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What's more important Laffer Curve or Income Inequality?

is4junk          4 December 2015 04:52 PM


I have had surreal conversations about taxes. Are they to fund government or solve social problems? One way to look at it would be - are you willing to run a deficit in order to fix income inequality via taxation? Secondary question: do you believe in absolute or relative wealth (or poverty)?



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Silent Cal 28 December 2015 08:47 AM
70%

No one has yet given the most basic answer: maximize utility.

There are two effects at work here that are pretty much undisputed in mainstream economics:

1) Redistribution distorts economic incentives, lowering total production. This produces the Laffer Curve.

2) Individual wealth is subject to diminishing happiness/utility returns.

Taken together, these lead to an optimal level of redistribution that's greater than zero but somewhere short of the peak of the Laffer Curve.

There are various other effects we might consider, but probably none as widely accepted as these two. For one example, there are worries on both left and right about the effects various policies will have on politics.


Deficit spending is essentially orthogonal to the issue, entangled only by politics. Budget balancing is indeed associated with the fiscal right in the US, but as long as taxes are as high as spending, it's possible to have a balanced budget with any level of GDP-relative spending.


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melian 28 December 2015 02:55 PM
73%

Suppose the economists could precisely calculate each individualís happiness for different redistribution policies. Then you would be able to choose a policy that maximizes happiness for any population set. The question is how this set is to be chosen. Some people might argue that you need to include all citizens in it. Others may argue for a less inclusive set (for example, excluding criminals and people unwilling to work). The set can also be extended to all humans or even animals.

Do you have a suggestion how this set can be objectively chosen?


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Silent Cal 30 December 2015 03:24 PM
72%

The practical choice is to choose by popular vote of citizens. Or have a court rule that all citizens have to be weighted equally, also fairly likely. Either way will probably generate a pretty good outcome and not start a war.

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VoiceOfRa 4 December 2015 06:36 PM
68%

Why is Income Inequality a problem again?


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haltingthoughts 2 February 2016 10:12 PM
67%

Decreasing marginal returns to consumption.Redistribution will improve overall welfare (at least for "small" values).

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is4junk 4 December 2015 07:11 PM
64%

The main problem is that its the Left's most effective way to recruit more people. Of course, they have to re-brand it with a new name for every generation but its the same class warfare that they always use.

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adventureworm 27 January 2016 04:29 AM
65%

Which is more important, Newton's third law or going to Mars?


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ChristianKl 5 December 2015 04:51 AM
65%

According to research on the Laffer Curve Wikipedia suggests that the revenue maximizing tax is at 70%. We likely shouldn't have a tax on that level and nobody in the mainstream calls for tax levels that high.

If you look at real economic growth that's powered by innovation. China invests public money in it's infrastructure and can therefore build better trains than the US with lacks public spending in that sector. We live in Peter Thiels great stagnation.

The one sector that doesn't suffer from it is tech. How does income inequality relate to the prospects of a company like Apple? Apple doesn't sell $20,000 notebooks to rich people. It rather wants to sell cheaper notebooks to more people. An economic policy that allows more people to be rich enough to afford Apple's products. Apple profits from an economic policy that grows the middle class.

What happens when a rich person buys an expensive yacht? The money goes to a company that produces a custom project for a limited amount of people. The company won't standardize technology to produce it as cheaply as possible. Rolex doesn't work on producing watch technology that produces watches that provide much more use to their owners than the old watches. Rolex is not setup to systemize their internal processes to produce watches as cheaply as possible the way most real technology companies try to conduct their business.

The business strategy of a luxury company that wants to be a premium brand that can only be afforded by rich people is not about producing innovation that grows the economy.

Who are rich people who use their capital in a way that brings society forward? Bill Gates who made his fortune with Windows probably spents his money more effectively for the good of society than if the government would tax it away from him.
On the other end Ubuntu's Mark Shuttleworth also uses his fortune in a way that brings society forward.

When libertarian Peter Thiel get's asked about what he thinks about taxes, he says that provided the government does something with them they aren't the core of the problem. The problem is that he isn't free to do with his land what he wants to do. The problem is that he can't do in the medical sector what he wants to do due to regulation.

When rich people buy Tesla's that allows Tesla to fund their technology development but most luxury products are different. Houses and Yachts spending frequently doesn't lead to real new technology.

The core frmae shouldn't be rich vs. poor but "where do our societal resources go?"
Do they actually go where they lead to growth?

If we think of healthcare as being about developing new drugs where most of the costs are the drug development and not the costs of the pill, universal healthcare makes a lot of sense.
On the other hand if we look at medical testing we can see that Theranos business model of selling directly to consumers makes a lot of sense. It creates price pressure on lowering the testing prices in a way that universal healthcare or insurance based healthcare doesn't.

Diversity of system of funding are good.


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melian 5 December 2015 07:16 AM
73%

Norway collects 44% of its GDP in taxes and spends a large share of it on welfare policies. Singapore collects 14% of its GDP in taxes and spends almost none of it on welfare policies. In Norway there were 572 personal computers per 1000 people (2004 data). In Singapore there were 621 personal computers per 1000 people (2002 data).

The idea that you need high taxes and massive redistribution of wealth to enable mass consumption of technology seems to contradict empirical evidence.


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ChristianKl 5 December 2015 02:35 PM
65%

The main point of my post was that the tax level isn't the central variable.
Singapore does a lot of good things. It pays government burocrats competetive wages with the private sector to forward looking people in government.

I spoke about car as luxury goods being a waste of capital in society.
It has a tax system that means that a BMW 335i costs five times as much as the same car costs in the US.

It prevents ghetto's being created where everybody is poor by preventing on ethic group from taking the majority in a specific neighborhood.

Singapore can spend less on wellfare policies because it has laws that force it's citizen's to provide welfare to family members without a job. You couldn't have the same laws in the US which highly values individual freedom.

If an US politican would campaign on a quota for racial diversity in every local neighborhood I ... read more


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is4junk 5 December 2015 02:52 PM
67%


nobody in the mainstream calls for tax levels that high

How far out of the mainstream is France? Which went beyond calls for it and actually implemented the tax!

Now this is what I call a super progressive tax rate (same article)

Earlier this year French Finance Ministry data revealed that over 8,000 French households paid taxes topping 100% of their incomes


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ChristianKl 5 December 2015 03:33 PM
65%

So your complained has nothing to do with the kind of taxes that Democrats want to implement in the US and you want to focus on the kind of taxes being payed in France?

Earlier this year French Finance Ministry data revealed that over 8,000 French households paid taxes topping 100% of their incomes
Given people like Steve Job, Mark Zuckerberg, Larry Page and Sergey Brin having $1 salaries I don't think it's that horrible to tax them higher than 100% of their income.

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