v=gG3AKoL0vEs

 

[stevea]

Capital losses can be carried forward for 2 years and in most cases you can defer taking the loss for much longer. While there may be corner cases where it’s a little off the best approximation is to apply the capital gains to calculate your net return then apply the capital gains tax.

WOW - that is just dead wrong. There is a one year (not 2) carryover special case with a lot of exceptions for ST losses and yes you can carry forward LT losses forever but lost at death. But you are ignoring your own argument.

You cannot take CG losses on the same basis and time as LT gains are taxed - therefore your argument that the two can apply equally to evenly reduce gains and losses is WRONG.

Above you completely ignored losses and calculated return based on the taxing only positive returns. Since you knew this was wrong I have to ask why If you knew it was completely off base and wrong why did you bother writing it?

Your reading skills are suspect. The entire content of my previous post after the 3rd quote discusses tax treatement of CG losses. They were not ignored.



If you believe that mandated taxation for the full CG in the same year it is realized is financially equivalent to a possible, partial or delayed income decrease for an applied C-loss - then you don't understand finance or investment.

 

[stevea]

Whether we have a spending problem or not, I don't see why someone making millions should be in a lower tax bracket than someone making far less. Regardless of the spending and debt problems we have.

Why is "making millions" the basis for apportioning social burdens ?

Buffet and his secretary go to the same office every day. They work in similar conditions, have similar patterns of consumption, live in similar houses. They personally certainly create similar social burdens.

Secretary pays perhaps ~$30k in taxes total taxes incl payroll deductions,
while Buffet pays $7.5M. Perhaps 250 times more.

There is something very unfair here that only closed minded ideologue can ignore.

The electorate has not simply exempted the indigent from taxes, they have pushed an inordinate fraction of social costs onto high-earners, and exempted median and lower earners from too much of the costs. There isn't any egalitarian idealism in wealth transfer to the non-indigent. It's a use of the tax system for social engineering or social justice instead of as a means of apportioning social costs based on burdens imposed.

 

[Toke]

The problem is that its not true:

http://www.youtube.com/watch?v=gG3AKoL0vEs

The problem here is that you have fallen for pretty videos and strawman arguments.

No, destruction does not create wealth, it does however create economic activity. Under normal circumstances it will just supplant some other and actually constructive activity. (liker the bakers suit)

The Keynesian point, which your video carefully omit is that during a recession there is far to little economic activity and at least in theory anything would help.
In reality Keynesian economists would recommend something a bit more constructive than breaking windows to encourage economic activity.

Infrastructure is a classic recommendation, Denmark got some nice bridges in the 30's depression.

I recommend that you think very carefully about why that video omitted the whole story.
http://krugman.blogs.nytimes.com/
You could also try reading some of Krugman's posts on his blog, he might make more sense to you than I do.

 

[jimtron]

Why is "making millions" the basis for apportioning social burdens ?

It's not. The only reason "millions" is relevant, is because "tens of millions" is much, much more than "hundreds of thousands. My basic point is that he makes way more than many people who are in a 25-35% bracket, while he's in an 18% bracket.

Buffet and his secretary go to the same office every day. They work in similar conditions, have similar patterns of consumption, live in similar houses. They personally certainly create similar social burdens.

How do you know they have similar patterns of consumption and live in similar houses?

Secretary pays perhaps ~$30k in taxes total taxes incl payroll deductions,
while Buffet pays $7.5M. Perhaps 250 times more.

So in your opinion, how should taxation work in the U.S.? Should it not be based on a percentage, but instead on the dollar amount? A flat percentage for everyone? Something else?

 

[cesarz]

Infrastructure is a classic recommendation, Denmark got some nice bridges in the 30's depression.

Poland got some nice things during Giereks era also - the problem we still suffer from this great building with borrowed money

What you omit is who will pay for all this spending.


I will read Krugman blog in free time, thanks.

 

[Belz...]

You aren't missing anything. If fairness were something he was really interested in, he could start with his own tax burden. He apparently isn't interested enough in it to do that, so color me skeptical about what his real motives might be in this case.

Chris, this doesn't change a thing about what is being said. Stop using it as some sort of a "gotcha", thread-killing finisher.

 

[Toke]

Poland got some nice things during Giereks era also - the problem we still suffer from this great building with borrowed money

He were not quite a Keynesian economist.
Economy is quite complicated, under some circumstances it is a great idea to borrow money to modernise a country, under others not*.
Perhaps it would have worked without the oil crisis in the way?

What you omit is who will pay for all this spending.

The people will pay, as always.
Try think of the difference between the non-growth under a recession and the growth that could be achieved with a large enough stimulus. That difference in the country's wealth as a whole could outweigh any deficit, enabling the government to raise taxes later to pay it off.

I will read Krugman blog in free time, thanks.

Good, it will give a completely different perspective.

*Until a few years ago Ireland were the poster boy for neo-liberal economic ideas. You do not need to be a communist to screw up an economy.

 

[cesarz]

Yes Gierek was not Keynesian economist but he actually did what some of them promote - taken credits that were spend on infrastructure.

Well libertarians have different opinion on Ireland:

http://www.cato-at-liberty.org/five-lessons-from-ireland/

And what if keynesians are wrong and stimulus programs will fail?

 

[Toke]

Yes, there is more than one opinion on Ireland.
Somebody is busy rewriting history to support their own economic theory.

And what if keynesians are wrong and stimulus programs will fail?

It worked in the 30's.

I am starting to suspect that all this austerity talk is sponsored by people who want to greatly increase the income disparity in society. And that a recession is not a problem for the richest people, unemployment and a few % drop in general wealth is not a problem if their share of it e.g. doubles.

 

[cesarz]

I dont see any rewriting of history - what Krugman wrote is not step by step rebuttal of Cato's article.

Theres is also more then one opinion on what happened 30's:

"In a survey of economic historians conducted by Robert Whaples, Professor of Economics at Wake Forest University, Whaples sent out anonymous questionnaires to members of the Economic History Association. Members were asked to either disagree, agree, or agree with provisos with the statement that read: "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." While only 6% of economic historians who worked in the history department of their universities agreed with the statement, 27% of those that work in the economics department agreed. Almost an identical percent of the two groups (21% and 22%) agreed with the statement "with provisos" (a conditional stipulation), while 74% of those who worked in the history department, and 51% in the economic department disagreed with the statement outright"

Of course there's also many articles about this on net by i guess you already read some of them

 

[lomiller]

WOW - that is just dead wrong. There is a one year (not 2) carryover special case with a lot of exceptions for ST losses and yes you can carry forward LT losses forever but lost at death. But you are ignoring your own argument..

You don’t lose capital loss deductions simply because you are unable to use them the following year as you are attempting to argue.

Your reading skills are suspect.

It’s your analytical skills and possibly your honesty that are suspect here. Your “analysis” was simply not correct you are much better admitting your error then trying to obfuscate.

Capital gains is paid on NET gains. IOW if you make investments that have a 42% chance to lose $1 and a 58% chance to gain $1, your losses tend towards $42 on every $100 invested and your gains tend towards $58 on every $100 invested. This is a NET gain of $16 and that is all you pay the capital gains tax on. Yes there are rules that complicate this somewhat but they do not significantly change the outcome.
At 15% capital gains this results in a final return of 13.6% where you claimed the tax reduced it to 7.3%

At 35% capital gains you actually made the absurd claim there would be a loss of 4.3% when in fact the actual return is $16 (1-0.35) = $10.4 on $100 invested for a 10.4% return.

Here is the relevant section from your post.

Case 2/ 15% CG rate on gains
If a 15% LTCG rate applies then the return applies, that the expectation value (I'm ignoring the loss tax reduction, will discuss later) then the expectation value of return is
0.42*(-1) + 0.58*(+1)*0.85 = 0.073 or 7.3%. Still a decent return.

Case 3/ 35% CG rate on gains.
If a 35% tax rate applies then ... 0.42*(-1) + 0.58*(+1)*0.65 = -0.043, a 4.3% percent loss !! No one in this tax rate would touch this investment. It needs to at least exceed other safer investments. It's a clear loser.

 

[Toke]

Yes, of course there are more than one opinion on the New Deal, I would say that the good lessons from it are being forgotten/repressed by fringe ideologists.

It looks like economic historians are the most resilient to some of the new fasions sweeping through economics.